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The Commissioner of Taxation - Annual Report 1999-2000
Commissioner's Annual Report 1999-2000
The Commissioner's Annual Report 1999-2000
This has been the busiest year in the history of the Australian TaxationOffice (ATO). The key driver for this eventful year was the challengewe faced in preparing for and implementing the government's plan toreform and modernise the tax system.
In addition to maintaining our business-as-usual work, we spent muchof the year striving to meet the target date of 1 July 2000-when thebulk of the new tax system was put into place.
Our overall performance in 1999-2000 is reported in more detail in chapters3, 4, 5 and 6, and in the graphs at the end of this chapter. This chapter providesan overview of where we are now with tax reform and addresses some of the pressingissues we face.
There can be little doubt that the introduction of the new tax systemfrom 1 July 2000 involved one of, if not, the most extensive communitychange programs ever tackled in Australia.
The process had to address fundamental behavioural and attitudinalchanges, as well as business practices such as pricing and cash-flowmanagement. Widespread education and technological change programs,at an unprecedented community level, were carried out. And all of thiscentred on a highly emotive and politically sensitive matter-taxation.
Of course, this effort belies the major implementation effort put inby the Australian business community-which showed itself to be morebusiness savvy than many commentators gave it credit for. It also beliesthe massive education and support programs carried out by our staff,the goods and services tax start-up office, and the many business andprofessional organisations that worked in close partnership with usfor the benefit of their members and the community.
Significantly, as part of this, businesses have the benefit of accessto a wide range of skills programs and business support tools we haveprovided. The mail out of our free record-keeping software package,E-record, to around one million small businesses operating on a cashbasis paved the way for the end of the days of shoebox record-keeping.
It is also a credit to the people in the ATO who, I believe, have surprisedthe community and commentators with their innovation and responsiveness.
Some figures as of 30 June are relevant.
Almost 2.9 million applications for Australian Business Numbers had been receivedwith 97 per cent registered, and safety net arrangements in place for the balance.This result far exceeded anyone's expectations and represented a great achievementin its own right and by international standards. In Canada, for example, about65 per cent of businesses (about 1.1 million) were registered when their goodsand services tax began operating on 1 January 1991.
In relation to the new system alone, our tax officers responded tomore than 2.4 million telephone enquiries and about 39 000 written oremail enquiries. More than 12 million publications, fact sheets andbooklets were distributed. More than 40 key rulings covering generalprinciples of the operation of the new tax system were issued. Morethan 200 000 people attended 1000 seminars conducted by us across Australia.Videos were provided to business, and our tax reform website had morethan 100 million hits.
We also started issuing businesses with 137 000 digital signature certificates,which underpin the security of lodging business activity statementson the internet.
The information technology systems we have developed and are continuingto implement to support the new system represent our largest-ever systemsupgrade. Around 30 June of each year, we make about 500 program changesto our processing systems. However, to put the right systems in placefor the tax changes, this year we made eight times as many-in excessof 4000 program changes, involving more than 17 million lines of code.
A key driver in the way we are introducing tax reform has been deliveringthe tax changes in partnership with business and the community.
In all, we have worked through and clarified literally thousands ofissues with charities and non-profit organisations, tourism and hospitalityoperators, the food industry, property and construction, retirementvillages, transport and tax operators, education providers, primaryproducers, tax practitioners, banks and finance organisations, healthproviders, and electronic commerce and telecommunications providers.
This has given us the opportunity to show a new face of tax peopleto the community-one that breaks free of past one-dimensional stereotypes.It also offers the prospect of a new supportive relationship with thosein the business community trying to do the right thing.
This is exemplified by our advisory visits where, after a slow start,we received more than 156 000 requests by 30 June for tax people tocome into a business' premises to help them implement tax changes.
Clearly, the implementation task did not finish on 30 June. Our supportactivities are continuing in the lead up to the first business activitystatements.
I have already indicated that people who have made a genuine attempt to implementthe new tax system will continue to see the supportive face of the ATO overcoming months. Where inadvertent errors are made, our focus will be on correctingthe error rather than penalising the business. We have no desire to see viablebusinesses put out of business through a debt with us caused by such a mistake.Our policies and actions will reflect that.
Nevertheless, a stated purpose of the new tax system is to provide a more robustrevenue base for the community. As such, a changing compliance landscape isemerging under the new system. For example, under business tax reform, specificmeasures have been introduced or foreshadowed. These include:
- company tax rate reductions (from 36 to 34 cents in the dollar for 2000-01,and to 30 cents in the dollar for 2001-02);
- removal of accelerated depreciation and a shift to an 'effective life'regime;
- tightening the pre-payment rules, particularly relating to tax shelters;
- quarantining losses from non-commercial activities;
- restricting alienation of personal services income;
- measures preventing loss duplication and value shifting;
- consolidation of corporate groups; and
- a simplified tax system for small business.
In addition, however, there are improvements coming from the overall designintegrity of the first wave of reform. A challenge we face is to ensure theseintegrity measures become operational features on the new tax landscape. Itis important that we do not allow practices and habits contrary to the intentof these measures to develop unchecked.
This means we need to have in place a comprehensive and targeted mix of strategiesfor dealing with them in accordance with our compliance model.
In response to the Review of Business Taxation's recommendations on reformingthe tax design process, we have initiated a project to build, in conjunctionwith other stakeholders, an integrated tax design capability. Emphasising thestrategic importance the ATO attaches to integrated design, we have identifiedthat capability as a key high-level process that is central to our corporatecoherence and effective administration.
Our vision is for sustained excellence in the integrated design and deliveryof the Australian taxation system. Put simply, we need to fully integrate thepolicy, legislative and administrative considerations of tax system design,both within and between projects, producing the sets of experiences taxpayerswant.
The project's task is to distil, from the vision of an integrated tax designcapability, the discrete pieces of work that need to be carried out, and toprogress them in a way that is consistent with the principles of good design.
Because there are many stakeholders in tax system design, the project has establisheda sponsors group with senior-level represen-tatives from the three key stakeholderagencies-the ATO, Treasury and the Office of the Parliamentary Counsel. Thereis also a representative, Mr John Ralph AO, from the business community, andthe recently formed Board of Taxation has been invited to nominate a representative.
The project is establishing small design teams to focus on the developmentof particular parts of the required capability, and encouraging those teamsto prototype their designs with likely community of users before seeking toembed them in normal work practices.
We have taken a number of steps to improve the intelligence we gatherabout potential compliance risks and our timeliness in identifying whatis occurring in the marketplace.
Potentially rich new sources of intelligence will flow to us underthe new tax system.
The Australian Business Register itself is a new source of intelligence.One of our first priorities, therefore, will be to identify any mismatchesbetween the Register and records of businesses lodging income tax returnsand meeting other tax responsibilities, including subsequent lodgmentof business activity statements. The Register will also assist us intracing businesses with outstanding debts.
Of course all of this points to the need to do the work necessary toensure the ongoing integrity of information on the Register.
will be a new source of up-to-date trading information on businesses.This will enhance our ability to ensure people in the system are meetingtheir full responsibilities. Importantly, it will help us in our shifttowards dealing more and more with issues as they are emerging ratherthan after they are ingrained in day-to-day practices.
The statement provides a new opportunity to explore data matching ofincome and expense data returned in it against income tax return data.Useful Ôearly warning' signs in relation to income tax issues will becomeavailable to us.
What we have called a risk-rating engine has been developed to providea risk analysis and case selection tool that can rapidly analyse andassess lodgment data from business activity statements against a rangeof risk indicators. This will automatically generate casework for fieldoperatives and our new outbound call verification centres. Findingsfrom casework will be used to adjust the risk criteria.
We will have enhanced information to identify expected business normsfor particular industries, reflecting current trading conditions. Salaryand wages expenses can be compared to turnover. The ratio of goods andservices tax input tax credit claims to turnover can be monitored.
A range of other information will help us identify cases where questions needto be asked.
As part of our gearing up for the goods and services tax we have put in placea substantial field presence that is widely distributed around Australia.
Field staff have initially focused on supporting business in the implementationof the new tax system through our successful program of advisory visits.
As I mentioned, this support program will continue with an emphasis on goodrecord-keeping and cash-flow management leading up to the lodgment of the firstbusiness activity statements.
We are also making plans to build on this advisory visit program as a vehiclefor educating small business about the proposed simplified tax system that willtake effect from 1 July 2001 under business tax reform.
At the same time our field operations will progressively be moving beyond theadvisory visit program to an expanded compliance role in ensuring businessesare meeting their goods and services tax and pay as you go obligations.
Businesses have had a big task in making the transition. Our field people areonly too well aware of this from their experience in supporting business inthe transition.
As part of the move to an expanded compliance role, we are finalising plansfor a more integrated field approach in the small business market.
Aggressive tax planning remains a significant issue for the community. We are,unfortunately, continuing to see intense activity amongst those who would seekto devise, promote, market and participate in aggressive tax planning. Thisis despite our clear and unambiguous messages and activity over recent years(an expanded report on our work in this area begins on page 79).
Any attempts to check aggressive tax planning will fail unless those who profitfrom devising and promoting these arrangements see very real prospects of financialand other downsides for themselves.
During 1999-2000, I announced our strategy to examine those engaged in devisingand marketing aggressive arrangements. Our examinations will include an increasingfocus on those structured finance houses that have a history of involvementin aggressive tax planning.
It is the growth of a highly competitive, entrepreneurial promoters' marketthat, in our view, has been the most significant driver of the growth in aggressivetax planning. The competition in the market has also stretched the boundariesof arrangements, with some edging to the fraudulent.
While many in this industry would argue that they are simply responding tothe demands of their clients, we equally see situations where participants havebeen led to invest based on trust in the proposals marketed to them. Examplesof people investing their retirement savings in what were presented as legitimatebusiness ventures, even presented as being good for the country, are not uncommon.
As we enter the era of the new tax system, we would feel much more comfortablein settling existing cases if the new landscape included new downsides for promotersand marketers of aggressive tax planning products.
In our view, a more immediate prospect for financial detriment to promotersand marketers is the single most important lever in putting a check on aggressivetax planning. It is relevant that the Senate Economics References Committeealso recommended we examine the scope for administrative penalties on promoters.We are actively pursuing this recommendation.
In their report on our management of tax debt collection (Audit Report No.23, 1999-2000) the Australian National Audit Office reported the following;
ATO research shows that there are three professional groups (lawyers,accountants and medical practitioners) with an average level of tax debt thatis nearly five times the national average (barristers nearly ten times thenational average). Whilst the average level of debt per occupation is only2.6 per cent, over 20 per cent of taxpayers in these professions are tax debtors.
It is important to stress that the great majority of taxpayers in these professionsmeet their obligation under the law.
At the other end of the scale, however, there are a number of individuals whooften report high levels of income and who, on becoming bankrupt, leave theATO as the sole or the most significant creditor. It is difficult to escapethe conclusion that some of these people use insolvency to avoid their tax obligationsto the Australian community. Some become bankrupt for a second or third time,owing hundreds of thousands of dollars in tax on each occasion.
The following case studies illustrate the issues we confront.
Case study A
Dr Y was made bankrupt in 1996 and filed his own petition for bankruptcyin 1998, owing tax of $100 000 on the first bankruptcy and $407 000 onthe second. During 1993 to 1997, this doctor reported a taxable incomein excess of $100 000; however, soon after entering his second bankruptcyhis income fell to a level below which contributions must be made. Henow has a new debt with the ATO.
Case study B
Mr A is a barrister. He has not paid tax during his working life. In1994, he became bankrupt and the ATO was the sole creditor for just under$1 million. His failure to make contributions, as required under the BankruptcyAct 1966, escalated the original debt to $1.4 million. This year, Mr Afiled his own petition for bankruptcy for a further $500 000, so his debtto the Australian community is about $2 million in a period of 10 years.This barrister has not paid court-imposed fines for non-lodgment of taxreturns, and he has failed to comply with a section 264 notice askingfor information.
Case study C
Mr W is a barrister with a current tax debt of nearly $2 million; hereports a taxable income of more than $500 000. Mr W's wife has extensiveproperty holdings; however, he has not acquired any new assets since hislast bankruptcy in 1994. At that time, a dividend of 25 cents in the dollarwas returned to the ATO.
Case study D
Mr E is a successful barrister who reports a taxable income of about$700 000 annually; however, in 1999 he filed his own petition for bankruptcy,owing more than $1 million in tax. In the month prior to filing his petition,all his credit card debts and any other debts were paid, so the ATO wasthe sole creditor. This individual was last bankrupt in 1994 . He nowpays contributions of about $15 000 a month to his trustee and is keepingup-to-date with his current liabilities. The taxpayer has no assets inhis own name.
In my September 1999 address to the American Club, I announced my intentionto include, in this annual report, the names of taxpayers with a substantialoutstanding debt and a history of what I described as 'playing hardball' and'serial bankruptcy'. However, I have subsequently received advice that doingso would be outside my legal powers.
We will however be increasing our focus on persistent tax debtors. In December1997, we established a project focused on the legal profession. This projectis being upgraded and extended to other professions. Our strategies include:
- gathering real-time intelligence on persistent debtors and related entities;
- enhancing our focus on outstanding returns and overdue accounts;
- increasing audit activity
- having more active involvement with trustees including the use of oralexamination under section 81 of the Bankruptcy Act 1966;
- examining possibilities for legislative change in partnership with otheragencies;
- working with the Centre for Tax System Integrity;
- prosecuting offences; and
- sharing information with others including State and Federal agencies andpeak professional bodies with a view to finding leveraged solutions.
We will also use the information gathered to determine whether to recommendthe introduction of reporting or withholding arrangements for payments to certainprofessional groups. As a result of tax reform, the income tax law providesa new legislative framework for transaction reporting that is intended to beused in areas where non-compliance is entrenched. The main objective of thenew systems is to ensure that business participants meet their tax obligationsand that any current or future competitive advantage resulting from non-complianceis minimised. The legislative framework applies to certain payments as specifiedby regulation. Similarly, the Pay As You Go withholding provisions provide fornew categories of payments to be added by regulation.
We face many choices as a community. Through our elected representatives inParliament we have chosen to implement a new tax system. There is a relatedchoice for us that cannot be determined by votes in Parliament.
That choice is about the value we place on our tax system and how we chooseto demonstrate and reinforce it. In essence these issues go to culture, prevailingattitudes and accepted norms.
We have adopted a new tax system. But we run the risk that old attitudes reflectedby at least some of those involved in the compliance issues outlined in thisoverview will hold us back from achieving the full potential of that new system.
Our tax system is important to our community. It is about education, healthtreatment, support for those in need and roads and other community assets.
But while acknowledging that, can we do more to reinforce its value to us and,in doing so, put a check on behaviour that undermines it?
There are tangible, everyday, moves we can make as a community to reinforceand symbolise the community responsibility that is taxation, and the value thatcommunity leaders place on it is an area that deserves greater debate and explorationas a fundamental plank for the effective operation of our tax system and community.
To take one example, many professional and other bodies have notions of 'fitand proper' person to underlie membership and yet many do not have any notionof meeting tax responsibilities, even at the most basic level of paying acknowledgedtaxes, as an indicator of being such a person.
There is, I believe, an opportunity for community leadership by these bodiesreviewing their position.
I am sure there are many similar leadership opportunities available.
A visual overview of our performance during the financial year begins on thefollowing page.
Finally, I wish to commend my staff. Throughout the year, I have continuedto be impressed by and proud of the dedication and personal effort they haveput in to achieving our business outcomes and to helping the community duringthe transition to the new tax system.
In reading this report, you will gain some appreciation of the challenges theyfaced to meet the extra demands of major tax reform.
I congratulate and thank them for their superb work over the past year.
Michael Carmody Commissioner of Taxation
|Revenue collected by the ATO on behalf of the community continuedto grow strongly, following the pattern of the last few years. The largeincrease since 1998-99 can be mainly attributed to the ATO taking on theexcise function.|
Figure 1.1 ATO revenue collections
|Company collections also continued to grow.|
Figure 1.2 Company collections
|For most of the past decade, total and company tax collectionshave grown at a rate greater than GDP.|
Figure 1.3 Growth in company tax, total ATO collections and GDP
The Australian Taxation Office (ATO) is responsible for managing and shaping the systems that support and fund services for Australians and give effect to social and economic policy through the tax system.
In recent years, the ATO has also reviewed and addressed broader issues affecting the taxation system, such as aggressive tax planning, globalisation, the cash economy and the internet.
Throughout 1999-2000, the organisation played an important role in developing and delivering the systems and education programs needed to implement the government's plan to reform and modernise the Australian tax system.
The ATO also supports the delivery of community benefits, having roles in other services, including:
- the Australian Valuation Office;
- the Development Allowance Authority;
- private health insurance;
- family assistance; and
- cross-agency support, such as working with Centrelink to reduce benefit fraud, and with the Australian Bureau of Statistics to reduce the cost to the community of collecting statistics.
Each year, the organisation's efforts are guided by the Taxpayers' Charter, the related compliance model and the current ATO plan, as well as the business plans developed by individual areas. Important supporting documents include agency agreements, internal audit plans, occupational health and safety policies and agreements, workplace diversity plans and a code of conduct.
The ATO is part of the Treasury portfolio. The Commissioner of Taxation, Michael Carmody, leads the organisation and is responsible for administering all taxation laws. The senior executive includes three Second Commissioners. There is also a group of National Program Managers, which includes Deputy Commissioners, First Assistant Commissioners, a Deputy Chief Tax Counsel and a Chief Financial Officer. The ATO employs about 19 000 staff. More information on the Commissioner's functions and powers appears on page 137.
The ATO is structured into 12 divisions known as lines (see figure 2.1). Each line focuses on a major market segment, such as individuals, small business and large business, or on an aspect of internal support, such as information technology and financial support. The structure also includes the Australian Valuation Office.Figure 2.1 ATO organisational structure, 30 June 2000
With the exception of the creation of the ATO Production Management line in late June 2000, there was little change to the organisation's core structure during the year. There was, however, considerable cross-line movement of staff and the induction of more than 4000 new employees (this was mostly to cope with implementation of tax reform). An overview of staffing begins on page 97.
As of 30 June 2000, the lines and their main responsibilities were as follows.
Large Business and International manages and shapes the tax systems as they apply to large business and associated key individuals in domestic and global markets, and ensures that Australia gets its fair share of tax. It develops the ATO's insights into the: tax implications of global business; interaction of Australia's tax system with those of other countries; international tax policy and practice; degree of alignment between the tax system and industry policy; how the tax system operates in each industry segment; flow-on effect of large and international business activity for the rest of the tax system; where the balance lies between the interests of the line's clients and those of the community; and understanding and influencing compliance behaviour.
In the light of implementing the new tax system, Small Business is becoming increasingly market-focused by designing and operating its system to suit the specific needs of various stakeholder segments. The line manages and administers the income tax system for business taxpayers. It works with small businesses and their advisers to help and support them to meet their income tax, fringe benefit tax and employer withholding obligations while maintaining the integrity of the system. Small Business also provides a wide range of services to support all business taxpayers including registration, debt and lodgment, payment, taxpayer enquiries and the endorsement of income tax exempt charities and deductible gift recipients.
Individuals Non Business manages and maintains that part of the income tax system dealing with individual taxpayers who are not in business. It has a client base of approximately eight million taxpayers, 24 000 tax agents and a range of other intermediaries. Given the diversity of tax matters that affect its clients, this line strives to assist individual taxpayers to understand their requirements and, where necessary, to help them report their circumstances. Its activities include service, compliance, processing, benefits distribution, fringe benefits tax, the savings bonus for older Australians and the private health insurance rebate.
Superannuation administers and shapes the system responsible for compliance with the current superannuation tax laws. This includes: legislation that deals with the taxation of superannuation contributions, investment income and benefits, and the superannuation surcharge. The line administers the reasonable benefits limits system, self-managed funds, the lost members register, unclaimed superannuation monies (where states do not have appropriate legislation) and the superannuation holding accounts reserve. It also administers compliance with the superannuation guarantee legislation and collects the relevant charge from employers who fail to make required contributions to complying funds.
Goods and Services Tax is responsible for designing, developing and implementing the new system to collect tax on the supply of goods and services. To fulfil this role, the line is establishing appropriate legislative infrastructure and support mechanisms, preparing a professional and well-trained workforce, and implementing a comprehensive community and business education program. The line also administered the sales tax system, which ceased when the goods and services tax was introduced on 1 July 2000.
Excise manages and shapes the commodity-based revenue and business payment (transfer) systems of the ATO. It is responsible for collecting nearly $20 billion in excise per annum and administering the $1.5-billion-per-annum, off-road diesel fuel rebate scheme. As part of the tax reform program, this scheme was extended to marine and rail transport from 1 July 2000. The line also manages other product-based tax reform projects including the wine equalisation tax, the on-road diesel and alternative fuel grants scheme, the fuel sales grants scheme, the goods and services tax special petroleum credit, and alcohol and tobacco reform. From 1 January 2001, the line will administer the product stewardship (oil) rebate on behalf of Environment Australia. It will also administer the energy grants scheme, which will replace the diesel fuel rebate and diesel and alternative fuel grants schemes, from 1 July 2002.
The Office of the Chief Tax Counsel provides professional leadership by settling the ATO view on all significant issues arising in requests for advice, litigation and the like. This view is often disseminated through public rulings. This line manages the public rulings program. It ensures the integrity of the tax system through strategic litigation on behalf of the ATO. It also ensures robust legislation that delivers the government's taxation agenda, and manages the ATO's parliamentary and ministerial services. It acts as corporate assurer for quality in tax-professional decision making in the ATO. In this latter role, the line creates a supportive environment that includes provision of electronic support tools such as professional databases, skilling and professional development, and recruitment and placement of graduates.
ATO Corporate supports the day-to-day operations of the ATO and advises on strategic direction. It comprises Corporate Directions, Shared Services, the Business Development Unit, Electronic Information Services, the Internal Assurance Branch, the Problem Resolution Service and the SES Support Unit. The Problem Resolution Service plays a key role in the complaints resolution process described in the Taxpayer's Charter.
Information Technology Services plans, designs, builds and maintains the ATO's corporate business systems, and plans for and manages the provision of information technology and telecommunications services.
Financial Services provides the ATO with effective financial systems for both administered and departmental items. The line is concerned with safeguarding the ATO's financial integrity and providing support for effective financial decision making through maintaining the appropriate policy, revenue analysis and accounting frameworks.
The Office of the Commissioners comprises the Reform Program Office, the Business Tax Reform Implementation Project Team and Centres of Expertise. The Reform Program Office ensures an integrated and coordinated approach to ATO initiatives relating to the government's plan to reform and modernise the Australian tax system. It provides explicit assurance processes for the ATO's reform work, and ensures that the capabilities delivered by projects align with the strategies and directions set by the organisation's executive. It also monitors all reform projects and seeks to avoid duplication in the development of information technology systems.
Created in late June 2000, ATO Production Management provides the organisation with a coordinated approach to planning and managing input and output processes related to money, correspondence and data. The need for such a line was prompted by the implementation of tax reform and the enormous increase in transaction volumes that occurred during the year (up by 350 per cent). The line has operational responsibility for mail processing, correspondence, data capture, mailpay, end-of-year processing for pay-as-you earn, processing of returns for income tax and fringe benefits tax, and processing of activity statement exceptions. It also manages short and long-term resourcing, priorities and contingencies to ensure internal clients' needs are met.
As stated in the Portfolio Budget Statements 1999-2000 Treasury Department, the ATO has an overall outcome of 'strong, sustainable growth and the improved wellbeing of Australians'.
As Output Group 1.1, the ATO has a single specific outcome-Outcome 1-which is 'effectively managed and shaped systems that support and fund services for Australians and give effect to social and economic policy through the tax system'.
In this context, 'effectively managed and shaped' means the degree to which the ATO manages and shapes compliance, costs of compliance and community confidence within the taxation, excise and superannuation systems, while doing so as an efficient and adaptive organisation.
