Background

4.1 The ATO takes a risk-based approach to compliance activities and allocates resources to cases posing the highest risk to government revenue.248 The ATO’s risk identification process, with respect to employer tax and superannuation obligations, varies depending on the risks being investigated. It may be targeted to a particular obligation or may involve investigating multiple obligations at once. A diagrammatic representation of how sources of intelligence inform primary risks and trigger different types of compliance activities is produced in Figure 4.1 below.

Figure 4.1: Employer obligations intelligence sources, risks, and compliance activities

Figure 4.1: Employer obligations intelligence sources, risks, and compliance activities

Source: IGT based on ATO correspondence.

4.2 The above diagram depicts how the ATO identifies employer obligations risks through a number of sources including third party data, notifications by employees and tax evasion referrals.

Pay As You Go Withholding

4.3 In relation to identifying potential non-compliance with PAYGW obligations, the ATO has advised that it compares amounts reported by employers on their activity statements with amounts on employers’ PAYGW annual reports as well as the credits claimed by employees in their individual income tax returns.249

4.4 In order to identify instances where employers have failed to withhold, such as by paying cash wages or incorrectly treating workers as contractors, the ATO utilises a variety of information to assess the risk and select candidates for review. Such information may include income tax performance indicators such as PAYGW as well as benchmark expenses including wages, payment to contractors and superannuation payments.250 Furthermore, the ATO may receive referrals from external agencies, such as SROs.251

4.5 Once PAYGW risks are identified, ATO compliance activities aim to determine the PAYGW amount for each period and ensure that this amount was debited to the employer’s account.

4.6 If employers have failed to notify or withhold the appropriate PAYGW liability, the ATO may raise the liabilities based on information available252 or estimates.253 The ATO may also impose failure to lodge,254 failure to withhold255 and administrative penalties.256

Superannuation Guarantee

4.7 The ATO identifies potential non-compliance with employers’ SG obligations through:

  • Employee Notifications (ENs) from workers who believe that they are employees and have not been paid the correct amount of SG;257
  • data matching, behavioural analysis, which considers employers’ compliance histories, and certain high risk industries;258 and
  • third party referrals.259

4.8 Where the ATO has identified non-compliance with SG obligations, it may raise an SGC liability. Employers may also be subject to an additional penalty which can be up to 200 per cent of the SGC amount.260

Fringe Benefits Tax

4.9 The ATO utilises data obtained from employer lodged activity statements, FBT returns and income tax returns as the main basis for identifying potential non-compliance with FBT obligations. Intelligence and data is also obtained from third parties including motor vehicle registration data, immigration data and Australian Charities and Not-for-profits Commission data.261

4.10 Employers that provide benefits in kind are required to register for FBT and lodge FBT returns if they have a FBT liability in a particular year.262 Where the ATO identifies discrepancies in FBT returns lodged by employers, the ATO will request amendments to the returns and the lodgement of amended payment summaries to reflect the correct amounts.263 Employers may also be liable for an administrative penalty where they have understated their FBT liability.264

4.11 Where employers have not lodged their FBT return, the ATO may issue a default FBT assessment.265 The ATO may also impose a failure-to-lodge penalty.266

Broad employer obligations compliance cycle

4.12 Where PAYGW risks are identified, the ATO has advised that it will also investigate other employer obligations such as superannuation and possibly FBT. There are a number of compliance methods which may be employed depending on the circumstances of each case. These methods are part of a broader employer obligations compliance cycle which is diagrammatically represented below in figure 4.2.

Figure 4.2: Employer obligations compliance cycle

Figure 4.2: Employer obligations compliance cycle

Source: IGT based on ATO correspondence.

4.13 In the above diagram, case selection is the process of selecting employers with an identified risk for review or audit. The decision to select an employer for review or audit is based on application of risk ratings and business rules such as a de minimus threshold below which risks are not investigated.

4.14 Once a case is selected, pre-compliance profiling is undertaken to determine whether the employer should be excluded from compliance activity. Where the employer is not excluded, the existence of the earlier identified or new risks will inform the choice of compliance activity which is described in the following section.267

4.15 After the completion of each compliance activity, staff are required to complete a case debrief. The debrief captures quantitative and qualitative data which may include reasons for non-compliance such as natural disasters.

4.16 There are also team debriefs which are a qualitative form of intelligence undertaken every two months by each team. The case and team debriefs, combined with case outcomes, filter into internal publications and intelligence scans which are then used to raise awareness of emerging trends and assist in targeting future compliance activities.268

Broad employer obligations compliance methods

4.17 As mentioned earlier, the ATO has different types of compliance activities which are used to investigate the various compliance risks. These are described below.

Reviews

4.18 Since 18 February 2015, the ATO has been conducting streamlined field reviews where an employer has not recently been audited, the potential debts are not excessive and the employer is considered to be at least partially engaged and therefore more likely to meet their compliance obligations.269

4.19 From 2 September 2015, the ATO has also been using streamlined desk reviews. The selection criteria for this type of review are the same as the above field reviews. Desk reviews are generally used when the geographical location of an employer makes field reviews difficult.270

4.20 Both desk and field reviews seek to verify PAYGW and SG compliance, but not FBT and may result in penalties and interest charges on employers for non-compliance. The streamlined field review also considers employers’ record keeping practices, payroll information, preparation and lodgement of activity statements as well as the administration of PAYGW and SG.271

4.21 The ATO also uses the above two types of reviews to provide education to employers, assist them in complying with their taxation obligations and where necessary, negotiate the collection of any outstanding liabilities.272

4.22 The ATO has advised that, where there is a high risk that employers in a particular industry are paying cash wages and are not complying with PAYGW and SG obligations, they may use another type of review called ‘Walk in’. It involves an unannounced visit to the employer’s premises where the ATO gathers intelligence, requires completion of a questionnaire and makes ‘real time’ observations to identify risks. Employers are provided with an opportunity to make a voluntary disclosure, are educated on their obligations and informed that further compliance activity may be undertaken.273

4.23 Where employers do not comply with their obligations during the course of any of the above types of review or significant risks are identified, the review would be escalated to an audit for further investigation.274

Audits

4.24 The ATO may undertake a desk audit where it has identified PAYGW discrepancies. Desk audits are also used in situations where the geographical location of an employer makes field audits difficult. During desk audits, the ATO will seek to gather information in relation to identified discrepancies and correct those discrepancies. Desk audits are not considered appropriate where FBT, contracting arrangements or large employer risks are being examined.275

4.25 The ATO uses field audits where risks and issues have been identified but employers’ circumstances do not meet the streamlined field review criteria, discussed above, or when the ATO considers the employer is not cooperating with a streamlined field review. The field audit also seeks to investigate certain FBT risks.276

4.26 The field audit is conducted on the employer’s premises and involves an interview with the employer, their staff, contractors and representatives. A questionnaire focusing on the identified risks is also to be completed onsite. For example, the questionnaire may focus on any contracting arrangements and the nature of the relationship between the parties.277

4.27 The field audit also involves discussion and analysis of the employer’s records and their record keeping practices for payroll, PAYGW and SG.278

4.28 Where non-compliance is identified, the relevant treatments discussed earlier such as PAYGW estimates and penalties will be applied.279 The ATO uses intelligence gathered from the audit to refer other identified risks to the relevant business lines or external agencies, such as SROs, for further action if necessary.

Compliance with Contracting Arrangements

4.29 Compliance with Contracting Arrangements (CCA) audits are used to specifically address the risk of an employer failing to withhold PAYG amounts which is usually due to incorrect classification of workers.280

4.30 As part of CCA audits, the ATO obtains contractor payment data for the purposes of income matching, identifying and addressing ABN registration issues as well as to assist in determining the status of the worker, that is, whether they are contractors or employees. This may also involve the use of the ECD Tool.281

TPRS Audits

4.31 For employers involved in the building and construction industry, the ATO may conduct specialised field audits to investigate TPRS issues, such as non-lodgement of the TPAR and identified discrepancies.282

Targeted compliance methods

4.32 The ATO also investigates specific risks associated with SG and FBT. Such investigations may be triggered through risk assessment or by way of a referral following another compliance activity such as the reviews and audits mentioned above.

4.33 Of particular relevance to the concerns raised by stakeholders are the targeted SG audit strategies, namely, the High Risk Employer (HRE) and High Risk Industry (HRI) strategies and the extent to which they sufficiently address non-compliance with SG.

High risk employers and industries

4.34 The HRE and HRI strategies are designed to proactively select industries and employers presenting the highest risk of SG non-compliance for audit.

4.35 The HRE risk assessment considers a number of factors when assessing the risk of employers for audit. It includes a comparison of salary and wage amounts reported by employees to superannuation payment amounts reported by superannuation funds. This comparison is followed by determining the number of employees for whom SG is fully paid as against the total number of employees.283

4.36 The HRI strategy targets employers in sub-industries that are considered to have a higher risk of non-compliance with their SG obligations. The sub-industries are selected for targeted audit activity by analysing the outcomes of EN investigations per sub-industry. The ATO then selects a group of sub-industries for targeted education and communication followed by targeted audits in appropriate cases. 284

4.37 The two strategies work together as follows:

  • Step one - Identify employers presenting a high risk of SG non-compliance and select those with the highest risk rating.
  • Step two - Identify high risk industries.
  • Step three - Select employers from within each high risk industry that would not otherwise be selected under Step one based on their risk rating.

4.38 As the intention of the HRI strategy is to promote voluntary compliance with SG, the effectiveness of the HRI is measured by comparing the number of SG statements voluntarily lodged in an industry before and after the strategy. This measurement occurs three months after the completion of the strategy to allow for the subsequent quarterly due date to lapse.285

4.39 An internal ATO document indicates that the HRI strategy has demonstrated varying level of effectiveness across different industries. For example, in the most recent group selected for the HRI strategy, which commenced in November 2014 and concluded June 2016, there was a 34.3 per cent increase in voluntary statements lodged for the ‘pub, taverns and bars’ sub-industry whilst there was a 39.3 per cent decrease in voluntary statements lodged in the ‘building and industrial cleaning’ sub-industry compared to the level prior to the HRI strategy. 286

Summary of stakeholder concerns

4.40 Stakeholders have raised a number of concerns with respect to the ATO’s end-to-end approach to employer obligations compliance activities. These concerns include that the ATO:

  • is heavily reliant on reporting by employees of potential non-compliance of employers and does not sufficiently use third party data at an early stage to improve its risk assessment and case selection processes;
  • unnecessarily expands the scope of employer obligations compliance activities to include other obligations which increases the compliance cost for employers and delivers little additional revenue;
  • does not adequately enforce FBT compliance other than in relation to cars;
  • makes broad information requests which do not provide sufficient context to assist employers’ in understanding what information to provide, identify suitable alternative documents, consider the resource impacts on employers, or provide employers sufficient time to respond to requests;
  • does not have the technical ability or commercial understanding to consistently determine status of workers and deal with FBT and PSI issues resulting in delays in the resolution of issues due to poor decision-making with inadequate reasons being provided for those decisions; and
  • is unduly harsh in its SG compliance activities although it is acknowledged that it may partly be due to the punitive nature of the relevant legislation.

