4.1 Delay in the actioning and processing of held income tax returns under the ITRIP is a significant cause of concern for taxpayers and their advisers. Delay brings inherent uncertainty and anxiety. Moreover, delayed refunds may also result in lost opportunity for taxpayers who may have earmarked the expected monies for a specific purpose. These impacts are not necessarily able to be addressed through the ATO's payment of interest on delayed tax refunds.117

4.2 A high level overview of the nature of ITRIP complaints is provided in Table 13, below. These statistics clearly show that dissatisfaction with delays in finalising ITRIP audits and reviews was the primary cause of complaints across each of the years presented.118 In 2010-11, these account for almost two-thirds of all ITRIP complaints, approaching close to three quarters in 2011-12 and 2012-13 (73.9 per cent and 71 per cent, respectively).

Table 13: Numbers of complaints and main reason for complaint119
  2010-11 2011-12 2012-13
Total complaints received 1269 7381 1394
Reasons for complaints
Time to finalise audit/review 64.50% 73.90% 71.00%120
Verification Procedures 14.20% 4.70% 4.20%
Dissatisfied with Process 10.20% 8.70% 8.50%
Dissatisfied with Outcome 4.40% 1.50% 10.70%
Other/not specified 6.70% 11.20% 5.60%

Source: ATO

Minimum twelve week delay on processing of returns

4.3 In early 2011-12, the IGT received correspondence and enquiries in relation to the ATO's initial 'delay' letters which issued to taxpayers and tax agents whose clients' returns were held for ITRIP reviews. One of the main concerns was that the ATO estimated that the checks would take a minimum of twelve weeks.121 It was not apparent on the face of the letter why a review of an income tax return should take that long. Some tax agents also reported that the ATO had informed them that they were unable to provide specific reasons for the twelve week delay.

4.4 The IGT reviewed copies of standardised correspondence which had been used historically by the ATO. The IGT notes that in 2009-10, the ATO took a very general approach towards the length of time a return would be held. Specifically, the ATO's letter stated that:122

As a result of this the Tax Office will hold your 2009 return until investigations are finalised.

4.5 In 2010-11, the ATO began adopting its 'minimum twelve week' statement which noted:123

What we will do

We have a responsibility to the government and the community to ensure that everyone pays the correct amount of tax under the law. We will be undertaking further investigations and will compare the information in your return with data supplied by third parties, such as employers.

We anticipate your return is likely to be delayed for a minimum of twelve weeks while we conduct our investigations. If we require further information to verify particular details within your return we will contact you and request it. Credit interest is payable by the Australian Taxation Office (ATO) in certain circumstances. If you are due a refund you may be entitled to an amount of credit interest as a result of the delay in issuing your notice of assessment. Where applicable we will automatically calculate and credit your account with the interest amount payable.

4.6 The 'twelve week minimum' statement was used again in 2011-12:124

What we will do

We have a responsibility to the government and the community to ensure that everyone pays the correct amount of tax under the law. We will be undertaking further investigations and will compare the information in your return with data supplied by other parties, such as employers.

We anticipate your return is likely to be delayed for a minimum of twelve weeks while we conduct our investigations. We will hold your <Year> return until our investigations are finalised.

4.7 The use of the 'minimum twelve week' period by the ATO created significant uncertainty and concern amongst taxpayers and tax agents. Moreover, the concern may also have been exacerbated by the inability of taxpayers and tax agents to understand the reasons for the ATO needing a minimum of twelve weeks to review a tax return, matters the ATO was seeking to test and what could be done to expedite processing.

4.8 Similar sentiments were echoed in submissions made to the IGT which considered that the period was excessive, especially when the ATO was unable to specifically explain why it needed such a long period of time to undertake and complete its reviews.

