A report to the Assistant Treasurer
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11 March, 2010
Senator the Hon Nick Sherry
CANBERRA ACT 2600
On 10 March 2009, the former Assistant Treasurer directed me to review and report on concerns in relation to any perceived ATO delayed or changed approaches — so called 'U-turns' — on significant interpretative matters or on past administrative practices. I am now pleased to provide you with my report on this review which contains my findings as well as recommendations which when implemented should result in significant improvement to tax administration in Australia.
Overall, I found that, in certain circumstances, taxpayers' perception of changes in ATO views or practices are justified. The main problem is not one binding ATO advice clearly changing another, but it is disagreement over whether a previous view or practice existed and if it did exist whether the subsequent view constituted a change. The situation is further compounded by ATO delays in firstly identifying its compliance concerns (which are usually the reasons for developing the subsequent view) and, secondly, finalising its position in relation to those concerns.
Taxpayers are not as concerned with the perceived change as they are with its retrospective effect. To overcome these concerns, I have suggested that the Government consider whether some legislative changes are necessary. In the meantime and in the absence of such legislative change, I have worked with the ATO, with input from business and tax practitioners, to develop mechanisms to reduce the adverse impacts of perceived changed and delayed ATO advice. These mechanisms are contained in recommendations two to five and whilst they may not eliminate the problem, when appropriately implemented, they should improve the level of transparency and due process and thereby significantly alleviate the current concerns.
The direct involvement of key industry representatives, key tax practitioners, the ATO's Acting Second Commissioner - Law, Acting Chief Tax Counsel and particularly the Commissioner of Taxation on key points has greatly enhanced the outcomes of this review. I consider that this direct involvement is a good example of how the ATO, external practitioners, industry and my office can work together to improve Australia's tax administration system.
Inspector-General of Taxation
© Commonwealth of Australia 2010
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