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Register of Potential Investigation Topics

This Register identifies potential topics for IGTO review investigation as identified and suggested by various stakeholders, our taxation dispute investigation service and other sources. The Register is current as at June 2023 and will be updated periodically as required. Additions to the Register will be notified via our Newsletter – IGoT News.

The IGTO welcomes comments, feedback and suggestions from interested parties, including tax professionals and members of the public, on these and other potential topics for IGTO review investigation.

Background

The IGTO conducts investigations into tax administration systems and laws with the objective of improving the administration of the tax system for the benefit of all taxpayers, tax practitioners and other entities. Areas for review are selected based on available resources, other priorities (including dispute investigation priorities), the feedback and concerns raised by the community and opportunities to improve the tax administration system for the benefit of the community.

Potential review topics for investigation are identified from our engagement with stakeholders, themes raised in dispute investigations and representations made to the IGTO’s office, as well as other sources.

Reviews selected from these potential topics are commenced following consultation with stakeholders which may include tax professionals and their representative bodies and government bodies such as the Australian National Audit Office, Commonwealth Ombudsman, Australian Taxation Office (ATO) and Tax Practitioners Board (TPB). We also engage with Parliamentary committees and relevant Ministers (especially the Treasurer, Assistant Treasurer and Minister for Superannuation and Financial Services) as appropriate.

Please note that the Register does not reflect a formal or proposed work program – given the resource requirements that would be needed to investigate the complete list. However, in the interests of transparency and consistent with the Recommendations made by the House of Representatives Standing Committee on Tax and Revenue [see External Scrutiny of the Australian Taxation Office (April 2016)], we want to let the community know what issues have been raised with us or identified by us and therefore are potential topics for future IGTO reviews.

Please let us know if you have any other suggestions or comments on the Register, including the topics as listed or any issues that you may wish to raise with us in seeking to improve the administration of the taxation system. All feedback and comments will remain confidential but may assist the IGTO in selecting priority areas for review.

Email [email protected]

Our review work aims to improve the administration of the taxation system to assure and ensure tax administration aligns with community expectations. Our understanding of the community’s expectations with respect to the features of good tax administration is outlined on our website – click here.

Register of Topics Identified in 2023

Area of tax administration suggested for IGTO investigation The effectiveness of the ATO’s Proof of Record Ownership (PORO) and Extensive PORO processes in safeguarding Taxpayer records
Tax administration features to be improved Certainty and Consistency
Accountability
Pro-actively
Source of suggestion Stakeholders; Complaint Investigations
Description The ATO procedures require its officers to establish proof of identity when registering a client and PORO when interacting with a client.  

The Commissioner’s Chief Executive Instruction to all staff and contractors titled ‘Identity management CEI’ explains that these practices are undertaken ‘to ensure the integrity of [ATO’s] registers, to reduce the risk of unauthorised access to confidential information and to help protect clients from identity theft’.  

In the current environment where many Australians have had their personal information compromised or potentially compromised as a result of various data breaches and scams, questions have been raised as to whether the ATO’s existing PORO and Extensive PORO processes are sufficiently effective to prevent unauthorised access to taxpayers’ confidential information using information that has already been compromised. 

IGTO comments Elements of this topic overlap with those identified in Topic 2023-5 and they may be combined in any future review investigations. 

Any investigations into this area will likely consider the work currently being undertaken in relation to digital identity that is being led by the Department of Finance as well as the ATO’s current work to strengthen its authentication and PORO strategies.  

 

Area of tax administration suggested for IGTO investigation ATO’s use of paper forms in its administration of the tax system
Tax administration features to be improved Simplicity to minimise costs
Clear and effective communication
Source of suggestion Stakeholders; Other (Objections Review)
Description In 2015, the ATO commenced a ‘Digital by Default’ initiative that used the ATO digital services to send and receive information from taxpayers. Since then, many forms used by the ATO have been made available to taxpayers in an online format, which has allowed the ATO to capture information essential for tax administration more efficiently and minimised compliance costs for taxpayers.  

However, there are still a significant number of ATO forms which cannot be lodged online. These forms must be manually completed by the taxpayer and sent to the ATO via post or fax. Examples include:   

  • An unrepresented individual who is seeking to lodge an objection;   
  • An unrepresented individual who is seeking to lodge a private ruling request but does not have an Australian Business Number (ABN); and  
  • Providing identity documents to apply for a Tax File Number or ABN where the applicant is outside of Australia
IGTO comments An IGTO review investigation may seek to understand the extent of which the ATO’s interactions are currently ‘digital by default’, the FTE cost to the ATO associated with the manual processing of paper forms, as well as the client experience where providing information through an online channel is not available.   

For the avoidance of doubt, providing a digital channel to submit information is not limited to the use of digital forms or webforms. The submission of a scanned paper form via a portal or email would also be considered as a form of online submission.  

This investigation may also consider matters identified in Topic 2022-1 in relation to Accessibility of ATO services.

 

Area of tax administration suggested for IGTO investigation ATO pre-filling of income tax returns
Tax administration features to be improved Certainty and Consistency
Correctly
Accountability
Source of suggestion Complaint Investigations
Description Through the IGTO dispute investigation service, the IGTO has received concerns about the accuracy of the ATO pre-fill data on income tax returns. 

As an example, a complainant identified that the income amount pre-filled on her tax return was incorrect due to her employer having reported her income twice, under different business entities. The complainant was concerned that the ATO did not check or validate the payroll data it had received from her employer before pre-filling her tax return, and this pre-filling error had happened to her before.

IGTO comments This topic relates to Topic 2020-2: ATO pre-filling of income tax returns. 

Area of tax administration suggested for IGTO investigation The ATO’s approach to Director Penalty Notices (DPNs) 
Tax administration features to be improved Fairly
Certainty and Consistency
Clear and effective communication
Accountability
Source of suggestion Complaint Investigations
Description In early 2022, the ATO sought to encourage taxpayers to re-engage with the ATO about their outstanding debts and escalated its firmer debt collection activities post the Covid-19 pandemic. This included the use of DPN awareness campaigns and public messaging (for example, ATO prioritising support and assistance for debt collection efforts | Australian Taxation Office) to inform taxpayers that stronger actions, such as issuing DPNs, may be taken if they do not engage with the ATO. Over 50,000 warning letters were sent to taxpayers as part of the ATO’s DPN awareness campaign and almost 18,500 DPNs were issued in 2022 (ATO figures reveal final 2022 DPN tally | Accountants Daily).

Complaints lodged with the IGTO have raised concerns about the issuing of DPNs despite taxpayers engaging with the ATO and attempting to address the debt. Subsequent IGTO investigations have uncovered potential issues with how the ATO considers the individual taxpayers’ circumstances when deciding to issue a DPN, as well as concerns with the level of procedural fairness afforded to taxpayers during the ATO’s DPN awareness campaign process.  

Where the taxpayer is no longer a director of the company that the DPN debt relates to, there are also difficulties in accessing details of the underlying debt and disputing the debt amount, due to the disclosure provisions provided in the legislation. This has been a source of multiple IGTO complaints, which have found the ATO’s approach to disclosing such information to former directors to be inconsistent and may lead to further complaints as the frequency of DPNs continues to increase.   

There may also be a lack of transparency with the ATO not disclosing the total amount of potential DPN debt when it issues its DPN warning letters. The ATO does not warn taxpayers of what debts may be subject to lockdown DPNs and what debts may be subject to standard DPNs prior to issuing a DPN, which can be critical information when taxpayers are considering insolvency actions such as appointing a voluntary administrator or liquidator.

IGTO comments N/A

Area of tax administration suggested for IGTO investigation ATO protection of taxpayer accounts from identity fraud and administrative actions in response to potential fraud
Tax administration features to be improved Respectfully, Professionally and Collaboratively
Fairly
Simplicity to minimise costs
Clear and effective communication
Correctly
Accountability
Pro-actively
Source of suggestion Complaint Investigations
Description The IGTO has received a number of complaints concerning the ATO’s processes and actions to protect taxpayer accounts from identity fraud and respond to potential fraud. 

Taxpayers’ concerns raised with the IGTO included: 

  • insufficient ATO action taken to protect accounts from identity fraud – for example, taxpayers inform the ATO about potential fraudulent tax returns, but the ATO is too slow to apply protections or the protections are insufficient. 
  • protections applied to compromised accounts are too harsh and long lasting, which in many cases are disproportionate with the original compromise situation. For example, a taxpayer has had protections applied to their account for many years due to one potential compromise activity from years ago. The ATO internal procedures/policies do not appear to have a way to ramp down protections applied to compromised accounts. The taxpayer is concerned that these protections severely inhibit their interactions with the ATO (such as the need to call the ATO for a 24-48 hour window to access electronic lodgement of tax returns) for an indefinite period of time.
IGTO comments There have been several high-profile data breaches in prominent organisations in Australia recently. There is also general consensus that identity fraud is on the rise in modern society. It is important that the ATO has robust system and procedures to safeguard taxpayers’ information and protect against identity fraud.