4.41 Some stakeholders have also raised concerns with the ATO’s approach to phoenix activities and Director Penalty Notices (DPN). The IGT recently considered these issues and made recommendations with respect to phoenix activities and DPNs in his Debt Collection review.287

4.42 Stakeholders held mixed views regarding the difficulties associated with applying the PSI rules. Some stakeholders believe that the PSI rules are too complex while others felt that the rules provide a bright line test for the employee/contractor distinction. In this regard, various aspects of the PSI regime and stakeholder concerns have been recently investigated by the BoT, the Department of Treasury and the ANAO. The key aspects of these reviews were summarised in Chapter 1. Accordingly, this report only considers issues raised that have not already been covered by these reports.

4.43 It is appropriate to delay the consideration of issues raised with respect to phoenix activities, DPNs and PSI rules until recommendations of the above reviews have been implemented and sufficient time has elapsed so that an assessment can be made of the new environment. If these issues persist, they may be detected through the IGT complaint handling service.

ATO use of third party referrals in risk identification and case selection

4.44 Stakeholders have raised concerns with the degree to which the ATO currently relies on direct reporting by employers and employees to identify non-compliance with employer obligations. Such reliance is said to create an uneven playing field for employers as there are some that do not accurately report their obligations and may remain undetected.

4.45 Many stakeholders believe that the ATO should take a more proactive compliance approach by better using third party data to identify risks that may go otherwise undetected. Such third party data may include state payroll information whilst an examination of previous employment relationships or other contractual arrangements may also unearth useful information.

4.46 A small number of stakeholders have raised concerns that the use of third party data without taxpayer knowledge may constitute a breach of privacy. However, the majority of stakeholders are of the view that the third party data should be used and the employer in question be afforded an opportunity to give context or correct the data.

4.47 Stakeholders believe that the above proactive approach is particularly important with respect to SG as many affected employees may not become aware of the non-compliance for a significant period of time after the breach and, in any event, they may be reluctant to inform the ATO of the breach during their period of employment for fear of losing their job. They may also be unaware as to the avenues open to them for redress and, in particular, may be unaware of the ATO’s role in this regard.

4.48 To reinforce the importance of a proactive approach, stakeholders have asserted that where non-compliance remains undetected and the employer becomes bankrupt or is liquidated, the amount of unpaid SG cannot be recovered. Unpaid SG is not protected under the FEG. The IGT has previously recommended to the then Government to consider expanding the former General Employee Entitlements and Redundancy Scheme (now FEG) to cover unpaid SGC liabilities where a company has been placed in liquidation and the ATO has not been able to recover against the directors personally.288

4.49 It should also be noted that where the ATO decides not to further investigate an employee’s claim for non-payment of SG, there are no avenues of appeal for that ATO decision.

Relevant ATO materials

4.50 The ATO has advised that it utilises a variety of information sources in its risk identification and case selection of employer obligations compliance activities, including data and payments directly made to the ATO as well as data from third parties.

4.51 The ATO makes use of internal data by:

  • matching PAYGW discrepancies with annual amounts reported to the ATO through individual income tax returns;
  • comparing employees’ salary and wages with estimated employer superannuation contributions; and
  • matching the outcome of previous audit work with industry codes.

4.52 To assist with its risk identification and case selection, the ATO also receives third party data, including those from:

  • the FWO;
  • the various SROs;
  • superannuation funds via the lodgement of Member Contribution Statements (MCS) and referrals of potential SG non-compliance; and
  • employees who have lodged ENs to the ATO for the potential non-payment of SG.

4.53 The type and use of third party information received by the ATO from the above sources as they relate to employer obligations is described below.

Fair Work Ombudsman referrals to the ATO

4.54 The ATO has advised that it has Memorandums of Understanding (MOU) with the FWO to facilitate the sharing of information.289 At the time of writing, a new MOU was in the process of being drafted.

4.55 The new draft MOU largely reflects the existing MOU in that the ATO receives information from the FWO in relation to their investigations, which may indicate certain:

  • employers that have not paid SG;
  • employers incorrectly treating employees as contractors; and
  • entities and individuals suspected of participating in fraudulent phoenix and cash economy activities.290

4.56 The new draft MOU provides for quarterly meetings between the ATO and FWO to discuss operational compliance activities, such as opportunities for joint activities and high profile issues.291

4.57 The ATO has provided statistics on the number of referrals made by the FWO over the five financial years to 30 June 2015 which is shown in Table 4.1 below.292

Table 4.1: Aggregate FWO referral to the ATO from 1 July 2011 to 30 June 2015
FWO referrals to SG 3500
FWO referrals to Phoenix Taskforce 1
FWO referrals to Employer Obligations 0

Source: ATO.

4.58 The above table shows that a great majority of FWO referrals are made to the ATO with respect to potential SG non-compliance. Only one referral was made concerning potential phoenix activity and none were made to the Employer Obligations business area.

4.59 The ATO has advised that all FWO referrals concerning potential SG non-compliance are placed into the pool of potential HREs and subjected to that risk assessment process, which is described in the background to this chapter. The ATO has advised that it is unable to provide records on whether FWO referrals resulted in compliance activity.293

State and Territory Revenue Office Referrals

4.60 The ATO has advised that it has MOUs with all of the SROs which allow the exchange of information. The ATO uses this information to identify tax compliance risks including those relating to employer obligations. The exchange of information may either be formal which may occur periodically pursuant to the MOU. It may also be proactive in that one agency may forward information to the other where the former believes the latter would find the information useful. Information may also be requested on an ad hoc basis from one agency to another.294

4.61 The formal exchange mechanism is predominately used by the ATO to identify non-compliance with GST rather than non-compliance with employer obligations.295

4.62 A pilot was conducted for the proactive exchange of information with SRO which resulted in 795 referrals to the ATO. 296 However, the ATO ultimately concluded that, whilst the referrals provided valuable information, the number of referrals which resulted in an outcome was relatively low such that the cost of the program outweighed its benefits.297

4.63 The ad hoc requests for information between the ATO and SROs298 focus on shared risks. Information shared through ad hoc requests may include the results of SRO audits that identified contractors who are employees for payroll tax purposes.

4.64 Table 4.2 below shows statistics provided by the ATO on the number of referrals received from ad hoc requests, the number that proceeded to audit, the number and aggregate value of audits with an outcome as well as the number of nil outcomes (for completeness) for the last three financial years.

Table 4.2: SRO referrals, ATO audits and outcomes from 1 July 2013 to 30 June 2016
Financial year Number of cases from ad hoc requests Number
selected for audit
Number with outcome $ Number with nil outcome
2013-14 97 23 14 2,106,607 9
2014-15 84 66 31 3,204,050 35
2015-16 6 1 0 0 1
Total 187 90 45 5,310,657 45

Source: ATO.

4.65 The above table shows a decreasing amount of cases received by the ATO in response to ad hoc requests. In 2013-14, 23.7 per cent of cases were selected for audit. In 2014-15, despite receiving fewer cases than the previous year, a greater proportion (78.6 per cent) was selected for audit. Liabilities were raised in 60.9 per cent and 47 per cent of audits for the 2013-14 and 2014-15 financial years respectively.

Superannuation fund – Member Contributions Statements and referrals

4.66 The ATO has advised that all superannuation funds regulated by the Australian Prudential Regulation Authority (APRA) must submit MCSs to the ATO by 31 October each year. Amongst other things, the MCS reports all the contributions received by the superannuation fund for each member during the financial year.299 In this respect, the ATO has advised that the MCS data it receives may be up to 18 months old by the time it is received and available for use in its risk assessment processes.300

4.67 In addition to data in the MCS, the ATO receives proactive referrals from superannuation funds in relation to potential unpaid SG.301 During the period from 1 July 2013 to 29 February 2016, the ATO assessed a total of 130 of such referrals.302

4.68 During the review, the ATO has advised that it upgraded the mechanism by which superannuation funds could lodge a proactive referral with the ATO. Prior to 1 November 2015, proactive referrals were received by the ATO via email. As a result of the upgrade, superannuation funds can lodge their referrals via a new online Fund Notification Form. Whilst it was primarily designed for superannuation funds to report employers’ non-compliance with SuperStream requirements, it also allows them to report employers who have not paid an SG contribution.303

4.69 Unlike referrals from the FWO described earlier, the ATO has advised that superannuation fund referrals are risk assessed separately and not placed into the same pool as HREs. This is because data from superannuation funds is likely to be more recent than FWO referrals as superannuation funds receive quarterly contributions and would know how long it has been since an employer last made a contribution.304

4.70 Where superannuation funds notify the ATO that employers have not paid certain contributions, the ATO would profile the employer to determine the level of risk and refer such matters to the superannuation active compliance teams, now called ‘Engagement and Assurance’ teams, to determine whether an audit should be conducted.305

4.71 Table 4.3 below sets out the number of proactive superannuation fund referrals and the proportion selected for audit during the 2013-14 to 2015-16 financial years. The number of referrals actioned in the 2015-16 financial year include 57 referrals from the 2010-11 financial year which were misplaced due to a ‘routing error’ but were found and actioned in early 2016. These referrals are displayed separately in the table for completeness.

Table 4.3: Numbers of proactive superannuation fund referrals, by ATO action and financial year
Financial year Referrals received ATO action Outcome No Outcome In Progress
    No
further
action
% Selected
for
audit
%   $    
2010-11 57 48 84.2 9 15.8 3 101,184 3 3
2013-14 33 13 39.4 20 60.6 10 - 10  
2014-15 33 20 60.6 13 39.4 7 303,145 6  
2015-16 7 5 71.4 2 28.6 1 148,611 1  
Total 130 86 66.2 44 33.8 21 552,940 20 3

Source: ATO.

4.72 The data provided by the ATO in the above table shows that the number of proactive referrals from superannuation funds has decreased significantly in 2015-16. Furthermore, over the period from 2010–11 to 2015–16, approximately one third of all referrals (44) were selected for audit and no further action was taken in relation to the remaining two-thirds (86). An outcome was obtained in 50 per cent (21) of the cases selected for audit with an overall ‘strike rate’ of 16 per cent.

4.73 For the 2013–14 financial year, over 60 per cent of cases were selected for audit. After factoring in the routing error for 2010-11 which had a low strike rate of 5 per cent, the figures indicate a gradual decline in the number of referrals received from superannuation funds.

4.74 The ATO has advised that there are a number of reasons why ‘no further action’ may be taken in relation to referrals from superannuation funds. These reasons are outlined in Table 4.4 below including the number of referrals to which they apply.

