From 1 July 2018, the ATO is running a 12-month pilot in Victoria and South Australia to assess the viability of extending the existing pre-assessment technical merits case review (Independent Review) to small business taxpayers with income of less than $10 million who have audits undertaken by the ATO.
Since 2013, Independent Review has been offered to taxpayers in Public Groups and International (PGI) (i.e. those with income of more than $250 million). Independent Review allows eligible taxpayers to have the results of an initial ATO audit referred to an independent technical officer from outside the audit area, together with the position of the taxpayer, prior to issuing notice of assessment or amended assessment.
The Independent Review pilot for small business will initially target small business audit cases involving issues identified as high priority and will be based on the same design and principles as the existing Independent Review for PGI, and will follow the following process:
- eligible taxpayers will be invited to participate in the pilot by their audit case officer
- taxpayers invited to participate must email the ATO within 30 days of the date of the audit finalisation letter with a clear outline of the specific issues in the audit decision they dispute
- a Review and Dispute Resolution officer will contact the taxpayer to discuss the request for Independent Review and
- if approved, the request for Independent Review will be referred to an independent reviewer.
Disputes relating to GST, superannuation, fringe benefits tax, fraud and evasion findings, and penalties and interest are excluded from the scope of the pilot. It would be surprising if the pilot for small business does not also exclude disputes relating to areas that have or will be considered by the General Anti-Avoidance Rules Panel in relation to Part IVA of the Income Tax Assessment Act 1936, which is currently excluded by the existing Independent Review regime available in PGI.
The pilot does not affect the rights of taxpayers who do not wish to seek an Independent Review, who are excluded from the pilot or who are ineligible from lodging an objection to any amended assessments or notices issued following the finalisation of an audit.
In our experience, Independent Review has been a useful mechanism to resolve issues with the ATO, and we would generally recommend that taxpayers accept an offer to participate in the pilot.