The Australian Taxation Office (ATO) will seek to ensure future correspondence automatically generated by a computer can be relied on, following a recent Federal Court ruling a taxpayer was liable for interest charges on a tax debt, even though he received a letter from the deputy commissioner suggesting he was not.
The letter was automatically generated by a computer and, while stating it was from the deputy commissioner, the full Federal Court decision in Joe Pintarich v Deputy Commissioner of Taxation found machine-generated correspondence could not be relied on.
The letter, the court found, did indicate that the taxpayer interest charge was inclusive of the debt owed rather than separate to it, but it could not be relied on since there was no related “mental” decision involved in it being issued.
The case was dismissed for appeal by the High Court, but could still have wide ramifications for Australian taxpayers.
Senator Eric Abetz asked ATO commissioners, including tax commissioner Chris Jordan, appearing before Senate Estimates what the agency would be doing to give assurance to taxpayers they can rely on ATO correspondence.
He said it was important the ATO was an exemplary administrator and its decisions could be relied on.
He also questioned why the ATO would continue pursuing the taxpayer involved in the case, Joe Pintarich, for interest charges on a tax debt, when it should have apologised for having “mucked up”.
“People’s livelihoods are at stake,” Senator Abetz said. “Sometimes people’s houses are at stake. Their whole families are at stake — especially in the small business sector.”
ATO told to ‘own up’ to its errors
Second commissioner Neil Olesen said the ATO had tried to verbally resolve the case with the taxpayer, but agreed that the fact that an automated letter was sent in error was not a good look for the agency.
“The case is a little bit more complex, but I’m not arguing with you Senator — it is a bad look,” Mr Olesen said.
“We don’t want letters like that going out, we are seeking to change that letter so that circumstance does not happen again.”
Debbie Hastings, who heads the ATO’s dispute resolution area, said the ATO would soon provide a decision impact statement setting out the details of the case and the implications.
Nevertheless, Senator Abetz said he was disappointed the ATO pursued the taxpayer, and High Court had not considered the taxpayer’s appeal.
“I trust that the ATO will ensure that businesses are given certainty,” he said, adding that when the ATO makes mistakes it should “own up to them and not make the taxpayer suffer”.
Mr Jordan later told Senate Estimates the case was heard by the full Federal Court and the decision was based not just on the automated letter but also verbal discussions.
“We were trying to settle and trying to not have this go through the courts,” Mr Jordan said.
“It was a special set of circumstances.”
Mr Jordan said it did not put people’s livelihoods at risk.
Case could cause taxpayers confusion
The court heard Mr Pintarich had wanted to enter a payment arrangement with the ATO as he was facing a tax debt of $1.17 million with a general interest charge of about $335,000 applied.
Mr Pintarich, on December 8, 2014, got a letter from the ATO headed “Payment arrangement for your Income Tax Account debt”.
It read: “Thank you for your recent promise to pay your outstanding account. We agree to accept a lump sum payment of $839,115.43 on or by 30 January 2015. This payout figure is inclusive of an estimated general interest charge (GIC) amount calculated to 30 January 2015.”
Mr Pintarich paid the outstanding tax debt (minus the general interest charge) by the due date.
The court heard the deputy commissioner’s name was automatically applied on the letter. Although the letter had a signature block, which recorded the name of the first deputy commissioner, it was unsigned.
The ATO official believed the verbal agreement with Mr Pintarich was that the primary tax debt was to be paid in full “whilst we consider the remission of general interest charge”.
On May 13, 2016, the ATO wrote to the taxpayer advising that only a partial reduction of the general interest charge owing would be granted, and the letter dated December 8, 2014 was issued in error.
The taxpayer applied to the Federal Court for judicial review, but the full Federal Court majority denied the taxpayer’s appeal.
However, there was also a dissenting judgement delivered by Justice Kerr, who said the majority’s decision “would turn on its head fundamental principles of administrative law” and cause “confusion” for Australian taxpayers.