Table 4.4: Reasons why the ATO did not investigate referrals from superannuation funds
Reasons for ‘No further action’ 2013-14 2014-15 2015-16 Total (%)
Employer had already been audited for the period 6 5 11 22 (25.6%)
Employer subject to an audit by another ATO unit 0 1 0 1 (1.2%)
An EN investigation is currently in progress 2 6 3 11 (12.8%)
Employer is insolvent 1 1 10 12 (14%)
Employer is deemed to be low risk 0 6 15 21 (24.4%)
Insufficient information to identify relevant entity 4 1 14 19 (22.1%)
Total ‘No further action’ 13 20 53 86

Source: ATO.

4.75 Table 4.4 indicates that the number of superannuation fund referrals not being subject to any audit action has increased over the 2013-14 to 2015-16 financial years. The main reasons appear to be that employers had already been audited by the ATO or there was insufficient information to identify the employer. There has also been a growth in referrals not being investigated because the employer is insolvent or deemed to be low risk. It is unclear whether the late investigation of 2010-11 cases in the 2015-16 financial year may have contributed to the relatively high number of cases with ‘no further action’ due to insolvency.

4.76 While the number of proactive referrals from superannuation funds may not be large, the proportion of cases in which audit action is taken is significant. For example, Table 4.3 and Table 4.4 together show that in 2013-14, of the 33 referrals received, 85 per cent were either:

  • referred for audit (20);
  • closed because a previous audit addressed the period (6); or
  • closed because an investigation was in progress (2).

4.77 In 2014-15, the proportion of proactive referrals from superannuation funds was slightly lower at 73 per cent.

Employee Notifications

4.78 The ATO has advised that employees, who believe that their employer is not paying their SG, may lodge an enquiry about their unpaid superannuation using an online form - ‘Employee SG calculator’.306 Employees are required to provide information about themselves, the employer and periods where SG has not been paid.307 The ATO will then advise the employee whether an investigation will take place.

4.79 Table 4.5 shows the number of ENs received and the number of employer audits that were finalised in the five financial years up to and including the 2014-15 financial year. On average, over the five years, the ‘strike rate’ is 58 per cent per year.308

Table 4.5: Number of Employee Notifications, by ATO action and financial year
  Employee Notifications received Finalised employer audits resulting from ENs Finalised audits resulting in raising of liabilities Finalised audits with no liabilities raised
    No. No. % $m  
2010‑11 18017 17943 11378 63% 329 6565
2011‑12 19440 19752 11442 59% 306 8310
2012‑13 18564 16976 11413 61% 331 5563
2013‑14 21274 18107 11539 54% 417 6568
2014‑15 21009 17444 11333 54% 474 6111
Total 98304 90222 57105 58% 1857 33117

Source: ATO.

4.80 The above table shows that the number of ENs received varies over the 2010-11 to 2014-15 period (the lowest number of ENs received was in the 2010-11 year at 18,017 and the highest was 21,274 in 2013-14). The proportion of these audits that resulted in liabilities being raised varies between 54 per cent, in the 2013-14 and 2014-15 years, and 63 per cent in the 2010-11 year.

ATO’s move to a proactive approach for SG and PAYGW

4.81 The ATO has advised that, for the period 1 July 2015 to February 2016, the number of full time staff allocated to investigate ENs was approximately seven times more than the number of staff allocated to conduct proactive audits.309 In terms of cases over a longer period, in the five financial years leading to 30 June 2015, the ATO completed 84,058 EN audits310 compared with 3,512 proactive SG audits.311

4.82 The ATO has advised that it has a number of strategies to reduce its reliance on ENs and free up resources for proactive work.312 One such strategy involves the superannuation area working with other areas of the ATO to consider SG during broad employer obligations compliance activities.313 The ATO has conducted 32,442 broad employer obligations reviews and audits in the five financial years to 30 June 2015, with 19,382 cases resulting in SGC liabilities raised, totalling $531,935,510.314

4.83 The ATO has also advised the IGT that it has reduced the number of full audit cases stemming from ENs through its new tailored approach which allows generally compliant employers to ‘catch up’ on the contributions. This tailored approach is discussed later in this chapter.

4.84 The ATO has also publicly committed in 2015 to estimate the SG gap315 which would further inform its future compliance strategies. The SG gap is the difference between the estimated amount of SG theoretically payable assuming full compliance by all employers and the amount actually paid to superannuation funds for a defined period. The ATO had expected to announce the estimate of the SG gap in 2015–16, however, it found that ‘methodological improvements and further data were required’ and is now expected to provide an update to the House of Representatives Standing Committee on Tax and Revenue in late 2016, together with an overall timetable for completion.316

4.85 It should be noted that the ATO also plans to use the ‘real time’ nature of STP data to proactively address PAYGW317 and SG318 risks. The Explanatory Memorandum to the STP legislation states that:

More timely information will allow the Commissioner to engage with employers earlier to address cases of non-compliance. This could potentially prevent more punitive outcomes for such employers which would apply under the SG charge regime where non-compliance is identified further down the track.319

4.86 Under STP, employers will be required to notify the Commissioner of certain SG related information such as the ordinary time earnings or salary or wages, SG contributions paid to a superannuation fund and any contributions that reduces SGC liability.320 Towards the end of this review, the ATO advised the IGT that it will obtain this information from two sources. Amounts of ordinary time earnings and salary and wages will be automatically extracted from the employer’s payroll software. In relation to SG contributions paid, the ATO plans to obtain the SuperStream data sent by employers to superannuation funds. These two sources together will satisfy employers’ SG reporting requirements under STP. 321

IGT observations

4.87 The IGT has consistently supported the use and refinement of ATO risk assessment tools322 to appropriately target ATO resources for identifying non-compliance and taking proportionate action. Such an approach should reduce unnecessary costs for both the ATO and taxpayers particularly those that are compliant.

4.88 A key part of the risk assessment process is the effective use of relevant third party referrals including those obtained from other government agencies as well as bodies, such as superannuation funds. There are challenges in this regard such as the timeliness of the provision of reliable information. For example, typically, SROs inform the ATO that a particular employer has incorrectly classified an employee as a contractor, for payroll tax purposes, following the completion of their audits. The information is reliable at this stage but there is a significant passage of time from risk identification by the SRO through to notification to the ATO, the conduct of an investigation and subsequent action. By such time it may be too late for the ATO to recover any SG amounts from an employer, particularly where they have become insolvent.

4.89 The situation outlined above indicates the importance of periodically assessing whether benefits of using certain data from third party referrals are so limited as to be outweighed by its costs. Strike rates are a good indication. They involve analysing the use of particular third party referrals to determine the percentage of cases where their use has led to corrective action being taken following an audit. Included in this percentage should be instances where the referral identifies risks that have already been addressed. For example, based on the IGT’s processing of ATO material, it appears that whilst there are a relatively small number of referrals from superannuation funds, the strike rate is high because the majority of such referrals have identified risks that have already been addressed or have resulted in an audit with subsequent corrective action. The ATO’s current analysis of data and calculation of the strike rate only considers instances where the ATO takes action as a result of the referral.

4.90 Analysing the utility of third party referrals all the way to case outcome also provides an opportunity for the ATO to identify what is working well in the referral process as well as areas for improvement. For example, the number and reasons for why ‘no further action’ was taken on a referral can assist with refining the referral process. Tables 4.3 and 4.4 together show that 19 out of the 130 unsolicited referrals received from superannuation funds were treated as ‘no further action’ as there was insufficient information provided to identify the relevant entity. Accordingly, further inquiry could determine the type of missing information that prevented the referral from being actioned and subsequent adjustment made to the online Fund Notification Form to ensure the future capture of such information.

4.91 The ATO currently does some analysis of data from ENs, superannuation fund referrals, and ad hoc referrals from SROs but not referrals from the FWO. The IGT is of the view that the ATO should improve its analysis as described above and extend it to all sources of third party data including FWO referrals.

4.92 The more extensive analysis of third party data, suggested above, should validate the effectiveness of the source and, where possible the ATO should seek to maximise its use of those sources. For example, given the high strike rate when data from superannuation fund referrals is used, the ATO should seek to encourage superannuation funds to make more referrals. Whilst there may be some reluctance by some superannuation fund trustees to do so due to their contractual relationships with employers, they are ultimately charged with a responsibility to act in the best interest of their members who depend on SG contributions to help fund their retirement income.

4.93 One of the ways to encourage referrals from superannuation fund trustees is to increase their awareness of the ATO’s Fund Notification Form. The IGT believes that the ATO may collaborate with trusted third parties, such as APRA or superannuation industry bodies, and issue joint letters to the trustees to highlight the importance of maintaining the integrity of the system through referrals and assure them that their confidentially would be strictly observed. The ATO should also point out to the trustees that they would not be informed of any action taken as a result of the referral due to the corresponding confidentiality owed to the employers.

4.94 Another potentially valuable data source, in the future, is STP which may provide ‘real time’ data with respect to PAYGW and SG. This would be particularly beneficial for SG compliance because employers, generally, pay SG directly to superannuation funds, and presently the ATO does not have visibility over the timing and amount of SG payments. Only SGC payments are made to the ATO as described in Chapter 1.

4.95 As stated in Chapters 1 and 3, STP will not provide a complete data set for some time. Large employers will not be required to comply until 1 July 2018 and small employers will not be required to adopt STP unless the legislation is amended. Until all employers are required to remit data and payments to the ATO under STP, the ATO will experience limitations in detecting potential non-compliance in relation to a large proportion of employers. Furthermore, even if STP becomes mandatory for all employers, some time will be required before meaningful trend analysis can be conducted.

4.96 Furthermore, as STP data does not confirm amounts received by superannuation funds, the ATO may face similar limitations under the current system as it will need to await payment information before it can fully verify compliance. This challenge can be easily overcome in relation to PAYGW as the ATO will receive the monthly or quarterly remittance of PAYGW amounts and can conduct reconciliation of the data reported.

4.97 This above challenge cannot be as easily overcome in relation to SG as the ATO does not receive SG contributions in the normal course of events. One solution may be to obtain confirmation of SG payment from superannuation funds in the form of MCS. However, as MCS are compiled and provided annually there can be significant delays, up to 18 months, before the ATO is in a position to conduct reconciliation and become aware of unpaid SG. Another option would be for the ATO to obtain SuperStream payment data. Although such data could be obtained through employers’ STP compliant software and clearing houses, these sources would not confirm that the correct amount of SG has been paid on time. If such data was obtained from the superannuation funds, it would confirm whether payments were received by the funds and whether those payments were made on time.

4.98 Obtaining SuperStream data directly from superannuation funds would also provide the ATO with greater visibility with respect to the level of SG compliance than obtaining it through STP as fewer employers are required to comply with STP than with SuperStream. The ATO can use the SuperStream data, obtained from superannuation funds, in conjunction with PAYGW data to estimate potential SG shortfalls. However, some allowance should be made to account for minor errors in calculating PAYGW which are later corrected by the employer.

