2.1 The IGT observed, through this review, that the class ruling system is generally considered to be a useful element of the tax system, while also acknowledging that there are areas for improvement. In general, class rulings effectively mitigate operational costs and reduce risk by providing greater administrative certainty to relevant taxpayers. There was also strong stakeholder support for the priority class ruling system approach to be adopted more broadly.
2.2 It is important to appreciate that the representations to the IGT to undertake this review were made at a time when most class rulings arose from capital markets merger and acquisition transactions. The number of these transactions has reduced dramatically in that market. If demand for class rulings in relation to these types of transactions increases dramatically again in future, the ATO's systems and processes may need to be tested at that time, particularly in relation to information gathering.
2.3 Notwithstanding the change in market conditions over the period of this review, the IGT observed that class rulings issued under the priority class rulings process were generally of higher quality and issued on a more timely basis than those issued under the routine processes. It appears that the priority rulings process contributes positively to ensuring that advice is delivered effectively and efficiently, documentation is maintained by ATO staff and communication between the ATO and external stakeholders is appropriate.
2.4 The priority rulings process typically draws in more experienced technical ATO personnel at earlier points in the process. This personnel also have greater authority to make decisions, thereby contributing to the effectiveness of the process. However, the number of cases falling within the priority rulings process is relatively small. The IGT notes, that the ATO's Transforming Tax Technical Decision Making project (TTTDM project) is considering using the principles of the priority rulings process model, such as early engagement, more broadly.
2.5 Stakeholders have raised difficulties with the existing ATO technical decision making process in a number of IGT reviews and these have also been noted in our 2010 annual report. The IGT has expressed in-principle support for the ATO's TTTDM project. Accordingly, the IGT has now deferred any review action in this area pending the outcome of the project's implementation.
2.6 In addition to the comments above, the IGT also observed that there is room for improvement in the ATO's administration of class rulings. Although the focus of these improvements is on those matters falling outside of the priority class ruling process, there are aspects of these improvements that relate to the priority class ruling processes as well.
2.7 For the purpose of addressing the areas for improvement to the class rulings system identified by the IGT and to provide certain direction on their implementation, the IGT has made 8 recommendations that are set out later in this chapter.
2.8 The ATO has worked with the IGT to settle on a significant program of work aimed at improving its class rulings administration and related areas and these are noted in the recommendations and the ATO's response to those recommendations.
2.9 The overall aim of this work is for the ATO to make improvements in the areas that the IGT has identified for improvement, such as class rulings processes, case management, reporting, record keeping, external performance standards, communication, transparency, ATO staff awareness of procedures and policies and the Siebel system's search functionality.
Improving class rulings processes
Extending the principles of the priority class ruling process
2.10 As stated above, the IGT observed that the priority class ruling process is generally a higher quality process than the routine class ruling processes, albeit that the number of applications falling under this priority process is relatively small.
2.11 As a management philosophy, the ATO has advised that it is moving to adopt the main principles of the priority class ruling process, such as early engagement, to all class ruling applications and other interpretative situations on a risk based approach.
2.12 The ATO'sTTTDM project is a large undertaking. It is considering the use of these principles developed under the priority class ruling system more broadly for this new interpretative advice model.
Streamlining ATO class ruling management authorisation
2.13 Generally, the ATO's technical issues escalation process only escalates issues to a Centre of Expertise (COE) where the issue requires an ATO precedential view. However, authorisation processes for class rulings require COE sign-off, regardless of whether or not the ruling involves a precedential issue. The requirement to involve COEs is currently driven by the nature of class rulings as a subset of public rulings and is an automatic risk-rating process. However, the IGT's fieldwork revealed that no more than a third of the class rulings reviewed involved precedential issues—that is, two-thirds of class rulings rely on existing precedential views.
2.14 The IGT also observed that the broad nature of the information that may be required from an ATO perspective to enable effective risk assessment for class rulings did not always appear to be effectively communicated or captured as part of the initial class ruling application process. Sometimes the difficulties with information gathering and the assessment process for stakeholders continued all the way through the process.