This topic aligns with Topic 2023-1 and they may be combined in any future review investigations. 

Any investigations into this area will likely consider the work currently being undertaken in relation to digital identity that is being led by the Department of Finance as well as the ATO’s current work to strengthen its authentication and PORO strategies.  

Register of Topics Identified in 2022

Area of tax administration suggested for IGTO investigation Accessibility of ATO services
Tax administration features to be improved Pro-actively
Respectfully, professionally and collaboratively
Source of suggestion Complaint Investigations
Description In line with whole of government initiatives, the ATO is encouraging taxpayers to communicate and comply with their taxation obligations through digital channels and has designed their systems to ‘push’ taxpayers through these pathways to access services. Whilst there is acknowledgement that these developments may bring increased efficiency in service delivery, it is also recognised that they may not be suitable for all taxpayers, especially those that are elderly, in vulnerable circumstances or those living in remote areas with limited internet access.

The ATO’s push to digital channels may make it more difficult for some taxpayers to communicate and engage with the ATO on taxation matters leading to increased costs, delays, disengagement and potential non-compliance.

An example provided to the IGTO for consideration is where the ATO defaults the issuing of Business Activity Statements (BAS) electronically as soon as a taxpayer lodges their BAS online. This is so despite the taxpayer’s previous request for BAS to be issued by paper. The ATO will only maintain the taxpayer’s preference if their delivery preference is paper and they continue only to lodge their BAS by paper. Any subsequent electronic lodgement or electronic amendment will result in the preference automatically changing to electronic. This can create issues where the taxpayer needs to engage the services of a registered tax practitioner. who generally undertakes lodgements electronically, but otherwise wishes to retain their preferred method of communication.

While the ATO may want to encourage taxpayers to engage through electronic means, the ATO should also ensure that their services are readily accessible to all taxpayers.

IGTO comments Any IGTO review in this area would necessarily involve considering broader government initiatives, including those related to myGov. The IGTO would engage the insights and expertise of those managing these matters within the ATO as well as those in the broader community working to support the elderly, people with disabilities and those living in remote areas in Australia.

 

Area of tax administration suggested for IGTO investigation ATO communication of decisions made 
Tax administration features to be improved Accountability
Certainty and consistency of taxation outcomes
Source of suggestion Complaint Investigations
Description The ATO issues thousands of decisions every day, ranging from basic and routine administrative decisions to outcomes in complex compliance or advice matters.  

Concern has been raised that a number of ATO decisions are template driven and not tailored to taxpayers’ circumstances. At times, ATO officers have copied and pasted content without referencing the documents that they have considered in arriving at the decision and/or explaining how the law applies to the taxpayers’ facts. These types of decisions may not include sufficient detail in relation to the relevant legislation, policies, evidence considered and how these have been applied to the taxpayer’s circumstances to allow them to understand the ATO’s decision. 

Early release of superannuation decisions were cited as an example of where decision letters utilised generic dot points to explain why applications were not approved. There is often little or no accompanying explanation of what supporting documents were specifically missing or the reasons why the taxpayer is ineligible. There is often no telephone contact made by the ATO officer to the affected taxpayer before the decision is issued. Rather, the onus is laid upon the taxpayer to contact the ATO to seek further information or details. 

The current processes suggest opportunities to improve the ATO’s communication of decisions to taxpayers. As noted in the ATO’s Good decision-making model, even if a decision has been well considered and is technically sound, it is wasted if not communicated well.

IGTO comments This review follows observations made in the IGTO’s Review Investigation into ATO Communications of Taxpayers’ Rights to Complain, Review and Dispute an ATO decision.

Area of tax administration suggested for IGTO investigation The ATO’s administration of private binding rulings
Tax administration features to be improved Certainty and Consistency of taxation outcomes
Pro-actively
Correctly
Source of suggestion Stakeholders; Complaint Investigations
Description Rulings are a significant element of Australia’s taxation system and provides certainty through the provision of interpretative advice that is legally binding upon the Commissioner. 

Private binding rulings may be issued upon application by a taxpayer and applies to the taxpayer and transaction that are subject of the ruling. Where the taxpayers acts in good faith in reliance upon the ruling, they are protected from payment of any underpaid tax, penalties or interest even if the advice in the ruling is ultimately shown to be incorrect.  

Concerns have been raised with the IGTO about delays in the issuing of PBRs, refusals to rule on certain areas of tax law and ATO officers using information requests to extend timeframes for the issuing of private rulings.

IGTO comments The IGTO had previously examined the ATO’s administration of both public and private rulings, although these were undertaken in 2009 and 2010 respectively. The Australian National Audit Office and the Joint Committee of Public Accounts and Audit have also previously examined the ATO’s approach to rulings in the 2000s.  

Given the length of time that has elapsed since these earlier reviews, it may be worthwhile re-examining this area of tax administration. 

Area of tax administration suggested for IGTO investigation The ATO’s management of significant and strategic litigation 
Tax administration features to be improved Certainty and Consistency of taxation outcomes
Pro-actively
Correctly
Source of suggestion Stakeholders
Description The effective conduct of litigation is important both for compliance enforcement as well as to clarify the law and provide certainty to taxpayers. Litigation cases dealing with high profile taxpayers or high value disputes and those dealing with novel areas of law are managed internally by the ATO as significant or strategic litigation, in recognition of the broader impacts that the outcomes may have on the administration of the tax system 

Concern has been raised with the IGTO by stakeholders about the efficiency and effectiveness with which the ATO identifies and manages such litigation, including any post-outcome processes where policies, processes or legislation may need to be amended in light of judicial rulings. 

It has been suggested to the IGTO that ensuring the program of strategic and significant litigation is well resourced and efficiently managed would yield broad benefits for the taxpaying community through increased certainty on the application of tax laws, particularly new tax laws.

IGTO comments This investigation may also consider matters identified in Topic 2020-26 in relation to the ATO’s test case litigation funding program. 

Register of Topics Identified in 2021

Area of tax administration suggested for IGTO investigation Communication on non-pursuit of tax debts in bankruptcy
Tax administration features to be improved Provides certainty and consistency of taxation outcomes
Source of suggestion Complaint Investigations
Description During bankruptcy, the ATO labels debts falling within the bankruptcy as ‘irrecoverable at law’. However, the ATO is empowered to re-raise those debts prior to the bankrupt being discharged.

The IGTO has identified that the labelling of the debt as ‘irrecoverable at law’ without accompanying correspondence warning the taxpayer of the possibility of it being re-raised has given rise to confusion and complaint.

IGTO comments This topic is related to Topic 2020-23 – ATO re-raised debts.

As part of our complaint investigation, the IGTO has identified a Business Improvement Opportunity (BIO) for the ATO to improve its communication in relation to bankrupt tax debts.However, the ATO has not agreed to the proposed Business Improvement.

Investigation of this topic may involve broader consultation with the Australian Financial Security Authority (AFSA) which has general oversight of the Bankruptcy Act 1966.

Area of tax administration suggested for IGTO investigation Administration of unclaimed superannuation money
Tax administration features to be improved Easy to use, aim for simplicity and to minimise costs
Ensuring tax paid and collected is correct
Source of suggestion Complaint Investigations
Description Since 1 July 2019, the law has required that superannuation providers pay to the ATO the balances of low, inactive superannuation accounts. The ATO is responsible for administering these unclaimed superannuation monies, including through identifying and proactively reuniting the monies to their rightful owners.

The IGTO complaint handling service has received complaints about unclaimed superannuation monies both prior to, and since, 1 July 2019. These complaints have touched on issues including delays in accessing the unclaimed superannuation, it being paid to incorrect persons or accounts, or difficulties of access for claimants who have relocated overseas.

Area of tax administration suggested for IGTO investigation Administration of COVID-19 Economic Response Measures
Tax administration features to be improved Fairly
Certainty and consistency of taxation outcomes
Easy to use, aim for simplicity and to minimise costs
Ensure tax is paid and collected correctly
Source of suggestion Stakeholders; Complaint Investigations
Description The COVID-19 pandemic impacted the Australian (and global) community in unprecedent ways. In response, the Government enacted a number of Economic Response Measures (ERMs) to support the community throughout this period.

The ATO was tasked with implementing systems to administer a number of these Jobkeeper, Cash Flow Boost and Early Release of Superannuation, within a very short timeframe.

As with all large-scale implementations, a number of issues emerged through complaints lodged with the IGTO including concerns about eligibility decisions, timeliness, difficulties engaging with the ATO and taxpayers falling through the cracks.

The IGTO has undertaken investigations on certain issues – such as Jobkeeper and Cash Flow Boost eligibility – but there remain others that may need examination to identify learnings that could be adopted to prepare for possible future implementations of this kind.

