After the ATO's unplanned system outages, it provided lodgment deferrals, and remitted interest and penalties where the outages affected practitioners and their clients' lodgments. But what about compensation?
The ATO has advised that it assesses claims for compensation in two ways:
- compensation for legal liability (eg negligence)– claims that are resolved on the basis of legal liability must be settled in accordance with legal principle and practice; and
- compensation under the Compensation for Detriment caused by Defective Administration (CDDA) scheme, which allows the ATO to consider claims and pay compensation if practitioners or their clients have suffered disadvantage or loss because of defective administration.
The ATO says it considers claims in accordance with guidelines issued by the Department of Finance. Applications for compensation must address the criteria set out in the guidance material and establish that:
- the practitioner or client suffered direct financial loss;
- the loss was caused by the ATO's defective administration; and
- the practitioner or client has taken reasonable steps to mitigate that damage.
In this context, "defective administration" means:
- a specific unreasonable lapse in complying with existing administrative procedures;
- an unreasonable failure to institute appropriate administrative procedures;
- an unreasonable failure to give the proper advice within an officer's power or knowledge to give; or
- giving advice that was in all the circumstances incorrect or ambiguous.
The type of compensation the ATO says it can consider is financial loss with a direct connection to its actions that lead to a finding of legal liability or defective administration. This can be a loss such as:
- professional fees, where evidence of payment is provided and the decision-maker considers the fees to be reasonable;
- interest for delays in providing funds in cases where no statutory interest can be paid;
- bank or other administrative fees that the taxpayer incurred because of the ATO's actions.
Generally, the ATO says claims for the following types of losses cannot be considered under claims of legal liability or the CDDA scheme:
- claims for personal time spent resolving an issue;
- claims for stress, anxiety or inconvenience;
- claims for delays in receiving funds from the ATO where statutory interest was paid;
- claims for costs associated with complying with the tax system, including costs associated with audits, objections and appeals – even where it is found that taxpayers complied with their obligations;
- claims for the costs of putting in a claim or conducting a claim for compensation;
- claims for taxation or other Commonwealth liabilities with substantive review rights that can be or could have been pursued.
Claims for compensation can be made using the ATO's Applying for compensation form (NAT 11669).
For more information about how the ATO deals with compensation claims, please either contact us; send an email to firstname.lastname@example.org or phone 1800 005 172.