4.99 Some stakeholders have raised privacy concerns about the ATO’s use of third party data. It should be noted that the ATO is required to abide by the Privacy Act 1988, the Privacy Commissioner’s Privacy Principles (APPs) as well as his Guidelines on Data Matching in Commonwealth Administration which relates to agencies’ access and use of data for programs.323 The ATO has also provided management representation that this data is only used for risk identification and would not be used for other purposes including amending assessments.324

Recommendation 4.1

The IGT recommends that the ATO:

  1. improves its PAYGW and SG risk identification process by analysing the utility of data from third party referrals with a view to maximising the use of sources which yield the best results;
  2. improves its SG risk identification process by:
    1. encouraging trustees of APRA-regulated superannuation funds to refer more relevant data; and
    2. obtaining SuperStream payment data from superannuation funds for employers not required to use STP to promptly identify those not reporting or paying SG.

ATO response

Agree with recommendation 4.1(a).

Agree with recommendation 4.1(b) (i).

Disagree with recommendation 4.1(b) (ii).

We will explore options, including through APRA, to promote awareness of and channels for APRA regulated funds to report SG compliance matters. This was also addressed in a recent ANAO recommendation.

We recognise that if Single Touch Payroll is not extended to employers with fewer than 20 employees that there will still be limitations in identifying SG risks posed by these employers. However, until a decision is made by the Government about whether to extend Single Touch Payroll to cover these employers, and the design of STP implementation is finalised, we think it is premature to pursue an alternative option to obtaining the SuperStream data.

Compliance activities

4.100 Stakeholders have raised concerns about the effectiveness of audits in addressing risks associated with employer obligations, especially in the area of SG as left untreated, it would have wide ranging impacts on employees, employers and government more broadly.

4.101 In contrast, other stakeholders have raised concerns with the scope of employer obligations compliance activities. They believe such activities are frequently expanded beyond the initial identified risk. For example, stakeholders have commented that an employer may be selected for audit due to a discrepancy identified with PAYGW which is then expanded to investigate unpaid SG amounts and FBT over multiple periods. Stakeholders believe that such expansion often achieves immaterial adjustments and imposes unnecessary compliance cost on employers.

Relevant ATO materials

4.102 As described in the background to this chapter, the ATO utilises a number of broad and targeted review and audit methods to identify and address PAYGW, SG and FBT risks. In the five years up to and including the 2014-15 financial year, the ATO has conducted 125,825 such compliance activities.

4.103 Unpaid SG is investigated in almost all of the above compliance activities. Approximately 70 per cent of all SG compliance activities were audits conducted in response to ENs. There was an outcome, that is, at least a portion of unpaid SG was recovered, in 70 per cent of all EN related audits.

4.104 The remaining compliance activities consisted of broader employer obligations audits and reviews (27 per cent), proactive audits undertaken by superannuation areas (3 per cent) and audits as a result of superannuation fund referrals (0.03%).325

4.105 The ATO has advised that risk identification and case selection for broad employer obligations compliance activities is predominately identified through PAYGW discrepancies.326 Case selection is further refined through pre-compliance profiling.327 The ATO has advised that, in the five financial years up to and including the 2014-15 financial year, such profiling has excluded approximately 40 per cent of cases initially identified.328

4.106 As part of the profiling, the ATO will consider whether other risks such as SG or FBT should be investigated using the field audit method (FBT risks are not investigated using desks audits or the streamlined review methods).329 The ATO has advised that approximately 75 per cent of broad employer obligations audits may expand to all risks (field audits), while the remaining 25 per cent are desk audits involving PAYGW and SG only.330

4.107 Table 4.6 below sets out the number of broad employer obligations compliance activities conducted in the five financial years leading to 30 June 2015, the overall outcome and the outcome for each employer obligation.

Table 4.6: Broad employer obligations compliance activities completed from 1 July 2010 to 30 June 2015, by number, outcome, and revenue raised
Employer obligations Number Per cent Revenue raised
No. of Cases 32,442 100  
No. of outcomes 26,532 82  
- PAYGW 23,415 72 $ 1,574,300,365
- SG 19,382 60 $ 531,935,510
- FBT 793 2 $ 15,885,508

Source: ATO.

4.108 The ATO has conducted 32,442 broader employer obligations compliance activities and has raised liabilities in 26,532 cases with an overall strike rate of 82 per cent. The outcomes for PAYGW (72 per cent) and SG (60 per cent) were considerably higher than the outcomes for FBT (2 per cent).331

4.109 The ATO has also advised that since the introduction of streamlined reviews, the time for field investigation has been reduced from 114 to 35 days in some cases. The ATO has advised that debts raised under the streamlined review method are more likely to be collected than under its previous approach.332

IGT observations

4.110 As compliance activities can be a resource intensive and costly exercise for the ATO and employers, it is important that where they do occur, they are effective in identifying and addressing risks.

4.111 As mentioned earlier in this chapter, one of the risks that employer obligations compliance activities seek to address is unpaid SG. Information provided by the ATO indicates that 70 per cent of the investigations into unpaid SG are in response to ENs. This raises a concern that the origins of the bulk of the compliance activities may not sufficiently address the proportion of employees who are more vulnerable to non-compliance and do not lodge ENs for fear of losing their jobs, including those from non-English speaking backgrounds or in casual or part time employment.333

4.112 Unpaid SG, if left undetected and untreated, can have wide ranging and adverse impacts. Firstly, the affected employees miss out on superannuation entitlements which impacts their standard of living in retirement and increases their reliance on the Age Pension. Correspondingly the Government would be exposed to higher Age Pension outlays which would be funded by future generations.334

4.113 Secondly, compliant employers are adversely affected in that an uneven playing field is created where non-compliant employers obtain an unfair advantage if they remain undetected. Such non-compliance may propagate a domino effect. For example, if there are a number of businesses in the same geographic area offering the same services and one of them is not paying the correct amount of SG for their employees, the other business may be forced to follow suit in order to remain competitive.

4.114 The IGT recognises that, when implemented, STP will improve the SG risk identification, however, it will not be sufficient of itself as currently a significant portion of employers are not required to adopt STP.

4.115 As a result, it is crucial that the ATO considers other proactive approaches in addressing SG risks at the earliest possible stage. One option would be to conduct some random audits as considered in a broader context in the IGT’s review of the ATO’s risk assessment tools.335 The ATO has previously rejected such an option.336

4.116 Whilst carrying out random audits may expose some compliant employers to unnecessary compliance cost, these costs and inconveniences may be minimised by the manner in which the ATO might conduct the audits. The IGT noted in a previous review that such costs may also be mitigated by the ATO reimbursing complaint taxpayers for any additional compliance cost incurred.337 Furthermore, such costs and inconveniences should be weighed against the potential disadvantage that the very same compliant employers face if their competitors do not pay SG and remain undetected. It should be noted that, in the long term, random audits may also lead to better targeting of non-compliant taxpayers. As the ATO’s current risk assessment processes rely largely on reported data, these audits may be the only way that the most non-compliant employers can be detected. Certain common characteristics of non-compliant taxpayers may also be exposed and they could be used to improve the ATO’s current risk assessment tools.

4.117 The IGT continues to receive complaints from employees whose superannuation entitlements have not been paid and who are unlikely to be able to recover such unpaid amounts due to, for example, the employer becoming insolvent by the time any recovery action can be initiated. Both the Government and the ATO are aware of these challenges and since the IGT carried out its review of SGC,338 they have taken a number of positive steps to address it.339 However, further measures including the use of deterrents, such as random audits, may need to be considered. Better detection and resulting improvement in SG compliance would ultimately reduce employees’ reliance on the Age Pension.

4.118 Turning to the issue of compliance activities being expanded beyond the identified risk giving rise to them, it is reasonable to expect that expansion should be proportionate to the likelihood of additional risks. In this regard, the ATO has provided some justification, in particular with respect to expanding PAYGW audits to also cover SG.

4.119 The ATO’s outcomes for PAYGW, SG and FBT compliance activities indicate that there is a correlation between raising PAYGW and SG liabilities with respect to the same employer with ‘strike rates’ being 72 and 60 per cent respectively. Thus PAYGW discrepancies are a reasonably effective indicator of SG non-compliance. This is not surprising given that the definition of employee for SG purposes is, in essence, the expanded definition of that used for PAYGW.

4.120 The ATO correlation data on audit outcomes also indicates that a relatively small number of broad employer obligations compliance activities resulted in FBT liabilities (2 per cent). This may be partly due to the investigations in these field audits being limited to profiling where no information is requested from the employer. In such circumstances, from the employer’s perspective, FBT has not been ‘investigated’. It is not clear whether the absence of any correlation is due to no liabilities being raised after thorough investigations, or alternatively, the FBT aspects of the audits not being progressed beyond profiling.

Recommendation 4.2

The IGT recommends the ATO seeks further means of ensuring superannuation entitlements are paid promptly including the use of deterrents, such as random audits, to curtail the propagation of non-compliance - compliant employers who undergo such audits should be reimbursed for any additional costs.

ATO response

Disagree with recommendation 4.2.

We do not support random audits as a cost effective approach to compliance. As the report acknowledges, we have an active and diverse set of strategies in respect of SG compliance that delivers significant benefits for employees who have not otherwise received their entitlements.

Random audits are an untargeted approach that imposes unnecessary costs and time burdens on compliant taxpayers. Investment in random audits would be at the expense of more effective and beneficial approaches.

STP will provide a new source of data that will further assist our targeted approaches.

The ATO is already investigating the use of educational reminders and prompts to deter non-compliance as part of our SG compliance strategies.

Fringe Benefits Tax

4.121 As mentioned in Chapter 3, the breadth of the existing FBT regime imposes a high level of compliance cost on employers, making it difficult to achieve full compliance, whilst not raising a significant amount of revenue compared to income tax. The challenge is not limited to small employers alone. Large employers are required to determine FBT liability for large numbers of employees and given its complexity, accurately capturing every fringe benefit provided to each of them may not always be achievable.

4.122 Based on the above, there is a view that there is a significant level of unintentional or unavoidable FBT non-compliance which by its very nature is undetected. Certain stakeholders believe the ATO’s level of compliance activity in this area may be due to the fact that the ATO is cognisant of the challenges employers face in their efforts to fully comply.

Relevant ATO materials

4.123 The ATO has provided data on the number and type of compliance activities undertaken which have considered FBT risks. This is set out in Table 4.7 below.

