The Assistant Treasurer on Fri 21.2.2014, released 3 reports from the Inspector-General of Taxation (IGT), Mr Ali Noroozi. They cover:

  • the ATO’s compliance approach to individual taxpayers – use of data matching. The IGT said data matching was generally positively received where the ATO uses it to assist taxpayers, such as in pre-filling their income tax returns. However, he said stakeholders were concerned that the data used by the ATO was inaccurate and not sufficiently “cleansed” and “validated” before comparison was made with taxpayer-reported information. The IGT identified areas for improvement in relation to the ATO’s management of data matching projects including the need to formalise processes, undertake evaluations of certain projects and re-distribute resources to maximise the benefits. The IGT made 13 recommendations. The ATO has agreed with all of the recommendations with qualification in respect of Recommendation 2.2 concerning remission of shortfall interest charge;
  • the ATO’s compliance approach to individual taxpayers – delayed refunds – income tax refund integrity program (ITRIP). The IGT said that in 2011-12, the ATO’s ITRIP system stopped 109,000 returns rather than the expected 33,000 returns. As a result, Mr Ali Noroozi said a significant number of taxpayers experienced extended delays, sometimes of many months following lodgment. While he acknowledged the ATO’s improvements to the ITRIP, he said the report made 13 recommendations aimed at enhancing the ATO’s processes as well as communication and engagement with taxpayers and tax agents. These recommendations include that the ATO: (i) better differentiate potentially fraudulent claims from mere mistakes; (ii) improve time taken to review cases and provide clearer reasons for any adjustments made; (iii) adopt a differentiated approach to expedited hardship applications; and (iv) streamline its governance processes to respond to unforeseen workloads. The ATO has agreed in full with 12 recommendations and agreed in principle with one; and
  • the IGT’s report on aspects of the ATO’s use of compliance risk assessment tools. The IGT said stakeholders had broadly supported the ATO’s risk-based approach to audits but had also raised some concerns. “Ultimately, the effectiveness of risk assessment tools can only be reliably evaluated if evidence-based metrics are used. Such metrics may include results from random audits, although the ATO does not currently conduct them,” Mr Noroozi said. He said he had recommended that the “transparency” and “willing participation” of taxpayers should be objectively assessed in terms of the adequacy and accuracy of information available to the ATO. Overall, the report made 16 recommendations all of which have been agreed to by the ATO.

[LTN 35, 21/2/14]