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The Commissioner of Taxation Annual Report 2003-04
The Commissioner of Taxation Annual Report 2003-04
The Hon. Peter Costello, MP
Treasurer
Parliament House
CANBERRA ACT 2600
Dear Treasurer
I have pleasure in presenting to you the eighty-third annual report of the Australian Taxation Office, covering the financial year 1 July 2003 to 30 June 2004.
In addition to reviewing the administration of the Tax Office, the report also includes annual report information on the administration of the Australian Valuation Office and the Development Allowance Authority.
In preparing this report, I have addressed all the legislative requirements listed in appendix 3.
This report has been prepared under section 63 of the Public Service Act 1999, and in accordance with requirements referred to in subsection 63(2) of the same Act.
Yours sincerely
Michael Carmody
Commissioner of Taxation
25 October 2004
Delivering on our commitment to government
Excellent revenue results
Tax Office collections in 2003-04 exceeded the 2003 Federal Budget forecasts by almost $8.8 billion, or 4.6%.
The main sources of the increased amounts collected were PAYG withholding tax, company income tax, amounts collected from other individuals and GST. The result reflected a buoyant domestic economy. See part 2.
Outstanding compliance results
We raised total liabilities of approximately $6.4 billion from our compliance activities in 2003-04 - up by $229 million on 2002-03. Almost half the liabilities were raised on large business, including high wealth individuals and their associated entities.
Collections in 2003-04 from compliance activities exceeded $4.7 billion - up by more than 40% on 2002-03.
Almost all of this increase came from large business, with collections from this segment up by more than 90% on last year. The amount collected from large business was more than $2.5 billion, representing 54% of the total amount we collected from our compliance work. See part 2.
Promoters of aggressive arrangements
While the promotion of mass marketed investment schemes continued to be subdued in 2003-04, we focused on those who promote these aggressive arrangements, identifying a number of arrangements tailored to particular taxpayers' circumstances.
Our work included issuing 10 taxpayer alerts, undertaking access visits involving 26 promoters and 50 premises, and jointly investigating 36 promoter cases with other government agencies. See part 3.
Developing innovative approaches
Tax Agent Portal
This year was the first full year of operation of the Tax Agent Portal, which was launched in October 2002. We made substantial enhancements to the portal this year, in response to feedback from tax agents.
The portal aims to improve agents' experience by ensuring they can access the information they need in a convenient, efficient and more personalised way.
Surveys of agents about 2003-04 portal improvements show that some 96% of agents rate the portal as useful, while 43% report a net decrease in costs as a direct result of using the portal. See part 3.
Business Portal
In another step towards delivering on our promise to improve the tax experience for the community, on 17 March 2004 we launched the Business Portal.
People can log on to the portal 24 hours a day, 7 days a week, to access their business tax accounts and lodge and pay activity statements online. See part 3.
Practical compliance outcomes
In April 2004 we announced a new series of practice statements focusing on practical administration of the law.
These practice statements cover situations where taxpayers have complied with the law in practice, but have failed to meet sometimes disproportionately complex evidentiary requirements. See part 2.
Open engagement with the community
In July 2003 we published Making it easier to comply, which outlines our three-year program for providing easier, cheaper and more personalised interactions, information and advice for individuals, businesses and tax agents. See part 3.
In August 2003 we published our Compliance program 2003-04, which details the many compliance issues we face in managing Australia's revenue system and how we manage those issues. It outlines our successes in delivering our compliance program last year and the choices we have made to encourage and support high levels of voluntary compliance this year. See part 3.
In January 2004 the Commissioner wrote to the boards of 1,500 Australian publicly listed companies, providing some practical guidance on managing the tax risks associated with major transactions or arrangements. See part 3.
In February 2004 we published Tax havens and tax administration, which explains our approaches to managing compliance in this area. The booklet also highlights the types of arrangements and marketing claims that should raise a 'red flag' for investors. See part 3.
We continued to use independent research organisations to monitor community perceptions of our services. Results show:
- 79% of taxpayers surveyed are satisfied or very satisfied with the professionalism of our employees. See part 2.
- 88% of tax agents surveyed believe that our initiatives have made it easier for them to deal with the revenue system. See part 2.
- 65% of taxpayers surveyed believe we are doing a good job overall. See part 2.
When developing the content of our annual report, we set out not only to meet our parliamentary reporting requirements but to meet the information needs of the community as a whole.
There are a number of target audiences for our report, including members of parliament, peak bodies, professional associations, consumer groups, the media, potential employees and consultants, and taxpayers in general.
As some parts of the report will be of more interest to you than others, you can read this page to help work out which parts will be most useful. Each part is divided into sub-parts.
Part 1 introduces you to the Tax Office with a review of the year by the Commissioner of Taxation, and provides an analysis of our financial performance and an overview of what we do.
Part 2 reports on our performance in relation to our outcome and outputs, as published in our 2003-04 Portfolio Budget Statements. This is the nuts and bolts section of the report that describes in detail what activities we undertook and how we spent our budget.
Part 3 describes some of our significant achievements as well as many of the challenges we faced during the year. It covers how we are working with taxpayers to make it easier for them to comply, and our compliance program for 2003-04. We have included a number of case studies that will be of interest to a wide cross-section of readers.
Part 4 reports on the statutory authorities that come under our jurisdiction - the Australian Valuation Office and the Development Allowance Authority.
Part 5 explains our management practices, including our corporate governance framework, and external and internal scrutiny.
Appendixes 1 to 10 provide:
- a summary of our performance information, in table format (appendix 1)
- freedom of information reporting (appendix 2)
- legislative requirements (appendix 3)
- a list of major consultants engaged during the year (appendix 4)
- advertising, direct mail, market research and media placement conducted during the year (appendix 5)
- financial statements for the Tax Office (appendix 6)
- financial statements for the Australian Valuation Office (appendix 7)
- other matters (appendix 8)
- a list of tables (appendix 9), and
- a list of figures (appendix 10).
Part 1 Overview
Download Part 1 in PDF format (274 KB)
Part 1 introduces you to the Tax Office with a review of the year by the Commissioner of Taxation, and provides an analysis of our financial performance and an overview of what we do.
1.1 A snapshot of the Tax Office
The role of the Australian Taxation Office (Tax Office) is to manage and shape tax, excise and superannuation systems that fund services for Australians, giving effect to social and economic policy. Our excise role excludes customs duty.
We started with 12 employees in the Department of the Treasury more than 94 years ago. Our initial role was to collect land taxes to fund Commonwealth pensions. Since then we have grown to an organisation with over 21,000 employees (at 30 June 2004) and undertake the complex task of administering Australia's revenue system, collecting almost $200 billion in net tax this year.
Arguably the greatest change in the Tax Office has occurred in the last few years, with numerous reforms that have revolutionised both the way we work and the way taxpayers comply with their tax obligations.
Today we administer the following:
- income tax
- pay as you go (PAYG) withholding and instalments
- goods and services tax (GST)
- fringe benefits tax
- excise duty
- superannuation, and
- the Australian Business Register.
We also work with other agencies to deliver community benefits, including family assistance and the energy grants credits scheme. A further responsibility is overseeing the Australian Valuation Office and the Development Allowance Authority.
In 2003-04 we:
- collected 88% of Australian government revenue, and over $33 billion in GST for state and territory governments, see part 2.3
- administered Australia's direct tax systems (income tax, capital gains tax and fringe benefits tax) and most of Australia's indirect tax systems (GST and excise), see appendix 2
- administered and collected the superannuation guarantee and superannuation surcharge, and regulated self managed superannuation funds, see part 2.4
- paid around $3.4 billion in industry grants, such as through fuel and energy grant schemes, see part 2.3.
In administering Australia's revenue system this year we:
- managed compliance of 15 million individual and business taxpayers covering all taxes, and non-profit organisations within the income tax and GST systems, see part 3.3
- regulated almost 300,000 self managed superannuation funds, see part 2.4
- handled over 11.4 million telephone enquiries, see part 2.4
- processed over 60 million forms and remittances, see part 2.3
- maintained more than 30 million individual and business accounts, 18.6 million of which required direct action, see part 2.1
- managed over 1.5 million debt cases for collections of more than $40 billion, see part 2.3.
Our business intent - what we are here for
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To optimise collections and make payments under the law in a way that instils community confidence that the system is operating effectively.
'Optimise' is not about chasing every last dollar of revenue, but making intelligent choices about where to best apply our resources. We make our choices public by publishing our annual compliance program.
Working 'under the law' recognises that what we collect and pay is determined by the laws we administer.
'Making payments' relates to the range of benefits and refunds we are responsible for administering, including the baby bonus, income tax and GST refunds, excise grants, family tax benefits, and superannuation guarantee transfers.
'Instils community confidence' is an ongoing objective that ensures we have a sustainable revenue collection system. This guides how we go about our work, the choices we make in optimising collections under the law, the efficiency of our processes, and the professionalism of our contact with the community.
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Challenges we face
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The issues that present the greatest challenges for us as we seek to achieve our business intent are:
- continuing to implement reform and deliver the revenue and compliance improvements promised by the new revenue system, and
- making the revenue experience easier, cheaper and more personalised for the community.
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We have 18 service standards to measure how we perform in various areas. This year we equalled or exceeded annual benchmarks in 14 of these service standards. This was despite the fact that we increased all benchmarks for service standards by 2% to 5% (with the exception of complaints, which remained at 100%).
Table 1.1 provides more detail on how we performed against each service standard this year compared to last year.
Table 1.1: Our performance against service standards, 2002-03 to 2003-04 (88 KB)
The breakdown of our expenditure is shown in figure 1.1 and the breakdown of work done by our full-time equivalent employees in figure 1.2.
Figure 1.2 shows that a quarter of our employees are engaged in providing advice or education to help taxpayers meet their tax obligations. Another 26% are involved in active compliance activities and a further 15% in seeing that taxpayers lodge the appropriate returns and pay their tax debts.
1.2 Commissioner's review
Our strategic statement is based on two key objectives - delivering improved compliance, while also making people's experience with the revenue system easier, cheaper and more personalised.
Managing compliance with Australia's revenue system requires that we make choices about where to best apply the resources available to us.
This, in turn, requires us to understand the nature of the risks to our revenue system and identify the most appropriate strategies to deal with them.
We then have to make choices about how to deal with particular risks and the best mix of strategies to use.
The decisions we have taken are reflected in the Compliance program 2003-04, which we released in August 2003.
Based on these decisions, at the broadest level we resourced the most intensive review and audit activities in the large business market segment (which includes high wealth individuals and associated entities). These activities are focused on improving compliance in this segment.
We used more leveraged compliance activities in the individuals segment, where our activities were directed at broadly maintaining current levels of compliance.
We used various mixes of these approaches in other market segments.
Collections in 2003-04 from compliance activities amounted to $4.7 billion - an increase of more than 40% over 2002-03 collections. Almost all of this increase came from the large business segment.
Compliance collections from the large business segment, including high wealth individuals and associated entities, were more than $2.5 billion.
This partly reflects the lumpiness of collections from large cases, but also a trend towards increased collections following our more intensive compliance activities in this market in recent years.
These results show the direct revenue impact only. There is also the deterrent effect of our compliance activities, which is evident in overall collections.
Managing compliance is not simply about audits, verification and enforcement. It is also about supporting people to meet their obligations and making it as easy as possible for those seeking to do the right thing.
Roughly one-third of our compliance budget is directed at providing advice and assistance through, for example, rulings, enquiries and marketing and education products.
To illustrate, this year we answered over 11 million telephone enquiries and 1 million items of general correspondence, and issued 332 public rulings and determinations and around 15,000 private binding rulings. We have over 800 printed publications and 6,700 electronic products.
The emphasis we place on supporting those trying to do the right thing is illustrated by the range of services we offer people setting up a new business. By going to our website they can:
- find tax checklists and basic information they need when starting a business
- register for a free tax basics seminar
- apply for an Australian business number online
- find out about accounting and record keeping software that meets our requirements
- download free record keeping software designed to make completing activity statements as easy as possible
- check a calendar of key tax dates for business, and
- discover the latest news and changes that affect business.
They can also arrange an onsite advisory visit. This year we conducted over 27,000 such visits.
For individual taxpayers we also introduced a number of initiatives, including improvements to e-tax to enable them to roll over their details from last year and then update with current information.
As for last year, we devoted 2% of our budget to a program of initiatives to deliver on my promise to make the revenue experience easier, cheaper and more personalised.
This year the program delivered further improvements to our telephone services and correspondence, continued enhancements to the Tax Agent Portal and introduction of the Business Portal for businesses.
The positive impact of those results can be seen in the feedback received from surveys of tax agents. Amongst other positive results, 86% of those surveyed said our written correspondence was clear and 88% said our systems and processes are being improved to make it easy for them to deal with us.
This year we introduced a further initiative to provide more practical approaches to meeting what are sometimes disproportionately complex requirements for evidencing compliance with the law.
Revenue collections in 2003-04 remained robust, with total collections (including GST) exceeding original budget estimates by around $8.8 billion.
Notwithstanding that, challenges to our revenue system remain and require our constant focus.
These include the impact of the dynamic and innovative nature of the world financial and trading system, abusive use of tax havens and countries with tax secrecy policies, the growth of participation in the investment property market and the cash economy.
At times, the risks posed by these challenges arise from lack of knowledge of the tax implications of participating in a new business or income-generating activity. At the other end of the spectrum, they arise from aggressive tax planning practices or, more seriously, from criminal intent.
We will continue to deliver improvements under our easier, cheaper and more personalised program. Next year will see the first release of systems designed to ensure that when a taxpayer contacts us our people will have at their fingertips details of the taxpayer's accounts, contact history and other information necessary for them to respond quickly and comprehensively to the taxpayer's enquiries.
In 2004-05 we will also progress the design of new core production systems. These will enable us to more readily integrate our dealings with taxpayers across all their responsibilities. While full implementation will take some years, the new systems will enable us to be more responsive to changes to revenue laws. Inevitably, development projects of this size carry significant risks and managing them will continue to be a focus for us.
Our superannuation responsibilities have grown enormously in the 12 years since the introduction of the superannuation guarantee. There has been a constant stream of new initiatives in this area as greater recognition has been given to the importance of retirement incomes policy. For example, the past three years have seen the introduction of the quarterly superannuation guarantee, co-contributions, superannuation safety, and choice of superannuation fund.
