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Morrison’s great small business tax intent risks ‘blowing up’

Sunday, February 24, 2019

On Friday (22 February) another scathing report on the performance of the ATO was released. (See this media coverage.) This time it was from the Parliamentary Committee responsible for overseeing the ATO. The report was particularly critical of the ATO’s treatment of small business people. The Committee made 37 major recommendations for ATO change. (Details are here.)

We’re delighted to see this new report and thank goodness parliamentarians are listening and probing. But we need action now.

Two weeks ago we congratulated the Morrison government for taking immediate action. They are doing, and not just talking, by setting up the new Small Business Tax Tribunal to start on 1 March 2019. The intent of the Tribunal ticks a large number of boxes for delivering fairness to small business people in disputes with the ATO. It’s an important major step. But goodness!!! It’s running off the rails already.

The draft rules for the new Tribunal have been released and they are ‘a shocker’ in two vital areas:
  1. The ATO will be able to use lawyers and not pay for the small business person’s lawyers. This is entirely the reverse of what the Morrison government promised.
  2. The ATO will be able to enforce debt even before the Tribunal has heard or decided a case. This makes a mockery of the government’s claim that the Tribunal will create a ‘level playing field’.
The draft rules are here and here.

On Thursday we put in a submission opposing these particular draft rules and recommended that the following wording be inserted:
In most cases, other than test cases for example, legal representatives are not to act for either the ATO or the small business… If the ATO seeks to put such (legal) written submissions, the ATO must fund the small business for legal opinion up to an amount equal to that expended by the Commissioner on its internal and external legal services.
Where the Commissioner may seek to implement a decision while the review is being decided (for example, by commencing recovery of a debt) the Commissioner must apply to the SBT for leave to implement a decision and cannot implement without AAT authority.
Our full submission is here. (It’s only 4 pages.)

If we were being cynics, we could allege that some mysterious Canberra bureaucrats have had control of the drafting of the rules. (Now we wonder what government body those bureaucrats might come from?)

But these draft rules present a grave risk to the government because they destroy the government’s intent for a fair process for small business people in their dealings with the ATO.

Have no doubt. If the new Tribunal proceeds to operate under these draft rules, we will have to campaign against it in an aggressive manner. This is a threshold issue for small business fairness. But let’s wait and see if the Morrison government fixes this problem. We’ll let you know.

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