Changing nature of taxation complaints – Inspector-General of Taxation releases FY21 Annual Report

Karen Payne, the Inspector General of Taxation (IGTO) and Taxation Ombudsman today presented the Annual Report for her Office saying she was delighted to be able to provide details of performance and achievements from the financial year ended 30 June 2021 (FY21). 

“I want to highlight that the IGTO is here to help the community and improve taxation administration. In the past twelve months we have highlighted and strengthened these objectives,” Ms Payne said. “Our Annual Report provides an overview of what we did in FY21 and how this has helped taxpayers, tax practitioners – and the tax system overall.” 

She recognised that although the COVID-19 pandemic resulted in a significant reduction in the number of complaints received by the IGTO (see Figure 4 below), it was also important to note that: 

  • Consistent number of complaint investigations – the number of investigations commenced by the IGTO (category 3.2 and above) had not changed materially over the last three years (see Figure 5 below).
  • Increased complexity of complaints – the mix of complexity in taxation complaints received has seen a notable change, especially in FY21.
  • Reduction in Category 3.1 cases – Category 3.1 complaint cases have significantly reduced in FY21. These are complaints where the ATO has no record of a formal complaint and, accordingly, they are referred back to the ATO in the first instance to resolve, with IGTO oversight (see Figure 3 below).
  • Increase in more complex cases – Category 4 and 5 complaint cases, which are significantly more complex and time consuming to investigate have also noticeably increased (see Figures 3 and 5 below).
  • prior to the COVID-19 restrictions commencing (February 2020), the total number of complaints received by the IGTO in FY20 was higher than the same period in FY19 (see Figure 4 below).
  • Total complaints have declined during COVID-19 – Since February 2020, complaints received have been declining (compared to the same period in prior years). This is, in part, due to the ATO debt collection areas refocusing resources away from tax debt collection. Debt collection and debt issues have historically been the most common complaint issue raised with our office, accounting for approximately 25% of taxation complaints.
  • ATO debt collection activity is expected to resume – Although complaints about ATO debt collection reduced significantly with the COVID-19 pandemic, the ATO is expected to resume its debt compliance and recovery work, especially as the lockdown restrictions ease and it is anticipated that there will be a corresponding increase in complaints upon resumption.

A bar graph showing the overall trend in IGTO complaint investigations (Categories 3, 4 and 5) from 2017 to 2021

A graph comparing the total complaints received by the IGTO in each month for each of the financial years in 2019 to 2021

A bar graph showing the total complaints received by the IGTO and commenced as an investigation from 2019 to 2021

Feedback from Complainants 

The Annual Report includes excerpts from feedback received by complainants about the IGTO’s own tax complaints investigation service (see pages 40-42), a sample of which is below: 

Excerpt of survey response received from an individual taxpayer in August 2020  
I believe that my complaint was managed and handled extremely well by the IGTO and I’m not able to think of any aspects that could have been improved. I believe that the support and assistance provided by the IGTO was instrumental in achieving a satisfactory outcome with my complaint about the ATO. The satisfactory result was achieved in what seemed to be quite a short amount of time and I greatly appreciated the initial telephone call from the IGTO in which I was able to further explain my complaint and to clarify what had occurred. For good measure, I had also lodged an appeal against the ATO tax decision in the Administrative Appeals Tribunal (AAT), Melbourne – but as a result of assistance from the IGTO I did not need to attend that AAT and was able to withdraw my appeal prior to an initial AAT telephone conference. A great deal of time (and potential expense) was saved for both the ATO and me, as a result of the help of the IGTO. 
Excerpt of feedback received from an individual taxpayer in June 2021 
I am delighted that [IGTO officer was] such a good listener and [IGTO officer] effectively handled the conversation between us. This has enabled me to relay information more effectively and therefore be able to get to the root cause of the situation. [IGTO officer] should be commended for your abilities and certainly deserve a worthy applause. It’s rare to find people with such a good understanding regarding the nuances of the situation. You never lost track of the details in spite of listening to this conversation with me for the first time. I admit I was emotionally charged, but you maintained calm and objective throughout the conversation. Your organization should value your services as you bring something that’s unique and of much value to the customers. 