The breadth and rapidity of those changes have challenged our capacity to provide the systems support necessary for efficient administration of our superannuation responsibilities.
Next year will see us concentrate on consolidating our existing superannuation production systems. Given that continuing development of retirement incomes policy is likely, we will also be examining whether our existing systems are adequate to respond flexibly to new policy initiatives or whether a major redevelopment is necessary.
During 2003-04 a number of process and/or systems issues affected the reliability of our financial accounts. These issues are disclosed in note 2.3 to our financial statements and form the basis of a qualification by the Australian National Audit Office. They relate to our administration of elements of the superannuation surcharge, superannuation guarantee and general interest charge. More information is located in part 3.3 and part 2.3 respectively.
We are working with the Australian National Audit Office to resolve these issues.
There is no end to the challenges we face in administering Australia's revenue laws. Once again, our employees responded professionally to these challenges in 2003-04.
To administer our revenue laws effectively we also rely on the contribution of business people, advisers, their representative bodies, software producers and taxpayers themselves. I would like to thank them for helping us deliver the revenue that is so important to the Australian people.
Michael Carmody
Commissioner of Taxation
1.3 An analysis of our financial performance
During 2003-04 the Tax Office had an operating budget of $2,316.2 million, of which $2,251.3 million was appropriated by government. The remainder was primarily funded by providing services to other organisations. See table 1.2 for more details.
Our 2003-04 operating budget was $101 million more than last year's budget. This largely reflected increased funding from our Output Pricing Agreement and other measures, funding to implement the Super Co-contribution measure, and additional funding to offset the increase in the superannuation contribution rate.
Our original budget for 2003-04 projected an operating surplus of $0.6 million for the year. The final result was an operating loss of $1.66 million, representing a 0.07% variation from our budget.
We operate through five programs:
- compliance
- easier, cheaper and more personalised
- operations
- information technology, and
- people and place.
Figure 1.11 shows how we allocated expenses between these programs in 2003-04.
We are a people-based organisation, with staff and related costs accounting for around 64% of total expenditure in 2003-04. Employee numbers were tightly managed throughout the year, with a full year average of 20,701 full-time equivalent staff, compared to a budgeted average of 20,750.
Staff costs were followed by information technology costs, accounting for 10% of total expenditure, and accommodation and property costs accounting for approximately 8%. Within the remainder of our expenses a further 9% were largely fixed, covering items such as printing and postage ($53 million), bank fees and charges, including Billpay and BPAY® (Registered to BPAY Pty Ltd ABN 69 079 137 518) ($18 million), legal expenses ($36 million), depreciation expenses ($74 million) and payments for Customs services ($37 million).
Figure 1.12 shows our operating expenses for 2003-04.
Table 1.2 shows how we used our funding to achieve our outcome.
Table 1.2: Resources for Outcome 1, 2003-04 (88 KB)
Employee superannuation expenses are a significant cost for the organisation, totalling $245.0 million in 2003-04. This was an increase of $60.1 million (or 33%) from 2002-03.
While the increase is consistent with higher employee numbers and increased salaries following agency agreement pay rises, it was predominantly due to the increased contribution rates for the Commonwealth Superannuation Scheme and the Public Sector Superannuation Scheme. Superannuation as a percentage of our total labour expenses has grown from 13% in 2001-02 to 16% in 2003-04. The government partially funded the contribution rate increases as a separate measure in the 2003 Federal Budget.
Our 2003-04 financial statements contain a qualification for the way we treated a major technology contract. This contract, and related audit qualification, have been in place for five years and relate to a difference in interpretation of Australian Accounting Standard, AAS17 Leases. We have consistently treated the lease of certain computer equipment as an operating lease but the Australian National Audit Office views it as a financing lease. The financial impact of the different accounting treatments is disclosed in note 2.8 to our financial statements. As 2004-05 is the first year we have taken up the option of extending the original contract, we will review our accounting treatment, as required under Australian Accounting Standard, AAS17 Leases.
We also had a $126 million capital budget in 2003-04, of which we spent $109.6 million. This represented a 13% underspend, largely a result of delays associated with building information technology systems for the easier, cheaper and more personalised program.
Of the total amount spent in 2003-04, $23 million related to building improvements, $11 million to information technology infrastructure, and the balance to internally developed software. Major software assets purchased or built in 2003-04 related to the Tax Agent and Business portals, customer relationship management software, and further superannuation system enhancements.
We strive to achieve best value for money when purchasing goods or services. Procurement processes are managed centrally and in accordance with the Commonwealth procurement guidelines to ensure the efficient, effective and ethical expenditure of public money.
We advertise publicly available business opportunities through the government's electronic AusTender system and review and manage contracts to ensure they continue to deliver value for money. During 2003-04 we advertised major contracts for voice services, property management, short-term car hire, commercial and business information services, office chairs, workstations, storage services and budget management software.
As part of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations, we are required to maintain systems that show the cost of administering GST. While we are funded directly by the Australian Government for GST-related activities, the government is reimbursed by the states and territories for this expenditure. Each year, a budget for this activity is developed and agreed with the states and territories.
Our system of allocating costs to administering GST and the statement of attributed costs are separately audited by the Australian National Audit Office. This year we came within 0.6% of the GST budget. Figure 1.13 shows GST costs as a proportion of our total costs for 2003-04.
1.4 Agency overview
With the June 2003 launch of our Strategic statement 2003-05, we outlined our business model for ensuring that the revenue system remains sustainable (see figure 1.14). The model represents how we administer the revenue system, recognising that:
- the context of our business is that individuals and businesses self-assess and, while we may check identified high-risk cases, we generally accept the information taxpayers provide to us
- the taxpayers' charter, compliance model and our brand management system guide our actions, enabling us to differentiate on the basis of taxpayer circumstances, behaviour and risk profiles, and tailor our approaches accordingly, and
- to sustain our success, we need to focus on building and maintaining our internal capabilities, as well as supporting people and businesses that contribute to the effective operation of the revenue system.
Due to the size, nature and diversity of the revenue system and the taxpaying community, we broadly separate taxpayers into market segments.
Our market segments are individuals, micro-businesses, small to medium enterprises, large business, and non-profit and government organisations. These divisions mirror how the community is organised, allowing us to better understand the community and develop strategies, products and services that best meet the needs of taxpayers in each segment. They also enable us to tailor our compliance work to address the risks in the various segments. For more information see part 3.3.
Revenue products are the different elements of the revenue system, with the main ones being income tax, GST, superannuation and excise.
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Capabilities are the skills, knowledge and attributes required for the range of jobs throughout the organisation. Defining capabilities helps us understand how efficient and effective we are, identify where we can improve, and systematically implement improvements.
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Our business model reflects our approach to managing the revenue system. Relating directly to this model, four key long-term strategies that underpin our approach are continuing to:
- increase our focus on compliance to get the right balance between ensuring that taxpayers comply (for example, through audit, risk reviews and prosecution) and helping them comply (for example, through education and advice), consistent with the spirit of self-assessment
- make it easier for taxpayers to comply through initiatives under the easier, cheaper and more personalised program and improved service levels
- effectively manage our relationship with the various participants in the revenue system by tailoring our approaches to their particular circumstances, and
- support the people and businesses that contribute to the effective operation of the revenue system.
To understand how these key strategies are reflected in the work we do, see part 3.
As part of the Treasury Portfolio, we employed 21,009 people at 30 June 2004 in offices all around Australia.
The Commissioner of Taxation, Michael Carmody, leads the organisation and is responsible for administering a wide range of revenue and superannuation laws. For more information about the Commissioner's functions and powers, see appendix 2. The Commissioner and three statutory officers, the Second Commissioners, form the ATO Executive. During 2003-04 our Second Commissioners were:
- Michael D'Ascenzo, who is also Chief Tax Counsel, with an overall focus on the interpretation of tax law and tax design and implementation. He leads our resource management, corporate planning and governance activities, including our finance, integrity and internal audit functions. Michael also takes a leadership role with the Australian Valuation Office.
- Greg Farr, who leads the technology area and also the operations area, which processes transactions forwarded to the Tax Office, enforces lodgment of returns and collects debt. Greg is also in charge of the easier, cheaper and more personalised program, which is aimed at improving community interactions with us.
- Jennie Granger, who is in charge of our compliance program, which develops and implements strategies to ensure individuals and businesses comply with their tax obligations. Jennie also leads the people and place program, which predominantly covers human resource functions and employee workplace accommodation.
The three Second Commissioners play crucial roles in our management forums and structures, including our Executive, the sub-plan executives, corporate steering committees and forums, and external committees. For more information see part 5.2.
We also have a group of National Program Managers, which includes Deputy Commissioners, Deputy Chief Tax Counsels, First Assistant Commissioners, and the Chief Finance Officer. For more information about our people, see part 5.4.
The outcome and outputs framework is the basis of the government's performance management and reporting. Our outcome describes what the government is seeking to achieve for the community and our outputs are the goods and services we deliver to achieve this outcome. We are funded on the basis of this outcome and its associated outputs.
Our outcome and outputs framework is supported by effectiveness performance measures for our outcome, and by quantity and quality performance measures for the outputs. These measures are approved by the Minister for Revenue and Assistant Treasurer.
Under Australia's system of self-assessment, individuals and businesses collect and prepare the information they need to claim their entitlements and meet their tax, excise and superannuation obligations.
Fundamental to self-assessment is that taxpayers are confident they will be treated fairly and reasonably under the law, receive help to comply with their tax obligations, and know that those who intentionally try to avoid their obligations will be brought to account.
The taxpayers' charter and compliance model guide our actions in giving effect to this approach. They require us to understand taxpayer circumstances, behaviours and risks so that we can tailor our approach accordingly.
The taxpayers' charter outlines taxpayers' rights and obligations under the law, as well as the service and other standards they can expect from us. It is about being fair, open and accountable in our dealings with taxpayers, within the framework set by the law. It directs the way we behave towards the community and what the community can expect from us.
The compliance model directs that we understand why people are not complying and develop appropriate and proportionate responses. An underlying objective is to develop responses that maximise the proportion of the community who are both able to, and choose to, comply.
The charter and the compliance model are supported by our brand management system. Under this system we apply a consistent style to our various products, forms and channels of communication to make it easier for taxpayers to comply with their obligations and access their entitlements.
Figure 1.15 shows how the taxpayers' charter, the compliance model and our brand management system work together to help us instil community confidence - the essential ingredient in a self-assessment system.
Our corporate priorities aim to ensure that we optimise collections and make payments under the law in a way that instils community confidence that the system is operating effectively.
Reducing taxpayer debt
Addressing serious non-compliance and those outside the system
Strengthening our capacity to address international aggressive tax planning
Improving the implementation of tax reforms and new policies while making it easier for the community
Improving our infrastructure to support capability changes
Investing in skilling, management and leadership fundamentals
Evaluating the effectiveness of our services and strategies in supporting our work
Reducing taxpayer debt
During 2003-04 the overall level of taxpayer debt reduced by 1.6%. While the level of collectable debt increased, the growth reduced from 25% last year to 9% this year and is predominantly related to activity statement debt. Presented as a percentage of net revenue collections, collectable debt increased only slightly from 3.74% last year to 3.79% this year.
Addressing serious non-compliance and those outside the system
To provide the appropriate focus and resources necessary to address serious non-compliance, we strengthened our strategic and operational relationships with law enforcement agencies such as the Australian Crime Commission and the Australian Federal Police. We also enhanced the capabilities available to prevent, detect and deal with this sort of behaviour.
An important task was to expand and improve our ability to match data from internal and external sources to detect any professionals in particular industries operating outside the revenue system. This year we focused on the accounting, architectural and legal professions. We also started examining the low-documentation loans market.
As a result of our work with the Director of Public Prosecutions, 47 people received prison sentences for fraud related to income tax or GST this year, and 34 for excise-related fraud.
We strengthened our strategic and operational relationships with law enforcement agencies.
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Strengthening our capacity to address international aggressive tax planning
We continued to make strong advances in addressing international aggressive tax planning. We have partnered with Canada, the United Kingdom and the United States in a joint taskforce (Joint International Tax Shelter Information Centre) to identify and address cross-border aggressive tax planning arrangements. We also continue to work with the Organisation for Economic Cooperation and Development and Treasury to enable countries to exchange more tax information. The investigation of key offshore and onshore promoters of schemes and arrangements that breach Australian tax law remains one of our main priorities.
Our approach to managing compliance for tax haven dealings was detailed in our publication, Tax havens and tax administration.
Improving the implementation of tax reforms and new policies while making it easier for the community
We delivered products and services for individuals, businesses and tax agents that were designed to be easier to understand. In many cases, these products and services were designed in partnership with the community groups that will ultimately use them. This continued focus on designing and implementing products and processes to ensure that not only is new policy delivered on time but is easier for the community to understand and use was one of our driving goals in 2003-04.
For individuals, we improved e-tax to make it easier and faster to lodge tax returns, and developed a system to allow tax file number applications to be generated electronically from approved partners, such as the Department of Immigration and Multicultural and Indigenous Affairs. We also made it possible for taxpayers to track and reclaim their lost superannuation using the internet.
We introduced a new Business Portal that businesses can use to lodge activity statements and access a variety of tax information, including registration details, account details and previously lodged activity statements, and a secure messaging service. We have a range of other online services that enable businesses to apply for an Australian business number, request and send PAYG summary reports, lodge excise fuel grant scheme claims, and lodge superannuation statements and reports.
A portal is an online means for taxpayers to access information and services and deal with us. So far we have developed two portals - the Tax Agent Portal and the Business Portal.
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In recognition of their pivotal role in the revenue system, we provided tax agents with improved support and services to make it easier for them to interact with us. Agents can now use the Tax Agent Portal to access a variety of tax information, including registration details and account details, and a secure messaging service. They can use the portal to transfer account balances between a client's accounts, request refunds of credit balances and receive real-time responses, and will soon be able to link to the portal through commercial software packages.
We also upgraded our premium telephone service for agents, reducing waiting times and piloting a voice call-back system.
Improving our infrastructure to support capability changes
Improved infrastructure enhances our ability to deliver on our promise to improve taxpayers' experience of the revenue system. This year we invested in a range of new infrastructure to help manage interactions with taxpayers, including a new client relationship management system, which will start operating in 2004-05.
