The consultation paper released by the ATO proposing a ‘one chance’ rule to relieve individuals and small business of first-time tax penalties is a positive move and another example of the cultural shift that is occurring within the ATO, according to the Institute of Public Accountants (IPA). 

“The ‘one chance’ rule proposal is a clear sign that the ATO recognises that in the past, it may have been too heavy handed on taxpayers trying to do the right thing, by not taking into account individual circumstances” said IPA chief executive officer, Andrew Conway. 

“In real life, mistakes can be made and people should be entitled to learn from their mistakes especially if the individual circumstances are clear that the mistakes were inadvertently made. The ATO has the luxury of time and expertise so the balance of power is heavily weighted in their favour. 

“If someone has failed to take reasonable care or failed to lodge an activity statement or an income tax return on time, this proposed rule gives a first-time offender a break. This is a good sign for a small business that is time-poor and drowning in regulatory responsibilities. 

“The reality is that the ATO remits a substantial number of penalties down the track after they are disputed which normally involves a great deal of time, effort and stress. 

“Not levying the penalty in the first instance will result in a reduction in the administrative burden facing individuals and small business. 

“The ATO is to be commended for this approach and it is a positive sign that the working culture of the ATO is improving,” said Mr Conway.