The effectiveness measures are:
- maintain overall tax compliance by:
- collecting budgeted revenue;
- maintaining overall compliance level, including improved compliance in 'hot spots', such as the cash economy, aggressive tax planning and international issues;
- increasing lodgment and payment compliance;
- reducing overdue debt; and
- increasing the percentage of obligated employers who meet superannuation guarantee requirements;
- minimise compliance costs by:
- minimising client compliance costs;
- maintain community confidence by:
- ensuring the community perceives the ATO as an organisation that provides a quality service, treats taxpayers fairly, respects taxpayers' rights and achieves good levels of compliance with the laws; and has confidence in the ATO's administration of the tax and superannuation systems; and
- meeting commitments to the Taxpayers' Charter;
- be an efficient, adaptive organisation by:
- reducing the ATO's costs to administer tax and superannuation systems; and
- improving the view that key stakeholders have of the ATO's adaptability.
As stated in the Portfolio Budget Statements, there are four outputs that contribute to the ATO's single outcome. These are:
- output 1.1.1-provide revenue
- output 1.1.2-provide transfers;
- output 1.1.3-contribute to policy advice and legislation; and
- output 1.1.4-support other agencies.
Quality and quantity performance measures are linked to each output, enabling the ATO to assess the degree to which its outputs are met. Reporting against these measures begins on page 23.
Figure 2.2 shows the ATO's current outcome and output structure, as noted in the Portfolio Budget Statements. Figure 2.3 shows how this structure relates to the former program structure.Figure 2.2 ATO outcome and output structure, 1999-2000
Figure 2.3 Relationship between program and outcome structures
|Program management budgeting ||Accrual budgeting |
Program 4-Australian Taxation Office
Manage and shape systems (taxation, Child Support Agency, superannuation and Australian Valuation Office) that support and fund services for Australians through increased compliance, reduced compliance costs, improved community confidence and being an efficient and adaptive organisation.
Subprogram 4.1-Income and Other Taxes (Large Business and International, Small Business, Individuals Non Business, Superannuation, Goods and Services Tax, and Excise)
Subprogram 4.2-Child Support Agency (this moved to the Department of Family and Community Services in October 1998)
Subprogram 4.3-Corporate Support (the Office of the Chief Tax Counsel, Corporate Services, Information Technology Services, Financial Services and the Office of the Commissioners)
Subprogram 4.4-Australian Valuation Office
Effectively managed and shaped systems that support and fund services for Australians and give effect to social and economic policy through the tax system.
Output Group 1.1-Australian Taxation Office
This chapter reports the ATO's performance in 1999-2000 in relation to our single outcome and its four related outputs, as described in chapter 2 and in the Portfolio Budget Statements 1999-2000 Treasury Department.
The Commissioner's overview (chapter 1) highlights some major overall results. Chapters 4, 5 and 6 explain performance relating to tax reform, Australian Business Number registrations and aggressive tax planning, respectively.
Results in this chapter are presented in prose and, as appropriate, tables and figures.
Some measures apply to more than one output-for example maintaining community confidence and meeting service standards in the Taxpayers' Charter. Reporting on these measures has been consolidated, and is presented later in the chapter.
The chapter also covers performance in relation to social justice and equity, and purchaser/provider arrangements and the use of resources.
Output 1.1.1-provide revenue The performance measures relating to output 1.1.1-provide revenue-are:
- quantity-maintain the current standard for tax collected as a percentage of estimate; and
- quality-maintain the current standard for percentage of tax collected on time; reduce the level of overdue debt as a percentage of total collectable debt; maintain the technical quality of advice; maintain service standards of the Taxpayers' Charter; improve professionalism; and maintain community confidence.
These measures cover direct and indirect revenue.
The next three sections discuss performance in relation to revenue and debt collection1, and the cash economy. Since the Portfolio Budget Statements 1999-2000 were published, the diesel fuel rebate has changed from a revenue offset to an outlay. Its results are reported here instead of under Output 1.1.2.
1The ATO now uses accrual accounting for its financial statements and Budget estimates. Budget estimates were previously based on cash. The financial statements are based on the economic transaction method of accrual accounting, in accordance with advice from the Australian National Audit Office. Alternatively, the Budget and Portfolio financial statements, incorporated into the whole-of-government accounts, are based on the tax liability method of accrual accounting. Therefore, to allow for consistent analysis of trends over time, cash figures have been used to report revenue and debt collections.
Reporting on other measures appears as follows: technical quality of advice, page 14; community confidence and service standards in the Taxpayers' Charter, page 47; and professionalism, page 51.
Total cash collections in 1999-2000 were $151 714 million, an increase of $9 983 million or 7 per cent over the preceding financial year. This includes $1 514 million in diesel fuel rebates. In 1998-99, these rebates were estimated as outlays, so were not included in collections.
Significant growth occurred in some major areas: gross pay-as-you-earn, up 7.5 per cent; collections on assessment (including provisional tax), up 6.6 per cent; companies, up 17.4 per cent; prescribed payments system, up 11.8 per cent; petroleum resource rent tax, up 182.6 per cent; and individuals' refunds, up 6.2 per cent.
Higher pay-as-you-earn collections were linked to growth in employment and salary and wages. The results included $656 million collected under the higher education contribution scheme (see also page 38). This amount was transferred to the Department of Education, Training and Youth Affairs.
Collections on assessment were higher than expected because of stronger than anticipated growth in provisional income, an increase in revenue relating to prior year returns, and significant increases in penalties and debt amendments.
Company collections were significantly higher than forecast. Two factors influenced this-stronger than expected growth in company profits and a lower than expected take-up rate (by early-December balancing companies) of deferred instalments under the pay as you go transitional arrangements.
Higher collections in the prescribed payments system reflected the considerable activity in residential construction leading up to the introduction of the goods and services tax.
Growth in petroleum resource rent tax reflected the sustained, high world oil prices throughout the year, compared to 1998-99, and higher domestic production activity to take advantage of the higher oil prices.
Although individuals' refunds increased during 1999-2000, they fell considerably short of the Budget estimate. The shortfall was attributed to lower than expected growth in existing deduction and rebate items. There were slightly fewer than expected claims for the savings rebate and the 30 per cent private insurance rebate. There was also a slight decline in lodgment performance.
Compared to the May 1999 Budget, overall total net collections (including excise but excluding collections for the alcohol, petroleum and tobacco surcharges, and higher education contribution scheme) were $5 008 million, or 3.6 per cent, higher than forecast. Collections of income tax from individuals, companies and petroleum resource rent tax exceeded Budget estimates, while collections from superannuation funds and excise (excluding surcharges) fell short.
Lower than predicted collections from superannuation funds were mainly attributed to negative capital gains growth, which resulted in lower balancing payments. The overall lower than expected collections from excise were due to a fall in tobacco collections, resulting from the introduction of the 'per stick' taxation method (see also page 58). This fall was partly offset by strong crude oil collections, reflecting sustained high oil prices and production. Diesel fuel rebate claims were lower than expected.
Tables 3.1 to 3.6 and figures 3.1 to 3.7 summarise the ATO's tax collections in 1999-2000 and compare these results to those in previous financial years.
Figure 3.1 Total ATO revenue collections, by year, 1990-91 to 1999-2000
Table 3.1 Total ATO revenue collections, by head of revenue, 1990-91 to 1999-2000
(a) Includes higher education contribution collections.
(b) Includes child support trust account receipts.
(c) Includes alcohol surcharge on sales tax.
(d) Includes refunds of child support trust account receipts.
(e) Includes superannuation surcharge.
(f) Includes superannuation surcharge and excise including surcharges, but excluding diesel fuel rebates.
Figure 3.2 Revenue collections as a percentage of total collections, 1998-99 and 1999-20001998-1999-$141.7 billion
Figure 3.3 Revenue collections, by head of revenue, 1990-91 to 1999-2000
Gross collections on assessment
Figure 3.4 Revenue collections from other taxes, by tax, 1990-91 to 1999-2000
Prescribed payments system
Petroleum resource rent tax
Fringe benefits tax
Figure 3.5 Total refunds of revenue, 1990-91 to 1999-2000
Table 3.2 Amount refunded, by tax, 1994-95 to 1999-2000
Rounding may cause totals to differ from the sum of the components.
(a) Includes refunds of collections for Medicare levy in all years and child support trust account receipts from 1994-95 to 1997-98.
(b) Excludes Commonwealth on-Budget departments and authorities.
(c) Excludes the impact of diesel fuel rebates.
Figure 3.6 Capital gains tax collections, by type, 1989-90 to 1998-99 income years
Table 3.3 Capital gains tax collections, overview, 1996-97 to 1998-99
Capital gains are included as assessable income in tax returns; tax paid on capital gains is estimated from this information. It is not a separate revenue line. Only taxable records are included in these calculations.
(a) Revised figures.
(b) Preliminary figures.
Figure 3.7 Sales tax collections as a proportion of total collections, by broad business type, 1990-91 to 1999-2000 (including excise from 1998-99 onwards)
Collections by broad business type 1990-91-$9.4 billion
Collections by broad business type 1999-2000-$15.5 billion
Table 3.4 Sales tax collections, by broad business type, 1990-91 to 1999-2000
(a) Excludes 15% alcohol surcharge collections.
Table 3.5 Comparison of actual 1998-99 results, 1999-2000 Budget estimates and actual results
Rounding may cause totals to differ from the sum of the components.
(a) For Budget purposes actual collections exclude amounts of $600 million in 1998-99 and $656 million in 1999-2000, collected through the higher education contribution scheme and appropriated to the Department of Education, Training and Youth Affairs.
(b) Includes provisional tax.
(c) Includes reportable payments of $2 million in 1998-99 and $3 million in 1999-2000.
(d) Includes an estimated amount for Medicare levy of $4 180 million in 1998-99 and $4 350 million in 1999-2000.
(e) Includes collections from superannuation surcharge of $286 million in 1998-99 and $577 million in 1999-2000.
(f) Excludes collections from Commonwealth on-Budget departments and authorities of $293 million in 1998-99 and $284 million in 1999-2000.
(g) Includes sales tax collections by the Australian Customs Service of $762 million in 1998-99 and $831 million in 1999-2000.
(h) Excludes alcohol sales tax surcharge collections of $998 million in 1998-99 and $1 036 million in 1999-2000.
(i) Excludes excise surcharge collections on petroleum of $2 545 million and tobacco of $3 061 million in 1998-99, and petroleum of $2 564 million and tobacco of $3 139 million in 1999-2000.
(j) Excludes diesel fuel rebates of $1 463 million in 1998-99, which was estimated as an outlay.
Table 3.6 Collections, by head of revenue, by month, 1999-2000
Rounding may cause totals to differ from the sum of the components. Figures in brackets are negative amounts.
(a) Includes an estimated amount of $656 million collected through the higher education contribution scheme and appropriated to the Department of Education, Training and Youth Affairs.
(b) Includes reportable payments of $2.8 million.
(c) Includes an estimated amount of Medicare levy of $4 350 million.
(d) Includes superannuation surcharge collections of $577 million.
(e) Includes an amount of $1.5 million for mining withholding tax.
(f) Excludes collections from Commonwealth on-Budget departments and authorities of $284 million.
(g) Includes sales tax collections by the Australian Customs Service of $831 million and alcohol sales tax surcharge of $1 036 million.
(h) Includes excise surcharge on petroleum of $2 564 million and tobacco of $3 139 million.
Debt collection contributes significantly to the ATO's overall performance, and the efficient and effective management of relevant cases is a vital component of improving the community's confidence in the organisation. Overall, we aim to reduce debt, collect debt more quickly, improve cost effectiveness and achieve higher standards of quality.
Throughout the financial year, we continued to refine our debt collection processes. Risk-based debt management was further developed through changed work practices and organisational arrangements. These efforts apply the compliance model, and are regarded as best practice and are being emulated in the commercial world. Development of these and other initiatives-including an enhanced case management system, a new penalty regime and accounting system, and a computerised receivables management design-created the platform and infrastructure needed to successfully launch the new tax system.
During 1999-2000, we introduced a general interest charge for four collection systems-pay-as-you-earn, prescribed payment system, sales tax and reportable payments. We also moved to a running balance account, which issues automatic tax statements to clients.
These initiatives reinforced the need for clients to pay tax on time, and their adoption led to an increase in the number of cases referred for collection (up by 78 per cent to 1 049 337). The value of new cases increased by $2.09 billion (11 per cent). Most of the new cases were low in value-involving general interest charges only, which are linked to late payment of primary tax.
During the same period, the number of finalised cases rose by 331 972 (60 per cent), and the value of finalised cases rose by $30 million (0.2 per cent).
In terms of ATO staffing, the cost of debt collection for 1999-2000 was $0.03 cents per dollar collected. The rate for finalising cases increased by 4.7 cases per full-time equivalent employee (up by 36 per cent).
On 30 June 2000, there were 525 735 debt cases on hand, up by 50 per cent over the previous financial year. Disputed debt on hand increased by 9 per cent from $4.3 billion in 1998-99 to $4.7 billion in 1999-2000. Disputed debt accounted for 55 per cent of total outstanding debt.
Collectable debt increased by 22 per cent or $630 million.
Table 3.7 summarises our overall debt collection results for the last four years.
Table 3.8 summarises the results in terms of collectable debt as percentages of total collections.
Table 3.7 Debt collection results, 1996-97 to 1999-2000
1. This amount excludes $0.03 billion tax not due for payment at 30 June 1997.
2. This amount excludes $0.04 billion tax not due for payment at 30 June 1998.
3. This amount excludes $0.04 billion tax not due for payment at 30 June 1999.
4. This amount excludes $0.07 billion tax not due for payment at 30 June 2000.
Table 3.8 Collectable debt compared to total collections, 1996-97 to 1999-2000
The total collections amount is net of refunds and excludes Child Support Agency collections.
1. Collectable debt has been adjusted to reflect accounting modifications and extraordinary collection factors that increased the level of collectable debt reported. The adjustment allows for a direct historical comparison with the percentage of collectable debt to total collections for previous years.
Our cash economy project aims to ensure that recipients of cash income meet all of their tax obligations relating to that income, or that their omissions are detected and brought to account by the ATO. This will ultimately benefit small to medium-sized businesses by enabling them to compete on an equitable taxation basis. Our compliance model guides project work.
Initial key measures of success were a 5 per cent increase in lodgment of tax returns and a 20 per cent increase in income declared in identified high-risk cash industries over the two years to 1998-99, and an overall improvement in community attitudes towards the cash economy. These measures were attained.
Our focus this year was to maintain the gains previously achieved, while ensuring the successful implementation of the new tax system.
In the relevant cash industries and in relation to 1998-99 income tax returns:
- lodgments were up by 3 per cent on the previous year, and a total of 14 per cent since the project began; and
- the total amount of business income declared was up by 7 per cent, and a total of 29 per cent since the project began.
Results from the 1999-2000 community perceptions survey (see also page 35 and 50) showed:
- the percentage of respondents who had heard about what the ATO is doing to stop tax evasion on cash earnings increased from 36 per cent to 40 per cent;
- 78 per cent of people disagreed with the statement, 'It is okay for business people who don't pay tax on cash earnings, because these days staying in business is tough'; and
- the percentage of respondents who believe it is wrong not to declare cash earnings increased by 4 per cent to 72 per cent.
Output 1.1.2-provide transfers
The performance measures relating to output 1.1.2-provide transfers-are:
- quantity-monetary value of expenditure, outlay, transfers and refunds; and number of obligated employers. The number of funds regulated is to be reported from 2000-01; and
- quality-maintain percentage of monetary value collected on time; maintain service standards of the Taxpayers' Charter; maintain technical quality; and achieve measures specified in memorandums of understanding with other agencies.
These measures cover the movement of moneys that are not classified as revenue.
Since the Portfolio Budget Statements 1999-2000 were published, the diesel fuel rebate has changed from a revenue offset to an outlay. Its results were reported in the previous section.
Reporting on other measures appears as follows: technical quality of advice, page 14; and service standards in the Taxpayers Charter, page 47.Tax expenditures
Tax expenditures are the financial benefits that individuals and businesses derive from taxation concessions of various kinds. Tax exemptions, tax deductions, tax rebates or reduced tax rates usually deliver these concessions.
In 1999-2000, the ATO administered an estimated $22.4 billion in tax expenditures, compared to $21.2 billion in the previous year. These figures include items for which the value of the tax expenditure can be quantified.
The superannuation guarantee exists to ensure that as many Australians as possible have access to superannuation. If an employer fails to contribute the statutory minimum level of superannuation for an employee, the ATO will establish the employer's liability (superannuation guarantee charge) and transfer collected amounts to a superannuation fund chosen by the employee. In 1999-2000, the rate for the guarantee was 7 per cent.
A 1999-2000 survey of 4800 employers across Australia indicated compliance with the guarantee had been maintained compared to the previous year: 71 per cent of employers were fully compliant and 28 per cent were partially compliant. Compliance among employers in regional areas increased from 59 per cent to 70 per cent. Overall, 83 per cent of new employers were fully compliant, indicating that the guarantee is now integrated into new business set-up procedures.
The survey information, together with notifications from employees who are not receiving superannuation (or less than the legislated amount), help to guide our compliance initiatives, which include education, advice and project-based audits of industries and regions.
We have also revised our approach to responding to notifications we receive from employees regarding superannuation guarantee. This strategy includes establishing the risk profile of each case, which in turn helps us to determine the level and type of follow up required.
The Australian National Audit Office (Report No. 16, Superannuation Guarantee, 15 November 1999) concluded, 'the ATO's administration of the superannuation guarantee is sound' and the organisation has 'effective risk assessment, risk planning, risk treatment and performance monitoring strategies in place' for the superannuation guarantee.
Table 3.9 Superannuation guarantee survey results, 1999-2000
Table 3.10 Superannuation guarantee compliance results, 1998-99 and 1999-2000
Superannuation holding accounts reserve
The superannuation holding accounts reserve was established in 1995. It collects, on behalf of employees, small contributions from employers who are unable to find a superannuation fund willing to accept their small contribution. Our efforts to encourage employers to use superannuation providers, rather than use the holding reserve, has had limited success. The fact that some funds will not accept small contributions remains an issue.
Table 3.11 Superannuation holding accounts reserve balance
Lost members register
The ATO manages a register of people who have become 'separated' from their superannuation funds. Lost members are those who cannot be contacted or who superannuation accounts have remained inactive.
During 1999-2000, we reunited about 29 850 lost members with their retirement income, compared to 9700 in the preceding year, Legislation to allow the ATO to use tax file numbers for matching purposes was introduced this year.
According to superannuation funds, there were 2.3 million 'lost' accounts as of 31 December 1999.Self-managed superannuation funds
During the year, the ATO took over from the Australian Prudential Regulatory Authority as the regulator of self-managed superannuation funds. This was in line with the purposes of the Superannuation Industry (Supervision) Act.
There are 165 000 such funds, which account for 95 per cent of all superannuation funds.
In 2000-01, we will conduct a survey of self-managed superannuation funds to establish a compliance benchmark and major compliance issues. Survey results will help to guide our compliance initiatives, which are likely to focus first on education and advice.Choice
Parliament has not yet enacted proposed changes to the superannuation guarantee that would allow employees, rather than employers, to choose their superannuation fund.Family assistance initiative
Since 1996, individual taxpayers have been able to increase their tax-free threshold if they meet certain family-related criteria. For the last two financial years, the value of this concession has been about $400 million. From 1 July 2000, a new family tax benefit will apply. The ATO will have a role in administering this benefit.Higher education contribution scheme
The higher education contribution scheme commenced in 1989 as a way to supplement funding of Australia's higher education system. It is governed by the Higher Education Funding Act 1988 and is jointly administered by the Department of Education, Training and Youth Affairs, higher education institutions and the ATO.
Through the scheme, students contribute to the cost of their higher education. They can pay up-front to the institution or defer their liability and pay through the tax system when their repayment income reaches the minimum threshold. The threshold in 1999-2000 was $20 700.
An indexation rate of 1.9 per cent was applied to the scheme's accumulated debt on 1 June 2000, effectively increasing the debt by $102.9 million.
Table 3.12 shows results relating to the scheme for the last two years.
Table 3.12 Higher education contribution scheme, 1998-99 and 1999-2000
Student financial supplement scheme
The student financial supplement scheme is a voluntary loan scheme that gives tertiary students the option to borrow money to help cover their living expenses while studying. It has been available since 1993.
Students do not have to start compulsorily repaying such a loan for at least five years from July in the year in which the loan was taken, and then only when their taxable income reaches the minimum threshold. The threshold in 1999-2000 was $31 127.
Five years after a loan is taken, the ATO becomes responsible for collecting the debt. The debt for loans taken in 1995 was transferred to the ATO on 1 June 2000. This involved 57 063 clients with a total debt of $275.8 million.
On 1 June 2000, an indexation rate of 1.9 per cent was applied to the accumulated debt for student financial supplements, effectively increasing the debt by $6.1 million.
Table 3.13 shows results relating to the scheme for the last two years.
Table 3.13 Student financial supplement scheme, 1998-99 and 1999-2000
The wool tax is a levy charged to assist in the marketing, promotion and research of Australian wool. The ATO administers collection of the levy under provisions of the Wool Tax Acts Nos 1-5, the Wool Tax (Administration) Act 1964 and related regulations.
All revenue received is reconciled and paid to the Department of Agriculture, Fisheries and Forestry-Australia, which then distributes the money to the Australian Wool Research and Promotion Organisation, in accordance with directions from the Minister.
In 1999-2000, recommendations arising from a review of the wool tax began to be implemented. This included a move to form a new company structure to replace the Australian Wool Research and Promotion Organisation, and a poll of woolgrowers regarding whether to retain the compulsory tax. Growers voted to retain the tax, but at a lower rate of 2 per cent. On 1 July 2000, the rate was lowered from 4 per cent to 3 per cent. Approval to drop the levy to 2 per cent is expected when the new company structure is established.
The wool tax levy rate remained at 4 per cent during 1999-2000. Total collections rose significantly because wool prices recovered and because growers released stocks that had been held.
Projects to determine the compliance level of wool exporters and wool manufacturers and to collect information on unregistered clients continued, producing significant positive results.
Table 3.14 shows wool tax results for the last three years.
Table 3.14 Wool tax collections, by year, 1997-98 to 1999-2000
Output 1.1.3-contribute to policy advice and legislation
The performance measures relating to output 1.1.3-contribute to policy advice and legislation-are:
- quantity-capacity to predict and manage risks; legislation delivered according to government programs; costings/estimates delivered to anticipated volume; and volume of services delivered; and
- quality-strategic intelligence-no significant risks remain unaddressed; quality of legislation including consistency with policy, legislation and administration principles; accuracy of revenue estimates-current standard maintained; and client satisfaction with services provided.
These measures cover strategic research/risk assessment, provision of policy advice, design and development of legislation, and provision of ministerial and parliamentary services.Strategic research/risk assessment
As noted in chapter 1, the ATO recognises that strategic research, knowledge and intelligence, as well as risk assessment, are vital to the health and integrity of Australia's tax system.
Lines that focus on market segments-such as Large Business and International and Small Business-carry out extensive work to gather strategic intelligence and to identify and manage risks relating to tax avoidance. Their work is coordinated through Anet, a corporate-wide intelligence network, and the strategic intelligence and analysis unit, which has a corporate-wide focus on aggressive tax planning.
More detailed information on risk management appears in chapters 1 and 6.Policy advice
Over the last two years, the ATO has provided government with numerous estimated costings associated with taxation reform. This high demand for support in relation to policy advice was led by the move to the new tax system, and is expected to decline in future years. The costings have been provided on an as-needed basis, and within the deadlines set.
It is too early to tell the degree to which the estimated costings are accurate. Some legislation to which the costings relate has only recently been implemented; other legislation is yet to be implemented.Design and development of legislation
There were 107 bills on the government's taxation legislative program in 1999-2000. This included all bills before Parliament and those to be introduced. Of these, 44 were introduced during the year, with the remainder scheduled for introduction in the next sittings.
Tax reform represented slightly more than 80 per cent of the bills and measures Parliament enacted. A total of 17 bills required amendments, and 16 were referred to committees. By the end of the financial year, 81 bills had received Royal Assent.
Thirty-six regulations were gazetted in 1999-2000, compared to 11 in the previous year (see figure 3.8). This substantial increase resulted from the need to provide support for tax reform. About 60 per cent of these regulations related to tax reform.
In line with the government's regulation review and reform policy, the ATO prepared regulation impact statements for proposals that would affect business. Appendix 1, beginning on page 114, lists the primary and secondary legislation (including amendments) for 1999-2000, and indicates those that were accompanied by a statement.
