Issue
There is a concerning trend of the ATO rejecting interest remission requests.
In the past, even pre-COVID-19, you and your clients experienced a kinder ATO where interest remission requests were allowed if reasons were provided.
However, currently the ATO is pushing back significantly and requiring the reasons put forward to be extremely extenuating.
Unfortunately, it appears relying on the impacts of COVID-19 is simply not good enough for the ATO.
It is obvious that since the loss of revenue during COVID-19, the ATO’s task is to collect as much revenue as possible which includes rejecting interest remission requests.
Options
If an interest remission request is rejected, there are two avenues of redress:
A. provide additional information to the ATO that was not presented in the initial request; and/or
B. apply to the Federal Court.
In respect of option (B), this will be an expensive and, unfortunately, low chance of return option. This is because interest remission is a discretion of the ATO and it would be difficult for a Federal Court judge, sitting in place of the ATO, to overturn a discretion decision unless the evidence is highly favourable to your client, as opposed to just favourable.
Tax Tip
Our tip is to focus on the initial request or, if an initial request has already been rejected, focus on option (A).
This will mean that you and your client will need to devote sufficient time, and incur the necessary costs, to put the ‘best case’ forward at the outset.
In our opinion, the reasoning for the interest remission must be focused on what reasonable members of the community, who pay their taxes on time, would see the circumstances as fair and reasonable to remit the interest because reasonable members of the community, who experience the same unfavourable events as that experienced by your client, would view the circumstances as exceptional.
Be it COVID-19 and/or financial/emotional/family distress, any reasoning must show that it is above and beyond what is reasonably experienced by other members of the community. Unfortunately, it appears the ATO’s view is that members of the community have all experienced COVID-19 and that COVID-19, on its own, is now the norm and not the exception.
In addition, and this is the ATO trend that is currently in play, the ATO are rejecting requests if you and/or your client did not approach the ATO in a timely manner to discuss the deferral for the lodgement and/or debt including entering a payment plan and/or provision of security. The ATO is also relying on its records of attempts to contact taxpayers via phone and letters to prove there was a lack of timely contact with the ATO.
In essence, the ATO are stating that ‘if you put your head in the sand’ then the ATO will reject the request. However, if reasonable members of the community, that experience the same unfavourable events, would also put their head in the sand, then the ATO ought to remit the interest.
Unfortunately, unless there is lobbying from the professional bodies, newspaper articles highlighting this concerning trend (which is unlikely) and/or a Federal Court case changes the ATO trend (which is also unlikely), ATO rejections of interest remissions requests will become more prevalent.
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