In a recent IGTO investigation, the complainant asked the Commissioner to exercise his discretion to refund the complainant’s 2023 tax refund instead of offsetting against his tax debt. The complainant was in urgent need of his refund to prevent an immediate risk of homelessness, which he had provided evidence of.

The complainant’s original request was denied. The ATO advised that it was too late. This was because he entered into a payment arrangement after his 2023 income tax credit had been posted to his account (the complainant had called to enter a payment arrangement the day after lodging). The complainant was provided with this advice on at least seven separate occasions by the ATO.

During the IGTO investigation, the ATO provided the IGTO with internal ATO (OPAL) advice that was contrary to their original decision. The advice confirmed the Commissioner’s discretion to refund instead of offsetting is available if a complying payment arrangement is entered into before the credit crystallises – when the Notice of Assessment is issued. OPAL also clarified that it is not necessary for a payment to have been made under the payment arrangement for it to be considered compliant.

Despite the OPAL advice, the deciding officers re-considered the complainant’s request and maintained their position, in part, on the basis that the complainant had a history of compliance issues. The facts show the complainant had one adverse audit, and the ATO was aware the complainant intended to object to this outcome when they were in a financial position to do so.

The ATO had confirmed on two occasions that the complainant’s circumstances fell under serious financial hardship. The deciding officers denied the request by placing great weight on one compliance issue and the resulting advantage compared to compliant taxpayers, but only gave a brief reference to the demonstrated hardship claim that masked the serious and immediate risk of homelessness that would
ultimately result.

Following urgent discussions between the IGTO and senior ATO officers, the ATO reversed their decision, and the complainant has since been provided his refund.

A sole trader taxpayer had a dispute (or unresolved complaint) with the ATO concerning its intention to disclose a $590,000 tax debt to Credit Reporting Bureaus (CRB) and had been offsetting their tax refunds against the debt. The taxpayer believed the ATO was discriminating against them given they were previously incarcerated and a discharged bankrupt.

The IGTO’s investigation found that there was a primary tax debt amount of $100,000 which was incurred in 2005, however, by 2008 the taxpayer entered bankruptcy and was discharged in 2011. Accordingly, the primary debt amount and interest accrued until the time of discharge should have been treated by the ATO as irrecoverable at law. However, the ATO was unaware of the bankruptcy and discharge, and the debt accrued interest for 15 years which resulted in the total debt amount of $590,000.

As a result of the IGTO’s investigation, the ATO treated the debt as irrecoverable at law, did not disclose any debts, and returned refunds to the taxpayer. The taxpayer was satisfied with the outcome of the IGTO’s investigation, stating “I really appreciate your help. It’s rare to find someone these days that would go out their ways to help people like me.”

The director of a small business company contacted our office in relation to the difficulties she was experiencing in trying to address her company’s debt with the ATO. The ATO had raised superannuation guarantee charge assessments and issued a director penalty notice (DPN) despite the director’s insistence that payments towards the debt had already been made.

The IGTO investigated the allocation of payments in the ATO’s systems, and provided independent assurance that her payments were made to the proper accounts, according to the ATO’s policies and procedures. However, as a result of our investigation of the complaint, the ATO reviewed the issue of the DPN and confirmed that it had accepted the director’s defence. Accordingly, the ATO withdrew the notice.

The ATO issued a garnishee notice to a taxpayer for debts from a former partnership business. The taxpayer was travelling at the time and the garnishee notice resulted in them losing access to funds whilst in a foreign country.

Our investigation revealed that in 2016 the ATO had advised the taxpayer that they would not be pursued for debts from the former business. Although, this advice was not correct at law, it was nonetheless provided and the taxpayer relied upon it. To resolve the complaint the ATO honoured its earlier advice to the taxpayer and returned the garnished funds. The ATO apologised and also took steps to ensure that no future debt collection actions would be taken against the taxpayer.

