ATO’s Independent Reviews for SME Businesses

Independent Review Service: “You make a claim against the ATO, but the ATO is going to be considering the claim. How is that considered to be fair, just and independent?” 

Are you an SME business owner? You will want to read on for more information about the ATO’s new Independent Reviews process. 

This month, the ATO permanently instated its independent review service for small businesses. 

What You Need to Know: 

  • These independent reviews were previously only available to businesses with a turnover of more than $250 million.
  • A 3 year pilot program was initiated in 2017, which generally scored the approval of its participants.
  • From 1 April 2021, the independent review service became available permanently for eligible small businesses with a turnover less than $10 million.
  • The independent review was designed to empower businesses with a quick, relatively cost-effective way to dispute auditing decisions made against them.
  • Of the 1,200 small businesses offered the option to use the independent reviews process, more than 180 have done so.
  • Each review is conducted by an ATO officer who was not involved in the original audit and works in a separate part of the Tax Office.
  • The process has been criticised recently for its potential to make biased decisions.

The ATO states that the independent review was designed to resolve areas of disagreement with business owners as early and cooperatively as possible, but the process is not without its criticisms. 

Richard Bobb, tax adviser at Encountr, told Accountants Daily that he believes there’s room for some serious reform.  

Even the fact that the ATO conducts the reviews themselves exposes each one to unconscious bias, Mr Bobb said.

“I think the whole thing is flawed,” he continued. “You would like to think that an independent review officer, who is not an auditor — therefore is not seeking to generate revenue for the commissioner — that his role is to review a position and to form a completely independent view.

“Hopefully, he won’t be unconsciously biased as a result of reading the material which, I would always suggest, is cherry-picked.”

Mr Bobb suggests the ATO should adopt a panel framework, which would see independent reviews led by a third party with no former ties with either the ATO or the taxpayer.

“They need to have an independent person [conduct the review], in the same way the Inspector-General [of Taxation] is independent of the ATO; otherwise, unconscious bias is going to come into it.”