When dealing with the ATO, Ms Maharaj noted what it all essentially comes down to is understanding the strength of a client’s case, the amount at stake and, in early engagement outcomes, the profile or perception that early decision-makers at the ATO form of a client.

In an example provided, consider the taxpayer was an SMSF, approached by an adviser (known to the ATO) with a tax scheme that had no prospects of success.

“The ATO has said that they will be commencing a review and have asked for additional information,” she said.

“The scheme involved around $1 million in non-arm’s length income over some years. In addition to income tax considerations, there are potential SIS Act breaches, some possibly attracting criminal prosecution.”

In this scenario, Ms Maharaj said that the client clearly has a case for voluntary disclosure, specifically to seek a reduction in penalties and potentially interest.

“This reduction is automatically 80 per cent of the shortfall amount if disclosed before the earlier of ATO audit notification or the closing date on an invitation to voluntarily disclose to the ATO,” she explained.

“The commissioner also has the discretion to treat a later disclosure as having been made earlier; otherwise, there is still a 20 per cent reduction available for disclosures made later, where the timing of the disclosure has allowed the commissioner to save significant time and resources in conducting an audit.”

Ms Maharaj said from a legal perspective, the best angle would be to recognise that the client has already suffered significant damage at the hands of the scheme adviser, and rather than further punishment, it is reasonable to seek to mitigate that damage.

“This may translate into painting the scheme adviser as an ‘enemy in common’, with us being left to sort through the mess,” she warned.

“No matter the circumstances for working with the ATO, at the end of the day, we are dealing with people, and our interactions can have significant consequences in altering our outcomes.

“It is important to note that there will be a tendency for the ATO to attribute our attitudes to our client, and for this reason, there is an importance of staying respectful and professional in all dealings.”