Evaluating ADR in
ATO Disputes
Executive Summary
Evaluating ADR in ATO Disputes – Executive Summary
1. Introduction
The ‘Evaluating Alternative Dispute Resolution (ADR)’ Report
considers a total of 118 taxation and superannuation disputes that
were referred to conciliation, mediation or evaluation processes that
took place between 1 July 2013 and 30 June 2014. The Report details
findings made by the Australian Centre for Justice Innovation (ACJI)
based at Monash University which was engaged by the Australian
Taxation Office (ATO) to design and implement a mechanism for
independently evaluating the ATO’s use of ADR in taxation disputes.
The Report considers the effectiveness, cost, perceptions and
approaches used in the ADR processes that were noted on the ATO
ADR Register.1 Some ADR processes are not noted on the Register.
For example where conferencing takes place at the Administrative
Appeals Tribunal (AAT) this is not recorded as ADR on the ATO
Register (conferencing involves facilitation and case management
and, where parties are represented, usually only the representatives
attend). These processes are also important as they lead to the
finalisation of most taxation and superannuation disputes that are
commenced at the AAT.
“It was a good
outcome for both
parties. It could have
been resolved earlier if
there had been an
earlier mediation
conference with both
parties being brought
together.”
Those involved in the more intensive ADR in each dispute (parties,
representatives, ADR practitioners and experts) were surveyed about
their experiences and 340 people involved in the 118 disputes
responded to survey requests. In addition to the surveying, deidentified data about each dispute was collated by the ATO and has
provided valuable baseline data that has been considered in the
project. The Report contains detailed findings and this Executive
Summary has been prepared to assist in understanding and
communicating the main outcomes of that work.
The Project involved a project design stage (including ethics approval
and survey creation), a surveying stage (concluded in September
2014) as well as regular incremental quarterly reporting about
findings. An important objective of the Project was to evaluate and
consider user experiences to help understand how ADR processes
can be used more effectively and to more generally evaluate the use
This updated version of the Executive Summary (23 February 2015) includes
some minor clarifications to the data reported under ‘Saving Cost and Time’ (pp.
11–12). These clarifications do not represent a material change to the findings.
1
Evaluating ADR in ATO Disputes – Executive Summary
3
of ADR in disputes involving the ATO. The project was also oriented
towards assisting the ATO to evaluate ADR use into the future.
The base data about the 118 disputes was used to obtain more
information about the processes used, the characteristics of each
dispute and the timing and other features of the ADR processes. This
data was then combined with the survey data (340 survey responses)
to explore key evaluation criteria and test hypotheses. The Final
Report in this project provides details about this analysis and will be
available on the Monash University ACJI website at
http://www.law.monash.edu.au/centres/acji/ from early December
2014.
“The success of this
process was primarily
due to face-to-face
contact.”
Throughout this Executive Summary, quotes from those involved in
the ADR processes have been noted as they highlight a number of
user perspectives.
Evaluating ADR in ATO Disputes – Executive Summary
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2. About the ADR used
Type of ADR Process
Most of the ADR processes that were examined took place in the
Administrative Appeals Tribunal (AAT) with a smaller proportion of ADR
work being conducted at the Federal Court of Australia or by private ADR
practitioners. Some AAT processes were not explored. For example,
where a conference took place at the AAT, this was not noted as an ADR
event on the ATO Register and conferencing was therefore not evaluated.
In the sample:

72 percent of disputes involved conciliation

20 percent involved mediation

8 percent involved evaluation.
Type of Dispute
There was some data about the disputes and dispute complexity. The
base data suggested that three-quarters of the disputes that progressed
to ADR were assessed as being of low (23%) medium (52%) or high (25%)
complexity. Dispute complexity can impact on the ADR timing and this is
discussed below. Base data was compared and tracked in respect of other
indicators. For example, complexity was used to consider how processes
were used. The least complex matters tended to be referred to
conciliation (89% of sample of least complex cases were referred to
conciliation) at the AAT and the most complex were more likely to be
referred to mediation (40% of sample) or neutral evaluation (10% of
sample).
The disputes included taxpayers from all States of Australia. The sample
was roughly comparable to Australian Bureau of Statistics profile
statistics. Data about disputant location was also used to confirm that the
dispute pool was representative. The taxpayer size was also tracked and
categorised.