The new system consolidates a taxpayer's information and enables our employees to understand the taxpayer's relationship with us, for example, by providing a history of their contact with us. We can then give the taxpayer a quick, accurate and personalised response. We expect the new system to reduce the time it takes to resolve issues raised by taxpayers.
Investing in skilling, management and leadership fundamentals
Recognising that effective management and leadership of our systems and people are crucial for meeting our commitments, we re-aligned some of our skilling, management and leadership capabilities. We did this through a program called Managing for success. Aimed at over 2,000 of our managers and leaders, the program focuses on what is expected of our managers today. It has a particular emphasis on managing workloads for productivity, motivating people to perform, ensuring a safe and healthy workplace, and understanding the manager's role in our governance and integrity frameworks.
The technical competency of our staff is also critical to our success. In light of this, we delivered comprehensive training programs to a large number of compliance field staff, covering technical tax information, industry knowledge, work practices and systems. As part of rebalancing our activities to do more active compliance work, we implemented a program aimed at providing experienced field staff with advanced skills. This compliance officer advanced audit and accounting program was delivered by the Australian Taxation Studies Program at the University of New South Wales to 302 senior compliance field staff in 2003-04.
Evaluating the effectiveness of our services and strategies in supporting our work
We have developed a suite of key indicators and service standards to measure our performance across a wide range of internal and external services. The indicators provide information about the integrity of our systems and practices, as well as our conformance with approved governance procedures. They are supported by annual client surveys conducted to evaluate satisfaction with the internal and external services we provide. We used the feedback obtained from the surveys to improve our processes where appropriate. For more information see part 2.7.
Part 2 Report on performance
Download Part 2 in PDF format (640 KB)
Part 2 reports on our performance in relation to our outcome and outputs, as published in our 2003-04 Portfolio Budget Statements. This is the nuts and bolts section of the report that describes in detail what activities we undertook and how we spent our budget.
2.1 Introduction
This part reports on the Tax Office's 2003-04 performance in relation to our outcome and its five related outputs, as stated in the Portfolio Budget Statements 2003-04, Treasury Portfolio.
We contribute to the overall outcome of 'strong, sustainable economic growth and the improved wellbeing of Australians'. As Output Group 1.1, we are responsible for 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, superannuation, excise and other related systems'.
We aim to achieve this single outcome by providing the government with a viable and sustainable tax administration system, delivering on social and economic policies through five outputs:
- shape, design and build administrative systems
- management of revenue collections and transfers
- compliance assurance and support for revenue collection
- compliance assurance and support for transfers and regulation of superannuation funds' compliance with retirement income standards, and
- services to governments and agencies.
Our integrated approach enables us to cost-effectively deliver both revenue products and transfers. Figure 2.1 shows the relationship between the government outcome and the outputs we deliver.
Transfers are movements of money that is not revenue, for example, tax offsets, grants, superannuation guarantee vouchers and benefits distribution.
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This year we started to implement the recommendations contained in Best practice in annual performance reporting. This guide, jointly published by the Department of Finance and Administration and the Australian National Audit Office, aims to improve the transparency, usefulness and quality of performance information.
Output 1.1.1 - Shape, design and build administrative systems
Output 1.1.2 - Management of revenue collections and transfers
Output 1.1.3 and Output 1.1.4 - Compliance assurance
Output 1.1.5 - Services to governments and agencies
Output 1.1.1 - Shape, design and build administrative systems
We continued to have a significant role in designing, developing and implementing high-quality administrative products that deliver policy intent and meet community needs. Having bedded down processes following the transfer of the law design function to Treasury, we contributed to policy advice and legislative design by providing timely and quality input to law design processes within Treasury. Our advice encapsulates our administrative, compliance and interpretive experience and aims to ensure that the impacts of new policy on taxpayers and their representatives are considered throughout the law design process.
At a strategic level, the relationship between the two agencies is overseen by a joint Tax Policy Coordination Committee, and underpinned by a protocol and a practice statement.
A key achievement this year was the development of a decision-making model aimed at providing certainty for taxpayers about measures that have been announced but not yet enacted.
Output 1.1.2 - Management of revenue collections and transfers
This year we delivered on our service commitments to the community, with the timely processing of returns, statements and payments within the standards outlined in the taxpayers' charter. In doing this, we maintained more than 30 million client accounts, directly actioning 18.6 million, and issued 11.4 million refunds. We processed more than 1.94 million new registrations and made 3.13 million changes to the registers, with 14% more Australian business number transactions and 12% more tax file number applications.
We improved the overall number of activity statements lodged or finalised by securing lodgment or determining that there was no longer any obligation to lodge. We also focused on income tax and other lodgment obligations.
Particular concerns to address issues for small business led to the introduction of an assistance package for small businesses and individual taxpayers with outstanding tax obligations. We collected $40.4 billion in tax debt in 2003-04.
Our work in verifying employer obligations under pay as you go (PAYG) withholding and reviewing potentially high-risk income tax refunds resulted in 74,175 cases being finalised, with revenue adjustments totalling $671 million.
Output 1.1.3 and Output 1.1.4 - Compliance assurance
This year saw the introduction of some initiatives to improve our compliance assurance performance, and the continuation of some existing strategies. We introduced a brand management system to improve the consistency and clarity of our information products and services.
With the impact on both the community and the Tax Office of major tax reforms beginning to subside, this year we increased our focus on active compliance activities. Active compliance involves actively checking whether the tax laws are being complied with. In this work we use products ranging from telephone calls, letters, walk-in visits, risk reviews and audits to prosecution investigations. This year we worked to improve the capability of our employees by providing more training in the skills and knowledge needed for active compliance work.
Despite our focus on active compliance, we nonetheless continued to provide whatever help taxpayers needed to comply with their tax obligations. Over the year we worked to improve our capability to help them, making particular gains in the quality of our written advice and telephone services.
Output 1.1.5 - Services to governments and agencies
We provided a range of services to the Treasurer and Minister for Revenue and Assistant Treasurer, the Parliament, and other Australian public sector agencies. These included activities that contributed to other agencies' outcomes, for example, Centrelink, the Department of Family and Community Services and the Child Support Agency.
This year saw the appointment of an Inspector-General of Taxation. We also built on the insights provided by external scrutineers, including the Ombudsman and the Australian National Audit Office.
2.2 Output 1.1.1 - shape, design and build administrative systems
Output 1.1.1 reflects the Tax Office's role in effectively shaping systems to give effect to the legislation we administer and includes:
- contributing to policy advice and legislative design, reflecting our insight into administration, compliance and interpretation, and
- designing, building and implementing the administrative systems and products to enable the community to meet their obligations under the law.
Defined processes now support our relationship with Treasury in developing tax policy and law design. The relationship is working effectively and the joint Tax Policy Coordination Committee continues to monitor the protocol between the two agencies, while we focus on improving operations and activities to support the relationship. This includes determining the appropriate level of support for drafting instructions.
Specifically, our role is to try to ensure that administrative impacts are considered in developing policy proposals and implementing them. We particularly focus on administrative and compliance costs, with a view to making it as easy as possible for taxpayers to comply. Our ability to provide formal administrative advice on new measures is enhanced by working with tax professional bodies through the National Tax Liaison Group, particularly its Technical Issues Management Sub-committee.
We provided 702 formal advices to Treasury during the year, including 288 specific costing estimates.
We monitored the progress of policy and legislation projects through a fortnightly readiness report. We endorsed 79 projects and another 8 moving to business-as-usual. At 30 June 2004 there were 159 projects being monitored.
When there are proposals to change tax laws, we provide government with estimates of how the changes might affect revenue, and the costs of complying with the changes. While demand for such analysis is ongoing, it varies according to the magnitude and complexity of possible changes.
The 288 specific costings provided to Treasury this year reflected the demand for costing elements of the 2004 Federal Budget, variations to administration of the revenue system, and the review of income tax self-assessment.
Tax legislation continues to be a significant part of the government's legislation program, with between 50 to 100 new measures introduced each year. This year Parliament passed 28 Bills containing 108 tax measures, with 59 of these being applied from a date of announcement prior to enactment. Administering these changes poses a significant challenge for us, as taxpayers often seek certainty about government announcements.
After consultation with Treasury, the Australian National Audit Office and the National Tax Liaison Group, we developed a risk model incorporating a decision tree analysis to guide the administration of each such change. Applying this model should ensure there is consistency in the decisions made.
This year we applied the model to 12 announced measures:
- Second World War payments
- rollover for financial services reform transitions
- consolidation
- imputation for life insurance companies
- foreign hybrids
- deduction for transport between workplaces
- small business capital gains tax relief and discretionary trusts
- capital gains tax event K6 and demergers
- extension of the transitional period for related party at-call loans
- goods and services tax (GST) small business tax simplification
- rollover relief for the transfer of life insurance business under Part 9 of the Life Insurance Act 1995, and
- taxation of capital-protected products.
The small business capital gains tax relief and discretionary trusts measure illustrates how we manage legislative delays. After using the risk analysis model, we decided not to enforce the existing law in the period between when the proposed law was announced and enacted. Now that the legislation has received Royal Assent, taxpayers who anticipated the change (claimed the rollover relief) need take no further action, and those who followed the existing law (did not claim rollover relief) should have their return amended.
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We are working hard to increase compliance by making it easier and cheaper for the community to comply with their tax obligations. The main vehicle for this work is our easier, cheaper and more personalised program.
The planning phase of the program was completed in February 2004 and we expect to complete the analysis phase in October 2004. Details of what we will deliver under the program are set out in our booklet, Making it easier to comply.
We engaged a consulting company to work with our employees
in planning and designing the program. During the year an average of 250 employees were involved in analysing the program and ensuring that design review processes are robust and involve the right people in the organisation. We are using commercial off-the-shelf software to help implement the program.
This year we implemented 40 initiatives aimed at improving how taxpayers can interact with the revenue system, including upgrades of the Tax Agent Portal and a new Business Portal, and will deliver more over the next two years.
We completed the interface standards project, a framework enabling computer systems to interoperate, and are well on the way to allowing activity statements to be submitted through third party software products.
This year also saw the development of a number of security initiatives, including improvements to public key encryption, support for the portals and a security blueprint.
2.3 Output 1.1.2 - management of revenue collections and transfers
Output 1.1.2 represents extensive interactions and transactions between the Tax Office and taxpayers as they:
- enter systems we administer, via the appropriate registration
- receive and provide information
- make payments
- receive refunds or other payments, or are notified of their obligations, and
- receive advice about outstanding obligations and any remedial action we are taking.
In 2003-04 the operations area:
- managed more than 60 million forms and payments for 15 million individual and business taxpayers
- managed more than 30 million tax accounts, 18.6 million of which required direct action
- issued 11.4 million refunds
- finalised 74,175 cases related to employer obligations and high-risk income tax refunds, resulting in $671 million additional revenue from raising increased liabilities or reducing refunds
- actioned 1.1 million letters.
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Revenue collections increase by 7.4%
Collections are measured in cash terms
We collected net tax of $198,732 million in 2003-04, an increase of $13,688 million (or 7.4%) on last year. The increased collections were largely from PAYG withholding, company tax, GST and collections from other individuals.
Collections from other individuals comprise income tax and Medicare levy paid by individuals that are not collected through the PAYG withholding system. They include PAYG instalments, balances payable on assessment and payments arising from audits.
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PAYG withholding collections were $5,363 million (6.3%) more than last year, reflecting growth in wages and employment. Company collections were $3,260 million (10.0%) more than last year, reflecting strong income and profit growth stemming from buoyant economic conditions. Company collections continued the trend of recent years of growing more quickly than gross domestic product. GST collections were $2,496 million (8.1%) more than last year, due to the strong demand for goods and services created by positive conditions in the domestic economy. Collections from other individuals were $2,505 million (14.4%) more than last year. This was due to strong growth in the property-related income of individuals and the high profitability of the small business sector flowing from a strong economy.
Other categories that experienced significant growth in collections over 2002-03 were tax on contributions and earnings of superannuation funds ($631 million), excise ($346 million) and fringe benefits tax ($121 million). There was less significant growth for the superannuation surcharge, luxury car tax and wine equalisation tax.
This growth was offset by an increase in refunds to individuals ($774 million), and a fall in revenue from petroleum resource rent tax ($544 million) due to reduced production and higher costs in the petroleum extraction industry.
Revenue collections also exceeded 2003 Federal Budget forecasts by almost $8.8 billion (4.6%), with the main contributors being company tax ($3.8 billion), GST ($1.5 billion), PAYG withholding ($1.4 billion) and collections from other individuals ($1.2 billion).
Table 2.1: Total revenue collections, by head of revenue, 1994-95 to 2003-00 (96 KB)
Figure 2.4: Revenue collections, by head of revenue, 1994-95 to 2003-04 (40 KB)
Figure 2.5: Revenue collections from other taxes, by tax, 1994-95 to 2003-04 (43 KB)
Table 2.2: Amount refunded, by type of tax, 1995-96 to 2003-04 (62 KB)
Figure 2.7: Capital gains tax collections, 1993-94 to 2002-03 (37 KB)
Table 2.3: Overview of capital gains tax collections, 2000-01 to 2002-03 (53 KB)
Table 2.5: Comparison of actual 2002-03 results, 2003-04 budget estimates and actual results (cash basis) (123 KB)
Table 2.6: Comparison of actual 2002-03 results, 2003-04 Budget Administered Outlay estimates and actual results (cash basis)
Debt collection and lodgment enforcement
Our overall revenue and compliance performance is underpinned by taxpayers paying liabilities that are established when they lodge statements and returns. While many taxpayers pay their tax on time, we have to actively collect debt from some taxpayers. Our debt collection work is based on recognising payment obligations early, minimising ongoing debt holdings, and improving timeliness and efficiency. We take into account a taxpayer's compliance history, and the cost-effectiveness of our actions and opportunities to influence behaviour. Where taxpayers fail to respond to our approaches, we take firmer action, which can include legal proceedings or recovering a debt from a taxpayer's bank accounts or other income sources.
