Chapter 5 Theme 4 – External Scrutiny
This chapter examines matters relating to bodies that directly
scrutinise the ATO, namely:
- Inspector-General of
- Australian National
Scrutiny bodies on ato.gov.au
The ATO has greatly increased the visibility of performance information
on its website in response to recommendations by the Committee. The Committee’s
previous report recommended that the ATO increase the visibility of its
‘traffic light’ reporting system, which lists its achievements against
benchmarks. The recommendation which was adopted and implemented by the ATO,
and has enabled users to quickly determine whether the ATO is meeting its
The ATO advised in its submission that its Audit Committee oversees
implementation of recommendations made by external scrutiny bodies, and that it
receives quarterly reports on the progress of implementation of these
The ATO also reported in its submission that it planned to publish information
about the implementation of recommendations from its scrutiny bodies on its
Inspector-General of Taxation
The Inspector-General of Taxation reported on the reviews conducted over
the last year, and briefly outlined his findings.
In a review into the administration of class rulings: The
Inspector-General found class rulings to be a useful element of the tax system,
but a number of areas for improvement were identified.
Reviewing ATO compliance approaches to Small and Medium Enterprises [SMEs]
and high-wealth individuals, recommendations were primarily focused on
improving ATO staff capability, which was found to be the main underlying
challenge. Further, the ATO agreed to replace its Wealthy and Wise
booklet, aimed at high wealth individuals, with a booklet covering ATO
compliance approaches to the entire SME and high-wealth individual markets,
giving taxpayers and advisers a better understanding of the processes and means
of holding ATO officers to account when expectations were not met.
Further, the Inspector-General noted two more reviews had been completed
but not yet released – the ATO’s use of benchmarking to target the cash
economy, and improving the self-assessment system.
Forward work program
Each year, the Inspector-General of Taxation publishes a forward work
program which outlines areas he intends to review. Each review is subject to
resourcing priorities, and the potential for ministerial direction to review a
particular matter of concern.
The Inspector-General advised the Committee that he had embarked on a
public consultation process prior to releasing his forward work program. He
noted the value of such a process, reporting that grassroots consultation drew
his attention to issues that may otherwise not have been considered, and that
the use of an open process ensured that resources were maximized in delivering
The Inspector-General advised there had been approximately 70
submissions made by the public, that consultation meetings had been held, and that
newspaper advertisements had been placed to promote the consultation process.
The Committee asked about the key themes that had already been
identified through the public consultation process, with the Inspector-General
identifying the following:
- The ATO’s risk
engine: the risk assessment process the ATO uses to focus its compliance
- Delayed income tax
- ATO administration of
- ATO administration of
general anti-avoidance provisions
- ATO compliance approach
to transfer pricing
- Excess superannuation
The Committee is interested in the conduct of the Inspector-General’s
public consultation process in preparing his work program, and would appreciate
a brief review of the process and the comments of the Inspector-General on the
value of the process.
Australian National Audit Office
The Australian National Audit Office (ANAO) acts as a scrutineer of the
ATO by auditing the ATO’s annual financial statements, and by undertaking
independent performance audits that seek to evaluate the efficiency and
effectiveness of ATO administration.
The ANAO reported on the implementation of a recommendation that the
three external scrutiny agencies of the ATO (the ANAO, the Inspector-General of
Taxation, and the Commonwealth Ombudsman) engage in more strategic planning and
information sharing. The Committee was advised that the agencies had committed
to a three-way meeting as part of each agency’s planning processes. Further,
the purpose of the meeting was to promote, where possible, information sharing
arrangements, and consideration of the impact of scrutiny body review
activities on ATO resources.
In its submission, the ATO advised that the audits conducted in the last
year presented the view that the ATO’s governance structures were sound, and
that its approach to revenue collection remained consistent with international
practice. Indeed, the Organisation for Economic Cooperation and Development
sometimes refers to the ATO as a model revenue collection agency.
The Committee was advised that over the last year, the ANAO had
conducted five performance audits into ATO administration, looking at:
- The management of
compliance in the small to medium enterprises market
- Administration of Project
- Interpretive assistance
for self-managed superannuation funds
- Implementation of
the Small Business Superannuation Clearing House
- The engagement of
external debt collection arrangements.
