In Australia, the tax dispute process generally involves the following six stages:

1. Lodgment of tax return: The taxpayer submits their annual income tax return as required by the Commissioner

The lodgment of a tax return in Australia involves several key steps and requirements:

• The Commissioner issues a legislative instrument annually, calling for the lodgment of income tax returns for the previous financial year.
• Individuals must lodge a return if their taxable income exceeds the tax-free threshold, or if they meet other criteria such as having tax withheld, incurring a loss, claiming prior year losses, or receiving certain government payments
• Non-residents must lodge a return if they derived taxable income from Australian sources, except for certain types of income subject to withholding tax
• Tax returns can be lodged electronically via the ATO’s “myTax” system, through a registered tax agent, or by mailing a paper return to the address specified by the Commissioner
• The standard lodgment period for individual, trust, and partnership returns is from 1 July to 31 October following the end of the financial year, with extensions available for those using tax agents
• Taxpayers must include all income, profits, and capital gains derived during the relevant period, and retain records for at least five years
• Special rules apply for taxpayers overseas, deceased estates, minors, and those with substituted accounting periods
• Failure to lodge by the due date may result in penalties or prosecution

These requirements ensure that taxpayers report their income accurately and on time, forming the basis for assessment and further stages of the tax process.

2. Assessment: The Commissioner reviews the return and issues a notice of assessment, determining the taxable income and tax payable

The assessment stage in the Australian tax dispute process involves the following key steps:

• After a taxpayer lodges their tax return, the Commissioner of Taxation reviews the return and any other relevant information to ascertain the taxpayer’s taxable income and the tax payable thereon
• The Commissioner is required to serve a written notice of assessment on the person liable to pay the tax. This notice communicates the result of the assessment process, specifying the amount of taxable income and tax payable
• The notice of assessment can be served personally, by post, or electronically (for those who lodge electronically). The date of service is important for determining objection periods and payment due dates
• For full self-assessment taxpayers, the return itself is deemed to be a notice of assessment, served on the day the return is lodged
• The notice of assessment does not need to be in any particular form but must bring to the taxpayer’s attention that it is an assessment of their tax liability for a particular taxable income
• Once the notice is served, the taxpayer is liable to pay the assessed tax by the specified due date. The taxpayer also gains rights to object to the assessment if dissatisfied

This stage formalises the tax liability and sets the foundation for payment, objection, and any subsequent dispute resolution steps.

3. Payment or refund: Tax is paid through the year (e.g., PAYG). If the assessed tax exceeds payments, the taxpayer pays the balance; if payments exceed the assessment, a refund is issued

The payment or refund stage in the Australian tax process involves the following steps:

• Throughout the year, taxpayers typically pay tax via the Pay As You Go (PAYG) system, which includes withholding by employers and instalments for businesses
• After the Commissioner issues the notice of assessment, the tax paid during the year is credited against the assessed tax liability.
• If the tax paid exceeds the assessed tax, the taxpayer is entitled to a refund. The refund is generally credited directly to the taxpayer’s nominated bank account, and interest may be payable on the amount refunded if certain conditions are met
• If the assessed tax exceeds the payments made, the taxpayer must pay the balance by the due date specified in the notice of assessment. Payment can be made using approved methods such as BPAY, credit/debit card, direct credit/debit, cheque, or in person at Australia Post
• Taxpayers should ensure that all credits for tax already paid are properly accounted for before making any additional payment
• If a taxpayer is unable to pay the full amount by the due date, the ATO may allow payment by instalments, but general interest charges will accrue on outstanding amounts
• Failure to pay by the due date may result in penalties and recovery action by the ATO.

