4.1 Where taxpayers believe that their ‘rights’ have been transgressed, they may seek avenues of redress to rebalance what they may perceive to be an injustice to them or restore them to the position they were in prior to the transgression.
4.2 There are a range of options which the ATO may use to restore the taxpayer’s confidence in the administration. Some of these may involve providing taxpayers with additional time to comply, informally reviewing decisions or updating policies and procedures that are found to give rise to unintended outcomes. It is not possible to examine the effectiveness of each and every possible form of redress as these will necessarily vary from case-to-case.
4.3 In this Chapter, the IGT will examine the concerns raised by stakeholders, and the ATO’s approach to, three specific forms of redress, namely:
- the scheme for compensation for detriment caused by defective administration (CDDA Scheme);
- compensation for legal liability; and
4.4 Whilst concerns were identified with each of the above forms of redress, the greatest degree of concern appeared to be focused on the ATO’s administration of the CDDA Scheme. As such, before turning to discussing the other areas of redress, this Chapter will examine the CDDA Scheme and the associated stakeholder concerns in some detail.
The CDDA Scheme
4.5 The CDDA Scheme was established in 1995 as an administrative remedy and allows Commonwealth agencies to provide compensation where there is no legal right of redress but a moral obligation to do so.292 The CDDA Scheme is intended to restore a person to the position they would have been in had a Commonwealth agency’s defective administration not occurred.293 All claims are considered on their own merits and principles of procedural fairness apply in the CDDA decision-making process.294
4.6 The administrative framework for the CDDA Scheme is the responsibility of the Department of Finance. However, CDDA decisions are the responsibility of the relevant Portfolio Minister.295 In effect, however, the Ministers authorise their portfolio agencies to make the decisions on their behalf.296 Portfolio agencies are provided with discretion in the application of the Scheme, subject to certain specific requirements set out in Resource Management Guide 409 Scheme for Compensation for Detriment caused by Defective Administration (RMG 409).
4.7 In addition to having discretion over the application of the CDDA Scheme, agencies also have discretion over whether payment of compensation is appropriate and the quantum of any such compensation. There is also no automatic right of review of decisions under the CDDA Scheme. Taxpayers who are dissatisfied with a CDDA decision may request an internal review of the decision with the agency concerned. However, there is no statutory or administrative requirement for there to be an internal review process and it is at the discretion of agencies whether to offer internal review and, if so, how such a process would operate.297
4.8 Beyond an internal review, a CDDA decision may be reviewable by the Ombudsman or, in the case of claims concerning the ATO or the TPB, the IGT. A CDDA decision may also be reviewable under section 75 of the Constitution or section 39B of the Judiciary Act 1903 (Judiciary Act). These provisions provide a remedy for affected taxpayers where officers of the Commonwealth have failed to perform legally enforceable duties or acted in a way which is unlawful or exceeds their powers. Where a Court makes such a finding, the remedies would generally be confined to remitting the matter back to the original decision-maker to remake the decision in line with relevant procedural directions. It is important to note that these provisions would not entitle a taxpayer to a specific substantive outcome (for example, an order that the agency pay a certain amount of compensation).
4.9 There have been a number of reviews which have examined or referred to the CDDA Scheme, namely those of the Administrative Review Council (ARC), the Senate References Committee, the Ombudsman, the IGT and the Australian National Audit Office (ANAO).
4.10 The ARC’s 2012 review, Federal Judicial Review in Australia, amongst other things, considered whether there was a need for decisions under the CDDA Scheme to be reviewable under the ADJR Act.298
4.11 The extension of ADJR Act review to decisions made under the CDDA Scheme was opposed on the basis that the flexibility and efficiency in decision making could be lost if too much weight is placed on the judicial review of decisions.299 It was noted that applications for review of CDDA decisions had been made under the ADJR Act on at least two occasions and were unsuccessful because CDDA decisions were not made ‘under an enactment’ and therefore not reviewable under the ADJR Act.300
4.12 Ultimately, the ARC did not make any recommendations which would extend the ambit of the ADJR Act to cover decisions under the CDDA Scheme. However, it observed that decisions made under the CDDA Scheme would continue to be reviewable in the Federal Court under sections 75 of the Constitution and 39B of the Judiciary Act.301
4.13 In 2010, a Senate References Committee review was undertaken in respect of a range of government compensation schemes, including the CDDA Scheme.302 Submissions to that review identified a number of limitations and associated issues with the CDDA Scheme. The Ombudsman at the time noted that the scheme did not then apply to entities governed by the Commonwealth Authorities and Companies Act 1997 (CAC Act) and was not applicable in instances where the defective administration arose as a result of actions by contracted non-government entities.303
4.14 The review committee made one recommendation in respect of extending the CDDA scheme, in appropriate circumstances, to cover CAC agencies and third party service providers.304 The IGT notes that, whilst the issue has not been entirely addressed, with the introduction of the PGPA Act, the Financial Management and Accountability Act 1997 and the CAC Act have now been consolidated and the CDDA Scheme has been applied to both corporate and non-corporate Commonwealth entities.305 However, it remains unclear whether the CDDA Scheme extends to the actions of third party service providers contracted by Commonwealth agencies.
4.15 Concerns were also raised in respect of other aspects of the CDDA Scheme, including the narrow definition of ‘detriment’ and the high threshold for proving economic loss.306 These concerns were also raised by submissions to this IGT review and will be discussed later in this Chapter.
4.16 The IGT’s 2010 review of the Change Program highlighted concerns from the tax practitioner community about the ATO’s basis for and process to obtain compensation.307 The ATO had considered a number of CDDA claims from practitioners for losses incurred as a result of the ATO’s actions in implementing the Change Program. However, the ATO declined to provide compensation at that time on the basis that there had been no defective administration.
4.17 The IGT observed that the ATO’s compensation decisions had failed to acknowledge that although the ATO had published a list of known issues with the new system, it did not do so in a manner that helped taxpayers and tax practitioners minimise risk and unnecessary costs. As a result, the IGT made the following two recommendations to the ATO:
For the purpose of minimising risks arising in future large, complex ICT projects, the IGT recommends that the ATO consider for future projects, whether it should have guidelines in place early in the development of the project to assess and process claims for compensation by members of the community for substantial detrimental impacts imposed.308
For the purpose of addressing tax practitioners’ concerns with the basis for, and process to obtain compensation, the IGT recommends that the ATO work with the tax practitioner community to robustly and openly consider its position on compensation claims under the CDDA Scheme and the process by which such claims should be made.309
4.18 In response, the ATO agreed with Recommendation 5. However, it disagreed with Recommendation 6 as it was of the view that compensation claims are considered on their merits and the CDDA Scheme does not operate on the basis which involves consultation about findings of defective administration.310
Commonwealth Ombudsman reviews
4.19 In 2009, the Ombudsman undertook an own motion review of three Commonwealth agencies’ administration of the CDDA Scheme, including the ATO.311 The Ombudsman concluded that, overall, these agencies had well-developed systems in place to handle CDDA claims.312 However, a major theme emerging from the report was that:
… while there is general acceptance by agencies of the CDDA Scheme, there is still a reluctance by agencies to admit error and to approve worthy claims. More can be done within agencies to facilitate greater acceptance of the scheme, its principles and purpose.313
4.20 The Ombudsman also identified actions that the agencies should take to improve their administration of the scheme, including:
- providing greater visibility of the scheme so that the public knows they can ask to be compensated for government error;
- providing staff with greater guidance and instructional material, including illustrative case studies;
- using information technology to improve case monitoring, provide support for better decision making and capture feedback; and
- establishing an inter-departmental advisory or review panel to deal with disputed or exceptional CDDA claims.314
4.21 An earlier Ombudsman review of the CDDA Scheme, in 1999, had also resulted in several recommendations. These included clarification of the CDDA guidelines, by the Department of Finance, to ensure that if the Ombudsman and the agency concerned agree that there has been detriment caused by defective administration, there is sufficient basis for compensation.315 The development of Finance Circular 2001/01 was, in part, a response to this recommendation.316
4.22 In 2003-04, the ANAO conducted a cross-portfolio performance audit on the processes applied by agencies to manage claims for compensation and debt relief.317 The audit also assessed the Department of Finance’s role of providing policy advice and its management of the compensation arrangements. The ATO was not included in this audit.