4.9 The ATO has advised that when the delay letter was first issued, the ATO did not have any historical data in relation to the processing of the ITRIP cases and therefore provided the twelve week minimum period as a 'guesstimate'.125 This was based upon a number of factors including peak period resourcing, the number of cases held and expected case completion rate.126

4.10 Following the feedback received from stakeholders and the Commonwealth Ombudsman, the ATO undertook some user-testing of its ITRIP correspondence for use in 2012-13. The feedback from external users of the letters noted that:127

  • the 12-week minimum was too open-ended;
  • uncertainty around when the period started and finished;
  • some thought something happened at the 12-week mark; and
  • some questioned whether any work is performed by the ATO during the 12-week period.

4.11 Amongst the recommendations made following the user-testing of this letter was the removal of the 'minimum twelve week' reference and replacing it with a timeline of expected events within the twelve weeks. For example, when taxpayers may expect a letter requesting further information and when they can expect their tax return to be processed and tax refund issued.128 To further reduce the likelihood of confusion, it was recommended that specific dates should be used rather than time periods.129

4.12 The ATO adopted some of the recommendations (such as providing more specific timing information rather than just the 12 week period) and updated the letters which issued during the 2012-13 year. The ATO did not specifically provide a timeline of expected events, but it did provide greater detail of what it intends to do as part of the checking process. These changes are illustrated in relevant extracts below:130

What we will do

We will check the information in your return with data supplied by other parties, for example, employers must lodge their pay as you go (PAYG) withholding payment summary annual report with us by 14 August each year. If we can match the information in your tax return with information provided by other parties, we will issue your notice of assessment without contacting you again.

If we cannot match the employment details in your return with other party data or require further information to verify particular details in your return we will contact you and request it.

When can I expect my notice of assessment?

We will hold your <Year> return until we have verified your claims. It is likely your return will be delayed until <insert date> while we verify these details with other party data we are yet to receive. We will then:

  • issue a notice of assessment, or
  • contact you and request additional information to prove the claims listed in the table above.

4.13 Moreover, the ATO's 2012-13 ITRIP letters also include dates by which the ATO expects to have contacted the taxpayer, and a telephone contact number for the taxpayer to follow up where this has not occurred.

4.14 The ATO calculates these dates based on the numbers of returns, expected staffing levels and the rates at which the ATO expects that cases would be finalised. In addition to setting these new timeframes, the ATO also actively monitors and adjusts expected delays in accordance with work performance so that the ATO can update its communications accordingly.131 Information provided to the IGT indicates that the ATO updated its timeframes several times in 2012-13 to reflect changing workloads and resources. Specifically, these updates occurred in August 2012, September 2012, October 2012 and January 2013.132 In addition, in April 2013, the ATO ceased issuing delay letters, noting that its resources enabled lodged tax returns to be allocated and actioned within two weeks of lodgement.133

4.15 The 2012-13 ITRIP letters also provided some guidance as to the action taxpayers may wish to take in the meantime. Namely:134

What can you do

Review the claims outlined in the above table and make sure you have the written evidence to support these claims in case it is requested. For more information about written evidence — go to Australian Taxation Office website and search for 'Income tax return integrity supporting documentation'.

4.16 The ITRIP letters used in 2012-13 represented an improvement on those in prior years. The updated letters anchored taxpayer expectations as to dates by which they can expect to be contacted and any action they can take in the meantime. Such clarification helps to address the uncertainty and anxiety for taxpayers when returns are held for review by the ATO.

Actual ITRIP timeframes

4.17 The ATO has extracted data in relation to the average timeframes for processing of returns held through the ITRIP. As a broad overview, the ATO has provided a three year comparison of completion timeframes within ranges of days. This is outlined in Table 14 below which records data from the date of lodgement to the notice of assessment being issued.

