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Australia Disagreeing with an ATO Decision Guide

disagreeing with an ATO decision. The guide covers: the formal objection (the "objecting to the ATO decision") — the taxpayer who disagrees with the ATO decision (the "notice of assessment", the "amended assessment", the "private ruling", the "penalty notice", the "interest charge") can lodge the "formal objection" (the "objection in writing" under the "Taxation Administration Act 1953"); the objection must: (a) be in writing, (b) state the "grounds of the objection" (the "reasons why the taxpayer believes the decision is incorrect"), (c) be lodged within the "60 days" of the "date of the notice of the decision" (the "notice of assessment date" or the "notice of the penalty date"); the taxpayer can lodge the objection: (a) through the "ATO online services" (the "myGov" — the "Object to an ATO decision" option), (b) through the "paper form" (the "Notice of Objection — the NAT 4659" form), (c) through the "registered tax agent" (the agent lodges the objection through the "agent portal"); the ATO must respond to the objection within the "60 days" of the lodgement (the "statutory response period") — the ATO can "allow the objection" (the "full or the partial allowance"), "disallow the objection" or "request the further information" (the "extension of the response period"); the AAT review (the "Administrative Appeals Tribunal") — if the ATO disallows the objection or does not respond within the 60 days, the taxpayer can apply to the "Administrative Appeals Tribunal (the AAT)" for the review of the ATO decision; the AAT application must be made within the "60 days" of the ATO's objection decision; the AAT process: (a) the "pre-hearing conference" (the "AAT mediator" facilitates the discussion between the taxpayer and the ATO), (b) the "hearing" (the "AAT member" hears the evidence from the both parties), (c) the "decision" (the "AAT member" affirms, varies or sets aside the ATO decision); the AAT can award the costs in the limited circumstances (the "AAT costs order" for the unreasonable conduct); the Federal Court appeal (the "appeal from the AAT or the direct appeal") — the taxpayer can appeal the AAT decision to the "Federal Court of Australia" on the "question of the law" (the "error of the law" — not the "question of the fact"); the appeal must be lodged within the "28 days" of the AAT decision; the Federal Court can affirm, vary or remit the decision to the AAT; the Federal Court can also hear the "test case" or the "complex case" directly (the "direct appeal from the objection" for the "large tax disputes").

Private Rulings and Alternative Dispute Resolution

  • Private ruling request: The taxpayer can apply for the "private ruling" (the "binding ruling from the ATO") on the proposed transaction or the arrangement. The ruling is binding on the ATO if the taxpayer carries out the arrangement as described. The taxpayer can object to the private ruling if the ruling is unfavourable.
  • Alternative dispute resolution (ADR): The ATO offers the "Alternative Dispute Resolution (the ADR)" for the eligible disputes. The ADR includes the "mediation, the conciliation and the facilitated discussion". The ADR is voluntary and the non-binding. The ADR can resolve the dispute without the formal AAT hearing.
  • Test case litigation: The ATO may select the "test case" (the "litigation to clarify the law") for the significant tax issue affecting the multiple taxpayers. The taxpayer involved in the test case may receive the "test case funding" from the ATO. The test case decision sets the precedent for the similar cases.

For the tax audit process and the ATO investigations, see our Tax Audit & Appeals Guide →.

Penalties and Cost Risks

  • Shortfall penalty during the objection: The taxpayer who lodges the objection against the amended assessment may still be subject to the "shortfall penalty" (the "base penalty" of 25% to 75% of the tax shortfall). The shortfall penalty is reduced if the taxpayer has the "reasonably arguable position" (the "RAP" — the 25% reduction of the base penalty).
  • AAT and the Federal Court costs: The AAT does not award the costs in the standard review. The Federal Court can award the costs against the unsuccessful party. The taxpayer should consider the cost risk before proceeding to the Federal Court. The legal costs for the Federal Court appeal can exceed $50,000.
  • Interest on the disputed amounts: The "general interest charge (the GIC)" continues to accrue on the tax shortfall during the objection and the appeal period. The taxpayer may request the "remission of the GIC" if the delay is caused by the ATO. The GIC rate for the 2025-26 quarter is 11.54% per annum.

For the interest charges and the penalties, see our Interest & Penalties Guide →.