2.15 The ATO's Superannuation business line has introduced a streamlined process for a straightforward class ruling (for example, class rulings in relation to early retirement schemes) which involves these rulings being processed by the business line only. It is also of note that product rulings—which are also a form of public ruling—only require COE involvement if the case is precedential.
2.16 The ATO advised the IGT that it is currently reviewing the policies and processes around the escalation of issues to COEs and TCN (as part of the TTTDM project) and is actively looking to move towards risk-based escalation which would enable better differentiation for the management and sign-off of class rulings.
2.17 In some cases, the IGT also observed sequential rather than contemporaneous processing of issues by different COEs in cases involving multiple issues. Over half of the cases reviewed by the IGT involved a minimum of two COEs, as well as one or more business lines. The ATO acknowledged that this approach has been an issue in the past and has contributed to delays.
2.18 The ATO advised that its early engagement model is assisting to achieve parallel processing where appropriate, since a key principle of the model is to identify all likely areas impacted by a ruling request, to engage collectively to identify the likely issues and develop an approach. This model has been used in the priority rulings process and is being applied in a broader interpretative context on a risk based approach. The IGT observed that the approach has been effective in the limited number of cases examined. The ATO advises, however, that in some situations, sequential processing is unavoidable (for example, where the resolution of an issue is conditional on resolution of another issue), in which case early engagement should help to identify the need for sequential processing earlier and keep the taxpayer informed of the approach and likely timeframes.
Productivity benchmarking for class ruling outputs
2.19 In a number of cases reviewed by the IGT, large teams of ATO personnel were involved on what appeared to be very straightforward matters. The IGT believes that the ATO should consider developing productivity benchmarking for class rulings outputs. The allocation of ATO staff engaged in the class ruling decision-making process should be such that it enhances the timely delivery of quality class ruling outputs. To support this outcome there should be appropriate reporting and assurance mechanisms to monitor staff engagement and accountability in optimising performance against benchmarks.
2.20 Similarly, situations will also arise where it may be necessary to have a larger number of ATO officers involved in the development of class rulings where the technical issues or facts are complex.
2.21 While there can be a range of views on what comprises a straightforward or complex matter, the ATO acknowledged that there is scope for improvement in relation to having the right people involved at the right time. The ATO also agreed that there is scope to improve the efficiency of class rulings processes and the external user experience and, to this end, will differentiate and streamline its class rulings processes.
2.22 The IGT recognises that there may need to be some flexibility in the approach taken to design productivity benchmarking in this context. The most effective outcome is expected to be developed through a process of consultation with stakeholders.
Improve class rulings processes, by the ATO:
1.1. extending the main principles of the priority ruling process (such as early engagement) to all class ruling applications on an appropriate risk basis;
1.2. ensuring that the right people are involved in cases at the right times and that their roles and responsibilities are clearly defined with respect to the class ruling application;
1.3. in relation to the different ATO staff and areas involved in the class ruling process, requiring those different staff and areas to collectively and contemporaneously identify issues and potential approaches at the application stage and adopt differentiated processes based on up-front risk assessments, such as whether the risks warrant the involvement of precedential decision makers (early engagement and triage);
1.4. consulting with relevant stakeholders to develop appropriate benchmarks regarding quality and timely delivery of key milestone outputs against which to test class ruling performance and developing appropriate reporting and assurance mechanisms to monitor staff and maintain accountability in order to optimise performance against these benchmarks; and
1.5. implementing streamlined processes for straightforward class rulings.
Agreed in part; agree in principle with recommendation 1.4 to develop productivity benchmarking for class rulings.
Recommendations 1.1, 1.2, 1.3 and 1.5 are all being addressed as part of our Transforming Tax Technical Decision Making project (TTTDM). A central feature of this project is the better alignment of technical decision making with the ATO's enterprise risk model, ensuring that senior technical resources are quickly engaged on the resolution of high risk, high priority technical issues.
