Navigating Tax Disputes: A Closer Look at ATO Scrutiny

In the age of the Australian Taxation Office’s (ATO) data-driven strategies, taxpayers are increasingly subject to heightened compliance scrutiny, resulting in a surge in tax disputes. Contrary to common belief, challenging an ATO assessment involves more than refuting the Commissioner; it demands a nuanced grasp of the burden of proof, especially in default assessments.

The ATO’s formidable data arsenal draws from diverse government sources. Through programs like the lifestyle asset data matching initiative, discrepancies in assets and reported income are flagged, revealing instances of undeclared profits, personal asset use, and erroneous GST credit claims. Additionally, data from AUSTRAC and other agencies unveil unreported financial transactions and potential tax fraud.

tax disputes

Default Assessments: When Can the ATO Issue Them?

Under section 167 of the Income Tax Assessment Act 1936, the ATO can issue assessments dissatisfied with return information or suspecting undeclared income.

Filing a tax dispute is complex; taxpayers must prove excessiveness or inaccuracy, establishing actual taxable income surpassing the levied tax. In default assessments, the taxpayer bears the burden, discharged when explaining unexplained wealth, using methods like the asset betterment calculation.

Real cases highlight the challenge. In the Cammarano case, gamblers faced increased taxable income due to unexplained gambling winnings. Le and Trieu’s asset betterment case initially lacked evidence but was reheard on appeal. The Ross case saw increased taxable income when unable to explain their financial activities.

These cases emphasize that default assessments affect not only high-profile taxpayers. A robust defense, supported by evidence, is crucial. As the ATO intensifies data use, practitioners and clients must anticipate potential ATO risk reviews, substantiating tax positions, including alleged ‘unexplained wealth.’

This article provides general insights and doesn’t replace professional advice for specific cases. EndureGo Tax Pty Ltd and associated individuals disclaim liability related to its use.