Table 14: Number and percentage of cases finalised within days specified for the lodgement years ending 30 June 2011 to 2013 (YTD)
Days Year ending 30 June
2010-11 2011-12 2012-13 YTD
Number Per cent Number Per cent Number Per cent
30 days 1,471 6% 14,334 14% 5,416 13%
60 days 3,966 15% 13,132 13% 15,945 39%
90 days 3,387 13% 10,384 10% 12,579 31%
120 days 4,688 18% 10,863 10% 4,644 11%
150 days 4,922 19% 9,908 10% 1,012 2%
200 days 5,366 20% 17,316 17% 179 <1%
250 days 1,769 7% 19,647 19% 1 <1%
300 days 375 1% 7,549 7% 1 <1%
300+ days 275 1% 658 1% 10135 0%

Source: ATO data for 2011 and 2012 years extracted as at 11/2/2013 and 2013 YTD data extracted as at 4/2/2013.

4.18 The data shown above from the ATO largely reflects the previous taxpayer experience that large numbers of returns were delayed for processing and completion with two-thirds of cases requiring more than 90 days to complete. This can be compared with 83 per cent of cases being completed in 90 days or less in the 2012-13 year to date.

4.19 Moreover, these statistics are a useful point to determine whether the time actually taken to complete cases aligned with the ATO's expected shortest and longest timeframes prior to 2012-13, being 39 days and 148 days, respectively.136 In 2010-11, 29 per cent were completed after 150 days had elapsed; exceeding the ATO's longest expected timeframe. In 2011-12, the number of cases requiring 150 days or more to complete increased to 44 per cent.

4.20 However, following the ATO's improvements in 2012-13, 96 per cent of cases were completed in 150 days or less and more than half (52 per cent) being completed in 60 days or less. This appears to better align with the ATO's expected shortest timeframe for completion of ITRIP cases for 2012-13.

4.21 To further illustrate differences in timeframes, the ATO has also provided two sets of average actual timeframes comparing three consecutive financial years of performance being 2010-11, 2011-12 and 2012-13 year to date. Table 15, below, shows the mean, mode and median of timeframes between the taxpayer lodging their income tax return and the refund being issued.

4.22 The ATO's data also examines differences in average timeframes depending on the specific outcomes resulting from action taken by the ATO. The ATO's definition of each of the outcome categories included in the Table 15 are:

  • no adjustment — compliance action has resulted in no adjustment being made to the original return. This is sometimes referred to as no further action (or NFA);
  • adjustment — compliance action has resulted in an adjustment being made to the original return. The adjustment could either be in favour of the taxpayer or in favour of the revenue;
  • internal review — the return is matched and verified against internally held data or third party data (such as employers' returns) and is released without adjustment and without further contact with the taxpayer; and
  • unknown — these cases cannot be categorised owing to missing data fields in the ATO's information.
Table 15: Days elapsed from lodgement to issue of notice of assessment for the lodgement years ending 30 June 2011 to 2013 YTD
Category Financial year
2010-11 2011-12 2012-13 YTD
Mean Median Mode Mean Median Mode Mean Median Mode
No adjustment 120 119 125 168 177 9 67 64 64
Adjustment 143 143 127 172 176 232 83 81 85
Internal review 61 43 41 79 43 9 56 56 68
Unknown 93 72 50 120 104 9 65 63 79

Source: ATO data extracted as at 12/2/2013

4.23 The IGT notes, from the data in Table 15 above regarding days elapsed, that the ATO's average timeframes for cases resulting in adjustments in 2010-11 fell just under the ATO's expected longest timeframe for completion of ITRIP cases of 148 days. In 2011-12 this expected standard was exceeded on average by 24 days, with a median of 176 days and the most frequently occurring completion being around 232 days. It should be noted that the timeframes in both 2010-11 and 2011-12 were better in relation to cases in which no adjustment was made, or where the ATO could use other data to assist in its verification.

4.24 In the 2012-13 year to date, all average timeframes were markedly better than in the preceding two years, with average timeframes being under 90 days for adjusted returns, and around 60 days for other outcome categories.

4.25 There also appears to be a reasonably consistent difference between time taken in cases involving an adjustment and those involving no adjustment. This may be attributable to the time taken for the ATO to initially contact the taxpayer, consider any taxpayer-provided information or to notify the taxpayer of the outcome of the review.

