Practice Statement PS CM 2004/05 (RM)

Transcription

1 FOI status: May be released This Corporate Management is issued under the authority of the Commissioner and must be read in conjunction with PS CM 2003/01. Corporate Management s are endorsed corporate policy and must be followed by ATO employees. In circumstances where the anticipated impact is likely to result in unintended consequences, matters are to be referred to Corporate Directions. SUBJECT: PURPOSE: Handling compensation and similar monetary claims against the ATO To explain the policies and procedures to be followed in the handling and settlement of monetary claims against the ATO; and To ensure compliance with Commonwealth policies in the settling of these monetary claims. SUMMARY OF MAIN POINTS Monetary claims against the ATO will generally take the following forms : o o court, tribunal or other formal proceedings/litigation eg. civil action by taxpayers in negligence, unfair dismissal action by employees, discrimination complaints to the Human Rights and Equal Opportunity Commission (HREOC); a direct claim to the ATO for compensation eg. a claim by a taxpayer or tax agent arising from the conduct of an audit. all claims must be dealt with in accordance with the relevant Commonwealth policies viz. the Legal Services Directions (the LSDs) issued by the Attorney-General under section 55ZF of the Judiciary Act 1903, and the scheme for Compensation for Detriment Caused By Defective Administration (the CDDA scheme); the settlement of claims on the basis of legal liability should only be made by a person with a delegation under section 44 of the Financial Management and Accountability Act 1997 (FMA Act) to approve payments for settlement of legal liability; where no legal liability exists, claims must be considered under the CDDA scheme. o only the occupants of certain positions in the ATO have been authorised by the Minister for Revenue and Assistant Treasurer to approve payments under this scheme where the claim does not exceed $50,000. o a current list of approved officers can be obtained from the ATO General Counsel; existing and former ATO employees claims against the ATO are settled in the same way as non-employee claims, with the additional scope for payment under section 73 of the Public Service Act Page 1 of 12

2 STATEMENT Definition and Scope 1 All monetary claims against the ATO must be dealt with in accordance with the policies and procedures set out in this. 2 All monetary claims against the ATO, irrespective of the form that the claim takes or the forum in which it is made, must be lodged and registered centrally with the ATO General Counsel in the Legal Services branch of the Office of the Chief Tax Counsel (OCTC) in National Office. The only exception to this are claims by employees under the Safety and Rehabilitation Compensation Act These claims should continue to be lodged through the relevant Human Resources area in ATO Relations. 3 Any tax officer who receives a claim from any person for the payment of money arising from a dispute with or action by the ATO or its employees and agents is obliged to refer that claim in the first instance to the ATO General Counsel. 4 The ATO General Counsel is responsible for maintaining a central register of claims against the ATO. BSLs have responsibility for processing all claims for $2,000 or less. The ATO General Counsel is responsible for processing all claims greater than $2,000. However, the ATO General Counsel is also ultimately responsible for the way in which all claims, regardless of quantum, are processed by the ATO. 5 All claims must be acknowledged within three business days of receipt of the claim. That acknowledgment must also give the name and contact number of the person who is responsible for handling the claim. Claims must be processed within strict time frames (see Explanation below). 6. Claims in excess of $10,000 and claims for $10,000 or less that are complex by their nature may take longer to investigate and consider. Where it is necessary to do so, the claimant must be contacted within seven working days of receipt of the claim to negotiate an extended reply date. EXPLANATION Page 2 of 12