 

Case Studies 

The report also sets out ten case study summaries to illustrate How IGTO can assist through our complaint investigations (see pages 43 – 50). A sample of these is included below: 

Case study 3 – ATO reverses decision to decline late JobKeeper enrolment and clarifies application of ATO staff instructions  
A JobKeeper (JK) complaint was lodged on behalf of a small travel business, owned and operated by an elderly couple. The revenue of the business was reduced to nil due to the responses to the COVID-19 pandemic. The owners mistakenly believed that, as the business had no employees, it was ineligible for JK. In the course of attending to their end of financial year accounting in late July 2020, a bookkeeper advised one of the owners of his status as an eligible business recipient. Once he became aware, he sought retrospective registration from JK’s inception. This was initially denied by the ATO on the basis that the complainant’s circumstances did not fall within one of four ATO-specified circumstances which warranted retrospective enrolment, including natural disasters, impeded access to records, serious illness or death and system issues. No other facts and circumstances were considered by the ATO.

As a result of our investigation, the ATO accepted that in considering retrospective registration for JK the relevant question is whether granting deferral of the due date for lodgement of the registration forms would be “fair and reasonable”. Such consideration was required by the Commissioner’s instructions to ATO staff in Practice Statement Law Administration 2011/15 Lodgment obligations, due dates and deferrals. This question is to be determined with reference to all the relevant facts and circumstances of an applicant. That is, the exercise of the discretion to allow retrospective registration should not have been confined to determining whether or not one of four ATO-specified circumstances were present in the case. In light of this, the ATO considered the complainant’s facts and circumstances in their totality and allowed the retrospective registration from JK’s inception. 
Case study 4 – ATO reconsiders deceased estate requirements (in light of IGTO review recommendation) and releases monies
A complainant was not able to finalise her daughter’s estate as the ATO required her to provide it with a Letter of Administration (LOA) before it would recognise her as a legal personal representative of her daughter’s estate. However, the complainant could not obtain an LOA. This was because the relevant State law required a minimum amount of assets in the estate to do so and her deceased daughter had left no such assets. She was unsuccessful in persuading the ATO to make an exception, notwithstanding the difficulties and disproportionate financial costs that she would incur if she sought to pursue it further. 

She raised a complaint with the IGTO. During the IGTO’s initial discussions with the ATO, the ATO did not agree to release the monies in the estate to the complainant. 

The IGTO observed that the concerns raised by the complainant were similar to concerns that we had raised in our review of Death and Taxes: An Investigation into Australian Taxation Office Systems and Processes for dealing with deceased estates. The IGTO reminded the ATO of recommendation 7(a) in that review: that the ATO confirms its position on the interaction between State and Territory succession laws and tax laws to confirm which ‘representatives’ of the deceased can represent the deceased for various tax purposes, particularly in circumstances where neither probate nor letters of administration are required by State and Territory succession law. Accordingly, our office requested the ATO to reconsider the complainant’s circumstance in light of its agreement to recommendation 7(a).  

The ATO reconsidered the complainant’s circumstance having regard to recommendation 7 and approved release of the estate monies to the complainant.
Case study 5 – ATO reverses decision to decline late JK enrolment and apologises
A complainant raised concerns in relation to the ATO’s decision that they were not eligible to receive JK payments as they did not apply by the due date. The complainant explained that they submitted a lodgement deferral request for the periods for which they were late, explaining to the ATO that they were dealing with serious family issues at the time which delayed their application. The ATO did not grant the deferral request and the taxpayer subsequently lodged a complaint with the IGTO.  

The IGTO commenced an investigation and asked the ATO to explain why the complainant’s deferral was not granted, as the complainant appeared to be eligible based on the ATO’s relevant public guidance. The ATO escalated the decision to senior officers for review and after reconsidering the complainant’s explanation it was determined that the lodgement deferral should have been granted. As a result, the complainant received backdated JK payments and an apology from the ATO. 

For further information – Contact 

Marjorie Johnston – Wordmakers 

Mobile: 0407 329 430 

[email protected]

About the IGTO 

The Inspector-General of Taxation and Taxation Ombudsman (IGTO) is an independent, Commonwealth statutory agency, established in 2003. The Taxation Ombudsman function was transferred to the IGTO in 2015. The IGTO provides an important safety net service in the tax system. Independent investigation of taxpayer complaints enhances community confidence in the fairness of the tax system and provides assurance to taxpayers in the fairness of their outcomes. This helps to enhance voluntary compliance. The IGTO also provides independent advice and assurance to Government on the taxation administration laws and systems. Since 2015, the IGTO has performed dual roles, which complement each other: 

  • The Taxation Ombudsman provides independent assistance and assurance directly to taxpayers and tax professionals and investigates taxation complaints about the actions and decisions of the Australian Taxation Office (ATO) or the Tax Practitioners Board (TPB). The Taxation Ombudsman, also conducts investigations of actions that have broader community impact or are commonly observed in a number of complaints to identify wider system improvements that address the causal issues.
  • The Inspector-General of Taxation undertakes investigations of actions, systems and taxation laws (to the extent they deal with tax administration matters).