In addition to our standard actions to enforce lodgment, such as warning letters, reminder telephone calls and penalties, this year we implemented strategies aimed at specific target groups. These included those taxpayers who are in the new revenue system but do not lodge income tax returns. We also made greater use of data provided by financial and other institutions to identify taxpayers who do not meet their lodgment obligations, and increased our focus on ensuring that taxpayers fulfil any obligations identified as a result of an audit.
These activities led to increased payments, as well as some increase in the number/value of collectable debt cases.
Collectable debt is debt that is not subject to dispute or insolvency. This amount also excludes debt that is not yet due.
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During 2003-04 we accounted for approximately 2.15 million overdue activity statements and 476,000 overdue income tax returns. We referred for prosecution more than 7,000 taxpayers who failed to respond to our demands to lodge income tax returns, and more than 2,600 taxpayers for failing to lodge activity statements.
At 30 June 2004 there were 1.4 million debt cases on hand, 9% more than at the beginning of the year. The value of debt on hand at the end of the year decreased by 1.6% to $16.93 billion and was made up of:
- $7.53 billion in collectable debt
- $8.24 billion in disputed debt, that is, debt subject to objection or appeal - most of this debt was in the large business sector, with the greatest value represented by a small number of significant income tax cases, and
- $1.16 billion in insolvency debt.
The 9% increase in the value of collectable debt in 2003-04 compared to last year's 25% increase. As with last year, the increase was predominantly activity statement debt.
The value of debt finalised at 30 June 2004 was $53.14 billion, an increase of 11.5% over last year. The value of new debt referred increased by $3 billion (or 6%) on last year.
Outcomes for our overall debt and lodgment program improved significantly, with $40.41 billion in debt collected this year, compared with $37.75 billion for the same period in 2002-03.
Table 2.7 shows debt collection results for the past four years, while table 2.8 summarises our results in terms of collectable debt as a percentage of total collections. Figure 2.9 shows the percentage value of debt collections for each of our market segments.
Table 2.7: Debt collection results, 2000-01 to 2003-04 (57 KB)
The total debt disclosed in table 2.7 does not align with our financial statements. This amount has been sourced from our debt case management system. The total debt disclosed in the financial statements is adjusted to reflect the economic transaction method employed in recognising income tax revenues and corresponding debt, as explained in note 2.25 to the financial statements.
General interest charge
Overview
Current state
The way forward
Overview
General interest charge provides a common single rate of interest for all tax types where a correct payment is not received by the due date.
Over recent years we have moved to consolidate responsibility for the general interest charge into one area of the organisation. This and the recent need to consider our approach to small business debt turned our attention to the way general interest charge is brought to account in systems other than our instalments systems.
The vast bulk of revenue is properly brought to account through our instalments systems. Nevertheless, a small part of the accrued general interest charge attributable to other systems has had to be manually estimated. This estimate covering the past four years is:
- revenue of $555 million, and
- remission expenses of $490 million.
These amounts have been included in our financial statements. Corrections to the accounting systems are planned to resolve this problem in 2004-05.
Current state
A range of different due dates that arise as a result of our income tax lodgment program, in combination with accounting systems designed for a number of different tax types, complicate the administration of the general interest charge.
Activity statement accounting system - all taxpayers
We are confident that the general interest charge functionality is operating as specified and in accordance with legislation and our administrative policy. This is significant as 90% of collections flow through these accounts.
The accounts are reviewed monthly and general interest charge is imposed on the last weekend of each month. Automated remission thresholds are used to minimise taxpayer impacts. Some accounts are excluded from general interest charge reviews (for example, due to the operation of debt recovery law).
Income tax accounting system - individuals
A similar automated general interest charge function operates in the income tax accounting system for individual taxpayers. Around 5% of collections flow through these accounts.
The accounts are reviewed quarterly for debit balances of more than $100. General interest charge is not ordinarily posted at 30 June but at the time of the account review. Automated remission thresholds are used to minimise taxpayer impacts. General interest charge is also imposed in these cases as part of our recovery processes.
Income tax accounting system - companies and superannuation funds
Our annual income tax lodgment program presents complexities for posting general interest charge for companies and superannuation funds. As a result, automation within the annual company income tax system has proved difficult. Around 5% of collections flow through these accounts. Manual workarounds exist, although their coverage generally operates on a risk management basis - with general interest charge also imposed in cases where recovery action is taken.
The PAYG instalments system provides for the larger share of collections. These are managed separately through the activity statement accounting system outlined above.
Fringe benefits tax accounting system
We rely on manual efforts to calculate and impose general interest charge in the fringe benefits tax accounting system.
Fringe benefits tax instalments account for a large share of collections and are managed separately through the activity statement accounting system. General interest charge is imposed where recovery action is taken.
The way forward
Our aim is to ensure a common rate of general interest for all tax types and that all business accounting systems operate as the law intends. In order to do this we need to:
- critically examine the current exclusion rules and indicators that prevent general interest charge being automatically imposed
- review current accounting system thresholds that automatically remit general interest charge from taxpayer accounts, and
- review our accounting policies to ensure general interest charge is administered in a way that does not inappropriately add to workloads for taxpayers or us.
We are developing strategies to address the functional gaps identified in some of our business systems and plan to implement them over the coming 12 months. As an interim measure, we are ensuring more rigour is applied to our manual interventions.
Our work in this area involves creating and maintaining client records on the Tax File Number Register and the Australian Business Register. In undertaking this activity, integrity of our data holdings is the major priority.
Specifically, our registration work involves:
- enhancing and maintaining the Tax File Number Register and the Australian Business Register
- ensuring the integrity of both registers
- matching and validating tax file number declaration forms
- establishing and maintaining relationships with external stakeholders
- improving the Tax File Number Register and Australian Business Register systems, and
- implementing new policy initiatives.
This year we processed more than 1.94 million new registrations, completed around 3.13 million updates or alterations to the registers, processed 5.1 million tax file number declarations, and answered 237,500 telephone calls, while meeting taxpayers' charter service standards.
The number of Australian business number registrations increased by 14% compared with last year.
Expansion of the Tax Agent Portal and introduction of the Business Portal, together with enhancements to our registration systems, saw an increase of 18% in online registrations. This demonstrates an increasing trend for clients to deal with us electronically.
The average unit cost of registering a client (based on total direct costs) during 2003-04 was $6.68, which compared favourably with last year's cost of $6.86 and was consistent with estimates in our Output Pricing Agreement.
The average unit cost for maintaining the Australian Business Register (based on total direct costs) decreased to $9.30, from $11.43 in 2002-03. The reduction was due to the large number of computer-assisted transactions processed this year.
During 2003-04 our coding of Australian business number registrations consistently exceeded the required quality standard of the Australian and New Zealand Standard Industrial Classification for employing businesses. We worked closely with the Australian Bureau of Statistics to improve coding of Australian business number registrations for non-employing businesses and will implement further technology solutions to enhance the accuracy of automatic coding early in 2004-05.
We are working closely with federal, state and local government agencies to increase the use of Australian business numbers in business-to-government interactions.
Payment and product processing
The Australian revenue system is based on self-assessment. Individuals and businesses determine their obligations and entitlements by providing monthly, quarterly or annual information statements and payments. Many taxpayers receive a refund. The community expects efficient, accurate and timely processing of lodgment and payment transactions.
We processed 12.8 million income tax returns, 14.2 million activity statements and 17.8 million payments through electronic and paper channels in 2003-04. We also received and processed data from third parties, such as employers, superannuation funds and financial institutions, for income matching and sharing with other agencies. We processed 14.6 million PAYG withholding payment summaries lodged by 782,000 employers.
In our efforts to process and store payments and information accurately, we employ data validation techniques across all inbound channels. This year approximately 4 million information items (8%) required manual action to resolve illegible or missing data. We also adjusted over 1 million returns or statements after receiving amendment notifications or revisions.
We support a range of electronic and paper options and actively promote electronic channels as these produce the lowest number of data exceptions. This reduces the need to contact taxpayers to clarify information.
During the year we met or exceeded our primary service standards for processing original lodgments and refunds. We were marginally under our target for processing income tax amendments.
We aim to ensure that our accounting systems record accurate debits, credits and payments for each client so that our administered financial statements are reliable and accurate. It is equally important to have robust integrity controls governing the release of tax refunds. The community expects us to pay correct refund amounts, on time, to the right taxpayers. The government must be confident that we have the right checks and controls in place to allow this to occur.
During 2003-04 we maintained 17.2 million accounts, and issued 11.4 million refunds, while exceeding service standards. In particular, we issued over 2.4 million activity statement refunds, processing more than 94% of these within 14 days.
As part of our client accounting work, we have significant interaction with the tax community (including taxpayer representatives), with students in our management of loan accounts, and with other agencies.
Expansion of the Tax Agent Portal and implementation of the Business Portal have provided easier access to our accounts. Further initiatives will make us more efficient and therefore improve the service we provide to taxpayers. These include increased automation of our refund process, an improved secure messaging facility, and enhanced facilities for tax agents to access client information.
We also monitor employer obligations and this year completed 30,000 PAYG withholding reviews, establishing more than $300 million in additional tax liabilities.
Excise rebate and grant payments
The energy grants credits scheme replaced the diesel fuel rebate scheme and the diesel and alternative fuels grants scheme on 1 July 2003. The new scheme provides a rebate for customs or excise duty paid on diesel or 'like' fuels used in certain off-road activities and for the on-road use of fuel in eligible activities by businesses.
The fuel sales grants scheme was introduced so that fuel retailers in non-metropolitan areas can pass on a reduction of one or two cents at the fuel pump.
The product stewardship for oil program (previously known as the product stewardship (oil) scheme) is designed to encourage oil recyclers to collect and recycle more oil. This scheme was developed in conjunction with the Department of the Environment and Heritage, which maintains and develops policy while we administer the scheme.
The cleaner fuels grants scheme provides for the payment of a grant to licensed excise manufacturers (including holders of storage licences) and to importers of eligible cleaner fuels. The scheme was developed to offset the excise and customs duty payable on alternative fuels such as biodiesel. Once again, the Department of the Environment and Heritage maintains and develops policy while we administer the scheme.
Table 2.9 shows amounts transferred through the excise schemes we administer.
The Higher Education Contribution Scheme (HECS) 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 jointly administered by the Department of Education, Science and Training, higher education institutions and the Tax Office.
Through the scheme, students are required to contribute to the cost of their higher education. They can pay up front to the institution, or defer their liability and make compulsory HECS repayments through the revenue system when their income is above the minimum threshold. These payments are known as compulsory HECS repayments and the minimum repayment threshold for 2003-04 was $25,347.
Debts are indexed on 1 June each year, adjusting them in line with the cost of living to maintain the value of the debt. The indexation figure is based on changes in the consumer price index.
In 2003-04 around 353,000 compulsory repayments were raised on assessment, accounting for approximately $640.43 million. There were 1,393 compulsory repayments deferred due to serious hardship or other special reasons, to the value of $2.38 million. Net voluntary repayments of $156.48 million were made, consisting of more than 61,100 payments. Of these, 49,300 received $23.3 million in bonuses.
Debts of $1.6 billion were reported to us by tertiary institutions for the second semester, 2003, and the first semester, 2004.
An indexation rate of 2.4% was applied to the accumulated HECS debt on 1 June 2004, effectively increasing the debt by $215.7 million. At 30 June 2004 there were approximately 1.2 million clients with a total accumulated HECS debt of $10.9 billion.
The Student Financial Supplement Scheme (SFSS) was a voluntary loan scheme that gave tertiary students the option to borrow money to help cover living expenses while studying. The scheme commenced in 1993 and ceased on 31 December 2003.
Students start repaying loans in the fifth year after these were taken out where their taxable income is above a minimum threshold. The threshold for 2003-04 was $35,885.
During 2003-04 there were around 39,500 compulsory Financial Supplement repayments raised on assessment, totalling $50.92 million. More than 7,700 net voluntary repayments accounted for $4.92 million.
Debts relating to Financial Supplement loans taken out in 1999 were transferred to us from Centrelink on 1 June 2004. These represent 56,800 loan accounts for a total debt of $292 million.
An indexation rate of 2.4% was applied to the accumulated Financial Supplement debt on 1 June 2004, increasing the balance by $34 million. At 30 June 2004 there were around 203,300 taxpayers with a total Financial Supplement debt of $1.74 billion.
We collected and transferred $919.48 million under various schemes managed by other departments and agencies in 2003-04, including Centrelink, the Department of Education, Science and Training, the Department of Family and Community Services, and the Child Support Agency. Table 2.10 shows the breakdown of total funds transferred.
Funds were transferred to the Higher Education Contribution Scheme and the Student Financial Supplement Scheme. Remaining transfers were by way of garnishees.
A garnishee is a formal notice the Commissioner issues to a third party that owes money to a taxpayer who has a tax debt. The third party then has to pay money to the Commissioner, rather than to the taxpayer. This amount is used to reduce the taxpayer's tax debt.
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Table 2.10: Funds transferred to other agencies, 2003-04 (52 KB)
We administer the Superannuation Holding Accounts Reserve. Established in 1995, the reserve is designed to receive small superannuation amounts from employers who cannot find a superannuation provider that accepts these small amounts.
The Superannuation Holding Accounts Reserve does not operate as a superannuation fund, and payment of interest is subject to certain conditions. Interest was not payable on reserve accounts during the year.
To encourage and educate employers to use superannuation providers rather than the reserve, we publish on our website the names of superannuation providers that accept small amounts. We also encourage people who contact us to consider depositing superannuation monies with these providers.
This year there was a marked increase in the number (up 49%) and value (up 38%) of deposits to the reserve. This was expected with the 1 July 2004 introduction of the quarterly superannuation guarantee as this brought forward deposits from employers who previously paid annually. Table 2.11 shows changes in the reserve from 1999-2000 to 2003-04.
At the same time, there was a 20% increase in the transfer of money from the reserve to superannuation providers. This was largely achieved through the SuperMatch and SuperSeeker products that we offer to superannuation providers and individuals to locate superannuation monies held in the reserve.
SuperSeeker allows individuals to search the Lost Members Register, the Superannuation Holding Accounts Reserve and unclaimed superannuation guarantee vouchers to match their details against lost superannuation accounts.
SuperMatch is an online tool that allows funds to check their member details against the Lost Members Register, the Superannuation Holding Accounts Reserve and unclaimed superannuation guarantee vouchers.
