In response to the former Assistant Treasurer's direction, issued on 19 April 2010, and concerns raised by taxpayers, tax practitioners and their representative bodies, the Inspector-General of Taxation (IGT) undertook this review which was mainly focused on the impact on taxpayers and tax practitioners resulting from the income tax release of the Australian Taxation Office's (ATO) Change Program.

In conducting this review, the IGT has relied on the reports made by the ATO's independent assurers, Capgemini and Aquitaine Consulting, and the Release 3 post-implementation reviewer, CPT Global. We have also relied on interviews with the contractor, Accenture, past and present ATO officers and the ATO's own documentation.

The Change Program was an ambitious and far-reaching project aimed at delivering a range of significant capabilities to the ATO's Information and Communication Technology (ICT) systems in order to ensure effective administration of the taxation and superannuation laws into the future. At the outset, the IGT acknowledges the commitment from ATO staff and contractors on a sustained basis over a number of years to achieve the deliverables of the Change Program to date.

The Change Program was a large and complex 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. There were a number of key risks associated with the projects and, generally, the ATO developed appropriate mitigation strategies although some areas of improvement have been identified in this report. In particular, based on the learnings from the Change Program, the first recommendation raises a number of matters, including governance and scrutiny functions as well as intra-government agency information exchange issues, for the Government to consider in relation to future large or significant ICT projects.

In relation to the timing of the income tax release, 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, the IGT has 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 ATO did carry out its planned communication and intelligence collection strategy which included providing information to taxpayers and tax practitioners. However, this plan and subsequent ATO communications ultimately proved to be inadequate in alerting the taxpaying community to adopt strategies that would minimise any potential adverse impacts.

The report also seeks to address the issue of compensation for those adversely affected and a number of recommendations are made to the ATO in this regard. The report also contains findings in relation to impact on ATO staff and recommends that the ATO address these by conducting open and frank consultation with its staff.

An ATO commissioned report, issued on 22 September, quantifies some benefits of the Change Program and expects further benefits in the short term which would accumulate into the future. It may be useful to conduct a further cost/benefit analysis sometime after the Change Program work is completed and the new ICT systems have achieved full functionality and are well-settled operationally. In the meantime, there are likely to be many ongoing opinions on what should be considered in such an assessment and the range of costs that should be included. To this end, as a starting point, the ATO has agreed to publicly release its commissioned report which should promote open and transparent discussion in this regard.