Quantifiable administered contingencies

At any point in time, the ATO is involved in a range of dispute resolution processes, including litigation, relating to tax disputes. Details of the outcome of dispute resolution processes are uncertain until a court ruling is made and/or an agreement is reached with the taxpayer at some future date. In most cases it is not possible to estimate with any reliability the likely financial impact of current disputes.

The ATO is designing system functionality to automatically identify, calculate and pay interest on early payment entitlements to taxpayers. If successfully deployed, the ATO may expand the system build to include payment of historical amounts which would be completed no earlier than December 2022. The success of the expanded system build is dependent on several risks and uncertainties that gives rise to a less than probable but more than remote possibility of economic outflows. As at 30 June 2021, historical entitlements are estimated to be $221m.

Unquantifiable administered contingencies

In some cases, the decision in relation to the cases above will be precedential. No estimate is able to be made as to whether contingent liabilities exist with respect to other taxpayers who may be impacted as a result of the decision.

As a result, in most cases it is not possible to estimate with any reliability the likely financial impact of current disputes to other taxpayers who may be impacted by a decision. The ATO acknowledges that the incidence of tax evasion and other breaches of the taxation laws, unavoidably affect its fiduciary responsibilities to the Australian Government.

Accounting policy

The amount disclosed as a quantifiable administered contingent liability represents the total tax in dispute for cases assessed on an individual basis where an allowance or provision has not been made.

These amounts represent the disputes for which the ATO has assessed that there is a possible, but not probable, reduction to the amount of tax payable. The future financial impact will likely be lower than the total disclosed as a proportion of these cases will be decided in favour of the Commissioner.

Refer to Note 14 for the accounting policy on allowance for credit amendments and provisions for refunds.