Recommendation 1.1 — the TTTDM project will extend key features of the priority ruling process (i.e., early risk assessment through a triage process; early engagement; project management methodology) to class ruling applications involving high risk and/or priority.
Recommendation 1.2 — the TTTDM project is clarifying roles and responsibilities — particularly for decision-makers — across our technical workforce, including those involved in class rulings work. It is also implementing case triage, early engagement and prioritisation and escalation processes for technical work, including class rulings, which will ensure that the right people are involved in cases at the right times.
Recommendation 1.3 — as noted above, the TTTDM project will extend key features of the priority ruling process to class ruling applications involving high risk or priority. This will ensure issues and approaches are identified collectively and contemporaneously, including identification of which decision-makers will need to be engaged.
Recommendation 1.5 — the TTTDM project will streamline processes for straightforward class rulings by extending to all business lines the process currently enabling the Superannuation business line to finalise non-precedential class rulings without Centre of Expertise sign-off, and applying the differentiated risk model and processes outlined above in response to recommendations 1.1-1.3 to all other class rulings work.
Recommendation 1.4 — We agree with the Inspector-General that undertaking relevant benchmarking can be useful and we will explore it as part of our general approach to benchmarking. However, we have sought to find benchmarks in the past. We know from experience how challenging it is to find comparable external organisations that are leaders in this area. This is particularly true when attempting benchmarking at a product level, particularly in cases like class rulings where numbers are low (around 200 per year), are split across divergent markets and contain varying degrees of complexity within each market, involve a consent process for publication, and comparable products may not exist elsewhere.
The ATO already has both quality standards and timeliness measures for class rulings, which are regularly monitored, reported on and assured. In the case of our quality standards, the quality assessment process for class rulings includes occasional reviews involving external representatives, and we are happy to test our existing quality criteria and standards with external stakeholders through that process. There may also be scope to more regularly test these with external stakeholders to ensure they appropriately reflect stakeholder expectations. Similarly, our timeliness measure for class rulings will, from this year, be publicly reported through our annual reports, providing another mechanism for external stakeholders to provide feedback on both the appropriateness of the measure as well as on our performance against the measure.
These actions will be implemented by 31 July 2012.
Standardising case management reporting and record keeping
2.23 The ATO has two nominal internal performance standards for class rulings:
- a finalisation standard requiring 80 percent of class ruling cases to be completed within 28 days of receiving all information, or within the negotiated due date; and
- a completion standard requiring 99 percent of class ruling cases to be completed within 90 days of receipt in the office, or within the negotiated due date.
2.24 Extracts from the ATO's internal reports on class rulings completed over the last two years are set out on the next page.10
Figure 2.1: Completed cases 2009–2010
Source: Australian Taxation Office.
Figure 2.2: Completed cases 2010–2011
Source: Australian Taxation Office.
2.25 On the ATO's internal reports, the ATO has met the nominal finalisation standard more consistently in the last 12 months. However, it has not met the nominal completion standard over the last 3 years.
2.26 The ATO advises that the nominal internal performance standards for class rulings are based on measures to the point of case completion and include periods outside the ATO's control, such as periods attributable to the review of drafts by applicants. The IGT also observes that the nominal performance standards may be met by negotiated timeframes in excess of 90 days and received submissions expressing frustration that applicants had little choice but agree to ATO-initiated extensions of deadlines.
2.27 All of the ATO's business lines and COEs have some form of call-over case review process for IA area cases, although these are not always specific to class rulings nor to aged cases. Nevertheless, the ATO acknowledged there could be benefits, such as more effective and timely case management, if standardised reporting and call-over processes across its business lines and COEs are adopted (noting the impact of potential differentiation of class rulings processes, discussed above).