3 7. A person usually makes a monetary claim against the ATO to put the person back into the position he/she would have been in had the particular impugned action or conduct not occurred. This usually involves the payment of compensatory damages. However, it is generally recognised that no amount of money will fully compensate some losses. Indeed, sometimes, money is not the best way to compensate a loss. 8. There are two broad bases by which the ATO assesses claims for compensation. These are: compensation for legal liability (eg. negligence); compensation for detriment caused by defective administration. 9. The policy on when and how compensation can be paid by any Commonwealth Agency, including the ATO, is definitively set down in written Government policy and guidelines established by the Department of Finance and Administration and the Attorney- General s Department. These policies are described below. 10. If the ATO is not liable to pay compensation under either of the two bases above, a person can apply for an act of grace payment. These payments are administered by the Department of Finance and Administration, and not the ATO. 11. The table below summarises the way in which all monetary claims are to be dealt with by the ATO. Note: All claims must be registered with ATO General Counsel when they are received. Quantum of Claim BSL Responsible for Processing Claim Level of Documentation Required to Support Claim Settlement Deed and Release Required Time By Which Claim Must be Processed by the ATO < $300 BSL responsible for the action or conduct giving rise to the claim Minimal * No 28 days Page 3 of 12

4 $300 to $2,000 BSL responsible for the action or conduct giving rise to the claim Minimal * Preferred 28 days $2,000 to $10,000 OCTC (ATO General Counsel) Minimal Substantial * Yes 28 days > $10, 000 OCTC (ATO General Counsel) Substantial * Yes to be agreed with claimant * The level of documentation required should be commensurate with the quantum of the claim Central lodgement and registration of claims 12. All claims will be lodged and registered centrally with the ATO General Counsel in the Legal Services branch of OCTC. The relevant contact details are as follows: ATO General Counsel Australian Taxation Office PO Box 900 CIVIC SQUARE ACT 2608 Telephone: Facsimile: compensation.application@ato.gov.au Claims should be lodged on the application form attached to the ATO Publication Compensation: Application and ATO Guidelines. However, if a claimant does not use the application form, it will be necessary for the claimant to provide all information relevant to the making of a claim, including the reason for claiming compensation and any documentation that supports the claim. 13. The toll free compensation helpline is available to provide assistance of a general nature about ATO compensation policies and procedures. It can also be used by a person who is having difficulty ascertaining the progress of a particular claim. However, once a claim has been allocated to an ATO officer, all enquiries made to the helpline must be referred to the case officer. It is the responsibility of the case officer to communicate the status of the claim to the claimant and to clarify any issues that will enable the claim to be finalised. Page 4 of 12

5 General principles to be applied in handling claims 14. Under section 44 of the FMA Act, an Agency Head must manage the affairs of the Agency in a way that promotes proper use of the Commonwealth resources for which the Agency Head is responsible. The proper use of resources means the use which is efficient, effective and ethical. 15. A delegate under the FMA Act is subject to this obligation when determining monetary claims against the ATO. There must be a balance between the competing public interests of: (i) verifying claims against the Commonwealth, to ensure there is integrity in the claims assessment process; and (ii) ensuring claims are processed efficiently in accordance with community expectations and risk management principles. 16. Where the balance lies in particular cases will depend on the facts of the case. Generally, the time and agency cost of processing claims should be proportionate to the quantum of the claim. For example, the amount of time spent on verifying a claim for $50 would usually be substantially less than the time spent on verifying a claim for $500. Dealing with small monetary claims ($2,000 or less) 17. BSLs will have the authority to settle claims for $2,000 or less without referring the claim to the ATO General Counsel. BSLs must ensure, however, that these claims are processed fairly, efficiently and in a timely way. Claims for $10,000 or less must be processed within 28 days of receipt in the ATO. Claims in excess of $10,000 must be treated as major claims, and the time for processing those claims should be the subject of agreement with the claimant. 18. Small claims must be processed in accordance with principles of good financial management. This means that the amount of time and resources expended in dealing with a claim should be commensurate with the quantum of a claim. Claims for $2,000 or less can be processed with minimal documentary support from the claimant, provided that compensation is payable in principle. Page 5 of 12