4.23 The ANAO concluded that whilst the management of compensation claims was generally in accordance with the relevant legislative requirements and administrative guidelines, there was room for improvement with respect to the overall coordination of the arrangements and processing of claims.318 The ANAO made 11 recommendations, of which four were directed at the Department of Finance and seven were directed at the agencies receiving claims for compensation. The recommendations to agencies included developing and documenting procedures for processing claims and determining appropriate performance time indicators.319 Agency responses to the ANAO’s recommendation to develop comprehensive written procedures for processing compensation claims varied, however, most agreed with this recommendation and indicated that work would be undertaken to review and refine existing procedures.320
4.24 It is noted that, of the above reviews, only the 2009 Ombudsman review directly examined the ATO’s administration of the CDDA Scheme. The other reviews were either broader in scope, considered the CDDA Scheme in the context of other matters or did not review the ATO’s administration.
4.25 Notwithstanding the above reviews and actions taken in response to their findings, the difficulty in obtaining compensation under the CDDA Scheme was one of the primary concerns raised by stakeholders in their submissions to this review. In particular, stakeholders expressed concerns about:
- the level of awareness and accessibility of the CDDA Scheme in providing redress to taxpayers;
- the ATO’s management of CDDA claims and its decision-making process, including the independence of decision makers; and
- the internal and external review avenues for CDDA decisions.
4.26 Each of these concerns is discussed below.
Awareness and accessibility of the CDDA Scheme
4.27 Stakeholders have raised some concerns that there is limited public education and guidance available about the CDDA Scheme. They have asserted that many taxpayers do not know that the CDDA Scheme exists or how to seek compensation. This claim seems to be supported by the relatively low number of CDDA applications made to the ATO.
4.28 The Ombudsman, in his 2009 review, also identified similar concerns regarding the need to raise awareness of the CDDA Scheme and recommended that all agencies:
… review their publicly available information to ensure that information about the CDDA Scheme, including the Ombudsman‘s role in review of decisions, is accessible on agency internet sites, and referred to in service charters, correspondence relating to decisions, and on fact sheets and similar material relating to complaints, review of decisions and appeals.321
4.29 Even where taxpayers are aware of the scheme, submissions made to the IGT have expressed concern about the threshold criteria for compensation under the CDDA Scheme as a barrier to access. In particular, stakeholders have noted that the threshold for demonstrating ‘defective administration’ is too high and that the guidelines for what can and cannot be compensated are prohibitively narrow.
4.30 It has been further asserted that the time and cost of preparing CDDA claims is disproportionate to any benefits particularly for taxpayers in the individual and small business markets. These stakeholders consider that compensation should be available to the most vulnerable taxpayers in an efficient, timely and low cost manner.
4.31 In cases where taxpayers have succeeded in meeting the threshold criteria, submissions made to the IGT have observed that the CDDA Scheme does not adequately address productivity loss, opportunity costs (particularly for tax practitioners) or psychological injury (for example, stress and depression). It has been suggested that taxpayers should be able to seek financial compensation for time expended and emotional stress, with one submission expressing the concern as follows:
… in our experience, one of the key causes of financial loss in relation to pursuing the ATO for failure to uphold the Taxpayers Charter is the time and effort which has to be given up or diverted from other endeavours in order to undertake a time-consuming pursuit of redress from the ATO. In the context of a small business, for instance, this is time taken away from running the business, including generating sales. It is not unreasonable to expect that taxpayers should be able to seek financial compensation for the time spent in clearing up a mess largely created by the ATO. Similarly, the emotional stress involved in dealing with ATO compliance activity can be severe. Where it turns out that that ATO activity was not justified, the taxpayer should have redress to compensation.
4.32 Similarly, some stakeholders have indicated that the CDDA Scheme does not adequately compensate for losses arising from major ATO changes in process or information technology (IT). Tax practitioners, in particular, are keen to see a better compensation mechanism put in place to support tax practitioners inadvertently impacted by systems modernisation, such as the upgrades required as a result of the government’s digital-by-default initiatives. Concerns have also been raised by tax practitioners regarding the limitations to the CDDA Scheme in compensating for losses incurred as a direct result of Tax Agent Portal performance and system errors.
4.33 In relation to publicly available information, the ATO’s website contains general information about how the ATO assesses a claim for compensation, the losses for which compensation can be considered, the losses that generally cannot be claimed, options for review of compensation decisions and its service standards for processing claims. The website also provides assistance to taxpayers and tax practitioners through its dedicated toll-free compensation phone line and dedicated compensation email inbox.
4.34 In addition, taxpayers and tax practitioners are made aware of the ATO’s compensation schemes through the Charter, which acknowledges that taxpayers may in some circumstances be entitled to compensation.322
4.35 Following the Ombudsman’s 2009 review, the ATO had undertaken some action to improve the public guidance on the CDDA Scheme, including by engaging with the Charter team to discuss updates to relevant sections of the Charter as well as reviewing the relevant ATO webpages to ensure that the information presented accorded with the recommendation.
4.36 Turning to issues of accessibility, the threshold requirement for compensation requires taxpayers to show that the actions of the agency amount to ‘defective administration’. ‘Defective administration’ is defined in RMG 409 in the following terms:
- a specific and unreasonable lapse in complying with existing administrative procedures that would normally have applied to the claimant’s circumstances; or
- an unreasonable failure to institute appropriate administrative procedures to cover a claimant’s circumstances; or
- giving advice to (or for) a claimant that was, in all circumstances, incorrect or ambiguous; or
- an unreasonable failure to give to (or for) a claimant, the proper advice that was within the official’s power and knowledge to give (or was reasonably capable of being obtained by the official to give).323
4.28 RMG 409 also provides the following guidance on unreasonableness:
An unreasonable lapse or failure is one where the actions of the official(s) involved are considered to be contrary to the standards of diligence that the entity expects to be applied by reasonable officers acting in the same circumstances with the same powers and access to resources.
4.38 RMG 409 indicates that compensation can be approved for financial and
non-financial detriment under the CDDA Scheme. Detriment is considered to be the amount of quantifiable financial loss, including opportunity costs, that was suffered as a direct result of the defective administration despite the taxpayer taking reasonable steps to minimise the loss.324 Non-financial loss claims may relate to personal injury (including psychiatric injury), emotional distress or damage to reputation. However, compensation is not payable solely for grief or anxiety, hurt, humiliation, embarrassment, disappointment, stress or frustration, that is unrelated to the personal injury, irrespective of the intensity of the emotion.