4.26 The ATO notes that while the days elapsed from lodgement to issuing of notices of assessment is one measure of the timing impact of ITRIP; it does not represent the most accurate picture. It considers that a better measure of the timing impact of ITRIP would be from the suppression start date, that is, when the return is suppressed from further processing in ICP, and the suppression end date when the return continues to be processed through ICP following completion of the ITRIP checks.

4.27 While the ATO may consider that suppression start and end dates provide a better measure of the timing impacts of the ITRIP process itself, it is important to appreciate that much of the machinations of the ITRIP are not visible to the taxpayer. The primary measure of timeliness of tax return processing for taxpayers is the date of lodgement and the date on which the refund is received. To an extent, the ATO also recognises this, having provided both sets of data for comparison.

4.28 Suppression start and end dates serve as a good 'internal measure' for the ATO to assess the timeliness of its ITRIP process. The average days elapsed from start to end of suppressions for the years 2010-11, 2011-12 and 2012-13 year to date are outlined in Table 16, below.

Table 16: Days elapsed from suppression start to end dates for the lodgement years ending 30 June 2011 to 2013 YTD
Category Year ending 30 June
2010-11 2011-12 2012-13 YTD
Mean Median Mode Mean Median Mode Mean Median Mode
No adjustment 114 109 120 155 163 197 55 53 50
Adjustment 132 130 134 156 159 218 67 65 57
Internal review 64 39 34 76 37 16 48 47 63
Unknown 94 71 41 127 117 16 53 50 29

Source: ATO data extracted as at 12/2/2013.

4.29 The data in Table 16 largely aligns with that contained in Table 15. It shows that returns in the 2010-11 year largely comply with the ATO's estimated longest timeframe for completion of ITRIP cases. In 2011-12, average timeframes for cases in which, following compliance activity, either an adjustment was made or no adjustment was made, exceeded the ATO's estimated longest timeframe. In 2012-13, average timeframes were significantly improved from the previous two years with all timeframes averaging between 29 and 67 days.

IGT observations

4.30 From the information contained in both Tables 15 and 16, the IGT notes that the taxpayer experience in 2012-13 appears much improved from the previous two years in relation to the timeliness of processing of returns. In some cases, the 2012-13 experience represented an average improvement of about 100 days.

4.31 It is clear from the data in these tables that the review of ITRIP returns is significantly more efficient where the ATO is able to use third party data to verify its concerns. In all years presented for comparison, cases in which third party data is used to address the risks identified by the ATO, the average days elapsed to completion was lower — frequently by a wide margin from other cases.137 The ATO has also indicated that it recognises the efficiency of utilising third party data to verify and release returns held by the ITRIP. Accordingly, it is currently trialling the use of third party data in relation to some returns held under the pattern detection and identity crime models.138

4.32 The IGT acknowledges that not all cases can be verified through the use of third party data as it is dependent on the data available and the risk being addressed. However, the efficiency benefits of using third party data for this purpose are clear from the statistics. Accordingly, the IGT considers that, to the extent possible, the ATO should implement strategies to enhance its use of third party data to verify and release as many returns as possible without the need to contact the taxpayer or their agent. Such an approach would assist in minimising resource impacts on the ATO and taxpayers and their agents.

Recommendation 4.1

The IGT recommends that:

  1. the ATO continuously improve the time period between a return being stopped and initiating inquiries with the taxpayer or their agent by increasing staff conducting ITRIP reviews during Tax Time and commencing audits sooner;
  2. the ATO continue to implement strategies to obtain data in a timely manner which may be applied to verify tax returns held by the ITRIP; and
  3. where any new risk or label rules are proposed to be incorporated into the ITRIP, or where any existing rules are proposed to be updated, the ATO build into the model available third party data that could be used for compliance verification.

ATO Response

Agree.

