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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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The review into aspects of the Pay As You Go (PAYG) instalments system is our first review to be undertaken in direct response to insights
drawn from the IGT’s complaint handling service. It also had stakeholder support during consultation on our 2017 work program and attracted submissions from individual taxpayers, tax practitioners and their representative bodies.

A key focus of this review was individual taxpayers’ awareness and understanding of the PAYG instalments system. Individual taxpayers were unclear as to why they had been entered into the system, its requirements and exemptions, its interaction with the annual income tax system and the support tools available to them. Accordingly, the IGT has
recommended a number of improvements to the ATO’s taxpayer communication and guidance materials as well as internal staff education and support.

Overall, we made 7 recommendations which are made up of 22 parts. The ATO has agreed in full with six recommendations and has partly agreed with the other (or agreement with 21 out of 22 parts).

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Our review into the Australian Taxation Office’s (ATO) employer obligations compliance activities was undertaken in response to concerns raised by stakeholders and is based on submissions from a wide range of stakeholders, including employers, workers, superannuation funds and tax practitioners as well as their respective
representatives.

Given the Government’s focus on reducing the compliance burden, particularly for small businesses, a number of other reviews, considering various aspects of employer obligations, had already been undertaken prior to this review. The ATO had also embarked on a program of improvements. Accordingly, this review seeks to build on existing or developing ATO practices to enhance the tax and superannuation systems as a whole whilst delivering improvements to all relevant parties.

Overall, we made 11 recommendations. Two are directed to Government and 9 were directed to the ATO. The ATO has agreed in full or in part with 7 recommendations and disagreed with two.

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