Figure 3.8 Number of bills and regulations introduced into Parliament and number of regulations gazetted, 1995-96 to 1999-2000
Ministerial and parliamentary services
During the year, the ATO received and processed 3800 ministerials, and prepared 399 new question-time briefs, 113 questions on notice and 622 minutes for ministers. This was a 45 per cent increase in overall services provided and was due largely to tax reform. It is expected this high volume of work will continue into the next year.
In the first half of 1999-2000, there was a trend of decreasing performance in meeting the 14-day turnaround time for ministerials-48 per cent of these were completed within 28 days. In the latter half of the year, turnaround began to improve. The major cause of delays was the pressure on our resources, particularly in the Goods and Services Tax line, where the increase in ministerials was the greatest.
Formal feedback from the Treasurer's and Assistant Treasurer's office indicated that, in general, the quality of our parliamentary and ministerial services was good to very good, and that professionalism was very good to excellent. On some occasions, question-time briefs were noted as an area of concern in regard to timeliness. Strategies have been implemented to improve processes for the coming year.
Output 1.1.4-support other agencies
The performance measures relating to output 1.1.4-support other agencies-are:
- quantity-output as determined by agreement with clients, and measures as specified in memorandums of understanding with other agencies; and
- quality-measures as specified in memorandums of understanding with other agencies.
These measures do not involve the movement of moneys. They cover services provided to other organisations.Data matching
The Data-matching Program (Assistance and Tax) Act 1990 allows the matching of data by specific government agencies on issues such as income, personal and family identity, and tax file numbers for the purposes of:
- identifying tax evasion;
- detecting a person who is evading tax liabilities by failing to disclose income to the ATO where income information on that person is held in another government agency's database;
- detecting instances where a person could be receiving incorrect payments from a government agency; and
- verifying the accuracy of income data held about a person by a government agency.
The specified government agencies are the ATO, Centrelink and the Department of Veterans' Affairs.
Centrelink administers the matching of the data, which is carried out by the Data Matching Agency. Results may be shared with the specified government agencies. The ATO can use the data-matching results to issue an assessment or an amended assessment to a person, correct personal identity data it holds in relation to a person or investigate possible fraudulent activity.
Five data-matching cycles were carried out during 1999-2000, with about 13 million tax file numbers checked in each cycle.Tax technical advice to other government agencies
The ATO provides a range of tax technical advice to government bodies at the federal, State and local level. In 1999-2000, this advice was provided on about 600 occasions.
The advice addressed many issues such as tax reform measures and consequences, fringe benefits tax, goods and services tax, policy and technical interpretations, assistance with ministerial replies and briefings, attendance at Olympic events, vehicle schemes for executives and relocation of employees.Law enforcement access to tax information
The Commissioner has discretionary powers, under Section 3E of the Taxation Administration Act 1953, which authorise him to release information to certain law enforcement agencies. This power is available only when the information is relevant to determining whether a serious offence has been or is being committed or when the information is relevant to proceeds-of-crime order proceedings.
Information provided under the legislation can be used for investigative purposes but not as evidence in a court for non-tax prosecutions, except in relation to a proceeds-of-crime order where a person has been convicted of a serious offence.
In 1999-2000, the ATO received 373 requests for such information. A further six cases were on hand at the beginning of the financial year. A total of 360 were processed during the year with information disclosed in 358 cases. These involved the affairs of 1 512 individual and corporate taxpayers.
Sixteen cases remained on hand at 30 June 2000 and three were withdrawn during the year.
Tables 3.15 and 3.16 summarise the categories of offence and the requesting agencies.
Table 3.15 Categories of offence, 1999-2000
Table 3.16 Requesting agencies, 1999-2000
Support for Tax Agents Boards
The ATO contributes to the maintenance of community confidence in the tax system by providing administrative support for the functions of the Tax Agents Board in each State. The boards are constituted under the Income Tax Assessment Act, with members appointed by the Minister (Assistant Treasurer).
For 1999-2000, the ATO provided a secretariat in each State to assist the boards with their statutory obligations. Twenty-three staff were engaged, plus a national coordinator. Each secretariat is responsible for carrying out its board's direction in regard to the registration and discipline of tax agents. The secretariats are funded to provide appropriate clerical and legal resources to each board.Support for the Child Support Agency
Through a memorandum of understanding, the ATO provides services to the Child Support Agency. These relate to prosecution investigations, lodgment enforcement, fraud prevention and control, payment processing, ancillary business, software/system interfaces, accommodation, protective security, in-house prosecutions, personnel, human resources and information technology.
In 1999-2000, half of these services were provided to standard. Minor problems occurred in several areas, but these have been, or are being resolved. Major problems occurred in the areas of personnel, human resources and information technology.
For the most part, problems regarding personnel and human resources services related to timeliness of recruitment, which affected the Child Support Agency's ability to plan for its workforce requirements. The ATO's own need to recruit more than 4000 staff during the year (to cope with tax reform) contributed to the problem. The situation is expected to improve in the coming year.
Concerns regarding information technology related to uncertainty about the charges imposed by Electronic Data Systems, which supplies the bulk of information technology services to the ATO. This issue is being investigated.Support for the Australian Bureau of Statistics
The ATO and the Australian Bureau of Statistics (ABS) have a memorandum of understanding for activities of mutual interest. Joint committees and work groups support the relationship, and there is an annual meeting between the Commissioner and the Australian Statistician. The ABS also outposts an experienced senior officer to the ATO.
Under paragraph 16(4) of the Income Tax Assessment Act, the ATO provides the ABS with specific information-about employers and businesses-to be used for the purposes of the Census and Statistics Act. In addition, non-identifiable taxation information is made available to the ABS for statistical purposes.
With the introduction of the new tax system, the ABS will also receive details of businesses that are included on the Australian Business Register, and information from business activity statements for statistical purposes.
The memorandum of understanding includes milestones that set standards for the timeliness and quality of data we supply to the ABS. In 1999-2000, we met all our obligations in this regard.
The ATO continues to develop strategies to improve its performance in the development, interpretation and application of the laws it administers.
We continue to develop and refine a comprehensive professional excellence program, under the direction of the Professional Excellence Forum. This forum, chaired by a Second Commissioner, includes representatives of the tax community and business.
We use a judgment model as one means to assess the success of this program, especially for the quality of technical advice provided to the community.
This model sets out the four elements of a good decision-this mainly involves comprehending the question and providing a correct, well reasoned and clearly communicated answer. Periodically, a random sample of cases is examined and, if all elements are satisfied, the case receives an 'A' for professional excellence.
Figure 3.9 Percentage of cases awarded 'A' for excellence
An 'A' rating is a measure of professional excellence, rather than a measure of technical quality. The latter is depicted in figure 1.13 on page 14.
Review of private binding rulings
In May 2000, we engaged a consultant to further review our systems and procedures relating to private binding rulings and advance opinions. The terms of reference involved an assessment of:
- the adequacy of our current systems and procedures to achieve consistency and appropriate levels of quality in private rulings; and
- the adequacy of current systems and procedures to guard against fraud, as outlined in our current fraud control plan.
The consultant was also asked to recommend further improvements that would help to ensure community confidence in our systems and procedures.
Many factors contribute to the community's confidence in the ATO. These include: the way we treat taxpayers, the degree to which we ensure taxpayers meet their tax obligations, the quality of our advice, our responsiveness and our professionalism.
Some measures of the community's confidence in the organisation are the results against the service standards stated in the Taxpayers' Charter, the work of the Problem Resolution Service, and the results of the community perception and professionalism surveys.
The Taxpayers' Charter aims to define the qualities of the ATO's relationship with the community and, through this, reinforce the community's confidence in the ATO. The Charter:
- explains clients' legal rights and obligations;
- explains the principles we will observe in our dealings with clients; and
- sets out standards of performance for transactions with clients, such as the timeframe in which a telephone enquiry will be answered.
The Charter complies with requirements for government service charters, and is the result of comprehensive consultations with the community and business and professional groups.
In its third year of operation, the Charter is a key underpinning document for the 'new tax office for a new tax system'. It is being reviewed and refined in the coming year to include new standards of service and ensure continued relevance to the community.
During 1999-2000, we achieved high levels of performance (86 to 100 per cent) in 10 of the 14 service standards outlined in the Charter (see table 3.17). Several factors contributed to overall improvement. These included our move to shared services, and the increased reliability of the processing systems used in relation to tax returns for the 1998-99 income year. Improved performance in clerical and administrative errors (from 22 per cent to 66 per cent) reflected a return to normal operations following the completion of amendments to self-education expenses last year.
Some drops in performance were caused by increased workloads, most notably for telephone calls, due to tax reform. There were also early teething problems when the call centres were established.
Table 3.17 ATO performance against service standards in the Taxpayers' Charter, 1997-1998 to 1999-2000
Problem Resolution Service
The Problem Resolution Service (PRS) plays key roles in supporting the Taxpayers' Charter and ATO compliance model, and in providing the ATO's complaints resolution service.
During 1999-2000, PRS staff developed and presented training in relation to the Charter, the compliance model and effective complaints handling. This training focused, in particular, on the areas working on tax reform. This was because these areas had high levels of staff recruitment and a large proportion of new staff came from outside the ATO.
The training helped to raise awareness of the importance of the Charter and compliance model, and provided staff with an understanding of how these tools can be used to help them meet the day-to-day challenges of their jobs.
The lines consider the PRS a respected resource for advice and assistance on matters relating to the Charter and the compliance model.Complaints
The complaints process is described in the Taxpayers' Charter.
If clients believe their legal rights or the standards set out in the Charter have not been met, they are encouraged to discuss their concerns with the ATO officer with whom they have been dealing. If they are still dissatisfied, they are encouraged to discuss the matter with that officer's manager. These measures cover level 1 and level 2 complaints.
For a level 3 complaint, a PRS case manager will conduct an objective review of the matter (in consultation with both parties). This step occurs when steps one and two do not resolve the matter, or when the client is reluctant to deal directly with the area where the complaint originated.
During the year, the PRS call centre treated 5 654 of its calls as complaints. The majority of these were level 1 or 2 complaints. These were referred to the lines for action. PRS case managers handled 606 level 3 complaints, compared to 638 in the previous year.
The PRS also:
- continued to provide a call centre service for tax evasion tip-offs, taking more than 20 000 calls in this regard prior to March 2000, when this function was moved to the Individuals Non Business line;
- operated a call feedback service for clients who wished to comment on any aspect of the ATO. More than 1700 calls were received and passed to relevant areas for action or information;
- established, chaired and maintained a network within the ATO to deal with various complaint and Charter issues; and
- continued to identify systemic issues and refer these to the lines.
Community perception surveys
Since December 1996, the ATO has conducted biannual surveys to measure community perceptions of the organisation. Each survey includes a sample of about 2 000 people.Generally fewer than 25 per cent of those surveyed have had contact with the ATO in the previous 12 months, other than to submit a tax return. Community perceptions measured in this way are expected to change only slowly and, indeed, the results to date have remained fairly constant.
In an effort to capture views that enable us to provide products and services in accordance with the spirit and intent of the Taxpayers' Charter, we added new questions to the June 2000 survey. These questions effectively replaced several other questions relating to the Charter, and asked respondents about:
- their perceptions of the ATO website;
- whether they would use BPay to pay their taxes after it became available on 1 July 2000; and
- whether respondents who spoke a language other than English preferred to use the telephone interpreter service.
Table 3.18 summarises some of the survey findings, averaged for each year. These results do not cover all survey questions, but are representative of the highs and lows in responses. Table 3.19 outlines results for some of the survey questions added to the June 2000 survey.
The results show that respondents perceived the ATO as being more effective in addressing the cash economy, compared to views in December 1997.
Table 3.18 Community perceptions survey results, 1996-97 to 1999-2000
Table 3.19 Community perceptions survey results, new questions, June 2000
In 1998, we implemented a program to evaluate staff's performance in achieving the professional standards of service agreed between the ATO and the community, as set out in the Taxpayers' Charter and agency agreements.
Extensive research and regular surveys of key client groups have supported the evaluations.
Results from the last 12 months are encouraging in that they provide evidence that the work staff are performing, and the relationships being built with the community, are valued.
Figure 3.10 shows the professionalism results since 1998.
Figure 3.10 Overall professionalism comparison, 1998-99 with 2000
The taxation system is not restricted to particular cultural or socioeconomic backgrounds. To be an effective agency, the ATO needs to reflect the cultural mix of the community it serves and to be aware of how taxation matters may affect people within that community.
As part of implementing tax reform, we focused in particular on ensuring our messages reached our diverse audiences. For example, in 1999-2000 we:
- produced publications and materials in up to 33 languages;
- provided seminars for businesses in eight languages. A particular focus was on newly established businesses in which the owner/operator commonly used a language other than English in running the business;
- trialled a monthly talkback radio program on SBS, covering issues put forward by the ATO. The trial was done in four languages. The programs will continue in 2000-01, and four additional languages will be trialled.
- conducted about 141 000 field advisory visits, on request, to assist taxpayers to comply with their goods and services tax and related ATO obligations; and
- upgraded our website to better serve all audiences.
During the year, the Human Rights and Equal Opportunity Commission applauded our efforts to improve accessibility to information stored on our website. In its report, Accessibility of electronic commerce and new service and information technologies for older Australians and people with a disability, the commission said 'progress by the ATO merits particular recognition in view of the significance of its services across the Australian community'.
For 1999-2000, the ATO entered into purchaser/provider arrangements with the Department of Family and Community Services and the Department of Health and Aged Care.
We provided services to the Department of Family and Community Services for the Family Assistance Office (as a result of a Budget measure) and the Child Support Agency (as a result of the administrative arrangements order of October 1998). Information on these services appears on pages 60 and 45, respectively.
Services to the Department of Health and Aged Care supported implementation of the private health insurance rebate (as a result of a Budget measure).
The Health Insurance Commission and the Department of Health and Aged Care administer the rebate. The rebate can be claimed in one of three ways: as reduced premiums through the health insurance provider; as a cash or cheque rebate from Medicare offices; or as a refundable tax rebate or offset through tax returns. The ATO administers the tax return option.
Table 3.20 Resources for outcome, Outcome 1-Effectively managed and shaped systems that support and fund services for Australians and give effect to social and economic policy through the tax system
Royal Assent for the goods and services tax legislation, in July 1999, marked the beginning of a new chapter in the history of tax administration in Australia. The ATO was responsible for implementing 'The New Tax System' and delivering on a range of tax reforms. Along with the goods and services tax, the new Pay As You Go system was a key element of the reforms. To achieve all this, we had to adopt a whole new approach to tax administration.
Also on the agenda for the year was the redesign of the business tax system. The Review of Business Taxation, headed by John Ralph, submitted its final report, A New Tax System Redesigned, to the Prime Minister and Treasurer in August 1999. Following this, some early pieces of business tax legislation were enacted by Parliament.
The implementation of the goods and services tax and Pay As You Go system required us to administer a fresh set of laws. This involved a complete overhaul of our systems, procedures and education strategies.
Tax reform touched nearly every job at the ATO, and managing this dramatic change in the workplace was one of our biggest challenges. We devoted much of the year to rewriting the Australian tax system and replacing it with new laws that took effect from 1 July 2000. We also implemented more than 4000 new and amended programs for the new tax system.
The ATO received additional funding to deliver the government's tax reform agenda. We employed more than 4000 new staff to help cope with the additional workload related to tax reform, and had 56 applications teams working in information technology support areas. We also expanded our number of call centres to respond to taxpayer enquiries, and embarked upon the largest-ever public education campaign in the history of Australia since the introduction of decimal currency.
An integral feature of the entire tax reform agenda was the ongoing public education about the new tax system through booklets, seminars, personal visits, industry partnerships and a massive information campaign for businesses. The campaign had us working in close partnership with the business community and tax professionals. To answer queries on tax reform, we established information lines for businesses, tax agents and the general public. There was also a website, and we launched Reply-in-5-an information service to support taxpayers and the community-to field and answer enquiries related to tax reform.
In July 1999, the Office of the Treasurer established The New Tax System Advisory Board to ensure new tax arrangements were implemented effectively, and that costs and transitional difficulties were minimised. The board advised government about the assistance required by the business and community sectors to implement the tax reform changes, and also monitored assistance to these sectors. The board has eight representatives, from a cross-section of the economy including businesses, the charity and education sectors, and rural and regional areas.
Our planned and coordinated approach to implementing reform ensured a smooth and trouble-free transition to the new tax system.
Major elements of the program included:
- a major restructure of the community's revenue base through the implementation of the goods and services tax and related wine equalisation and luxury car taxes, combined with reduced tax rates and increased family benefits;
- a significant overhaul of how people pay their taxes during the year through the introduction of the pay as you go system for instalments and withholding taxes;
- the introduction of binding oral advice for individual taxpayers with simple tax affairs and simple enquiries;
- the introduction savings bonus for older Australians;
- registration of almost three million businesses for Australian Business Numbers and establishment of the Australian Business Register;
- registration and endorsement of the exemption and gift-deductibility status of charities, non-profit organisations and other relevant entities;
- an extension of the diesel fuel rebate for off-road vehicles and introduction of the diesel and alternative fuels grants scheme for certain on-road transport;
- the fuel sales grant scheme for regional and remote service stations;
- the new product stewardship arrangements for waste oil from 1 July 2000 that will see the ATO collecting the levy on relevant oils, and paying benefits to companies recycling waste oil in environmentally appropriate ways; and
- implementation of the first important steps as part of the recommended complete overhaul of the country's business tax system.
The tax reform initiatives took the shape of projects and subprojects. These were coordinated nationally, but were implemented by teams of varying sizes and from across regional centres. The magnitude and time-bound nature of tax reform meant these projects called for extensive planning, management and a significant allocation of resources.
For tax reform, we had no precedent to emulate and, therefore, its successful implementation was one of our biggest achievements for the year.
The following discusses the major components of the government's tax reform program that have been, or are being, implemented by the ATO. It also discusses some of the strategies we used to effectively prepare for and introduce change. Information on the Australian Business Number and Australian Business Register appears in chapter 5, beginning on page 63.
The goods and services tax legislation received Royal Assent in July 1999. It became effective from 1 July 2000 as a 10 per cent tax on the supply of most goods and services, with exemptions on basic food. The new tax replaced the wholesale sales tax and some State and Territory taxes. The ATO collects the tax on behalf of the States and Territories.
We had less than 11 months to implement the new tax and educate the community about the impending changes. This involved a complete overhaul of policies and systems. During the year, the Goods and Services Tax line alone gained an additional 3600 staff to help ensure the transition to the new tax was smooth. We also conducted a successful communication campaign for small and medium-sized businesses, educating them about the various elements of the new tax. As of 30 June 2000, about 2.1 million businesses had applied for registration for the goods and services tax.
As part of implementing the goods and services tax, the ATO established industry partnership forums. These forums proved successful in clarifying issues relating to the goods and services tax and other tax reform matters, and in disseminating information.
Pay as you go is the single, integrated system for reporting and paying tax on business income and withholding amounts. The ATO administers this system. Legislation for pay as you go received Royal Assent in December 1999.
The new system replaced 11 existing payment and recording systems including provisional tax, company and superannuation fund instalments, pay-as-you-earn, and the prescribed payments and reportable payments systems. It consolidates and simplifies the collection of income tax, and reduces the cost of compliance.
Under pay as you go, business and investors calculate and pay their tax instalments based on their actual receipts for a quarter. It also collapses all the withholding arrangements into a single system and gives businesses much more certainty on when they should withhold tax from others.
Pay as you go has two distinct components-instalments and withholding. The instalments regime replaced provisional tax and company tax instalments. It takes effect at the beginning of a taxpayer's 2000-01 financial year (1 July 2000 for most taxpayers). The withholding regime replaced the pay-as-you-earn system and other withholding systems. It commenced 1 July 2000.
Government introduced the first round of business tax reforms in Parliament in October 1999. The first set of changes was passed through Parliament in December, and another set received Royal Assent in June 2000.
Business tax reforms are being implemented in a staggered manner, in order to ease the impact on businesses already contending with the goods and services tax, pay as you go and other reform measures.
The business tax reforms were based on the recommendations from the Review of Business Taxation headed by Mr John Ralph AO. As a first response, the government announced on 22 February that certain new integrity measures would apply from that date. The government then announced its decision on the recommendations, introduced changes to the capital gains tax regime and replaced accelerated depreciation with 'effective life'. These changes took effect in September 1999. The next raft of changes, including certain integrity measures, further capital gains tax concessions and life assurance company changes, took effect on 1 July 2000. During the year, a total of 13 business tax reform bills were introduced and passed by the Parliament.
Some business tax reforms that commenced earlier than 1 July 2000 affected the 1999-2000 tax returns filed by business and investor taxpayers. The major changes related to capital gains tax, capital losses and depreciation.
Changes that came into effect from 1 July 2000 included reduced company tax, changes to treatment of losses from non-commercial activities, and measures to restrict opportunities to alienate personal services income. Many other major structural measures are due to commence on 1 July 2001. These include consolidation of corporate groups, taxation of trusts like companies and a simplified tax system for small business.
Business Tax Reform Implementation Project
In July 1999, the ATO established the Business Tax Reform Implementation Project Team to coordinate and drive the implementation of the new business tax system. The project team works closely with the Treasury and the Office of Parliamentary Counsel and was responsible for:
- designing and developing legislation that reflected the government's policy decisions;
- designing, building and implementing new ATO systems and processes, including rulings, that supported the introduction of business tax reforms;
- monitoring and managing the risks associated with implementing the new design;
- developing compliance assurance strategies to identify new compliance risks and putting in place mitigation strategies; and
- educating the business community, investors, tax professions and peak bodies about the changes to the business tax system.
The ATO has established 12 centres of expertise to provide an authoritative view on key areas of the new business taxation laws. Their main responsibility is to provide an expert understanding of how the new tax laws apply, provide new sources of intelligence for the ATO on community responses to the implementation of the new tax system, and contribute to policy development and law improvement.
The centres work closely with expert bodies, businesses, tax professionals, and taxpayers and their representatives to ensure a strong community understanding of the new tax measures.
Each centre focuses on a specific topic. The topics are: tax value method, financial arrangements, entities and distributions, losses, insurance and superannuation, international, capital allowances, leases and rights, consolidation, capital gains tax, small benefits and fringe benefits tax.
Legislation on the endorsement of income tax exempt charities and deductible gift recipients received Royal Assent in December 1999 and came into force on 1 July 2000.
Under this legislation, endorsed organisations-income tax exempt charities and donors of gifts to deductible gift recipients-are entitled to certain income tax concessions. The Commissioner of Taxation endorses organisations that meet specific criteria.
This legislation is expected to improve the integrity of the taxation system because the endorsement process helps the ATO to ensure that only eligible organisations are able to benefit from the concessions.
Applications for endorsement were sent to all Australian Business Number applicants who indicated they were a charitable institution or trust, or entitled to deductible-gift-recipient status. The ATO continues to accept applications. The Australian Business Register shows whether an entity is a deductible gift recipient.
The government introduced several reforms to the excise rate structure on tobacco, petroleum, diesel, alcohol and wine. Except for tobacco, all the other changes came into effect on 1 July 2000. The per-stick tobacco excise rate was introduced in November 1999. The ATO administers these reforms.
Fuel rebate scheme
To compensate for the effect of the goods and services tax, the government reduced excise on petrol and diesel. It also introduced the diesel and alternative fuels grants scheme and amended the diesel fuel rebate scheme to complement the cut in fuel excise made as part of the new tax system. Both schemes were introduced to reduce fuel costs for business. Around 210 000 businesses-including retailers, builders and truckers-benefit from these schemes.
The amended diesel fuel rebate scheme replaced an existing scheme and provided businesses with a 100 per cent rebate on the customs or excise duty paid on diesel. Businesses therefore benefit from cheaper fuel. The scheme was extended to include the rail and marine sector.
The diesel and alternative fuels grants scheme operates for certain on-road transport activities and is intended to maintain the relative price of alternative fuels compared with diesel. Alternative fuels used in eligible operations include compressed natural gas, liquefied petroleum gas, recycled waste oil, ethanol, canola oil and other fuels specified by regulations.
Both schemes will, however, be replaced by the energy grants (credits) scheme from 1 July 2002. This new scheme will maintain the benefits available from the two previous schemes, while actively encouraging conversion to cleaner fuels.