Tax agent visits

4.33 The ATO has recognised that in 2011-12, about half of the returns stopped by the ITRIP (approximately 50,000) were lodged by tax agents. As a result of the extended delays experienced in that year, a number of tax agents were managing multiple individual tax returns which the ATO was reviewing.

4.34 The ATO had originally planned in July 2011 to send compliance managers to all tax agents identified as having 50 or more returns stopped to provide education on the ITRIP and to deliver key Tax Time messages.139 However, following observations regarding the high numbers of returns stopped in 2011-12, the ATO decided to re-focus the purpose of these meetings to assist these tax agents in managing tax returns held by the ITRIP and to improve ITRIP processing efficiency.140 Between the end of August and early October 2011, the ATO undertook approximately 90 such visits to tax agents who were dealing with a combined total of about 4,500 income tax returns which had been stopped by the ITRIP.141

4.35 A number of these visits were educational, while others focused on the risks identified in the returns. While the ATO notes the good feedback received from these visits, it did not keep any records of the numbers of returns which were processed as a result of this initiative.

4.36 As the high numbers of returns stopped by the ITRIP created a backlog into early 2012, the tax agent site visits initiative was undertaken again in February 2012. The initiative involved a re-allocation of compliance managers to make personal visits to tax agents who had more than 10 clients with returns held. As with the earlier visits, the purpose was to expedite information gathering, consideration of information provided and processing of returns.

4.37 Between February and June 2012, the ATO visited 100 tax agents and finalised 2,000 cases. While the ATO did not undertake any formal assessment of the effectiveness of the initiative, it has advised the IGT that informal feedback received from tax agents noted the following benefits:142

  • Opportunity to speak with someone face to face regarding the process, individual cases and answer any queries.
  • A single contact point for cases, ongoing concerns and issues.
  • Ability to better systematically manage their workloads resulting from the income tax return integrity process.
  • A feeling of satisfaction that consideration was given to the effect of these workloads on their practices and clients.

4.38 The reduction in backlog cases coupled with the reduced numbers of tax agent-lodged returns which were stopped by the ITRIP in 2012-13 (approximately 15,000 in 2012-13), has resulted in fewer instances of tax agents being required to manage multiple cases subject to ATO review.143 Accordingly, the ATO notes that the tax agent visits initiative will not be implemented in future years.144

4.39 Notwithstanding this, the ATO notes that based on the informal feedback it received in 2011-12, it has implemented a communication strategy to assist tax agents with the highest number of returns held by the ITRIP, including:145

The top 5 Tax Agents with the most number of client returns stopped were allocated to a Tax Agent Compliance Strategy Compliance Manager. The cases from these 5 Tax Agents were allocated to a specific team in Pre Issue Compliance. The Compliance Manager worked with these teams in terms of co-ordination of the work and discussion of key points. The Compliance Manager contacted the Tax Agent to explain the Income Tax Return Integrity process, discuss any issues and identify themselves as a central contact point.

The remaining top 30 Tax Agents with the most number of client returns stopped were also profiled by Compliance Managers. These Tax Agents were also contacted in order to explain the process and provide any relevant messaging.

4.40 During the course of this current review, the ATO has advised the IGT that, moving forward into future years, it intends to implement a more comprehensive engagement model with tax agents to assist them through Tax Time. The first of these initiatives was a series of 1,000 visits to tax agents by ATO compliance managers in the weeks leading up to 1 July 2013. The purpose of this was to deliver key messages regarding refund fraud to those tax agents considered at risk of being affected by fraud and who used online systems to communicate with their clients.146

4.41 In addition to delivering key messages to assist tax agents to identify instances of potential fraud, the ATO also notes that through these visits, tax agents were provided with a single point of contact, being the visiting compliance manager. The ATO notes that it has received positive feedback from these visits though no formal evaluation of the initiative has been undertaken.