Further, at the time of the public hearing, the Auditor-General advised
that the audit on the ATO’s financial statements for 2011-12 was progressing,
and that the audit had found:
The ATO has designed and implemented governance arrangements,
a financial reporting regime and an internal control system to provide
reasonable assurance about the achievement of ATO’s business objectives.
...The ATO has made a concerted effort to address
significant, moderate and legislative compliance audit findings previously
reported to Parliament. From June 2004 to June 2012, the number of significant
and moderate risk findings has steadily declined to the point where there is
only one outstanding legislative matter.
In his appearance before the Committee, the Auditor-General reiterated that
he had seen continuous improvement in terms of ATO administration through the
period of his, and the Commissioner of Taxation’s incumbency.
Most of the issues raised by the Commonwealth Ombudsman are examined in
detail in Chapter 2 of this report, as they relate directly to service
standards and complaints about ATO handling of individual complaints.
In its submission, the Commonwealth Ombudsman outlined the areas the ATO
can continue to improve to improve its complaint handling capabilities:
- building its analytical
- making better use of intelligence
from complaints in policy, service design and implementation;
- making executive
officers accountable for resolving the root-cause of complaints; and
- undertaking more
first contact resolution.
The submission from the Commonwealth Ombudsman also identifies specific
matters of interest that were encountered over the previous year. These
included an increase in income tax return integrity checking by the ATO, and
complaints about an ATO decision relating to the Superannuation Excess
In her appearance before the Committee, the Acting Ombudsman reported
that the relationship between her office and the ATO had improved markedly over
the last two years, and that she was very happy that issues that had been
raised by her office were being resolved.
The Committee welcomes the ATO proposal to report progress against the
recommendations made by its scrutiny bodies through a single page on the ATO
website. Providing a ‘one stop shop’ enables users to identify current issues
that have been identified by scrutineers, and whether these issues are being
acted upon by the ATO. Further, the Committee would also welcome being included
on such a portal. This increases visibility of the work of all bodies that
scrutinise tax administration, and enables users to actively monitor the
progress of the implementation of recommendations over time.
That the Australian Taxation Office publish information
regarding the implementation of Joint Committee of Public Accounts and Audit
recommendations on its website alongside those of other Australian Taxation
Office scrutiny bodies.
The Committee was pleased to hear about the public consultation process entered
into by the Inspector-General of Taxation in preparing his annual work program.
For members of the general public, the Inspector-General is probably the least
well known scrutiny body of the ATO, and the Inspector-General’s responsibility
for examining systemic tax administration issues makes a public consultation
process more valuable.
This process increases the sources from which the Inspector-General
draws his information, and also informs the public of the important role he
plays. While the Inspector-General may seek contributions from individual
taxpayers, he only uses these to identify broader systemic issues that may not
have been brought to his attention any other way.
The Committee also believes the delineation of responsibilities between
the Inspector-General of Taxation and the Commonwealth Ombudsman is an
extremely valuable one. Maintaining separate scrutiny bodies to address both
systemic and individual issues provides a more comprehensive scrutiny regime
than to have a single body to examine administration of the tax system.
At the same time, the Committee notes the benefits in collaboration and
coordination between the ATO’s scrutiny bodies, which provides opportunities to
examine potential information sharing arrangements, and consideration of the
impact of scrutiny body review activities on ATO resources.
The Committee notes the broadly positive comments from scrutiny bodies
at this year’s public hearing, and is pleased to hear that there is closer
engagement between the ATO and its scrutiny bodies.
However, the Committee also notes that the Commonwealth Ombudsman is the
scrutiny body that identifies the most problems with ATO. This may suggest that
while the ATO may be satisfactorily addressing systemic issues, and may have
appropriate internal management systems in place, there may still be deficiencies
with the way some individual taxpayer cases are handled. The Committee looks
forward to seeing a reduction in individual complaints, and less use of the
‘one last chance’ referral process in next year’s submissions.
Robert Oakeshott MP