Most Tax Penalty Waiver Requests Approved

Claims that it has become harder to have tax penalties waived are being challenged, as the ATO states it still approves most requests, at least in part. The issue has raised concerns about transparency and fairness in the handling of penalty waivers, particularly as taxpayer debt has now surpassed $50 billion.

The debate follows criticism from a legal firm arguing that taxpayers are facing tougher criteria to obtain waivers for general interest charges (GIC). According to the firm, approvals are now largely limited to exceptional situations like natural disasters or serious illness. In previous years, waivers were granted for a wider range of personal and financial difficulties, including those caused by COVID-19. However, the ATO no longer accepts the pandemic as a valid reason for waivers.

In response, the ATO says its approach has remained consistent and is based on risk factors and individual circumstances, not a fixed set of approved reasons. The agency reports that more waiver requests are approved than denied, either fully or in part. Still, frustrations persist, especially for taxpayers who cannot speak directly with decision-makers.

A major concern is the lack of transparency in how waiver requests are assessed. The ATO has broad authority to reduce or cancel penalties but does not release details on how often that authority is exercised. As a result, it is difficult to determine whether high-profile cases, such as a $1 million penalty being cancelled for a former political leader, are rare or more common than they appear.

What is becoming more apparent is the growing pressure on the Tax Office to improve how it explains and justifies these decisions. With many small businesses and individuals still under financial pressure due to past economic challenges, offering clearer guidelines and more accessible communication may help bolster trust in the system.

Source: Australian Financial Review, Sleek, PwC Tax Summaries 

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