49% of the sample involved micro business

28% involved individuals

13% involved small business

9% involved large business.
Evaluating ADR in ATO Disputes – Executive Summary
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Timing of ADR
Most disputes in the sample (92 per cent) involved disputes that had
already commenced in the AAT or the Federal Court. There was a small
percentage of disputes where no court or tribunal processes had
commenced (8 per cent). Where proceedings had already commenced,
survey respondents were asked why they did not use ADR before starting
proceedings and the responses varied according to survey groups.
Taxpayers tended to indicate that their lawyers advised them to
commence proceedings and lawyers tended to respond that either the
‘other side took too long’ or ‘would not negotiate.’ An important issue
considered in the Report is whether the ADR processes that were
evaluated could be conducted at an earlier time in the dispute.
There were two measures of time taken in respect of each dispute. First,
the time taken from the date the objection was lodged to the date of the
ADR event and second the date that any proceedings were commenced in
the Federal Court or the AAT. ADR occurred reasonably late in the life
cycle of most of the disputes. Many disputes were ‘old’ by the time the
ADR event took place and more than one third were more than 2 years
old. Most cases would have experienced case management at the AAT or
Federal Court before the ADR event. At the AAT tax cases are often
referred to conferencing (where the majority of tax disputes are finalised)
before referral to more intensive forms of ADR.
Timeliness was also considered in the context of case complexity. It is
clear that less complex cases were referred to the ADR process much
earlier than more complex cases.
Number of days
Timeliness (date objection lodged to date
ADR conducted) by case complexity
800
700
600
500
400
300
200
100
0
762
597
479 476
Low
530
Medium
Case complexity
Average (days)
699
High
Median (days)
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3. Key Findings
The Report considered the effectiveness of ADR, the cost and timing of
ADR and whether the ADR processes were considered to be fair.
Effectiveness
The qualitative and quantitative data suggests that the intensive forms of
ADR are effective in about 70 per cent of disputes in either fully resolving
the dispute, partly resolving the dispute or enabling facts or issues to be
clarified. The outcome data reflects that more than 40 per cent of matters
resolved completely in the ADR process and at least 25 per cent appear to
resolve following the ADR process. This is an important finding as many of
the disputes would have already passed through a conferencing process
at the AAT where settlement had not been achieved (most matters that
proceed through conferencing are resolved although a number of matters
may have more than one conference).
It was clear that in many instances the settlement of the dispute occurred
after the intensive ADR process took place and prior to surveying (surveying
took place up to three months following the ADR session). The ATO base
data that captures information up to the timing of the ADR event does not
reflect this significant cohort (however, the survey data did). This means
that the ‘settlement rate’ is higher than the ATO base data suggested.
The data suggests that micro-enterprise disputes are most likely to resolve
at the ADR stage. In addition, they are more likely to be resolved more
quickly (referral to ADR is more likely at an earlier time). Large complex
business disputes were also more likely to resolve at the ADR event
although they will usually not be referred to conciliation, mediation or
evaluation until a year after proceedings have commenced in the AAT or
Federal Court. It was also noted that outcomes varied by State according to
the base data.
Evaluating ADR in ATO Disputes – Executive Summary
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ADR outcome by disputant location
(state/territory)
80%
70%
60%
50%
40%
30%
20%
10%
0%
70%
62%
59%
41%
38%
“[A] lack of
preparation on the
other side, they had to
go away and get more
information (about a
taxpayer and their
representatives).”
22%
0% 0%
Resolved
NSW (n=39)
7%
Partially resolved
VIC (n=34)
No result
QLD (n=27)
The reasons for the different settlement rates may include later ADR
referral in some states as well as other factors including practitioner
behaviours. Practitioner behaviour can refer to legal and other experts
who may not engage in the same way with ADR in different States and
may also refer to ADR practitioner approaches. A larger sample would
indicate what factors may be more relevant however given the State
differences in the sample it is suggested that it may be useful to have
focus group or internal ATO interviews as well as liaison with the AAT to
explore the reasons for these differences.
Another measure of effectiveness is whether the ADR process reduced
complexity or narrowed issues. The ATO base data suggests that ADR plays
an important role in clarifying facts (which may have longer-term impacts
and reduce litigation and other costs). In about half of the ADR cases, ADR
was seen as important in clarifying issues, which suggests that the ADR
process may assist to narrow issues in dispute where the matter does not
resolve and may result in later settlement or reduce the issues that proceed
to litigation.
In terms of process effectiveness and possible improvements, a number
of factors were considered. First, this issue was considered from the
perspective of fairness. Second, resolution rates were considered. The
research shows that there were high levels of satisfaction with the
processes. However, in some disputes, there were issues with the level of
preparation undertaken by taxpayers, representatives or the ATO and this
may have impacted on effectiveness. It is also the case that, when
considering comments made, it is important to understand that at times
the comments can reflect the reality that the survey respondent did not
achieve the outcome they wanted.
Evaluating ADR in ATO Disputes – Executive Summary
“The problem in this