The ATO should standardise case management reporting and record keeping, by:
2.1 adopting improved aged case reporting along with clear, specific and meaningful definitions that may be understood by relevant ATO staff (such as the 'start date' or 'case creation' for the purposes of calculating elapsed time periods);
2.2 improving system capture and accessibility of issues, outcomes and reasoning for all class rulings in the Siebel system.
Agreed and partially implemented.
Recommendation 2.1 — a standardised report for class rulings was designed and delivered during the review, providing standardised ATO-wide down to team-based reports on class rulings by elapsed time and time up to and over due dates (built on standard definitions drawn from the current internal timeliness measures for class rulings).
Recommendation 2.1 has been implemented.
Recommendation 2.2 — use of the Legal Reasoning Template in Siebel has been standardised across other IA products and will be extended to class rulings to standardise the manner in which the questions raised in class ruling applications ("issues"), the answers provided ("outcomes") and the reasons for those answers ("reasoning") are captured and made accessible within Siebel, noting that some differentiation may be necessary based on differential processes being introduced for straightforward and higher risk rulings.
Recommendation 2.2 will be implemented by 30 April 2012.
Introducing external performance standards
2.28 As outlined above, the ATO has nominal internally reported standards for class rulings, involving both finalisation and completion. However, there are no externally reported performance standards.
2.29 During the review, the ATO agreed that public reporting against external performance measures would promote the ATO's public accountability in its administration of the class rulings system. To this end, it will take steps to publicly report on class ruling performance measures.
2.30 The ATO also advised the IGT that the ATO has conducted a strategic review of its service standards. This strategic review has recommended the development of a renewed set of service standards. The focus of the new service commitments is broadly the following categories:
- Easy to deal with
- Keeping taxpayers informed
- Accurate and relevant
2.31 A project team is being established by the ATO to assess priorities and practicalities for implementation. The IGT expresses in-principle support for this initiative and is keen to see the project activated and fully implemented as soon as possible.
The ATO should publicly report on class rulings performance measures, including its performance against service standards for class rulings, in its annual report.
Agreed and implemented.
We will publish performance against our 80% finalisation target for class rulings, commencing in the 2010-11 Annual Report. We also note the measure reported may change in future as a result of differentiated processes for streamlined or higher risk class rulings, and/or as part of the implementation of a new approach to service standards (as outlined at page 12).
2.32 The IGT observed that communication was good in those class ruling applications within the priority rulings process. However, in other cases, only some areas of the ATO regularly communicated with applicants as to the key expectations under the class rulings process and whether it was unlikely that the ATO would meet those key expectations. The IGT also observed that the quality of some class ruling applications made by applicants required substantial additional ATO work, such as further information requests.
2.33 A shared expectation of the class rulings process and specific aspects of that process would help to minimise taxpayers' and the ATO's costs, improve the ATO's efficiency in completing class ruling work and improve the user experience of the class rulings system.
2.34 During the review, the ATO agreed that there was scope to improve the shared understanding of expectations of the class rulings process and will ensure that it communicates to class ruling applicants what they can expect from the ATO, including:
- the expected completion times;
- how the ATO will communicate, and negotiate alterations to, the planned approach to, and timing of, the class ruling;
- further expected engagement on the ruling application;
- the expected and actual internal ATO workflows and interdependencies that impact on those workflows, such as which officers or areas are expected to be involved in the project, their role and specific decisions that they will be required to make; and
- alternatives to a class ruling.
2.35 The ATO has advised that there is also scope to better assist applicants to provide relevant information upfront and so reduce the need for subsequent further ATO information requests. To this end, the ATO has agreed to take steps to improve the information capture in class ruling applications.
