ATO Code of Settlement Practice

The Tax Office has issued a revised Code of Settlement Practice effective 21 February 2007.

The Code provides guidance for Tax Office staff on:

• the settlement of taxation disputes in relation to all taxpayers
• where settlement could be considered, and
• outlines the processes which should be followed.

The Code is intended to provide guidance on the following principal matters:

• what constitutes a settlement, including special considerations that apply to borderline questions of fact and law, and disputes as to quantum 
• the legal basis for making settlements in taxation disputes, and the scope of the "good management rule" 
• whether a settlement is appropriate in view of factors such as:
  • whether there is an actual or pending ATO view;
  • the likelihood of inconsistent treatment;
  • the likelihood or desirability of litigation;
  • the possible effect on compliance;
  • the ability of the taxpayer to pay;
  • the availability of alternative methods of dispute resolution;
  • any other special factors; and
  • additional considerations that apply to global settlements 
• the relationship between settlement procedures and actual or potential prosecution action, and the procedures that must be followed in such cases, including notification requirements 
• the appropriate treatment of penalties and interest charges in cases involving settlements 
• the procedures that should be followed in negotiations for a settlement, including approval of decision makers, establishment of the ATO view, obtaining advice from counsel, the conduct of proceedings, documentation requirements and the avoidance of conflicts of interest, and
• the procedures that should be followed in making and documenting a settlement agreement and determining its scope, including ensuring that it complies with the Code and lodgment on the Settlement Register.