Tax

ATO small business compensation to be reviewed under $13.9 million package

Matthew Elmas /

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Treasurer Josh Frydenberg and Prime Minister Scott Morrison. Source: AAP/Sam Mooy.

The Department of Finance will undertake a review into the tax office’s small business compensation mechanism as part of a federal government package aimed at addressing issues with tax disputes.

Nestled in measures detailed in mid-year fiscal and economic outlook (MYEFO) papers released today, the government said the ATO’s implementation of the Compensation for Detriment Caused by Defective Administration (CDDA) scheme will be scrutinised.

The review is one of several measures being undertaken by the government to address small business disputes with the ATO, following allegations of heavy-handed tactics published in an ABC Four Corners investigation earlier this year.

The CCDA is a key compensation mechanism designed to compensate members of the public for mistakes or poor administrative decisions made by government agencies.

However, under the current system, payments are at the discretion of the agency to which the claim is made.

Even if a mistake has been made by an entity such as the ATO, that doesn’t mean compensation is automatically payable, and when a payment is made, the ATO decides how much.

In a statement, the ATO said it is participating in the review.

“CDDA decisions are independently made by ATO General Counsel who apply whole-of-government guidelines issued by the Department of Finance,” it said.

Former inspector general of taxation Ali Noorozi recommended reforms to the ATO’s compensation processes earlier this year.

The scope of the review was not detailed and the Department of Finance did not respond to a request for comment on Monday morning.

Council of Small Businesses of Australia (COSBOA) chief executive Peter Strong welcomed the review.

“Compensation is something we’ve always considered to be underdone,” he tells SmartCompany.

“The tax office is pretty good but no organisation that big is going to be perfect.

“If you lose your business you just become incredibly stressed with how it works and when you’re in the right compensation needs to reflect the personal as well as the financial costs.”

The CCDA review is part of a $13.9 million package which includes previously announced measures such as the creation of 10 tax advice clinics, a small business concierge service to provide Administrative Appeals Tribunal (AAT) advice, and the creation of a dedicated small business tax division within the AAT.

Measures to address and raise awareness about small business mental health issues, including recently announced funding for the Ahead for Business program is also included in the package.

Missing from MYEFO papers on Monday were details of a possible extension of the instant asset write-off program, which was signalled by Small and Family Business Minister Michaelia Cash last month.

The government is understood to be considering another extension of the program, including possibly increasing the asset threshold from $20,000.

Cash did not respond to questions before SmartCompany‘s deadline on Monday, but Strong says the government is likely considering how it will implement an extension of the write-off.

Treasurer Josh Frydenberg did, however, unveil a $4.1 billion budget surplus forecast in 2019-20, revised upwards from $2.2 billion on the back of a larger-than-expected company tax windfall.

Wages are expected to grow by 3% in 2019-20, a downward revision from the 3.25% detailed in the budget earlier this year.

NOW READ: Leak reveals government plan to bring forward small business tax cuts and change $20,000 instant asset write-off

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Matthew Elmas

Matthew is the news editor at SmartCompany. You can contact him at [email protected].

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