Recommendation 2.1

When selecting SME (including S4, HWI and Wealthy Australian) cases for compliance activity, the ATO should determine the overall complexity for the cases and resource those cases accordingly.

ATO response:

Agree

Recommendation 2.2

The ATO should improve understanding of the roles, responsibilities and accountabilities of the different staff involved in the end to end process of SME cases:

  1. by ensuring clear guidelines on the roles and responsibilities of key ATO stakeholders in the end to end SME case process and the priority associated with them are available; and b. including in those guidelines, the specific roles, responsibilities and accountabilities of:
    1. SME officers, such as risk officers, case officers, advice officers, objection officers, Senior Technical Leadership officers, case leaders, senior management officers; and
    2. non SME officers, such as COE and TCN officers.

ATO response:

Agree

Recommendation 2.3

To strengthen and better match individual SME business line staff capability for specific cases, the ATO should:

  1. obtain and maintain a formal footprint of each officer's training and experience to identify gaps when compared to the expected knowledge, skills and experience;
  2. ensure all SME compliance, interpretative assistance and technical officers have a current learning and development plan that includes skills and knowledge development contributing to the delivery of business outcomes; and
  3. allocate work to officers according to their footprint and their learning and development plan.

ATO response:

Agree

Recommendation 2.4

The ATO should involve Senior Technical Leadership (STL) officers in resolving technical issues on the basis of the STL officer's area of speciality or expertise.

ATO response:

Agree

Recommendation 2.5

To improve the Senior Technical Leadership's (STL) contribution to the SME business line's objectives, the ATO should:

  1. ensure the STL engages with both Active Compliance and Interpretative Assistance officers, in particular objection officers; and
  2. involve the STL in the SME Executive's planning for resources and capability development.

ATO response:

Agree

Recommendation 2.6

In the new booklet (which will replace the 'Wealthy and wise' booklet, as set out in recommendation 5.1), the role, responsibilities and accountability of the case leadership area should be clearly explained.

ATO response:

Agree

Recommendation 2.7

With the aim of developing highly capable SME compliance officers, the ATO should refine its approaches to recruiting and developing its compliance officers by using the Expertise Assessment Tool developed by Inside Story to:

  1. identify development needs across the SME business line;
  2. align recruitment and selection criteria with the identified characteristics of 'expert' compliance officers;
  3. align learning and development programs more closely with the identified characteristics;
  4. improve on the job training and mentoring; and
  5. measure the capability development of compliance officers.

ATO response:

Agree

Recommendation 2.8

The ATO should facilitate a degree of SME compliance officer specialisation by taxpayer type or industry to better equip them for conducting compliance activities and become better acquainted with the common arrangements of taxpayer types and industries.

ATO response:

Agree

Recommendation 2.9

In balancing the need for more capable staff to deal with areas of higher risk and consequence with the need of the SME business line to retain enough of its workforce capability, the ATO should ensure that:

  1. the LBI business line recruits staff from all business lines including the SME business line; and
  2. the SME business line recruits capable staff from all areas including the LBI business line, COE and TCN.

ATO response:

Agree

Recommendation 2.10

The SME business line should conduct exit interviews for staff leaving to other areas of the ATO irrespective of the reason why a staff member is moving.

ATO response:

Agree

Recommendation 2.11

To address SME staff concerns in relation to their work, sufficiently senior ATO staff, who are not the subject of the concerns, should:

  1. conduct open and frank consultation with the relevant staff;
  2. seek to understand the concerns and their underlying causes;
  3. communicate consideration of those concerns including what action will be taken; and
  4. periodically communicate the status of the remedial action.

ATO response:

Agree

Recommendation 2.12

In the SME business line recruitment processes, the ATO should emphasise the attractive aspects of the work of this business line such as its complexity, variety and development opportunities.

ATO response:

Agree

Recommendation 2.13

The SME business line should take action to retain staff, including establishing a clearer career pathway for existing staff to progress along and deal with more complex work.

ATO response:

Agree

Recommendation 2.14

With the aim of improving SME business line understanding of commercial and business issues, the ATO should:

  1. develop programs that provide SME officers with a strong understanding of the business environment and related decision making in taxpayer or industry groups that are the subject of compliance action — such programs should be developed by drawing on:
    1. input from key tax professional and industry stakeholders;
    2. expertise of Senior Tax Counsel personnel, ATO executive management and external experts;
    3. complaints relating to potential shortfalls in officer training or capability; and
  2. ensure that before SME officers review/audit taxpayers within a particular industry these officers should have completed, or be accompanied by an officer who has completed, the relevant program of the type outlined in 'a.' above.

ATO response:

Agree

Recommendation 2.15

In seeking to improve SME business line staff training, the ATO should:

  1. provide a broader range of ways to deliver training so that officers have access to information when needed, including a resource library training suite;
  2. in relation to the external training provided, capture that training in a way that allows it to be disseminated more broadly than those who did not attend and to be reviewed by those that did attend; and
  3. engage tax practitioners, academics, and business and client management experts to deliver training on a regular basis.

