Outcome 1 Improved tax law administration — taxpayer benefit

The role of the IGT is to improve the administration of the tax laws for the benefit of all taxpayers.

Key strategies to achieve Outcome 1 are:

  • undertake community consultation, research and other processes to identify and prioritise areas of tax administration that can be systemically improved;
  • call for submissions to review and stimulate input by, for example, issuing terms of reference and similar materials;
  • review identified areas and provide independent advice and recommendations to Government on improvements to the administration of the tax laws;
  • maintain a positive public profile for the IGT through participation in conferences and seminars;
  • build on approaches that increase the ATO’s involvement and contribution to review processes and outcomes;
  • selectively engage external expertise and undertake overseas comparisons to enhance capabilities and objectivity for appropriate reviews; and
  • seek to develop internal research capability.

The IGT’s work program derives from statutory requirements. This program involves the:

  1. identification of systemic issues for inclusion in the work program; and
  2. provision of independent advice to Government on the administration of the tax laws.

The work program may comprise of review topics identified by the IGT in consultation with the community, review topics in relation to which the Minister has directed the IGT to conduct a review and review topics in relation to which the following bodies have requested the IGT to conduct reviews:

  • the Minister (separate from the direction provision);
  • the Commissioner of Taxation;
  • a resolution of either House, or both Houses, of the Parliament; or
  • a resolution of a committee of either House, or both Houses, of the Parliament.

Ultimately, however, the IGT retains discretion in setting his work program.

The Commissioner of Taxation has statutory independence in his administration of the tax laws. The IGT does not hold any powers to direct the Commissioner of Taxation in the administration of the tax laws.

The way in which the IGT’s advice to Government contributes to the achievement of the outcome of improved administration of tax laws takes several forms.

First, the provision of advice to Government may be policy in nature and lead to legislative change to address an identified systemic issue.

Second, and more commonly, the Commissioner of Taxation may independently address a systemic issue identified by the IGT in review issues papers terms of references or during a review itself, or otherwise following the release of a review report by the Minister.

Third, improved administration of tax laws can also be achieved without formal advice to Government but by direct day-to-day interaction between the IGT and the ATO.

Issues identification, work program and review action

Issues identification

The IGT is in constant dialogue with the broader tax community. Issues are regularly raised by stakeholders through this dialogue. The IGT then works through these issues and assesses what action is required. Some issues are more appropriately addressed by other government agencies and these are referred on. Issues that are then considered appropriate are placed on the potential work program list — this process is discussed in more detail in the next section.

Work program

The IGT engages with the broad-based tax community to identify and prioritise those issues or topics on the potential work program list that provide significant opportunity to improve the tax system’s administration for all taxpayers. This prioritisation process means that the finalised work program is a smaller sub-set of the potential work program.

Topics on the potential work program list, not included on the final work program, are maintained on the IGT reserve work program list. Topics on the reserve work program list may be elevated onto the active work program, where opportunity and resource availability combine to allow review. The work program is reviewed periodically.

The IGT established a new work program for 2011–12. Work on the new program commenced towards the middle of this calendar year. The new work program must be flexible in actioning specific reviews to take account of competing priorities that may arise due to various factors.

Ministerial direction is a factor. The IGT may be directed by the Minister to undertake a review. The Minister has previously directed the IGT to undertake several reviews. The most recent example of such direction resulted in the Review into the ATO’s Change Program.

Government agency review is also a factor. This arises where other agencies announce or consider reviews that may have a degree of overlap with proposed IGT terms of reference. In maximising resource efficiency it may be better to defer IGT reviews to take advantage of other agency outputs or insights. The approach taken in the case of Project Wickenby, as discussed earlier in the report, is such an example.

Resourcing is another factor. A review is also very difficult to pin-point as to timing and scope due often to the priorities afforded by various parties and the small size of the IGT office. The IGT actively seeks to mitigate the tension between the need for flexibility and undue delay through regular project management review.

The next step is to action the specific review and thereafter report to the Minister with findings and recommendations thereon (For details on current IGT reviews and reports please refer to the section ‘Review action’).

