Tax compensation overhaul a win for small business
The government has released its response to the review of the treatment of small business tax cases under the CDDA scheme, and has said it is committed to improving small business access to justice and ensuring fair and independent decision making.
The government has announced it accepts all 12 recommendations made by the independent review of the Compensation for Detriment Caused by Defective Administration (CDDA) scheme, and will work on their implementation, in full, in part, or in principle, from 30 November.
Among the recommendations the government has accepted in full is the establishment of a Small Business Compensation Assistance Service, to be administered by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
“We are delighted we will now be able to help small businesses understand how they can pursue CDDA claims and we look forward to working closely with the ATO on increasing the awareness of the scheme,” the ASBFEO Kate Carnell said in response to the government’s announcement.
“Having an effective and well-publicised CDDA scheme will help to ensure small businesses have access to justice when things go wrong.”
Other key recommendations the government is committed to implementing include:
- The government will ensure that there is a greater separation of ATO officers investigating CDDA claims from the relevant division of the Tax Office. The most sensitive or complex matters will be referred to independent reviewers outside the ATO.
- More serious cases will also be escalated to senior levels for decision, with the Tax Commissioner himself deciding the outcomes where an independent reviewer is involved.
- For the most serious matters, there will be an opportunity for a complainant to comment on an investigator’s preliminary views before a final decision is made and an opportunity to request a review of a decision.
- Plausibility will be adopted as the standard of proof in CDDA tax matters, to establish whether defective administration has occurred (instead of balance of probabilities).
- ATO procedures will require its staff to take into account a small business’ financial and personal capacity to respond to a review, audit or other compliance process.
- The ATO will review and update its guidance material to ensure that making a claim is as simple as possible and decisions are explained in succinct everyday language.
- The government is strengthening oversight of CDDA matters and accountability, by ensuring the Assistant Treasurer is well briefed on the operation of the scheme. Delegations to the ATO will reflect how the Assistant Treasurer wants the ATO to administer the scheme on the minister’s behalf.
The ATO is due to update Assistant Treasurer Michael Sukkar in 12 months on its progress in carrying out the changes.
Responding to the review, the Tax Office agreed that “applying for compensation should be as easy as possible” and said it is committed to making the process straightforward, fair and consistent.
“In a small number of cases that result in a dispute, these reforms will provide small businesses with a clearer path through the dispute process,” the ATO said.
The Tax Office added that it will be revising its guidance materials and engaging in an education and awareness campaign in the coming months to raise awareness about the CDDA Scheme among small businesses and tax professionals.