6 19 A claim is payable in principle if, having regard to the particulars of the claim: the facts suggest there is either legal liability or defective administration on the part of the ATO; and it is reasonable to conclude that a loss of the kind claimed could have arisen as a result of the ATO s conduct. Payment on the basis of legal liability 20 All claims must be dealt with in accordance with the existing Commonwealth policies viz. the Legal Services Directions (the LSDs) issued by the Attorney-General under section 55ZF of the Judiciary Act In particular, Appendices B and C to the LSDs (Directions on the Commonwealth s Obligation to Act as a Model Litigant and Directions on Handling Monetary Claims) are particularly relevant (see The key features of these directions in their application to the ATO are as follows: monetary claims can only be settled in accordance with legal principle and practice; to settle a claim, the ATO must be satisfied there is, as a minimum, a meaningful prospect of legal liability being established; the ATO cannot settle claims simply because it is cheaper to settle than to defend a hopeless claim. 22. Additionally, the ATO has an obligation to behave as a model litigant, which means that the ATO must act honestly and fairly in handling claims and litigation brought by or against the ATO by: dealing with claims promptly and not causing unnecessary delay in the handling of claims and litigation; Page 6 of 12

7 paying legitimate claims without litigation, including making partial settlements of claims or interim payments, where it is clear that liability is at least as much as the amount to be paid; acting consistently in the handling of claims and litigation; endeavouring to avoid litigation, wherever possible; where it is not possible to avoid litigation, keeping the costs of litigation to a minimum, including by: not requiring the other party to prove a matter which the Commonwealth or the agency knows to be true, and not contesting liability if the Commonwealth or the agency knows that the dispute is really about quantum; not taking advantage of a claimant who lacks the resources to litigate a legitimate claim; not relying on technical defences unless the Commonwealth s or the agency s interests would be prejudiced by the failure to comply with a particular requirement; not undertaking and pursuing appeals unless the Commonwealth or the agency believes that it has reasonable prospects for success or the appeal is otherwise justified in the public interest; and apologising where the Commonwealth or the agency is aware that it or its lawyers have acted wrongfully or improperly. Payment on the basis of defective administration 23. The Commissioner has a duty to administer the tax law responsibly and reasonably, and to provide accurate, appropriate and unambiguous advice. 24. If we have acted unreasonably, or we have provided wrong or ambiguous information, and this causes a person to suffer a financial (and in some cases non-financial) loss, that person should be compensated for the loss, even if our actions do not give rise to a legal liability. In such cases, compensation may be payable under the CDDA scheme. 25. The CDDA scheme is a uniform Commonwealth administrative (non-statutory) scheme, established in October 1995, to enable Commonwealth agencies to compensate Page 7 of 12

8 persons who have been adversely affected by the defective action or inaction of such agencies, and who have no other avenues to seek redress. 26. Compensation under the CDDA scheme is only available if the ATO has no legal liability to meet a monetary claim. What is defective administration? 27. The CDDA scheme defines defective administration as being one of the following four things: a specific and unreasonable lapse in complying with existing administrative procedures; or an unreasonable failure to institute appropriate administrative procedures; or an unreasonable failure to give to (or for) a claimant, the proper advice that was within the official s power and knowledge to give (or reasonably capable of being obtained by the official to give); or giving advice to (or for) a claimant that was, in all the circumstances, incorrect or ambiguous. 28. Not every mistake the ATO makes, or incidence of a falling short of ATO and/or community expectations, is defective administration. There are a range of performance standards that the ATO publishes and attempts to meet (see the Taxpayer s Charter for more details). The ATO faces the challenge of administering a large and complex tax system with finite resources, and like other large organisations, there will be times when our performance standards may not be met. However, a failure to meet a performance standard is not, of itself, defective administration for which the ATO is liable to pay compensation. Nor is every incidence of human error in ATO processing and administration defective administration. 29. Rather, with the exception of incorrect or ambiguous advice, defective administration is unreasonable conduct and behaviour. It is behaviour or conduct that falls sufficiently Page 8 of 12