ATO response:

Agree

Recommendation 2.16

The ATO should continue measuring the performance indicators for the effectiveness of its training and development activities.

ATO response:

Agree

Recommendation 2.17

With the aim of improving the assessment of staff capability development effectiveness measures, the ATO should:

  1. routinely and systematically capture external views on staff capability as a factor in assessing capability development effectiveness measures;
  2. take more proactive measures (other than the Staff Professionalism Survey and Client Feedback Questionnaires) to obtain and understand externals stakeholders' perceptions of SME officers' capability (such as conducting key client visits); and
  3. work with private sector stakeholders to improve SME officers' ability to understand their needs and demonstrate sufficient understanding of the relevant issues.

ATO response:

Agree

Recommendation 3.1

If the ATO wishes to expand the scope of a compliance activity to encompass issues that were not identified at the point of case selection, then it should only do so after subjecting the issues to an appropriate approval process such as business case approval or risk review. This is designed to ensure that the compliance activity is warranted and that overall compliance costs are minimised.

ATO response:

Agree

Recommendation 3.2

The ATO should:

  1. improve its initial compliance decision making capability to ensure sustainable decisions are made in the first instance; and
  2. identify the reasons for initial compliance decisions not being upheld on review and take action to address those reasons.

ATO response:

Agree

Recommendation 3.3

To improve internal processes dealing with suspicions of evasion, the ATO should:

  1. ensure that any suggestions of evasion are internally reviewed by senior officers before they are communicated to taxpayers and/or used as a reason to investigate matters; and
  2. in the event evasion is considered a risk by those senior officers, the case should be referred to the sme technical panel for further action and the taxpayer be notified of this action.

ATO response:

Agree

Recommendation 3.4

To improve the evidentiary basis for compliance decisions, the ATO should require SME officers to use the Facts and Evidence Worksheet to:

  1. guide their inquiries and formulate views from the point at which a risk hypothesis has been developed through to the finalisation of position papers;
  2. improve SME officers' (including those who sign off on compliance officers' work):
    1. ability to break down the elements of a legislative provision;
    2. to determine what constitutes facts and evidence;
    3. how to address conflicting pieces of evidence
    4. that affidavits are a form of evidence; and
    5. what level of evidentiary burden is appropriate; and
  3. update worksheets as new information comes to light.

ATO response:

Agree

Recommendation 3.5

The ATO should improve IQF reviews of SME work, including:

  1. ensuring IQF review of S4 and HWI cases is done by experienced senior technical officers with expertise in S4 and HWI work (such as Case Leadership);
  2. stratifying IQF reviews according to the different population segments of the SME market;
  3. improving case assessors' access to HWI cases for independent review; and
  4. involving senior officers in open case reviews.

ATO response:

Agree

Recommendation 4.1

The ATO should develop indicators to measure how funding allocated directly to the COEs and tcn results in benefits to the sme business line.

ATO response:

Agree

Recommendation 4.2

For the purpose of obtaining end to end analyses of completed compliance cases, the ATO should extend the use of its 'case sequencing charts' to capture:

  1. the reversal of liabilities in the cases' downstream dispute resolution steps;
  2. the ATO's costs in the cases' downstream dispute resolution steps; and
  3. estimated taxpayer costs for the total activities in cases (that is, cases' active compliance and downstream dispute resolution steps).

ATO response:

Partially agree

Recommendation 4.3

In order to appropriately minimise unnecessary compliance burdens on taxpayers and their advisers, the SME business line should:

  1. continue to monitor the effectiveness of cycle times over the range of its compliance products and, in doing so, inform itself of the views of taxpayers and advisers who were involved in the compliance cases; and
  2. enable SME officers to extend the cycle times in appropriate circumstances, without adverse impact on the taxpayer.

ATO response:

Agree

Recommendation 4.4

The SME business line should assess the effectiveness of its upstream risk identification processes in targeting likely non compliance and reducing compliance costs on compliant taxpayers. In conducting this assessment, the SME business line should inform itself from the analysis of the case sequencing charts and analysis of objections cases.

ATO response:

Agree

Recommendation 4.5

The ATO should improve management oversight and assurance measures to ensure SME officers proactively manage cases, including continually monitoring cases, re-communicating with taxpayers and complying with the requirement to complete case plans before commencing compliance activities.

ATO response:

Agree

Recommendation 4.6

To reduce the risk of duplicating risk reviews for the same economic group, the ATO should improve its automated systems' ability to identify links between related entities within the same economic group.

ATO response:

Agree

Recommendation 4.7

To ensure that the ATO appropriately resources its compliance activities in relation to HWIs, S4 and Wealthy Australian taxpayers, the ATO should:

  1. identify and fill gaps in resourcing (such as that identified in its internal report, 'Review of interpretative advice as part of the SM&E pipeline');
  2. ensure that relevant information on workflows and resourcing is shared within the SME business line;
  3. based on the increased complexity of this work, reassess the expected workloads of its SME Active Compliance, SME Interpretative Assistance (IA) officers and other ATO officers involved in dispute resolution (such as TCN and litigation);
  4. assess the impacts of this compliance action on other SME business line commitments; and
  5. sufficiently resource the SME's IA function to appropriately handle the number and complexity of objections being, and expected to be, lodged.