4.39 The ATO’s public guidance on what may be claimed under the CDDA Scheme states that compensation can be considered under the CDDA Scheme for financial losses that have a direct connection to the actions of the ATO that give rise to ‘defective administration’ such as professional fees, interest for delay or bank and other administrative fees.325 However, the ATO also notes that claims for certain types of losses generally cannot be considered including those relating to personal time spent, stress, anxiety or other forms of emotional distress, delayed refunds where statutory interest has been paid and costs of compliance.326
4.40 The website and the Charter are the primary sources of ATO public information on the CDDA Scheme. The Charter information presently asks taxpayers to contact the ATO’s toll-free information line or alternatively to search ‘Compensation’ on the ATO’s website.327
4.41 Early in the review process, the IGT observed that the above website information (at least as it appeared in the PDF version of the Charter) seemed to be out of date. Test searches of ‘Compensation’ yielded several results but none of the first page results related to the CDDA Scheme. The ATO website at the time appeared to require ‘CDDA’ and ‘defective administration’ to be entered before directing them to the ‘Applying for Compensation’ page which contains the relevant CDDA details. The IGT raised concerns with the ATO that such restrictive search terms require the taxpayer to at least be aware of the existence of the CDDA Scheme before finding the relevant information on the ATOs’ website.
4.42 Moreover, the IGT also noted that the ATO’s website also referred taxpayers to the superseded Finance Circular 2009/09 on Discretionary Compensation and Waiver of Debt Mechanisms328 rather than the current guidance on CDDA matters, being RMG 409.
4.43 The IGT notes that during the course of the review, the ATO took some steps in this regard such as replacing the old Finance Circular 2009/09 with the
update-to-date RMG 409 and the ATO’s website being more responsive to the search term ‘compensation claim’. Having regard to the above, the IGT considers that it is important for the ATO to ensure that its website is kept up-to-date to better inform taxpayers of their rights in respect of the CDDA Scheme, more responsive to flexible search terms and links to the most current guidance material.
4.44 In addition to the above improvements to the ATO’s website, the implementation of recommendations in the previous chapter, in relation to the education and promotion of the Charter, should significantly assist in raising awareness of the CDDA. The updated Charter should include references to the availability of compensation in certain cases with links where further information would be available including the requisite information on the CDDA Scheme.
4.45 In relation to claiming compensation, a key requirement is for taxpayers to demonstrate that the actions of the ATO gave rise to ‘defective administration’. It would appear that ‘defective administration’ requires a higher degree of misconduct than mere mistake but not so high as to reach the levels of ‘conscious maladministration’ (that is, an intention to cause harm or loss).329 It is not an easily understood concept, particularly for taxpayers who do not often interact with the tax system. By contrast, in other jurisdictions such as the UK, a higher degree of misconduct is not required to be demonstrated in their redress and consolatory payment regimes.330 However, this may be due to these regimes being more closely aligned with ex gratia payments than compensation. Indeed, the UK guidance specifically states that such payments are not to be referred to as ‘compensation’.331
4.46 RMG 409 has provided a definition for ‘defective administration’ as well as a broader statement by way of guidance, both of which have been set out above. The guidance, in effect, asks the ATO (as the assessing agency) to determine whether the action giving rise to the compensation claim was an ‘unreasonable lapse’ having regard to the standards of diligence expected of a reasonable officer acting in the same circumstances. Measurements of standards of reasonableness can be problematic, especially given the range of interactions between the ATO and taxpayers. Moreover, it can give rise to markedly different perspectives between the ATO officers charged with making the assessment and the taxpayer who has been affected.
4.47 There is limited public information through the ATO’s website, or elsewhere, which provides a more detailed definition or illustration of the concept in practice. Therefore, an effective yardstick is not available to taxpayers or tax practitioners and they effectively have to lodge an application to find out whether the ‘defective administration’ standard has been met. It should be noted that the ATO may provide guidance in this regard through its assistance phone line or via a dedicated email inbox. The IGT understands that more tailored guidance, including the likelihood of compensation being payable, is available through these channels.
4.48 Whilst the ATO’s approach to providing more tailored information to taxpayers is welcomed, the IGT considers that there are opportunities for the ATO to provide greater clarity on the types of losses that are compensable under the scheme and those that are not. Such guidance is likely to assist both taxpayers to better assess the likelihood of success and minimise workflows for the ATO.
4.49 One area in which further guidance could be given is compensation for
non-economic loss. Non-economic loss may include matters such as stress or anxiety, depression or productivity losses as a result of ATO interactions. As noted above, the ATO’s website indicates that claims for personal time expended, stress or other emotional distress as well as costs associated with audits, objections and appeals are generally not compensable.332 However, it is understandable that taxpayers and tax practitioners may view this to be at odds with RMG 409 which indicates that compensation may be approved for non-economic losses:
- Non-economic loss claims may relate to personal injury (including psychiatric injury), emotional distress or damage to reputation.
- Compensation for personal injury loss would be generally limited to the types of personal injury compensable in legal practice and principle. Entities must look to legal principle and practice when determining an appropriate amount to quantify the claimant’s loss.
- Compensation under the CDDA Scheme is not payable solely for grief or anxiety, hurt, humiliation, embarrassment, disappointment, stress or frustration that is unrelated to a personal injury which is being compensated under the CDDA Scheme, no matter how intense the emotion may be.333
4.50 Whilst non-economic loss can have an impact on taxpayers, it can also affect tax practitioners whose day-to-day work is impacted by ATO system outages or other actions, such as the Tax Agents’ Portal being down, preventing tax practitioners from completing their lodgment work. The IGT has been informed that tax practitioners have met with significant difficulty in seeking compensation for losses of this kind.
4.51 As noted earlier, the IGT had discussed such options in the review into the Change Program where large scale IT upgrades undertaken by the ATO had resulted in significant delays in the processing of tax returns leading to dissatisfaction for both taxpayers and tax practitioners.
4.52 The IGT remains of the view that, where the ATO undertakes large scale projects, such as those relating to significant IT upgrades, it should as a matter of risk assessment and good governance, particularly in the light of the requirements under the PGPA Act, consider catering for potential outages and teething issues which may lead to unintended delays and outcomes. In doing so, the ATO could consider a range of contingencies including setting aside appropriate portions of the budget to account for potential compensatory payments as well as other measures such as expedited processes for investigation, escalation and communication with those affected. A similar approach may be necessary where existing systems suffer frequent failures over a significant period of time and effective remedial action which adequately deals with the issues cannot be taken in a reasonable timeframe.
4.53 The ATO has advised the IGT that a separate budget allocation for specific projects is not necessary as General Counsel currently has a centrally managed budget allocation for compensation purposes. It has also asserted that there have been no identified instances where budgetary constraints have resulted in compensation not being paid.
Management of the CDDA Scheme and decision-making processes
4.54 The manner in which the CDDA Scheme is administered has given rise to perceptions of bias and lack of independence. This perception stems from having the ATO form its own opinion as to whether its actions amount to defective administration and deciding the appropriate quantum of compensation for taxpayers. There is a strong view that having the ATO review and decide on the outcome of matters that it has purportedly mismanaged is lacking in basic procedural fairness.
