This report shares insights, observations and recommendations to improve the ATO’s administration of the Small Business Litigation Funding Program, which arose during Tax Ombudsman investigations of unresolved complaints (disputes) that were lodged by small businesses and legal practitioners.

The Small Business Litigation Funding Program was initiated by a 2019 Government measure. It was aimed at levelling the playing field for unrepresented small businesses in the Small Business Tax Division of the Administrative Appeals Tribunal in cases where the ATO chose to engage a barrister to represent it.

In practice, the ATO gives an up-front commitment to make a specified amount of funding available and to reimburse some of the small business’s representation costs.

Documents and downloads

This investigation examines the effectiveness of the Australian Taxation Office’s (ATO) communications to taxpayers and their representatives of their taxpayers’ rights to review, complain and appeal decisions made and actions taken by the ATO.

The investigation involved an examination of a case sample of written communications of ATO decisions made – for clear communication of the taxpayers’ rights to review, complain and appeal these decisions. The communication of taxpayers’ rights is an important feature of procedural fairness and is consistent with the Taxpayers’ Charter. These rights and the community’s awareness of them is important for maintaining confidence in the fairness of the tax administration system.

Tax Ombudsman survey

Between August and September 2020, we engaged Orima Research Pty Ltd to conduct a voluntary and independent survey to gauge taxpayers’ and tax professionals’ views on the effectiveness of ATO communications on taxpayers’ right to review, complain and appeal decisions.

The survey comprised 10 questions (of which 3 sought demographic information from respondents). A list of the questions is available for download.

A total of 69 respondents participated. Some respondents chose not to answer certain questions.

Documents and downloads

This report sets out the findings and conclusions from our tax complaint investigations of the Australian Taxation Office’s (ATO’s) administration of applicants’ requests to defer the due date for lodgement of JobKeeper enrolment notices (JobKeeper enrolment deferral), in accordance with:

• Section 388-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953); and
• The Commissioner of Taxation’s instructions to ATO staff, practice statement PS LA 2011/15 Lodgment obligations, due dates and deferrals (PS LA 2011/15).

JobKeeper enrolment deferrals allow JobKeeper applicants to enrol for JobKeeper retrospectively and receive JobKeeper payments for fortnights prior to the fortnight in which the notice of enrolment is given to the Commissioner.

Documents and downloads

The report presents a summary and analysis of a large amount of data as supplied by the Australian Taxation Office (ATO). The data relates to levels of undisputed tax debts (and changes in these debts) over the past several years, commencing in FY16 and ending in FY20 – that is, as reported at 30 June in each financial year. The report delivers a number of key related insights and makes five recommendations for consideration by the ATO as outputs from the investigation.

The report is a key piece of research intended to provide Australian taxpayers, tax practitioners, government and business with a detailed understanding of where tax debts are accruing in the tax system and occurring in the economy.

Documents and downloads

The Inspector-General of Taxation and Taxation Ombudsman (IGTO) conducted complaint investigations (commencing in June 2020) in response to concerns raised by or on behalf of new small businesses –
individuals and entities. Most complainants were concerned that the Australian Taxation Office (ATO) had decided they were ineligible to receive the Boosting Cash Flow (BCF) and/or JobKeeper (JK)
payments because either:

• sales had not been reported in their Business Activity Statement (BAS) as lodged (or to be lodged) before 12 March 2020; or
• they were not required to lodge a BAS at all.

Concerns were similarly raised by the accounting, tax and business professional bodies, Members of Parliament and in the media. Professional bodies referred their members to the IGTO’s complaint
investigation service.

This report provides some background to our complaint investigations and some insight into how independent investigation of these complaints improves the tax administration system for the benefit of all taxpayers, tax practitioners and other entities. This report may also help minimise issues arising in the design of future tax administrative measures, including those which deliver fiscal support measures to the wider Australian community.

We also made observations on the underlying issues which were identified during the complaint investigations. The context of the extraordinary and unprecedented impact of the COVID-19 pandemic on Australian jobs and businesses, as well as the exceptional ATO response in providing economic support in the form of JK and BCF payments to many Australians, is an important backdrop to these observations. However, the opportunity to learn from the crisis should not be missed.

