Background
1. The Australian Taxation Office is responsible for the management of income tax issues for approximately 1400 large public groups and superannuation funds operating in Australia. In 2014–15, the two types of entity contributed $47.6 billion (or 65.5 per cent) of the total income tax receipts collected from companies and superannuation funds.1
In 2014–15, the Australian Taxation Office conducted a pilot to test the effectiveness and viability of large business taxpayers using either a registered company auditor or Australian Taxation Office staff to check eight different types of factual matters identified by the Australian Taxation Office as a potential error or omission in the taxpayer’s annual tax return.2
The External Compliance Assurance Process pilot ran for approximately six months and involved 56 companies, of which 29 companies completed the full process. The cost to the Australian Taxation Office for the pilot and earlier concept design was approximately $1.05 million.
2. An Australian Taxation Office evaluation concluded that the pilot was successful, however, the Australian Taxation Office only endorsed the progressive introduction of the option for review by its own staff.
In the May 2016 Federal Budget, savings for the Government of $5.7 million over four years from 2016–17 were to be achieved by implementing the Australian Taxation Office’s external compliance assurance processes.
Audit objective and criteria
3. The objective of the audit was to assess the effectiveness of the Australian Taxation Office’s External Compliance Assurance Process pilot conducted with large business taxpayers.
To form a conclusion against this objective, the Australian National Audit Office adopted the following high-level audit criteria:
- the Australian Taxation Office effectively assessed the future viability of the External Compliance Assurance Process for large business taxpayers; and
- the Australian Taxation Office effectively conducted the External Compliance Assurance Process pilot.
Conclusion
4. The Australian Taxation Office’s pilot of an external compliance assurance process for large business taxpayers was conducted effectively and demonstrated the potential for better client experiences, cost reductions and increased efficiency, by satisfactorily verifying factual matters in company tax returns. The pilot provided the Australian Taxation Office with a sound basis for conducting external compliance assurance processes for large business taxpayers in the future.
5. A number of key lessons have been identified for future Australian Taxation Office pilots and more widely for pilots in all public sector entities. The two categories of learnings address:
(a) for the Australian Taxation Office, the design and management of pilots of compliance processes; and,
(b) for all public sector entities, the benefits of trialling new ideas through pilots, the value of co-design, and the importance of establishing a sound evidence base for evaluating and reporting the outcomes from pilots.
[ANAO website – conclusion on pilot] [LTN 170, 2/9/16]