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Report to the Assistant Treasurer

December 2010


Telephone: (02) 8239 2111
Facsimile: (02) 8239 2100

Australian Government - Inspector-General of Taxation crest

Level 19, 50 Bridge Street
Sydney NSW 2000
GPO Box 551
Sydney NSW 2001

3 December 2010

Mr the Hon Bill Shorten MP
Assistant Treasurer
Parliament House
CANBERRA ACT 2600

Dear Minister,

On 19 April 2009, the former Assistant Treasurer directed me to conduct a comprehensive review of the Australian Taxation Office's (ATO) Change Program. In response, I commenced the review with a staged approach due to the size of the task, my current resources, the need to expeditiously deal with the most pressing concerns as identified by the former Assistant Treasurer and other related reviews either already in progress or completed. Consequently, this report focuses mainly on the impact on taxpayers and tax practitioners of the income tax release, the latest part of the Change Program to be deployed. Once you have released this report, consideration may be given to whether there is a need to proceed with further reviews of the Change Program.

The Change Program was a large and complex Information and Communication Technology (ICT) project that has taken approximately seven years during which time it has been subject to constant change with components being removed or added to the initial scope. The review identifies a number of major risks associated with the projects and, generally, finds that the ATO developed appropriate mitigation strategies, although some areas of improvements have been identified in this report.

Other key findings of the review relate to the timing of the income tax release and the ATO's related communications with taxpayers, tax practitioners and their representatives. Specifically, at the time of deployment, the ATO found itself in an invidious position where testing would be effectively extended into production. Having found itself in such a position, based on the independent assurers' opinions, the contractor and the ATO itself as well as the cost and risk of further delay for only diminishing returns, I have concluded that, the ATO had little choice but to go live when it did. However, as acknowledged by the ATO, significant risk of potential adverse impact on taxpayers and tax practitioners could have been better communicated to them.

The remit of the Inspector-General of Taxation does not extend beyond the Australian tax administration system and whilst this report explores the ATO's experience, broader consideration are raised for the Government in relation to large ICT projects that may be undertaken by other Government agencies. In particular, the first recommendation, the only one to be addressed to the Government in this report, relates to governance and scrutiny functions of large ICT projects as well as related intra-government agency information exchange issues. We appreciate that some of these matters may fall outside your portfolio and you may refer it to other Ministers for consideration.

The report contains eight other recommendations which are all addressed to the ATO. The ATO has agreed with six of them, partly agreed with two and disagreed with another that recommends that the ATO consults with tax practitioners over its reconsideration of compensation claims.

I offer my thanks to the support and contribution of tax practitioners, their professional bodies, other Government agencies and individuals to this review. The willingness of many to provide their time in preparing submissions and discussing issues with myself and my staff is greatly appreciated. I also thank ATO officers for their professional cooperation and assistance in this review.

SIGNED

Ali Noroozi
Inspector-General of Taxation


© Commonwealth of Australia 2010

ISBN 978-0-642-74661-0