Under the new arrangements more businesses will be eligible for either a fuel rebate or grant. Eligible businesses will also be able to claim a rebate or grant on more types of fuel.
Wine equalisation tax
The government introduced a value-based wine tax on all sales, importations and certain other dealings with wine made on or after 1 July 2000. The wine equalisation tax replaced the wholesale sales tax that applied to dealings with wine and similar products prior to 1 July 2000. This tax was intended to keep the price of wine stable following the introduction of the goods and services tax.
Legislative changes to the scheme were drafted in late 1999 and went through Parliament in the same year. The ATO developed an education program to prepare businesses for the new tax.
Excise rates and customs duty on beer, spirits, liqueurs and other alcoholic drinks not subject to the wine tax were increased to offset the removal of the wholesale sales tax.
The government also introduced the wine equalisation tax rebate to help small winemakers adversely affected by the introduction of the wine tax. They are now eligible to receive a rebate from the Commonwealth for their cellar door, mail order and internet sales.
Per-stick excise on cigarettes
The government introduced the per-stick rate on all tobacco products containing 0.8 grams of tobacco or less, which included most cigarettes, very small cigars and bidis. Intended as a health initiative, this measure is designed to reduce tobacco consumption by removing the excise duty advantage afforded to lightweight cigarettes sold in large packets. Under the per-stick arrangements, it is much simpler to determine the duty liability for cigarettes than under the earlier weight-based system.
All other tobacco products, such as cigars, roll-your-own and pipe tobacco, are subject to a weight-based rate on per kilogram of tobacco content.
In order to encourage waste oil collection and reprocessing, the government has agreed to pay benefits to oil recyclers for certain categories of recycled products when these products are sold to end users. This rebate takes effect from 1 January 2001.
Reforms to personal income tax formed an important part of the changes that came into effect on 1 July 2000. These changes included cuts to personal income tax and the implementation of four key initiatives-binding oral advice, shorter period of review, the savings bonus for older Australians and the family assistance office.
Personal income tax was cut by $12 billion annually from 1 July 2000. Around 80 per cent of all Australians are now paying a marginal rate of 30 per cent or less.
Binding oral advice
The ATO launched the binding oral advice system to allow individual taxpayers with simple tax affairs and simple enquiries to rely on the oral advice we provide. This regime came into force on 1 July 2000 and is only applicable for oral advice for the 2000-01 and later income years.
Under the regime, the oral advice we provide to individual taxpayers with simple tax affairs is binding on the Commissioner, in much the same way as written private rulings. However, the oral advice given is not binding on the taxpayer. In instances where a taxpayer acts on advice that is wrong, the Commissioner will forego the difference in primary tax payable and any related penalties.
The regime is supported by a reference database that assists staff to determine whether a taxpayer is eligible to receive binding oral advice. The database also guides staff in providing oral advice. At the time binding oral advice is given, the ATO issues a unique algorithmic number which serves to safeguard the ATO and the taxpayer.
Binding oral advice can only be given by authorised staff, to taxpayers who enquire orally on their own behalf. It cannot be given at seminars or field days or by officers conducting an audit.
Shorter period of review
The shorter period of review is aimed at reducing uncertainty for taxpayers with simple tax affairs. It came into effect on 1 July 2000. This regime allows some taxpayers to finalise their tax affairs sooner by limiting the amendment period from four to two years. Similarly, the period for which these taxpayers are required to keep relevant records, other than capital gains tax records, has been reduced from five to two years.
It also means eligible taxpayers will not be subject to further ATO scrutiny after the two-year period has lapsed. Although the regime is effective from 2000-01, the changes will not actually affect taxpayers until the 2003-04 income year. Eligibility criteria have been included in TaxPack and notices of assessment.
Bonuses for older Australians
The savings bonus for older Australians is a one-off, tax-free payment introduced to assist older Australians to adapt to the new tax system and to compensate for the effect of the goods and services tax. This bonus is expected to help maintain the value of their savings and investments.
Two kinds of bonuses are being paid:
- the aged persons savings bonus of up to $1000; and
- the self-funded retirees supplementary bonus of up to $2000.
To be eligible for the bonus, people must have taxable income of less than $30 000 in either the 1998-99 or 1999-2000 tax years. They must also have savings and investment income in the same year. Lodgment of claims began on 1 July 2000 and will close on 1 July 2001. More than one million ATO clients were sent an information kit in June of this year explaining eligibility requirements and lodgment procedures.
Employees who receive fringe benefits will, for the first time, have a reportable fringe benefits amount printed on their group certificate for 1999-2000. This amount does not count as income but it is taken into account when determining liability for some surcharges and eligibility for various government benefits.
In May 2000, the government passed the second phase of reform legislation for fringe benefits tax. These changes acknowledged the impact of the goods and services tax and affected all employers who provided fringe benefits. The changes have been designed to improve fairness in the tax system while still recognising the special needs of some employers who provide their employees with fringe benefits.
The government established the Family Assistance Office to administer the family assistance reforms outlined in the tax reform package. The new reforms simplified the 12 existing family assistance payments into three benefits.
The initiative is a joint venture of the ATO, Centrelink and the Health Insurance Commission, with the Department of Family and Community Services having overall responsibility. The office began operations on 3 July 2000 in 550 locations across Australia, including all existing Centrelink, Medicare and ATOaccess enquiry sites. It is now the first point of call for all families for all enquiries about the new family assistance payments.
Staff answer enquiries about the new family tax benefits and child-care benefit and payment options. They also assist with completion and lodgment of claim forms.
The Family Assistance Office has been built on existing resources with no interagency staff transfers. ATO public assistance staff received in-depth training between February and June in order to help them cope with enquiries.
We launched Reply-in-5 in February 2000 to support taxpayers and the community with their information needs in relation to tax reform. Reply-in-5 promised to respond to tax reform questions related to 'settled law' within five working days. Reply-in-5 staff answered questions from business and individuals on the goods and services tax, the Australian Business Number and pay as you go.
Reply-in-5 received correspondence from taxpayers by email, fax and letters. These enquiries were lodged through call centres, field staff, the reform website, industry partnerships and/or industry seminars.
By 30 June 2000, Reply-in-5 had received and responded to more than 36 500 pieces of correspondence. While we did not achieve a five-day turnaround in all cases, the service provided was a marked improvement on normal Taxpayers' Charter standards.
Registered software facility
The registered software facility is a partnership between the software development industry and the ATO. It became operational in March 2000 as a reliable source of information about the status of accounting software products. This facility has three main components.
- access to ATO specifications, rulings and determinations and guidelines;
- test scenarios for software developers to check whether their products meet ATO requirements; and
- a list of accounting software products that have been tested and are deemed, by the software providers, to produce correct results.
E-record was the first product to be registered under this facility. By 30 June 2000, almost 100 products were listed with the facility.
We developed E-record to help small businesses and non-profit organisations keep good business records. It has been issued to all businesses that registered for the goods and services tax, and indicated they use a cash system of accounting.
It is a baseline product designed for those using paper-based records rather than commercial accounting packages. It contains electronic worksheets to record cash receipts and payments, with automatic calculations and consolidations. It is expected to help business operators to manage cash flow and complete tax-related paperwork.
The introduction of the Australian Business Number (ABN) was one of the major tax reform initiatives implemented by the ATO this year. Seen as the solution for simpler and cheaper transactions between business and government, the ABN is effectively businesses' gateway to tax reform.
The Small Business Deregulation Task Force's report, Time for Business, identified the need for such a number in 1996. It suggested three initiatives to cut government red tape and reduce the cost of compliance for small businesses- a single business number, a single compliance statement and a single entry point for businesses to access government services. Government accepted these recommendations.
The ABN supports the government's tax reform agenda. With the passage of A New Tax System (Australian Business Number) Act 1999 in July 1999, the ABN became the new single identifier for business and a key element of the government's framework for a new tax system. As such, it is a mechanism for receiving information from businesses and distributing it within government more efficiently.
The Australian Business Register contains information supplied by Australian businesses, some of which is available to the public. While the information is protected from unauthorised access and changes, the public can access some core details (for example, to confirm whether a business is registered for the goods and services tax). The Register is also part of a wider strategy to encourage a greater volume and quality of business-to-government electronic commerce in Australia by providing an appropriate infrastructure that ensures security and authentication issues are addressed.
The Register is maintained by the ATO and the Commissioner of Taxation is its Registrar. The ATO administers the Register as a separate system and other government agencies have been and will continue to be involved in its development. These include: the Australian Bureau of Statistics; the Australian Customs Service; the Australian Securities and Investments Commission; the Department of Communications, Information Technology and the Arts; and the Department of Employment, Workplace Relations and Small Business-owner of the Business Entry Point. Involvement by other Commonwealth and State agencies, such as the Offices of State Revenue and Offices of Fair Trading, as well as local government agencies, is also planned.
In future, government agencies at all levels, business, intermediaries and the general public will be able to access the services of the Register in a variety of ways, including the internet. Services to business and the public will be expanded, and other government agencies will use the Register.
Benefits from the ABN and the Australian Business Register will be realised over many years. Ultimately, it will reduce the number of government registration and reporting requirements for businesses.
The ABN registration process was a resounding success, with the number of businesses registered exceeding the highest expectations.
By 30 June, 2 898 000 businesses and other eligible entities had applied for an ABN and around 2.1 million2 had applied to be registered for the goods and services tax. More than 99 per cent of businesses that applied for an ABN before 31 May 2000 received their ABN by 1 July 2000. The others were sent safety-net letters, which gave recipients authority to operate as if they had received an ABN. The safety-net letters applied from 1 July to 31 July.
During the main registration period, businesses and other entities lodging applications-with all essential details completed-were issued ABNs within a maximum of 14 days (electronic lodgment) or 28 days (paper lodgment).
2This includes 200 000 clients whose registrations were interim until further information was provided.
Table 5.1 ABN registration results, 30 June 2000
The following sections describe some of the strategies and work involved in the implementation of the ABN.
Government made the ATO responsible for implementing and administering the ABN and the Australian Business Register. We were uniquely positioned to provide support to the reform processes because we had the foundations of an appropriate infrastructure, strong partnerships with tax agents and industry groups, and national registration service centres that registered businesses for taxes. Furthermore, we had strong alliances with the Business Entry Point, which provided access to broad government and industry-based information and services, and scope to conduct transactions such as applying for a tax file number.
In November 1998, we established the ABN registration project team and charged it with implementing the ABN in two phases:
- phase one focused on registering eligible businesses for the new tax system by 1 July 2000; and
- phase two (in progress) addresses whole-of-government requirements such as developing the Register to meet requirements across government agencies. The team is also investigating ways to enhance the efficiency and delivery of the ABN product.
The project team used a coordinated management approach in phase one. This included:
- implementing external and internal communication strategies for initial and ongoing ABN registration;
- registering applicants through appropriate forms;
- building an electronic registration database in the existing ATO client register;
- providing quality, streamlined service to tax agents;
- providing specialised service to large, complex and special clients;
- ensuring that appropriate staff were skilled to operate the new registration processes and systems; and
- ensuring that the infrastructure was in place to support the registration processes.
The task of informing and educating businesses and the general community about the ABN and the Australian Business Register was an important responsibility for us. Key audiences included all businesses, especially small to medium-sized ones and those from non-English and indigenous backgrounds. Additional target audiences included charities, other non-profit organisations and industry associations. Internally, we also kept staff informed of legislative changes and the new registration procedures.
We took special effort to communicate with our various audiences. The main focus was to help businesses understand the role of the ABN, its relevance and benefits, and ways to register for an ABN and for other taxes. Most importantly, we wanted to ensure that eligible businesses registered for the ABN before the start of the new tax system. Businesses were encouraged to register by 31 May 2000, preferably using electronic registration. This emphasis paid off with 62 per cent of applications being lodged electronically either through the Business Entry Point or the ATO's Electronic Lodgment Service (see table 5.2). On 31 May, the Business Entry Point website attracted more than 4 per cent of all Australian internet traffic.
Table 5.2 ABN lodgment results, 30 June 2000
To convey the importance of timely registration, we used conventional communication channels such as advertising, publications and public relations, as well as other media such as websites, seminars, workshops, Sky Channel broadcasts, talk-back radio, educational videos and advisory visits to businesses. Results from a survey in late May 2000 showed that 98 per cent of English-speaking businesses were aware of the ABN.
International experience indicated that early registration of businesses for the ABN was essential for a smooth transition to the new tax system. Approximately 2 380 000 registration packages were printed, personalised and sent to prospective registrants in November and December 1999, following an intensive quality review of our existing registration data.
In total, more than 7 000 000 copies of the package were printed and distributed by mail, and through other outlets such as newsagents, post offices and banks.
The focus of the campaign was to maximise responses by 31 May 2000. In February and May, the Commissioner sent reminder letters to businesses that had not yet responded to the initial mailout.
The ATO developed new systems to enable the rapid registration of business clients for ABNs. Rather than using manual data-entry techniques, we introduced advanced data capture processes for paper-based applications, and this helped to optimise data accuracy. It also made two other electronic channels available for tax agents and clients to lodge applications-the Electronic Lodgment Service and the Business Entry Point.
Compared with paper-based ABN applications, these electronic processes further helped to reduce errors and omissions in data because they were designed to prompt applicants to ensure correct answers to questions. The electronic processes also streamlined the issuing of ABNs.
Of the systems we put in place, two in particular helped to streamline the processing of ABN applications. The first, the forms exceptions actioning system, was designed to allow staff to work efficiently when processing large volumes of registrations. It had capacity to detect missing and incorrect information on the application, and it also identified discrepancies between ATO records and information provided by the applicant.
The second, the interactive voice response system, was a telephone tool that allowed clients to order new application packages or to advise the ATO that they did not need to register. About 25 per cent of businesses that had been contacted, but did not need to register for an ABN, used this system.
We also created an internet-based interface for businesses that preferred to or were required to deal with us electronically only (for example, those with an annual turnover exceeding $20 million). The interface will support a whole-of-ATO approach to electronic service delivery for businesses and is based on technology that provides a digital authentication certificate, an electronic signature and high-level data protection.
In phase two of the ABN project, we plan to develop technologies, processes and systems to enable the Register to be used by the Commonwealth, State and local government agencies.
The ATO recognised that many businesses have an existing relationship with tax agents for at least some of their ongoing tax obligations. As a result, we took special interest in providing quality and streamlined service to this client group, including a specialised tax agent enquiries line. Bulk registrations submitted by tax agents through the Electronic Lodgment Service were processed by specially trained staff. We also structured our communications and user interfaces to suit tax agents using the electronically distributed ABN News to keep agents abreast of trends, tips and other information.
These efforts helped to minimise errors and speed the processing of applications. More than 1.3 million businesses registered for an ABN with the assistance of a tax agent.
Other initiatives that supported tax agents included:
- specialised seminars, broadcasts and journal articles to communicate important messages and answer technical questions;
- an extension of May lodgment dates for income tax returns for those who lodged through the Electronic Lodgment Service, so that tax agents had time to focus on ABN registrations; and
- an upgrade of the tax agents' information line.
Business Registration Services, part of our Small Business line, was given operational responsibility for processing ABNs and maintaining the Australian Business Register.
Their Dandenong, Victoria office was temporarily dedicated to initial registration processing. It was supplemented with temporary staff and supported by other Business Registration Services' offices. During the year, staff numbers in this unit rose from 300 to approximately 1200 to handle business-as-usual work, assist in processing initial ABN registrations, establish specialised teams to deal with large and special clients, and deal with progress-of-registration enquiries.
Client groups with special and/or complicated requirements under tax reform-large clients, government entities, charities, schools and churches-were registered through a separate process. Skilled client teams provided proactive contact and facilitated registration.
Business Registration Services also established national teams to answer some 76 000 calls, referred from call centres, regarding more detailed progress-of-registration enquiries from clients awaiting an ABN. Other areas provided staff support to answer queries in April to June 2000.
Overall, the implementation of ABN affected staff in many areas of the ATO, including call centres and units dealing with education, compliance, workforce, logistics, dispatch services and information technology. All staff concerned were given comprehensive training. Staff in Business Registration Services were trained using simulated registration-related activities.
The ATO responded to concerns and feedback received from businesses and other entities regarding the practical implementation of the ABN. In some cases, the feedback resulted in legislative changes.Some of the legislative changes concerned the treatment of joint ventures, grouping and branching for goods and services tax purposes of government and non-profit sub-entities, and the need to limit public access to certain details contained on the Australian Business Register.
During 1999-2000, the ATO continued to pursue, in a determined and professional way, the issue of aggressive tax planning. This issue remains one of our key focuses, and a cross-line steering group provides organisational leadership to ensure our responses to its many forms are coordinated and strategic.
Our intelligence gathering is focused on identifying new and emerging arrangements. We need to continue to improve our effectiveness in getting on the front foot in obtaining and sharing intelligence, and in devising comprehensive strategies consistent with our compliance model.
As the new tax system emerges it is important that the community has confidence in the ATO's effectiveness in ensuring that people are paying their fair share under the law.
Those involved in aggressive tax planning often have a vested interest in concealing information from us or misleading us as to the true nature and intent of the arrangements. Our ability to detect and access details of what is going on is therefore critical.
We are pleased to note that the full Federal Court in September 2000 confirmed that the Commissioner may engage barristers to conduct examinations under our access powers before ATO officers. This is sometimes necessary, for example, in aggressive tax planning cases where the examination would otherwise be frustrated by a lack of cooperation on the part of persons holding information the ATO legitimately requires.
Equally, however, others in the community can, and should, have a responsibility to bring issues to our attention.
Sometimes when an issue blows up there are comments in the media about how this matter was well known in the marketplace. These comments often criticise us for inactivity. In our view of the world, it is a criticism of those 'in the know' who are abrogating a community responsibility by not bringing issues to our attention in a timely way.
We want to work with responsible members of the community and are happy to explore the best avenues for them to provide us with the information we need to protect the community's interest. We hope this would include tax professional bodies and industry associations.
Some important legislative reforms, which affect aggressive tax planning arrangements, were enacted during the year. These included:
- measures preventing loss duplication and value shifting; and
- prepayment rules relating to tax shelters.
Other reforms have been foreshadowed by government and, once enacted, are also expected to affect such arrangements.
Broadly, mass-marketed arrangements can be categorised as:
- round-robin schemes, including non-recourse financing, often in agriculture, afforestation and franchises;
- certain film schemes with guaranteed returns that are, in effect, a return of part of the invested funds; and
- employee-benefit arrangements that have more to do with creating tax benefits than anything else.
By the end of the financial year, we finalised our position on 212 schemes. A further 70 schemes are currently being examined and are expected to be finalised during the current year. We also issued amended assessments to 17 980 taxpayers. A total of 696 objections had been determined and 228 appeals had been lodged.
Employee-benefit arrangements continued to be marketed by some, even after we made clear that, in our view, these arrangements were not effective under the existing law, including by virtue of general anti-avoidance provisions. This has been our consistent position in our advice to government. It also remains our position. However, because of this continued marketing and participation, the government announced in June this year that it would introduce legislative amendments to address controlling interest and offshore superannuation schemes. We advised government to announce these legislative changes because of our desire to protect people to whom the arrangements continued to be marketed.
The following case study illustrates arrangements that seek to deduct contributions made to offshore superannuation funds.
Employer Y Pty Ltd contributed $3 million to an offshore non-complying superannuation fund. The two directors of Y Pty Ltd are the only employees nominated for membership in the fund. Annual salaries for these directors were $50 000 and $10 000. Under section 82AAE of the Income Tax Assessment Act, Y Pty Ltd claimed a deduction for the contribution, with the effect that it returned a taxation loss for the year, which was to be carried forward to future years.
Y Pty Ltd borrowed the funds to make the contribution. An amount of $3 million was returned to the employees as a loan via offshore entities. The employees used the funds to purchase property and other investments.
The ATO believes Y Pty Ltd is not entitled to a deduction for the $3 million contribution because the amount was not paid for the purpose of making provision for superannuation benefits. Alternatively, the general anti-avoidance provisions would apply to deny the deduction claimed.
During the year, we evaluated our work in relation to mass-marketed schemes over the last three years. The key findings were:
- the level of deductions associated with mass-marketed schemes increased markedly over the years from 1992-93 to 1996-97, but there was a levelling off in 1997-98 and 1998-99;
- the level of deductions associated with mass-marketed schemes was still unacceptably high, at around $1 billion in 1998-99; and
- the ATO had been largely successful in putting an end to schemes that use non-recourse loans, effected by a round-robin flow of funds, to artificially inflate deductions relating to tax-shelter investments.
The evaluation attempted to estimate the impact of the ATO's crackdown on mass-marketed schemes. Figure 6.1 compares scheme deductions claimed with the projected level of deductions in 1997-98 and 1998-99, based on the rate of growth in previous years.
Figure 6.1 Estimated effect of voluntary compliance, all entities, 1992-1993 to 1998-99
The product rulings system, introduced in June 1998, continued in 1999-2000. The system provides potential investors with certainty about the taxation consequences of investing in a particular product, subject to the product or arrangement being implemented as stated in the ruling application. Product rulings seem to have had a significant impact in helping to curtail certain prospectus-based, mass-marketed schemes.
In 1999-2000, investment promoters applied for rulings on 165 products. The ATO ruled on 102 of these. Of the remaining applications, 31 were either withdrawn or the ATO refused or was unable to rule. Thirty-two applications were undecided at 30 June 2000.
During the year we commenced a review of favourable rulings issued in 1998-99 to ensure adherence to the ruling, including determining whether the arrangement had been implemented as outlined in the ruling application. The review had not been completed by 30 June 2000.
Assessments and objections
Our strategy of generally holding off on determining objections and, in some cases, amending assessments while pursuing representative cases to test arrangements was also reviewed during the year.
Without placing blame, our experience to date in a number of arrangements has been that we are not getting an appropriate range of representative cases before the courts as early as we would like. The ATO cannot force taxpayers to lodge objections and appeals; and promoters have their own agenda in relation to the process of selecting representative cases.
Our experiences from past years also tell us there is a very real danger that the selected representative taxpayers in particular arrangements may decide to pull out of the process at the last moment. This is a totally unacceptable outcome for other participants who are relying on a decision.
There is another consideration about the signals being sent on participation in aggressive arrangements. This is that any long delays put off the hard edge of reality of participating in aggressive schemes. Perhaps this is a factor in the continuing participation in such arrangements.
In practical terms, this means the ATO generally issues amended assessments when we believe tax is payable, unless we are still considering matters-such as realistic offers of settlement-put to us by taxpayers or their representatives.
We will also consider and determine objections, again subject to having sufficient facts and consideration of realistic settlement offers. However, given previous commitments and the fact we now have test cases listed for hearing, we will continue to hold off on determining objections in the Budplan3 arrangement cases for the moment.
When objections are disallowed, each participant needs to assess the strength of their case to decide whether to lodge an appeal with the Administrative Appeals Tribunal, the Federal Court or, in those limited cases where the tax in dispute is less than $5000, the Small Taxation Claims Tribunal. We continue to work with promoters and taxpayer advisers to get representative cases heard by the courts as quickly as possible.
Our normal policy in relation to the collection of the outstanding debt continues to apply. In cases where appeals are lodged, we generally seek payment of 50 per cent of the tax in dispute.
3This tax-shelter scheme, known as Budplan, involved 9842 investors and deductions of $372.5 million. The ATO believes the claims for deductions are not allowable under the law.
During the year, we released a draft addendum to the Code of Settlement Practice to provide guidelines for the settlement of mass-marketed aggressive tax planning schemes. After reviewing feedback on the draft we finalised the addendum in July 2000.
The settlement guidelines attempt to find a balance between giving the right downside signals and allowing both the ATO and also taxpayers to clean up the past and move forward.
Investment schemes ruling
In June this year, tax ruling TR2000/8 was issued in respect of investment schemes. This ruling, which had earlier been issued as a draft, provides the ATO's views in respect of so called tax-effective or tax-shelter arrangements that are commonly mass marketed.
In addition to the mass-marketed arrangements, there are a wide variety of tailor-made arrangements including financial products. These continued to be marketed during 1999-2000. Many of these financial products appear to be variations on products we have seen previously, and some appear to be essentially designed to provide taxation timing benefits.