IGT observations

4.42 The IGT supports the ATO's ongoing engagement with tax agents and acknowledges the ATO's new initiatives to assist tax agents during Tax Time. Such engagement assists in developing a more effective and efficient working relationship between tax agents and the ATO and operates to mitigate potential adverse impacts which may otherwise arise from the ATO's compliance activities. Tax agents have raised with the IGT the benefits of having direct access to identified ATO officers to resolve and address issues as and when they emerge.

4.43 The IGT acknowledges that, historically, the ATO had provided tax agents with relationship managers to assist in resolving issues as and when they emerge. However, given the numbers of tax agents, such a program was resource intensive and the officers allocated to the roles were perceived to lack sufficient seniority and technical proficiency to effectively manage relationships with tax agents. As such, these roles were abandoned in favour of such initiatives as tax agent 'fast key codes' to provide more timely telephony support to direct tax agent enquiries to appropriate areas within the ATO.

4.44 However, given the positive feedback received by the ATO in relation to its tax agent visits campaign, the IGT considers that there may be some benefit in the ATO looking to identify further opportunities to engage and assist tax agents to meet their obligations and resolve any issues which may emerge, including undertaking site visits at the request of tax agents with larger numbers of tax returns stopped by the ITRIP.

Recommendation 4.2

The IGT recommends that the ATO, in addition to undertaking specific campaign visits to assist tax agents:

  1. undertake site visits at the request of tax agents with larger numbers of delayed income tax returns held under the ITRIP to review and finalise these in an efficient and cost-effective manner; and
  2. provide a direct contact point within the ATO and clear lines of escalation to assist tax agents to raise and address areas of concern in relation to the ITRIP.

ATO Response

Agree.

4.45 Issues regarding the ATO's interaction with tax agents more generally have been raised in earlier IGT reviews.147 The IGT may consider this as part of a broader review into the ATO's services and support for tax practitioners which was announced as part of his 2012-13 forward work program. As stated in that work program announcement, the IGT considered that there would be some benefit in allowing time for the ATO to implement its initiatives under the Tax Practitioner Action Plan before a review is undertaken.148

Opportunities to expedite processing

4.46 One of the chief stakeholder complaints arising from ITRIP processing is the lack of appropriate mechanisms for taxpayers or tax agents to intervene and expedite the process. The ATO acknowledges this and notes that taxpayers are only able to provide information when the ATO has requested information and not sooner. The ATO contends that this aligns with the principle that returns are processed in the order they are received.149

4.47 However, submissions stated that such a situation creates additional anxiety and uncertainty and does not assist tax agents to plan their work effectively. It also creates an incentive for taxpayers and tax agents to seek other channels of engagement with the ATO to address delayed processing issues, such as the ATO Complaints section.

Using ATO complaints and hardship applications

4.48 In submissions to the IGT, some tax agents have noted that they were unable to progress their clients' returns through the ordinary ITRIP channels within the MEI business line. They, therefore, resorted to lodging formal complaints via the ATO's Complaints section as a means of bringing the case to the attention of an ATO officer. These tax agents have noted that they were able to more clearly ascertain reasons for delay and to progress their clients tax returns for processing more quickly through the complaints mechanism.

4.49 Indeed, the increased level of complaints received in relation to delayed refunds in 2011-12 outlined earlier in Table 13 lends support to this approach. While not as pronounced as in 2011-12, the statistics in relation to complaints in 2012-13 (year to date) also show an increase from 2010-11.150

4.50 Submissions to the IGT have suggested that, on occasions, ATO Complaints staff have encouraged tax agents to lodge ITRIP complaints as a means of progressing the cases rather than pursuing the matter through the MEI business line. In discussions with the IGT, the ATO has acknowledged that in prior years, the varying work practices across different case actioning teams within the MEI business line has enabled some taxpayers and tax agents to resolve their delayed refund issues sooner.151

4.51 The ATO notes that such a situation is undesirable as it creates an uneven playing field. The ATO has taken action to ensure a consistent approach across its general ITRIP processing and cases which are escalated through ATO Complaints. This included an updating of the ATO Complaints section scripting for the management of complaints relating to ITRIP delays.