IGTO comments The IGTO has published a report detailing the outcomes of the investigation into a number of Jobkeeper and Cash Flow Boost complaints, focusing on the ATO’s determination of their eligibility to access those support measures.

The Auditor-General has also announced a number of performance audits focusing on different aspects of the implementation of COVID-19 support measures.

Any investigation by the IGTO will take into account the work that has been, or will be, done by the Auditor-General to minimise costs and duplication.

Area of tax administration suggested for IGTO investigation Maintaining the integrity of registered tax practitioner client lists
Tax administration features to be improved Providing accountability
Source of suggestion Stakeholders; Complaint Investigations
Description Registered Tax Agents and Registered Business Activity Statement (BAS) Agents play a critical in Australia’s tax and superannuation systems, representing over 75% of individual and 90% of business taxpayers.

The management of agent client lists is essential for the efficient management of both an agent’s business as well as their ability to service clients and ensure their compliance with taxation obligations. Registered agents are able to add, remove and update client details through the ATO’s Online Services for Agents.

Through our complaints handling service, we have received concerns about some agents inappropriately adding clients without authorisation, resulting in uncertainty of payment of refunds, access to taxpayer records and disputes.

Stakeholders have also raised concerns that the ATO automatically removes a deceased person from the tax agent tax listing (which locks down any further action on behalf of the deceased).

Stakeholders have also raised concerns about the ATO’s failure to notify agents of any changes they make to a tax agent’s listing – i.e. taxpayers that have been deleted.

Concerns have also been raised about correspondence that is sent to the taxpayer’s myGov account, but which includes the tax agents address and contact details – so the taxpayer/client mistakenly thinks the agent has received the correspondence (and has actioned it).  This can become a source of tension between the client and their agent when the client assumes/expects the agent will have actioned the item of correspondence, when in fact the agent may not have been aware of it at all.

IGTO comments Any investigation undertaken by the IGTO in this regard would seek to balance the need for registered agents to have quick and easy access to manage their client lists while preventing inappropriate agent conduct.

Consultation with leading professional bodies as well as the Tax Practitioners Board will be necessary in the conduct of any investigation in this area.

Area of tax administration suggested for IGTO investigation ATO policies and processes for dealing with taxpayers with disabilities
Tax administration features to be improved Respectfully, professionally and collaboratively
Easy to use, aim for simplicity and to minimise costs
Source of suggestion Stakeholders; Complaint Investigations
Description Concern has been raised with the IGTO, by stakeholders and through complaints cases, that ATO frontline officers may not possess sufficient skills and empathy when dealing with taxpayers with disabilities.

Examples have been given where officers have requested taxpayers with vision impairment to read and provide details from ATO-issued documents for proof of record ownership processes, or where taxpayers with hearing and speech impediments are requested to call in order to obtain necessary documents.

Investigations in this area would seek to ensure that ATO policies and processes for dealing with taxpayers with disabilities is empathetic, efficient and effective.

IGTO comments The IGTO notes that any investigations in this area will necessarily require engagement with other key stakeholders supporting Australians with disabilities including the Disability Discrimination Commissioner at a Federal level, as well as State and Territory counterparts and the range of charitable and support organisations working in this area.

Area of tax administration suggested for IGTO investigation ATO debt recovery actions for unpaid superannuation
Tax administration features to be improved Managed Proactively and responsively, Provides Accountability, Transparency and Governance
Source of suggestion Complaint Investigations
Description The ATO has responsibility to audit employers’ compliance with SG obligations and may do so when an employee notifies the ATO that their employer may not have complied with SG obligations. The tax laws do not allow employees to recover SG liabilities directly, only the ATO is empowered to do so.

In some complaint cases, the IGTO has observed that the ATO has informed employees that the ATO has confirmed they have unpaid superannuation entitlements, but were not actively progressing debt recovery actions. In many cases, the IGTO’s investigation into the ATO’s actions prompted the ATO to take further debt recovery action such as issuing a Director Penalty Notice (DPN) to the employer.

Complainants have also raised concern that the ATO’s debt collection area is not driven to collect the debts due to the fact that the money is collected on behalf of employees and not on behalf of the ATO.

A potential review could examine how the ATO determines when to take further debt recovery action against an employer for its outstanding superannuation obligations.

IGTO comments This topic is related to Topic 2020-15 –ATO Superannuation Guarantee (SG) audits.

The Taxation Administration Act 1953 was amended in 2019 to expand the ATO’s ability to disclose information to an employee regarding a real or suspected failure by their current or former employer to comply with their SG obligations. The new legislation assists the ATO to provide employees with information about further debt recovery action it has taken against the employer, including if it has issued a garnishee order or DPN to collect the unpaid superannuation.

Area of tax administration suggested for IGTO investigation The role and functions of the ATO’s Tax Counsel Network
Tax administration features to be improved Provides certainty & consistency of taxation outcomes
Providing accountability
Source of suggestion Stakeholders; Complaint Investigations
Description The Tax Counsel Network (TCN) provides high level technical tax advice to other business areas of the ATO dealing with high-risk technical issues. The ATO’s Practice Statement PSLA 2012/1 instructs officers to engage the TCN when dealing with general anti-avoidance issues, strategic litigation, development of certain public rulings and cases where taxpayers maintain that ATO views of the law should be applied prospectively only.

The TCN’s role in providing this level of technical advice is necessary to ensure that all taxpayers are provided with certainty and consistency of tax outcomes, particularly in complex matters.

Stakeholders have raised concerns that it is not clear when the TCN is engaged in their matter and how they can engage with the TCN to discuss any opposing views. In recent complaints investigations, including those relating to Jobkeeper and Cash Flow Boost, it has been identified that earlier and more proactive engagement of the TCN could have minimised the delay in resolving certain technical issues that had emerged.

IGTO comments The concerns had been raised with the IGTO as part of an earlier work program and listed in the IGTO’s 2009-10 Annual Report as a potential area for investigation.

Area of tax administration suggested for IGTO investigation The ATO’s administration of the General Anti-Avoidance Rules
Tax administration features to be improved Fairly
Providing accountability
Respectful, professional and collaborative
Ensure tax is paid and collected correctly
Source of suggestion Stakeholders
Description Australia is one of the few tax jurisdictions to have general anti-avoidance rules (GAAR) which operate as a measure of last resort to ensure that blatant, artificial and contrived arrangements to obtain tax benefits will fail. It empowers the Commissioner to effectively cancel the tax benefit.

The application of GAAR is a serious matter and requires careful consideration. The ATO has established a panel (GAAR Panel) to assist officers in making decisions on the application of GAAR.

Stakeholder feedback on the administration of GAAR has indicated that the ATO timeframes on GAAR are unclear, leaving little time for taxpayers and their representatives to prepare submissions and appearances before the GAAR Panel. Similarly, they expressed uncertainty as to the status of GAAR Panel recommendations and whether ATO officers accept the recommendations of the panel. Finally, stakeholders expressed concern that the ATO is reticent in addressing potential GAAR issues in private rulings.

IGTO comments The IGTO supports the ability of the ATO to effectively address contrived tax schemes designed purely to obtain a tax benefit. Any review investigation in this area would not seek to change the underlying policy outcomes or powers of the Commissioner. Rather, it would examine the administrative approaches adopted by the ATO in applying these rules, ensuring transparency, procedural fairness and defensible outcomes.

Area of tax administration suggested for IGTO investigation The ATO’s use of Fraud or Evasion Opinions
Tax administration features to be improved Fairly
Providing accountability
Respectful, professional and collaborative
Ensure tax is paid and collected correctly
Source of suggestion Stakeholders; Complaint Investigations
Description The law provides a limited period of time under which the ATO may review and amend returns lodged by taxpayers. However, where the Commissioner forms an opinion of fraud or evasion, the timeframe to amend (or to collect underpaid indirect taxes) is unlimited.

Concerns have been raised with the IGTO that the use of such opinions imposes a significant compliance cost and evidentiary burden on taxpayers seeking to dispute such opinions given the lengthy time that may have passed and lack of clarity of the information or evidence relied upon by the ATO. Furthermore, in some complaint cases received by the IGTO, it appears that opinions formed by the ATO have not been robust and supported by probative evidence.

Further issues arise due to the limited ability of taxpayers to have ATO fraud or evasions independently and externally reviewed through the Administration Appeals Tribunal (Nguyen v Commissioner of Taxation [2016] AATA 1041) or the Federal Court of Australia (Binetter v Commissioner of Taxation [2016] FCAFC 163).

IGTO comments Any review investigation in this area would not seek to alter the policy outcomes of this power, but would examine the administrative processes adopted by the ATO in forming these opinions to ensure transparency, procedural fairness and defensible outcomes.

The ATO’s use of fraud or evasion opinions was included on the IGTO’s 2017 work program. The ATO indicated at the time that it was undertaking an internal review of the use of fraud or evasion opinions across all business lines.

