Using ATO in-house facilitation to resolve tax disputes

I recently represented a client in a drawn-out dispute with the ATO about how the tax law applied to a particular amount of money. We had applied for a Private Ruling, but we didn’t get the answer we wanted. Instead of objecting to that Private Ruling (click here to find out why), we lodged tax returns that were in line with the Ruling, and then objected to those tax assessments.

After months of back and forth about the objection, the ATO invited us to participate in in-house facilitation, during which we were able to resolve the issue.

Overall, the in-house facilitation was a very positive experience. Of course, the details of that exact in-house facilitation is confidential. However, if you’re considering in-house facilitation, here is some information that might help.

What is in-house facilitation?

In-house facilitation is a free mediation process between you and the ATO. The facilitator is an ATO officer who has been trained in the role and who must act impartially.

The facilitator only facilitates – they do not make any decisions that are binding for either you or the ATO. They do not take sides, or give advice on what they think is right or wrong.

Depending on the nature of your issue with the ATO, the purpose of the in-house facilitation will be to:

  • identify the issues that are at the heart of your dispute;
  • develop options for proceeding;
  • attempt to reach a resolution or settlement between you and the ATO.

If you don’t resolve the issue during the in-house facilitation, then you can proceed with your other options under the law (such as lodging an objection or appealing a decision to the Administrative Appeals Tribunal or the Federal Court). These options should not be affected in any way by the in-house facilitation.

When might in-house facilitation be helpful?

In-house facilitation is aimed at small businesses and individuals, but it can be accessed by other taxpayers too. Generally speaking, it can be most helpful if you are at the audit or objection phase of an ATO dispute.

The purpose of in-house facilitation is for the ATO to engage with you about disputed issues as early as possible, to reduce the number of cases that are litigated in the AAT or the Federal Court.

An example of where the facilitation can be helpful is where you think that the ATO officer conducting your audit or considering your objection is just plain wrong on an issue, but you are having trouble getting them to see this. They may be able to see things more clearly once they have to explain it to you with an independent person in the room.

Who can propose in-house facilitation?

Either you or the ATO can propose the in-house facilitation. In most cases, the in-house facilitation occurs at the request of the taxpayer.

If you want to propose in-house facilitation, you need to lodge a ‘Request for in-house facilitation’ form, which is available on the ATO’s website.

Should I be represented at in-house facilitation?

In my view, the answer to this is YES.

This isn’t because the facilitation is complicated or has any particular rules about presenting evidence or making arguments. It is absolutely possible to go to a facilitation on your own and present your own arguments.

However, if you have a tax lawyer representing you, then you will have an expert in the room who understands your situation, the law that applies and the arguments that the ATO might raise.

In-house facilitation is your chance to resolve a dispute with the ATO in a straightforward way, without having to go to the expense of going to the AAT or Federal Court.

By turning up to in-house facilitation with your expert tax lawyer, you will be putting yourself in the best situation possible to resolve the matter there and then. If you are unprepared for the in-house facilitation, then you could be throwing away your opportunity to resolve the issues early, without the Court’s involvement.

Remember that the ATO will be bringing their expert. To make the best out of the process, you should bring yours too.

Who makes the decision during in-house facilitation?

In-house facilitation relies on you and the ATO reaching an agreement in order for it to be successful. There will be a facilitator (or two) in the room – but their role is to keep the discussion on track and help the parties in discussing the issues. The facilitator cannot make a decision about what happens next.

Do I get time to speak privately with my tax lawyer during the facilitation?

Yes. The facilitators will make sure that you get time to discuss the issues and any potential settlement offer in private with your lawyer.

For this reason, it is important to make sure that the venue for the facilitation has at least 2 rooms for the facilitation – one room in which everyone comes together, and another room that you can move into for your private discussions. Ideally, these rooms won’t be next to each other, so you have some real privacy.

The ATO has appropriate venues for in-house-facilitation, but you may prefer to have it somewhere else (such as your tax lawyer’s office).

What happens at the end of the in-house facilitation?

You may fully resolve an issue during in-house facilitation, in which case, you will generally enter into either a Heads of Agreement or a Settlement Deed with the ATO before leaving the facilitation. If you only sign a Heads of Agreement, then the ATO should prepare a Settlement Deed in the weeks following in-house facilitation.

You may only partially resolve the matter with the ATO – for example, you might decide how tax will apply for one particular year, but you may not resolve how it will apply for another income year.

For any issues that you don’t resolve during the in-house facilitation, you can still pursue your other rights, such as objecting or appealing to the AAT or Federal Court.

My tips for in-house facilitation

I have three key tips for being involved in in-house facilitation.

Be prepared

In-house facilitation is your chance to deal with the matter without it escalating to a costly AAT or Federal Court process. Make the most of the opportunity by being prepared and ready to present a strong case to the ATO.

Have a solid basis for a settlement offer

Don’t try to settle on just a number. The ATO needs objective criteria to support any settlement that it agrees to. It is not enough to just offer an amount of money for them to “walk away”, without being able to justify why this is appropriate given the facts and the law. This ties back into the first tip – be prepared. Be able to show them why any settlement you offer makes sense in the circumstances.

Think about the timing of the outcomes

Depending on what has been agreed and what the next steps are, you may want to push to have a Settlement Deed signed during the in-house facilitation (rather than just a Heads of Agreement). This would be ideal where you are expecting a tax refund – you want the whole thing finalised quickly, so that your refund is back in your account as soon as possible. On the other hand, if you need to pay the ATO some money under the terms of the settlement, you may not be too concerned with how quickly that paperwork is completed.

Next steps

If you have a dispute with the ATO that you don’t know how to deal with, or that you think could benefit from in-house facilitation, then call me on 0486 041 442, 1300 75 84 84 or get in touch with me here to arrange a consultation.


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