Both SuperSeeker and SuperMatch are available on our website at www.ato.gov.au
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We are responsible for administering departing Australia superannuation payments. From 1 July 2002, temporary residents who have permanently departed Australia can choose to be paid their accumulated superannuation benefits, subject to tax being withheld at the appropriate rate.
Temporary residents can apply directly to their superannuation provider for a departing Australia superannuation payment, or to us if they have a Superannuation Holding Accounts Reserve account. We also provide an online facility that allows people to apply for the payment from anywhere in the world, 24 hours a day, 7 days a week. This facility is linked to Department of Immigration and Multicultural and Indigenous Affairs information technology systems so that applicants can immediately establish their immigration status.
Applying for a departing Australia superannuation payment is optional and the decision to apply is a personal one. Accordingly, we seek to ensure that temporary residents are aware of the option, with the main vehicle for telling them about it being the Departure Card they complete when leaving Australia.
2.4 Output 1.1.3 and output 1.1.4 - compliance assurance
Output 1.1.3 and Output 1.1.4 represent compliance assurance and support for revenue collection (Output 1.1.3) and for transfers and regulation of superannuation funds' compliance with retirement income standards (Output 1.1.4).
These outputs represent the processes required to assure and support compliance with tax obligations and entitlements relevant to revenue collection, including:
- providing the community with information about their obligations and entitlements
- helping them meet their obligations
- identifying and addressing non-compliance, and
- assuring the community and government of the integrity of the revenue system.
In 2003-04 our compliance area:
- issued 332 public rulings, including 131 class rulings and 112 product rulings
- issued around 15,000 private rulings
- handled over 11.4 million telephone calls
- undertook a range of field, phone and letter activities, including 118,000 field visits, 222,000 telephone calls and 694,000 letters
- finalised 685 fraud investigations and initiated 172 prosecutions, resulting in 166 successful convictions and 81 prison sentences.
- collected $4.7 billion from compliance activities - an increase of more than 40%
- collected more than $2.5 billion (or 54%) of total compliance collections from large businesses, high wealth individuals and their associated entities - an increase of 90% over last year, and
- increased GST collections by 27% to $994 million.
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Marketing and education are important elements in a revenue system that relies on people self-assessing their tax obligations. The community must be confident that the system is fairly administered and be aware of their obligations and entitlements. We use marketing and education to encourage taxpayers to pursue their entitlements, and to cultivate a positive attitude to Australia's revenue system among taxpayers.
This year we aimed to show that we are managing the revenue system openly and accountably in order to improve community confidence and alert individuals to particular compliance risks. To achieve this, we published our annual Compliance program 2003-04, detailing key compliance focus areas for particular market segments - individuals, micro-businesses, small to medium enterprises, large business, and government and non-profit organisations. The program also explains the help and advice available to taxpayers in addressing the risks.
We continued to publish special focus booklets covering areas of particular interest. This year we published Tax havens and tax administration, detailing our approach to this international tax issue.
We took both an issues-based and market segment and product approach to marketing and education so that target audiences are aware of relevant priority issues.
Our ability to develop and deliver products and services benefited from the implementation of a brand management system this year. The system not only satisfies government branding requirements, but also provides a consistent style for our communications and interactions with the community.
What is brand?
A brand is the combined set of impressions and expectations that a customer has of an organisation or a company.
Our brand is a mixture of tangible and intangible attributes, symbolised by our name and logo, that create influence and generate value for our organisation.
At the heart of our brand are a clear brand intent, positioning and qualities, supported by a design system that ensures a consistent and continuous brand style and presentation across all of our communication, products and services.
We have four brand qualities that reflect our role in different situations:
- firm enforcer of the law
- trusted authority
- fair administrator, and
- professional adviser and educator.
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Our marketing and education activities made a significant contribution to the successful launch of the Business Portal by the Commissioner in March 2004. We implemented a comprehensive marketing program, including paid advertising and public relations activities, to build awareness and increase uptake of this new online service.
We undertook an extensive media campaign to inform the community about the Super Co-contribution scheme, a new measure to help low and middle-income earners increase their retirement savings. The print media and television campaign aimed to help taxpayers work out whether they were eligible for the co-contribution, and how it would benefit their retirement savings.
As in other years, we delivered tax information to help the community meet their annual tax return obligations and access entitlements. We used broadcast and print media, publications, our website and field programs to disseminate information to around 10 million individual taxpayers and those claiming benefits through the revenue system.
We continued our quarterly radio and press advertising to increase awareness of the due dates for lodging activity statements, with tracking research showing it to be highly successful. We also sent out an information update with activity statements each quarter to help businesses meet their obligations.
Lost Members Register and unclaimed super
Lost Members Register and unclaimed super
We maintain a register of people who have become 'separated' from their superannuation. Superannuation funds report members as 'lost' when they have received returned unclaimed mail for the member, or when the account has not had any activity for some time.
We help funds and individuals to search our records to determine if people have outstanding vouchers, hold accounts in the Superannuation Holding Accounts Reserve, or are listed on the Lost Members Register. Online search facilities include:
- SuperMatch, which allows funds to check their member details against the Lost Members Register, the Superannuation Holding Accounts Reserve and unclaimed superannuation guarantee vouchers, and
- SuperSeeker, which allows individuals to search the Lost Members Register, the Superannuation Holding Accounts Reserve and unclaimed superannuation guarantee vouchers to match their details against lost superannuation accounts.
During 2003-04 close to 1 million accounts were removed from the Lost Members Register. The large majority of these were due to people being reunited with their superannuation, the remainder a result of funds providing updated member records. Despite this, there was a net increase in the number of accounts due to approximately 1.3 million new accounts being reported as 'lost'. Table 2.12 shows the number and value of Lost Members Register accounts since 1999-2000.
Any superannuation not claimed when a member reaches age 65 or dies is transferred as unclaimed money to the state revenue office in which the fund is located, except in the Australian Capital Territory (ACT), where it is transferred to Australian government revenue. Should a member or beneficiary become aware of unclaimed superannuation to which they are entitled, they may claim their entitlements from the relevant state revenue office or, for funds located in the ACT, from the Commissioner of Taxation.
Our provision of advice model promotes timeliness and consistency by ensuring the advice we provide is based on precedents contained in our legislative database.
Improving the way we provide advice on tax laws continued to be a priority this year. As part of this, we changed the way we look at this aspect of our work to get a clear idea of both oral and written advice workloads.
Key changes to improve our capability to provide written advice included:
- reviewing our internal legal service, and strengthening our management of this area
- managing written advice across the organisation, rather than in separate areas, to use resources better and reduce the number of delayed cases
- planning new quality assurance processes to meet next year's higher performance measures
- extending performance reporting and employee time-recording systems to cover all areas and workloads involved in providing written advice
- starting to use the same computer system for all written advice work
- measuring the time it takes for each stage of responding to requests for advice, from the time we receive requests to when they are completed, and
- reviewing our private binding rulings and dispute processes to improve service and achieve productivity gains.
Capabilities are the skills, knowledge and attributes required for the range of jobs throughout the Tax Office. Defining capabilities helps us understand how efficient and effective we are, identify where we can improve, and systematically implement any improvements.
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We also improved our people management, training and individual skill assessment, developed legal and administrative practice statements, and designed internal and external online services from a user perspective.
Technical quality review
Technical advice
Telephone services
Shopfront access
Technical quality review
We continued to use a judgment model as one way of assessing the quality of technical advice we provide to the community. The model sets out the critical elements of a good decision, namely, understanding the question and providing a correct, well-reasoned and clearly communicated answer.
Panels, which include tax professionals from outside the Tax Office, examine a random sample of interpretive work twice a year. If all elements are satisfied, the case receives an 'A' rating. This rating is considered a measure of professional excellence, as it goes beyond just giving a technically correct answer. Work receives a 'pass' if, at a minimum, the question was understood and the decision was correct, that is, it was technically accurate.
We use the information from our technical reviews to help shape our improvement strategies. Tables 2.13 and 2.14 show the results of our last two technical quality reviews.
Technical advice
Public rulings
Public rulings express the Commissioner's view on the interpretation and application of the laws he administers. They are primarily aimed at tax professionals but also provide information to help the community understand their obligations and entitlements under those laws.
The National Tax Liaison Group monitors our public rulings program to ensure that the topics reflect market priorities. To ensure that public rulings are of a high quality, we issue draft versions of rulings for comment by the professions and the community.
Most public rulings are reviewed by a public rulings panel before they are issued as drafts and again before they are finalised. Public rulings panels involve top technical experts from within the Tax Office, and leading members of the legal and accounting professions, and academia.
This year we issued 332 public rulings, including 131 class rulings, 112 product rulings, and 89 rulings and determinations dealing with a range of income tax, international, GST and product grant and benefit issues. We also issued 58 draft rulings and determinations.
Some significant public rulings issued during the year included a GST ruling dealing with reduced credit acquisitions; a product grant and benefit ruling on entitlement to off-road credits for mining operations; and tax rulings dealing with foreign life assurance policies and personal services income.
Private rulings
Private rulings provide the Commissioner's view of the law, tailored to an individual's specific circumstances. They are legally binding on the Commissioner. Taxpayers can object to private ruling decisions and have them reviewed by the Administrative Appeals Tribunal or the courts.
This year we issued around 15,000 private rulings. The demand for these remained broadly the same as for last year. Objections against private rulings also remained the same, at around 1% of the total number issued.
We issued 88% of private rulings within 28 days of receiving all necessary information, or within a negotiated timeframe where the matter was complex, exceeding the service standard of 80%. We also continued to improve our processes to reduce the time taken to issue private rulings.
Telephone services
Numbers of calls delivered
We received more than 11.4 million telephone calls to 30 June 2004, slightly less than the number received last year. The decrease was partly due to the community's increasing familiarity with tax reforms, but also to the increased availability and uptake of online and self-help services.
Calls disconnecting before answer
While 442,347 phone calls were abandoned to 30 June 2004, we did reduce the call abandonment rate significantly - from 5.5% to 3.8%.
Service levels
We improved our service levels for both general callers and tax practitioners over last year, to 91.3% and 91.2% respectively. During the year we realised that concentrating on answering the bulk of calls quickly could lead to certain calls being missed or callers waiting an unacceptably long time to be answered. To prevent this, we implemented and monitored a new service target of 'All calls answered within 600 seconds'.
For general callers:
- 91.3% of calls were answered within 120 to 300 seconds (target of 83%)
- 99.7% of calls were answered within 600 seconds (target of 99.50%).
For tax practitioners:
- 91.2% of calls were answered within 120 seconds (target of 90%)
- 99.8% of calls were answered within 600 seconds (target of 99.50%)
- the average wait was 34.1 seconds (target of 30 seconds).
Quality assurance measures
Some 86% of telephone calls passed our quality assurance assessments. While this was below our target of 90%, over the long term our quality results are improving. The result was partly due to our employees being unfamiliar with new practices and processes (particularly more stringent proof of identity procedures), which caused some cases to fail our quality standards even though the correct answer may have been given.
We have developed a number of strategies to improve the quality of our telephone services, including:
- introducing a quality measure across the organisation to replace individual line measures. Quality has been fluctuating since we did this but overall quality is improving
- consistently measuring quality across all services, and
- using information gained from our quality assurance process for coaching and targeted learning and staff development.
Client contact management
The responsibility for forecasting and reporting, call management, resource deployment and technology has been integrated across all business and service lines so that we consistently apply solutions across the organisation.
We can also detail call loads in all our telephone sites, allowing us to forecast demand and analyse our ability to meet that demand across all sites. So if one delivery line is experiencing high demand and another has resources available, workload shifts can be made quickly.
In the past, forecast accuracy was 82%, but has improved to 89%. This represents a 39% improvement in the margin of error for forecasting and helps with our planning and scheduling.
Shopfront access
This year around 95.6% of taxpayers who visited one of our shopfronts were interviewed within 10 to 15 minutes (target of 88%). We are receiving fewer enquiries at our shopfronts, partly because we have improved access to information and services via other channels, especially providing for online tax file number registration.
Active compliance
The objectives of our active compliance program are to ensure that taxpayers pay the right amount of tax, and to positively influence their compliance behaviour. To meet these objectives, we continued to more closely tailor our activities to the differing circumstances and characteristics of taxpayers. For example, where business taxpayers required help in understanding their obligations, we provided direct assistance through new business and advisory visits. Where risks warranted other responses, we used a full range of field and office-based activities, including telephone calls, awareness letters, risk reviews and audits.
This year we continued to enhance our active compliance work. Almost 5,460 tax officers were involved in active compliance activities, while a further 3,100 officers were involved in debt and lodgment activities. Their work included:
- undertaking a range of field, telephone and letter activities, including:
- 118,000 field visits (which included new business and advisory visits, and GST and income tax audits of businesses)
- 222,000 telephone calls (which included verifying information provided on activity statements and claims under the energy grants credits scheme)
- 694,000 letters (which included verifying deduction claims for work-related and rental expenses)
- raising $6,368 million in tax ($4,902 million) and penalties and interest ($1,466 million)
- collecting approximately $3,379 million relating to tax, penalties and interest raised in 2003-04, and
- collecting approximately $1,337 million relating to tax, penalties and interest raised in years before 2003-04.
Table 2.15 shows the channels we used to achieve our active compliance results.
In addition to assessing tax and penalties, some of our active compliance activities have a future revenue effect, known as revenue protection. Active compliance activities conducted during 2003-04 'protected' an estimated $3,527 million in revenue by reducing carried forward losses and potential rental and work-related expense claims.
In ensuring that taxpayers comply with their tax obligations, it is vital that we have a skilled workforce ready to meet the challenges of new legislation, increased complexity of business dealings and emerging risks. To make sure that tax officers involved in active compliance work are equipped to meet these challenges, during the year we:
- improved the skills and knowledge of our field officers by:
- operating a program on accounting and auditing in partnership with the University of New South Wales to equip them with the skills to address risks associated with cash dealings and more complex business transactions
- training them in computer-assisted verification techniques
- providing them with comprehensive programs on tax technical issues, industry knowledge, work practices and systems
- trained our employees who deal with large business about the consolidation regime and formally tested their proficiency once they had completed the training
- assessed the capability of our active compliance workforce to deal with capital gains tax issues, and
- trialled a range of external learning, including risk-based auditing, audit report writing and tools for the beginning auditor.