The IGT also consults directly with the Commonwealth Auditor-General and the Commonwealth (and Taxation) Ombudsman in finalising the work program.

2011–12 work program

The IGT work program for 2011–12 (subject to any matters of overriding priority that may arise) was announced, as follows, on 4 April 2011:

  • Review of ATO implementation of the Report on Aspects of Income Tax Self Assessment (ROSA) recommendations
    This is a broad review into a range of concerns raised by stakeholders in relation to the self assessment system regime.
  • Review into ATO use of benchmarking to target the cash economy
    The review will seek to determine whether ATO use of benchmarking data to identify and assess taxpayers in the micro and small business sector is appropriate and identify improvements where appropriate.
  • Review into ATO use of Early and Alternative Dispute Resolution
    The purpose of the review is to consider ATO use of early and alternative dispute resolution and to determine when and how they might be most beneficially employed.
  • Review into the ATO’s Small and Medium Enterprise (SME) audit and risk review policies, procedures and practices
    The review will consider the ATO’s audit and risk review practices in relation to the larger SMEs (that is, companies with turnover of $100 to $250 million) and High Wealth Individual taxpayers.
  • Follow-up review into ATO implementation of IGT recommendations
    The follow-up review would assess the ATO’s implementation of IGT recommendations made in review reports issued since November 2008.

Work program — reserve list

The consultation process identified a number of strong topics for review. These were shortlisted for consideration but ultimately not included on the work program. These topics are maintained on the work program reserve list.

Work program details including updates can be located on the IGT website at: igt.gov.au/our-reviews.

Review action

The IGT publishes terms of reference for a review, along with submission guidelines or consultation plans, and invites submissions from interested parties. These materials are available on the IGT website www.igt.gov.au.

Reviews in progress

The IGT has three reviews in progress at 30 June 2011. As the reviews are in progress the IGT is not in a position to report details on findings or recommendations at this time. The reviews are listed below.

  • Review into the ATO’s administration of class rulings — commenced 25 March 2010.
  • Review into the ATO’s small and medium enterprise (SME) audit and risk review policies, procedures and practices — commenced 7 April 2010.
  • Review into improving the self assessment system — commenced 16 June 2011.

For more details please refer to the Reviews in Progress section on the IGT website at www.igt.gov.au/our-reviews.

Reviews finalised

The IGT finalised five reviews during the reporting period. The five reviews are as follows:

  • Review into the ATO’s administration of the Superannuation Guarantee Charge — publicly released on 24 November 2010.
  • Review of aspects of the ATO’s administration of private binding rulings — publicly released on 24 November 2010.
  • Follow up review into the ATO's implementation of agreed recommendations included in the six reports prepared by the IGT between June 2006 and October 2008 — publicly released on 21 March 2011.
  • Review into the ATO’s Change Program — publicly released 5 May 2011.
  • Review into the ATO’s large business audit and risk review policies, procedures and practices — submitted to the Minister on 3 May 2011.

On completion of a review the IGT provides a review report to the Minister for consideration and thereafter public release by the Minister. Review report recommendations are also subject to follow up review to ensure implementation is effected in the manner agreed with the ATO.

The IGT review reports are performance information, as set out below in the section on independent advice to Government.

Positive public profile

The IGT maintains a public positive public profile by participating in conferences, seminar presentations and through appropriate media management.

