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The Australian Taxation System and your legal and tax obligations

It is probably fair to say that the Australian taxation system is enforced through a ‘carrot and stick’ approach. That is, on the one hand it offers protections and assistance to those who aim to comply with the regulations, yet it is more than capable of harsh punitive measures when it feels slighted, ignored, or purposively contravened or avoided.

This dual approach is developed through Australia’s administrative law system, which, in essence, means that, at first instance, the Australian Tax Office (ATO) is the fundamental decision making body in regards to one’s taxation claims. Furthermore, most tax contentions are dealt with at this level and never go beyond. However, in the event that one disagrees with the ATO’s decision, an appeal to review this decision and have it replaced can be made by appealing to the Administrative Appeal Tribunal (AAT). As an alternative to an appeal to the AAT, or in an attempt to have an AAT decision overruled, one can make an application to have their case heard within the federal court system.


The ATO is the Australian government body that administers Australia’s national tax system, it is not the only tax body in Australia, as each state also has their own taxation body – for instance: NSW has the Office of State Revenue and Victoria the State Revenue Office. But, most taxes in Australia are imposed by the commonwealth, so the ATO is Australia’s main taxation body.

As an administrative body, the ATO is capable of making determinations and exercising discretion. This often means that keeping the ATO informed as to your particular situation, including your attempts to and problems in complying with the law, may result in the ATO deciding to reduce – or even remove – the penalty provisions which you might otherwise incur.

Furthermore, in cases where you are unsure as to the nature of your situation and how the law applies to you, you can request the ATO to make a pre-emptive decision. This ensures that you do not accidently breach the law and get hit with unforseen tax bills, or pecuniary penalties for tax avoidance.

We recommend that any request for a pre-emptive decision is made through a tax professional. As a tax professional can ensure that your situation is genuinely ambiguous. Furthermore, the ATO will only consider its decision on your situation binding if you inform them of all material facts on the relevant issue. Often the factual considerations that the ATO will take into account will be numerous and lengthy, and thus determining what the ATO may consider material can be a difficult undertaking.  Furthermore, a tax professional will know, and can argue, the relevant tax legislation in a superior manner.

If the ATO denies to rule in your favour on a submitted issue, then you can generally request the ATO to re-evaluate its decision. As can you ask the ATO to re-evaluate your situation as it changes.

The Administrative Appeals Tribunal

If you fundamentally disagree with the ATO decision you can appeal the issue to the Administrative Appeals Tribunal (AAT). The AAT can determine that the ATO did not make the best decision in consideration of the legislation.

The value of putting an issue before the AAT is that the AAT will only look at the relevant legislation and your factual situation, whereas the ATO decision maker is likely to be subject to internal ATO policies and may therefore come up with a decision that does not truly reflect the original legislation. Furthermore, AAT decision makers are generally much more highly qualified individuals with an impressive legal background, and consequently their decision may be considered better informed and more reflective of the law.

However, the reality is that the AAT is like a court in many respects, with formal and intricate procedures. While and the ATO will likely employ its own tax lawyers on the issue. Consequently, success at this level generally requires one to employ a legal team – the costs associated with which can be substantial, and one will generally not be reimbursed for these costs if they win. Furthermore, this is a very time consuming and potentially stressful process.

We strongly recommend advice from both tax professionals and legal counsel before deciding to proceed to the AAT. Australian Accountants  is a tax professional with strong connections to taxation experts within the legal profession. We can assist by providing relevant taxation advice and assistance with choosing and consulting legal professionals that can undertake appeals to the AAT Australian Accountants can help you meet your tax obligations in Australia Contact us now

The Federal Courts: Finally, one can appeal to Australia’s Court System. Normally, this will only be done after one has gone through a private ruling and AAT hearing.

As taxation systems which come before the ATO are based on commonwealth laws, one will generally appeal to the Federal Court system. However, as State courts will hold federal jurisdiction in many instances, legal consultation should be sort in making a decision as to which court one ought to lodge their case with. Furthermore, each court has its own unique procedure, which may be very complex in itself, and must be strictly adhered to.

You must be aware that the Federal Court can only make very particular types of decisions, and thus the grounds on which one can appeal to the Federal Court system are limited. Finally, a loss before the Federal Court will generally mean that one pays the legal costs of the other side – which are likely to be substantial.

Consequently, we consider it to be absolutely essential that you consult a taxation lawyer before considering this avenue of action. Australian Accountants  may be able to assist by recommending an appropriate lawyer or legal team. Australian Accountants can help you meet your tax obligations in Australia

Contact our professional team for a confidential discussion about expanding your business into Australia on 02 9415 1118.