Area of tax administration suggested for IGTO investigation Administration of the release of tax debts on the grounds of serious financial hardship
Tax administration features to be improved Fairly
Pro-actively
Respectfully, professionally and collaboratively
Source of suggestion Stakeholders
Description Individual taxpayers and trustees of deceased estates are eligible to apply to the Commissioner for permanent release of certain tax debts where payment of those debts would cause the taxpayer serious hardship.

Over time, the numbers of applications for release from tax debts has declined as has the number of approvals and quantum of debts released. This has occurred, even in FY20 where large numbers of taxpayers were significantly impacted by the bushfires and the COVID-19 pandemic.

Taxpayers seeking release from tax debts are likely to be amongst the most vulnerable, who are unlikely to be able to afford professional tax representation and unable to fund ongoing challenges to ATO decisions.

Accordingly, it is imperative that the ATO takes appropriate steps to inform these taxpayers of their options to seek release and to ensure that internal processes for receiving, considering and decision making are robust to minimise disputes.

IGTO comments This investigation follows observations made in the IGTO’s Investigation and Exploration of Undisputed Tax Debts in Australia as well as recent independent research in academia – see Kevin O’Rourke, Ann Kayis-Kumar and Michael Walpole, ‘Serious Hardship Relief: In Need of a Serious Rethink?,’ Sydney Law Review, Vol 43(1):1-42.

Area of tax administration suggested for IGTO investigation Investigation and analysis of large debt balances (Debt Levels 5 and 6) – especially for individual and small business client experience groups
Tax administration features to be improved Pro-actively
Ensure tax is paid and collected correctly
Source of suggestion IGTO Review Investigation
Description The IGTO’s Investigation and Exploration of Undisputed Tax Debts in Australia has observed that there are a small number of tax debt accounts holding significant amounts of debt, across all taxpayer segments.

The IGTO’s investigation would seek to provide an in-depth analysis on the profile of these debt accounts, how the collectable debts accumulated, actions taken by the ATO to recover the debts and opportunities to improve the debt collection process in relation to these large balance accounts.

IGTO comments This investigation follows observations made in the IGTO’s Investigation and Exploration of Undisputed Tax Debts in Australia.

The accumulation of large amounts of debt in a small number of accounts creates a risk in the tax debt collection system and can diminish confidence in the overall administration of the tax system. Understanding how these debts arose and what actions can be taken to address them earlier and more effectively can assist the ATO to focus its resources and activities to minimise the risks of these debts becoming irrecoverable.

Area of tax administration suggested for IGTO investigation Investigation into the ATO’s approach to consultation with taxpayers and the tax profession
Tax administration features to be improved Respectfully, professionally and collaboratively
Certainty and consistency
Source of suggestion Stakeholders
Description Stakeholder consultation across a range of technical, administrative and new law issues within the tax system is of critical importance to its effective operation. Through its consultation arrangements, the ATO is able to leverage stakeholder expertise and receive direct input and feedback on the potential impacts that proposed administrative actions could have on taxpayers and tax practitioners.

Stakeholders have raised concern with the IGTO that the ATO’s current consultation approaches are not sufficiently targeted, not fit for purpose and does not provide sufficient opportunity for stakeholders to ventilate and discuss issues needing to be addressed.

IGTO comments A potential investigation into the ‘ATO’s public consultation arrangements’ was previously included on the IGTO’s 2014-15 Work Program, but was not progressed as the ATO had only recently updated its consultation arrangements at the time.

Area of tax administration suggested for IGTO investigation Administration of JobKeeper measures – allowing applicants to register retrospectively
Tax administration features to be improved Fairly
Transparently
Consistently 
Source of suggestion Complaint Investigations
Description The Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Rules) provide a time by which an employer or eligible business participant must notify the Commissioner of an election to participate in the JobKeeper scheme for a particular fortnight (rule 6(2) and 11(2)). The notes to these sections state: The Commissioner may defer the time for giving an approved form: see section 38855 in Schedule 1 to the Taxation Administration Act 1953.

The ATO has published guidance on how s. 388-55 should be applied by ATO officers in PS LA 2011/15 Lodgment obligations, due dates and deferrals. Our complaints investigations suggest that deferrals under “s. 388-55” were only allowed in a very narrow, fixed set of exceptional or unforeseen circumstances, whereas the threshold in PS LA 2011/15 is “fair and reasonable”. A number of ATO decisions have been remade and reconsidered following our complaints investigations.

IGTO comments There is a risk that the ATO has taken an unduly narrow approach to allowing retrospective registration for JobKeeper. IGTO complaint investigations on this issue have revealed a potential lack of transparency and fairness in the ATO’s decision making, by identifying departures from published guidance and highlighting inconsistent outcomes.

Investigating and reporting on the issue squarely aligns with the IGTO’s strategic objectives, as it goes to the consistency, transparency and effectiveness with which a key COVID-19 economic relief measure has been administered for the benefit of the community.  It is also an area with limited review rights for applicants, as a decision not to grant deferral of enrolment is not reviewable by the Administrative Appeals Tribunal or the Federal Court of Australia, leaving an IGTO investigation as one of the only avenues for taxpayers to seek an independent review of the ATO decision.

While the IGTO has investigated complaints from, and assisted, taxpayers who have approached our office, there may be others who have not approached the IGTO for assistance, or who are unaware that they can approach the IGTO for assistance. An investigation into this area would provide opportunity to raise public awareness of the issue and channels available for affected taxpayers.

Area of tax administration suggested for IGTO investigation Lessons learnt from the Administration of the Commissioner’s discretion for COVID-19 economic support measures
Tax administration features to be improved Fairly
Certainty and consistency
Accountability
Pro-actively
Respectfully, professionally and collaboratively 
Source of suggestion Complaint Investigations
Description The COVID-19 pandemic necessitated the swift enactment of legislation to provide support for those affected individuals and businesses. To effectively administer the COVID-19 support measures, as intended by Government, certain discretions were made available to the Commissioner of Taxation. The rapid implementation of these support measures also meant that the ATO had the difficult task of quickly developing internal guidance for its staff on the range of factual circumstances in which these discretions should be exercised and external communications to taxpayers and tax professionals.

The Commissioner’s discretion was initially exercised in very limited circumstances but following judicial clarification, was broadened to include a wider range of taxpayer circumstances. However, this consequently meant that some classes of taxpayers, who were later deemed to be eligible, did not have access to the COVID-19 support measures during their time of need.

The lessons learnt and insights from how the Commissioner’s discretion was communicated and exercised in administering relief during the COVID-19 pandemic will be important in driving future implementations of this kind, particularly in circumstances where time is of the essence.

IGTO comments The IGTO has received a large number of complaints in relation to the ATO’s application of the Commissioner’s discretion since June 2020, which have been addressed individually through our complaint handling service.

This investigation is related to Topics 2021-3, 2021-12, and 2021-13.

Area of tax administration suggested for IGTO investigation Further inquiries arising out of the IGTO’s Investigation and Exploration of Undisputed Tax Debts in Australia
Tax administration features to be improved Pro-actively
Respectfully, professionally and collaboratively
Ensure tax is paid and collected correctly 
Source of suggestion IGTO Review Investigation
Description The IGTO’s Investigation and Exploration of Undisputed Tax Debts in Australia presented a range of data and statistics in relation to the collectable (undisputed) tax debt balances and distribution across a number of financial years.

That report identified a number of different areas for future inquiry. In addition to Topics 2021-10 and 2021-11, the following may be examined in future IGTO investigations:

  1. industries that consistently rank highest in relation to collectable debt amounts and the underlying causes and reasons for this occurrence;
  2. accounts of collectable debt aged 5 to 10 years, or older than 10 years, and the ATO’s recovery attempts;
  3. SGC debt collection practices and the efficiency of collection of these liabilities
  4. Factors contributing to low levels and at times declining levels of payment arrangements;
  5. the impacts of new initiatives on collectable debt levels, such as the expansion of Director Penalty Notices to GST and the introduction of Single Touch Payroll;
  6. whether unexpected liabilities arising out of ATO compliance activities are impacting collectable debt; and
  7. The efficiency and effectiveness of PAYGW and PAYGI tax collection.
IGTO comments These potential investigation areas arose out of an IGTO review investigation and are related, in theme, to Topic 2021-10 and 2021-11. The IGTO may undertake each of these as discrete own-initiative investigations in future.

Area of tax administration suggested for IGTO investigation Cost of Compliance for Large Businesses 
Tax administration features to be improved Simple and minimises costs
Certainty and consistency
Fairly 
Respectfully, professionally and collaboratively
Source of suggestion Stakeholders
Description Business taxpayers generally have more complex tax affairs than individual taxpayers in Australia and are subject to a range of additional tax compliance requirements and ATO compliance activities. 

Some examples include: 

  • Key taxpayer engagement 
  • Top 100 and Top 1000 tax governance reviews as part of Justified Trust 
  • Reportable Tax Positions 

For some taxpayers, Annual Compliance Arrangements may have been entered. 