This stage ensures that taxpayers either settle any outstanding tax liability or receive a refund for any overpayment, finalising the financial aspect of the assessment

4. Objection: If dissatisfied with the assessment, the taxpayer may lodge an objection within the statutory time limits. The ATO reviews the objection and issues a decision

During the objection stage in the Australian tax dispute process:

• If a taxpayer is dissatisfied with a tax assessment or certain other decisions made by the Commissioner, they may lodge a formal objection within the statutory time limits specified by law.
• The objection must be in writing, state the grounds for the objection, and be lodged in the approved form.
• The Commissioner reviews the objection, considering the taxpayer’s arguments and any supporting evidence provided.
• The Commissioner then makes a decision to either allow or disallow the objection, in whole or in part, and issues a written notice of the decision to the taxpayer.
• If the objection is allowed, the assessment or decision is amended accordingly. If disallowed, the taxpayer may proceed to the next stage of review or appeal.

This stage provides taxpayers with an opportunity to formally challenge assessments or decisions before seeking external review.

5. Review or appeal: If the taxpayer is dissatisfied with the objection decision, they may seek further review by the Administrative Review Tribunal (ART, formerly AAT) or appeal to the Federal Court. Further appeals may be available to higher courts

During the appeal stage of a tax dispute in Australia, the following steps are involved:

• If a taxpayer is dissatisfied with the objection decision made by the Commissioner, they may seek further review by applying to the Administrative Appeals Tribunal (AAT) or by appealing to the Federal Court. The application or appeal must generally be lodged within 60 days of service of the notice of the objection decision
• The taxpayer (appellant) must file an application in the approved form, stating the details of the objection decision and the grounds for appeal. The application is filed in the appropriate registry, depending on the taxpayer’s location or business operations
• The appeal is generally limited to the grounds stated in the original objection, unless the AAT or Court allows otherwise. The taxpayer bears the burden of proving that the assessment is incorrect and what the correct taxable income should be
• In the Federal Court, the appeal is heard by a single judge and is usually confined to questions of law if it is an appeal from the AAT
• The Commissioner must file relevant documents, including the notice of objection decision, the original objection, and any related returns or documents, within 28 days of being served with the notice of appeal
• The Court or Tribunal reviews the Commissioner’s decision and may confirm, vary, or set aside the decision. The Commissioner is required to give effect to the Court’s order within 60 days of it becoming final
• Liability to pay the assessed tax is not suspended during the appeal process, but the ATO may allow payment deferral in genuine disputes

This stage provides taxpayers with an independent review mechanism and the opportunity to challenge the Commissioner’s decision before an external body or court.

6. Recovery and enforcement: If tax remains unpaid, the ATO may commence recovery proceedings as a civil debt. Liability to pay tax is not suspended pending the outcome of a dispute

The recovery and enforcement stage in the Australian tax dispute process involves the following key steps:

• Once tax is due and payable, any unpaid tax becomes a debt owed to the Commonwealth of Australia. The liability to pay tax is a civil obligation, and the ATO may commence civil proceedings to recover the debt in any court of competent jurisdiction
• The ATO may use a range of enforcement measures, including issuing garnishee notices to third parties (such as banks), accepting payment by instalments, accepting security for payment, or initiating legal action that may result in bankruptcy or liquidation of companies
• The ATO may also use estimates of PAYG withholding, superannuation guarantee charge (SGC), and GST liabilities to recover amounts owing
• If the taxpayer cannot be found, or is overseas, the ATO may serve recovery documents by post to the last known address or seek substituted service orders from the court. Cross-border recovery may be pursued under international treaties
• Liability to pay assessed tax is generally not suspended pending the outcome of an objection, review, or appeal. The ATO can continue recovery action even if the dispute is ongoing, except in limited circumstances for small business entities where the AAT may pause recovery
• If a taxpayer is unable to pay, they should contact the ATO to discuss payment arrangements. Failure to pay may result in further enforcement action, including use of refunds or credits, director penalty notices for companies, or statutory demands

This stage ensures that the ATO has robust mechanisms to recover unpaid tax, regardless of ongoing disputes, and provides options for taxpayers to manage payment difficulties.