Table 4.7: FBT liabilities raised from compliance activities
Primary risk 2010-11 2011-12 2012-13 2013-14 2014-15
Audits Amount $12,282,261 $23,273,243 $16,860,277 $27,564,282 $56,623,753
No. 292 384 367 704 787
- FBT   28 64 24 255 372
- GST   173 139 140 214 219
- Income tax   8 12 16 49 17
- Luxury Car Tax   - - 1 - -
- PAYG W   83 169 186 186 179
Reviews Amount $5,694,641 $4,039,851 $6,717,526 $12,559,037 $8,127,261
  No. 134 191 1,257 1,070 578
- FBT   111 170 1,222 1,028 529
- GST   17 9 9 9 10
- Income tax   6 12 26 32 35
- Luxury Car Tax   - - - 1 4
Compliance agreement Amount $0 $2,391,497 $0 $0 $0
No. 3 2 1 - -
- FBT   3 2 1 - -
Investigate and prosecute Amount $0 $0 $0 $0 $0
No. - - - - 1
- FBT   - - - - 1
Grand Total Amount $17,976,901 $29,704,592 $23,577,803 $40,123,319 $64,751,014
  No. 429 577 1,625 1,774 1,366

Source: ATO.

4.124 The above table shows that there has been a general increase in the number of targeted FBT audits over the last five financial years up to and including the 2014-15 year. The ATO has advised that in addition to targeted FBT audits and reviews, FBT may also be investigated as part of other types of audits, such as GST and income tax, depending on outcomes of its risk assessment processes. In the five financial years up to and including the 2014-15 year, the ATO has raised additional FBT liabilities of $176,133,629.340

4.125 The ATO has advised the IGT that key FBT compliance risks, generally, relate to car fringe benefits and outstanding FBT lodgements. Auditors in Employer Obligations teams are advised to close the FBT aspect of the audit where car fringe benefits are not provided by the employer, unless there is strong evidence of other FBT non-compliance.341 If the auditor identifies that car fringe benefits have been provided by the employer, the auditor will also obtain the relevant documentation to calculate the taxable value of other benefits such as health insurance premiums, a mobile phone or home computer.342

4.126 The ATO publishes the number of FBT compliance activities conducted in the appendices to its annual report343 and provides an indication of its areas of focus on its website.344 Although the ATO may provide a detailed list of focus areas for its compliance activities as well as a list of common mistakes in its presentations at external forums, such lists are not always published or otherwise freely accessible by the public.345

IGT observations

4.127 As mentioned in the previous chapter, the key to addressing stakeholders’ concerns is to focus on appropriately limiting the scope of the FBT regime to ease the compliance burden and the ATO enforcing compliance with the resulting regime more strictly. Such an approach would also create a more level playing field as more employers would be better placed to comply.

4.128 In the previous chapter, a recommendation has been made to the Government to review the FBT regime with the above goal in mind. However, the IGT believes that the ATO could take some remedial action in the meantime. One option would be for the ATO to publically announce its area of FBT compliance focus for coming years as it used to do more broadly in its Compliance Program.346 Such action is consistent with a recommendation by the Productivity Commissioner that regulators should provide clear guidance on enforcement priorities, especially where resource constraints cannot be addressed in the short term.347

4.129 For example, currently, key FBT risks that the ATO seeks to address include the provision of cars and entertainment to employees. More detailed information on these risks, for example the correct use of depreciation values and rates, could be made public on the ATO website for coming years to raise awareness, focus employer attentions on target areas and further improve voluntary compliance. Such an approach would also result in a reduction in the overall compliance burden and create a more level playing field.

Recommendation 4.3

The IGT recommends the ATO publicly announce its areas of FBT compliance focus for future year(s).

ATO response

Agree with recommendation 4.3.

We will include, on our ‘Building Confidence’ site, material which expressly outlines our FBT compliance focus and priorities for the FBT year.

Further, as part of our commitment to transparency we will continue to provide information on the approaches we are taking and the issues and risks we typically encounter in FBT on our ‘What attracts our attention’ site, with targeted guidance (including FBT specific webinars), and through industry forums and other public engagement events which reach a range of employers.

Information requests and timeframes in compliance activities

4.130 Many stakeholders have raised concerns that the ATO’s information requests, during employer obligations compliance activities, are too broad, do not consider the resource impacts on them and the time provided for an appropriate response is insufficient. The situation is further exacerbated by the paucity of reasoning or context being provided such that they are not in a position to, for example, provide alternative documents where the requested documents are not readily accessible.

4.131 A number of examples were provided as part of submissions to this review and in specific complaints lodged with the IGT. The majority of the concerns related to the costs and impacts of information requests.

4.132 In a more extreme example, the employer was asked to provide information for every employee over a three year period in relation to SG. The auditor had requested the employer to submit the information via fax and informed the employer that only a one-week extension could be granted under ‘federal law’.

4.133 In another example, an audit involved multiple companies in the same group, for multiple years with respect to all employer obligation tax risks. The ATO information request did not consider the complexity of the employer’s payroll system or the resources required to extract the necessary information. The audit resulted in an amended assessment and was only resolved at the objections stage when a face-to-face meeting was held with the ATO.

4.134 In addition to the adverse impact on their resources, stakeholders believe that the above practices prolong the length of compliance activities and potentially give rise to disputes that could have been avoided.

Relevant ATO materials

4.135 The ATO has advised that its principles with respect to information gathering are set out in its publication entitled: Our approach to information gathering. It states that taxpayers can expect the ATO to provide an opportunity to discuss the scope, appropriateness and relevance of the information requested and work with taxpayers to identify alternative documents where they have difficulties in providing the documents that were requested.348

4.136 The publication also sets out the timeframes for requesting information, and states that:

  • the period of time is generally 28 days, and while extensions are not normal practice, they may be granted in some circumstances;
  • consideration is given to the nature, extent, and urgency of the information requested; and
  • consideration is given to a taxpayer’s locality, the availability of information, processes necessary to retrieve, and cost of compliance.349

4.137 The ATO has also advised that its active case management guidelines for employer obligations reinforce the above flexible timeframes.350 There is an exception with regard to seeking lodgement of overdue statements.351 In such cases, staff may consider negotiating a staggered lodgement plan where there are several overdue lodgements spanning more than one financial year.352

4.138 The ATO may narrow the scope of an audit without requesting information from the employer based on business profiling which takes place during the planning phase of the audit as set out in the background section to this chapter. For example, where profiling confirms no motor vehicles exist for FBT purposes, such information may not be requested from the employer by the ATO auditors.

4.139 The ATO has advised that the application of the audit approach, including information requests, is guided by the procedures relating to the specific methods and discussions amongst the staff, their team and technical leaders.353

4.140 The ATO has provided representation that there is no specific direction given to staff on the degree of information required to test a particular risk and that discretion is provided in determining the information the auditor believes is required to investigate that risk.

4.141 The ATO provides instructions to staff354 and requires them to tailor information requests based on profiling.355 The ATO’s methods and procedures state that audit confirmation letters which request information must be approved by team or technical leaders prior to being issued unless they are issued without modification. In such cases, there may be approvals sought from peers.356

IGT observations

4.142 As mentioned earlier in this chapter, seeking to comply including assisting the ATO with its compliance activities imposes a significant burden on employers. Therefore, it is important that information requests do not impose any additional cost that can be avoided through appropriate discussions which may lead to better identifying the required information.

4.143 In a number of previous reviews, the IGT has considered the ATO’s information gathering processes across various ATO business lines.357 These reviews prompted the ATO to develop the Our approach to information gathering publication which generally reflects the above principles. This publication indicates that at a corporate level, ATO management have set appropriate principles in relation to how staff are expected to manage information requests.

4.144 The above principles, however, do not appear to be supported by sufficient practical guidance as to how they should apply in a review or audit context. For example, the relevant staff are not advised on the use of business profiling for estimating the amount of time the employer might require to respond to an information request. Accordingly, the IGT believes that the ATO could provide more practical guidance, such as common scenarios in training materials, to compliance staff on tailoring an information request, being cognisant of its impact on the employer and considering alternative sources of information in appropriate circumstances.

Recommendation 4.4

The IGT recommends the ATO supplement the principles contained in its ‘Our approach to information gathering’ booklet with practical guidance, such as common scenarios in training materials, to assist compliance staff to apply them in the context of an employer obligations audit or review.

ATO response

Agree with recommendation 4.4.

We agree with this recommendation and will incorporate the examples provided by the IGT as practical scenarios into existing training material to provide further guidance to staff when undertaking an employer obligation audit or review.

Technical expertise and discipline

4.145 Stakeholders have raised concerns that the relevant ATO officers do not have the technical ability or commercial understanding to consistently determine the status of workers and deal with FBT and PSI issues. Examples include auditors relying solely on the ECD tool or checklists to determine audit outcomes, with inadequate reasoning being provided for decisions. The lack of sufficient reasoning provided by ATO officers in these situations has led to employers questioning how the law was applied and what use was made of the information they had provided at the ATO’s request.

4.146 Some stakeholders also raised particular concerns regarding ENs. They believe that the ATO does not adequately communicate the outcome of EN investigations or its decision to decline to investigate ENs. The IGT has previously investigated such concerns in 2010 and made a recommendation to the ATO on improving communication to employees through appropriate and personalised letters in relation to collection and non-collection of SGC.358 The IGT has also completed a follow up review into the ATO’s implementation of agreed recommendations in 2014 and considered that the ATO had implemented this recommendation.359

Relevant ATO materials

4.147 The ATO has provided senior management representation that it manages its workforce through its workforce planning infrastructure which has the following features:

  • Effective structural design to ensure jobs are designed in a way to provide meaningful and correct work at the right level with built-in stretch opportunities to build capability for the future
  • Built-in technical leader roles (in addition to the team leader) that provide the technical leadership and mentoring to less experienced staff
  • Routine succession risk analysis is undertaken to assess the likelihood and impact of employees leaving ahead of time to identify opportunities for skills and knowledge transfer prior to departure
  • Single-source skill and knowledge dependencies are minimised through structural and job design by broadening [staff] skill base through exposure to various work which results in spreading capability across a range of officers to minimise succession risk.360

4.148 The ATO has also provided management representations that it develops and manages capability through the following measures:

  • Employees are mapped to Employer Obligation Audit jobs through their position numbers
  • These jobs have defined capability and knowledge requirements
  • Employees in these positions are assessed against these capabilities and knowledge requirements
  • This information is aggregated at the corporate level on an ongoing basis to ensure:
    • That the ATO has the required number of capable employees to perform [employer obligations] Audit jobs to deliver business outcomes
    • That employees themselves have attained the capabilities and knowledge to perform these jobs
    • That capability gaps are identified early and a plan can be developed between the manager and the employee to develop these requirements
    • The performance process (COMPASS) is used as the vehicle for the discussion, the plan going forward and also the ongoing monitoring of progress into the future. In Employer Obligations, team leaders actively manage quality assurance and staff capability needs. The Team leaders use Sero, Small Business line quality and coaching tool, as an indicator of capability and quality issues of their staff. Sero provides leaders and staff with a consolidated view of capability at all levels. The system has automated sampling, reports and captures data from a number of sources to provide an operational view to building capability, that is, new staff/work types, focused products and performance improvement.
    • From an [employer obligations] perspective, [the ATO] also monitor complaints and use this as an indicator of any capability issues. To date [the ATO] have very low complaint levels. [The ATO] also receive positive feedback in relation to [its] staff and their ability to help clients and provide quality advice.361

4.149 As part of the COMPASS performance process, ATO management have also advised that staff are expected to take ownership of their performance, check-in regularly with their manager and seek feedback from others.362

4.150 The ATO has also provided documents outlining the training for its staff who are engaged in employer obligations compliance activities. It consists of induction programs and further training to develop their capability for undertaking compliance activities.363 There are technical resources for PAYG, SG, and FBT. Of these resources, only the SG training material addresses the definition of employee364 which provides links to the ECD tool and the relevant SG rulings365 for further information. In relation to PSI, the relevant learning package addresses the common law definition of employee366 and also provides reference to the relevant PSI tax rulings for further information.367

4.151 The above learning packages require reading the relevant information followed by answering a number of questions. The packages are effectively of a self-taught and self-assessed nature.