Table 2: Key speaking engagements

Date Organisation Type of function Location
9 July 2010 Committee for Economic Development of Australia (CEDA) CEDA Trustee Seminar Melbourne
22 September 2010 Tonkin Corporation 8th Annual Corporate Tax Summit Sydney
24 September 2010 University of Sydney Masters of Laws presentation Sydney
15 October 2010 Financial Services Council (FSC) FSC Expert Tax Working Group Sydney
24 October 2010 Law Council Taxation Committee Law Council Taxation Committee 2010 Workshop Sydney
21 January 2011 Australasian Tax Teachers Association (ATTA) 23rd Annual ATTA Conference Melbourne
7 February 2011 Taxation Institute of Australia (TIA) Younger Tax Practitioner Series Melbourne
16 February 2011 Tax Practitioner Group Melbourne Tax Discussion Group Melbourne
30 March 2011 Tonkin Corporation Tonkin's 9th Annual Corporate Tax Summit Sydney
7 April 2011 Institute of Chartered Accountants of Australia (ICAA) ICAA National Tax Conference 2011 Melbourne
29 April 2011 Minter Ellison Roundtable Presentation Sydney
26 May 2011 Taxation Institute of Australia (TIA) TIA Breakfast Presentation Perth
26 May 2011 PwC PwC Dinner Presentation Perth
27 May 2011 Institute of Chartered Accountants of Australia (ICAA) ICAA Breakfast Presentation Perth

Independent advice to Government — tax laws administration

The IGT provides independent advice to Government. The nature of this advice is primarily provided via review reports that are given to the Minister — Division 2 of the IGT Act. It may also take the form of direct briefing to the Minister.

The review reports detail IGT findings and outline recommendations for the improvement of the tax system’s administration. Review reports are given to the Minister after providing the Commissioner of Taxation with the opportunity to make a submission in accordance with section 25 of the IGT Act.

Once the Minister receives the IGT report, it must be published, either by tabling in both Houses of the Parliament or otherwise, within 25 sitting days of receipt — section 11 of the IGT Act.

Review reporting performance

During 2010–11, the IGT had completed and issued to the Minister five review reports. As at 30 June 2011, the Minister has publicly released four of these reports, but has not yet publicly released one report. These reports are listed in two separate sections below, being the publicly released and not yet publicly released review reports.

Review reports — publicly released

The four IGT reports publicly released by the Minister, as at 30 June 2011, are as follows:

  • Review into the ATO’s administration of the Superannuation Guarantee Charge — publicly released on 24 November 2010.
  • Review of aspects of the ATO’s administration of private binding rulings — publicly released on 24 November 2010.
  • Follow up review into the ATO's implementation of agreed recommendations included in the six reports prepared by the IGT between June 2006 and October 2008 — publicly released on 21 March 2011.
  • Review into the ATO’s Change Program — publicly released 5 May 2011.
Review reports — not yet publicly released by the Minister

The IGT report issued to the Minister but not yet publicly released, as at 30 June 2011, is as follows:

  • Review into the ATO’s large business risk review and audit policies, procedures and practices — submitted to the Minister on 3 May 2011.

All completed IGT reports and work program review details, including status updates, are available on the IGT website at www.igt.gov.au.

Outcomes

Historically, the Commissioner of Taxation has accepted fully, or in part, most (169 of 192) of the review recommendations published since the inception of the IGT until 30 June 2010. This trend continues for reviews published in 2010–11, with the Commissioner of Taxation accepting fully or in part 18 of the 20 recommendations made towards the ATO (see Table 3 below).

In several reviews completed in 2010–11, the IGT considered that systemic improvements could not be made by the ATO alone under present tax laws. The IGT therefore made several recommendations to Government to consider changes to the tax laws that underpinned the administrative systems.

The outcomes of these reviews, combined with feedback from community stakeholders and the ATO, provide clear evidence that the role of the IGT is achieving its objectives and is improving aspects of tax administration for the benefit of all taxpayers.

Table 3: IGT report recommendations summary 2010–11

IGT Review Number of recommendations accepted fully or in part by ATO Number of recommendations to Government Number of recommendations disagreed by ATO
Review into the ATO's administration of the Superannuation Guarantee Charge 6 5 1
Review into the ATO's administration of private rulings 5 1  
Review into the ATO’s Change Program 7 1 1
Total 18 7 2

Financial performance

The IGT received an unqualified audit report on the 2010–11 financial statements from the Australian National Audit Office. These statements can be found in Part 4 of this report.

The IGT ended 2010–11 with a surplus of $221,220 compared with a surplus of $41,038 in 2009–10. The increase included recognition of revaluation adjustments to assets and certain provisions.

The IGT’s net asset position increased accordingly. The agency has sufficient cash and reserves to fund its liabilities as and when they fall due.