For multinational taxpayers, Transfer Pricing, Mutual Agreement Procedures or Advanced Pricing Agreements may also be involved. 

This investigation could examine the costs associated with key compliance requirements and activities for taxpayers within various market segments, and the comparative benefits derived or expected to be derived by the ATO and the taxpayer. 

Area of tax administration suggested for IGTO investigation ATO approach to information gathering 
Tax administration features to be improved Simple and minimises costs 
Certainty and consistency
Fairly
Respectfully, professionally and collaboratively
Source of suggestion Stakeholders
Description Information gathering is a critical part of the ATO’s administration of the tax and superannuation system and enables it to discharge its statutory functions. While the ATO seeks to obtain information from taxpayers informally, it is also empowered to compulsorily obtain information. 

The provision of information by taxpayers to the ATO may carry a heavy compliance cost, especially where large volumes of information are required. Concerns have been raised with the IGTO that in some compliance activities, ATO information requests were not sufficiently targeted, requested large amounts of information that was difficult to obtain and provided little opportunity for the taxpayer to discuss the requested information and alternative options to address ATO enquiries. 

IGTO comments The IGTO may approach this topic broadly or may, based on stakeholder feedback, examine the issue by reference to specific taxpayer segments or compliance programs.  

This topic may also incorporate Topic 2021-18 in relation to the ATO’s management of Legal Professional Privilege and 2021-19 concerning the use of compulsory information gathering powers. 

Area of tax administration suggested for IGTO investigation Management of Legal Professional Privilege 
Tax administration features to be improved Fairly
Respectfully, professionally and collaboratively
Correctly 
Accountability 
Source of suggestion Stakeholders
Description Legal professional privilege (LPP) is a well-recognised and well-respected cornerstone of the client-legal adviser relationship. Although the ATO has extensive powers to gather information as part of its administration work, LPP operates to protect information shared between taxpayers and their legal advisers. Disputes about whether a particular document is covered by LPP can be costly and time consuming. 

In March 2019, the Commissioner of Taxation announced that the ATO would take a tougher stance on challenging claims of LPP. This coincided with the hearing in the Glencore case and the High Court’s judgment that subsequently followed. 

More recently, the ATO has also released a draft protocol on which it is seeking stakeholder feedback. 

This investigation could focus on systems and processes established by the ATO to consider and assess claims for LPP, how this is separate from its general information gathering activities and how it assures taxpayers that documents to which LPP attaches are appropriately managed. 

IGTO comments This investigation could be considered together with Topics 2021-17 and 2021-19 in relation to the ATO’s general information gathering approaches and its use of formal information gathering powers. 

Area of tax administration suggested for IGTO investigation The ATO’s use of compulsory information gathering powers under section 353-10 of Schedule 1 to the Taxation Administration Act 1953 
Tax administration features to be improved Fairly
Aim for simplicity and to minimise costs 
Respectfully, professionally and collaboratively 
Providing accountability
Source of suggestion Stakeholders
Description Section 353-10 of Schedule 1 to the Taxation Administration Act 1953 provides the Commissioner of Taxation with broad and unfettered information gathering powers, including powers to compel the giving of information, attendance to give evidence (under oath or affirmation) and the production of any document for the purposes of the administration or operation of a taxation law. These powers may be exercised in respect of the taxpayers who are the subject of ATO compliance activity, or any other individuals. 

Although the ATO seeks to obtain information from taxpayers without the need to rely upon these formal powers, there can be significant compliance burden and impact on individuals where those powers are used. Individuals who are formally compelled to provide information, evidence or documents have little to no recourse to challenge the use of those powers.  Moreover, individuals who fail to comply with the Commissioner’s requests under these powers may be committing an offence. 

Concerns have been raised with the IGTO that in certain circumstances, the ATO’s use of these powers can be disproportionate to the compliance risks sought to be addressed and can give rise to protracted compliance activities, increased compliance costs and heightened stress on the individuals. 

IGTO comments The IGTO may examine the issues generally as part of a broad review into the ATO’s approach to information gathering in compliance activities, or may adopt a tiered approach by examining the experience of taxpayer within specific market segments (e.g., high wealth individuals) or specific ATO actions (e.g., using the powers to compel attendance at formal interviews). 

Stakeholder feedback on the utility of an investigation and key areas of concern will inform the approach adopted by the IGTO in any investigation.

Area of tax administration suggested for IGTO investigation Administration of the Independent Review Program 
Tax administration features to be improved Fairly
Respectfully, professionally and collaboratively 
Simple and minimises costs 
Correctly 
Accountability 
Source of suggestion Stakeholders
Description The ATO has for some years, following a recommendation by the IGTO, maintained a program of independent review of statements of audit position for large taxpayer groups with more than $250m in turnover. In FY18, FY19 and FY20, respectively, there were 16, 13 and 22 Independent Reviews. 

The program was recently expanded to small businesses with less than $10m turnover (after a two year pilot). Over the last 3 financial years, the ATO has conducted 205 independent reviews for small business taxpayers.  

An investigation of the program could examine its ongoing effectiveness as a dispute resolution tool to avoid or minimise disputes at the audit stage and limiting the need for taxpayers to progress issues through the objection process. An assessment of cost savings for both participating taxpayers and the ATO would also be considered.  

IGTO comments The IGTO may consider aspects of the Independent Review program as part of the current review investigation into the Administration and Management of Objections. 

Area of tax administration suggested for IGTO investigation Administration of the Top 100 and Top 1000 Programs 
Tax administration features to be improved Fairly
Respectfully, professionally and collaboratively 
Simple and minimises costs 
Correctly 
Accountability 
Source of suggestion Stakeholders
Description The ATO’s Justified Trust Program is a broad compliance program aimed at building and maintaining community confidence that taxpayers are paying the right amount of tax through gathering and assessing evidence of the taxpayer’s:

  • governance framework
  • risks
  • significant transactions; and
  • variances in accounting and tax results.

There are a number of different compliance programs under the Justified Trust umbrella –

  • Top 100 Justified Trust Program
  • Top 100 GST Assurance Program
  • Top 1000 Combined Assurance Program
  • Top 1000 GST Assurance Program
  • Top 1000 Tax Performance Program
  • Top 1000 Next Actions Program

This investigation could examine one or more of the programs to assess costs and benefits for both ATO and taxpayers. It could also examine the ATO’s measures of success against its stated intended outcome of building and maintaining community confidence that large taxpayers are paying the right amount of tax.

Area of tax administration suggested for IGTO investigation Recovery of unpaid superannuation  
Tax administration features to be improved Fairly
Correctly 
Accountability
Source of suggestion Stakeholders, Complaint Investigations 
Description There are limited options for employees who are not paid, or underpaid, superannuation to seek recovery of those amounts themselves. Recent research from Industry Super Australia suggests that in 2018-19, the amount of unpaid or underpaid superannuation has approached $5 billion, with an average impact of $1,700 per taxpayer. 

The ATO is the primary avenue through which employees may raise unpaid superannuation complaints for compliance action and/or recovery.  

This investigation would examine the ATO’s resources in relation to these functions and the effectiveness of ATO strategies to identify, investigate and recover unpaid superannuation amounts. 

IGTO comments This topic may be considered with Topic 2020-15 concerning the ATO’s management of superannuation guarantee audits. 

The Auditor-General’s current performance audit – Addressing Superannuation Guarantee Non-Compliance – is due to be tabled in February 2022. The IGTO will consider the Auditor-General’s findings and recommendations before commencing any investigation, to avoid unnecessary duplication. 

Area of tax administration suggested for IGTO investigation The ATO’s approach to complaints handling  
Tax administration features to be improved Fairly
Accountability
Respectfully, Professionally and Collaboratively 
Pro-actively
Source of suggestion Stakeholders
Description Effective complaint handling processes are an essential feature of any customer service organisation, including the ATO. The ATO has publicly acknowledged that complaints, feedback and compliments provide valuable insights that contribute to the enhancement of its services to the Australian community. 

In the 2020-21 financial year, the ATO received 24,778 complaints (including those from the IGTO). The effectiveness of the ATO’s complaint handling processes ensures that taxpayer dissatisfaction is addressed, minimises compliance costs and de-escalates potential disputes. It also builds and maintains community confidence in the ATO and, by extension, the Australian Government. 

There has been increasing interest in the ATO’s complaint handling processes, with the House of Representatives Standing Committee on Tax and Revenue recently making (or reiterating) recommendations aimed at enhancing awareness,  transparency and reporting of ATO complaints (see Recommendations 2, 4, 5, 6 and 15 of the Inquiry into the 2018-19 Commissioner of Taxation Annual Report). 

IGTO comments The IGTO’s investigation would leverage the Commonwealth Ombudsman’s Better Practice Guide to Complaint Handling and learnings from the 2020 Complaint Assurance Project, as well as Australian and International Standards for complaint handling. 

