If a computer-generated letter arrives from the Australian Taxation Office informing you that the interest you owe on a tax debt is not due to be paid, you would most likely assume that this is the decision of the tax office.
Unfortunately, this assumption would be incorrect.
Machines unable to make rational decisions, thus computer-generated letters could be unreliable
The Full Federal Court of Australia decided in 2018 that a taxpayer is liable for the interest charges on their tax bill, even though they'd been sent a letter from the ATO stating that the interest was not due to be paid.
Even though the letter stated that it was from the Deputy Tax Commissioner, the Full Federal Court ruled that because it was machine-generated correspondence and there was no related mental decision involved, it could not be depended on as a decision that the ATO had made on the interest. (See Pintarich v Deputy Commissioner of Taxation [2018] FACFC 79.)
The ATO issued a decision impact statement in support of the ruling, and this decision does, in fact, represent the law, at least for the foreseeable future.
Computer-generated letter issued with misleading information due to oversight
In this case, Mr Pintarich, a small businessman, had failed to file tax returns for four years and owed $839,000 in tax, plus $344,216 in a general interest charge. He received a computer-generated letter from the ATO stating that if he paid his tax bill by a certain date, the payout figure would be inclusive of the estimated general interest charge.
Mr Pintarich borrowed $839,000 from the bank and paid the tax bill on time. However, the ATO then said that the letter's content regarding the interest charge not falling due was a mistake and he was still required to pay the interest. The court heard that the ATO had used a "template bulk issue letter" and the officer had not checked it before it had been sent to Mr Pintarich.
Uncertainty around legal accountability for automated correspondence
This case led to a considerable uproar in business circles, creating uncertainty around dealing with government authorities as they increasingly automate their communications with the public.
An ABC story about the case articulates how it raises serious questions about how legally accountable a government department, corporation or individual can be for computer-generated correspondence that is sent in their name.
Confidence and trust in online communication from authorities could decline
The courts appear to be in support of the proposition that taxpayers cannot rely on communication from the ATO, that it's okay for the tax office to make mistakes, and pity the poor taxpayer.
This could potentially result in a lack of confidence in the growing digital transformation of government authorities such as the ATO. While they want people to engage with them online and continue to use automated correspondence to deal with clients, they need to ensure that all information that is issued is accurate.
If you need to deal with the tax office or any government authority, it's important to keep detailed records of any phone discussions, letters or communication. With much uncertainty about the legal accountability of computer-generated correspondence, it's also prudent to seek legal advice before double checking with the ATO to confirm major determinations.
Tony Mitchell
Government investigations and prosecutions
Stacks Law Firm
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