case is that the
applicant talks about
evidence but doesn’t
produce any. The ADR
process seemed to
make it clearer to him
that he must provide
evidence not just say
what happened.
Would have been
useful if he had
provided evidence
beforehand but reality
is that he was not
going to do so.”
“While the process as
a whole was not
successful due to lack
of engagement by the
other party some
useful information was
obtained which will
enable the matter to
progress closer to
resolution.”
“All substantive issues
except for one were
resolved in the
process.”
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Some of the comments regarding preparation are relevant as lower levels
of preparation may have impacted on perceptions of process as well as
outcomes. Some comments suggested that a lack of preparation meant
that resolution was less likely or did not take place. Many of the
comments concerned the taxpayer’s lack of preparation rather than that
of the ATO, although there were some negative comments about ATO
preparation.
In the majority of matters the preparation undertaken was regarded as
adequate and helpful. However, there were a sufficient number of
comments to suggest that more attention needs to be paid to preparation
in respect of intensive ADR events. There were several suggestions that the
success of the process was influenced by direct face-to-face contact with
the parties who have authority to settle.
Some survey respondents suggested that there should be more guidelines
for selecting appropriate cases for ADR however most comments related
to the behaviour of those involved in ADR. In this regard it is notable that
the AAT published Guidelines in December 2013 in relation to ADR and
the requirement to engage in ‘good faith.’ However, more may need to
be done at the Tribunal, Court and ATO levels to ensure that guidelines
are supported.
The characteristics of the taxpayer may also be important and it may be
more likely that a lack of preparation leads to lower prospects of
settlement and that this is a factor with small and medium sized business
disputants. In such circumstances, it may be more useful for the ADR
process to take place earlier, involve intake sessions and ensure that
clearer preparation guidelines are available and understood.
Was the process fair?
In the course of the telephone interviews and online surveying of those in
the sample group, the survey respondents were asked a number of
questions relating to how they perceived the role of the ATO and whether
they considered that the ADR process took place in a fair manner.
Perceptions about what is a fair process can also be shaped by previous
experience in dispute resolution, and whether they had past experience
with the ATO and in dispute resolution. In this research this factor was
considered and appeared to have little impact although in freeform
comments some considered that the ATO adopted a more proactive and
positive approach to the settlement of disputes via ADR and that this was
‘fairer.’ The material also shows that in relation to this survey group there
is a strong link between the time taken to deal with a dispute and
perceptions of fairness. That is, if the dispute took a long time to be dealt
with, people were less likely to think it was fair.
Evaluating ADR in ATO Disputes – Executive Summary
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Overall, 95 per cent of those surveyed agreed or strongly agreed that the
process was fair. This finding is regarded as very high in the context of past
studies.
Fairness perceptions are often linked to participation perceptions – that
is, processes can sometimes be viewed as more fair if people can
participate or give voice to their concerns. There can be variations among
cohorts in terms of perceptions about the extent to which it is considered
that a process is fair or the extent to which participation was supported.
For example, representatives may consider that they could participate in
an ADR process, but taxpayers may think that they could not. There may
also be a correlation between these perceptions and the demographic
characteristics of disputants; for example, small business disputants may
consider that direct disputant participation in the dispute resolution
process is very important while big business disputants may consider this
to be less important (and may be more comfortable to have lawyers
participate more).
On the whole, the perceptions of ‘participation’ were very positive, with
more than 90 per cent of survey participants agreeing that they could
participate in the ADR. However, some survey respondents made
comments about the perceived willingness of the other side to genuinely
and fully participate in the process. A small number of negative comments
were made by both the ATO and taxpayers about participation and these
were mainly linked to behaviours within the ADR process. That is, on a
few occasions, the ATO was critical of the taxpayer (or their
representatives) or the taxpayer or their representative was concerned
about ATO or representative behaviour.
Some comments about participation may be relevant, although they can
be taken out of context and need to be considered against the
background of the very positive responses overall. A few survey
respondents, for example, commented on the attitude of representatives
in the ADR session (rather than the ADR practitioner) and this may be an
issue in some ADR processes. A number of survey respondents indicated
that they wanted to participate more (around 18 % of tax officers and
18% of taxpayer representatives and 44% of the taxpayer group).
“Conceptually I think
ADR is a fairer way to
resolve disputes when
an independent
umpire/facilitator is
involved. This was not
the case in the most
recent ADR I was
involved with as the
ATO resisted ADR,
came with a barrister
and a very legalistic
approach (putting the
taxpayer to proof) …”
“As a general rule this
type of process is
usually the better
option, but both
parties need to attend
in good faith. In this
instance this was not
the case. In my
experience this is not
common though.”
Some specific factors that can influence perceptions of fairness and
participation include:

The formality of the process. If the process is perceived to
be ‘too formal’ it may be that some participants do not
consider that they can participate adequately. Some survey
respondents considered that the process was ‘too formal.’
Most thought that the formality was ‘about right.’
Evaluating ADR in ATO Disputes – Executive Summary
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
The way in which roles are explained in the ADR process. If
lawyers roles are explained in the context of advice and
support (rather than advocacy) parties may perceive that
they have been included more in the discussion and it may
be less likely that exchanges are dominated by
representatives.

Who speaks after the ADR practitioner introduction? Parties
or their representatives. If parties speak first they may be
more likely to consider that their participation was
important and supported.

The extent to which there is an exploration, discussion and
clarification of issues may influence participation
perceptions. If parties quickly break to a private session they
may not consider that they have had an adequate
opportunity to speak with those in the process.

The extent to which parties can make settlement proposals
to one another. If shuttle negotiation processes are used,
parties may consider that participation in the agreement
and negotiation stages of the ADR process have been
reduced.
Perceptions of impartiality were recorded and considered. In general, the
survey responses show very positive results in terms of impartiality
perceptions, with more than 90 per cent of survey respondents
considering that both sides were treated ‘equally’. This finding is higher
than in some comparable studies.
Saving Cost and Time
On the basis of the data presented, overall the survey respondents (ATO,
Taxpayer and representatives) indicated that the intensive ADR process
resulted in significant cost savings. Many survey respondents did not
report on costs incurred or saved in the survey and as a result the findings
must be expressed with some caution. However, for many who were
surveyed the median value of costs saved by successful resolution
equated to around $70,000 per matter. Lower cost savings were linked to
attendance at the AAT or the Federal Court (where significant cost
variation is to be expected).
Significantly, a feature of the costs expenditure involved costs for
external non-lawyer professionals. The average cost estimates made by
ATO Legal Service Branch and external representatives (n=56) was more
than $55,000 in respect of valuers, accountants or expert fees. For
taxpayers, the sample size was reduced; however, for some the
expenditure in this category was considerable. It may be that an earlier
clarification of issues could reduce these costs.
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Based on previous work, in the sample many matters progressing to ADR
were ‘old’ matters where disputes were longstanding. The median length of
time from objection to the ADR process taking place was 607 days. The date
of objection was taken as a referable date from the ATO and it is probable
that many disputes had arisen before objection and were therefore even
‘older’ when the ADR event took place. Clearly, costs are increased as the
age of the dispute increases.
Some comments made by survey respondents included that an ADR
process may be more beneficial at an earlier stage. These comments and
views about earlier ADR referral were also supported by statements made
by legal representatives in response to whether there was anything that
the ATO could have done to make their contact easier, including “..a
personal meeting during the objection process.”
Evaluating ADR in ATO Disputes – Executive Summary
“(ATO staff) ADR needs
to be incorporated in
case management
earlier on. End of audit
or stage of objection.
This would get a better
understanding
earlier.”
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4.Conclusion