This year we continued to focus on ensuring that we apply penalties appropriately, taking into account the relevant facts and circumstances.
For most of the year we generally applied penalties in GST cases only where there was evidence of reckless or intentional disregard of the law. This policy was introduced to assist in the introduction of the new revenue system and applied until April 2004.
As a result, we continued to apply penalties in a relatively low number of cases this year. Most of these penalties were in the micro-business segment, where cash economy and credit fraud cases are more prevalent.
There is no penalty regime in the excise collections laws and a new legislative framework was introduced for excise grants during 2003-04. In recognition of this, we imposed limited penalties for excise evasion, with only cases of blatant non-compliance attracting penalties.
We did not impose any penalties on taxpayers within the government segment because administrative penalties cannot be imposed on entities that share the immunity of the Crown. Also, under subsection 8AAB(3) of the Taxation Administration Act 1953, the general interest charge cannot be imposed on the Commonwealth and its authorities.
Our active compliance activities related to the superannuation surcharge had an educative rather than enforcement approach, with penalties imposed only where there were deliberate attempts to avoid obligations.
During 2002-03 we received the first year of additional funding under our Output Pricing Agreement with the government to:
- improve GST and income tax compliance in the large and small business segments
- protect income tax revenue in the individuals and small business segments
- protect revenue associated with the superannuation guarantee, and
- improve the regulation of self managed superannuation funds.
Against these specific Output Pricing Agreement commitments, we:
- met our target of collecting additional GST of $141 million, as part of a target of collecting additional tax of $741 million overall
- exceeded our integrated field program's target of collecting $121 million by employing field staff to focus on the income tax, fringe benefits tax, PAYG withholding and GST obligations of small businesses
- maintained our income tax compliance focus on large business by collecting more than our target of $915 million
- used extensive data matching to check that individual taxpayers correctly report interest, dividend and employment income
- increased the level of superannuation guarantee payments made directly to the Tax Office, primarily through data matching, and
- maintained our capability to regulate self managed superannuation funds by increasing contacts with funds and benchmarking compliance levels in the sector.
The following tables show active compliance results through a number of lenses. Table 2.16 shows active compliance results by revenue product and table 2.17 by market segment, while tables 2.18 to 2.23 show results by revenue product for each market segment. Figure 2.10 compares tax, penalties and interest raised in 2003-04 with that raised in 2002-03, while figure 2.11 compares collections for the two years.
Table 2.16: Active compliance results, by revenue product, 2003-04 (74 KB)
Table 2.17: Active compliance results, by market segment, 2003-04 (63 KB)
Table 2.18: Active compliance results, by individuals market segment, 2003-04 (41 KB)
The amounts in table 2.16 reflect that for most of the year we generally applied penalties in GST cases only where there was evidence of reckless or intentional disregard of the law. This policy was introduced to assist in the introduction of the new revenue system and applied until April 2004.
As a result, we continued to apply penalties in a relatively low number of cases this year. Most of these penalties were in the micro-business segment, where cash economy and credit fraud cases are more prevalent.
The amounts in tables 2.19 and 2.20 reflect that for most of the year we generally applied penalties in GST cases only where there was evidence of reckless or intentional disregard of the law. This policy was introduced to assist in the introduction of the new revenue system and applied until April 2004.
Table 2.19: Active compliance results, by micro-business market segment, 2003-04 (45 KB)
Table 2.20: Active compliance results, by small to medium enterprise market segment, 2003-04 (50 KB)
As a result, we continued to apply penalties in a relatively low number of cases this year. Most of these penalties were in the micro-business segment, where cash economy and credit fraud cases are more prevalent.
The amounts in table 2.21 reflect that for most of the year we generally applied penalties in GST cases only where there was evidence of reckless or intentional disregard of the law. This policy was introduced to assist in the introduction of the new revenue system and applied until April 2004.
Table 2.21: Active compliance results, by large business market segment, 2003-04 (46 KB)
As a result, we continued to apply penalties in a relatively low number of cases this year. Most of these penalties were in the micro-business segment, where cash economy and credit fraud cases are more prevalent.
Table 2.22: Active compliance results, by non-profit market segment, 2003-04 (45 KB)
Table 2.23: Active compliance results, by government market segment, 2003-04 (52 KB)
Superannuation guarantee
Superannuation contributions surcharge
Eligible termination payments
Super Co-contribution
Self managed superannuation funds
Superannuation guarantee
The superannuation guarantee is aimed at ensuring that as many Australian employees as possible have access to superannuation for their retirement.
If an employer does not contribute the statutory minimum level of superannuation for an eligible employee, we establish the employer's liability to pay the superannuation guarantee charge and collect this amount. We then pay the employee their superannuation entitlement. In the past, we did this by issuing employees with a voucher to the value of their entitlements and they presented the voucher to their superannuation fund.
From 2002-03 the statutory minimum rate of superannuation guarantee that employers must contribute is 9%.
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Under our new system we will directly transfer entitlements into an employee's nominated superannuation fund, rather than issue a voucher. System difficulties have delayed these direct transfers, but we did make some transfers in June 2004.
From 1 July 2003, employers are required to pay employees' superannuation obligations and notify employees of these payments each quarter. Transitional arrangements allowed employers until 28 April 2004 to pay the superannuation guarantee charge for the first two quarters and avoid nominal interest and administration fees.
Employers now have to pay the superannuation guarantee charge by the 28th day of the month following the end of each quarter.
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Employer superannuation contributions in the 2003 calendar year totalled $37.3 billion, an increase of 20.4% over the 2002 calendar year. This amount is taken from the quarterly reports issued by the Australian Prudential Regulation Authority. Since the June report is still to be issued, the amount reported is over a calendar year.
In terms of our compliance activities in 2003-04, the two main sources of our work were cases arising from data-matching projects and complaints lodged by employees about their employers.
As part of our data-matching work, we continued to match payment summary data with superannuation surcharge data to identify employers who were at risk of not meeting their superannuation guarantee obligations.
Through this work we found that 46,000 of Australia's 1.1 million employers were at risk of not complying with their superannuation guarantee obligations. Further audit work established that approximately 50% of this at-risk group, or around 23,000 of employers, were not fully meeting their obligations.
We have developed a better process to manage complaints from employees who believe their employer has not paid superannuation on their behalf. This involves examining various factors, including past interactions with us.
Our compliance program included:
- auditing over 16,000 employers where employees notified us that their employers had not paid their superannuation - but due to systems problems we finalised only 9,923 of these audits
- auditing a further 16,200 employers as part of the project matching payment summaries with superannuation surcharge data, with all audits finalised
- phoning or writing to 4,000 high-risk employers about their quarterly obligations. This was an over-estimation as we actually identified only 2,153 employers as high risk and contacted them all about their quarterly obligations before 28 April 2004, and
- providing speakers at 14 industry conferences and regular information on superannuation guarantee obligations in Tax Office and other publications.
Superannuation guarantee charge collections increased significantly this year as a result of increased audit activity in 2002-03. Superannuation guarantee charge liabilities raised totalled $380.8 million this year, an increase of 50.2% over last year.
During the year 326 employers were prosecuted and fined a total of $207,159 for failing to provide information to us about their superannuation guarantee responsibilities.
Table 2.24 shows superannuation guarantee compliance results from 1999-2000 to 2003-04.
Table 2.24: Superannuation guarantee compliance results, 1999-00 to 2003-04 (39 KB)
Bilateral agreements
Commencing 1 July 2004, the government entered into agreements with Croatia and Chile so that Australian employers do not have to provide double superannuation coverage for employees who are temporarily seconded to work in these countries. We established similar agreements with the United States, Portugal and the Netherlands in 2002-03.
Since October 2002 we have provided an online system that allows eligible applicants to obtain a certificate of coverage. Employees use the certificate to provide evidence to overseas authorities that they are covered by Australia's compulsory superannuation system.
Superannuation contributions surcharge
The superannuation contributions surcharge applies to high-income earners and is designed to make the superannuation system fairer for all Australians. It is levied under the Superannuation Contributions Tax (Assessment and Collection) Act 1997, the Superannuation Contributions Tax (Members of Constitutionally Protected Funds) Assessment and Collection Act 1997 and the Termination Payments Tax (Assessment and Collection) Act 1997.
Superannuation providers are required to report to us the value of contributions received. We then match contributions with income tax data to determine whether they exceeded the surcharge threshold. We issue assessments for terminations payments surcharge and superannuation contributions surcharge four times a year.
We used information from telephone and field staff and extensive data matching to identify and assess compliance risks in this area. In doing this we:
- pursued outstanding lodgments in relation to the surcharge, reasonable benefit limits and the Lost Members Register
- identified common reporting issues for superannuation funds and ran workshops and prepared educational material to help funds deal with these issues
- identified high-income earners who had not lodged income tax returns to force them to lodge returns, thus enabling surcharge and other assessments to be raised
- contacted taxpayers who had not declared reportable fringe benefits in their income tax returns, which meant they had not been detected as high-income earners for surcharge purposes, and
- compared eligible termination payments reported in individual tax returns with reasonable benefit limits to check that taxpayers were assessed correctly.
We issued 931,638 assessments this year, with surcharge net collections of $1,050 million. Table 2.25 shows superannuation surcharge net collections from 1999-00 to 2003-04.
Assessments were levied at rates of up to 15% of the value of surchargeable contributions of high-income earners. Legislation was passed during the year to reduce the maximum surcharge rates to 14.5% for 2003-04, 13.5% for 2004-05 and 12% for 2005-06.
We are currently addressing some issues affecting our ability to redirect or raise assessments in some circumstances. These are outlined in part 3.3.
Our compliance and other activities in relation to the superannuation surcharge included:
- completing detailed field audits (including surcharge verification) of 941 self managed superannuation funds
- actioning 87,744 surcharge exceptions that were generated where data did not meet specific parameters required by our system and therefore could not be automatically processed
Exceptions alert our employees to manually investigate why automatic processing did not occur.
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- contacting 5,273 taxpayers who had not declared reportable fringe benefits in their income tax returns and were thus not detected as high-income earners for surcharge purposes. As a result, we issued 4,767 taxpayers with surcharge assessments, raising surcharge revenue of around $2.485 million
- conducting 10 workshops with the large superannuation funds and administrators to help them with surcharge reporting
- providing assistance to constitutionally protected funds to correct surcharge reporting errors, and
- receiving 8,083 written enquiries about the surcharge and answering 47,029 telephone enquiries, with 6,752 calls being escalated to senior officers for more assistance.
Eligible termination payments
An eligible termination payment (ETP) is a lump sum paid by a superannuation fund or employer that may be eligible for special tax treatment. This concession reduces the amount of tax payable by an individual when they receive an ETP.
The payer of an ETP must report payments to the Tax Office. We need to know about these payments because there are limits on the amount of ETPs and other retirement payments that an individual can receive before paying higher taxes. These limits are called reasonable benefit limits.
Reasonable benefit limits are lifetime limits. We advise people when they are over their limit by issuing a reasonable benefit limits determination, which contains information they must use when completing their tax return. Payments over these limits are taxed at higher rates once an individual lodges their tax return.
During the year we undertook two compliance projects to check that:
- ETPs in excess of an individual's reasonable benefit limit were correctly declared in their tax return and taxed accordingly, and
- ETPs paid by employers and superannuation providers in 2002-03 were reported to us for reasonable benefit limit purposes.
Early indications show that individuals, employers and superannuation providers are experiencing some difficulties in meeting their obligations.
In 2004-05 we will work with these groups to help address their underlying problems as well as continue to analyse compliance in the area. We will then use this information to enhance our future compliance programs.
Super Co-contribution
The Super Co-contribution was introduced from 1 July 2003 to replace the tax offset for personal superannuation contributions. If a person is eligible and makes personal superannuation contributions, the government will match their contributions with a co-contribution up to certain limits. Generally, we must have received a person's tax return and contribution information from their fund before a co-contribution can be paid. All co-contributions relating to 2003-04 will be paid from 2004-05 onwards.
We undertook a communication campaign to let people know about the Super Co-contribution. The campaign included television commercials, print advertising and direct mail.
Self managed superannuation funds
A record 27,091 additional self managed superannuation funds were registered in 2003-04, bringing the total number of these funds to 296,339. On average, the number of funds grew by around 2,500 a month.
Given the continued growth in the number of self managed funds and the complexity of requirements for such funds, we continued to focus on education to help trustees understand and fulfil their obligations. Our activities included:
- implementing an ongoing trustee education program that included telephoning over 3,000 new trustees to check whether they were aware of their responsibilities, and posting almost 45,000 guides to trustees
- delivering 134 seminars on self managed funds, as well as including information about these funds in a range of general superannuation and business presentations
- updating or producing more than 136 publications, and
- responding to 94,587 telephone calls and 11,514 letters about self managed funds.
To help drive these educational efforts and explain our planned compliance activities, which were particularly focused on trustees and auditors, we worked with professional accounting, superannuation and financial planning bodies.
As a result of our compliance activities, we identified a number of characteristics that indicate when a fund may be at higher risk of not complying. From next year, we will use this information to identify self managed funds that are at risk of not complying with their obligations.
Our direct compliance activities included:
- initiating 1,626 full audits, 1,055 of which we completed, with 571 continuing
- investigating 10,331 funds for specific breaches of their income tax and/or regulatory obligations (including concerns about lodging returns), in addition to 672 cases we continued to investigate, and
- implementing a program to assess the competency of auditors of self managed funds, with reviews of 222 auditors completed and another 55 in progress.
Illegal early accessing of superannuation investments remained a concern, so we continued our work with the Australian Securities and Investments Commission to detect, stop and prosecute promoters of these schemes. We referred eight schemes to the commission this year. We also started investigating the activities of over 500 individuals who have gained early access to superannuation through these schemes.
Intelligence obtained from these compliance activities helps us tailor our approaches, ensuring that our compliance and communication activities are appropriately targeted. In 2004-05 we will be placing more emphasis on detecting and dealing with non-compliance.
The focus of our serious non-compliance work is on the more extreme aspects of revenue evasion and fraud (including excise evasion). Revenue evasion occurs where taxpayers deliberately refuse to comply with tax obligations, while fraud involves dishonestly obtaining (or attempting to obtain) a benefit by deception or other means.
