Small businesses engaged in taxation disputes with the ATO could soon have another avenue to seek a stay of an ATO decision if a proposed Bill currently before the House of Representatives passes Parliament. Currently, the Commissioner can commence debt recovery action even if a taxpayer is seeking a review. While the taxpayer can seek a court order to stay the operation or implementation of the decision, it can be costly. The proposed Bill will enable small businesses to apply to the AAT instead of a Court for an order, significantly lowering the cost.

The AAT may soon be given more powers to help small businesses if a proposed Bill passes Parliament before the Federal election is called. The Bill, which is currently before the House of Representatives, seeks to enable small business entities to apply to the Small Business Taxation Division of the AAT for an order staying or otherwise affecting the operation or implementation of certain specified decisions of the Commissioner that are being reviewed by the AAT.

Under the current law, a pending review of a taxation decision does not affect the decision and any tax may be recovered as if no review were pending. This means that the Commissioner can commence debt recovery action even if the taxpayer is seeking a review of the liability for, or the amount of, the tax debt. While a taxpayer can seek a court order to stay the operation or implementation of the decision, it is a costly process. This could be made more economical if pursued before the AAT.

The types of orders that can be made by the AAT under these new potential powers include:

• orders directing the Commissioner to offer payment instalment arrangements;
• orders directing the Commissioner not to pursue specified debt recovery actions if the taxpayer agrees to pay a specified portion of liabilities immediately, or agrees to provide appropriate security for the payment of those debts;
• orders directing the Commissioner not to sue in a court to recover a specified amount relating to the reviewable objection decision; and
• orders directing the Commissioner not to issue one or more written notices to specified third parties who owe or may later owe money to the applicant as a means of recovering liability relating to the reviewable objection decision.

These additional powers will not include any order which will materially and permanently alter the underlying decision for review, such as directing the Commissioner to remit general interest charge (GIC) on unpaid liabilities or deferring the time at which a tax liability is or becomes due and payable. The AAT will also not be able to affect the automatic operation of Commonwealth laws such as accrual of GIC, nor will it be able to affect the operation of judicial remedies obtained by the Commissioner (ie warrants or freezing orders).

The Bill contains safeguards to mitigate risks of aggressive taxpayers such as promoters of tax schemes, phoenix operators, or others without a genuine dispute about an assessed quantum of tax, making applications to the AAT to frustrate the prompt recovery of genuine tax debts, or delaying recovery action.

It specifies that the AAT will only be able use its new powers if it is satisfied that the application for review and the request for making the order is not frivolous, vexatious, misconceived, lacking in substance or otherwise intended to unduly impede, prejudice or restrict the proper administration or operation of a taxation law.

In addition to the above, the conventional considerations will also apply in any AAT decisions to make an order under these new powers, including prospects of success of the underlying application, the consequence for the application of the refusal, any public interest considerations, consequences for the Commissioner, and other matters.

Need help?

These potential new powers for the AAT do not affect your existing rights to appeal taxation decisions. If your small business is having a difficult time dealing with the ATO, we can help you work out the best way forward. Contact us today for expert advice and service.

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