ATO response:

Agree

Recommendation 4.8

The ATO should improve staff understanding of the integration of the General Compliance, Wealthy Australians and HWIs areas and its impact on staff.

ATO response:

Agree

Recommendation 5.1

In consultation with taxpayers, tax practitioners and their representative bodies, the ATO should replace its 'Wealthy and wise' booklet (published in March 2008) with a new booklet to apply across the SME market segment that more clearly communicates what specific conduct taxpayers and their advisers can expect during compliance activities. This booklet should set clear expectations, including:

  1. what the ATO will and will not do during compliance activities in the SME market segment (including HWIs and Wealthy Australians);
  2. the manner in which those activities will be conducted; and
  3. more effective escalation processes where the ATO's SME officers do not meet those expectations.

ATO response:

Agree

Recommendation 5.2

In the new booklet (which will replace the 'Wealthy and wise' booklet, as set out in recommendation 5.1), it should be stated that at the outset of any compliance activity ATO officers will meet with the taxpayer and/or their representatives. The purpose of this meeting will include the following:

  1. identify the areas to be reviewed or audited;
  2. identify the information that the ATO is seeking and whether there are alternative forms of the information that would fulfil ATO purposes and be of reduced compliance burden to the taxpayer;
  3. agree on the timeframes for the compliance activity and deadlines for key milestones in that activity; and
  4. commit to the aim of 'no surprises' and the means to achieve that aim, such as periodic ongoing communication, preferred communication channels and escalation processes for any concerns arising during the audit.

ATO response:

Agree

Recommendation 5.3

In the new booklet (which will replace the 'Wealthy and wise' booklet, as set out in recommendation 5.1), it should be stated that ATO officers will discuss and develop compliance activity case plans with the taxpayer's representatives before any activity commences. If there are circumstances in which this opportunity was not to be afforded, these circumstances will be explicitly stated also.

ATO response:

Agree

Recommendation 5.4

In the new booklet (which will replace the 'Wealthy and wise' booklet, as set out in recommendation 5.1), it should be stated that ATO officers, based on the relevant facts and evidence worksheet which they have prepared, will discuss potential views with taxpayers and their advisers before drafting a position paper that may have adverse impact on them.

ATO response:

Partially agree

Recommendation 5.5

In the new booklet (which will replace the 'Wealthy and wise' booklet, as set out in recommendation 5.1), it should be stated that where the ATO's reasons for amending a taxpayer's liability change after assessments change (such as during the consideration of objections or litigation), the ATO will take fair and reasonable action to minimise the costs imposed on that taxpayer by reason of that change, including:

  1. communicating the reasons why the new ATO position was not formulated earlier;
  2. GIC remission; and
  3. a concessional approach to penalty remission.

ATO response:

Agree

Recommendation 5.6

In the new booklet (which will replace the 'Wealthy and wise' booklet, as set out in recommendation 5.1), it should be stated that the ATO will minimise taxpayers' costs arising from the change of SME officers during compliance activities. This will include, before engaging with the taxpayer or tax adviser the new compliance officer will:

  1. familiarise themselves with the issues, facts and status of the compliance case; and
  2. understand the information that has already been provided by the taxpayer and how that relates to the issues in question.

ATO response:

Agree

Recommendation 5.7

In relation to existing notification procedures concerning the commencement and finalisation of compliance activities, the SME business line should:

  1. in addition to existing quality assurance measures, ensure that its officers comply with these procedures; and
  2. more clearly set expectations about such notification by clearly and publicly stating when officers are to provide such notification.

ATO response:

Agree

Recommendation 6.1

The SME business line should require its compliance officers to use the facts and evidence worksheet to determine what information will be asked of a taxpayer in any particular compliance activity.

ATO response:

Agree

Recommendation 6.2

In the new booklet (which will replace the 'Wealthy and wise' booklet, as set out in recommendation 5.1), it should be stated that in relation to ATO information requests, the SME business line will:

  1. clearly state to taxpayers and their advisers the time periods within which the ATO will review and respond to information provided by them; and
  2. ensure that team leaders are progressing cases in a manner that provides taxpayers with adequate time to respond and minimises the time taken by SME officers to finalise cases.

ATO response:

Agree

Recommendation 6.3

The ATO should review, with their SME advisory group, the structure and content of any proposed new (or substantial alterations to existing) information gathering questionnaires.

ATO response:

Agree

Recommendation 6.4

The ATO should use the findings from the Risk Assessment Information Sharing project to develop improved information gathering and risk assessment and by communicating to each taxpayer the risks that the SME business line has identified in relation to that taxpayer.

ATO response:

Agree