4.152 In addition to the above training, the ATO management representation indicates that, upon joining a team, new staff are paired with more experienced staff and receive mentoring from the team’s technical leader.368

4.153 The ATO staff are also provided with procedures on how to conduct employer obligations audits including the ability to seek technical advice and approval from technical leaders within and outside the employer obligations area. For example, in relation to FBT, compliance officers can escalate an issue to their technical leader who can seek further assistance by sending an email to the mailbox of the Employer Obligations Product Team.369 The ATO has provided management representation that further assistance is available from its Private Groups and High Wealth Individuals business area, where the ATO predominately houses its FBT capability, as well as Tax Counsel Network for FBT matters which are particularly complex, novel or involve setting a new ATO view.370

4.154 At the conclusion of each employer obligations audit, the ATO’s audit procedures require staff to complete case debriefs which collate intelligence about employers, business structure and compliance issues and the audit outcome.371 Intelligence from case debriefs is incorporated into the Employer Obligations business area newsletter to share corporate knowledge amongst compliance staff.372

4.155 As mentioned above, the ATO also has a quality and coaching framework in the employer obligations business area, referred to as ‘Sero’. It involves the assessment of a sample of recently completed compliance activities by quality assessors against a matrix of criteria tailored to employer obligations. Where assessors find that a criterion has not been met, they must provide their reasons.373 These assessments, including the reasons, are provided to the relevant case officers and their team leaders. Case officers are required to acknowledge the assessment and feedback374 and undertake corrective action, such as following a coaching plan.375

4.156 Aggregate level reports of the Sero assessments are generated monthly and used to identify trends and address emerging or ongoing issues.376 To provide assurance on the capability of the assessors themselves, a sample of Sero assessments is also peer reviewed.377

4.157 The ATO has advised that it may focus all Sero assessments in a particular month to a particular risk in order to gain a deeper understanding of that risk. With regard to employee/contractor issues, this occurred in October 2015 and January 2016 by focusing on the CCA audits.378 The ATO has provided the Sero reports for these months. The results, produced in Table 4.8 below, indicate that the standards were met in approximately 96 per cent of compliance activities.

Table 4.8: Sero monthly reports, employer obligations, compliance activities which met standard
Criteria October 2015 (%) January 2016 (%)
Overall 96 96
Correct decision made 98 100
Professional client 99 98

Source: ATO.

4.158 The ATO has advised that it received 73 complaints during the four financial years up to and including the 2015-16 financial year in relation to employer obligations compliance activities. Five of these complaints make reference to decisions involving the employee/contractor distinction.379 However, specific details of the complaints were not provided.

4.159 Insight into the ATO’s handling of the employee/contractor distinction, in the audit context, can be gleaned from CCA audit procedures which are described in the background section of this chapter. Where auditors identify potential misclassification of workers, the CCA audit procedures direct them to consider the responses provided to the ECD tool and the additional questions using the relevant facts and evidence obtained during audit.380 The auditor’s findings and analysis are recorded in a template381 and sent to the technical leader for approval.382 The template requires auditors to present the relevant facts, employers’ contentions, evidence relied upon as well as all the answers to the questions outlined in the ECD tool.383

4.160 The employee/contractor distinction as it applies to the PSI rules is investigated separately through the PSI audit method.384 The ATO has advised that, as PSI is examined as part of broader income tax audits, they are only able to provide quality assurance results on income tax audits as a whole and are unable to provide specific reports on PSI decisions. However, the ATO has also advised that during the four financial years up to and including the 2015-16 financial year, it did not receive any complaints about its application of the PSI rules, but did receive five complaints mainly relating to the lodgement of PSI returns.385

4.161 ATO officers apply Taxation Ruling TR 2001/8386 in PSI audits. In determining whether income earned is excluded from the assessable income of the individual, the individual must meet one of four tests, including the ‘results’ test. Paragraph 110 of TR 2001/8387 states that the ‘results’ test is based on the traditional criteria for distinguishing contractors from employees and outlines the 11 relevant common law factors. It also states that there are no determinative factors and that the ‘totality of the relationship’ should be considered.388

4.162 Further, TR 2001/8 makes reference to the Explanatory Memorandum, of the PSI legislation, which states that ‘the individual must actually be paid on the basis of achieving a result, rather than for example, for hours worked’.389 Where there is a contract, the ruling states that the ‘true essence’ of the contract should be considered and that the ‘manner in which payment is structured will not of itself exclude genuine result based contracts’. For example, there are results based contracts where the contract price is based on an estimate of the time and labour.390

4.163 The PSI audit procedures require the auditor to obtain and review the contracts to determine whether the income from the contract is PSI and whether the taxpayer passes the ‘results’ test.391 The template, for recording the reasons for any decision, requires auditors to set out the issues, including the application of the ‘results’ test to the taxpayer’s circumstances against the three legislative criteria, specifically, whether the:

  • PSI is income for producing a result;
  • taxpayer supplies plant and equipment or the tools of trade to perform the work from which the result is produced; and
  • taxpayer would be liable for the cost of rectifying any defect in the work performed.

4.164 The template advises auditors that the essence of the contract should be to achieve a result and refer to the method of payment as a major relevant factor.392 The letter, which sets out the reasons for the decision, is approved before it is sent to the taxpayer.393

4.165 During this review, ATO management advised the IGT that it had commenced trialling a new ‘streamlined’ PSI audit in July 2016. This approach involves ATO staff having telephone conversations with taxpayers to identify and obtain relevant documents and alert taxpayers to any changes needed for ensuring future compliance with the PSI rules. At the time of finalising this report, the ATO advised the IGT that it had completed 40 such streamlined audits. However, the procedures and results for these audits were not available.394

IGT observations

4.166 As compliance activities may result in significant adjustment in taxpayers’ liabilities, it is important that the evidence used and reasons for arriving at key decisions are clearly explained to taxpayers. ATO staff need to receive adequate training and support to ensure that they discharge such duties equitably, accurately, expeditiously, confidently and with due care to the taxpayers’ circumstances.

4.167 Overall, it appears that the ATO’s workforce planning does include sound processes for capability development, including appropriate training packages. There also seems to be adequate procedures and templates to guide compliance officers in providing reasoning for their decisions. IGT has identified some further improvements which should enhance the ATO’s existing practices.

4.168 Capability development, including the importance of identifying the key skills required for specific roles and training to develop those skills, have been considered in previous IGT reviews.395 In this regard, ATO management has indicated that its workforce planning, training and coaching in the employer obligations business line predominately relies on a mixture of job design, learning packages and mentoring by more experienced team members.

4.169 Whilst learning packages are provided to staff, much of the packages are voluntary and self-directed without assessment. It would be beneficial if staff are assessed upon completion of training packages that are considered essential to the conduct of employer obligations compliance activities. At a minimum, the assessment may be done electronically in the form of multiple choice questions. Such an approach would provide assurance or identify knowledge gaps for both the team leaders and the compliance officers themselves. Ultimately, it should result in an improved taxpayer experience as well.

4.170 Turning to more tailored training, the employee/contractor distinction is only referred to as an ancillary concept in SG and PSI training packages and is not mentioned in PAYGW or FBT materials. Being central to the assessment of all employer obligations, the IGT believes that improvements to relevant training packages on the employee/contractor distinction, including links to detailed information about the risks, would be beneficial.

4.171 It is also important to monitor compliance activities for identifying capability gaps and take action to address them. Sero, as a process, seems to achieve this reasonably efficiently at the case level through feedback to case officers and team leaders. However, it is unclear how capability issues identified are recorded and tracked over time. Accordingly, the IGT believes that trends should be monitored to ensure that broader capability risks are addressed as early as possible. For example, Sero assessments for CCA audits could be reviewed over time to determine whether there are recurring issues relating to the evidentiary support for decisions and how these issues may be addressed through training or improvements to procedures.

4.172 Providing support tools to staff during compliance activities is also essential. Such support tools may be in the form of a compliance approach or in the form of templates. As mentioned earlier, the ATO’s 2016 trial telephony approach to making PSI determinations and the utilisation of conversations with taxpayers should assist in reducing the compliance cost for compliant taxpayers. However, as it is a recent initiative and the procedures are yet to be documented, more time is required before an assessment can be made of the effectiveness of this approach.

4.173 Currently, templates are provided to compliance officers to assist them in making decisions and documenting the reasons behind those decisions. The template relating to the employee/contractor distinction is based on the multiple choice style answers of the ECD tool. In the audit context, a more appropriate assessment, which includes the application of the law to the relevant facts, is necessary particularly in determining worker status which is heavily fact-based.

4.174 The template for recording decisions relating to PSI instructs compliance officers to apply the three legislative criteria of the results test but does not set out the various common law factors that require consideration.396

4.175 The IGT is of the view that templates could be generally improved by the use of ‘macros’ within templates. Using macros, compliance officers would select the relevant legislative and common law principles and the macro would populate the document with the necessary details on the interpretation of those factors by the courts.

Recommendation 4.5

The IGT recommends the ATO enhance its capability development framework and compliance support tools with respect to employer obligations and Personal Services Income compliance activities by:

  1. improving the relevant training packages on the employee/contractor distinction;
  2. ensuring that staff are assessed following completion of relevant training packages;
  3. monitoring the results of quality assessments over time to identify recurring capability issues with a view to improving training and procedures; and
  4. improving the documentation in the ‘reasons for decision’ templates, by requiring an appropriate assessment of the application of the law to the facts of the case.

ATO response

Disagree with recommendation 4.5.

We appreciate the IGT’s acknowledgement in the report (and in discussions) of the sound approaches already in place to support workforce and capability development and to assure quality outcomes. These approaches are generating good quality outcomes in the vast majority of cases as the IGT’s report highlights.