We continue to encourage dialogue with the banking and finance sector, especially to enable examination by us of new tax-effective products. This has many advantages for all concerned. It helps to provide greater certainty for investors, and reduce costs for everyone. Where tax-aggressive products are marketed without an ATO product ruling, we have no choice but to examine them and publicly state our view. This may result in a negative impact on the commercial viability of a given product and may lead to associated costs, such as for litigation.
This is unavoidable as long as issuers of these products refuse to talk with us before marketing them.
Some other arrangements identified during 1999-2000 with which we have concerns include:
- various arrangements that appear to be designed to avoid the provisions dealing with franking credit trading;
- arrangements designed to generate interest deductions and foreign tax credits to shelter Australian source income;
- intellectual property syndication arrangements which attempt to exploit the concessions afforded by Division 373 of the Income Tax Assessment Act; and
- arrangements designed to generate tax losses from investments in retirement villages.
The above arrangements are often tailor-made for higher income and corporate taxpayers. We flagged our concerns about these arrangements during the year and continued our analysis to enable us to communicate our view of the arrangements.
Much of the international tax avoidance that is currently of concern to the ATO involves the use of tax havens.
Our research indicates the use of tax havens has increased significantly in recent years. The main havens used by Australian taxpayers are Singapore, Hong Kong, the Netherlands and Switzerland; although exotic havens such as the British Virgin Islands and Vanuatu are increasingly being used by both corporates and individuals.
The dominant activities with the main tax havens used by Australian corporates continue to be financing, holding companies, marketing and business services, and investment, while much of the business through the exotic havens takes the form of mass marketing of avoidance schemes largely to individuals. The value of payments from Australia to tax havens has increased significantly since 1996.
Our concerns arise from the threat to the revenue posed by corporations and wealthy individuals who are avoiding paying their fair share of Australian tax by taking advantage of the services offered by tax-haven regimes and promoters who operate through them.
These services include the marketing of complex and artificial schemes to provide tax avoidance opportunities for Australian taxpayers. Development of these schemes is made possible by the provision of low-cost legal and commercial facilities by the tax-haven governments, and because of the low incidence of government regulations and supervision in these tax havens.
However, most importantly and of most concern to legitimate tax jurisdictions all over the world is the total secrecy related to all banking and commercial transactions that are channelled through these tax havens. The secrecy provided by tax havens is of particular concern because it enables corporations and individuals to conceal their tax avoidance and evasion activities.
This secrecy is also a primary facilitator of the 'laundering' of the financial proceeds of crime. As a result, law enforcement agencies cooperate with tax authorities throughout the world to monitor tax havens and work through responsible jurisdictions and forums to eliminate this cloak of secrecy in so far as it benefits tax avoidance and evasion and other criminal activity.
The ATO takes part in many international forums where tax havens are prominent among the issues discussed with officers of other tax jurisdictions. The OECD monitors tax-haven activity on a worldwide scale and we play an active part in this program. In addition, meetings with tax officers of other countries at international forums produce mutually profitable exchanges of ideas, practices, information and methodologies.
At the present time, the ATO is pursuing tax-haven activities by targeting:
- transactions by large corporations and individuals through known tax-haven jurisdictions;
- the activities of known promoters of tax avoidance schemes, whether the promoters are based in Australia or offshore; and
- taxpayers who do business with these promoters.
Our research has made good progress in identifying certain promoters, both within Australia and offshore, who offer schemes, which operate through tax havens, to Australian taxpayers as tax avoidance services. The names of individual taxpayers who use these services are also being identified.
We have also found that proper compliance activities, including audit concentration on known promoters and their clients, can both protect the revenue and broaden the ATO's intelligence base about tax avoidance schemes generally.
In May 1996, we commenced a comprehensive compliance program to expand our understanding of tax planning techniques used by high wealth individuals (HWIs) and the resulting compliance risks.
A task force was set up to carry out this program. Its objectives were to act on the tax planning techniques already identified, gain an expanded and comprehensive understanding of the techniques employed, and to continue to identify, monitor and address emerging techniques.
Review by the Australian National Audit Office
During 1999-2000, the Australian National Audit Office (ANAO) undertook a performance audit into the operations of the HWI task force. Its report was tabled in the Parliament on 13 June 2000 and strongly endorsed the task force's work.
ANAO concluded the management and operations of the task force had been effective, in that it had:
- managed the investigation of the tax affairs of HWIs in accordance with the ATO's risk-management principles;
- achieved the revenue targets set by the government; and
- contributed to the development of administrative and legislative proposals to address undesirable tax minimisation practices.
Tax planning techniques
Whilst not all HWIs and their associated entities are engaging in tax minimisation arrangements, many do pay relatively little tax compared to their apparent wealth. Some consistently adopt aggressive tax planning practices and others achieve reduced taxation within the terms of existing laws.
On the basis of its analysis and risk assessments, the task force has concluded it should continue ongoing monitoring of about 50 per cent of the HWIs.
Task force investigations have identified a range of reasons why some HWIs pay relatively little tax. Many achieve reduced taxation within the terms of the taxation laws, while some adopt an aggressive tax planning approach. The reasons include:
- tax-free distributions from trusts;
- non-cash benefits and loans from both trusts and companies to individuals;
- tax-deductible gifts;
- negatively geared property holdings generating annual interest deductions;
- deductions claimed for building construction expenditure;
- genuine tax losses from business operations, for example primary-production activities, which shelter income from profitable activities;
- profits on sale of properties by developers claimed to be of a capital nature;
- deductions claimed for investments in retirement villages;
- losses from film schemes and research and development syndications;
- acquisition of loss trusts and companies to shelter income from profitable activities;
- intra-group arrangements, including debt forgiveness, to generate non-economic losses;
- capital gains tax cost-base manipulation; and
- accumulation of wealth offshore and lack of evidence in some cases to prove avoidance of Australian tax.
Some of the tax aggressive techniques have been addressed by legislative measures in recent years, and a number of others are expected to be addressed through reform of business taxation.
The case study illustrates the complexity of one HWI's tax affairs and the history of aggressive tax planning arrangements undertaken by the HWI and his associated entities.
During the period 1994 to 1999 the HWI's group of entities entered into numerous aggressive tax planning arrangements which sought to reduce income tax payable by the entities within the group to either nothing or a negligible amount in each year.
In aggregate terms over six years, the group reduced its net trading income by $1011 million. The aggregate tax paid by the HWI group for the six years was around $12 million.
The following arrangements were entered into:
- acquisition of 12 entities with losses of $513 million-losses claimed to 30 June 1999, $360 million;
- section 23AJ arrangement-interest claimed, $266 million;
- nine research and development syndicates, $203 million;
- dividend washing to obtain rebate benefit and deduction for assignment fees, $145 million; and
- linked bonds arrangement, $37 million.
Based on the task force examinations to date, the ATO is of the view that all of the arrangements entered into are questionable. It is expected that a significant amount of the deductions claimed will be disallowed and that, in most instances, the general anti-avoidance provisions will be applied if necessary to deny deductions.
The above case study is illustrative of a very high-risk HWI group. The group will be subject to ongoing examination, including audit activity, until there is a substantial improvement in its compliance behaviour.
Since the task force was established, total compliance activities by the ATO have resulted in additional revenue collected of $198 million, of which $32.6 million is in dispute. This includes additional revenue of $73.5 million collected during 1999-2000, of which $32.6 million is in dispute. An additional amount of $33.7 million has been secured by settlement during the year and was due to be paid after 30 June 2000.
The task force's revenue outcomes since it was established in 1996 are summarised in Table 6.1.
Table 6.1 HWI task force's revenue outcomes, 1996-97 to 1999-2000
In addition, there is evidence the amount of tax paid by companies associated with HWIs has significantly increased over the last four years.
Since the creation of the task force, tax paid by HWI-controlled companies has increased by more than that paid by other private companies. For the 1995-1996 to 1998-1999 income years, the net tax collected from HWI companies was around $470 million more than that which would have been paid if HWI companies had grown in line with other private companies.
While some of the increased tax collections might be due to stronger economic growth of HWI companies compared to other private companies, it is our view that the analysis represents a reasonable estimate of indirect revenue resulting from the ATO's activities. The ANAO supported our approach to estimating the indirect revenue gains in its report on the task force (see paragraphs 3.15 to 3.22 of the ANAO report).
In the last four years, the task force has examined 409 HWIs. In depth examination and analysis of 236 of these HWIs and their associated entities has revealed significant increases in the amount of tax paid at both the individual and group levels. In the first three years of the task force's operations, the aggregate tax paid by the individuals and associated entities of these 236 HWIs increased by 48 per cent.
During 1999-2000, the task force issued amended assessments in 27 HWI cases, resulting in increased tax payable of $324 million. Of this, $253 million is in dispute.
During the financial year, the task force continued to focus on losses claimed by entities controlled by HWIs. Loss adjustment notices were issued in 11 cases, resulting in reduced revenue losses of $24.5 million and capital losses of $24.1 million. Losses claimed have been reduced by $927 million over the last three years. Table 6.2 summarises the results of adjustments flowing from the task force's activities.
Table 6.2 HWI task force's adjustments to losses claimed by HWIs and/or HWI groups, 1997-98 to 1999-2000
Losses claimed arise from various sources. Two ongoing areas of concern for the task force are losses claimed in respect of research and development syndication and film investment schemes.
Although legislation has been enacted to stop the abuse of research and development syndication, the task force continues to investigate cases including substantial claims for core technology in this regard. Film investment schemes are also the subject of continuing audit activity by the task force.
Legislative changes enacted during the year to address loss duplication and value shifting are expected to have a significant impact on some HWIs' tax planning arrangements.
International tax issues are a key focus of the task force because many HWIs engage in offshore dealings. Some HWI groups are presently under audit in relation to such dealings. Often it is difficult and resource intensive to gather information and evidence to determine the extent of compliance with Australian tax laws.
It is evident from the task force's examinations that there is a greater risk generally from offshore arrangements in groups controlled by HWIs in the wealthiest category. Some HWIs use tax havens to avoid tax.
The task force works closely with our international tax division and consults with external experts to help determine the ATO's position under the law on issues identified.
Higher risk HWIs will continue to be subject to close scrutiny by the ATO through analysis of expanded tax returns and fieldwork activities. This approach is consistent with our compliance model principles, which include targeted enforcement in the higher risk cases.
We are increasing our focus on HWIs' current arrangements, in particular, emerging planning arrangements and new risks arising out of tax reform. In addition, we will also focus on HWIs' key advisers and promoters of aggressive tax planning arrangements.
As part of its fieldwork and audit activity in relation to HWIs and associated entities, the task force finalised 31 cases in 1999-2000. A total of 86 cases were in progress in the ATO as of 30 June 2000.
Expanded tax returns
During the year, selected HWIs and associated entities were required to lodge more detailed information in annual tax returns. While the ATO is conscious of the additional compliance costs for these taxpayers, we believe that more comprehensive information is essential to effectively manage compliance.
The Senate Economics Reference Committee and the ANAO in their recent reviews of the operation of the task force have endorsed the strategy of requiring some HWIs to provide detailed tax returns.
At paragraph 2.55 of its report the ANAO said:
...the Expanded Return process is an effective compliance management technique for dealing with the complex tax planning and business arrangements of the HWI population. While acknowledging the increased compliance costs that Expanded Returns impose on HWIs, the ANAO notes that task force decisions to require provision of Expanded Returns are based on risk assessment outcomes. This means that low risk HWIs are generally excluded from such detailed examination and therefore do not have to meet the increased compliance costs that would arise from a requirement to lodge such returns. On the other hand, the information supplied by high and medium risk HWIs that are subject to Expanded Returns benefits the task force in its roles of gathering information on tax planning and techniques utilised by HWIs and analysing individual HWI circumstances that may result in task force audit activities.
The ATO recognises that although settlements may be appropriate in some cases, the ongoing positive compliance effect of taking issues to the courts is an important consideration. A number of HWI cases are currently subject to litigation. There were 10 HWI groups that had cases awaiting hearing in the courts or the Administrative Appeals Tribunal on 30 June 2000.
The task force played an important role in recent tax reform through its advice to both government and the Ralph Review of Business Taxation. Both the ANAO and the Senate Economics References Committee acknowledged the significant contributions of the task force in this area.
The ATO expects that the government's proposed systemic business tax reforms, such as the taxation of trusts like companies and the consolidation regime, will address major weaknesses in the current tax system. In addition, as noted earlier, some legislative measures already enacted, together with the ATO's ongoing administrative actions, will have considerable impact on the revenue risk from HWIs' tax planning arrangements. The ATO expects that the impact of the changes to business taxation will add to the delivery of revenue previously identified as being at risk in the HWI population. However, this is subject to the foreshadowed reforms being enacted without material change.
The task force anticipates that new minimisation arrangements will emerge in response to the legislative reforms and the ATO's actions. The task force will continue to focus on identifying tax planning issues and compliance risks in the HWI population. A particular focus will be on monitoring the impact of tax reform on the compliance behaviour of HWIs, identifying and understanding new drivers of tax planning and providing evidence to the government on the effectiveness of the reformed law.
Decisions of the courts will be a significant factor in dealing with the problem of aggressive tax planning. We have acted to assemble top-class legal support to coordinate our litigation of cases before the courts and we will be vigourously arguing for the policy underlying the law and opposing technical arguments which seek to avoid or undermine that policy intent.
In doing this, we take heart from the no-nonsense decision of the High Court in the Spotless case on the application of Part IVA, and the decision of the Full Federal Court in the Consolidated Press Holdings case during 1999-2000. The latter dealt with quarantining of deductions against foreign income, and the decision should send a shiver down the spine of those engaged in aggressive tax planning.
The ATO continued to take action during 1999-2000 to attempt to get cases before the courts in respect of various tax planning arrangements. However, as noted earlier, this has been a slow process. The timeframe for getting cases heard depends on a number of factors including court and Administrative Appeals Tribunal processes preparatory to a hearing, and the cooperation of taxpayers and their advisers.
In respect of the Budplan arrangement, which involves nearly 10 000 investors, a small number of cases were listed for hearing by the Federal Court in March 2001. The hearing has now been deferred to May 2001 as a result of a request by the taxpayers.
The ATO is also responsible for the Australian Valuation Office and the Development Allowance Authority. The following information covers the work carried out in these areas in 1999-2000.
The Australian Valuation Office (AVO) provides government agencies with policy and strategic advice on valuation and related issues. Its services cover sensitive and confidential areas that assist agencies to contain financial outlays and optimise revenue. It also provides valuation advice to the Northern Territory and the Australian Capital Territory for land management, rating and taxation purposes.
Its national plan identifies three areas on which the organisation focuses. These are customers, staff and operations. In 1999-2000, the strategies AVO employed were to:
- provide independent and professional valuation services to customers to help them to improve the administration of their programs;
- maintain a team of skilled and committed people to meet the broad range of advice and services required by government and customers;
- maintain a focus on continuous learning arrangements and simplify learning agreements for all staff;
- develop new products and methodologies that make the AVO unique and that meet and satisfy government requirements;
- achieve sound financial outcomes; and
- identify and implement best practice and tailor resources to meet customer needs.
Performance is set out against the AVO Business Plan's three areas of focus. These areas are interdependent: an achievement often meets more than one goal.
The AVO is Budget-neutral and focuses on providing a value-added service to government bodies. In conducting its valuations, the AVO uses procedures and methodologies that have been approved by the Australian National Audit Office.
In October 1999, the AVO surveyed its customers and found the overall satisfaction rate was 91 per cent, compared to 86 per cent in a 1996 survey. In the recent survey, customers stated there were four factors in particular that made them value AVO services. These were: accurate valuations; knowledgeable and experienced staff; valuations provided within agreed time frames; and services that helped them to achieve their outcomes.
During 1999-2000, the AVO received more than 35 000 requests for valuations and carried out more than 64 000 individual valuations. These services and advice were provided to a range of agencies including:
- Centrelink and the Department of Veterans' Affairs for asset test purposes. Both organisations use AVO information to assess the effect that asset values have on the level of pensions paid;
- the High Court of Australia, the Department of Parliamentary Reporting Staff, the Australian Defence Industries, the Australian Film Commission, the National Registration Authority, the Australian National University, Frontline Defence, the Australian Competition and Consumer Commission, the Office of Parliamentary Counsel, the Health Insurance Commission, the Family Court of Australia, the Department of Transport and Regional Services, the Department of Prime Minister and Cabinet, and the Department of Industry Science and Resources for financial reporting;
- the Northern Territory Government for rating, taxation purposes and its first homebuyers scheme;
- the Department of Defence, where AVO was successful in winning a competitive open tender for the valuation of all Defence real property for the next three years;
- the Australian Capital Territory Government and its agencies for rating property management and financial reporting;
- the ATO to assist with the implementation of taxation reforms, and to review research and development claims made by taxpayers;
- the Department of Finance and Administration, the Australian Communication Authority, the Australian Capital Territory's Kingston Foreshore Authority, Aboriginal Hostels Limited, and the Department of Transport and Regional Services for property management and sales;
- wildlife park agencies for heritage and commercial value of their assets;
- the Indigenous Land Corporation for the purchase of rural properties; and
- the Aboriginal and Torres Strait Islander Commission for financial valuations for its Business Funding Scheme.
The AVO is committed to strengthening the skills and capability of its professional and support staff. This year's efforts included:
- in-house specialist workshops covering valuation procedures for taxation purposes and central business district properties;
- scholarships to allow staff to further their educational qualifications in the fields of financial valuations, plant and equipment valuations, accounting, employee relations, marketing and information technology; and
- overseas visits to Canada (to attend the Commonwealth Valuer General's Conference), to the United States (to discuss asset depreciation with the Internal Revenue Service) and to New Zealand (for a native title conference).
Classification and remuneration systems were reviewed during the year as part of the terms and conditions of the AVO's certified agreement. The outcomes and recommendations from that review have been discussed and an implementation strategy has been developed.
The AVO also sought employees' opinions on a range of management and performance issues. Recommendations from this survey have been reviewed and an action plan for change is in place.
Throughout the year, AVO focused on its long-term viability and on improving its process to ensure its services are timely, professional and add value to clients' operations. To address these issues, the AVO:
- improved its work practices for providing valuation services to Centrelink and the Department of Veterans' Affairs. These improvements delivered a significant productivity increase to Centrelink;
- provided vital input supporting government policy in native title, the Department of Finance and Administration's asset sales task force and with Tax Reform;
- developed and implemented a revised marketing plan that targets customers requiring the more complex valuations;
- continued to develop the strategic valuation model database that provides a desktop decision support system that utilises information on comparable properties within the database. This will allow the AVO to better manage risks associated with determining property values;
- achieved sound financial outcomes to meet stakeholder expectations-net operating profit of $996 000 against a forecast profit of $27 000;
- provided sensitive valuation services to Centrelink, the Department of Veterans' Affairs and the ATO;
- contributed strategic advice to increase accountability within government financial reporting;
- negotiated a certified agreement that links the planning process to performance;
- rationalised accommodation and property operating expenses in some regions; and
- upgraded the information technology system to satisfy Year 2000 and goods and services tax compliance requirements - this included replacing non-compliant hardware and upgrading operating systems and application software.
The Development Allowance Authority was established in 1992 as a single-person statutory office responsible to Parliament for administering the Development Allowance Authority Act 1992. The office is currently held by the Australian Taxation Commissioner. During the year, the Authority's powers were delegated to senior executives, Anthony Sidari, Suzanne Ashmore-Smith and Scott Burrows, at different periods.
Table 7.1 AVO Financial and staffing resources, 1998-99 and 1999-2000
The Authority and its supporting staff administer two investment incentive schemes-the development allowance and the infrastructure borrowings tax offset scheme. These schemes are designed to encourage the improved international competitiveness of the Australian economy.
In the past, the Authority produced a separate annual report, but in 1999 it received permission from the Treasurer to fulfil its reporting obligations through the ATO's annual report.
The development allowance is a tax concession that was created in 1992 as a way in which the Government could:
- encourage investors to bring forward the timing of large investment projects; and
- encourage micro-economic reform in the carrying out and operation of large projects. The Act includes a 'competitiveness test', which requires that the labour relations associated with the project substantially reflect world best practice and that the pricing of significant inputs is economic and efficient.
The allowance comprises a tax deduction of 10 per cent of the value of eligible investment, in addition to depreciation.
To be eligible to receive the allowance, applicants went through a two-stage approval process (registration, followed by pre-qualification). At the pre-qualification stage, they had to demonstrate how they would achieve the required micro-economic reform.
Response to the program was much greater than expected. By the statutory deadline of 31 December 1992, the Authority had received more than 500 applications to register. A total of 250 applications for pre-qualification were received by the statutory deadline of 31 July 1996.
As of 30 June 2000, all applications had been reviewed and 220 projects had pre-qualified for the development allowance, involving nearly $60 billion in capital investment. The majority of these projects relate to the mining sector (40 per cent) with a further 26 per cent relating to the manufacturing sector (see Figure 7.1).
More information on the allowance can be found on the ATO web site.
Figure 7.1 Distribution of pre-qualified projects, by industry sector, 30 June 2000
Cost of the program
When the program was introduced in 1992, the preliminary estimate of the cost to Commonwealth revenue was less than $100 million, based on a predicted maximum of 50 applications. However, based on projects approved to date, Treasury now estimates the program's cost will be at least $1.5 billion during the period 1993-2002.
Infrastructure borrowings tax offset scheme
The May 1997 Budget announced the infrastructure borrowing tax offset scheme to provide Commonwealth support for genuine infrastructure investment in Australia.
Legislation giving effect to the scheme is contained in Division 396, Land Transport Facilities, of the Income Tax Assessment Act 1997. The ATO and the Department of Transport and Regional Services jointly administer the scheme.
The scheme enables infrastructure proponents to apply to the Commissioner for a tax rebate, described as a tax offset within the Income Tax Assessment Act 1997, which is provided to the project's resident-infrastructure lenders. In return, the infrastructure proponent (the borrower) has lower finance costs, in the form of lower interest rates or other benefits, and forgoes tax deductions on interest payments associated with the loan.
This is a selection scheme, not an entitlement scheme. The selection of projects is based on the limited funds available, the eligibility requirements and the relative merits of the projects.
The ATO's role, conducted through the Authority's office, is to:
- call for applications;
- determine the eligibility of borrowers, lenders and transitional projects;
- work with its public infrastructure unit to provide advice to the Minister for Transport and Regional Services on financing arrangements and the possible application of the income tax anti-avoidance provisions; and
- provide cost-to-revenue advice to the Minister for Transport and Regional Services and cost calculations for the purpose of determining the amount of tax offsets available under the revenue cap.
Following passage of the legislation and Royal Assent on 16 April 1998, the Commissioner called for two rounds of applications under the scheme.
The Department of Transport and Regional Services takes prime responsibility for evaluating applications against the selection criteria set out in section 396-75 of the Income Tax Assessment Act 1997. The Minister for Transport and Regional Services decides which projects are successful.
Once a project is approved, the borrower and all the lenders who are eligible for the tax offset are required to enter into an agreement with the Commonwealth, represented by the Minister for Transport and Regional Services. The agreement will specify details of the project, the borrower, the lender(s), the terms and conditions, the income years covered and the maximum amount of the tax offset.
Two of the eight projects that received approval in the first round of applications-Oakey Power Station in Queensland and City Link in Victoria-have signed agreements with the Commonwealth. From the second round of applications, the Minister has given two projects conditional approval, subject to environmental assessment and ATO advice. These projects are Bondi Rail and Walsh Point, both in New South Wales.
More information, including the scheme guide and application forms can be found on the ATO web site.
The first section of this chapter identifies the formal mechanisms by which the ATO develops strategy and manages it operations through its key forums and committees. This is followed by a detailed description of strategic management that includes the integrated planning system.
Our planning and governance arrangements are designed to ensure the ATO delivers today for the community, while building our capability to sustain our performance in an ever-changing environment. As a result, we have established a well-developed framework and set of operations. These are described below.
Chapter 2 describes the overall structure of the ATO, and identifies the senior executives and their key responsibilities. The following explains the primary executive committees and forums.
The ATO Executive is our peak decision-making body. It is comprised of the Commissioner and the three Second Commissioners. This group meets at least monthly. Among other responsibilities, this group makes key corporate direction and design decisions, assesses and approves the business plans for each line, and evaluates assurance and governance information.
