Disputing a Tax Debt with the ATO: Your Legal Rights
Receiving a notice from the Australian Taxation Office (ATO) about an outstanding tax debt can be stressful, especially if you believe the assessment is incorrect or unfair. Fortunately, Australian Financial Services and Tax Law provides several legal avenues to challenge or negotiate tax debts with the ATO.
Understanding your rights, obligations and the formal dispute process is key to resolving the matter effectively. In this article, we’ll explore how to dispute a tax debt with the ATO, and what legal protections and strategies are available to individuals and businesses.
Understand Your ATO Tax Debt
The first step is to clearly understand the tax debt in question. The ATO may issue a debt due to unpaid income tax, BAS, GST, PAYG instalments or interest and penalties. It’s important to review the notice thoroughly and verify that the amount is correct.
If you believe the debt has been calculated incorrectly or based on inaccurate information, you have the right to challenge it under Australian tax law.
Know Your Legal Rights
Under Australian Financial Services and Tax Law, taxpayers have a right to:
Be treated fairly by the ATO
Request a full explanation of any tax decision
Lodge an objection or appeal
Seek external review through independent bodies like the Administrative Appeals Tribunal (AAT)
Negotiate a payment plan or request a remission of penalties
The ATO also has an obligation to consider whether a taxpayer is experiencing financial hardship when recovering debts.
Lodge a Formal Objection
If you disagree with a tax assessment or decision, you can lodge a formal objection with the ATO. This must be done in writing, using the ATO's Objection Form, and clearly outline:
Why you disagree with the debt
Any relevant evidence supporting your position
The changes you believe should be made
Objections must be lodged within the prescribed time limit, usually 60 days from the date of the original notice. Failing to act within this timeframe may reduce your options.
Seek Internal Review or Dispute Resolution
If you're not satisfied with the ATO's response to your objection, you can escalate your matter through:
ATO’s in-house facilitation (a mediation process)
Independent Review for Small Business, where applicable
These are designed to resolve tax disputes quickly and fairly without the need for costly litigation.
Escalate to the Administrative Appeals Tribunal (AAT)
If internal review fails, you may apply to the Administrative Appeals Tribunal (AAT) for an independent review. The AAT is not bound by the ATO’s decision and can reassess the facts and law.
This process is more formal, but still designed to be accessible without requiring court proceedings. Legal representation, however, is highly recommended to improve your chances of success.
Contact the Inspector-General of Taxation (IGTO)
If you feel that the ATO has treated you unfairly during the dispute process, you can raise a complaint with the Inspector-General of Taxation and Taxation Ombudsman (IGTO).
The IGTO investigates concerns about how the ATO has handled tax matters and may recommend corrective action.
Consider Financial Hardship Relief
If you're unable to pay the debt, even if it is correct, you can request:
Payment plans
Debt deferral
Remission of penalties and interest
Serious hardship relief
The ATO has guidelines for recognising when tax recovery would leave a person unable to provide for basic living needs. In these cases, parts of the debt may be waived or repayment terms relaxed.
Get Legal Support Early
Disputing a tax debt can be complex, especially if you're dealing with multiple years, penalties or business-related tax issues. Engaging a solicitor who specialises in Financial Services and Tax Law can help:
Identify errors in the ATO’s calculations
Prepare legal arguments and evidence
Represent you in objections and tribunal hearings
Negotiate with the ATO for a fair resolution
You have the right to challenge a tax debt in Australia if you believe it’s incorrect, unfair or impossible to repay. The law provides several mechanisms for objection, review and relief. Acting quickly, staying informed, and seeking legal guidance will give you the best chance of resolving the issue with minimal stress.
At New South Lawyers, our Financial Services and Tax Law experts help individuals and businesses dispute unfair tax debts, navigate complex ATO processes, and protect their financial future. If you’re facing tax pressure, don’t go it alone—