Training in the employee/contractor distinction is part of training available to ATO staff. Our staff are well trained and supported to use their judgement when documenting reasons for decision and utilise a facts and evidence worksheet for complex cases. Not all staff in employer obligations areas action cases related to the classification status of workers. Therefore, training and capability building in these issues is focused on those staff who will be actioning this type of work.

Although there is no formal assessment at the completion of these training packages, technical advisers and team leaders review the work of their staff and any ongoing learning and development needs are managed through the ATO’s personal development system (COMPASS). We do not believe there would be additional value from having a formal assessment process in place.

In terms of monitoring the results of quality to identify recurring capability, the business areas that are responsible for employer obligations and PSI work currently use the SERO coaching system to review cases and identify individual capability needs. In addition to this, the ATO has an enterprise wide approach to individual learning and development. Under the COMPASS system team leaders have regular conversations with each team member about their development and learning needs.

The ATO has made some significant changes in its approach to identified PSI risks that are resulting in far fewer of these cases being escalated to audit. Where a case does escalate to an audit or review process the reasons for decisions do require an application of the law to the facts of the case.

Consequences of non-compliance with Superannuation Guarantee obligations

4.176 Many stakeholders have raised concerns that non-compliance with SG obligations results in disproportionate consequences for employers. Specific concerns were raised by stakeholders that the relevant legislation requires employers to:

  • lodge an SG statement as soon as the payment of SG is late regardless of an employer’s compliance history or if the late payment was only a few days late; and
  • pay SGC which is not tax deductible.

4.177 Stakeholders were of the view that the above consequences, whilst acting as a deterrent, discourage employers from self-reporting their late SG payments to the ATO.

Relevant ATO materials

4.178 Where employers miss a SG payment, or make late or insufficient SG payments for a quarter, they will have an SG shortfall and the legislation requires the lodgement of an SG statement397 and the payment of SGC.398

4.179 The SGC is imposed on the SG shortfall and arises quarterly to the extent that the latter remains unpaid. It comprises of an employer’s SG shortfalls, an administrative fee for each employee and nominal interest. While SG contributions are deductible in the financial year that they are made, payments of SGC are not tax-deductible.399 Where employers become liable for the SGC due to a late payment, they have the option to:

  • use the late payment to reduce the amount of SGC, in which case the payment is not tax-deductible; or
  • use the late payment as a pre-payment for future SG, in which case it is tax deductible, but the non-deductible SGC balance is not reduced.400

4.180 There are circumstances where raising an SGC assessment may result in the employer paying a disproportionate amount of interest.401 This is because nominal interest is calculated from the first day of the quarter to the date the assessment is raised, not the date the payment was made.402 It may also result in a disproportionate administrative component of the SGC403 where large employers have very small shortfalls for a large number of employees.404

4.181 The ATO has advised that, previously, its approach was to pursue all cases of potential SG non-compliance, especially where employees had lodged ENs with the ATO.405 From 1 July 2014, it commenced tailoring its approach to pursuing lodgement of SG statements through the use of the Commissioner’s powers of ‘general administration under section 43 of the SGAA and the proper use and management of public resources of the Public Governance, Performance and Accountability Act 2013’. The ATO strategy document states that exercising the Commissioner’s discretion means that it can target the ‘highest risk taxpayers’, maximise outcomes and ensure ‘return on investment’.406

4.182 This differentiated treatment strategy was implemented in two phases. The first phase took place from 1 July 2014 and is based on compliance history, not to pursue employers who had been impacted by natural disaster or those who would incur disproportionate nominal interest or administrative components. In addition, as discussed in Chapter 2, the strategy also provides a discretion to apply a ‘go-forward’ approach to employers who have unintentionally misclassified their workers such that SG statements for prior periods are not being required.407

4.183 Where the ATO exercises the above discretion, it would do so on the basis that the employer had paid the required SG contributions in full within three months of the relevant cut-off date, or in the case of a natural disaster, as soon as practicable.408 The ATO has advised that it also encourages the employer to pay 10 per cent interest per annum for the number of days that the payment was late. This is significantly less than the overall legislative requirement as discussed earlier.409

4.184 From 1 July 2015, the ATO commenced the second phase of its differentiated treatment strategy where it adopts a tailored approach to SG compliance. Under this tailored approach, the ATO considers the compliance history of all employers when deciding whether to pursue lodgement of SG statements. Employers are categorised into four classes based on their compliance behaviours. Those who are ‘largely’ or ‘mainly’ compliant may pay SG and interest directly to superannuation funds rather than lodge SG statements and pay SGC to the ATO. Employers categorised as ‘poor compliers’ or ‘seriously poor compliers’ will be subject to firmer compliance action, including being subject to audit, required to lodge SG statements, issued default assessments or Director Penalty Notices (DPN) or have legal action taken against them.410

4.185 The ATO has advised that between 1 July 2015 and 31 January 2016, its adoption of the above tailored approach resulted in 121 instances where employers, who were the subject of an EN, had made payment of SG and interest on behalf of their employees directly to a superannuation fund, totalling $311,967. These employers were not required to lodge SG statements.411

4.186 The ATO has released an infographic412 about employers’ obligations to pay SG and a 90 second video which communicates key messages about an employer’s option to use the SBSCH to meet their SG obligations.413 The above differentiated approach to non-compliance is also conveyed, but only on its website414 which explains that the ATO ‘may not check the current compliance of those employers who are viewed as low risk (as a result of having a good compliance history) and who have appropriately compensated their employees’.415

4.187 Towards the end of this review, ATO management has advised the IGT that it is in the process of designing the implementation review of its tailored approach, including qualitative and quantitative measures of effectiveness.416

IGT observations

4.188 In his 2010 Review into the ATO’s administration of the Superannuation Guarantee Charge,417 the IGT had identified the need to strike a balance between the deterrent aspects of SGC in discouraging non-compliance and appropriate consideration of the employer’s circumstances in imposing it. The Commissioner’s recent policy in exercising his general powers of administration and his decision to effectively manage his resources under the Public Governance, Performance and Accountability Act 2013,418 as stated above, appears consistent with the approach recommended by the IGT.

4.189 The ATO’s new administrative approach has been fully operational since 1 July 2015. It is important that employers are made aware of it and that its effectiveness in promoting voluntary compliance be assessed after the passage of an appropriate amount of time. Whilst ATO management has advised the IGT that it is currently designing the review of the implementation of this new approach, it is unclear, based on the documents provided, when and how it will be assessed.

4.190 The IGT is generally supportive of the ATO’s new approach and believes more can be done to raise employers’ awareness of it. For example, it should be highlighted in ATO publications and webinars in addition to its website content.

Recommendation 4.6

The IGT recommends the ATO increase employers’ awareness of its differentiated approach to non-compliance with SG obligations and assess the utility of this approach by analysing the results obtained from measuring its effectiveness.

ATO response

Agree with recommendation 4.6.

We agree with the recommendation. We are currently drafting a Practical Compliance Guideline to outline how we consider an employer’s circumstances and how that influences our engagement. This will provide a basis for increasing employers’ awareness of our differentiated approach to non-compliance with SG obligations.

We have built a framework and measures of success for evaluating the effectiveness of our new approaches for SG, and will be moving to complete an initial evaluation now that we have had a year of operation of the new approach.


248 ATO, Reinventing the ATO, Program blueprint (March 2015) p 3.

249 ATO, Employers Failure to Notify or Withhold PAYGW (internal ATO document, 25 March 2015) p 11.

250 ATO, Risk Treatment Plan Employers Failure to Withhold PAYGW – SBIT (internal ATO document, 11 September 2014) p 17.

251 Ibid p 17.

252 ATO, Employer Obligations – Liability Shortfall (LSFO) Method (internal ATO document, 4 December 2015).

253 TAA sch 1 div 268.

254 Ibid sch 1 s 286-75.

255 Ibid sch 1 s 16-30.

256 Ibid sch 1 s 284-75.

257 ATO, Report unpaid superannuation contribution from my employer tool (7 October 2016) <https://www.ato.gov.au>.

258 ATO, Risk Summary – Superannuation Guarantee (internal ATO document, November 2015).

259 ATO, Superannuation enquiries (2 February 2016) <https://www.ato.gov.au>; ATO, Report fraud, scams, tax evasion or a tax planning scheme (8 June 2016) <https://www.ato.gov.au>.

260 SGAA 1992 pt 7.

261 ATO, Risk Treatment Plan – Fringe Benefits Tax (FBT) (internal ATO document, 29 June 2015) p 8.

262 Taxpayers become registered for FBT by completing a registration form, lodgement of an FBT return or as a result of a default FBT assessment.

263 ATO, Employer Obligations (EO) Fringe Benefits Tax (FBT) audit method (internal ATO document, 28 October 2015).

264 TAA sch 1 s 284-75(1).

265 The default assessment is raised under s 73 of the FBTAA and considers the guidance provided by PS LA 2007/24 Making default assessments: section 167 of the Income Tax Assessment Act 1936 and other similar provisions.

266 TAA sch 1 s 286-75.

267 For example, cases may be excluded from selection at this stage due to identifying that PAYGW was reported at the incorrect label in the BAS, or because the employer is now insolvent.

268 ATO communication to IGT, 14 June 2016.

269 ATO, Employer Obligations (EO) – Streamlined field review method (internal ATO document, 14 January 2016).

270 ATO, Employer Obligations (EO) – Streamlined desk review method (internal ATO document, 2 December 2015).

271 ATO, Streamlined field review method, above n 269.

272 ATO, Streamlined field review method, above n 269.

273 ATO, Employer Obligations Walk in risk method (internal ATO document, 2 June 2015).

274 Ibid.

275 ATO, Employer Obligations (EO): Desk audit method (internal ATO document, 21 January 2016).

276 ATO, Employer Obligations (EO) field audit method (internal ATO document, 13 January 2016).

277 Ibid.

278 Ibid.

279 Ibid.

280 ATO, Employer Obligations (EO): Compliance with contracting arrangements (CCA) audit method (internal ATO document, 27 November 2015).

281 Ibid.

282 Ibid.

283 ATO communication to the IGT, 26 April 2016.

284 ATO, Superannuation Subcommittee submission paper - Selection of SG High Risk Industries for Group Seven (internal ATO document, 13 August 2015).

285 ATO communication to the IGT, 10 June 2016.

286 ATO, Selection of SG High Risk Industries for Group Seven, above n 284 p 2.

287 IGT, Debt Collection (2015).

288 IGT, Review into the ATO’s administration of the Superannuation Guarantee Charge (March 2010) pp 92-3.

289 ATO communication to the IGT, 8 March 2016.

290 ATO, Draft Memorandum of Understanding – Data exchange – Schedule (internal ATO document) p 11.

291 Ibid p 6.

292 ATO communication to the IGT, 10 May 2016.

293 ATO communication to the IGT, 26 April 2016.

294 ATO, Procedural Guide: Exchange of unsolicited information (internal ATO document, December 2015) p 6.

295 ATO communication to the IGT, 8 July 2016 citing ATO, Memorandum of Understanding, Subsidiary arrangement – Data exchange (internal ATO document, 31 March 2014) pp 18, 20.