The ATO should more clearly communicate expectations, specifically by:
4.1. making applicants clearly aware of all the application requirements up-front that the ATO will need in order to address its risk assessment requirements in relation to the ruling application (for example including the number and type of known taxpayers within the affected class and providing information about existing ATO views which may apply);
4.2. publishing an 'issues for consideration' document for class rulings. The format should be an accessible working document (i.e. akin to a key operational checklist document) that sets out all of the class ruling application requirements, including tips or ATO comment on areas that may require particular attention. It may include ATO comment drawn from experience on particular areas where applicants may be able to improve their engagement and applications. To enhance the usability, currency and relevance of the document it should be reviewed annually for update and reissue if required.
Recommendation 4.1 — we will revise our current application form to better capture information about relevant ATO views that would support the ruling application and an indication of the number and type of known taxpayers within the affected class.
Recommendation 4.2 — we will introduce a checklist to help applicants in framing their applications to minimise the kinds of difficulties that can otherwise arise in responding to requests. We are happy to work with the Inspector-General for any suggested 'issues encountered' he feels warrant consideration.
These actions will be implemented by 30 June 2012.
2.36 There are a number of cases where the nature of the law and the current state of judicial interpretation can create different outcomes on similar, but not identical, fact situations or where matters turn on finely tuned but reasonable variations of principle and interpretation. It is also not uncommon for such matters to involve extensive internal ATO workings and internal debate.
2.37 Some cases of this type were reviewed. In those cases, the IGT observed that the ATO went to lengths to justify the result in one class ruling which would appear to give an opposite result to that obtained in another class ruling. However, nothing of this additional reasoning was typically made externally available as a result of this process, such as in the form of a generalised statement or amendment to existing ATO guidance material on the relevant topic. In the absence of reasons for the distinctions, or indeed where an ATO view has altered, taxpayers and tax advisers may be otherwise left with an impression that ATO views are taken to achieve revenue objectives without regard to the cogency of reasoning.
2.38 During the review, the ATO acknowledged that it is beneficial to promote transparency about its decision-making processes and related outcomes. The ATO wants to ensure its views on the interpretation and application of the law be stated in ways that are clear and useful for the taxpayers concerned. The ATO is also mindful of its obligations to ensure taxpayer information that is private or confidential or otherwise commercial-in-confidence is not inappropriately disclosed.
2.39 The IGT considers that for these types of class rulings situations, the ATO should disclose the reasoning on the distinction giving rise to the different result. This should be disclosed to the applicant and the applicant should have the opportunity to respond. While appreciating the ATO obligations of confidentiality in these situations, an administrator needs to consider how it can best convey the 'public good' value of any view or interpretation it holds, especially if that view has altered on a timely basis. In cases where such a class ruling is finalised and published, the reasoning should also be made available publicly to foster transparency and understanding.
2.40 In making the following recommendation, it is acknowledged that there is a tension between the obligation to maintain confidentiality and the need to be transparent, so that perceptions of so called 'u-turns' are minimised (as set out in the IGT's report on the Review into the Implications of any Delayed or Changed ATO Advice on Significant Issues11).
Improve transparency and general taxpayer understanding, by the ATO publishing, in an appropriate form, reasons for different decisions given on apparently materially similar facts including the relevant factual or legal distinctions, having regard to the ATO's in-confidence information obligations.
Current ATO policy is to provide reasons for, and explanations of, our ruling decisions, including discussion of alternative interpretations or points of distinction from other rulings where appropriate. Applicants for class rulings are provided with a draft, including the explanation for the ruling, on which they can comment and about which they can seek further information. At any time after the ruling is published, taxpayers and tax professionals can seek further information about the basis of the decision if they do not otherwise understand or accept the decision and/or the ATO's reasons for the decision.
Following the IGT's Review into delayed or changed Australian Taxation Office views on significant issues (March 2010), ATO policy now also includes specific guidance on situations that might otherwise give rise to perceptions of so-called 'u-turns'. This policy requires the ATO to consider:
- if any ATO publication, product or evidence of ATO conduct could have reasonably conveyed a different view of the law on a particular issue, to taxpayers generally, or to a particular class or industry group; and
- the extent to which the ATO has facilitated or contributed to taxpayers adopting a different view of the law
to determine if it would be appropriate to apply the ATO view of the law only on a prospective basis (PSLA 2011/27: Matters the Commissioner considers when determining whether the Australian Taxation Office (ATO) view of the law should only be applied prospectively). If a decision is made to only apply the ATO view prospectively, or if the issue of potential prospective application has been specifically raised and considered, the basis for the decision must be explained in the relevant document.