4.55 Submissions to this review have emphasised the need for enhanced independence in the administration and management of the CDDA Scheme. Some submissions have suggested that independence could be achieved by delegating the administration and management of the scheme, insofar as the ATO is concerned, to an independent body, such as the IGT, so that compensation claims are subject to independent consideration at the outset. Whilst stakeholders recognise that the CDDA Scheme applies across government, they consider the ATO to be distinct from other government agencies. As one stakeholder has noted:
The ATO is distinguishable from and unique when compared to other governmental authorities who too administer the CDDA Scheme. The ATO’s reach stretches across the whole of the Australian community, and involves the whole of the Australian community. This is quite different from other governmental authorities that deal with a section of our community.
4.56 In this respect, submissions have commented that an overhaul of the entire scheme would not be required as the IGT could absorb the responsibility of administering the CDDA Scheme, given that its role already involves complaints handling and reviewing ATO activity.
4.57 The concerns regarding the ATO being responsible for making its own decisions about compensation are exacerbated by the perception that it is often reluctant to admit error, resulting in a tendency for the assessment of claims to be skewed towards denying compensation claims and safeguarding ATO funds. Concerns have been raised that offers of compensation by the ATO are nominal, often form less than the cost of submitting the claim for compensation and do not restore taxpayers to their original position as intended by the scheme. Stakeholders have also argued that the total compensation payout in a given year would be less than the total losses incurred by a single applicant.
4.58 Some stakeholders have viewed the limited numbers of CDDA claims approved and low quantum of CDDA Scheme payments as an indication that it is ‘just a token scheme’ and in place ‘for the sake of having a compensation scheme’. Submissions to the IGT note that in the 2014-15 financial year, the ATO paid, in full or in part, only 37.5 per cent of the claims processed during the year and of the 201 claims finalised in that year, the median payment was $484.334 On the issue of quantum, a small number of submissions have alleged that the ATO applies an arbitrary cap to the amount of compensation that would be payable where RMG 409 clearly states that no cap is applicable although it does require agencies to have regard to legal practice and principle when determining the quantum of compensation for non-financial loss.335
4.59 It has been identified that the concerns regarding the ATO’s decision-making processes may be better managed through improved communications on CDDA Scheme decisions. Stakeholders have observed that, while not widespread, the ATO’s reasoning on compensation decisions does not always properly address the taxpayer’s application for compensation under the CDDA Scheme. Examples cited by stakeholders include instances where the ATO’s compensation decision letter did not set out the facts applicable to the claim or explain how the CDDA criteria were applied to the facts of that claim. For these reasons, stakeholders have questioned whether CDDA claims are assessed by the ATO and considered on their merits.
4.60 Two ancillary issues have also been raised in this area. First, it has been alleged that, at times, the ATO’s decision-making process may be overly legalistic where the CDDA Scheme is directed more at moral obligations. Secondly, stakeholders have also commented on the ATO’s failure to meet its service standards in respect of some CDDA claims.
CDDA administration and decision-making process
4.61 Applications under the CDDA Scheme are received and managed by the General Counsel section within the ATO.336 General Counsel officers at the APS 5 level and above are authorised to make compensation decisions up to specified monetary levels.337 The ATO has advised the IGT that it is guided in its decision-making by RMG 409 and an internal CDDA Manual that was developed and made available to ATO staff in September 2016. There is a SharePoint site through which ATO staff can access a range of templates, draft deeds, decision-making authorisations and approaches to seeking background information from the relevant business lines.
4.62 The Ombudsman had previously recommended, in his 2009 review, that agencies consolidate all material on handling CDDA claims into a single coherent document.338 Whilst, the ATO had previously indicated that it considered general guidance to be unnecessary given the small size of the team handling CDDA claims,339 its CDDA Manual and materials on the SharePoint website appear to align with the Ombudsman’s recommendation.
4.63 In discussions with ATO General Counsel, the IGT has been advised that the process for receiving and assessing a CDDA claim is as follows:340
- Claims are received and allocated to a case officer in General Counsel who is required to acknowledge receipt of the claim within five days. The ATO relies upon RMG 409 in its assessment of the claim. RMG 409 does not impose a requirement that documentary or incontrovertible evidence be provided as essential to substantiate the claim, however, there must be sufficient evidence or information to enable the officer to form an opinion regarding whether there has been ‘defective administration’ and to substantiate the loss. In doing so, the ATO officer may seek input from the relevant BSL.
- Where defective administration is found to have caused detriment, there is no limit to the amount of compensation to be paid under the CDDA Scheme. The ATO has advised the IGT that this process involves reviewing the entirety of the claim to determine what losses have reasonably been caused by the defective administration. It may involve a mathematical process, discretionary judgment or legal practice and principles depending on the nature of defective administration and the loss. For example, in a finding of an unreasonable delay, the compensable amount will be determined as lost interest, calculated from the point in time when the defective administration occurred. Where the loss relates to professional fees, General Counsel will assess the work undertaken by the claimant’s advisers to determine the extent to which the ‘defective administration’ caused unnecessary cost to be incurred.
- Generally, a decision template is prepared by the relevant officers which records the background and facts of the case, communications with the taxpayer, applicable ATO policies which support the reasoning for the decision, as well as details of the ‘defective administration’ and the losses incurred. The template is approved by an executive level officer within General Counsel and a draft decision letter may be prepared based on the information in the template.
- Where the facts of the claim are straightforward and not contentious, a decision may be made without a draft decision letter being provided to the claimant. Such an approach may be appropriate where it is apparent that there is no new or further information that can be provided by the claimant.
- For complex matters, the ATO has advised that it is common practice to prepare a draft decision and provide the claimant the opportunity to comment on the draft to address any potential gaps in relevant facts or context. Such letters are reviewed and approved by an executive level officer before issuing. This practice is to ensure the claimant is afforded procedural fairness and to identify all relevant considerations or address any potential misunderstandings before the decision is finalised. If additional information has been provided by the claimant in response to the draft position, any new or relevant information is addressed before coming to a final decision on the CDDA claim.
- A letter is issued to the taxpayer setting out the ATO’s decision. Typically, the letter will set out the background of the case, the ATO’s understanding of the claim, general information about the CDDA Scheme, the reasons for the decision and the claimant’s review rights.341
- If a decision is made that compensation should be paid under the CDDA Scheme, this will be approved by an ATO officer at the EL2 classification with managerial responsibility for monetary claims or an executive level officer in General Counsel with CDDA experience. A Deed of Settlement is usually required to be executed between the taxpayer and the ATO for payments of compensation in excess of $2,000.00.342
4.64 The ATO has advised that where there are learnings arising from a CDDA claim, General Counsel may provide feedback to the relevant BSL, notwithstanding that no formal process which mandates this feedback being given. Due to the relatively low number of compensation claims against the ATO under the CDDA Scheme, such feedback occurs in an ad-hoc manner. The executive level officers in General Counsel, through the process of allocating and approving CDDA claims or through more general discussions, are positioned to identify potential trends of CDDA claims for feedback.343 Similarly, these officers are expected to have sufficient visibility of claims made under the CDDA Scheme to identify classes of similar claims and facilitate a streamlined approach to addressing affected claims.