4.52 In the main, the updated scripting provides guidance and details regarding the ITRIP process and, relevantly, the date by which the taxpayer can either expect their refund to be issued or further information to be requested based upon when the income tax return was lodged. This information is drawn from an internal spreadsheet made available by MEI to the ATO Complaints section.152

4.53 The ATO has advised that the spreadsheet used by the ATO Complaints section was an interim measure. The ATO has since established new procedures to include specific dates and timeframes in individual taxpayer delay letters which are attached to the taxpayers' correspondence history on the ATO's enterprise case management system, Siebel. ATO officers, including call centre staff, are able to access the letter and discuss relevant aspects of the taxpayer's case including timeframes and details of items proposed to be reviewed.

4.54 In addition to using ATO Complaints to raise concerns about the delays in issuing refunds, the IGT has also identified some instances of the complaints mechanism being used by taxpayers to bring issues of serious hardship to the ATO's attention. Where the taxpayer demonstrates that they are experiencing serious hardship, the ATO aims to deliver refunds in these cases within five working days.153

4.55 Taxpayers may lodge a request for serious hardship consideration either following the lodgement of their income tax return, or at the same time as lodging their income tax return through a designated facsimile number.154 The ATO has provided some guidance in relation to the type of material which individual taxpayers and business may put forward in support of a claim for hardship. These include documents such as official eviction notices, pending disconnection of essential services, bank overdraft notices or repossession notices.155

4.56 Based on information provided by the ATO, the standardised ITRIP correspondence indicates that general information regarding hardship was included for the first time in its ITRIP letters in 2011-12.156

4.57 The ATO caveats that provision of these documents may not necessarily result in a taxpayer being granted hardship status. Further, it notes that processing times may be impacted where the taxpayer has external liabilities such as with Centrelink or the Child Support Agency, or where there are multiple returns needing to be processed.157

4.58 The ATO has advised the IGT that hardship applications are administered corporately by the CAS business line. Once the CAS business line has substantiated the taxpayer's hardship status, the case is referred to the relevant business line (in the case of ITRIP, the MEI business line) for priority processing.

4.59 While the ATO currently collects data in relation to hardship applications generally, it does not presently record data in relation to those which relate to ITRIP. It notes:

There is no data to determine the percentage of hardship requests that relate specifically to the income tax integrity program. Client Account Services have advised that for the period 1 July 2012 to 30 Dec 2012, the tax office received 3,006 hardship requests in total. Of those, 1,937 (64.4 per cent) were substantiated and processed under the hardship criteria.158

4.60 As such, it is not known how many hardship cases involved ITRIP delays. Therefore, it is difficult to compare the relative timeframes of hardship priority processing against processing timeframes under the ITRIP generally.

IGT observations

4.61 The IGT acknowledges that hardship is a serious consideration and should rightly bear priority status where taxpayers can demonstrate the severe impact of delayed refunds.

4.62 In addition, there may also be other circumstances which may not, strictly speaking, give rise to hardship but are cases in which the ATO should give consideration to expedited processing. Such cases include where the ATO is informed that the taxpayer is due to travel and will not be available to address the ATO's enquiries, or where a tax agent requires assistance to manage tax commitments during Tax Time. In the latter case, given the high demands on tax agents' time to lodge a high quantity of tax returns, it may not always be possible to respond to the ATO on a case by case basis. Therefore, a certain degree of flexibility for tax agents to initiate contact with the ATO may assist them better respond to the ATO's inquiries and to manage their Tax Time commitments to taxpayer clients.

4.63 The IGT appreciates the ATO's need to ensure that returns are processed in the order that they are received and to manage its resources accordingly so that lengthy delays are avoided where possible. However, the IGT also considers that there is benefit in the ATO exploring mechanisms or strategies whereby taxpayers and tax agents can initiate contact with the ATO to expedite the processing of held returns in appropriate cases.