We use intelligence analysis, forensic audit and investigation skills to address serious non-compliance, and also work closely with law enforcement agencies such as the Australian Federal Police and the Australian Crime Commission. Where appropriate, we refer briefs of evidence to the Commonwealth Director of Public Prosecutions (DPP) and, for excise matters, to the Australian Government Solicitor (AGS).
During the year we:
- completed 441 audits, which resulted in adjustments to tax liabilities of $137.91 million ($89.98 million in assessments and $47.93 million in penalties)
- finalised 685 investigations
- referred 32 matters to the Australian Federal Police, and
- referred 227 briefs of evidence to the Director of Public Prosecutions and 8 to the Australian Government Solicitor for prosecution action. This figure was incorrectly reported as 229 in our Compliance program 2004-05.
An audit involves action to determine the correct tax position of a person or entity.
An investigation involves action to examine if a person may have committed a criminal offence, and to gather supporting evidence.
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The courts dealt with 172 matters during the year, with 166 taxpayers being convicted of an offence. In 81 of these cases, the courts imposed prison sentences ranging from 14 days to 10 years. The courts also imposed reparation orders to the value of $2.60 million and fines of $355,313.
The Director of Public Prosecutions issued a letter of caution in one case that did not proceed to prosecution.
Excise investigations resulted in the seizure of 64,120 kilograms of tobacco leaf, 4,084 kilograms of cut tobacco, 75 tobacco plants, 14 motor vehicles and 18 tobacco-cutting machines. The seized tobacco had an excise duty value of approximately $18.75 million. Twenty-six penalty infringement notices amounting to $57,200 were also issued as an alternative to prosecution.
Table 2.26 summarises prosecution activity by revenue product, while table 2.27 shows prosecution activity by market segment.
Table 2.26: Prosecution activity, by revenue product, 2003-04 (42 KB)
Table 2.27: Prosecution activity, by market segment, 2003-04 (44 KB)
As part of our increased focus on serious non-compliance this year, we changed our senior management arrangements and reviewed our capabilities in this area. The recommendations of the review will continue to be implemented in 2004-05 and will make us more effective in dealing with more extreme revenue evasion and fraud. We are putting particular emphasis on working with other agencies to detect serious non-compliance.
Petroleum resource rent tax
Tax Agent Integrity Unit
Petroleum resource rent tax
The Petroleum Resource Rent Tax Assessment Act 1987 imposes a secondary tax on the profits, above a compounded assumed rate of return, from the recovery of petroleum in offshore areas under Australian government jurisdiction that are covered by the Petroleum (Submerged Lands) Act 1967.
This year the number of petroleum resource rent tax clients increased by 26% to 34, 25 of whom made payments under the Act. Collections of petroleum resource rent tax were $1,167.5 million, which is 31.8% less than last year. This was predominantly due to lower petroleum production and lower crude oil prices.
We amended a number of tax returns as a result of differing interpretations on complex technical issues, some of which are being resolved through legal proceedings.
We improved our compliance assurance processes following a review during the year. We also reviewed all petroleum resource rent tax returns as part of a broader risk assessment and made specific enquiries of seven clients.
Tax Agent Integrity Unit
Our Tax Agent Integrity Unit continued to focus on improving the integrity of tax professionals. If we believe an agent has breached the registration requirements, we refer them to a Tax Agents' Board for consideration. This year we referred 162 agents. Where fraud is detected, we refer an agent for prosecution, with five agents referred this year. Our work aimed at detecting individuals and entities who are not registered tax agents but prepare returns for a fee led to 16 referrals for prosecution, with eight resulting in actual prosecution. The results of our work are summarised in table 2.28.
Table 2.28: Results of work to detect tax agents operating illegally, 2002-03 to 2003-04 (36 KB)
The personal integrity of tax agents received more attention this year as we systematically detected and actioned instances where agents were not meeting their personal income tax and activity statement obligations. In 2004-05 we will also look at compliance with GST, PAYG and superannuation obligations.
As in previous years, we used a standard risk assessment framework to identify compliance risks across the markets and products we administer.
Our risk assessment framework is set out in our Corporate Management Practice Statement PS LA 2003/2.
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As part of that process, we use intelligence derived from our extensive operational involvement in the revenue system and analysis of changes in the economic, business and social environment in which we operate.
Applying that framework led to us identify priority areas for next year, including:
- an increased focus on superannuation
- an increased focus on capital gains tax
- an increased focus on income tax in the small to medium enterprise market, and
- improved efficiency of our operations in the micro-business market.
2.5 Output 1.1.5 - services to governments and agencies
Output 1.1.5 reflects the range of services the Tax Office provides to the Treasurer and Minister for Revenue and Assistant Treasurer, the Parliament and other Australian public sector agencies.
We help a range of other government agencies achieve their outcomes by providing services and/or information. The use of the revenue system for collecting community information and delivering the Australian Government's social policy objectives has increased the number and complexity of our relationships with other agencies. In addition, we work closely with law enforcement and regulatory agencies.
In providing services to government and agencies, we try to improve our effectiveness by focusing on better intelligence, environmental scanning, responsiveness and clear accountability. We are committed to providing positive assistance to the range of external scrutineers, including the Inspector-General of Taxation, the Commonwealth Ombudsman and the Auditor-General, through cooperative working relationships based on mutual respect.
The agencies we work with and the main reasons why we interact with these agencies are shown in table 2.29.
We provide a range of corporate and business support and data-matching services to the Child Support Agency through a memorandum of understanding and several service-level agreements. These services include lodgment enforcement, fraud prevention and control, payment processing, ancillary business, software/systems interfaces, people/payroll services, accommodation, security and technology services. This year we provided these services to the agreed standards.
As the Tax Office and Child Support Agency have now been separate organisations for some years, we are working with the agency to disengage it from all our corporate services, including information technology services. This will not diminish the necessary core business relationship between the two organisations.
The Tax Office and the Australian Bureau of Statistics (ABS) have a memorandum of understanding covering the transfer of information from the Tax Office to the ABS.
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 Tax Office and, where appropriate, ABS staff participate in certain Tax Office projects. In addition, a joint Tax Office - ABS Information Management Unit located within the Tax Office addresses issues that are strategically important to both organisations, for example, industry codes.
Under paragraph 16(4) of the Income Tax Assessment Act 1936, we provide the ABS with specific information about businesses, which is used for the purposes of the Census and Statistics Act. We also provide non-identifiable tax information, details of businesses included on the Australian Business Register and information from activity statements for statistical purposes. The secrecy provisions of ABS legislation mean that we cannot receive any information about individual people or businesses from the ABS.
The memorandum of understanding includes milestones that set standards for the timeliness and quality of data that we supply to the ABS. This year we did not meet the target accuracy rate of 80% for classifying non-employing businesses on the Australian Business Register at the Australian and New Zealand Standard Industrial Classification subdivision level, but the ABS is helping us improve our accuracy. We met all other agreed milestones.
Data matching involves compiling data from different sources and comparing it. Much of the data matching undertaken by agencies is subject to the Privacy Act 1988 and aims to identify people for further action or investigation. For example, records from different agencies are often compared to identify clients who are being paid benefits to which they are not entitled or taxpayers who are not paying the right amount of tax.
The Data-matching Program (Assistance and Tax) Act 1990 regulates the use of tax file numbers in comparing personal information held by us and agencies we work with, such as Centrelink. Personal information is provided by an agency and compared with information we hold to detect inappropriate payments made by that agency. Additionally, we may act on information received to issue an assessment or an amended assessment of tax, correct the personal identity data we hold about a taxpayer or investigate possible offences.
During 2003-04 Centrelink initiated four data-processing cycles, each of which was conducted in accordance with the relevant privacy guidelines. These four cycles involved approximately 32 million records.
Research and Development Tax Concession Program
We jointly administer the Research and Development Tax Concession Program with AusIndustry, which is part of the Department of Industry, Tourism and Resources.
The government uses the concession to encourage innovation in Australian companies and develop internationally competitive, export-oriented and innovative industries.
This year 5,000 companies registered to receive tax deductions totalling $7.9 billion for research and development expenditure. Around 1,550 of these were small companies that claimed a total of $570 million in deductions, representing $170 million in tax offsets.
Uptake of the new 175% premium research and development tax concession was also strong, with 500 companies claiming $330 million in additional deductions.
Pooled Development Funds Program
As with the Research and Development Tax Concession, our role is to support AusIndustry in administering the Pooled Development Funds Program. The objective of the Pooled Development Funds Act is to encourage the market to provide 'patient equity' for new or growing small to medium enterprises that find it difficult to raise capital.
Pooled development funds are restricted in what they can invest in, but have to pay only 15% tax on income from small and medium enterprises and 25% on bank interest. Unfranked dividends are exempt in the hands of the shareholder, and the shareholder can choose whether they want franked dividends to be exempt or taxable in their hands.
Venture capital
The venture capital measures, designed to facilitate non-resident investment in the Australian venture capital industry, are jointly administered with the Department of Industry, Tourism and Resources. These measures provide additional incentives to invest in relatively high-risk start-up and expanding businesses that may find it difficult to attract finance through existing commercial sources.
The Commissioner has discretionary powers under section 3EA of the Taxation Administration Act 1953 to release tax information to the Australian Security Intelligence Organisation (ASIO). He must be satisfied that the information provided is directly relevant to ASIO's functions under subsection 17(1) of the Australian Security Intelligence Organisation Act 1979.
This year we did not receive any requests for tax information from ASIO, nor did we voluntarily provide any tax information to them.
The Commissioner has discretionary powers under section 3E of the Taxation Administration Act 1953, which authorises the release of tax information to certain law enforcement agencies. These powers are available only when the information is relevant to establishing whether a serious offence has been or is being committed, or when the information is relevant to the making or proposed or possible making of a proceeds-of-crime order.
Information provided under the legislation can be used to investigate a serious offence but not as evidence in a court for non-tax prosecutions (except in relation to proceeds-of-crime order proceedings).
There were 63 requests for information from law enforcement agencies on hand at the beginning of 2003-04 (this was the 57 we had on hand at 30 June 2003 plus 6 requests received by 1 July 2003). We received 652 requests during the year and processed a total of 576 requests, leaving 139 cases on hand at 30 June 2004.
These cases involved the affairs of 3,370 individual and corporate entities. This represents a 60% increase in the number of entities involved over last year.
Tables 2.30 and 2.31 summarise the categories of offence and the requesting agencies for 2003-04.
We help maintain community confidence in the revenue system by providing business and systems support for the Tax Agents' Board in each state. The boards are constituted under the Income Tax Assessment Acts, with members appointed by the Minister for Revenue and Assistant Treasurer.
This year we provided business systems to support boards with their statutory responsibilities. This included around 20 tax officers carrying out each board's directions in relation to the registration of tax agents.
The secretariats of Tax Agents' Boards continued to focus on achieving nationally consistent work practices in order to use government resources more efficiently and better meet board needs. For example, the re-registering of tax agents who were registered before 1 November 1988 (approximately 12,000), which occurs every three years, was largely completed by a national team on behalf of each state board secretariat.
We have continued to increase our focus on improving the practice integrity of tax agents. Data analysis and intelligence gathering methodologies are used to detect agents who are not meeting their obligations. If we consider that an agent has breached the requirements for registration, we refer the matter to the Tax Agents' Board for consideration. This year 162 agents were referred to the board.
From 1 September 2003, new provisions were introduced into Schedule 1 of the Taxation Administration Act 1953 giving the Commissioner responsibility for determining applications for release from debt on the grounds of serious hardship. The new legislation includes PAYG and fringe benefits tax instalments.
Individuals can apply to the Commissioner for release from certain tax liabilities. They need to satisfy the Commissioner that paying the debt will cause serious hardship.
From 1 September 2003 to 30 June 2004 the Commissioner considered 1,541 applications valued at $27 million. Table 2.32 shows details of the Commissioner's decisions.
Before 1 September 2003 all taxpayers could apply to the Taxation Relief Board for release from their income and fringe benefits tax liabilities if paying those liabilities would cause them serious hardship. Applications were determined by the board, comprising delegates of the Commissioner of Taxation, the Secretary of the Department of Finance and Administration and the Chief Executive Officer of the Australian Customs Service.
From 1 July to 31 August 2003 the board sat 12 times and considered 394 applications valued at $ 7.28 million. Table 2.33 shows details of the board's decisions.
The demand for our ministerial and parliamentary services generally continued to reduce compared to previous years. This reduction, particularly in ministerial correspondence, may be partly attributed to moving the tax legislative and policy function to Treasury on 1 July 2002. There were also no large-scale correspondence campaigns during the year, such as the campaign for mass marketed schemes in 2001-02.
We received 1,636 pieces of ministerial correspondence during the year. The most significant subjects were employee benefit arrangements, mass marketed schemes, failure to lodge penalties, waiving of debt and interest, and superannuation guarantee contributions.
We substantially improved our performance for ministerial correspondence, achieving a turnaround of 96% to the Ministers' offices within the due date, compared to 74% in 2002-03.
We provided 174 new question time briefs to Ministers, which was fewer than in previous years, and 263 formal minutes. This was an increase on last year and may be partly due to using more formal processes recommended in the Australian National Audit Office's 2003 Better practice guide - managing parliamentary workflow.
The number of questions on notice we had to respond to decreased slightly to 100. Around 40% of these were follow-up questions to answers previously tabled.
The Australian Valuation Office provides government agencies with policy and strategic advice on valuations and related issues and operates on a full cost-recovery basis. For more information see part 4.1.
2.6 Delivering to government
Total revenue collected by the Tax Office exceeded the 2003 Federal Budget forecasts for 2003-04 by almost $8.8 billion, or 4.6%. Company tax accounted for the most significant component of the excess, with collections exceeding the forecast by $3.8 billion (11.7%). This was due to the flow-on effect from higher than expected company collections in 2002-03, stronger profitability in 2002-03 and continuing buoyant economic conditions throughout 2003-04.