Register of Topics Identified in 2020

Area of tax administration suggested for IGTO investigation The role of outsourcing in the transformation of the ATO’s performance and culture
Tax administration features to be improved Managed Proactively and responsively, Provides Accountability, Transparency and Governance
Source of suggestion HoR Tax and Revenue Commitee
Description The House of Representatives Standing Committee on Tax and Revenue has recommended the IGTO should conduct a review of the role of outsourcing in the transformation of the ATO‘s performance and culture (See Inquiry into the 2017 Annual Report of the Australian Taxation Office, Recommendation 1). Such a review could include a costs versus benefits review of outsourcing in terms of the Reinvention of the ATO’s service culture in particular, and consider:

  • the effectiveness of measures for assessment of the value and risks in terms of the Reinvention of the ATO’s service culture;
  • adherence to ATO values in provision of advice, such as required under the Taxpayers’ Charter, and for staffing standards, including staff diversity, training and conditions for outsourced staff; and
  • the appropriate balance of ATO permanent versus contract staff and adequacy of resourcing under a self-assessment system.
IGTO comments IGTO to clarify the scope of this review with the House of Representatives Tax and Revenue Committee

Area of tax administration suggested for IGTO investigation ATO pre-filling of income tax returns
Tax administration features to be improved Tax is paid and collected correctly
Source of suggestion Stakeholders; Complaint Investigations
Description The ATO uses third party reported information to pre-fill income tax returns to assist taxpayers to correctly report required information – for example, interest reported by financial institutions. In some complaint cases, the IGTO has observed that the tax assessments in these cases were incorrect as the data that the ATO has used for prefilling these returns was not complete. It was also observed that taxpayers and their representatives in these cases may not have been made aware that their reported income was amended due to this third party data and may not have been afforded opportunity to understand the basis for the ATO’s amendments.

A potential IGTO review into this issue could examine how the ATO assures itself of the accuracy of the data provided by third parties, how it reconciles that data where it differs from information reported by taxpayers and the opportunities it affords taxpayers and their representatives to understand the basis for any amendments.

IGTO comments Consider if this should be part of a review about data reliability and onus of proof. Aspects of pre-filling were previously considered in the IGTO’s review into the ATO’s use of Data Matching

Area of tax administration suggested for IGTO investigation Taxation administration for unitised trusts – practical ATO administrative solutions for tax collection to ensure the overall compliance costs otherwise outweigh the benefits (tax collected)
Tax administration features to be improved Simplicity and minimise compliance costs
Source of suggestion Stakeholders
Description In certain situations, the administrative and compliance costs in complying with the “letter” of the tax law can be disproportionately larger than the revenue in question – for example, a unit trust fund’s mistake that would require thousands of taxpayers to amend their income tax returns resulting in a very small amount of tax payable. Stakeholders have raised concerns regarding the ATO’s willingness to explore mutually-agreeable revenue-neutral options for resolution in such circumstances.

A potential IGTO review into this issue could examine whether the ATO has authority to explore outcomes which address the risks to revenue and minimise the administrative and compliance costs as well the pathways through which taxpayers may engage the ATO to exercise this authority.

IGTO comments The IGTO is interested to understand how widespread the issue is for managed investment trusts.

Area of tax administration suggested for IGTO investigation Tax laws relying on specific expert opinion to evidence compliance
Tax administration features to be improved Simplicity and minimise compliance costs
Source of suggestion Stakeholders
Description Compliance with a substantial number of tax law provisions rely upon expert opinion in support of a specific compliance requirement – for example, valuation and transfer pricing. Stakeholders have raised concerns with the compliance costs and uncertainty that flows from using such concepts in the drafting of tax laws.

A potential IGTO review into this issue could identify the main tax laws which ultimately rely on expert opinion to evidence compliance and identify any resulting practical compliance problems. In addition, the review could explore the consequences which may arise from reliance on expert opinion.

IGTO comments The IGTO could build on observations and recommendations in previous reviews – especially Transfer Pricing and Valuations.

Area of tax administration suggested for IGTO investigation ATO use of MyGov communications
Tax administration features to be improved Provides certainty & consistency of tax outcomes
Source of suggestion Stakeholders
Description The ATO is increasingly using the Government’s “MyGov” portal to send important communications to taxpayers. Some tax practitioners have raised concerns that their clients lose confidence in their representatives where the ATO has not made practitioners aware of correspondence sent to their clients via the MyGov portal. This can result in difficulties for practitioners delivering services to their clients.

A potential IGTO review into this issue could examine the types of correspondence sent via the MyGov portal, how the ATO makes their representatives aware of such correspondence and the resulting consequences where it does not.

Area of tax administration suggested for IGTO investigation Management of objections
Tax administration features to be improved Respectfully, professionally and collaboratively, Provides Accountability, Transparency and Governance
Source of suggestion Stakeholders
Description The tax laws provide for internal review of ATO assessments (called “objection decisions“) before an appeal for external review can be lodged in the Administrative Appeals Tribunal (AAT) or the Federal Court of Australia. Stakeholders have raised concerns that there may be opportunity to improve the ATO objection process as approximately 84% of tax appeals lodged in the AAT are resolved by taxpayers and the ATO before they are heard by the AAT. The timeliness of the process is also a point of concern raised by stakeholders.

A potential IGTO review into this issue could examine how the ATO resources and structures its objection function and how it assures itself that both the ATO and taxpayers have common understanding of the strengths and weaknesses of each other’s case as well as the related scheduling and time management of those processes.

IGTO comments The IGTO previously examined the ATO’s management of objections in 2009.

Area of tax administration suggested for IGTO investigation ATO record management and communication systems and retrieval functionality
Tax administration features to be improved Provides Accountability, Transparency and Governance
Source of suggestion Stakeholders
Description The ATO provides staff with a range of systems to record and document interactions and events. Stakeholders have questioned whether the ATO provides all records in response to taxpayer FOI requests. Stakeholders suggest that this action can have adverse impacts – withholding of relevant information can impact taxpayer outcomes and confidence in the tax system. Also, both the Freedom of Information (FOI) Act and Privacy Acts provide taxpayers with rights of access to certain records and information.

A potential IGTO review could identify the ATO record management and communication systems that record taxpayer related interactions and events as well as the ease with which such records can be retrieved.

IGTO comments Appears to relate (in part) to Topic 2020-10

Area of tax administration suggested for IGTO investigation ATO fraud and/or evasion opinions
Tax administration features to be improved Simplicity and minimise compliance costs; Provides Accountability, Transparency and Governance
Source of suggestion Stakeholders
Description The tax laws allow the ATO to extend the standard periods of ATO review of tax assessments (generally 2-4 years) where the Commissioner forms an opinion that the taxpayer has engaged in fraud and/or evasion. The AAT or Federal Court cannot review the merits of such an opinion.

Stakeholders have raised concerns that such opinions impose significant compliance and evidentiary requirements on taxpayers who bear the burden of proof in a dispute to amended assessments that have been raised outside the standard periods of review. The IGTO has also made similar observations in older complaint cases.

A potential IGTO review of this issue could examine how the ATO assures itself of the robustness of such an opinion, including the evidentiary basis, and how the ATO affords taxpayers the opportunity to understand the case against them and provide relevant information before opinions are formally reached.

IGTO comments Potentially consider as part of a review of the burden of proof requirements under the taxation administration system.

Area of tax administration suggested for IGTO investigation ATO in-house facilitation
Tax administration features to be improved Simplicity and minimise compliance costs; Provides Accountability, Transparency and Governance
Source of suggestion Stakeholders
Description In line with a recommendation from the IGTO’s 2012 review into the ATO’s of Alternative Dispute Resolution, the ATO offers a mediation process for less complex cases where an impartial ATO facilitator aims to resolve issues in dispute. Some taxpayer representatives have raised concerns regarding the relationship that some facilitators have with ATO case officers as well as their (facilitator’s) inability to escalate matters where they disagree with ATO case officer decisions.

A potential IGTO review of this issue could examine how the ATO assures itself of the independence of its in-house facilitators as well as the means by which disagreements can be appropriately escalated and resolved.

IGTO comments The in-house facilitation program was instituted in line with Recommendation 3.6 in the IGTO’s 2012 review into the ATO’s use of early and alternative dispute resolution. Independence issues also arise in Topic 2020-10.

Area of tax administration suggested for IGTO investigation ATO Conflict of Interest (COI) policies
Tax administration features to be improved Provides Accountability, Transparency and Governance; Respectfully professionally and collaboratively
Source of suggestion Stakeholders
Description The ATO’s COI policies aim to minimise bias in ATO decision making by promoting transparency of ATO officers’ personal interests and requiring appropriate management of cases where those interests could impugn or be perceived to impugn officers’ decisions. Stakeholders have recently raised concerns that, in certain situations, taxpayers may not receive the best ATO decision as the COI policies may prevent the most knowledgeable and experienced ATO officer providing input. The IGTO has not conducted a review of this particular concern, although it had conducted a review of such policies in 2018 with respect to their use in fraud control measures.

