Australian Government - Australian Taxation Office crest

SECOND COMMISSIONER OF TAXATION

Mr Ali Noroozi
Inspector-General of Taxation
GPO Box 551
SYDNEY ACT 2001

Dear Ali,

RE: Review into the ATO's compliance approaches to small and medium enterprises with annual turnovers between $100 million and $250 million and high wealth individuals

Thank you for your letter dated 4 November 2011 and the opportunity to provide comments on your final draft report on the Review into the ATO's compliance approaches to small and medium enterprises with annual turnovers between $100 million and $250 million and high wealth individuals.

Acknowledgements

I would like to thank you for the collaborative manner in which you have conducted this review. Our involvement with the working party of key practitioners who represent many of the taxpayers in the two market segments which were the focus of the review has enabled us to better understand taxpayer perceptions and some of the issues which are relevant in these market segments.

General observations

I am pleased to note that while you have made a range of recommendations in the report you have also acknowledged that we have been actively working to improve our interaction with taxpayers in these markets and that we have a range of activities underway which will build on our technical capability and assist us to manage compliance in these market segments.

I am also encouraged to see that several of your recommendations are designed to support us in the work we have been doing over the last year or so to enhance a number of our existing processes and practices to ensure we have better outcomes for taxpayers and their advisers and for the ATO.

We are always striving to refine and improve our practices, processes and interactions with taxpayers and advisers. We are also trying to continuously improve the capability of our staff. A number of your recommendations will help us make further improvements which build on our existing staff capability and skilling activities.

There are a number of recommendations which relate to the work we have underway to replace the 'Wealthy and Wise" booklet.

We are developing a comprehensive booklet which will focus on our processes to assess risk, manage compliance and interact with taxpayers and advisers in the private wealth segment, including all taxpayers with net wealth of $5m or more and entities in the broader small and medium enterprises (S&ME) market with turnover of between $2m and $250m.

It will also detail the behaviours we expect to see from taxpayers and advisers in these market segments and also the behaviours we expect from tax officers who are dealing with taxpayers and advisers in these segments.

We have established a reference group of key stakeholders who will work with us to develop the new booklet.

The input and advice from the reference group will help us shape the final product and will be an important part of what we put in place to respond to the recommendations in your report which are dependent on the publication of the new booklet.

ATO Response to Inspector-General's recommendations

Our responses to your specific recommendations are at Attachment 1. I understand that you will include these under the relevant recommendation in your final report.

In summary, of your 41 recommendations we agree with 38 in full and 2 in part. There is 1 recommendation where we do not agree.

In keeping with the focus of the review, where we have agreed to recommendations we do so in respect of the policy, practices and priorities of the S&ME business line, in particular those related to the two market segments which were the focus of your review.

Thank you again for the opportunity to comment on your report on this review.

If you require further information, please contact Gary Andrews, Assistant Deputy Commissioner S&ME Active Compliance.

Yours sincerely

SIGNED

Bruce Quigley
Second Commissioner
Australian Taxation Office

Date: 8 December 2011

[To minimise space, the appendix to the ATO's response has not been reproduced here, but has been inserted into the text of this report underneath each of the recommendations to which that text relates.]