Taxpayers have committed suicide, suffered marriage break-ups and severe emotional stress because of disputes with the Australian Taxation Office.
A federal parliamentary inquiry into tax disputes, which reported those stories, has concluded the agency has failed to treat some taxpayers fairly during the course of disputes.
The inquiry's report, released on Thursday, said poorly-managed disputes have had severe consequences on some people.
A PricewaterhouseCoopers adviser told the inquiry about clients who committed suicide because of the emotional toll of an audit.
The adviser also described families under stress because of the length of time to settle a dispute, in some cases causing divorces.
The report said while the ATO handled most disputes fairly, matters could go awry because the ATO had such strong powers and did not always engage with taxpayers.
There was a risk people may not get a fair hearing until their matter went to the Administrative Appeals Tribunal, requiring substantial time and expenses.
The ATO was aware of the effect on taxpayers, acknowledging the physical and "paralysing impacts" of disputes and apologising for its conduct in some matters during the inquiry.
It has also vowed to do better.
The committee has recommended the government create a second ATO commissioner to manage disputes and litigation independently from the compliance and legal areas of the agency, and improve its communication channels.
* Readers seeking support and information about suicide prevention can contact Lifeline on 13 11 14 or Suicide Call Back Service 1300 659 467
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