He has only been in the job since January, but new Tax Commissioner Chris Jordan is shaking up the Australian Taxation Office and revamping how it handles disputes with taxpayers. Tax experts have applauded the move, but they remain sceptical of how truly independent the ATO will become.

Jordan, who is a former partner of accounting giant KPMG, has decided after years of political and industry pressure to create a new appeals division to provide taxpayers with an independent review of their cases in disputes to head off costly litigation for both the government and the taxpayer. At the moment, if you object to your assessment it’s likely the auditors who made the original decision in your tax bill will have too much of an influence in the determination of the objection.

As Crikey revealed last year, senior ATO lawyer Serene Teffaha instituted proceedings in the Federal Court against the Tax Office. In her statement of claim she alleged a “tick and flick” attitude to taxpayer objections by ATO staff, who were issued with a formal target of ensuring objections to audit decisions were upheld in fewer than 20% of cases — irrespective of merit.

In a speech to the Institute of Chartered Accountants last year shadow treasurer Joe Hockey said:

“If the taxpayer decides to contest a matter, their objection to the amended assessment will have to be examined by the ATO. It’s that reconsideration of the issue at the objection stage that potentially puts the ATO into the situation of investigator and prosecutor. The team that has undertaken the audit and just issued the amended assessment is unlikely to come to a different conclusion when they look at the taxpayer’s objection. There should be a completely new team that considers the objection. The perception that there may not have been a fair consideration of the matter needs to be addressed.

“To do that, the function of the audit must be separated from the second stage review that happens when a decision is to be made about an objection. The Coalition’s intention is to make sure that this happens in the most administratively effective manner.”

Hockey also raised the idea to completely move the appeals section out of the ATO into a different agency, recognising the audit function is different from an independent review.

Actor Paul Hogan and artistic collaborator John Cornell settled their eight-year dispute with the Tax Office over unpaid taxes last year. The pair’s lawyer, Andrew Robinson, said any movement to get tax disputes into the hands of an independent body could only be a good thing: “A big problem with current procedures is that historically it has been very difficult to get the Tax Office to change their minds once they take a position despite compelling evidence to the contrary.”

Hogan and Cornell reached a settlement following mediation before former High Court Judge Michael McHugh AC QC, who was brought in by both parties to break the impasse. One tax insider told Crikey: “If the Hogan matter didn’t get into the hands of a mediator the dispute would still be going.”

David Hughes from SMH tax lawyers needs to be convinced the Tax Office will provide a truly independent review, given ATO revenue targets and the fact staff will fall under the umbrella of the new appeals area.

“It looks like it is back to the future, as back in the ’80s and ’90s there was a separate appeals area and disputes used to drag on for years back then. I think there is also an acknowledgement that the current system is broken, and I think the ATO will need to look at compensating individual taxpayers that they have ruined with their action,” he told Crikey.

But: “I think it’s a good thing, and I think it shows the new Commissioner is listening and is prepared to come up with a solution to the whole dispute process.”

Tony Greco, senior tax advisor at the Institute of Public Accountants, sees nothing wrong with the new approach. “Anything to speed things up and make the process more efficient can only be good. Sometimes the ATO go into battle with a revenue bias, so a fresh look at matters can clear things up,” he said.

Teffaha feels vindicated with the new announcement. She told Crikey: “A compromised ‘independent review’ process was one of the key corporate risks identified in our whistleblower complaints back in March 2011. In my role as a senior objection officer, I was particularly concerned about the undue influence exerted over some cases at the objection stage by case leaders and senior technical leaders involved with audit. A big part of our struggle was the lack of guidance, procedures and training on how objections should be undertaken and the undefined boundaries in our relationship with original decision-makers.

“I am pleased that the aspirations set by the Taxpayers’ Charter for a proper independent review, free from the influence of original decision-makers, is finally being taken seriously in the ATO.”