Taxation Appeals are made to the Federal Court and require a written application which sets out brief details of the objection. Usually, the taxpayer must also serve a sealed copy of the application on the Commissioner for Taxation, as Respondent, at the Office of the Australian Government Solicitor in the state or territory in which the application was filed.
Ordinarily, within 28 days of serving a sealed copy of the application on the Commissioner, the Australian Taxation Office (ATO) will provide the taxpayer with a Notice of Appearance, a copy of the documents filed with the Federal Court and a statement of the facts, issues and contentions regarded by the Commissioner as relevant to the appeal.
The Federal Court will then call a Directions Hearing, usually at least 5 weeks after the taxpayer’s application was filed.
Once the Federal Court is satisfied that the Commissioner has provided all relevant documents, appeals are then set down for hearing. The taxpayer usually is required to pay a setting down fee when a date is fixed for the hearing of the appeal. There is also a daily hearing fee that must be paid.
The Federal Court is able to overturn a decision of the Commissioner. However, the Federal Court cannot interfere with any discretion exercised by the Commissioner. It can only refer the matter back to the Commissioner for further assessment.
The Federal Court is able to award costs either against the Commissioner if the taxpayer is successful, or against the taxpayer if the Commissioner is successful. In either case, the proportion of costs awarded will generally be between 60% and 70% of the actual costs incurred by the successful party. However, if the Federal Court were to conclude that the behaviour of either the taxpayer or the Commissioner warranted sanction because of the way in which the case had been brought or conducted, a higher proportion of costs may be awarded.
If you are unhappy with a decision, we can provide you with advice as to the choice of whether to seek review in the Administrative Appeals Tribunal (AAT) or appeal in the Federal Court. Whilst the Federal Court is the more appropriate forum for objections which are highly technical or which involve complex propositions of taxation law, the court costs can be quite high. Taxpayers generally have their lawyers retain barristers to conduct their appeals.
The AAT is comparatively cheaper to commence and pursue reviews and places an emphasis upon consensual resolution of disputes. However, AAT members may be less experienced than Federal Court judges in hearing highly complex disputes which involve difficult propositions of taxation law or in managing pre-trial processes to ensure a speedy hearing.
Finally, taxpayers should note that the ATO will impose a General Interest Charge (GIC) on all outstanding taxation assessments from the date that the assessment was made. The lodging of a review at the AAT or appeal to the Federal Court does not stop this GIC from accumulating.
Taxpayers should seek legal advice as to whether to pay either the whole or a part of the disputed taxation notwithstanding commencing the review or appeal. While this will have financial consequences on the taxpayer, the payment will prevent further GIC from accruing. The cost of funding the payment may be less than the GIC. If the taxpayer is successful in the review or appeal, and the amount of the assessment has already been paid, the Commissioner may be obliged to refund interest on the refunded taxation payments.