The complainant, who is a single mother of two children and legal guardian of her aging father, was concerned with the ATO offsetting her Centrelink Family Assistance (CFA) payment of approximately $8,000 towards a debt of $23,000. She did not receive the $8,000 CFA payment, but instead had a debt of approximately $15,000 remaining after the offset. She was relying on the $8,000 Centrelink payment to support her family, as she was unemployed at the time due to undertaking full time care responsibilities for her children and her father.

Through the IGTO complaint process, the ATO agreed to refund the $8,000 offset from Centrelink, by recognising that it was not appropriate to pursue debt collection given her circumstances at the time.

The complainant applied to the ATO for a full remission of General Interest Charge (GIC) on all tax debts due to their extenuating personal circumstances. The complainant had three separate tax debts on which GIC had accrued for a period of over 12 years and two of these debts had been subject to a court-imposed judgment during this time.

The ATO approved the complainant’s remission request and proceeded to remit all GIC on their ATO account. However, the complainant was concerned that the amount remitted did not reflect a full remission of GIC on all their tax debts. The complainant remained unsatisfied with the ATO’s responses to clarify the amount, and raised their concerns with the IGTO.

As a result, the IGTO commenced an investigation to determine whether all GIC on the complainant’s ATO account had been remitted. Following the IGTO’s examination and reconciliation of over 200 account postings on the complainant’s ATO account, the IGTO observed that, due to an oversight on the ATO’s behalf, GIC had not been remitted for one of the complainant’s tax debts and only a partial GIC remission had been applied to the two debts that were subject to a court judgment.

Consequently, the IGTO identified a significant amount of GIC remaining on the complainant’s account, which was then remitted by the ATO as a result of the IGTO’s investigation.

A representative raised concerns with our office that their client was in the process of selling his business and intends to use the funds from the sale of the business to pay his outstanding tax debts. The representative explained that their client had been negotiating for 22 months with the ATO and had offered his residential property and his business as security until  the business sale process completed and he repaid the debt. However, the ATO had not accepted their client’s proposed assets as security for his outstanding tax debts and was looking to refer their client’s business tax debts to the credit reporting bureaus.

The original outcome that the representative had sought was for their client’s case to be reassigned to a new ATO case officer in the interest of ongoing procedural fairness. We explained to the representative that it is unlikely the ATO would agree to reallocate their client’s case to a new ATO case officer if no specific reason for the request can be identified. Instead, the representative and our office agreed that the new outcome we would investigate was to better understand the reasons why the ATO declined to accept their client’s proposed assets as security and the options that may be available to refrain the ATO from referring their client’s business tax debts to the credit reporting bureaus.

During discussions with the ATO, we acknowledged the events that had led the ATO to the disclosure of the business tax debt warning letter. However, we explained to the ATO that the client’s proposed assets as security sufficiently covers the outstanding tax debt and it would be reasonable for the ATO to defer referral of the debt to credit reporting bureaus whilst the client was in the midst of selling their business. The ATO provided the IGTO with its reasons for declining the security offer. We discussed with the ATO the remaining reasons why the ATO did not accept the client’s proposal and identified reasons, including certain missing information, supporting documents that the ATO required and its concerns about the progress in the realisation of assets.

We shared our investigation findings with the representative and encouraged the representative to continue discussions with the ATO. The representative confirmed that they have since provided the ATO with the supporting documents the ATO required to evidence the progress of the sale of the business. As a result, the ATO has agreed to place a hold on referring their client’s business tax debt to credit reporting bureaus and granted a deferral of recovery action whilst further information was to be provided by the representative.

A complainant that had recently been diagnosed with stage four prostate cancer, was advised (by their doctor) to have surgery as soon as possible to remove the cancer. Understandably, the surgery was time critical.  The complainant needed to borrow money from a family friend to make the upfront payment for the surgery as well as other medical expenses. The complainant intended to repay their family friend by applying for an early release of their superannuation on compassionate grounds.  Applications for compassionate release of superannuation are set out in regulation 6.19A of the Superannuation Industry (Supervision) Regulations 1994 and are currently administered by the ATO but have previously been administered by the Department of Human Services (DHS) and the Australian Prudential Regulation Authority (APRA).  