Strategic Navigation Workshops
Strategic Navigation Workshops are a corporate forum for senior executives and managers. Participants meet periodically throughout the year. The workshops provide a forum to upgrade the ATO strategy in response to shifts in our external environment. The workshops also allow us to examine our strategic appropriateness and viability. As part of this, we analyse our external and internal environment using techniques such as scenarios, intelligence and research.
Corporate Design Forum
The Corporate Design Forum includes the Commissioner, the three Second Commissioners and the National Program Managers. This group meets at least monthly. The purpose of this forum is to design the ATO's internal capability, paying particular attention to our leadership, engagement and communication aspects. It is formed on the premise of the integrated planning system structure, gathering information, intelligence and assurance, while providing strategic design to the direction formed in the Strategic Navigation Workshops. This forum also provides input to the plan and resource activities conducted in the Reform Steering Committee.
Reform Steering Committee
The Reform Steering Committee is the key internal discussion and steering forum to manage the reform agenda. The committee meets fortnightly and its membership includes the Commissioner, the three Second Commissioners and the National Program Managers.
The Audit Committee comprises a Second Commissioner, an Assistant Commissioner and a person external to the ATO and who has no conflict of interest with the organisation. The committee oversees internal audit activities, the systems of internal controls for risk management and corporate financial reports, and ensures that external audits by the Australian National Audit Office are appropriately supported. It met six times during the year.
Integrity Advisory Committee
The Integrity Advisory Committee, formerly known as the Fraud Committee, advises the ATO on fraud and ethics matters. The committee includes senior representatives from the Australian Federal Police, the Commonwealth Ombudsman, and the Public Service and Merit Protection Commission. It met four times in 1999-2000.
Other committees, forums, panels and meetings also contribute to the operation of the ATO. Some groups have diverse membership, and may include our senior executives, line representatives, external representatives and people with specialist knowledge or expertise.
The internal-only groups include: governance and corporate assurers meetings, senior executive service dialogue days, the national occupational health and safety committee, and the national human resource and development forum.
Groups with internal-external representation include: forums for technical excellence, tax practitioners, and the goods and services tax; committees on aggressive tax planning, corporate consultation and legislative management; panels on international tax rulings, tax policy, public rulings, Part IVA, litigation, goods and services tax rulings, and small business consultation; and liaison groups on tax and sales tax.
Strategic management system
The ATO's strategic management system is a composite of interrelated systems, processes and practices that assist us to navigate through a complex and constantly changing global environment. The principles of the strategic management system are the fundamental building blocks for the viability and sustainability of the organisation.
We work to understand the external environment in which we operate. We seek alignment of internal capability with stakeholder needs in order to fulfil our niche, thus bringing value to what we do. We undertake research on possible alternative futures. This allows us to consider potential future impacts on our current plans and decisions, and to identify a desired future state.
We put the concepts of strategic navigation into practice by using the learning phases of sensing, making sense, designing and actioning. We use strategic conversations to build intelligence. We translate strategy into operations that include feedback loops through corporate and governance processes as well as reporting, providing us with the opportunity to evaluate effectiveness. This facilitates our corporate responsiveness and adaptability.
Our strategic management system is supported by an integrated planning system that was corporately endorsed in June 1999. This latter system provides the framework for implementing the strategic management system within the ATO's context. The integrated planning system addresses six core strategic management processes. These are:
- strategic direction;
- high-level corporate design;
- plans and resources;
- build and operate;
- intelligence; and
Together these systems provide us with a holistic approach to ensuring our continued capacity to evolve in our emerging future.
Our strategic direction is captured in four primary documents:
- the ATO Strategic Statement provides a high-level statement of our directions for the future. The Commissioner approved the current statement in June 2000;
- A New Tax Office for a New Tax System describes the type of organisation we want to become to meet the challenges ahead. This document was issued in May 1999, and the thinking it expresses continues to be developed by the Corporate Design Forum. The ATO Executive makes any major design decisions;
- the Taxpayers' Charter outlines the relationship we seek to have with the community. It also states taxpayers' rights and obligations, as well as the service standards we strive to meet (see page 50 for performance results). The Charter has been in place since July 1997 and is to be reviewed during 2000; and
- the compliance model describes our role in managing and designing regulatory systems. It encompasses the need to treat people based on their individual circumstances. The model has been used since 1997, and it continues to be developed in conjunction with the Centre for Tax System Integrity at the Australian National University.
High-level corporate design
Our high-level corporate design and directions are constantly emerging, as the tax environment changes and our understanding of that environment increases.
To manage the application of high-level corporate design, we use an internal capabilities model. This model covers eight elements-strategy, relationships, processes, culture, people, networks, information technology and organisation.
Each element is assigned a coordinator who has overall responsibility for ensuring the principle is developed and implemented. The model was approved in October 1999.
A variety of documents support the model, including the Taxpayers' Charter.
Plans and resources
A range of plans guides us. These include:
- operational plans developed by each line. These plans are reviewed and signed-off by the ATO Executive each year in June;
- the balance sheet and operating statement. Our financial status is reported to the ATO Executive monthly; and
- the investment plan which sets out the corporate investments needed to ensure our effective operation. The ATO Executive approved the current plan in June 1999.
Build and operate
We are building an infrastructure to ensure our future capability and long-term sustainability. Our operations are designed to ensure we can meet the immediate needs of our stakeholders. Agency agreements and Australian workplace agreements establish the relationship between staff and the ATO. The program leadership methodology sets out the steps to be followed when conducting projects and programs within the ATO. There are also comprehensive chief executive instructions, human resource and information technology policies, and a code of conduct.
Intelligence is a key to our relevance to the community. In the past, we had many intelligence functions, but none covered the entire organisation. To address this problem, the ATO Executive endorsed the creation of Anet in July 1999.
Anet is a corporate-wide intelligence network. It includes representatives-from all lines and projects-who meet bimonthly to exchange and evaluate intelligence from various sources.
Assurance processes ensure that our directions and designs are appropriate, that resources are allocated properly, that the 'build' program is on track, that operations are performing to agreed standards and that the ATO is above reproach. We have assurance processes at the individual, line and corporate levels. Some processes occur annually, while others are monthly or quarterly. The processes in place include:
- individual assurance based on a performance management system that stems from agency agreements and Australian workplace agreements. This process was last modified in June 1999;
- line assurance conducted by each line. This, in turn, feeds into the corporate assurance process; and
- corporate assurance covering the six core elements of the integrated planning system, as well as policies relating to human resources, security, fraud, finance and information technology.
Our internal assurance branch provides independent and impartial audit and fraud prevention and control services for the ATO.
During the year, our internal audit service:
- analysed, appraised and made recommendations about issues reviewed under their strategic plan. These plans were reviewed regularly to ensure internal audit activity remained appropriate to ATO needs;
- performed independent testing and evaluation of the adequacy and effectiveness of internal system controls and evaluations of the quality of management processes;
- focused on initiatives by ATO lines, internal audit's risk assessments including risks surrounding tax reform initiatives, internal audit's findings, audits by the Australian National Audit Office that affect the ATO (including cross-agency audits) and future developments in tax reform;
- adopted a risk-based and disciplined approach for its operations and audits (utilising techniques for control risk self assessment);
- completed 52 audits, including audits of contract management work;
- facilitated 22 workshops on techniques for control risk self assessment, to help lines fulfil their corporate governance and accountability obligations; and
- commissioned an external review by an independent consultant to ensure that best practices are followed.
Given our role and profile within the community, we take an active interest in ensuring our employees observe high ethical standards.
For example, strict and accountable regulations are in place to control employee access to client information.
We also conduct an innovative fraud prevention campaign. More than 16 000 employees (84 per cent) have participated in part one, Judge for yourself, and almost 4000 (21 per cent) have participated in part two, Play it again Sam. During 1999-2000, we focused on providing this training to new employees in the goods and services tax line.
Charges against ex-senior tax officer
During the year, joint investigations by the Australian Federal Police and the ATO into the alleged misuse of our private binding rulings led to one of our former senior tax officers being charged with a number of offences.
Because this matter is still before the courts, it is not appropriate for us to comment further on this.
Remuneration for senior executives
Under new agreement-making arrangements in the Australian Public Service, the Commissioner is responsible for setting actual remuneration and conditions for our senior executive service.
A salary review was conducted in 1999. Based on this, minimum salaries were set at $87 000 for Band 1 and $106 000 for Band 2. These minimums took effect from 1 July 1999. Final terms and conditions of employment, including salary, are negotiated through an individual Australian workplace agreement.
An overview of remuneration to our senior executives appears in note 26 of the financial statements.
During the year, external scrutiny of the ATO was carried out by the Australian National Audit Office, the Ombudsman, the Privacy Commissioner and Parliament. Their findings are as follows.
Australian National Audit Office
The Australian National Audit Office (ANAO) is the ATO's external auditor. Its representatives attend all meetings of our Audit Committee.
During 1999-2000, the ANAO completed five performance audits involving the ATO. The reports and their tabling dates in Parliament were:
- Audit Report No. 16: Superannuation Guarantee, 15 November 1999;
- Audit Report No. 23: The management of tax debt collection, 20 December 1999;
- Audit Report No. 27: Risk management of individual taxpayers refunds, 27 January 2000;
- Audit Report No. 31, Administration of tax penalties, 16 February 2000; and
- Audit Report No. 46: High wealth individuals task force, 13 June 2000.
Full report details are available on the ANAO's website at www.anao.gov.au.
The ANAO audited our 1998-99 financial statements, and reported the results to our audit committee. It also completed interim fieldwork on our 1999-2000 financial statements, and reported its findings, progressively, to the audit committee.
As of 30 June 2000, the following ANAO audits were in progress in the ATO:
- two financial control and administration audits (relating to implementation of a new financial management system and to travel follow-up);
- two performance audits specific to the ATO (relating to internal fraud control arrangements and to the organisation's use of data from the Australian Transactions Reports and Analysis Centre); and
- four cross-agency audits (relating to implementation of the information technology infrastructure consolidation and outsourcing initiative, certified agreements in the Australian Public Service, Commonwealth agency management of leased property, and survey and fraud control arrangements in Australian Public Service agencies).
The Commonwealth Ombudsman's Office is the major external body for handling complaints about our administrative decisions and actions.
In 1999-2000, the Ombudsman received 2 081 complaints about the ATO- 30 per cent less than in the previous year. This result returns the number of complaints to a level similar to that in 1997-98. Complaint levels were high in the interim year, largely because of our position on certain investment schemes.
During the year, the Ombudsman continued to refer more cases back to us for resolution, and commented that our Problem Resolution Service (see page 48) was clearly taking some of the pressure off his office by dealing with referred complaints.
To ensure our actions are open to people in the environment of tax reform, we agreed to transfer $200 000 per year, for two years, to the Ombudsman's office. These funds have allowed that office to expand to handle issues relating to the goods and services tax.
The Ombudsman conducted several complex investigations during the year. These included:
- our handling of mass-marketed schemes-the Ombudsman made suggestions about the wording of settlement proposals presented publicly, and provided input into our Code of Settlement Practice;
- the actions of ATO officers in releasing information to third parties-the Ombudsman was satisfied that we promptly and properly addressed privacy concerns;
- debt recovery-the Ombudsman reminded us of the importance of balancing the Commonwealth's entitlement to the prompt payment of debts against a fair and commonsense assessment of each debtor's financial capacity and situation; and
- claims for compensation for defective administration-we have agreed to consider applying alternative dispute resolution techniques in an attempt to resolve some outstanding cases more quickly. We also agreed to introduce measures to facilitate a more coordinated and consistent approach to these issues.
During the year, there were media reports that the ATO was perceived to have breached privacy laws in respect to public access to, and sale of, details held in the Australian Business Register. The Privacy Commissioner was of the view that the A New Tax System (Australian Business Number) Act 1999 provided for such access and sale to occur and that there was no breach of privacy laws. The Privacy Commissioner was also satisfied that bulk extracts from the Australian Business Register that has been provided to an external organisation for the purpose of testing had been done so under strict contractual arrangements which provided for privacy protection of personal information on the Register.
The Privacy Commissioner, however, was of the view that the ATO was not providing sufficient information about disclosures to other government departments and organisations in referring to the disclosures generally on the Australian Business Number application form as required by the Information Privacy Principle 2 under the Privacy Act 1998. In particularly, the privacy statement on the on-line version of the application form was not one click away or as clearly linked to the form as required by the Privacy Commissioner's guidelines. However, the Privacy Commissioner was satisfied that the steps subsequently taken by the ATO to address these issues met the standards set by the Privacy Commissioner's guidelines.
The ATO advised the government of the public's concerns, and appeared before the House of Representatives Standing Committee on Legal and Constitutional Affairs to provide information on the concerns. As a result, the government introduced legislation to amend the A New Tax System (Australian Business Number) Act 1999. This amendment allows the ATO to limit access to the Register, and permits us to suppress publication of details in appropriate situations, such as concern for personal safety.
Other privacy matters
In regard to other privacy matters, the Privacy Commissioner received six complaints about the ATO. Four have been resolved and two are still being considered. The six complaints involved the disclosure by banks of tax file numbers, the late delivery of group certificates to our staff, our disclosure of information and alleged staff browsing.
The Privacy Commissioner also began an audit, under paragraph 27(1)h of the Privacy Act 1988, of the Child Support Agency. This audit included the collection and flow of personnel information between the agency and the ATO. This audit is not yet complete.
The Privacy Commissioner also conducted a survey of our external websites, with respect to compliance with the Guidelines for Federal and ACT Government World Wide Websites. The results, with accompanying advice, were widely circulated within the ATO, and the lines have taken responsibility for ensuring all external websites fully comply with these guidelines.
The Senate Economics References Committee report on the inquiry into the operations of the ATO was tabled on 6 March 2000. The inquiry had its origins in the Sunday program screened on the Nine television network in mid-1998. The committee found that, on balance of the evidence received, the Sunday program allegations were largely without substance.
The report by the Senate Standing Committee on Scrutiny of Bills, regarding the inquiry into search and entry provisions in Commonwealth legislation, was tabled on 6 April 2000. We lodged a submission to this inquiry on 8 April 1999, and later appeared before the committee.
Agreements covering staff-the Executive Level 2 (EL2) Agreement 1998 and the General Employees Agreement 1998-both nominally expired on 30 June 1999; however, the provisions continued while new agreements were developed.
A separate agreement covering the Australian Valuation Office was certified in June 1999. It has a nominal expiry date of 3 June 2000.
Our 1998 agreements were comprehensive in that they consolidated all terms and conditions of employment into a single source for each employment group. Whilst providing staff with benefits in terms of pay and condition, they also supported productivity improvements by linking our pay increases to demonstrated improvements in corporate outcomes.
These approaches were retained in the development of new agreements. Key design features include:
- all activities in the ATO, including tax reform, link to productivity that results in pay rises which keep our salaries at the top end of the scale for the Australian Public Service;
- no trade offs or reductions in current conditions;
- new and/or improved conditions to meet changing needs in areas such as fieldwork and call centres, and to support a better balance between work and personal life;
- updated allowances, with some rewording of clauses to reflect the new Public Service Act; and
- short-term agreements (the nominal expiry dates for both new agreements is 30 June 2001) to reflect our staff's preferences.
There were extensive consultations with EL2 staff and general employees. Extended negotiations took place with unions in relation to the new general agreement.
Following a vote declared on 13 June 2000, the Australian Industrial Relations Commission certified the new EL2 Agreement 2000 on 4 July 2000.
A parallel vote on the General Agreement 2000, also declared on 13 June, was narrowly unsuccessful. The same offer was made again late in June and almost 80 per cent of eligible employees approved the offer in mid-July. Certification processes began immediately.
At the end of June, the AVO was in negotiations for a new AVO Agreement 2000.
Training and development
As noted earlier, we inducted about 4000 new staff members during the year. As a result, most of our training focused on bringing these newcomers 'up-to-speed' on our general operations and on preparing them to assist with the introduction of the new tax system. Considerable training was also provided for existing employees who moved into new lines.
We also continued to refine our learning systems, including processes relating to intelligence gathering and assurance. An electronic learning strategy was developed and endorsed. We also developed a capability framework to help us to identify and respond to 'gaps' in necessary skills.
More information on training appears in chapters 4 and 5.
As noted earlier, our agency agreements link pay rises with productivity. During the year, staff met the performance targets in all seven of the corporate measures-tax reform, revenue collection, debt collection, superannuation, professionalism, technical quality and service standards. This level of achievement guaranteed staff a 4 per cent pay rise and 2 per cent bonus.
Special package of conditions
A special package of conditions applied to our staff from 5 June to 8 July 2000. The package increased overtime rates and provided reimbursement for some travel and car-parking expenses. The Commissioner established the package to reward and support staff for the extra effort they made during the transition to the new tax system.
Addressing staff concerns
ATOconcern is a confidential service for staff to air their concerns or complaints relating to the organisation. It was established in August 1998 and focuses on staff wellbeing and the organisation's health and productivity.
Operating within the Problem Resolution Service, ATOconcern is independent of line influence. It has three main functions:
- to provide staff with the opportunity and certainty of being heard;
- to ensure the ATO takes appropriate action in response to issues raised; and
- to identify organisational issues and contribute to improving policies and processes.
During the year, ATOconcern received 337 approaches from staff, compared to 139 in its first year of operation. Staff raised issues of concern (of both an individual and organisational nature), sought information and advice, and reported wrongdoing.
An internal database was also developed to monitor cases and identify issues and trends. In the coming year, ATOconcern will introduce regular reporting to National Program Managers. This is consistent with the service's aim to provide a robust reporting system to help identify organisational issues of concern, along with possible resolutions and interventions.
Staff at 30 June 2000
As of 30 June 2000, the ATO employed 19 131 staff (including ongoing and non-ongoing personnel) under the Public Service Act 1999. Tables 8.1 through 8.4 give a breakdown of staffing by broadband classification, gender, full-time/part-time status and location. The Commissioner and three Second Commissioners are not included in these tables.
Table 8.1 Ongoing staff, 30 June 2000
Table 8.2 Non-ongoing staff, 30 June 2000
Table 8.3 Staff numbers, by line, 30 June 2000
Table 8.4 Staff numbers, by region/branch office, 30 June 2000
Staff as of 30 June 1999
At 30 June 1999, the ATO employed 14 720 staff (including ongoing and non-ongoing personnel) under the Public Service Act 1999. Tables 8.5 through 8.8 give a breakdown of staffing by broadband classification, gender, full-time/part-time status and location. The Commissioner and three Second Commissioners are not included in these tables.
Because definitions of ongoing/non-ongoing staff and permanent/temporary staff are different, the figures here vary slightly from those reported in 1998-99.
Table 8.5 Ongoing staff, 30 June 1999
Table 8.6 Non-ongoing staff, 30 June 1999
Table 8.7 Staff numbers, by line,30 June 1999
Table 8.8 Staff numbers, by region/branch office, 30 June 1999
The ATO has two specialist procurement units with fully accredited staff arranging and/or managing all strategic and high value purchases for the organisation. These units operate in accordance with the government's procurement policies and guidelines.
contracts for the supply of stationery, photocopy paper, photocopiers, project management consultancies, printing services, short-term car hire and web services were put in place. These contracts, along with effective contract management, are expected to reduce administrative costs.
The ATO has also streamlined processing, and has arrangements with selected suppliers to handle purchase orders and invoices electronically.
Assets management is not a significant aspect of the ATO's day-to-day operations, and is therefore not reported here.
During 1999-2000, the ATO engaged 93 consultants at a total cost of $46 367 593. Appendix 2, beginning on page 116, gives a complete listing of those consultants, their services, the payments made, the selection process and the reason for the consultancy.
Competitive tendering and contracting
During the year, no contracts were let through competitive tendering and contracting.