9 short of acceptable standards that it warrants the payment of compensation by the ATO for direct losses flowing from that action or conduct. What are the limitations of the CDDA Scheme? 30. The CDDA scheme does not provide the ATO with an unlimited discretion to pay compensation in any case where defective administration is made out. Most importantly, there must be some identifiable loss directly caused by the defective administration to warrant compensation being paid. 31. Broadly, even if there is defective administration, and a person can show that he/she has suffered a loss, the scheme will not provide compensation where: the ATO has a legal liability to the claimant (in which case compensation is paid by way of a settlement of legal liability as explained earlier in this ); or a statutory mechanism will provide an adequate remedy to the claimant (eg objection and appeal rights in Part IVC of the Taxation Administration Act 1953); or the claim is an attempt to overcome the effects of specific legislative provisions that are found to be flawed (an act of grace payment could be appropriate in these circumstances); or the claim is an attempt to offset the payment of a recoverable debt owed to the ATO. 32. The CDDA scheme does not obligate the ATO to approve a payment in any particular case. However the decision whether to approve or refuse a payment must be publicly defensible, having regard to all the circumstances of the case. How should a claim for defective administration be assessed? 33. There are four basic steps that should be followed in assessing a claim for defective administration: Page 9 of 12

10 consider whether the scheme can apply that is, look at the general limitations on its operation; consider whether the actions the subject of the complaint fall within the definition of defective administration; if defective administration exists, determine whether the claimant suffered any detriment ; and quantify the extent of the loss involved. 34. The CDDA scheme is designed to provide a method of paying compensation for administration that is defective without an inflexible application of legal principles. In other words, it provides Commonwealth Agencies like the ATO with a degree of flexibility to pay compensation even though there is no legal liability to do so. In relation to some aspects of the scheme, legal principles and practice are a useful guide to resolving claims. However, the scheme is not intended to be a de facto kind of assessment of legal liability. Rather, claims should be assessed in a practical, flexible and common sense way. This necessarily requires the exercise of sound judgment. Act of Grace payments 35. Please refer to the information on the website of the Department of Finance and Administration (DoFA) at DoFA administers act of grace payments. 36. At the time of publication, all act of grace requests are decided personally by the Parliamentary Secretary to the Minister for Finance. Therefore, requests for act of grace payments should be sent directly to DoFA. The ATO will generally be consulted by DoFA in relation to any act of grace claim relating to tax administration. Payments under section 73 of the Public Service Act 1999 (the PS Act) 37. Section 73 of the PS Act authorises the Public Service Minister to make payments in special circumstances that arise out of, or relate to, APS employment. The Public Service Minister has delegated this power to the Commissioner as Agency Head in relation to ATO employees. The Commissioner cannot authorise a payment in excess of $100,000. Page 10 of 12

11 38. At the time of writing, the Commissioner of Taxation has not authorised anyone else in the ATO to exercise his delegation under section 73 of the PS Act. 39. Advice No 30 Payments in Special Circumstances, dated 3 December 1999 and issued by the Australian Public Service Commissioner provides guidance on when payments under section 73 may be appropriate. 40. Payments under section 73 of the PS Act would generally not be appropriate where the matter could be settled on the basis of legal liability, or under the defective administration scheme as explained in this. 41. Payments under section 73 do not require deeds of release as, by their very nature, they are ex gratia payments. However, under subsection 73(4) of the PS Act, payments under section 73 can be made subject to conditions and, if any of those conditions are breached by the payee, the payment can be recovered by the Commonwealth in a court of competent jurisdiction by virtue of section 73(5) of the PS Act. Existing Compensation Policies Withdrawn 42. There are a number of existing internal policies on compensation. These policies are withdrawn and replaced by this. REFERENCES Judiciary Act 1903, s. 55ZF (Legal Services Directions) Financial Management and Accountability Act 1997, s.44 Public Service Act 1999, s.73 Page 11 of 12

12 APPROVAL Approved by: Michael Carmody Commissioner Endorsed by the Chief Finance Officer and the First Assistant Commissioner, ATO People exercising their delegated authority on 21 April For further information relating to this Corporate Management contact Corporate Directions by addressed to CMPS in Outlook. DOCUMENT INFORMATION Security Classification: UNCLASSIFIED Date of Endorsement: 21 April 2004 Date of Effect: 7 May 2004 Contact Officer: Stephen Goggs BSL: OCTC Section: Legal Services Office: ATO General Counsel ATO Reference: 2002/ Page 12 of 12