More difficult can be situations where a different decision turns on a consistent interpretation applied to fact situations that may be specific to the arrangements in question but not necessarily known beyond the applicant, the relevant sponsor and the ATO. In the case of class rulings, when considering how to explain our reasons for decision and what information to include, we must ensure that any explanatory discussion does not inappropriately disclose sensitive taxpayer or commercial-in-confidence information.
Nevertheless, the ATO will explore through our class ruling co-ordinators network and with those staff involved in class rulings work, ways and forms in which we might better reflect our policy in practice and provide explanations better tailored to the circumstances and context of the kinds of class rulings envisaged in the recommendation, especially those involving a changed ATO view, while continuing to ensure that we maintain appropriate protection of sensitive taxpayer or commercial-in-confidence information.
These actions will be implemented by 31 July 2012.
2.41 During the review, submissions suggested that the ATO had 'no go' topics for class rulings. The IGT made enquiries in this regard but no evidence of topics on which the ATO will refuse to rule was identified.
2.42 In this and other IGT reviews, it has been observed that this same perception may arise because the ATO gives special consideration to certain topics, with the result that there is considerable delay in the formulation of an ATO view. It may also be that a specific ATO technical officer is allocated to a particular specialist issue but has other competing priorities contributing to the significant delay. Issues that are the subject of litigation or considered high risk may also give rise to this perception, especially where Deputy or Chief Tax Counsel approval is required.
2.43 Perceptions are an important driver of behaviours in the tax administration system, particularly those impacting on community confidence. These perceptions can be ameliorated through communication and transparency.
2.44 During the review, the ATO agreed that more could be done to address perceptions that the ATO has topics on which it will refuse to rule. To this end, the ATO has agreed to adopt measures to address those perceptions.
Improve transparency and minimise stakeholder perceptions that the ATO has so called 'no go' topics or unexplained or excessive delays for class rulings by:
6.1. notifying class ruling applicants on the topics for which the ATO may subject the application to special internal processes and the impact that those special processes may have on the class ruling application; and
6.2. notifying the public (where appropriate) of the nature of such processes and what impact these processes may have on the timeliness of rulings on those particular topics.
Agreed in principle, insofar as the ATO agrees to take further steps to address misperceptions that there are 'no go' topics for class rulings, noting that the publication of this report, confirming that there was no evidence that the ATO has 'no go' topics on which we refuse to rule, should go a long way to addressing any such perceptions. We will review our website and other published material to ensure this is clearly stated for stakeholders and that we explain clearly reasons why some rulings may be delayed.
Existing ATO policy and process require officers involved in class rulings work to maintain effective communication with applicants about the progress of their applications, including anything that might otherwise impact a timely response. We will, however, remind officers involved in class rulings work of their obligations to maintain effective communication with applicants (by including this in our awareness-raising minute as part of our response to recommendation 2).
In addition to the personal communication mentioned above, there may be instances where it is appropriate to inform the general public of special processes that can impact a class ruling application. This is also reflected in current policy and practice (for example, the special escalation processes that are used with respect to the potential application of s 45B of the Income Tax Assessment Act 1936 to demergers are publicly described and accessible in Law Administration Practice Statement 2005/21).
These actions will be implemented by 31 December 2011.
Improving staff awareness
2.45 The ATO has set out its expectations of staff in their conduct of class rulings work through a range of means, including policies, procedures, processes and internal reporting. Fieldwork during the review indicated that staff may not always be aware of some of these expectations. Some examples of such expectations are set out in the recommendation below.