Bills (including amendments) introduced 1 July 1999 to 30 June 2000
|Title of bill ||Date of introduction ||Measures in bill ||Regulation impact statement* |
|Taxation Laws Amendment Bill (No. 9) 1999 ||2 September 1999 ||Amendment relating to the diesel fuel rebate scheme ||n/a |
|A New Tax System (Tax Administration) Bill 1999 ||2 September 1999 ||Pay as you go withholding ||n/a |
| || ||Collection and recovery rules ||Yes |
| || ||Binding oral advice on income tax matters ||n/a |
| || ||Payment, Australian Business Number and identification verification system ||n/a |
| || ||Shorter period of review ||n/a |
| || ||Endorsement of deductible gift recipients and tax exempt charities ||Yes |
| || ||Administration of business activity statement obligations ||Yes |
| || ||Pay as you go instalments ||n/a |
| || ||Provisional tax-technical correction ||n/a |
|International Tax Agreements Amendment Bill 1999 ||23 September 1999 ||Agreement with the Republic of South Africa ||Yes |
| || ||Amending protocol to the agreement with Malaysia ||Yes |
| || ||Agreement with the Slovak Republic ||Yes |
| || ||Agreement with the Argentine Republic ||Yes |
|Diesel and Alternative Fuels Grants Scheme (Administration and Compliance) Bill 1999 ||23 September 1999 ||Inserts machinery and administrative provisions necessary for the scheme ||n/a |
|A New Tax System (Indirect Tax and ConsequentialAmendments) Bill 1999 ||30 September 1999 ||Amendment of indirect tax laws and consequential amendment of other Commonwealth statutes ||n/a |
|Taxation Laws Amendment Bill (No. 10) 1999 ||14 October 1999 ||Restructuring of certain managed investment schemes ||n/a |
| || ||Film licensed investment companies ||n/a |
| || ||Income tax deductions for gifts ||n/a |
| || ||Cyclones Elaine and Vance trust account, and non-profit organisations that promote the development of fishing and/or aquacultural resources ||n/a |
| || ||Mining and quarrying: balancing adjustments ||Yes |
| || ||Petroleum resources rent tax ||n/a |
|A New Tax System (Indirect Tax and Consequential Amendments) Bill (No. 2) 1999 ||21 October 1999 ||Amendments relating to indirect tax reforms ||n/a |
|New Business Tax System (Former Subsidiary Tax Imposition) Bill 1999 ||21 October 1999 ||Disposal of leases and leased plant ||Yes |
|New Business Tax System (Income Tax Rates) Bill (No. 1) 1999 ||21 October 1999 ||Cutting the company tax rate ||n/a |
|New Business Tax System (Capital Allowances) Bill 1999 ||21 October 1999 ||Full balancing adjustments on disposal of plant ||Yes |
| || ||Balancing adjustment offsetting ||Yes |
| || ||Small business taxpayers ||Yes |
| || ||Accelerated depreciation ||Yes |
| || ||Submarine cables and indefeasible rights to use them ||Yes |
| || ||Working out new effective life ||Yes |
|New Business Tax System (Integrity and Other Measures) Bill 1999 ||21 October 1999 ||Disposal of leases and leased plant ||Yes |
| || ||Value shifting through debt forgiveness ||Yes |
| || ||Excess deductions ||Yes |
| || ||Preventing a deduction and a capital loss arising from a single economic loss ||Yes |
| || ||Transfer or creation of assets by companies that are members of linked groups ||Yes |
| || ||Transfer of losses within wholly-owned groups of companies ||Yes |
| || ||The continuity of ownership test ||Yes |
| || ||Applying the same business test to unrealised losses ||Yes |
| || ||Deducting prepayments ||Yes |
| || ||Limiting indexation of cost bases of capital gains tax assets ||Yes |
| || ||Concessions for capital gains by individuals and some other entities ||Yes |
|New Business Tax System (Income Tax Rates) Bill (No. 2) 1999 ||25 November 1999 ||Removal of capital gains tax averaging ||Yes |
|New Business Tax System (Capital Gain Tax) Bill 1999 ||25 November 1999 ||Small business relief ||Yes |
| || ||Scrip for scrip roll-over ||Yes |
| || ||Venture capital exemption ||Yes |
|A New Tax System (Tax Administration) Bill (No. 2) 1999 ||9 December 1999 ||Pay as you go instalments and trusts ||n/a |
| || ||Fringe benefits tax instalments ||Yes |
| || ||Consequential amendments relating to collection and recovery rules ||n/a |
| || ||Pay as you go withholding-technical and consequential amendments ||n/a |
| || ||Amendments to the oral rulings for individuals regime ||n/a |
|Medicare Levy Amendment CPI Indexation) Bill 1999 ||9 December 1999 ||Annual indexation of Medicare levy low income thresholds for consumer price index increases ||n/a |
|New Business Tax System (Venture Capital Deficit Tax) Bill 1999 ||9 December 1999 ||Exempting dividends received by complying superannuation funds on venture capital investments ||Yes |
|New Business Tax System (Miscellaneous) Bill 1999 ||9 December 1999 ||Intercorporate dividend rebate, refunding excess imputation credits, company rate change and low value pools ||Yes |
|Taxation Laws Amendment Bill (No. 11) 1999 ||9 December 1999 ||Alienation of real property through interposed entities (Lamesa) ||n/a |
| || ||Extension of period of certain gifts ||n/a |
| || ||Income of non-resident sports persons, clubs and associates ||n/a |
| || ||Technical amendments ||n/a |
|Taxation Laws Amendment Bill (No. 5) 2000 ||17 February 2000 ||Amendment to the Sales Tax Assessment Act 1992 ||n/a |
| || ||Employee share scheme ||Yes |
| || ||Closely-held trusts ||n/a |
|Excise Tariff Amendment Bill (No. 1) 2000 ||17 February 2000 ||A new tariff structure for tobacco products in stick form and a new rate of excise for other tobacco products ||Yes |
| || ||A new tariff structure for petroleum products ||n/a |
|Medicare Levy Amendment (Defence-East Timor Levy) Bill 2000 ||17 February 2000 ||Amendment to the Medicare Levy Act 986 and the Income Tax Assessment Act 1936 ||n/a |
|A New Tax System (Fringe Benefits) Bill 2000 ||9 March 2000 ||Restrict concessional tax treatment for public benevolent institutions and certain other non-profit organisations ||Yes |
| || ||Change the fringe benefits tax gross-up rate to reflect goods and services tax changes ||Yes |
| || ||Exempt remote area housing provided from fringe benefits tax ||Yes |
| || ||Exempt remote area board benefits provided by the pastoral industry from fringe benefits tax ||Yes |
|A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Amendment Bill 2000 ||9 March 2000 ||Technical corrections to the Medicare levy surcharge rules ||n/a |
|Petroleum Excise Amendment (Measure to Address Evasion) Bill 2000 ||6 April 2000 ||Technical amendments to improve the government's ability to address excise evasion through fuel substitution ||n/a |
|Excise Amendment (Alcoholic Beverages) Bill 2000 ||6 April 2000 ||To provide support for the administration and collection of excise duty on alcohol beverages not previously subject to excise ||n/a |
|International Tax Agreements Amendment Bill (No. 1) 2000 ||6 April 2000 ||Agreement with Romania ||Yes |
| || ||Amending protocol to the agreement with Finland ||Yes |
|Fuel Sales Grants Bill 2000 ||12 April 2000 ||To confer an entitlement to grants to be paid to registered sellers of petroleum fuel for sales to end users hat are made at an eligible location ||n/a |
|Fuel Sales Grants (Consequential Amendments) Bill 2000 ||12 April 2000 ||To ensure the appropriate application to grants and benefits schemes of those provisions of the Taxation Administration Act 1953 that apply generally to Acts administered by the Commissioner of Taxation ||n/a |
|Product Grants and Benefits Administration Bill 2000 ||12 April 2000 ||To provide a standardised administrative framework for grants and benefits administered by the Commissioner ||n/a |
|New Business Tax System (Alienation of Personal Services Income) Bill 2000 ||13 April 2000 ||Introduce new rules for the income tax treatment of certain personal services income ||Yes |
|New Business Tax System (Alienated Personal Services Income)(Tax Imposition) Bill (No. 1) 2000 ||13 April 2000 ||Introduce new rules for the income tax treatment of certain personal services income ||Yes |
|New Business Tax System (Alienated Personal Services Income)(Tax Imposition) Bill (No. 2) 2000 ||13 April 2000 ||Introduce new rules for the income tax treatment of certain personal services income ||Yes |
|New Business Tax System (Miscellaneous) Bill (No. 2) 2000 ||13 April 2000 ||Company losses and bad debts and technical amendments ||Yes |
| || ||Inter-entity loss multiplication ||Yes |
| || ||Amendments to Subdivision 170-C ||Yes |
| || || Amendments to Subdivision 170-D ||Yes |
| || ||Life insurance companies ||Yes |
| || ||Imputation-pay as you go instalments ||Yes |
| || ||Imputation-life assurance companies ||Yes |
| || ||Imputation-conversion of franking account balances ||Yes |
| || ||Imputation-threshold for franking credit trading rules ||Yes |
| || ||Capital gains tax: capital payments for trust interests (capital gains tax event E4) ||Yes |
| || ||Scrip for scrip roll-over ||Yes |
| || ||Pay as you go instalments: anti-avoidance rules ||Yes |
|New Business Tax System (Integrity Measures) Bill 2000 ||13 April 2000 ||Limit the extent to which losses from non-commercial activities can be used to reduce other income ||Yes |
| || ||Pre-payments for services in respect of 'tax shelter' arrangements ||Yes |
|A New Tax System (Tax Administration) Bill (No. 2) 2000 ||11 May 2000 ||Extend deduction for expenditures related to goods and services tax ||n/a |
| || ||Various technical amendments to the bill ||n/a |
| || ||No Australian Business Number amendments-input taxed supplies ||n/a |
| || ||Amendments to the Customs Act 1901 ||n/a |
| || ||Amendments to the Excise Act 1901 ||n/a |
| || ||Public access to the Australian Business Register ||n/a |
| || ||Provision of business activity statement services by people other than registered tax agents ||Yes |
|Indirect Tax Legislation Amendment Act 2000 ||11 May 2000 ||Goods and services tax amendments to various Acts relating to non-profit bodies ||Yes |
| || ||Amendments to wine equalisation tax rebate scheme for wineries ||Yes |
|Sales Tax (Customs) (Industrial Safety Equipment) Bill 2000 ||11 May 2000 ||Exemption from sales tax in relation to industrial safety equipment and transitional measures ||Yes |
|Sales Tax (Excise) (Industrial Safety Equipment) Bill 2000 ||11 May 2000 ||Exemption from sales tax in relation to industrial safety equipment and transitional measures ||Yes |
|Sales Tax (General) (Industrial Safety Equipment) Bill 2000 ||11 May 2000 ||Exemption from sales tax in relation to industrial safety equipment and transitional measures ||Yes |
|Sales Tax (Industrial Safety Equipment) (Transitional Provisions) Bill 2000 ||11 May 2000 ||Exemption from sales tax in relation to industrial safety equipment and transitional measures ||Yes |
|Taxation Laws Amendment Bill (No. 6) 2000 ||11 May 2000 ||Exempting value received from goods and services tax direct assistance certificates ||n/a |
| || ||Community Development Employment Project scheme participant supplement ||n/a |
|Diesel and Alternative Fuels Grants Scheme Amendment Bill 2000 ||1 June 2000 ||New entitlements and administrative provisions for the Diesel and Alternative Fuels Grants Scheme Amendment Act 1999 ||n/a |
|Excise Amendment (Compliance Improvement) Bill 2000 ||21 June 2000 ||Strengthen the provisions that regulate the production, dealing, manufacturing and storage of tobacco in particular and excisable goods generally ||Yes |
|Taxation Laws Amendment Bil (No. 7) 2000 ||29 June 2000 ||Pay as you go instalments for certain beneficiaries of trusts ||Yes |
| || ||Income tax deductions for gifts ||n/a |
| || ||Capital gains tax small business provisions ||n/a |
| || ||Minor capital gains tax changes ||n/a |
| || ||Technical amendments ||n/a |
*n/a is not applicable.
|Name of subordinate legislation ||Gazetted ||Description of regulatory proposals ||Regulation impact statement* |
|Excise Amendment Regulations 1999 (No. 1) ||16 September 1999 ||Refund arrangements to compensate distributors of Avgas who passed on excise duty reductions to aviation industry customers ||Yes |
|A New Tax System (Australian Business Number) Regulations 1999 ||29 September 1999 ||Prescribe details that are to be maintained in the Australian Business Register and to support the administrative processes involved in registering for an Australian Business Number ||Yes |
|A New Tax System (Goods and Services Tax) Regulations 1999 ||21 October 1999 ||Various regulatory measures supporting the goods and services tax legislation ||Yes |
|Excise Amendment Regulations 1999 (No. 2) ||15 November 1999 ||To counter excise evasion through fuel substitution ||n/a |
|Sales Tax Assessment Regulations 1999 (No. 1) ||25 November 1999 ||Repeal regulations that were in Sales Tax Assessment Act ||n/a |
|Retirement Savings Accounts Amendment Regulations 1999 ||15 December 1999 ||Consequential amendments resulting from Superannuation (Unclaimed Money and Lost Members) Regulations 1999 ||n/a |
|Superannuation Guarantee (Administration) Amendment Regulations 1999 (No. 1) ||15 December 1999 ||Exemption from Superannuation Guarantee for non-residents entering Australia to work for Sydney Olympics ||n/a |
|Superannuation Industry (Supervision) Amendment Regulations 1999 (No. 5) ||15 December 1999 ||Consequential amendments resulting from Superannuation (Unclaimed Money and Lost Members) Regulations 1999 ||n/a |
|Superannuation (Unclaimed Money and Lost Members) Regulations 1999 ||15 December 1999 ||Provision made for Commissioner to specify into requirements under Superannuation (Unclaimed Money and Lost Members) Act 1999 in an approved form ||n/a |
|Income Tax Assessment Amendment Regulations 2000 (No. 1) ||7 February 2000 ||Cents per kilometre car expenses rate for 1999-2000 ||n/a |
|Income Tax Amendment Regulations 2000 (No. 1) ||29 March 2000 ||Tax concessions for Australian Defence personnel deployed to East Timor ||n/a |
|Fringe Benefits Tax Amendment Regulations 2000 (No. 1) ||29 March 2000 ||Exclusions for fringe benefits tax reporting on group certificates ||n/a |
|Diesel and Alternative Fuels Grants Scheme Regulations 2000 ||12 April 2000 ||To specify the areas to be included in the metropolitan areas for the purposes of the fuel grants scheme ||n/a |
|A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 1) ||19 April 2000 ||To specify the requirements for partnerships and trusts that wish to use the goods and services tax grouping provisions ||n/a |
|Income Tax Amendment Regulations 2000 (No. 2) ||12 May 2000 ||To complete the legislative framework underpinning pay as you go withholding arrangements ||n/a |
|Taxation Administration Amendment Regulations 2000 (No. 1) ||12 May 2000 ||To support the pay as you go withholding system ||n/a |
|A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 2) ||26 May2000 || |
To ensure the rounding rule for amounts of goods and services tax shown on a tax invoice and recipient created tax invoices is consistent with the rounding rules for goods and services tax liability
To clarify whether a supply is, or is not, a financial supply for the purposes of entitlements to input tax credits
To specify which activities other than mineral exploration and exploitation may be approved as goods and services tax joint ventures
To clarify what acquisitions are reduced credit acquisitions for the purposes of entitlements to reduced input tax credits
To specify the schemes or kinds of schemes that are 'statutory compensation schemes' for the purposes of settlements of claims for compensation
|A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 3) ||1 June 2000 ||To prescribe a system under which importers may defer payment of goods and services tax on taxable importations entered for home consumption ||Yes |
|Income Tax Amendment Regulations 2000 (No. 3) ||1 June 2000 ||To align the calculation of the beneficiary rebate, which is allowed under section rebate, which is allowed under section 160AAA of the Act, with the personal income tax rates applying to the 2000-01 year of income and later years of income ||n/a |
|Taxation Administration Amendment Regulations 2000 (No. 2) ||15 June 2000 ||To prescribe the Metropolitan Ambulance Service Royal Commission to be an eligible Royal Commission for the purposes of the Act ||n/a |
|A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 4) ||15 June 2000 ||The requirements for tax-free sales to travellers are intended to prevent losses of goods and services tax revenue and unfair commercial advantages gained through fraud ||Yes |
|A New Tax System (Wine Equalisation Tax) Regulations 2000 ||15 June 2000 || |
To permit, under the Tourist Refund Scheme, refunds of wine tax to travellers leaving Australia who are also eligible for a refund of goods and services tax on wine they are exporting as accompanied baggage
To clarify the arrangements under the Act for fortified fruit or vegetable wines and mead
|Income Tax Amendment Regulations 2000 (No. 4) ||15 June 2000 ||To prescribe eligible duty for the purposes of section 23AD of the Act. This enables the pay and allowances received by Australian Defence Force personnel from their duty with the United Nations Transitional Administration East Timor in East Timor to be exempt from income tax ||n/a |
|Excise Amendment Regulations 2000 (No. 1) ||15 June 2000 || |
To impose excise on alcoholic beverages not currently subject to excise
To adjust the rates of duty to offset the removal of the wholesale sales tax by introducing a new tariff structure for alcohol
To amend the licensing and manufacturing provisions to reflect current drafting practice in respect of grammar and gender specific references
|A New Tax System (Goods and Services Tax Transition) Regulations 2000 ||15 June 2000 || |
To specify the kind of petroleum products that will be covered by the special petroleum credit for the purposes of the goods and services tax transition, and the manner of payment for the credit
To specify the kind of detachable trailers to which the transitional rules for goods and services tax will apply
To specify the requirements a supplier of acupuncture, naturopathy or herbal medicine services must meet for a service performed by the supplier before 1 July 2003 to be free of goods and services tax
To specify the kind of compulsory third party scheme to which the transitional rules for goods and services tax will apply
|A New Tax System (Luxury Car Tax) Regulations 2000 ||15 June 2000 ||To set out when a vehicle or class of vehicle will be an emergency vehicle and therefore excluded from luxury car tax ||n/a |
|Fringe Benefits Tax Amendments Regulations 2000 (No. 2) ||22 June 2000 ||To exclude certain housing fringe benefits from having to be reported on an employee's group certificate ||n/a |
|Income Tax Assessment Amendment Regulations 2000 (No. 2) ||22 June 2000 ||To establish procedures for the valuation of property donated to certain funds, authorities and institutions and to set the fees that the Commissioner will charge for the valuations ||Yes |
|Taxation Administration Amendment Regulations 2000 (No. 3) ||28 June 2000 ||To further amend the Taxation Administration Regulations 1976 to supplement the rules in the pay as you go withholding system ||n/a |
|Wool Tax Amendment Regulations 2000 (No. 1) ||28 June 2000 ||To lower the wool tax rate from 4 per cent to 3 per cent from 1 July 2000 ||n/a |
|Excise Amendment Regulations 2000 (No. 2) ||28 June 2000 ||To prescribe fuels to be included within the definition of 'diesel fuel' under the expanded diesel fuel rebate scheme and to allow applicants to prove their identity by providing an Australian Business Number ||n/a |
|Superannuation Contributions Tax (Assessment and Collection) Amendment Regulations 2000 (No. 1) ||28 June 2000 || |
To amend the Superannuation Contributions Tax (Assessment and Collection) Regulations to:
- include a method for calculating the actuarial value of the benefits that accrued to, and the value of the administration expenses and risk benefits provided in respect of, a member of a defined benefits superannuation scheme for the 1999-2000 financial year and later financial years;
- alter the information requirements in relation to statements superannuation providers are to give;
- identify that part of contributed amounts that is to be regarded as reasonably attributable to interest; and
- declare schemes that are to be regarded as unfunded defined benefit schemes
|Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Amendment Regulations 2000 (No. 1) ||28 June 2000 || |
To amend the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Regulations to:
- include a method for calculating the actuarial value of the benefits that accrued to, and the value of the administration expenses and risk benefits provided in respect of, a member of a defined benefits superannuation scheme for the 1999-2000 financial year and later financial years;
- alter the information requirements in relation to statements superannuation providers are to give;
- identify that part of contributed amounts that is to be regarded as reasonably attributable to interest; and
- declare schemes that are to be regarded as unfunded defined benefit schemes
|Diesel and Alternative Fuels Grants Scheme Amendment Regulations 2000 (No. 1) ||28 June 2000 ||To define diesel fuel and emergency vehicles; specify registration details; outline matters or circumstances which must be notified to the Commissioner within 28 days; and provide for the grant rates, expenses for attendance and the form of identity cards for authorised officers ||n/a |
|Fuels Sales Grants Regulations 2000 ||28 June 2000 ||To define eligible locations, and set the amount of fuel sales grants ||Yes |
|Product Grants and Benefits Administration Regulations 2000 ||28 June 2000 ||To prescribe conditions the applicant entity must satisfy; registration details; expenses for attendance; and the form of identity cards for authorised officers ||n/a |
*n/a is not applicable.
During 1999-2000, the ATO engaged 93 consultants at a total cost of $46 367 593.
The following list summarises those consultants, their services, the selection process, the reason for each consultancy and payments made. All amounts have been rounded to the nearest dollar.
Consultancies costing less than $10 000 are excluded, as are consultancies that were in progress as of 30 June 2000, but for which no payment had been made.
