If you are in litigation with the ATO, expect them to use dirty tricks on you.
Below is a list of the dirty tricks that I have personally seen used on my clients:
- Muddying the issue – when you appeal the ATO will sometimes “defend” a claim you did not make, thereby muddying the issue and also making their case look stronger. Imagine if you were claiming a simple $1,000 debt from someone and in their defence they write about how they didn’t steal your groceries. It makes your case look strange. Because it is coming from the ATO it sounds credible.
- Asking the Court to set a timetable they know you can’t meet. When in Court you need to do things by certain times, for example, file your evidence, or your submissions, or issue subpoenas. The ATO will find out when you are not available and will ask the Court to make that the deadline. This means you can’t run your case properly.
- Not letting you access your own evidence. I had one where we asked for evidence to be provided under subpoena and had a tight deadline. The ATO turned up and took the evidence from the Court (which they are allowed to do) and kept it meaning we didn’t have access and it made it hard for us to meet the deadline. This means you can’t run your case properly.
- The ATO will hire private (non-government) lawyers to get around the need to behave under the model litigant requirements. These private lawyers are incentivized to rack up costs by creating additional procedures. The ATO is happy to pay as it has deep pockets, but for the taxpayer this is a problem because the ATO is using its financial resources to ensure that taxpayers can’t run their case properly.
- The ATO will ignore comments by the judge if they think they can put pressure on you. Sometimes the judge will look at the case early and suggest the ATO should settle because the ATO’s case doesn’t look strong. The ATO will ignore this and try to win at all costs.
When they pick on a small business which has limited funds they expect the business to run out of money early in the process, which gives them a victory. If the small business manages to survive until Court then the ATO will try to drain them until they give up.Unsurprisingly, small businesses actually have the lowest success rates in litigation against the ATO. However, if you are clever and persistent enough, you can and will win in the end.
Adam Ahmed is an Australian international tax lawyer. Adam has over a decade of experience working at 3 of the big 4 accounting firms and one of the top tax law firms in Australia. He is currently the managing director of Adam Ahmed & Co.