4.65 In respect of the ancillary issue that at times the ATO’s approach could be overly legalistic, the Ombudsman’s 2009 report had noted the risks of such perceptions where decision-making for CDDA rested with the legal areas of the ATO. The Ombudsman emphasised the need to be clear that whilst the analytical skills and experience of legally-trained staff could be drawn upon, a legal perspective should not be only one applied to CDDA decisions.344
Quantum of CDDA payments
4.66 The ATO publishes compensation statistics in its annual report each year. These statistics include the number of claims received and finalised in a given year, the total claims paid in full and in part, the total claims unpaid, the median payment, and the number and type of claims on hand at 30 June of that financial year.345
4.67 The ATO’s CDDA statistics over three financial years between 2012-13 to 2014-15 (inclusive) are set out in Table 7.
|Financial year ended||Median payment||Total claims paid||Total paid
(in full or part)
|30 June 2013||$267||147 (43%)||$363,617||$609,586|
|30 June 2014||$300||79 (43%)||$841,754||$395,696,793|
|30 June 2015||$484||77 (37.5%)||$738,402||$200,730,465|
4.68 The ATO’s statistics show that across the three financial years, the median amount of CDDA payments increased from $267 to $300 to $484. Over the same period, the data indicates the number of claims paid decreased by almost 50 per cent. It is interesting to note that even though the total claims paid decreased between 2012-13 and 2013-14, the number of claims paid as a proportion of total claims remained the same.
4.69 There seems to be a significant increase in total compensation paid between 2012-13 ($363,617) and 2013-14 ($841,754). Whilst there was a decrease between 2013-14 and 2014-15 ($738,402), this figure is still substantially higher than the figure for the 2012-13 financial year.
4.70 The ATO website states that compensation claims will be acknowledged within three business days of receipt and processed within 56 days. However, the website information also acknowledges that some claims may take longer to investigate and consider due to their complexity. In such cases, the ATO states that it will contact the claimant to negotiate an extended reply date. In addition, the ATO states that it aims to contact the claimant within seven business days of receiving a claim if further information is required to make a decision.346
4.71 The ATO publicly reports on its performance against its service standards for processing CDDA claims in its annual reports.347 These are set out in Table 8 below.
|Financial year||Acknowledged within three days (%)||Processed within 56 days (%)||Processed within the negotiated timeframe (%)||Average days taken to finalise a claim|
|30 June 2013||91.3||73.9||61.2||110.7 days|
|30 June 2014||96.0||72.1||67.5||108.5 days|
|30 June 2015||93*||76.4||78.7||77 days|
*acknowledged within five days
4.72 The ATO’s reported statistics show that, in the majority of cases, it meets its service standard for acknowledging CDDA applications with all years reporting more than 90 per cent compliance. It is noted that in the Annual Report 2014-15, the ATO reported that it aimed to acknowledge all CDDA claims within 10 business days. The ATO reported that 97 per cent of claims were acknowledged within 10 business days and 93 per cent within five business days.348 For the 2016-17 financial year onwards, the ATO has revised its service standard for acknowledging CDDA applications to seven business days.349
4.73 The data also shows that the average number of days to respond to finalise a CDDA application has also reduced quite significantly from 110.7 and 108.5 days in 2012-13 and 2013-14 to 77 days in 2014-15. At the same time, the ATO has also improved the percentage of cases which it is able to finalise within the original 56 day service standard or within a renegotiated timeframe.
4.74 Notwithstanding the above improvements, the data still indicates that only approximately three-quarters of cases are finalised within the original service standard and, with the exception of the 2014-15 financial year, a smaller proportion of cases is finalised within renegotiated timeframes.
CDDA administration and decision-making process
4.75 The IGT acknowledges the perceptions of bias and lack of independence which arise in relation to the ATO bearing responsibility for assessing CDDA claims. However, this approach is consistent with the design of the CDDA Scheme whereby each agency is responsible for establishing processes and procedures to consider CDDA claims regarding its own conduct. It is beyond the remit of the IGT’s jurisdiction to make recommendations regarding the design of the CDDA Scheme itself, as that is the responsibility of the Department of Finance. Nevertheless, it is important to explore the concerns, consider the alternatives and explain the reasoning behind the design of the current CDDA scheme.
4.76 Stakeholders have suggested that having an independent agency, such as the IGT, make CDDA determinations at the outset would enhance perceptions of independence of the CDDA Scheme. Determination by an independent body may address the concerns about bias and lack of independence but such a change would be a significant policy shift affecting the provision of services provided by the entire public service. The CDDA Scheme was designed as a purely discretionary measure to allow agencies to make decisions purely on moral grounds taking into account its own actions and the circumstances of the taxpayer. The involvement of an independent body would lack the element of introspection contemplated with the process beginning to transform from one based on moral and ethical grounds to a legalistic one already available through the court systems.
4.77 The IGT considers that, before considering far-reaching measures such as that mentioned above, more appropriate measures could be taken to improve confidence in the ATO’s administration of the CDDA Scheme. For example, and in line with the recommendation made by the Ombudsman in 2009,350 the ATO could provide more public information regarding how CDDA claims are managed and, in particular, the processes in place to maintain independence between General Counsel and other areas of the ATO in respect of the CDDA Scheme. It could also assist to minimise any perceptions that the ATO is adopting an overly legalistic approach by highlighting how the ATO’s processes give effect to the moral basis of the CDDA Scheme.
4.78 In response to the Ombudsman’s recommendation, the ATO had previously indicated that due to the small size of the team, general guidance was unnecessary as training had been provided through team leader emails, model responses, oral feedback and staff mentoring. Whilst the IGT considers that feedback and mentoring are important, the absence of publicly available formal guidance to staff is problematic from a succession planning point of view and it can lead to diminishing public confidence. The IGT believes, therefore, that the ATO should reconsider its stance on developing general information about its CDDA decision making processes and making it publicly available. Reference to such information would be particularly useful in ATO responses to taxpayers to assure them of the robustness of the process.
4.79 In relation to concerns in respect of the appropriateness of the ATO’s responses, the IGT has considered a number of complaint cases on CDDA matters and notes that, in most of them, the ATO’s decision letters largely provide a suitable explanation for the decision reached and at times may be very detailed due to the nature and complexity of the claims themselves. However, the IGT is also aware of some instances where ATO decision letters do not adequately provide reasons for the rejection of claims. A good example observed by the IGT through a complaint related to a CDDA claim from a tax practitioner in respect of Tax Agent Portal downtime which the tax practitioner alleged resulted in losses for his business. Amongst other things, the tax practitioner felt that the ATO had not fully addressed his claim and that the response appeared to be a standard rejection letter for matters arising from Tax Agent Portal failures. In this case, the IGT was of the view that the response letter could have addressed the concerns in more detail and assure the tax practitioner that the impact on him and his business had been adequately considered.
Quantum of CDDA payments
4.80 The IGT notes the concerns regarding low or inadequate levels of compensation payments by the ATO under the scheme and the perceptions that have arisen as a result. In this regard, the IGT compared the ATO with the Department of Human Services (DHS) and the Australian Securities and Investments Commission (ASIC).
4.81 In the 2013-14 financial year, the DHS reported that it made 1,730 payments totalling $5,356,686 under the CDDA Scheme. By way of comparison, during the same period the ATO made 79 payments totalling $841,754. Whilst the statistics published by the DHS indicate that it made more CDDA payments in that financial year resulting in a higher total quantum, the ATO’s average payment per claim exceeds those of the DHS. Based on the above figures, the average amount paid per claim by the DHS was $3,096 whilst the average amount paid by the ATO in the same year was $10,655.