Method of selection
1 Advertised publicly
2 Selective tendering process
3 Not advertised because a contract already existed
4 Direct selection/sole source
5 Joint venture
6 Consultants register/panel
Reason to employ
a Specialised skills were not available in the ATO in the required time frame
b Need to access high-technology experience
c Limitations on executive time
d Lack of in-house resources
e Need for independent review
f Need for independent change agent or facilitator
|Consultant ||Task ||Value ||Method/ reason |
|Access Economics ||Business tax reform ||$10 000 ||4ade |
|Access Economics ||Business tax reform ||$10 000 ||4ade |
|Acumen Alliance ||Review of high wealth individuals' computer system ||$31 401 ||1a |
|Acumen Alliance ||Consultancy for internal audit ||$12 740 ||2ad |
|Ajilon Australia ||Methodology for determining the cost of holding bad data in ATO databases ||$85 000 ||1a |
|Andersen Consulting ||Build and deliver receivables management system ||$8 576 642 ||1ad |
|Andersen Consulting ||Australian Business Number ||$4 049 000 ||6ad |
|Andersen Consulting ||ATO skilling ||$1 271 640 ||2a |
|Andersen Consulting ||Business and information technology architecture ||$1 003 292 ||2abe |
|Andersen Consulting ||Business registration design ||$305 619 ||3a |
|Andersen Consulting ||Project management services ||$269 285 ||6ad |
|Andersen Consulting ||Project management for support capability testing ||$164 421 ||6a |
|Andersen Consulting ||Tax reform registration system-complete phase 1 ||$132 860 ||6abd |
|Andersen Consulting ||Project management services ||$120 418 ||6ad |
|Andersen Consulting ||Tax reform project-registration project ||$97 662 ||6abd |
|Andersen Consulting ||Capability testing-tax reform 2 ||$64 778 ||6a |
|Andersen Consulting ||Development of tax reform-phase 1 ||$44 927 ||6abd |
|Artcraft Research ||Cash economy research ||$36 000 ||3ad |
|Aspect Computing ||Analysis of public key infrastructure implementation ||$28 800 ||3ae |
|Austega ||Advice on foreign exchange dealings ||$14 162 ||4ab |
|Australian Government Actuary ||Actuarial services ||$77 640 ||4a |
|Australian Meat Marketing ||Conduct transfer pricing audit ||$18 202 ||4a |
|Australian National University ||Centre for Tax System Integrity ||$300 000 ||3a |
|Austrategies Consulting Network ||Training consulting ||$18 200 ||2a |
|Austrategies Consulting Network ||Multi-sourced feedback ||$12 993 ||3a |
|Buchanan, Richard ||Consultancy for corporate directions ||$53 302 ||4a |
|Burges, Kevin ||International Tax Rulings Panel ||$27 771 ||2e |
|Business Catalyst International ||Review of audit project ||$37 500 ||4d |
|Centre for Corporate Strategy ||Balanced scorecard ||$151 456 ||6a |
|Chant Link and Associates ||Superannuation systems modelling ||$88 000 ||3ab |
|Chant Link and Associates ||Communications research ||$84 575 ||3ae |
|Chant Link and Associates ||Compliance and auditing associated with self-managed superannuation funds ||$45 525 ||3ade |
|Chant Link and Associates ||Communications research ||$43 300 ||3ae |
|Chant Link and Associates ||Superannuation Guarantee 99 survey ||$25 000 ||3ae |
|Chant Link and Associates ||Research concerning self-managed superannuation funds ||$18 750 ||3ae |
|Charles River Associates ||Expert transfer pricing advice ||$54 599 ||6a |
|Clayton Utz ||High-level and ethical negotiation skills training ||$32 470 ||4a |
|Clayton Utz ||Negotiation skills training for tax treaties ||$16 744 ||4a |
|Cooney Consultants & Associates ||Corporate design workshops ||$211 945 ||1ae |
|Cooney Consultants & Associates ||Consultancy for corporate directions ||$112 700 ||3a |
|Cooney Consultants & Associates ||Planning and materials for senior executive service days, interview-based appraisals and competency surveys ||$105 800 ||2a |
|Cooney Consultants & Associates ||Multi-sourced feedback ||$59 800 ||3a |
|Cooney Consultants & Associates ||Consultancy for people strategy ||$55 488 ||6a |
|Cooney Consultants & Associates ||Executive development ||$33 060 ||3f |
|Cooney Consultants & Associates ||Consultancy for strategy unit ||$10 350 ||3a |
|Consultants in Industry Economics ||Expert transfer pricing advice ||$110 804 ||6a |
|Core Technology ||Prepare valuation report ||$122 906 ||4ae |
|Corporate Diagnostics ||Consultancy for corporate directions ||$32 951 ||6a |
|Corporate Diagnostics ||Strategic plan ||$21 034 ||6ade |
|Corporate Diagnostics ||Sampling of strategies for quality management system ||$14 320 ||2a |
|CPT Consulting ||Review of the mainframe production environment ||$$29 900 ||4a |
|Deakin Australia ||Develop new training modules ||$196 000 ||2d |
|Deloitte Consulting ||Program leadership framework, consistent project management methodology and support for projects to implement the framework and methodology ||$2 912 893 ||2a |
|Deloitte Consulting ||Consultancy for electronic publishing infrastructure ||$2 538 559 ||3a |
|Deloitte Consulting ||Business tax reform program leadership and project management support ||$1 331 934 ||2ad |
|Deloitte Consulting ||Establish call centres and give operational advice ||$1 086 121 ||2ad |
|Deloitte Consulting ||Consultancy for strategy unit ||$1 023 350 ||3a |
|Deloitte Consulting ||Savings realisation assessment of information technology outsourcing initiative ||$249 000 ||4a |
|Deloitte Consulting ||Consultancy for knowledge infrastructure ||$210 491 ||3a |
|Deloitte Consulting ||ATO skilling ||$173 127 ||2a |
|Deloitte Consulting ||Services in relation to the Diesel and Alternative Fuels Grants Scheme and Fuel Sales Grants Scheme ||$47 510 ||3a |
|Deloitte Consulting ||Quantifying savings from the information technology outsourcing initiative ||$23 000 ||4a |
|DMR Consulting ||Services in relation to development and implementation of the Diesel and Alternative Fuels Grants Scheme, the Fuel Sales Grants Scheme, Product Stewardship (Oil) and the Diesel Fuel Rebate Scheme ||$4 753 947 ||4a |
|DMR Consulting ||Consultancy for human resources management information system ||$14 177 ||4b |
|Donovan Research ||Multi-sourced feedback ||$12 685 ||3a |
|Dowling, Peter ||Review of draft provisions ||$12 619 ||2e |
|Economic Consulting Services ||Expert transfer pricing advice ||$79 615 ||6a |
|Edime Internet Agency ||Internet services for electronic publishing ||$94 000 ||1a |
|Edime Internet Agency ||Internet information product design, delivery and enhancement ||$138 900 ||2abd |
|Electronic International Trade ||Training and transfer pricing advice ||$54 320 ||3ae |
|Emden Consulting ||Development and integration of Diesel and Alternative Fuels Grants Scheme with ATO systems ||$142 600 ||2a |
|Emden Consulting ||Issues concerning performance measures and effects of tax reform ||$14 175 ||2acd |
|Ernst & Young ||Consultancy for knowledge infrastructure ||$43 622 ||2a |
|Ernst & Young ||Consultancy for internal audit ||$30 495 ||4e |
|Ernst & Young ||Consultancies for the shared services manager ||$29 838 ||2a |
|Ernst & Young ||Consultancy for fraud prevention and control ||$27 948 ||2ade |
|Ernst & Young ||Consultancy for business operations and support ||$14 357 ||2a |
|Ernst & Young ||Electronic record independent review ||$13 950 ||6c |
|Falls Corporate Research ||Professional services ||$180 000 ||1a |
|Falls Corporate Research ||Develop, conduct and report on outcomes for annual Australian Valuation Office customer and staff surveys, and link outcomes to previous surveys ||$81 500 ||4f |
|Ferrier Hodgson ||Valuation of debts ||$$19 240 ||3e |
|Ferrier Hodgson ||Verify disclosures of assets ||$15 872 ||2a |
|Focus Learning ||Induction program ||$24 650 ||2a |
|Gibson and Associates ||Multi-sourced feedback ||$24 567 ||3a |
|Gibson and Associates ||Performance feedback collection and documentation ||$11 525 ||4a |
|Global Business IT Solutions ||Provide automated email agent ||$108 646 ||1ad |
|Golsby-Smith & Associates ||Consultancy for corporate directions ||$250 000 ||3a |
|Golsby-Smith & Associates ||Strategic workshop ||$35 116 ||3f |
|Golsby-Smith & Associates ||ATO skilling ||$16 582 ||2a |
|Golsby-Smith & Associates ||Meeting facilitation for tax agents representatives ||$12 834 ||4c |
|Hardy, Bill ||Forms design ||$20 000 ||1a |
|Harris Smith & Co ||Assistance with 360-degree feedback process ||$61 791 ||2a |
|Hiser Group ||Collaborative design workshop ||$20 440 ||2a |
|Hiser Group ||Useability workshops ||$10 150 ||2a |
|Housley ||Investigate, monitor and test performance of correspondence workflow management system ||$40 000 ||4a |
|IBM Australia ||Develop and begin implementation of integrated design for ATO business intelligence capability ||$1 215 618 ||1a |
|IBM Australia ||Evaluate ATO field operations ||$449 201 ||1ade |
|IBM Australia ||Review of business support services ||$300 000 ||2e |
|IBM Australia ||Consultancy for human resource management ||$10 560 ||2a |
|IDEAS! ||Development of registered software facility ||$285 674 ||6a |
|Iner Action ||Development services ||$57 540 ||4a |
|Khoury, Phillip ||Services in relation to the diesel and alternative fuels grants scheme ||$45 000 ||4a |
|KPMG ||Project management handbook ||$80 000 ||3a |
|KPMG ||Review of implementation tests ||$73 100 ||3e |
|KPMG ||Expert valuations ||$63 575 ||3a |
|KPMG ||Review of computer processing system ||$33 500 ||2e |
|Layton, Roger ||Member of International Tax Rulings Panel ||$35 604 ||1,2ae |
|Leadenhall Australia ||Research, compile and prepare valuation report ||$73 943 ||4ae |
|MacLeod, Chandler ||Leadership program ||$101 230 ||6a |
|MacLeod, Chandler ||Field leadership development program ||$70 838 ||2a |
|Magney, Tom ||Legal advice and opinion ||$17 400 ||6a |
|Mastech Asia Pacific ||Year 2000 research ||$44 325 ||2a |
|Mastech Asia Pacific ||Internet information product design, delivery and enhancement ||$22 280 ||2abd |
|McNichol, Suzanne ||Advice on legal professional privilege ||$120 946 ||4ae |
|Mercer, William ||Consultancy for corporate priorities administration ||$106 695 ||2a |
|Mercer, William ||Human resources new framework ||$81 370 ||2a |
|Mercer, William ||Security expertise ||$40 720 ||3a |
|Mindopeners ||Implement strategic management system, develop and implement high level design, advise and assist with business intelligence project ||$838 627 ||3af |
|Mindopeners ||Review for corporate directions ||$214 820 ||4a |
|Mindopeners ||Strategic high level design ||$78 195 ||3ad |
|Mindopeners ||Business tax reform ||$17 421 ||3e |
|Mindopeners ||Strategic management system ||$16 771 ||2a |
|Mindopeners ||Executive planning workshop ||$11 760 ||3a |
|Mindopeners ||Service performance appraisal interviews ||$10 000 ||3e |
|Minter Research ||Research small business newsletter ||$15 656 ||3e |
|Moore Business Systems || Moore Business Design and provide electronic forms for the Tax Practitioners Group ||$118 531 ||2a |
|Niche Multimedia` ||Consultancy for corporate directions ||$110 513 ||4a |
|Nolan, Norton and Associates ||Project managers handbook and kit roll-out ||$107 893 ||3d |
|Pathways to Performance ||Executive performance management ||$49 390 ||3ae |
|Pathways to Performance ||Multi-sourced feedback ||$21 304 ||3a |
|Pathways to Performance ||360-degree performance appraisal services ||$18 770 ||2a |
|Pathways to Performance ||Performance agreements ||$18 128 ||2a |
|Pricewaterhouse Coopers ||Resolution of client case ||$584 243 ||4ae |
|Pricewaterhouse Coopers ||Risk assessment ||$201 158 ||1a |
|Pricewaterhouse Coopers ||Research, compile and prepare valuation report ||$95 000 ||4ae |
|Pricewaterhouse Coopers ||Critique of valuations conducted by client in respect to offshore businesses ||$29 222 ||4a |
|QMSG ||Review of information technology processes against relevant standards ||$20 000 ||2ae |
|Quality Systems Associates ||Information technology governance report ||$24 000 ||4a |
|Quasar Professionals ||Business analysis ||$77 137 ||2a |
|Queensland University ||Develop and deliver 'train the trainer' goods and services tax package for charitable organisations ||$270 300 ||2d |
|Queensland University of Technology ||Development and refinement of application ||$28 003 ||4b |
|Queensland University of Technology ||Market seller activity research ||$14 000 ||3a |
|Resolution ||New business tax system bills and tables ||$153 850 ||2a |
|Rightsized Systems ||Review of tax reform release management ||$53 820 ||4e |
|Rudenno, Victor ||Research, compile and prepare valuation report, and skill staff ||$16 400 ||4ae |
|SAP Australia ||Human resources management information system ||$3 014 408 ||4b |
|S. Das & Associates ||Develop a 'financial arrangements' taxation framework ||$100 000 ||4a |
|SecureGate ||Update public key infrastructure accreditation documentation ||$45 000 ||4a |
|SFC Consulting ||Training on client contact skills and coaching ||$242 512 ||2a |
|Simbient People ||Consulting for records management infrastructure project ||$48 498 ||2ab |
|Simbient People ||Records management ||$28 744 ||2ab |
|Simpson, Peter ||Work on OECD matters ||$31 625 ||4f |
|Sinclair Knight Merz (LandInfo) ||Cartography for the Diesel and Alternative Fuels Grants Scheme ||$125 681 ||2a |
|Stanley and Milford ||Evaluation tools and testing of website for the Forum on Strategic Management Exchange ||$44 382 ||2a |
|Stevenson McGregor ||Business tax reform consultation ||$10 575 ||2a |
|Synergetic Learning ||Human resource management information system ||$25 700 ||2a |
|Systemic Development Institute ||Provide and deliver strategic leadership program ||$83 705 ||3a |
|Tactics Consulting ||Develop online reference material system ||$119 190 ||2a |
|Tactics Consulting ||Develop call centre online reference material ||$101 176 ||2ad |
|The BTL Group ||Team building call centre workshop ||$14 850 ||2a |
|Trowbridge Consulting ||Actuarial consulting services ||$19 785 ||2a |
|TSG Australia ||Develop communication tools ||$46 330 ||3a |
|TSG Australia ||Knowledge infrastructure project ||$34 613 ||6a |
|University of Melbourne ||Enhance ATO understanding of the relationship between economic activity, corporate profitability and tax performance ||$89 200 ||4ab |
|User Insite ||Seminar ||$23 660 ||2e |
|Vann, Richard ||Work on OECD matters and forums ||$34 830 ||1,2ae |
|Woolcott Research ||Conduct, analyse and report on findings form discussion groups and workshops ||$47 400 ||2a |
|Wizard Information Services ||Design and implement the Forum on Strategic Management Exchange ||$605 770 ||2a |
|Wizard Information Services ||Development of implementation plans and contingencies for new policy initiatives ||$24 660 ||3a |
|Wright, Deloris ||Provide specifically designed economist training for technical staff ||$111 390 ||3ae |
|www.consult ||Review of ATO website in relation to usage by a particular line ||$12 000 ||2a |
|XCP Security ||Public key infrastructure implementation review ||$180 000 ||4a |
The ATO has a policy and an agreement that are in accordance with section 16 (3) of the Occupational Health and Safety (Commonwealth Employment) Act 1991.
We also have a national occupational health and safety (OH&S) committee, as well as similar committees in each business and service line. These committees develop, implement, review and update measures associated with any health and safety impacts of business initiatives.
There are designated work groups in all lines, and selection of health and safety representatives is in progress. As of 30 June 2000, about two-thirds of available positions were filled. Training has been offered to all representatives, and about two-thirds of these have taken part.
This overview covers the OH&S initiatives we carried out in 1999-2000, and addresses our other annual reporting requirements under section 74 of Act.
Health and safety management strategy
As part of our people system, we implemented a national health and safety management strategy. This strategy helps to ensure statutory compliance and introduces a corporate preventive management program that is in line with our restructuring.
The strategy has led to:
- improved consultative arrangements for OH&S committees and designated work groups;
- a stronger role for health and safety representatives;
- a strategic focus for the national OH&S committee; and
- a corporate management model for health and safety, based on six elements:
- commitment and leadership from senior management;
- active involvement from all employees;
- appropriate information, education and training;
- OH&S risk management methodology;
- effective communication through consultation; and
- OH&S management information systems.
To support the organisation's structural changes and associated accountabilities, a variation to our OH&S agreement was proposed. Negotiations began in October 1999, but a final document has not yet been agreed. While management and unions continue to negotiate, the existing agreement expired in May 1999. Comcare Australia knows the ATO does not have a current OH&S agreement; however, an approved agreement is expected in the near future.
Health management program
Our agency agreement includes an initiative regarding a balance between work and life. As a result, the organisation has designed a health management program. This program, which is to be implemented later in 2000, has broad immediate and long-term outcomes. These include:
- immediate free confidential health appraisals with a follow-up report identifying major health risks and a support process to deal with remedial options; a management database that identifies major health risks for the organisation; and a tailored corporate menu of health promotion interventions; and
- long-term an ATO-wide approach to managing individual performance and, consequently, organisational performance through health.
Employee support program
In order to support employees and to help the organisation achieve the tax reform agenda, we offered free influenza vaccinations for all employees.
Other reporting requirements
In regard to other areas of the Act:
- four provisional improvement notices were lodged under section 29 of the Act. These covered: the emergency evacuation system at the CCH Building, Canberra; accommodation, Dandenong; time off to attended an OH&S committee meeting, Brisbane; and access to medical information, Sydney. All four notices have been resolved;
- two investigations were carried out-one in relation to the Brisbane provisional improvement notice and one in relation to an injury;
- no directions were given under section 45 of the Act;
- no notices were issues under sections 46 and 47 of the Act; and
- three dangerous occurrences, two prescribed incapacities and five serious personal injuries were reported to Comcare under section 68 of the Act, compared to 28 accidents and incidents in the previous financial year.
Under the Freedom of Information Act 1982, a Commonwealth government agency is required to report annually on:
- the organisation and functions of the agency;
- the arrangements that exist for outside participation in agency decision-making;
- the categories of documents that are maintained in the possession of the agency; and
- how people can gain access to information held by the agency.
Functions and powers
The ATO is part of the Treasurer's portfolio. The Commissioner of Taxation has the status of Secretary of a Department.
The main function of the ATO is to administer legislation imposing taxes and excise (other than customs duty). We also work with appropriate departments on policy matters relating to taxation and excise and, when that policy is determined by the government, instruct Parliamentary Counsel in the preparation of necessary legislation.
Responsibility for administration of the various taxation and superannuation acts is vested by the Parliament in the Commissioner of Taxation. The authority of the Commissioner to administer each levy is written into the law relating to that levy, as are his general responsibilities, discretionary powers and rights.
With some exceptions (the power of general administration, the power of delegation and the furnishing of an annual report for presentation to the Parliament), the Commissioner's powers and functions may be exercised by the three Second Commissioners. In pursuance of the powers conferred on the Commissioner by section 8 of the Taxation Administration Act 1953, nearly all such powers and functions under the taxation Acts have been delegated to staff in National Office and in branch offices who, from time to time, occupy or perform the duties of specified senior officers within the ATO. Staff who perform such duties invariably authorise subordinate officers to make decisions on their behalf, subject to various terms and conditions.
As of 30 June 2000, the organisation employed 19 131 people. The national office is in Canberra. There are 26 branch and regional offices (with public access) located throughout Australia (see page 226 for a listing of locations).
An organisational chart and a description of the functions carried out by lines, as of 30 June 2000, appear on pages 16-19.
In 1999-2000, the main areas of legislation administered by the ATO were:
- income tax;
- company tax;
- fringe benefits tax;
- sales tax;
- the Australian Business Number and Australian Business Register;
- a new tax system;
- higher education funding;
- Medicare levy;
- superannuation guarantee;
- small superannuation accounts;
- superannuation contributions tax; and
- excise duty.
More detail on legislation administered by the Commissioner of Taxation, and information on amendments to that legislation during the period covered by is available on request and on our website.
Arrangements for participation
While not having any formally established non-statutory bodies, the ATO has a large number of committees set up to assist the organisation in consulting with the community and professional associations.
The Professional Association Liaison Unit works to improve our working arrangements with tax, accounting and legal professional bodies by providing them with a direct liaison and account manager service. The unit also provides communication services to a wide range of joint ATO/professional body liaison forums operating at regional and national levels.
As noted in chapter 2, we also have panels with external participation. These include: the International Tax Rulings Panel, the Public Rulings Panel, the Part IVA Panel (relating to general anti-avoidance provisions) and the Litigation Panel.
Categories of documents
The ATO produces and/or retains numerous documents, including ones that are available for inspection and/or purchase, and ones that are available free of charge.
Some documents are generally available; others are available under the Freedom of Information Act 1982. Some explain operations and future directions, or assist taxpayers or other segments of the public generally. There is also a database of generic lists of taxpayers, gathered pursuant to sections 263 and 264 of the Income Tax Assessment Act 1936. Subject to privacy and freedom of information considerations, this information is available to interested persons on request.
The following categories of documents are maintained in the possession of the ATO:
- agenda for, and minutes of, meetings of senior officers within the office, for example reports on conferences and departmental committee meetings;
- ministerial, interdepartmental and general correspondence papers;
- internal administration papers and records;
- ATO tax law and management policy documents, including recommendations and decisions;
- reports relating to research and projects undertaken within the ATO;
- proposals for legislation, drafting instructions and draft legislation;
- documents relating to double tax agreements;
- documents received from international organisations or overseas tax authorities relating to meetings and matters of interest to the ATO;
- copies of instruments of delegation given to, or by, the Commissioner of Taxation;
- requests for legal advice and copies of notes of advice given;
- briefing papers prepared for, and submissions to, the Treasurer or government at that time;
- answers to parliamentary questions;
- correspondence, reports and other documents relating to the structure of all or part of the ATO and the number, size and location of branch offices;
- correspondence, reports and other documents concerning human resource management by the ATO;
- training materials, including videotapes;
- freedom of information request files and papers relevant to the consideration of those requests;
- transcripts of proceedings before the Administrative Appeals Tribunal, the Federal Court and the High Court;
- financial reports, expenditure estimates and expenditure reports;
- statistical and financial reports detailing numbers of income tax returns lodged, the number and types of assessments issued, and taxation revenue collected;
- reports and associated working papers resulting from internal audit reviews;
- manuals (for example on audit, computer, training, Department of Finance and Administration, personnel, appeals, freedom of information);
- returns of income and associated papers;
- accounting records;
- speeches by senior ATO personnel, media releases, staff circulars and press clippings;
- applications, research material, reports and submissions relating to cases in which taxpayers have requested relief from tax;
- recovery files containing reports, submissions and other material on individual taxpayers and companies concerning the recovery of tax;
- instalment files containing information on individual taxpayers and companies concerning activities relating to group employers and tax stamp employers;
- taxation rulings and determinations;
- superannuation guarantee rulings and determinations;
- sales tax and miscellaneous rulings; and
- the ATO plan, corporate information technology plan, telecommunications strategic plan and business plans.
Documents available for inspection and/or purchase The following documents are available for inspection and/or purchase by the public, or a section of the public in accordance with arrangements made by the ATO:
income tax returns and associated papers. Our branch and regional offices process returns lodged by all classes of taxpayers (individual, trust, company, superannuation fund etc.). A return is maintained on an individual file, usually at the office in which it was lodged. Taxpayers may obtain copies of their own returns. Returns are periodically destroyed under a formal destruction program, so some returns are no longer available;
rulings and determinations-copies of taxation, superannuation and other relevant rulings and determinations are available in national and branch offices. They provide guidance on matters of policy, procedural instruction and interpretation of tax law, and are available for purchase (with exempt material excluded);
Income Tax Ready Reckoner-the reckoner sets out the rates of tax payable by companies and individuals for the relevant income year. It also contains information on the Medicare levy, allowable deductions and concessional rebates, and gives examples on how the rates are applied. The reckoner can be purchased at Government Info Shops;
Commissioner of Taxation Annual Report-the report is tabled in Parliament. This edition can be purchased at Government Info Shops or viewed on our website;
Taxation Statistics-this publication presents a range of taxation statistics. A CD-ROM accompanies it. The set can be purchased at Government Info Shops or viewed on our website;
handbooks and manuals (with exempt material excluded); and
lists of funds accepted for the purposes of the gift provisions under the Income Tax Assessment Act 1936.
Documents available free of charge Each year, the ATO produces numerous documents that are available free of charge, on request, from any of our offices (see page 226 for locations and contact details).
The documents include:
- income tax return forms and schedules for use with return forms;
- TaxPack 2000, TaxPack 2000 supplement and TaxPack 2000 for retirees;
- brochures and booklets on the Taxpayers' Charter;
- brochures and booklets on various elements of the new tax system;
- guides to taxes collected by the ATO, explaining people's rights and obligations under the legislation;
- guides on how to complete income tax return forms (in English and other languages);
- brochures explaining tax topics; * procedural documents and forms for group employers; * sales tax return forms;
- income tax instalment deduction schedules for group employers and others;
- application forms (such as to register as a group employer, to vary provisional tax, to apply for relief from payment of tax, for exemption from debits tax);
- forms relating to superannuation;
- forms, information sheets and information booklets relating to the diesel fuel rebate scheme;
- application forms and information materials relating to excise;
- entry forms relating to excise (initial form is free, subsequent forms must be purchased or printed at client's expense); and
- a Fax from Tax and HECS Infofax-topical fact sheets can be requested by calling 13 28 60.
Many documents also appear on our website at www.ato.gov.au.
The TaxPack refers to about 50 publications. These can be ordered, free of charge, by calling the distribution service on 1300 720 092.
Access to information
Inquiries on freedom of information matters can be directed to freedom of information officers.
Applicants may discuss the nature and scope of an intended request or seek advice on freedom of information matters. Whenever possible, an ATO freedom of information officer will assist in identifying relevant documents.
When a document, for which access has been sought, is deemed to be exempt or to contain exempt material, the access may be refused. Alternatively, access may be granted, if practicable, to a document from which exempt material has been deleted.
A refusal to grant access will be supported by a statement of reasons. An applicant has the right to request that the decision be reviewed.
Facilities for access
Facilities for inspecting documents, to which access is given under the Freedom of Information Act 1982, are provided at our National Office and at each branch office.
When physical attendance is not practical, we will make a document available through the post or in person. Information about facilities for access by disabled people can be obtained by contacting a freedom of information officer at one of our branch offices.
ATO freedom of information contacts
Freedom of Information Unit
Australian Taxation Office
GPO Box 869
Brisbane QLD 4001
Tel: 07 3213 5408
New South Wales/Australian Capital Territory
Freedom of Information Unit
Australian Taxation Office
GPO Box 4889
Sydney NSW 2001
Tel: 02 9374 2845
Freedom of Information Unit
Australian Taxation Office
GPO Box 1797Q
Melbourne VIC 3001
Tel: 03 9285 1515
South Australia/Northern Territory
Freedom of Information Unit
Australian Taxation Office
GPO Box 2934
Adelaide SA 3039
Tel: 08 8208 3680
Freedom of Information Unit
Australian Taxation Office
PO Box C109
Perth WA 6839
Tel: 08 9268 5257
Freedom of Information Unit
Australian Taxation Office
PO Box 900
Civic Square ACT 2608
Callers outside of capital cities may telephone 13 28 69 and ask for the Freedom of Information Unit.
Freedom of information requests
At the beginning of the financial year, the ATO had 75 requests for documents under the Freedom of Information Act 1982. During the year, an additional 417 requests were received.
A total of 343 cases were finalised. Applicants withdrew another 63 requests before a decision on access was made. Full access was allowed in 70 cases, while part access was allowed in 159 cases. Ten cases were transferred to other agencies. Access was refused in 104 cases. Four of these matters were appealed to the Administrative Appeals Tribunal.
|Ammirati Puris Lintas ||$53 159 |
|Flying Fox Typography ||$16 110 |
|George Patterson Bates ||$46 747 |
|J. Walter Thompson ||$3 391 720 |
|Neo One ||$125 019 |
|Robbie Weeks ||$1 670 |
|Spincreative ||$25 427 |
|Whybin TBWA & Partners ||$7 362 329 |
Market research and polling organisationsMarket research and polling organisations
|AC Nielsen ||$455 594 |
|Blue Moon Research & Planning ||$305 331 |
|Colmar Brunton Social Research ||$80 812 |
|Chant Link and Associates ||$202 598 |
|Donovan Research ||$158 004 |
|Minter Research ||$22 160 |
|Orima Research ||$19 005 |
|Quantum Market Research ||$2 307 368 |
|The Research Forum ||$127 575 |
|Worthington Dimarzio ||$1 117 728 |
Media advertising organisations
|AIS Media ||$1 247 291 |
|Mitchell Media ||$65 727 190 |
|Queensland Newspapers ||$2 264 |
|RadioWise Media ||$131 947 |
|Senior Scene Group of Magazines ||$1 500 |
|Australia Post ||$3 705 478 |
|Canberra Mailing ||$20 681 |
|Canberra Printing ||$166 674 |
|Gordon & Gotch ||$614 052 |
|HannanPrint ||$4 168 749 |
|Hermes Precisa Australia ||$2 877 |
|PMP Communications ||$78 380 |
|Salmat || $6 600 271 |
|Streetfile ||$1 412 744 |
The ATO does not provide discretionary grants.
There were no significant errors or incorrect statements of fact in the previous annual report.
|Chapter 1 -- Table of contents and Commissioner's overview ||PDF ||71 KB|
| Chapter 2 -- Agency Overview ||PDF ||46 KB|
| Chapter 3 -- Performance ||PDF ||110 KB|
|Chapter 4 -- Tax Reform and Its Implementation ||PDF ||62 KB|
|Chapter 5 -- Australian Business Number ||PDF ||35 KB|
|Chapter 6 -- Aggressive Tax Planning ||PDF ||37 KB|
|Chapter 7 -- Other Responsibilities ||PDF ||34 KB|
|Chapter 8 -- Management and Accountability ||PDF ||37 KB|
| Appendix 1 -- Legislation ||PDF ||26 KB|
|Appendix 2 -- Consultancy Services ||PDF ||33 KB|
|Appendix 3 -- Occupational Health and Safety ||PDF ||18 KB|
| Appendix 4 -- Freedom of Information ||PDF ||26 KB|
| Appendix 5 -- Advertising, Market Research, Direct Mail and Consultants ||PDF ||49 KB|
| Appendix 6 -- Other Matters ||PDF ||19 KB|
|Appendix 7 -- ATO Financial Statements ||PDF ||32 KB|
|Appendix 8 -- AVO Financial Statements ||PDF ||537 KB|
Last Modified: Thursday, 2 November 2000