ATO wipes off $2.6 billion in tax bills for big business

The Australian Tax Office wrote off $2.6 billion in tax liabilities for big businesses across the country last year as it sought to settle disputes instead of pursuing costly legal battles to recover the total amounts owed.

The tax office had expected to recover $5.6 billion from large businesses in the 2014-15 financial year, but the ATO’s 2014-15 financial report shows it settled on a figure of $2.9 billion instead.

The ATO also recovered more than $295 million from small businesses in Australia last year, which compares to a pre-settlement target of $447 million.

Overall the tax office recovered approximately $3.8 billion from an estimated $7.3 billion recovery target.

The figures follow a previous report by the Inspector-General of Taxation, which found there is a higher level of disputes regarding tax liabilities among large businesses than small businesses and individual taxpayers. 

The ATO’s annual report, released last week, also included an updated guide to the tax office’s approach to resolving disputes.

According to the annual report, the ATO’s Code of Settlement was streamlined and shortened from 54 pages last year to two this year, with the updated version highlighting the tax office’s commitment to “constructive dispute resolution where it is appropriate and reasonable to do so”.

The data shows in 2014, the ATO settled more than 1000 tax liability cases – which included individuals, large and small businesses – a rise of about 393 cases from the year prior.

One hundred and twelve of the 1037 cases settled during the 2014-15 period were for small-to-medium enterprises, while 81 were for large businesses.

Alex Malley, chief executive of CPA Australia, told SmartCompany this morning he believes the ATO’s new approach to settling tax disputes is appropriate.

“We all expect the ATO to administer the taxation laws appropriately and settlement is an important part of efficient administration,” he says.

“The last thing we want is a log jam of cases.

“The [Tax] Commissioner has made it clear he’s interested in getting results and moving forward, and when settlements are determined within the guidelines, including cost versus the benefits of continuing the dispute, it’s an appropriate approach.”