4.82 When compared with ASIC, the IGT notes that the ATO pays out many more claims and a higher total quantum. Between the 2011-12 and 2014-15 financial years (inclusive), ASIC reported two payments under the CDDA Scheme, one in 2012 ($2,590) and one in 2015 ($6,655).351
4.83 The IGT has identified some of these figures as examples only. Given the differences between the functions of government agencies, the degree of interaction with the public and the legislative functions that apply to each, it is not possible to draw any meaningful conclusions as to whether the quantum of compensation paid by the ATO is appropriate when compared to other government agencies.
4.84 Determining the appropriate level of compensation under the CDDA Scheme is not a straight forward matter and perhaps it is inappropriate to make any attempt at doing so. Neither the Ombudsman’s 2009 report nor the information available to the IGT in the current review definitively indicates whether the ATO has made adequate payments. Moreover, whilst costs associated with compliance with government laws and regulation should be kept to a minimum, such costs cannot be eliminated particularly in the self-assessment environment in which our tax system operates. Even where additional costs arise as a result of ATO compliance activities, such as audits, these costs may not be unreasonable or excessive such that compensation would be warranted. In more blatant or egregious cases the evidence would more readily support such a finding however, where the issues are more nuanced, it would be difficult to determine if compensation should be paid and definitively quantify the amount. This may assist to explain why the ATO has paid fewer claims but larger amounts of compensation on average when compared against some other government agencies.
4.85 Ultimately, the IGT considers that the quantity and quantum of claims paid are not the best indicators of effectiveness of the CDDA Scheme. Such measures can give rise to perverse outcomes, or a perception of perverse outcomes, where ATO officers feel compelled to either reject or allow claims to meet arbitrary internal budgetary measures.
4.86 The key is to develop robust systems for the management of the CDDA Scheme which demonstrates its effectiveness through transparency particularly of its decision-making and review processes and level of independence amongst officers whose conduct is the subject of the compensation claim, officers handling the compensation claim and officers who may be requested to conduct a review of the compensation decision (see below regarding reviews of decisions).
4.87 Concerns regarding the service standards applied by the ATO to manage CDDA claims are not new and were previously raised in the Ombudsman’s 2009 review (which resulted in a recommendation being made to address the issue) as well as the Senate review in 2010.352
4.88 As noted earlier, the ATO’s statistics indicate that it finalises approximately 75 per cent of the CDDA claims it receives within the 56-day service standard. The IGT also recognises that the average time taken to finalise a claim has improved from 2012-13 to 2014-15.
4.89 However, the ATO’s statistics show that where the ATO has renegotiated a timeframe, which is likely to occur in cases which have long histories or are otherwise complex, the proportion of cases which are completed within this renegotiated timeframe are generally not as high. The IGT is of the view that where a new timeframe has been negotiated, that timeframe should be respected in all but exceptional cases where a new finalisation date should be agreed with the taxpayer or their representative and the reasons for such further extension be made clear.
4.90 Whilst concerns regarding the time taken to process a CDDA claim are not widespread and did not feature prominently in submissions to this review, they have been previously raised in other contexts. The IGT believes that the ATO should monitor its own performance against the published service standards to consider whether the resources currently available to handling CDDA claims are adequate to meet these service commitments and, if not, what more could be done to improve its administration.
Internal and external review of CDDA decisions
4.91 Stakeholders have raised concerns about the lack of effective internal review options for CDDA decisions. Several stakeholders have observed that whilst internal review of decisions under the CDDA Scheme is available to taxpayers, it is only offered in limited circumstances where taxpayers can provide new information in support of their claim. Due to the discretionary nature of internal reviews and lack of publicly available information, there is a perception that the ATO does not seem to be bound by any guiding principles.
4.92 Similarly, stakeholders have noted that there is no option for CDDA decisions to be externally reviewed. Some have suggested the establishment of an independent review and appeals function within the ATO, such that CDDA decisions can be independently scrutinised. Others have suggested the establishment of a formal external review mechanism, such as through the IGT, that allows the reviewer to change the decision.
4.93 The ATO’s stated policy is to offer an internal review only where new information can be provided in support of a claim:
Internal review of compensation decisions is offered in limited circumstances where claimants can provide new information. There is no statutory or administrative requirement for this. Rather, it is an informal mechanism intended to provide a convenient means of double-checking the merits of original decisions.353
4.94 In practice, when a review request is received by the ATO, the original decision maker may be consulted to determine whether new information has been provided due to their familiarity with the history of the case. If it is determined that the taxpayer has provided new information, the matter will be allocated to a new decision maker for review (usually at the same level or above). Any review is based on the same considerations set out in RMG 409.354
4.95 The ATO does not currently report on internal reviews separately from original CDDA cases. In response to the IGT’s request for statistics of internal reviews of CDDA decisions, the ATO advised that of the 33 CDDA cases it had on hand in April 2016, two were internal review cases.355
4.96 There are limited options for external review of CDDA decisions. As noted above, one avenue of review rests with the Ombudsman and, since 1 May 2015, with the IGT for matters concerning the ATO and the TPB.356 RMG 409 sets out the parameters of the reviews by the Ombudsman or the IGT:
- Entities should be aware that the decisions made under the CDDA Scheme are reviewable by the Commonwealth Ombudsman, either following a complaint from a claimant or as an own-motion investigation.
- An entity must consider any proposal or recommendation made by the Ombudsman but is not bound by it. The Ombudsman has no power to overturn or vary an entity’s decision. Entities should be aware that the Ombudsman may exercise powers to bring the matter to the attention of the accountable authority of the respective entity, the portfolio minister, the Prime Minister and the Parliament.357
4.97 In the CDDA cases which have been considered by the IGT following the transfer of the complaints function on 1 May 2015, the IGT has examined the ATO’s decision making approach and the ultimate responses issued to taxpayers. In doing so, the IGT has specifically considered whether the ATO had taken into account all relevant matters raised by the taxpayer and, to the extent that it had not, requested that the ATO reconsider the matter. Moreover, the IGT has sought to assist taxpayers by providing further details on the parameters and limitations of the CDDA Scheme and provided advice on what further information may need to be presented to the ATO for it to reconsider the matter.
4.98 In addition to approaching the IGT, taxpayers who are dissatisfied with the ATO’s decision may also seek judicial review. As RMG 409 states:
As CDDA Scheme decisions are not made under an enactment or law, decisions are not amenable to judicial review under the Administrative Decisions (Judicial Review) Act 1977. However, they may be subject to judicial review under section 75 of the Constitution or section 39B(1) of the Judiciary Act 1903.358
4.99 Notwithstanding the availability of the judicial avenues for external review, the IGT notes that there have been few instances in which a taxpayer has sought to challenge a CDDA decision (from any Commonwealth agency) pursuant to these provisions.359 As a result, the scope of application of these provisions to the CDDA Scheme remains unclear although it is likely that the scope would be narrow.
4.100 At the outset, the IGT notes that the ATO’s present approach to internal review of CDDA decisions is in accordance with the wide discretion afforded to agencies by RMG 409. However, it gives rise to perceptions of bias and lack of independence which is an inevitable consequence of the involvement of the original decision maker, even if that involvement is minimal.