4.64 In developing such strategies, the ATO should give consideration to implementing a hierarchy of priorities with cases of demonstrated serious hardship being given the highest level of priority processing. The hierarchy can then examine other situations in which some mechanism to expedite processing may be appropriate, such as those circumstances outlined above.

4.65 Moreover, in developing these strategies the ATO should consider ways in which it would distinguish between taxpayers who genuinely require priority processing of their income tax returns and those who do not. Such strategies may include the ATO requesting taxpayers to demonstrate the reasons why priority processing is appropriate, such as providing copies of travel documents where the taxpayer expects to be overseas at the time of the ATO's review.

4.66 ATO staff procedures should be augmented to ensure ATO staff consider the taxpayer's and tax agent's circumstances holistically and provide clear lines of escalation in cases where circumstances are outside the norm.

Recommendation 4.3

The IGT recommends that the ATO develop and adopt a differentiated approach in reviewing and processing income tax returns held under the ITRIP by:

  1. the MEI and CAS business lines enhancing the management reporting of ITRIP serious hardship cases and using such findings to continually improve the management of these cases; and
  2. augmenting its pre-issue compliance procedures to:
    1. provide clear instruction and guidance to ATO staff to holistically consider taxpayers' or tax agents' circumstances and respond to these in a flexible manner; and
    2. provide clear lines of escalation where taxpayers and their agents are unable to resolve any disputes which may arise directly with the ATO audit officer.

ATO Response

Agree.


117 Taxation (Interest on Overpayments and Early Payments) Act 1983.

118 Above n 76; ATO, Communication with the IGT, 8 March 2013.

119 Ibid.

120 The IGT adjusted this figure on advice from the ATO that due to an error in reporting, some taxpayer's dissatisfaction with timeliness was incorrectly recorded as dissatisfaction with process.

121 Above n 76.

122 Ibid.

123 Above n 76.

124 Ibid.

125 Above n 57, p. 4.

126 Ibid, p. 4.

127 ATO, 'Income Tax Refund Integrity fraud letters usability report' (6 February 2012), internal ATO document, p. 5.

128 Ibid, p. 16.

129 Ibid.

130 Above n 76.

131 Above n 14, p. 1.

132 Ibid.

133 Ibid.

134 Above n 76.

135 The ATO notes that these 10 cases are a result of a suppression having been placed on the taxpayer's file in the previous year and which was not lifted until 2013. It is therefore not an ITRIP case in 2012-13.

136 ATO, 'Income Tax Return Integrity - End to End Process - Shortest Timeframe' (August 2011), internal ATO document; ATO, 'Income Tax Return Integrity - End to End Process - Longest Timeframe' (August 2011), internal ATO document.

137 With the exception of the mode in relation to internal reviews for the 2012-13 year to date which was six days more than the mode for adjusted returns.

138 Above n 14, p. 4.

139 Above n 72.

140 Above n 92.

141 Above n 72.

142 Above n 98, pp. 6 and 7.

143 Ibid.

144 Ibid.

145 Ibid.

146 ATO, communication with the IGT, p. 4.

147 IGT, Review into improving the self assessment system, 13 February 2013; Above n 61.

148 IGT, New IGT Work Program, 10 October 2012; ATO, Tax Practitioner Action Plan.

149 Above n 76.

150 The ATO has advised that in 2011-12, the complaints figure related only to ITRIP cases whereas in 2012-13, this was combined with HRR complaints. Care needs to be taken when examining trends in complaint levels.

151 Above n 51.

152 ATO, 'ITRI HRR Touchpoints July 2012', accessed from Quicksmart, internal ATO scripting system.

153 ATO, Financial hardship - what you need to know

154 Ibid.

155 Above n 153.

156 Above n 76.

157 Above n 153.

158 Above n 118.