296 ATO, Procedural Guide: Exchange of unsolicited information, above n 294, p 6.

297 ATO, ATRO Employment Taxes Working Group - meeting minutes (internal ATO document, 21 October 2014)
pp 5-6.

298 ATO, Memorandum of Understanding - Subsidiary arrangement – Data exchange (internal ATO document, 31 March 2014) p 5.

299 ATO, APRA-regulated funds (8 September 2015) <https://www.ato.gov.au>.

300 ATO communication to the IGT, 10 June 2016.

301 ATO, Proactive SG Compliance Strategy (internal ATO document, April 2008) p 6.

302 ATO communication to the IGT, 9 March 2016.

303 ATO communication to the IGT, 7 April 2016.

304 ATO communication to the IGT, 10 June 2016.

305 ATO communication to the IGT, 9 March 2016.

306 ATO, Unpaid super from your employer (10 May 2016) <https://www.ato.gov.au>.

307 ATO, Unpaid super, above n 130, <https://www.ato.gov.au>.

308 ATO, Annual Reports 2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2015-16 and ATO communication to the IGT, 26 October 2016.

309 ATO communication to the IGT, 9 March 2016.

310 ATO communication to the IGT, 15 March 2016.

311 ATO communication to the IGT, 9 March 2016.

312 ATO, Proactive SG Compliance Strategy, above n 301, p 4.

313 ATO communication to the IGT, 7 April 2016.

314 ATO communication to the IGT, 3 June 2016.

315 House of Representatives Standing Committee on Tax and Revenue, ‘2014 Annual Report of the Australian Taxation Office’, Second Report (November 2015), para [2.121].

316 Standing Committee on Tax and Revenue, 2014 Annual Report of the ATO, Second Report, above n 315, para [2.62]; House of Representatives Standing Committee on Tax and Revenue, ‘2015 Annual Report of the Australian Taxation Office’, First Report, paras [2.85], [3.35].

317 ATO, ‘SuperStream & Single Touch Payroll - Working together to improve the client experience’ (Paper presented at Business Engagement Forum, Sydney, 23 March 2016) p 2.

318 ATO, STP design workshops, above n 51 <http://softwaredevelopers.ato.gov.au&gt;.

319 House of Representatives, Revised Explanatory Memorandum, Budget Savings (Omnibus) Bill 2016, p 265.

320 TAA Sch 1 s389-5(1) item 3.

321 ATO, ‘Single Touch Payroll Design walkthrough’ (Paper presented at Single Touch Payroll Engagement Forum, 19 October 2016) pp 14-16.

322 IGT, Review into aspects of the Australian Taxation Office’s use of compliance risk assessment tools (October 2013).

323 Office of the Australian Information Commissioner, Guidelines on Data Matching in Australian Government Administration (June 2014) <www.oaic.gov.au>.

324 ATO communication to the IGT, 3 August 2016.

325 ATO communication to the IGT, 3 June 2016.

326 ATO, Employers Failure to Notify or Withhold PAYGW, above n 249, p 11.

327 ATO, Risk Treatment Plan Employers Failure to Withhold PAYGW, above n 250, p 17.

328 ATO communication to the IGT, 13 July 2016.

329 For example, where the employer is not registered for FBT and a motor vehicle registration search shows no evidence of car fringe benefits as per ATO procedures - Employer Obligations (EO) - How to complete the EO audit confirmation letter: Period of review (POR) and Schedules (internal ATO document 24 August 2015).

330 ATO communication to the IGT, 14 June 2016.

331 ATO communication to the IGT, 19 February 2016.

332 ATO, Small Business / Individual Taxpayers - Employer Obligations, How we are changing the client experience (internal ATO document) p 3.

333 IGT, Review into the ATO’s administration of the Superannuation Guarantee Charge (March 2010) p 6.

334 Ibid.

335 IGT, Review into aspects of the Australian Taxation Office’s use of compliance risk assessment tools (October 2013) pp 126, 145-7.

336 IGT, Review into the ATO’s administration of the Superannuation Guarantee Charge (March 2010) p 8.

337 IGT, Review into aspects of the Australian Taxation Office’s use of compliance risk assessment tools (October 2013) p 146.

338 IGT, Review into the ATO’s administration of the Superannuation Guarantee Charge (March 2010).

339 For example, targeting compliance activities for HRE and HRI.

340 ATO communication to the IGT, 19 February 2016 and 10 March 2016.

341 ATO, Employer Obligations Fringe benefits tax (FBT) audit method (internal ATO document, 28 October 2015) p 1.

342 Ibid p 5.

343 Commissioner of Taxation, Annual Report 2014-15 (October 2015) p 100.

344 ATO, What attracts our attention (25 May 2016) <https://www.ato.gov.au>.

345 ATO, Meeting your annual FBT obligations (presentation February 2016) unpublished.

346 ATO, Compliance in focus 2013-14 (July 2013).

347 Productivity Commission, Regulator Engagement with Small Business, above n 80, p 20.

348 ATO, Our approach to information gathering (22 December 2015) <http://www.ato.gov.au>.

349 Ibid.

350 ATO, Employer obligations (EO) – Active case management guidelines (internal ATO document, 1 June 2016).

351 For example, ATO, Employer Obligations (EO): Desk audit method, above n 275, task 3.1.10.

352 ATO, Risk Treatment Plan Employers Failure to Notify PAYGW – SBIT (internal ATO document, 11 September 2014) step 2.

353 ATO communication to the IGT, 27 July 2016.

354 ATO, How to complete the EO audit confirmation letter, above n 329.

355 For example, ATO Employer Obligations: Compliance with contracting arrangements audit method, above n 280, task 3.1.

356 ATO, Employer Obligations (EO) field audit method, above n 276, task 3.4.

357 IGT, 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 (December 2011); IGT, Report into the Australian Taxation Office’s large business risk review and audit policies, procedures and practices (May 2011).

358 IGT, Review into the ATO’s administration of the Superannuation Guarantee Charge (2010) p 61.

359 IGT, Follow up review into the ATO’s implementation of agreed recommendations in the five reports released between August 2009 and November 2010 (July 2014) p 78.

360 ATO communication to the IGT, 7 July 2016.

361 Ibid.

362 Ibid.

363 ATO communication to the IGT, June 2016; ATO, EO Training needs analysis and learning pathway (internal ATO document).

364 ATO, Introduction to super guarantee (internal ATO document) pp 19-27.

365 ATO, Superannuation guarantee: who is an employee?, SGR 2005/1, 23 February 2005.

366 ATO, Alienation of Personal Services Income – Introduction (internal ATO document) pp 76-7.

367 ATO, TR 2005/16, above n 13.

368 ATO communication to the IGT, 14 June 2016.

369 ATO, Employer Obligations (EO): fringe benefits tax audit method (internal ATO document, 22 January 2016) p 1.

370 ATO communication to the IGT, 7 July 2016.

371 ATO, Case debrief - Employer obligations/CCA and large withholder field audit (internal ATO document).

372 ATO communication to the IGT, 3 March 2016.

373 ATO, IND Sero system, User Procedures for Team Leaders (internal ATO document, 4 December 2015) p 6.

374 Ibid p 8.

375 ATO, Sero roles and support tools reference card (internal ATO document).

376 Ibid.

377 ATO, IND Sero system, User Procedures for Team Leaders, above n 373, pp 13-7.

378 ATO, SMB Quality and Coaching Update: October 2015 (internal ATO document); ATO, SMB Quality and Coaching Update: January 2016 (internal ATO document).

379 ATO communication to the IGT, 8 August 2016.

380 ATO, Employer Obligations: Compliance with contracting arrangements audit method, above n 280, step 6.4.

381 ATO, Reasons for decision template, Workers identified as <employees><contractors> (internal ATO document).

382 ATO, Employer Obligations: Compliance with contracting arrangements audit method, above n 280, step 6.5.

383 ATO, Reasons for decision template, Workers identified as <employees><contractors>, above n 381.

384 ATO, Case Context Document: Personal Services Income (internal ATO document, 3 February 2014).

385 ATO communication to the IGT, 5 August 2016.

386 ATO, Income tax: what is a personal services business, TR 2001/8.

387 Ibid para [110].

388 Ibid para [111]-[112].

389 Ibid para [116].

390 Ibid para [121].

391 ATO, Case Context Document: Personal Services Income, above n 384.

392 ATO, Reasons for Decision template, Personal Services Business Decision (internal ATO document).

393 ATO, Case Context Document: Personal Services Income – hourly or daily rate paid (internal ATO document, 29 August 2014).

394 ATO communication to the IGT, 27 July 2016 and 28 October 2016.

395 IGT, 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 (December 2011).

396 ATO, TR 2001/8, above n 386, para [110].

397 SGAA s 33.

398 Ibid s 46.

399 ATO, Claiming a tax deduction (1 June 2015) <http://www.ato.gov.au>.

400 ATO, Missed and late payments (17 June 2015) <www.ato.gov.au>.

401 ATO, Superannuation Guarantee Compliance Strategy and Treatments - SG Compliance Program 1 July 2014 (internal ATO document, May 2015) p 14.

402 ATO intranet, Superannuation Compliance Treatment One and Two Procedure (internal ATO document).

403 ATO, Superannuation Guarantee Compliance Strategy and Treatments, above n 401, p 16.

404 ATO communication to the IGT, 15 April 2016.

405 ATO, Superannuation Guarantee Compliance Strategy and Treatments, above n 401, p 4.

406 Ibid.

407 Ibid.

408 Ibid, pp 14-5.

409 ATO, Superannuation Compliance Treatment One and Two Procedure, above n 402.

410 ATO, Superannuation Guarantee Compliance Strategy and Treatments, above n 401, pp 20-5.

411 ATO communication to the IGT, 24 June 2016.

412 ATO, Super obligation employer’s checklist (19 October 2016) <https://ato.gov.au>.

413 ATO, Small Business Superannuation Clearing House (22 September 2016) <https://ato.gov.au>.

414 ATO, Communication strategy and action plan for Superannuation Guarantee 2015-16 (internal ATO document, 30 November 2015) p 2.

415 ATO, Super for employers - Our compliance approach (28 October 2015) <www.ato.gov.au>.

416 ATO communication to the IGT, 27 October 2016.

417 IGT, Review into the ATO’s administration of the Superannuation Guarantee Charge (March 2010) p 77.

418 ATO, Superannuation Guarantee Compliance Strategy and Treatments, above n 401, p 4.