4.101 To minimise the perceptions of bias and to achieve a degree of finality to the matter, the IGT believes that as a matter of best practice, a more formalised review process is necessary where claimants may request that the original decision be reviewed by a more senior officer not involved in the original decision. Such reviews should not be solely dependent on the provision of new information as there are circumstances in which the taxpayer may raise new grounds or contentions that would warrant an independent reconsideration of the decision. As an alternative, and given the low numbers of internal review requests, the ATO may also wish to consider establishing an internal panel of senior staff to consider the merits of more contentious or complex CDDA decisions.
4.102 In relation to a separate and independent review function within the ATO specifically for CDDA decisions, it should be noted that the IGT and the SCTR have previously recommended that the Government, through legislative change, establish a separate appeals function to review broader ATO decisions.360 However, the Government has indicated that such an approach is not warranted at this stage.361
4.103 As mentioned above, through the complaints handling process, the IGT already reviews the ATO’s CDDA decisions by verifying whether all relevant matters have been considered amongst other things. The IGT cannot request that the ATO change its decision but can ask the ATO to reconsider its position by, for example, taking any additional factors into account.
4.104 It should be noted that, with respect to matters that are at the discretion of the Commissioner, the courts can do no more than direct him to reconsider his position by taking into account relevant matters, that may have not have been considered appropriately. This is consistent with the IGT powers, albeit that the court can direct the Commissioner whereas the IGT can only make a request. Having said that, the IGT request is persuasive and, to date, no such request has been refused outright.
4.105 In relation to additional external review mechanism, the IGT believes that existing avenues for judicial review under section 75 of the Constitution and section 39B of the Judiciary Act should be considered and the scope of their application to the CDDA Scheme clarified.
4.106 The IGT understands that as part of an upcoming review of RMG 409, the Department of Finance will consult with Commonwealth agencies on potential improvements which may be made. It is likely that the scope and application of the abovementioned sections 75 and 39B would also be re-examined. The IGT believes that such a consultation process would be a valuable opportunity for the ATO to engage with the Department of Finance, and other relevant Commonwealth stakeholders, to consider how best to test and clarify these matters to obtain greater judicial certainty.
Compensation for legal liability
4.107 In submissions to the IGT, concerns were raised in relation to the very high threshold and limited prospects of success for taxpayers seeking to bring compensation claims against the Commissioner under legal liability. In particular, it was noted that the threshold for establishing negligence by an ATO officer and misfeasance in public office should be lowered as it was presently unreachable for taxpayers.
4.108 Stakeholders have also noted that the costs involved in pursuing legal claims for compensation against the Commissioner are a deterrent for many taxpayers. They argue that there needs to be non-court processes for small claims as the costs associated with court-based processes would exceed any amount received. By way of example, it was noted that the cost of commencing litigation in the Magistrates Court in Queensland for a two day trial would cost between $70,000 and $80,000.
4.109 Submissions have also noted the lack of guidance on how a claim for compensation for legal liability will be assessed by the ATO and the circumstances in which compensation might be paid.
4.110 The research undertaken by UNSW as well as other academics has been clear that there are only limited options for taxpayers seeking compensation from the Commissioner on the basis of legal liability. Claims against the Commissioner for tortious liability under negligence, breach of statutory duty or misfeasance in public office are likely to fail.362 The research also identified a possibility of taxpayers successfully mounting a claim against the Commissioner for personal injury or property damage caused by ATO employees. However, even in the unlikely event the taxpayer could demonstrate that the injury or damage was caused by the ATO officer, they would also need to show that the ATO officer acted within the course and scope of their employment with the ATO before the Commissioner becomes liable.363
4.111 All claims in relation to legal liability must be dealt with in accordance with the LSD 2005.364 The LSD 2005 requires that claims against the Commonwealth are to be handled in accordance with legal principle and practice and there must be, as a minimum, a meaningful prospect of liability being established before a matter can be considered. Under the LSD 2005, the ATO cannot settle claims simply because it is cheaper to settle than to defend a claim.
4.112 The ATO has advised that the majority of claims received for compensation under legal liability relate to internal employment issues.365 The ATO has advised that whilst it receives a number of claims based on legal liability outside of internal employment disputes, many of these claims do not in fact have a basis in legal liability and therefore need to be assessed in other ways. Where the converse occurs, for example a CDDA claim is lodged with legal liability elements, the ATO officer will discuss this with the claimant.
4.113 As noted earlier, there have been few attempts to pursue compensation from the Commissioner on the grounds of legal liability.366 In cases where allegations of negligence or breach of statutory duty have been judicially considered, no taxpayer has succeeded in recovering compensation from the Commissioner. In particular, judicial comments in cases such as Harris v Deputy Commissioner of Taxation367 and Lucas v O’Reilly368 indicate the limited prospect of success.
4.114 The evidentiary burden for proving legal liability is high as the above cases have demonstrated and as the research from the UNSW has borne out. A taxpayer seeking compensation or damages for the actions of the ATO faces significant hurdles in convincing a court that some form of redress is warranted. Whilst the IGT acknowledges the difficulties associated with this avenue, reducing the standards of proof or the thresholds to make out these actions are a matter for the courts and not within the IGT’s remit.
4.115 Whilst an alternative may be for the Government to legislate a specific cause of action, such as those rights under the Privacy Act 1988 (Privacy Act), the IGT considers that such a course of action would require significant evidence and support as it entails complex legal consideration. The evidence received by the IGT in this review does not presently demonstrate a need for the Government to consider such drastic action. Indeed, as discussed above, introducing new causes of action is unlikely to address current issues facing taxpayers with limited resources to pursue redress of this kind through the court system. It may also unnecessarily create further confusion and costs for both taxpayers and the ATO. The IGT considers that the improvements recommended in Chapter 3 are key to practical improvement in this area.
4.116 In submissions to the IGT, some stakeholders have noted that often taxpayers’ grievances with the ATO relate to how they have been treated by ATO officers rather than about a specific dispute. In many instances, all taxpayers are seeking from the ATO is an apology.
4.117 However, stakeholders have expressed the view that an apology from the ATO can be very difficult to obtain, or when received is not directed at the issues which have caused the taxpayer distress, as it can be seen as an admission of fault giving rise to liability.
4.118 The ATO recognises the role an apology has in helping to restore its relationship with taxpayers. On whether to provide an apology, the ATO’s policy for staff is that:
We should fix our mistakes as quickly as possible and apologise to the client. An apology can go a long way towards fostering or repairing our relationship with the taxpayer. An apology is not an admission of liability or an agreement to pay compensation.369
4.1119 Moreover, the ATO’s policy is that if a Charter commitment has not been met, an apology must be provided.370 The above instructions are reiterated through a number of resources on the ATO’s internal SharePoint in relation to complaints management.371
4.120 The benefits of an apology have previously been examined by the NSW Ombudsman,372 which identified that a prompt and sincere apology will often avoid the escalation of a dispute and the significant time, cost and resources that are often involved, as well as help to build trust and restore a damaged relationship.373
4.121 The IGT notes that in its 2013-14 report Management of Complaints and Other Feedback, the ANAO had identified areas in which the ATO could further improve. One such area was in relation to providing apologies to complainants where the ATO is at fault or where one would help to improve the taxpayers’ experience.374
4.122 Whilst the IGT acknowledges that the ATO has issued high level instructions to its staff regarding the issue of apologies, complaints received by the IGT suggest that in some cases, there can be barriers to obtaining an apology from the ATO. In one such complaint, whilst the ATO Complaints Unit had apologised, the taxpayer expressed concern that the apology did not adequately address the ATO officers’ conduct during the audit process. Furthermore, the apology was not provided by the auditors or BSL in which his complaint originated as they believed the actions taken were correct. The taxpayer has since sought a more fulsome apology from the ATO.
