You are allowed to disagree with the Tax Office, if they have disagreed with your self-assessment of your tax position.

If you believe your tax assessment is incorrect, the first step is straight forward and pretty informal. You contact us and we start making inquiries. If we still believe the assessment is wrong, or if you can provide us with extra information that may change it, we can lodge an amendment with the Tax Office (see separate story in this newsletter).

But if the Tax Office disagrees, we can lodge an objection on your behalf (in other words, we can disagree with the disagreement). We can also object if it amends an assessment and has taken a different stance to us on particular things (for example, we thought you were eligible to claim a deduction but were allowed only part of it).

We must put objections in writing detailing all the reasons we think a decision is incorrect. This requires us to prepare a document that includes, where relevant, references to legislation, rulings or case law. It will also be necessary to include any supporting documents and information that relates to the decision.

This can sometimes be a costly exercise and we would recommend that for complex tax affairs where Tax Office scrutiny may transpire, insurance should be considered.

The Tax Office will review its original decision with a tax officer, not involved in the original decision. It will then let us know the outcome in writing (referred to as an “objection decision”), but if you’re still not satisfied, the next step is to ask for an independent external review of the Tax Office’s actions and its decisions about your tax affairs.

This escalation process can get even more costly, so you need to consider the value of taking this next step.

Tax laws specifically give you the right to go to the Administrative Appeals Tribunal (the tribunal) or the Federal Court of Australia for a review of some of the Tax Office’s actions or decisions. When the Tax Office lets you know its decision, it will also explain how these options differ. The Tax Office allows 60 days from the date of this decision notice to seek a tribunal or court review.

When taking the tribunal or court route
The burden of proof is with us. We will need to go into the tribunal or court being able to prove the ways in which our idea of the tax outcome is the right one, and support this idea with evidence, documents, and sound technical analysis.

The tribunal is less formal than a court hearing, but its powers are substantial enough. It can confirm, vary or set aside the Tax Office’s decision. You can appear yourself or be represented, and there is an application fee, which is refunded if the hearing goes your way.

Under the umbrella of the tribunal is the Small Taxation Claims Tribunal, which provides a quicker and cheaper review if the amount of tax in dispute is less than $5,000. Either way, if you are not satisfied with the tribunal’s decision you can appeal to the Federal Court.

Be warned, though: Things get a lot more formal at the Federal Court. You will generally need legal representation and there are a lot more fees (filing fee, “setting down” fee and daily hearing fee, for example). So you want to be sure the claim is worth it.

After this level of intervention, the next steps up the legal ladder are the Full Federal Court and then the High Court – but these are rare options for most taxpayers, and these courts won’t grant every appeal requested.