2.46 This internal awareness gap may contribute to some of the adverse impacts that class rulings applicants' experience, such as elapsed timeframes and lack of shared understanding of the need for further information requested.
The ATO should improve staff awareness of relevant ATO policies, processes and procedures, on:
7.1. the relevant internal performance standards applicable to class ruling applications;
7.2. the operation of the case call-over system and the role that senior ATO staff play to overcome impasses in the resolution of class ruling applications;
7.3. the numbers of taxpayers who can be covered by a class ruling;
7.4. the circumstances in which the ATO will issue unfavourable class rulings;
7.5. the circumstances in which the subject matter of class ruling applications may be more appropriately dealt with by way of a product ruling;
7.6. the need to clearly explain and justify requests for further information made during the class ruling process and attach appropriate records of those requests to the case file;
7.7. the need to prepare and maintain planning documentation for all class ruling cases;
7.8. the need to attach to the relevant Siebel system case, draft rulings and working documents at key points in the application process so that the ATO may monitor the progress of class ruling applications;
7.9. the need to document issues, outcomes and reasoning for all class rulings in the Siebel system;
7.10. how work conducted in relation to class ruling applications is mapped and tracked in the Siebel system, such as identifying technical officers' involvement, the particular issues those officers will be required to resolve and the date by which that resolution is expected;
7.11. how to locate on the Siebel system potential earlier or multiple ruling requests from the same taxpayers or associated taxpayers;
7.12. the manner in which case chronologies are made visible in the Siebel system; and
7.13. the labelling and identification of key documentation for class ruling cases in the Siebel system.
Each of the points raised above are already covered by existing ATO policy, process and procedure. However, we do accept that the Inspector-General's field work indicated some instances where some ATO staff were unaware of, or uncertain about, some of the policies, processes and procedures that support class rulings work. We will issue a minute to all staff to remind them of relevant policies, processes and procedure, with specific examples and links to source material to address those issues identified in the dot points above.
We will also provide our business line class rulings co-ordinators and other relevant practice support areas with refresher training and re-establish the class ruling co-ordinators network to better assist them in providing timely support and advice on relevant policies, processes and procedures to case officers.
These actions will be implemented by 31 December 2011.
Improving the Siebel systems search functionality and ATO officer record-keeping
2.47 The IGT observed that for around two-thirds of the cases tested during fieldwork, important records such as case reports (or the recently introduced 'legal reasoning document') were not attached to the case file on the ATO's case management system, Siebel.
2.48 The ATO advised that it is seeking to improve how officers record work on cases as part of its IA capability project (referred to above)—for example, to ensure more ready visibility of the case chronology. The ATO also advises that it is encouraging officers to use the Siebel system's case and activity notes where appropriate, alongside standardised descriptions for documents and other key actions. Recommendation 7 above addresses the issue of officer record-keeping.
2.49 The ATO also acknowledged that there are some inbuilt limitations in the system's search functionality, as well as some ongoing errors in functional operation. The ATO advised that these issues have been raised with the vendor and solutions are being explored in the context of a Siebel system upgrade.
2.50 The ATO agreed that these limitations adversely impact on staff receptiveness and confidence in the completion of class rulings and will consider enhancing the system's search functionality to improve ATO officers' ability to identify materially similar ruling requests. The ATO indicated that given the relatively low volume of class rulings a tailored training approach would more likely improve user experience and usage effectiveness.
Improve the Siebel system's search functionality, with the ATO specifically:
8.1. enabling subject-based searches to determine whether other unpublished class rulings, private rulings and other technical work inside the ATO may have been done on similar topics or issues being raised in the class ruling application;
8.2. improving the ease in making searches of multiple class rulings lodged by an applicant;
8.3. reducing the number of lesser relevant documents returned in the Siebel system searches; and
8.4. removing case sensitivity in returned searches.
Agreed and partially implemented.
Recommendations 8.1, 8.2 and 8.4 have been implemented — see details below.