Documents and downloads

Australia has operated a self-assessment system of taxation since 1986-1987. Under this system, the taxpayer is personally responsible for lodging a return with detailed information to calculate their taxable
income. Upon lodgement, an assessment is issued by the Commissioner of Taxation to an individual taxpayer which then triggers a limited period of review for the ATO. The self-assessment system has been supported since 1992 by a system of legally and administratively binding advice (private and public rulings and determinations) and non-binding guidance issued by the ATO to provide information to assist taxpayers meet their tax compliance obligations.

This investigation does not seek to address every compliance requirement that arises after a person dies. Rather, it seeks to identify opportunities to reduce the tax compliance burden and associated costs, as well as improve or simplify the tax administration arrangements on behalf of a deceased.

Documents and downloads

This review examined the challenges and opportunities presented by new and emerging digital technologies, along with the accompanying social, policy and regulatory impacts on the administration of the tax system and the tax profession.

The review highlights the need for all participants within the tax system to take prompt action to address the upcoming challenges and realise the benefits presented by emerging opportunities. Given the interconnectedness of the Australian Taxation Office (ATO), the Tax Practitioners Board (TPB) and tax professionals, it is imperative that they take collective and well-coordinated action which can only be achieved through a strong and collegiate working relationship. It is regrettable, therefore, that in recent years, the working relationship particularly between the ATO and the tax profession has been strained through ongoing IT stability issues and unfortunate ATO commentary such as those in a recent speech by the Commissioner regarding work-related expenses. Building on previous IGT reviews, there are further recommendations in this review aimed at improving this crucial relationship.

Overall, 9 recommendations (comprising 28 parts) were made: three parts for the Government’s consideration, 19 parts for the ATO and the remaining 6 parts for the TPB. The TPB has agreed to all recommendations made to it. Whilst the ATO had initially indicated agreement with the majority of recommendations, in the final stages of the review, it conveyed disagreement with 8 parts of the recommendations. The ultimate disagreements are with parts of the recommendations aimed at enhancing the ATO workforce, assisting tax practitioners to prepare themselves to meet the future challenges and ensuring that the fragile relationship between tax practitioners and the ATO is carefully managed.

Documents and downloads

The Inspector-General of Taxation and Taxation Ombudsman commenced this review to maintain community confidence in the administration of the tax system after serious allegations were made about the Australian Taxation Office’s (ATO) inappropriate use of
garnishee notices on small businesses. These allegations
were made by both a current and former ATO officer on the
Australian Broadcasting Corporation’s (ABC) Four Corners
program on 9 April 2018. We investigated allegations that the ATO:

• gave directions to staff to issue enduring garnishee
  notices in every case as a ‘cash grab’ towards the end of the
  2016–17 financial year; and
• set targets for staff and assessed their performance
  based on the level of debt collected.

Garnishee notices allow the ATO to recover taxpayer debts from third parties such as banks or trade debtors. If use inappropriately they can severely affect a taxpayer’s cash flow; in particular, the more vulnerable, such as small businesses and individuals.

In our view, the allegations that there was an ATO direction for a ‘cash grab’ on small businesses or that debt staff’s personal performance were set on amounts collected are not sustained on the evidence.

Downloads and documents

Our review into the Australian Taxation Office’s (ATO) fraud control management was commenced at the request of the Senate Economics
References Committee. It followed events connected to Operation Elbrus including allegations of tax fraud that may be linked to abuse of position by a public official.

The review has not found evidence of systemic internal fraud or corruption. Generally, the ATO has sound systems in place for managing risks of internal fraud, however, the review has uncovered a number of areas which require improvement.

We made 13 recommendations to the ATO, all of which were agreed either in full or in part.

Downloads and documents

Our review into Goods and Services Tax (GST) refunds
arose from concerns raised through the our complaints handling service and during consultation to develop the 2017 work program. These concerns included the accuracy of the ATO’s risk assessment tools, its engagement with taxpayers and its efforts to minimise adverse impacts on affected taxpayers.

We reviewed the end-to-end process involved in refund verification including from initial case selection through to the review and audit activities. Overall, we found that the ATO’s administration of GST refunds operated efficiently with the vast majority of refunds released without being stopped for verification.

We made 5 recommendations (comprising 16 parts), all of which were agreed either in full or in part.

Downloads and documents