4.123 The IGT considers it critical that ATO officers are able to determine when an apology would be appropriate and how to provide that apology effectively. Importantly, ATO officers need to recognise that whilst they may have adhered to existing processes, such adherence may have given rise to unintended consequences, adversely impacting the taxpayer and that an apology is the appropriate course of action. The distinction between apologising for the action and apologising for the impact does not appear to be well understood. As the NSW Ombudsman has observed:
Even if a full apology may not be justified or warranted, a sincere expression of sympathy, sorrow or regret for the suffering of others may still be the right thing to do.375
4.124 The IGT believes that discrepancies between the high level instructions issued by the ATO and the conduct of staff in practice may be addressed by more comprehensive training and support.
The IGT recommends that the ATO:
- improve the currency of its website to provide more up-to-date public information about its administration of the CDDA Scheme, including its decision-making and review procedures to enhance public confidence;
- ensure that internal review for CDDA decisions is available where taxpayers are able to provide new information or grounds which warrant the decision being reconsidered by a new and independent decision maker; and
- ensure that staff are supported in providing an apology, where appropriate, and how to do so effectively.
- Agree in principle. The ATO acknowledges the importance of having an up-to-date and current website. We will continue to monitor the information and update as required. The ATO notes that updates have been made since the start of the review.
- Agree in principle. We note this is our current process and we will update our website to reflect this.
- Agree in principle. The ATO has existing procedures to guide staff when offering an apology.
As we move forward with our cultural changes and reinvention journey, we will improve guidance and training to further support staff on how to effectively provide an apology.
292 Resource Management Guide 409 Scheme for Compensation for Detriment caused by Defective Administration (RMG 409), para ; Department of Finance and Deregulation, Submission to the Administrative Review Council, Judicial Review in Australia (July 2011).
293 RMG 409, para .
294 Ibid, paras -.
295 Ibid, para .
296 Ibid, paras -.
297 Ibid, para .
298 Administrative Review Council, Federal Judicial Review in Australia (September 2012).
299 Submission by the Department of Finance and Deregulation to the Administrative Review Council’s inquiry into judicial review in Australia (July 2011).
300 Ibid, p 9.
301 Above n 298, p 88.
302 The Senate, Legal and Constitutional Affairs References Committee, Review of Government Compensation Payments, December 2010.
303 Ibid, pp 49-51.
304 Ibid, p 53.
305 Above n 293, p 2.
306 Above n 302.
307 IGT, Review into the ATO’s Change Program (December 2010).
308 Ibid, p 107.
309 Ibid, pp 109-110.
310 Ibid, pp 109-110.
311 Commonwealth Ombudsman, Putting things right: compensating for defective administration (August 2009).
312 Ibid, p 32.
313 Ibid, p 32.
314 Ibid, pp 32-35.
315 Commonwealth Ombudsman, To compensate or not to compensate? (September 1999) p 12.
316 ANAO, Compensation Payments and Debt Relief in Special Circumstances (2003-04) p 56.
318 Ibid, p 17.
319 Ibid, pp 19-21.
320 Ibid, pp 79-80.
321 Above n 311, p 34.
322 Above n 26.
323 Above n 293, para .
324 Ibid, para .
327 ATO, Taxpayers’ Charter – What you need to know, p 11.
328 Department of Finance and Deregulation, Finance Circular 2009/09 Discretionary Compensation and Waiver of Debt Mechanisms [Archived] <http://www.finance.gov.au/archive/archive-of-publications/finance-circulars>.
329 Federal Commissioner of Taxation v Futuris Corporation Limited  HCA 32.
333 Above n 293, para .
334 Commissioner of Taxation, Annual Report 2014-15 (2015) p 114.
335 Above n 293, para 55.
337 Assistant Treasurer, ‘ATO Business: Authorisations for the Scheme for Compensation for Detriment Caused by Defective Administration (the CDDA Scheme)’ (3 August 2012).
338 Above n 311, p 15.
339 ATO, Progress report on implementation of Ombudsman’s CDDA recommendations (internal ATO document).
340 IGT meeting with the ATO, 24 May 2016.
341 ATO, ‘Decision letter template’ (Internal ATO document).
342 ATO, ‘Short form CDDA Decision Letter Deed’ (Internal ATO document).
343 Above n 340.
344 Above n 311, p 25.
345 Above n 334.
346 Above n 332.
347 Commissioner of Taxation, Annual Report 2012-13 (2013) p 112; Commissioner of Taxation, Annual Report 2013-14 (2014) p 123; Commissioner of Taxation, Annual Report 2014-15 (2015) p 113.
348 Commissioner of Taxation, Annual Report 2014-15 (2015) p 113.
349 Above n 332.
350 Above n 311, p 34.
351 Australian Securities and Investments Commission (ASIC), Annual Report 2014-15 (2015), p 169; ASIC, Annual Report 2012-13 (2013), p 138.
352 Above n 311; The Senate, Legal and Constitutional Affairs Committee, Review of Government Compensation Payments (December 2010) p 52.
353 Above n 332.
354 ATO communication to the IGT, 11 April 2016.
355 ATO communication to the IGT, 20 April 2016.
356 Above n 293, paras -.
358 Above n 293, para .
359 In Croker v Minister for the Department of Finance and Deregulation  FCA 429, the Federal Court of Australia considered an application brought under section 39B of the Judiciary Act 1903 which sought an order to compel the Department of Finance and Deregulation to make a decision to pay compensation under the CDDA Scheme or an act of grace payment or an ex gratia payment. The case therefore did not consider the parameters of section 39B of Judiciary Act 1903 as an external review channel for CDDA decisions.
360 Above n 44, p 120; Above n 11, p 94.
361 Australian Government, Australian Government Response to the House of Representatives Standing Committee on Tax and Revenue Report: Tax Disputes (2015) p 5.
362 Above n 50, p 99. See also: John Bevacqua, Taxpayer rights to compensation for tax office mistakes, CCH and ATTA Doctoral series No3, CCH Australia Ltd.
363 Above n 50, p 99.
364 Legal Services Directions 2005, Appendix C – Handling monetary claims.
365 IGT meeting with ATO General Counsel, 24 May 2016.
366 John Bevacqua, ‘Australian business taxpayer rights to compensation for loss caused by tax official wrongs – a call for legislative clarification’ (2012) 10(2) eJournal of Tax Research 229.
367 Harris v Deputy Commissioner of Taxation (2001) 47 ATR 408.
368 Lucas v O’Reilly (1979) 36 FLR 102.
369 ATO, ‘Respecting Clients’ Rights or Review – Questions and Answers’ (Internal ATO document, 23 May 2016).
370 ATO, Managing Complaints and Compliments Policy, CEI 2014/06/02 (Internal ATO document, 31 March 2016), p 3.
371 See for example: ATO, ‘Writing for Complaints’ (SharePoint); ATO, ‘Reference Guide – Complaint Owner BSL managed’ (SharePoint); ATO.
372 NSW Ombudsman, Apologies – A practical guide – 2nd Edition (March 2009).
373 Ibid, p 5.
374 ANAO, Management of Complaints and Other Feedback – Australian Taxation Office (2014) p 74.
375 Above n 372, p ii.