Part of the problem was a lack of awareness by ATO staff of the search functionality available within Siebel, particularly around the advanced search functionality that does enable subject-based searching. Earlier functional errors with Siebel search have been fixed and refresher training for IA staff on how to use Siebel advanced search is being rolled out currently.
Recommendation 8.1, 8.2 and 8.4 — current functionality and the refresher training currently being delivered to Interpretative Assistance officers enables staff to conduct subject-based searches of all work in Siebel (including class rulings, private rulings and other technical work) and readily identify multiple class ruling applications lodged by the same applicant.
Recommendation 8.3 — current functionality and the refresher training currently being delivered will improve our staff's ability to conduct more focussed searches. The Siebel upgrade that is currently being delivered, which includes release of a new search engine, will enable even more refined searching criteria which will continue to enable more targeted searches for more relevant results.
Implementation of recommendation 8.3 will be completed by 30 April 2012.
2.51 The other issues raised during the review are outlined below.
Desire to address issues not requested in an application
2.52 The IGT observed that some ATO information requests were sometimes driven by an ATO officer's desire to address issues that the applicant did not ask to be ruled upon.
2.53 On the one hand, a class ruling could be limited to addressing those particular issues upon which the applicant has requested a ruling. On the other hand, the IGT recognises that there may be a number of circumstances in which it will be desirable to canvas issues in addition to those contained in the original request. This desire should be balanced against the additional compliance burden under which the applicant is being placed and the potential resulting delay.
2.54 In the IGT's view, pre-lodgement meetings, such as those that occur under the priority rulings process, should go some way to addressing this issue. The IGT notes that the ATO's TTTDM project is aiming to establish early engagement mechanisms more broadly in this respect.
Use of Public Rulings Panels for higher risk class rulings
2.55 The ATO's Public Rulings Panels (PRP) are chaired by a Deputy Chief Tax Counsel and comprise several of the most senior ATO officers, as well as well-respected tax practitioners and/or academics. However, the ATO does not ask the PRP to consider the issues that are raised in class rulings before they are finalised and issued.
2.56 The IGT acknowledges that there are current consultative mechanisms in the class rulings process and that seeking PRP advice to improve the robustness of those class rulings involving greater risk would necessitate a balance between ATO responsiveness to applicants' requests and the competing priorities for the PRP's attention. Nevertheless, seeking PRP advice would be an option in appropriate cases.
Additional guidance to accompany high profile class rulings
2.57 In the case of certain high profile transactions (such as large demutualisations, demergers from public companies or on-market buy backs), the ATO has often undertaken to issue non-binding guidance (eg. in the form of fact sheets) in addition to issuing a class ruling. The IGT received submissions citing that this practice was of great use to taxpayers and tax practitioners. Often the taxpayers affected were individuals using smaller tax agents. This additional guidance was felt to improve clarity and certainty and therefore lower compliance costs for these taxpayers and their agents.
2.58 The IGT recognises that although it may not be feasible to provide additional guidance in all cases, regard should be had to the positive impact such a practice has had in supporting taxpayers to comply and that guidance should be provided contemporaneously, where resources permit.
Obtaining user feedback
2.59 User feedback can provide important information on the areas in most need of improvement. The ATO has obtained end-user feedback on the class rulings process through two tax practitioner surveys in 2008. The IGT has also observed that the ATO uses client feedback questionnaires routinely in other large business segment contexts. While the IGT has raised some potential concerns about the form of certain feedback design, these approaches can be useful if done with care in design and consideration regarding approach.
2.60 The IGT notes that, at present, the ATO does not routinely seek this feedback, however, the program of work arising as a result of this review should effect changes to improve, amongst other things, the end-user's experience.
10 Care needs to be taken in interpreting the tables. The ATO advises that the table is an integrated internal management tool with two separate criteria directed at separate ends. The first two rows in the legend, being, >90 days and
11 March 2010, available at www.igt.gov.au >.