The resolution or settlement rates in respect of the ATO sample of
disputes that went to ADR from 30 June 2013 – 1 July 2014 are
consistent with past studies on conciliation (although at the lower
end – mediation settlement rates often cluster above 60 per cent at
The resolution or settlement rates in respect of the ATO sample of
disputes that went to ADR from 30 June 2013 – 1 July 2014 are consistent
with past studies on conciliation (although at the lower end – mediation
settlement rates often cluster above 60 per cent at the ADR event stage)
and the perceptions of those involved in the ADR processes were
generally very positive. Most people thought the processes were fair and
if a settlement did not occur at the intensive ADR session that the ADR
event had an impact on finalisation of the dispute within a short time
frame. The earlier that the intensive ADR process was used, the more
positive the perceptions seem to be; however this factor needs to linked
to case complexity and cost of dispute factors.
“When used correctly,
ADR (conciliations /
mediations) is a way of
articulating each
party’s relative
strengths and
weaknesses when it
comes to a dispute. It
can then be used to
narrow which issues
there are scope to
move on.”
There is also evidence to suggest that the ADR processes were perceived
to be cost and time-effective. ADR appears to be more effective for some
types of taxpayers than others. In this regard, large businesses and micro
business taxpayers were more likely to resolve disputes at an ADR event.
It may be that more preparation and intake processes could support some
taxpayers.
The research also showed that there was a perception among some
survey respondents that, in order for an ADR process to be beneficial,
everyone has to ‘come to the table with an open mind’ and it was
suggested that in some circumstances participants had not engaged in
good faith or appropriately. It was also noted that there should be clear
guidelines as to when ADR is appropriate as it may not be appropriate for
all cases.
In the context of future research in this area it is noted that an important
part of the project was to develop a methodology and set of tools that
could be used by the ATO to conduct sampling work into the future. It is
noted that there are some benefits in conducting this work outside the
ATO (external researchers are seen as independent, comply with ethical
approvals and therefore able to adequately separate confidential
information and survey responses from data bases and other operational
inputs). However, if work is to be conducted by the ATO, it is suggested
that surveying could take place for a three month period (perhaps
annually) to determine and track differences with the findings in this
Evaluating ADR in ATO Disputes – Executive Summary
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study. Such an approach particularly conducted in collaboration with key
agencies such as the AAT would support the improvement and future
development of ADR in taxation disputes.
In addition, there is some useful follow up work that could be considered.
Issues in respect of the timing of ADR and perceptions of fairness could be
usefully explored in focus groups. Focus group input could inform the ATO
about specific improvement opportunities as well as informing those who
work with ADR about the outcomes of this research. For example, internal
facilitation is being trialed by the ATO and the impact of this work could
be further considered. In addition, an evaluation and better tracking of
AAT conferencing processes in collaboration with the AAT could highlight
how referral to intensive ADR could take place earlier and whether there
are additional opportunities to improve ADR across this sector.
The Research Team thanks all those who responded to survey requests
and contributed to the research project. We particularly thank the ATO
who supported the research in a collaborative and transparent manner.
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