As per section 4 of the Superannuation Industry (Supervision) Act 1993 – the Commissioner of Taxation is generally responsible for self-managed superannuation funds, data and payment standards, tax file numbers and the compassionate release of superannuation amounts. 

Importantly, there has not been any legislative changes to the eligibility for early release of superannuation on compassionate grounds across the different periods of administration – that is, by the ATO and DHS, and APRA. 

Following the ATO’s consideration of the complainant’s application, the ATO informed the complainant that their application had been rejected on the basis that the surgery and medical expenses had already been paid. The ATO’s policy was to only approve compassionate release of superannuation for unpaid expenses. Therefore, if the expense had already been paid, for example by using a loan, a credit card or money borrowed from family or friends, then the applicant would not meet the eligibility requirements for compassionate release of superannuation. The complainant sought an internal review of the ATO’s decision which affirmed the ATO’s original decision. 

The complainant subsequently lodged a dispute with the IGTO. The IGTO’s investigation initially focused on the legislative basis that the medical expenses for early release of superannuation on compassionate grounds had to be unpaid. The IGTO also referred the ATO to a 2014 version of the DHS’s website which suggested that applications for compassionate release of superannuation to repay a loan, where an applicant borrowed money to pay for their medical expenses, may have been approved. Accordingly, the IGTO recommended that the ATO reconsider the complainant’s original application based on the specific circumstances. The ATO responded that further reconsideration of the complainant’s original application would not lead to a different outcome. 

The IGTO further examined the relevant legislative provisions and identified that it included a specific paragraph which provided the ATO with legislative residual discretion to approve release on grounds that are consistent with the compassionate grounds of release in the legislation. The IGTO formed the view that this legislative residual discretion could be applied to the complainant’s circumstance.  

The IGTO also further investigated the circumstances described on the 2014 version of the DHS website. This led the IGTO to locate a publicly available version of APRA’s guidelines from 2001.  The APRA guidelines stated that when an applicant had incurred debts by borrowing money to pay for expenses that were ordinarily grounds for compassionate release and have difficulties repaying the loan, then a release for the relevant expense can be approved under the legislative residual discretion. Furthermore, the guidelines set out what evidence was required from applicants at the time to approve their applications for early release of superannuation. 

The IGTO escalated its investigation to Senior ATO Executives and provided to them the evidence of how previous administrators would consider and approve applications for early release of superannuation on compassionate grounds to repay a loan that was paid for expenses such as medical expenses that were ordinarily grounds for compassionate release. The IGTO also communicated its view to the ATO that if the ATO were to adopt this approach, then further information would be required from the complainant to determine if they were eligible on this basis. 

The ATO established that the DHS approach in 2014 would not have resulted in a release of superannuation to the applicant, and that this outcome was also implicit in the guidance materials provided when administration passed to the ATO in 2018.   

Following the ATO’s further review of the relevant legislation and the policy intent, however, the ATO informed the IGTO that it had determined that a release of superannuation can be granted in certain limited circumstances where: 

1. a loan was taken out by an applicant to pay for medical treatment for themselves or their dependant,   
2. the applicant would have been eligible for release under the primary compassionate ground if the expense had not been paid, and 
3. all or part of that loan remains unpaid, and the applicant is assessed as being unable to repay such a loan. 

As a result of the ATO’s change in policy, it was agreed for the ATO to directly contact the complainant and request the relevant evidence required to determine whether the complainant was eligible for compassionate release on this basis. 

Once the ATO contacted and obtained the relevant evidence from the complainant, the ATO made the decision to approve the complainant’s request for early release of superannuation on compassionate grounds to repay the loan that was obtained from a family friend to pay for the complainant’s surgery and medical expenses.  

As a result of the IGTO’s investigation, the ATO has also agreed to review all of its internal guidance material and publicly available information to determine what changes are necessary to reflect this update to the ATO policy.