A potential IGTO review into this issue could examine whether the ATO‘s COI policies appropriately balance the need for unbiased decision making with ensuring that those decisions appropriately draw from the best available knowledge and experience.

IGTO comments Consider if conflict issues should be considered as part of ATO independence. See also Topic 2020-9.

Area of tax administration suggested for IGTO investigation Funding arrangements for Tax Practitioners Board (TPB)
Tax administration features to be improved Provides Accountability, Transparency and Governance
Source of suggestion Stakeholders
Description The TPB’s funding is provided by the ATO as a result of negotiation between the Commissioner and the Chair of the TPB. Unlike other bodies, the Government does not provide a separate appropriation for the TPB. Stakeholders have raised concerns that such a funding arrangement may impact on the TPB’s ability to achieve its outcomes.

A potential IGTO review of the issue could examine the history of such funding arrangements and their appropriateness for the current administrative environment.

IGTO comments There is a current review into the TPB by the Treasury which may consider this issue.  Accordingly, the IGTO will await the outcome of Treasury’s review before commencing any review into this issue.

Area of tax administration suggested for IGTO investigation Influencing Willing Participation in the Tax and Superannuation Systems
Tax administration features to be improved Managed Pro-actively and responsively
Source of suggestion ATO
Description During the IGTO’s 2017 work program development, the Commissioner asked the IGTO to identify strategies and opportunities for the ATO to work with others to encourage willing participation in the tax and superannuation systems.

It was noted that new taxpayer entrants into the tax system are often amongst the most vulnerable and strategies to support and encourage their early participation and compliance will likely yield significant benefits for them and the community.

A potential IGTO review of this issue could focus on youth and high school programs as well as strategies to engage with new arrivals to Australia.

IGTO comments IGTO to consider stakeholder perspectives regarding the priority of this review.

Area of tax administration suggested for IGTO investigation ATO audit/assessment/objection procedures when there is a change in trustee
Tax administration features to be improved Respectfully, Professionally and collaboratively
Source of suggestion Stakeholders; Complaint Investigations
Description The ATO’s procedures (outlined in the PS LA 2012/2) state that the trustee of the trust at the end of the income year in which a debt arose is liable for that particular debt. However, the ATO’s procedure is to audit and send assessments to the trust itself as opposed to the trustee. In some complaint cases, the IGTO has observed that when there is a change of trustee, the prior trustee may be unaware of ATO decisions and communications because the ATO will engage with (including any audit process) and send assessments to the new trustee only.

A potential IGTO review of this issue could examine how the ATO assures itself that trustees are afforded opportunities to be heard on matters that affect them, including where liabilities that are attributed to them and opportunities to dispute those liabilities.

Area of tax administration suggested for IGTO investigation Security of tax practitioners’ electronic communications of sensitive taxpayer information
Tax administration features to be improved Holistic – to identify main systemic issues
Source of suggestion Stakeholders
Description A recent IGTO complaint indicated that tax practitioners may breach TFN laws (the Privacy (Tax File Number) Rule 2015) by including TFNs in emails to their clients (for example, by forwarding to clients any ATO correspondence which includes their TFN, such as notices of assessment). As a result, concerns were raised by stakeholders regarding tax practitioners’ administrative costs to redact TFN details as well as tax practitioner difficulty in obtaining practical guidance from relevant government departments to assist them comply with the relevant law.

A potential IGTO review could explore opportunities to provide practical guidance to the tax practitioner community based on input from tax practitioners and their representative bodies as well as software providers, the Information Commissioner, Australian Signals Directorate, ATO and TPB.

IGTO comments Tax Practitioners and professionals are essential to the efficient function of the Australian taxation system. They provide support to all taxpayers, including more vulnerable individuals and small businesses. The IGTO has conducted two previous reviews in relation to the role of tax practitioners but has not investigated the impact of tax secrecy and confidentiality provisions.

On 1 September 2020, the TPB released a draft Practice Note TPB (PN) D42/2020 on the use and disclosure of a taxpayer’s TFN and TFN information in email communications. The TPB invited comments and submissions on the draft practice note by 30 September 2020.

Area of tax administration suggested for IGTO investigation ATO Superannuation Guarantee (SG) audits
Tax administration features to be improved Fair treatment of taxpayers
Source of suggestion Complaint Investigations
Description The ATO has responsibility to audit employers’ compliance with SG obligations and may do so when an employee notifies the ATO that their employer may not have complied with SG obligations. The tax laws do not allow employees to recover SG liabilities directly, only the ATO is empowered to do so.

In some IGTO complaint cases, the IGTO has observed that employees may be prevented from recovering their SG entitlements where the ATO does not appropriately check or test the accuracy of information provided by employers during SG audits.

A potential IGTO review could examine how the ATO tests employer-provided information when it conflicts with employee-provided information as well as opportunities afforded to employees to provide input and the ease with which employees may access compensation where ATO mistakes are identified.

IGTO comments The Taxation Administration Act 1953 was amended in 2019 to expand the ATO’s ability to disclose information to an employee regarding a real or suspected failure by their current or former employer to comply with their SG obligations. The new legislation may assist the ATO to test employer-provided information when it conflicts with employee-provided information.

SG audits were examined in the IGTO’s Review into the ATO’s employer obligations compliance activities. The review examined the ATO’s information sources and recommended a greater reliance on proactive measures to detect SG non-compliance. The review did not examine in detail how the ATO tests information, opportunities afforded to employees to provide input and the ease with which employees may access compensation.

Area of tax administration suggested for IGTO investigation ATO’s use of contractors
Tax administration features to be improved Managed pro-actively and responsively, Respectfully, Professionally and Collaboratively
Source of suggestion Complaint Investigations
Description The ATO engages contractors to assist with a range of activities, including call centre peak-periods. In some complaint cases, complainants have raised concerns regarding services provided by ATO contractors.

A potential IGTO review of this issue could include the level of training provided to contractors, the security measures taken as well as how the ATO assures itself of the consistency of complaints services delivered through contractors’ – such as information provision, consistency of decision making, professionalism, integrity and service standards.

IGTO comments Review may be undertaken in conjunction with Topic 2020-1.

Area of tax administration suggested for IGTO investigation Compassionate release of superannuation
Tax administration features to be improved Provides Accountability, Transparency and Governance
Source of suggestion Complaint Investigations
Description From 1 July 2018, the ATO has been responsible for deciding whether individuals can gain early access to their superannuation on compassionate grounds. In some IGTO complaint cases, the IGTO has observed varying quality and timeliness of ATO decisions as well as inconsistent clarity in communicating the grounds on which these decisions are made.

A potential IGTO review of this issue could examine how the ATO assures itself that, in initial decisions, sufficient reasons are provided, the legislative definitions are being appropriately applied and alternative grounds for compassionate release are being considered.

IGTO comments This suggestion was raised prior to the introduction of COVID-19 responses, which include the early release of superannuation funds. IGTO will monitor taxation complaints for any increase in related complaints. The IGTO is also interested in any stakeholder feedback in formulating terms for reference.

Area of tax administration suggested for IGTO investigation ATO delays in finalising objection decisions
Tax administration features to be improved Managed Pro-actively and responsively
Source of suggestion Complaint Investigations
Description A few years ago, the ATO’s service standard to finalise objection applications was 56 days in the majority of cases. However, there is currently no such standard or service commitment for timeframes in dealing with objections. In some IGTO complaints, the IGTO has observed that extended timeframes taken by the ATO to allocate, progress and finalise objection applications.

A potential IGTO review of this issue could examine how the ATO resources its objection function, its internal expectations regarding timeliness, taxpayer engagement, quality and sustainability of decisions as well as how it assures itself that such expectations are being met.

IGTO comments Review may be undertaken in conjunction with Topic 2020-6.

Area of tax administration suggested for IGTO investigation ATO record keeping on its use of debt collection powers 
Tax administration features to be improved Respectfully, Professionally and Collaboratively
Source of suggestion Complaint Investigations
Description The ATO has significant powers to actively recover tax debts, including garnishees and director penalty notices. The ATO has issued instructions to staff regarding the matters which need to be taken into account when exercising those powers. In some IGTO complaints, the IGTO has observed varying quality of the ATO’s documentation of reasons for exercising those powers, particularly in complex debt recovery cases.

A potential IGTO review of this issue could include the adequacy of relevant instructions to debt recovery staff, how the ATO assures itself that staff comply with these instructions and the appropriateness of staff record-keeping of their debt recovery decisions.

IGTO comments The ATO’s management of taxpayer debts is vital to effective operation of our taxation and superannuation systems. Our current review regarding Undisputed Collectable Tax Debts, while deferred due to the COVID-19 priority measures requiring implementation, was primarily undertaken to better understand the facts and reporting of debt and improved transparency in this context. It was anticipated that future more targeted reviews would be undertaken into the ATO’s management of debt. This potential review into record keeping on its use of debt collection could be one such targeted review.

