Implementation of Treasury's ROSA recommendations
6.1 On 16 December 2004, the Government released Treasury's Report on Aspects of Income Tax Self Assessment (the ROSA report), which made 54 recommendations (ROSA recommendations). These are set out in appendix 6.
6.2 Of the ROSA recommendations, 29 required legislative response and 25 were administrative in nature. Of these 25 administrative recommendations, 17 were to be implemented by the ATO, five by Treasury, two by the IGT, and one by the Board of Taxation in conjunction with Treasury. All the ROSA recommendations requiring legislative change also required consequential administrative changes by the ATO.
6.3 The government committed to adopting the recommended legislative changes arising from the report. The ATO committed to implementing the administrative changes. The most important changes were to:
- improve certainty through providing for a better framework for the provision of Tax Office advice and introducing ways to make that advice more accessible and timely, and binding in a wider range of cases;
- improve certainty by reducing the periods allowed for the Tax Office to increase a taxpayer's liability in a wide range of situations (this will mean that approximately 8 million individual taxpayers and over 745,000 very small businesses will have a shorter period of review);
- mitigate the interest and penalty consequences of taxpayer errors arising from uncertainties in the self assessment system; [and]
- provide for future improvements through better policy processes, law design and administrative approaches.338
Process for implementation
6.4 Soon after the ROSA report was released, the ATO established a project management governance framework to oversee the implementation of the ROSA recommendations (see appendix 7).
6.5 In summary, this framework included a ROSA implementation team overseeing five project teams, each with a particular focus. Approval for work was obtained from the relevant ATO Deputy Commissioners and National Program Managers, with sign off by the ROSA First Assistant Commissioner (FAC). Through the ROSA FAC, the ATO Executive, Policy Implementation Forum and Tax Policy Coordination Centre were kept informed on a regular basis through reports as well as provided sign off and resolution of major issues.
6.6 The ROSA implementation team was disbanded in May 2006.
6.7 The ATO has also given updates of the implementation of the ROSA recommendations to its consultative forum, the National Tax Liaison Group (NTLG).
Status of implementation
6.8 As at 19 September 2011, the ATO advised that it had implemented all administrative recommendations, except for two:
Recommendation 2.9 – [A]dvice to tax agents
The Tax Office should continue to replace large 'mail-outs' to tax agents with more targeted electronic contacts, and a 'whole-of-agency' view should be applied to volumes of information distributed.
Recommendation 4.4 - Penalties
The Tax Office should explain more fully, for example in a Ruling or Practice Statement, how it exercises the discretion to remit tax shortfall penalties, including in Part IVA cases.
6.9 With regard to ROSA recommendation 2.9 the ATO advises:
A preferred delivery mechanism to electronically support preferencing, including the delivery of notices of assessment and statement of accounts has been developed. Work to deliver the changes is currently being scheduled as part of the 'ATO Online 2015' forward plan.
6.10 With regard to recommendation 4.4, the ATO released a draft practice statement (PSLA 3545) on 22 September 2011. The ATO advised that:
The ATO will be consulting internally and externally concurrently. External consultation will be via the NTLG and ATPF.339
Issues arising from submissions
6.11 Submissions to this review suggested that although the ATO may have completed some action in response to the ROSA recommendations, some recommendations had not been implemented effectively as they did not achieve the desired effect in certain instances.
6.12 Underlying these concerns was an observed ATO reluctance to issue more legally binding advice. A major impediment appears to be the ATO's perception that legally binding advice cannot be given in a simple and practical manner (see for example, the ATO's recent approach to TaxPack). In this respect, the ATO has not acted to achieve the objectives of Treasury's ROSA review. These issues are discussed in more detail in chapter 2 of this review, together with relevant recommendations.
Other issues — dispute resolution
6.13 The balance of power during dispute resolution processes was another issue raised by submissions. The ATO is seen as an organisation with substantial resources and power. It was considered, particularly by smaller taxpayers and advisers, that acquiescing to ATO views was preferable to incurring significant compliance costs in prosecuting their case.
6.14 The ROSA review suggested that greater use of alternative dispute resolution (ADR) has proven successful in other situations and could prove successful in improving addressing this potential issue.340 The IGT's recent Review into the ATO's use of early and alternative dispute resolution (ADR review) deals with these issues more fully.
6.15 Also relevant is the ATO's current Transforming Tax Technical Decision Making project which is intended to reduce the likelihood of disputation through the engagement of more senior ATO experts earlier in the compliance process. However, it is acknowledged that not all disputes will be resolved at that time, or at a later stage.
6.16 In this respect, the IGT's submission to the Tax Forum341 advanced the position that the ATO's dispute management framework would be much enhanced by establishing a separate appeals area within the ATO to improve its current handling of objections and conduct of litigation. Such an area would be headed by the appointment of an additional Second Commissioner from the private sector, who would inject a wider range of experiences and perspectives into ATO management and provide intelligence and insight regarding trends in corporate governance and taxation risks. An extract of this submission is reproduced in appendix 8.
6.17 Ultimately, an appeals area, as proposed by the IGT, would provide an independent internal review at the objection stage, providing continuous feedback to better inform and enhance primary decision-making and support better selection of cases for litigation. Furthermore, by having specialised litigators as well as technical experts, it should also result in better management of the entire litigation process.
6.18 This was an issue considered in the IGT's ADR review. As a result the IGT recommended that in working towards the structure outlined in his submission to the Government's Tax Forum, the ATO establish a pilot 'Appeals Section' under the current Second Commissioner — Law to carry out the objection and litigation function for the most complex cases.
6.19 The ATO did not support this recommendation.
338 Peter Costello, 'Outcome of the Review of Aspects of Income Tax Self Assessment' (Media Release, 16 December 2004).
339 Australian Taxation Office, Communication to the Inspector-General of Taxation, 19 September 2011.
340 The Treasury, above n 63, p 74.
341 The Federal Government's Tax Forum which was convened on 4–5 October 2011; Inspector-General of Taxation, 'Tax Forum — Next Steps for Australia' (Submission to Australian Government, September 2011) pp 17-18.