Area of tax administration suggested for IGTO investigation ATO promotion of MyTax
Tax administration features to be improved Tax is paid and collected correctly
Source of suggestion Stakeholders
Description MyTax is a free income tax return platform offered by the ATO to taxpayers. Some tax practitioners have raised concerns that the ATO may be attempting to persuade their clients to lodge via MyTax as a preferred return lodgement method. That is, without the assistance of their tax adviser. Concerns have been raised about the accuracy of information reported by taxpayers via this method.

An IGTO review of this issue could examine the ATO’s promotion of MyTax and messaging regarding registered tax practitioners as well as the how the ATO assures itself of the accuracy of information reported and relied upon by taxpayers in using MyTax.

IGTO comments Review may be undertaken in conjunction with Topic 2020-5.

Area of tax administration suggested for IGTO investigation ATO administration of Research & Development
Tax administration features to be improved Provides certainty and consistency of taxation outcomes
Source of suggestion Complaint Investigations; IGTO 2017 Work Program
Description Stakeholders raised concerns about interactions between the ATO and AusIndustry regarding the ATO’s testing of eligibility for Research & Development (R&D) Tax Incentive claims where the taxpayer believed that AusIndustry had, at least, tacitly approved such eligibility in the past.
IGTO comments The IGTO notes that recent reviews of the R&D Tax Incentive have been completed. A potential review of this issue could examine the relevant actions of the ATO, but not that of AusIndustry – consistent with the Inspector General of Taxation Act 2003.

Area of tax administration suggested for IGTO investigation ATO Advice and Guidance
Tax administration features to be improved Provides certainty and consistency of taxation outcomes
Source of suggestion Stakeholders; IGTO 2017 Work Program
Description Stakeholders have raised concerns about the declining trend in the ATO providing binding advice in favour of guidance which offers a lower level of protection to taxpayers. As a result, there may now be less certainty and increased risk for taxpayers.

A potential IGTO review of this issue could examine the trend in numbers of public rulings and ATO use of practical compliance guidelines and other guidance products. It could also examine how the ATO provides certainty on integrity-related issues, for example how the ATO ensures that Taxpayer Alerts are followed up with subsequent ATO guidance or action as well as the ATO’s willingness to issue private rulings on certain issues.

The timeliness and management of the private ruling applications by the ATO is also highly relevant.  Elongated time frames and delay in process leave the taxpayer exposed where that arises due to ATO management.

IGTO comments Advice and guidance from the ATO as the system administrator is crucial in a self-assessment system where the primary legal obligations and risk rest with the taxpayer.

Area of tax administration suggested for IGTO investigation ATO re-raised debts
Tax administration features to be improved Respectfully, Professionally and Collaboratively
Source of suggestion Complaint Investigations
Description The ATO may consider certain debts are ‘uneconomical to pursue’ and communicate that the debt has been ‘written off’, but then later re-raise a debt when a taxpayer would otherwise be due a refund. In some complaints, the IGTO has observed some variance in the application of the ATO’s ‘initial’ and ‘exclusion’ checks when deciding whether to re-raise a debt as well as varying expectations regarding the retention of records where written off debts are more than 5 years old.

A potential IGTO review of this issue could examine the effectiveness of ATO communications regarding written off debts as well the related ATO policies.

IGTO comments This topic was examined in the Commonwealth Ombudsman’s 2009 report, Re-raising written-off tax debts. Significant time has elapsed since that report and the IGTO continues to receive complaints about this topic. Our current review regarding Undisputed Collectable Tax Debts, while deferred due to the COVID-19 priority measures requiring implementation, was primarily undertaken to better understand the facts and reporting of debt and improved transparency in this context. It was anticipated that future more targeted reviews would be undertaken into the ATO’s management of debt. This review topic could be one such targeted review.

Area of tax administration suggested for IGTO investigation ATO apologies
Tax administration features to be improved Respectfully, Professionally and Collaboratively
Source of suggestion Complaint Investigations
Description The Commonwealth and NSW Ombudsmen have issued guidelines of the elements needed for effective apologies. In some IGTO complaint cases, the IGTO has observed that further complaints and dissatisfaction have been generated as a result of ineffective apologies being provided by ATO officers.

A potential IGTO review of this issue could examine how the ATO supports its staff in providing effective apologies and monitors officer effectiveness in doing so.

IGTO comments A review of this nature may be helpful in transparently debunking certain myths while also promoting positive aspects about apologies more generally.

Area of tax administration suggested for IGTO investigation Administration of the Self-Managed Superannuation Fund (SMSF) Supervisory Levy
Tax administration features to be improved Provides Accountability, transparency and governance
Source of suggestion Stakeholders; Other
Description SMSFs are required to pay an annual levy to the ATO of $259 to cover the costs for the ATO to educate SMSFs and to regulate the sector to ensure compliance with superannuation laws. There are presently approximately 600,000 SMSFs in Australia, equating to over $155 million in Levy funds being paid to the ATO annually.

Stakeholders have suggested that given the large amount of money that is paid to the ATO for this purpose, a review could be conducted to identify whether there are opportunities to improve how the ATO uses the Levy to provide education and services to the SMSF industry.

Area of tax administration suggested for IGTO investigation Litigation management including test case funding
Tax administration features to be improved Provides Accountability, transparency and governance
Source of suggestion Stakeholders; Other
Description The ATO has a responsibility as the administrator to undertake appropriate litigation where it considers taxpayer compliance actions are contrary to law and where the consequences are sufficient to warrant resourcing.  The ATO also has a strategic litigation program to support the development of law through the courts where it meets this objective.  As part of this program there is a test case litigation facility that provides for taxpayer funding support.

Certain stakeholders have raised concern that the ATO is not undertaking sufficient litigation nor managing the other aspects of the strategic litigation program as fairly and effectively in developing the law as it should.

IGTO comments The IGTO has considered aspects of the program in a review context, several years ago, but certain stakeholder concerns continue to be raised in this general area.

Area of tax administration suggested for IGTO investigation ATO management of Small business taxpayer disputes, objections and appeals
Tax administration features to be improved Provides Accountability, transparency and governance
Source of suggestion Stakeholders; Complaint Investigations; Other
Description The IGTO receives a wide range of complaints directly from Small Businesses and their tax practitioner representatives, (who are also often small business owners in their own right).  The ATO’s management of small business taxpayer disputes, objections and appeals are important, given the nature of their administrative powers and capacity in this context.  Small business taxpayers often have limited resources at their disposal for the management of disputes with the ATO.  Stakeholders including complainants and other bodies have raised concern regarding the ATO’s management in this area.
IGTO comments Consider if this review should be conducted as a stand-alone review or as part of Topic 2020-6.

This Register identifies potential topics for IGTO review investigation as identified and suggested by various stakeholders, our taxation dispute investigation service and other sources. The Register is current as at June 2023 and will be updated periodically as required. Additions to the Register will be notified via our Newsletter – IGoT News.

The IGTO welcomes comments, feedback and suggestions from interested parties, including tax professionals and members of the public, on these and other potential topics for IGTO review investigation.

Background

The IGTO conducts investigations into tax administration systems and laws with the objective of improving the administration of the tax system for the benefit of all taxpayers, tax practitioners and other entities. Areas for review are selected based on available resources, other priorities (including dispute investigation priorities), the feedback and concerns raised by the community and opportunities to improve the tax administration system for the benefit of the community.

Potential review topics for investigation are identified from our engagement with stakeholders, themes raised in dispute investigations and representations made to the IGTO’s office, as well as other sources.

Reviews selected from these potential topics are commenced following consultation with stakeholders which may include tax professionals and their representative bodies and government bodies such as the Australian National Audit Office, Commonwealth Ombudsman, Australian Taxation Office (ATO) and Tax Practitioners Board (TPB). We also engage with Parliamentary committees and relevant Ministers (especially the Treasurer, Assistant Treasurer and Minister for Superannuation and Financial Services) as appropriate.

Please note that the Register does not reflect a formal or proposed work program – given the resource requirements that would be needed to investigate the complete list. However, in the interests of transparency and consistent with the Recommendations made by the House of Representatives Standing Committee on Tax and Revenue [see External Scrutiny of the Australian Taxation Office (April 2016)], we want to let the community know what issues have been raised with us or identified by us and therefore are potential topics for future IGTO reviews.

Please let us know if you have any other suggestions or comments on the Register, including the topics as listed or any issues that you may wish to raise with us in seeking to improve the administration of the taxation system. All feedback and comments will remain confidential but may assist the IGTO in selecting priority areas for review.

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Our review work aims to improve the administration of the taxation system to assure and ensure tax administration aligns with community expectations. Our understanding of the community’s expectations with respect to the features of good tax administration is outlined on our website – click here.