The strength of the domestic economy was also evident in other categories. GST collections exceeded the budget forecast by about $1.5 billion (4.7%), based on strong domestic demand, and collections from other individuals were above forecasts by $1.2 billion, reflecting favourable conditions in the unincorporated business sector. PAYG withholding exceeded the budget forecast by $1.4 billion (1.6%), mainly due to stronger than expected growth in employment. Superannuation funds and superannuation surcharge, excise, fringe benefits tax and other indirect taxes also exceeded budget forecasts.
For a detailed comparison of actual receipts with budget forecasts, see part 2.3.
Tax payable relative to gross domestic product
Over time, growth in tax payable has exceeded nominal growth in gross domestic product (GDP), as shown in figure 2.12. The progressivity of the individual income tax system and enhanced compliance have contributed to this. For the 2000-01 income year, however, growth in tax payable was well below GDP growth, primarily reflecting the large cut in tax rates and transitional arrangements that occurred with the introduction of the new revenue system.
Total income declared compared to income earned
Although more volatile than GDP growth from year to year, gross income has grown at a rate similar to GDP, as shown in figure 2.13. The unusual pattern for superannuation funds reflects very strong growth of employer contributions, which coincided with robust growth of capital gains in the early years, followed by a significant decline in more recent years.
Despite favourable conditions, income returned for companies declined in 2002-03 due to the introduction of the consolidation regime. This regime permits companies in a fully owned group to provide consolidated details on their return forms, thereby eliminating the value of any intra-group transactions from this analysis. The decline in total gross income for 2002-03 is strongly influenced by the outcome for company income.
Effective income tax rates
Effective income tax rates have remained fairly stable over time, as shown in figure 2.14, although they are affected by changes to the revenue system and timing and measurement issues. Overall, there has been a slight increase in recent years despite some significant reductions in tax rates.
PAYG withholding collections compared to wage and employment movements
PAYG withholding collections have increased more quickly than compensation of employees, demonstrating the progressivity of the revenue system and enhanced compliance. The outcome for 2000-01 reflects the introduction of the new revenue system and the associated large cut in tax rates. Figure 2.15 shows PAYG withholding collections compared to wage and employment movements.
Transfers through various excise schemes have continued to increase, while transfers of funds to other agencies have grown overall in recent years despite some volatility in individual components. For more information see part 2.3 and part 2.4.
2.7 Maintaining community confidence
The Tax Office business intent is to optimise collections and make payments under the law in a way that instils community confidence that the system is operating effectively.
Instilling community confidence is an ongoing objective that aims to ensure we have a sustainable revenue collection system. This guides how we do our work, the choices we make in optimising collections under the law, the efficiency of our processes and the professionalism of our contact with the community.
A key component of community confidence is being open and fair in the way we treat people, within the framework set by the law. We tell the community how we will behave towards them and what they can expect from us.
The relationship we seek with the community is one based on mutual trust and respect. We aim to be professional and responsive, fair, open and accountable and take into account taxpayers' circumstances and previous compliance behaviour. Table 2.34 outlines what we undertake to do in our relationship with the community.
The key elements of the relationship we seek with the community are set out in the taxpayers' charter. The charter helps taxpayers understand their rights under the law, the service and other standards they can expect from us, their important tax obligations, and what they can do if they are not satisfied with our decisions, actions or service, or if they want to make a complaint.
As the charter sets out what the community can expect in their dealings with us, it is important to link relevant aspects of our performance to the charter principles. While some key performance measures are in this part of our annual report, others fall under other parts, so we have provided the relevant references in table 2.35.
A community perceptions survey is conducted each June to obtain a high-level measure of the general community's perceptions about the Tax Office, taxes and the revenue system. It is conducted by an independent consultant and core questions have been asked continuously since 1996, enabling us to monitor community trends over time. Community perceptions measured this way are expected to change slowly, although there were consistent improvements between 2002 and 2004. In June 2004 the survey was conducted as a standalone survey rather than as a part of a larger survey as in previous years.
The most significant changes in attitude over the last year are shown in table 2.36 and outlined below.
The positive changes from last year reflect our focus on educating taxpayers about their obligations while making their interactions with the system easier. This was particularly evident among those who prepare their own tax return, whose perceptions that we were doing a good job were predominantly stronger than other groups.
The only significant area of negative change in community perceptions related to knowledge of taxpayer rights. In 2004 significantly fewer taxpayers (22%) agreed that 'most taxpayers are aware of their rights when they have a problem with the Tax Office' compared to the previous year (30%). We are investigating the possible reasons for this result so that we can take appropriate action to see that taxpayers do know their rights.
Table 2.37 and figures 2.16 to 2.18 summarise some of the key findings over the last five years. The overall trends are positive for us, with most responses either maintaining or improving on last year's results. Overall, we maintained the general confidence of the community, with 65% of taxpayers agreeing that 'the Tax Office is doing a good job'.
In 2004-05 we will continue to refine the survey so that we monitor trends to increase the insights it provides.
Managing complaints
Our focus is on implementing the principles of the taxpayers' charter and good complaint management practices. We see complaints as a means to improve our processes where possible.
The intent of the charter is that areas causing complaints should be primarily responsible for resolving them. So the charter advises taxpayers to first try to have their complaint resolved by the area responsible for it. If they are still not satisfied, they should ring the complaints line on 13 28 70.
While our primary focus is to resolve complaints, we also need to address the underlying issues that led to the complaints. Where the underlying issues indicate problems with processes, systems or policies, we will work collaboratively with areas within the organisation to implement necessary improvements.
Complaints handled
The following information relates solely to complaints received through our advertised complaints line 13 28 70.
This year we received 9,861 complaint and feedback items, or about 40 each working day. The downward trend in the volume of complaints continued this year, with the introduction and greater awareness of products and services like the online portals for tax agents and businesses, and the relationship management program for agents.
Figure 2.19 shows the top five issues of concern to taxpayers in the complaints and feedback received during the year. Table 2.38 shows the breakdown of complaint and feedback items received for the year according to how they were managed, compared to last year.
The two main causes of complaint in the 'General information provided by the Tax Office' category were telephone access problems and unanswered correspondence. For more information about how we addressed these issues, see part 3.2.
The main concern taxpayers had in the 'Tax Office people' category was with the professional behaviour of tax officers. Complaints centred on the failure of officers to return telephone calls, impolite attitudes and failure to understand a taxpayer's circumstances. We have worked to improve this and there has been a reduction in these types of complaints.
'Processing' problems mainly related to delays in issuing income tax assessments and activity statements. Complaints in this category were mainly associated with those in the 'Refunds' category, where the main complaints were about delays in issuing income tax and GST refunds.
'Compliance with tax obligations' captured taxpayers' dissatisfaction with the complexity, cost and time required to meet their tax obligations, particularly with the reforms of recent years. Our easier, cheaper and more personalised program should mitigate these concerns.
Tax Office professionalism
Since 1998 we have externally evaluated our employees' performance in achieving the professional standards of service. These standards are set out in the taxpayers' charter and our agency agreements with employees. In December 2000 we started using a single survey to measure employee professionalism across all segments and lines. This new approach aims to have 70% or more of taxpayers being 'satisfied' or 'very satisfied' with the professionalism of our employees.
We engage an independent consultant to conduct and analyse the survey twice a year. The survey results are used to identify staff development and training needs, with the view to improving professionalism across the office. The two surveys conducted during the year canvassed a broader range of groups than in previous years and, as with last year, included those who had contacted us with complaints.
This year's results show an overall average of 79% of taxpayers being 'satisfied' or 'very satisfied' with the professionalism of our employees. This represents an increase of two percentage points over last year, indicating that we are maintaining a positive relationship with the community. Figure 2.20 shows the breakdown of this average, with an 81% satisfaction level by businesses and a 71% satisfaction level by individuals.
As in previous years, respondents were most satisfied that our employees respect taxpayers, but indicated that we need to be mindful of closing feedback loops after interactions with taxpayers.
We continued to improve our performance in interpreting and applying the laws we administer through a number of strategies aimed at promoting professional excellence. We made progress on several fronts.
On the infrastructure side, we continued to improve our systems and processes for technical decision making in order to improve quality, integrity and timeliness. We expanded the technical decision-making system, our case management, actioning, recording and reporting tool, to include more of our legal technical work. Our performance reporting system now provides a wide range of reporting options for all levels of management, enabling us to make quicker decisions, for example, in managing workloads.
We now have a website on our intranet that provides links to relevant policies, procedures and other instructions and makes key procedural guidelines easily accessible to employees and readily able to be modified and updated.
Building the capability of our technical decision-making workforce was also a high priority this year. Here we made good progress through our professional streams initiative, particularly in relation to the advice (law) and active compliance streams. We significantly improved the scoping of types of work in these streams, and job and capability profiling, to enable us to more accurately and comprehensively assess people's capability gaps and development needs.
This was complemented by an integrated curriculum and set of learning products for people doing the various types of work in these streams. We advanced our compliance development program, which contains core curriculums for advice, active compliance and taxpayer contact, as well as everyday skilling programs, specific bridging programs and the graduate program.
We put a great deal of effort into improving our assurance mechanisms so that we can be confident of the capability and performance of those tax officers involved in making technical decisions. As well as trialling different ways of assessing the capability of officers, we continued to refine and use the professional accreditation processes we established two years ago for officers involved in providing written binding advice. There are now 1,288 accredited officers.
We continued to assess the quality of our written interpretive decisions by conducting twice-yearly reviews of a sample of our work. These reviews involve members of the tax profession, external to the Tax Office.
The revised taxpayers' charter was released in November 2003.
The charter principles remain essentially unchanged as they are still relevant to the relationship we seek with the community. However, we have reworded some principles to clarify their meaning and strengthened the importance of community involvement in administering the revenue system.
In addition to reflecting changes to the law, we have updated the design and content based on feedback from the community and our employees and to reflect our new brand.
The Taxpayers' charter - what you need to know is now the primary document for taxpayers. It is shorter, addressing feedback from the community that the previous version was too long. We have retained the larger document, Taxpayers' charter - in detail, for taxpayers who want more detail.
We have updated key explanatory booklets but discontinued some of the more procedural booklets on topics such as lodging returns and paying because more tailored information is available to taxpayers when they need it. Examples include step-by-step information on our website, publications such as TaxPack, and activity statement instructions and specific correspondence.
The charter information on our website is much clearer to locate and follow. Although it covers the same information as the publications, it is arranged differently to take advantage of the features of web delivery. It is clearly signposted from the home page under the heading of 'Your rights', accessible from every other page, and linked to other relevant documents.
Implementation of the revised charter
Australian National Audit Office audit
Implementation of the revised charter
We know from research that most taxpayers are more receptive to information about their rights in dealing with us when they need it. This means that we need to tell taxpayers about their rights and obligations on the basis of what they need to know, when they need to know it. This is the most effective way to increase community confidence and empower taxpayers in their dealings with us.
To support this approach of 'living the charter' more in our everyday interactions with taxpayers, we:
- factor the application of the charter into all formal and on-the-job learning and development programs for our employees, through practical examples, case studies and discussion modules
- provide guidelines on how to apply the charter principles in our communication products - publications, correspondence, web and voice scripts
- factor charter principles into the development of our programs, initiatives and corporate assurance, and
- emphasise performance against the charter principles as well as against our service standards.
When writing a letter to a taxpayer, applying the charter to their current situation involves clearly explaining the purpose of the letter and what action the taxpayer needs to take; giving them reasonable time to obtain and supply any information we request from them; providing a contact name and number so they can obtain more information, ask any questions or clarify issues; and telling them of any review rights they have and how they can exercise them.
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We also apply key elements of the charter in our dealings with each other within the Tax Office.
Australian National Audit Office audit
The Australian National Audit Office is currently doing a performance audit of the taxpayers' charter, focusing on:
- the charter itself - whether we have effective systems and processes to review, maintain and update the charter
- our strategic commitment - whether we demonstrate our commitment to implement the charter by using it as a guide in our strategic management processes and when driving continuous improvement
- our business processes - whether the charter principles are integrated into our business processes, and
- our performance monitoring and reporting - whether we effectively monitor and report on our performance against the commitments in the charter.
The performance audit will be completed during 2004-05.
As noted in part 1, we increased all benchmarks for service standards between 2002-03 and 2003-04 by 2% to 5%. The one exception was complaints, which was already at 100%. Despite this increase, we equalled or exceeded annual benchmarks in 14 of the 18 service standards (see table 1.1) and, overall, achieved an index 1.33 on a benchmark of 1.0.
A focus on clearing backlogs and delayed cases was the primary reason for our slightly lower performance on paper requests for amendments and general correspondence compared to last year. While our performance against objections to private rulings improved significantly this year (up 14.9% from 2002-03), we failed the benchmark by 1.5%. Our performance in addressing complaints reached 99.3%, but failed to reach the benchmark of 100%. We will continue to make improvements in 2004-05.
Overall, our performance against service standards improved slightly against 2002-03 benchmarks.
In an effort to improve our annual service standards, this year we introduced several initiatives, including:
- reducing backlogs of correspondence relating to information management systems, which has involved improving data integrity; market testing letters sent to tax agents; commissioning research of taxpayer behaviour; and ensuring appropriate resources are available at peak times
- training extra people to deal with paper requests for amendments in high workload periods
- centralising some functions and providing increased resources where available
- re-assigning workloads to improve performance in recognised hot spots, such as paper requests for amendments, where significant redeployments occurred nationally in January and February 2004
- doing causal analysis to better understand changes in taxpayer behaviour that affect service standards, and
- continuing to focus on achieving a sustainable balance between finalising new cases within their appropriate benchmarks while also ensuring that aged cases are addressed.
As a result of reviewing our service standards this year, in 2004-05 we will:
- increase the benchmark for private rulings from 80% to 83% and for visit general enquiry service from 88% to 90%
- start indexing the Superannuation Holding Accounts Reserve (with a benchmark of 85% completed within 21 days), excise grants and rebates (92% completed in 14 days) and eRespond (90% answered in 3 days), and
eRespond is an automated system for responding to taxpayers' tax questions and their requests for information by email.
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- introduce a new standard, tax practitioners' premium telephone service, with a benchmark of 90% of telephone calls answered within two minutes.
We have implemented a Balanced Scorecard to measure how well we manage our relationship with tax agents. The scorecard was developed through consultation, including workshops with agents and other key stakeholders.
The scorecard identifies the core elements and factors critical to the success of our relationship with agents, including the different interests we need to balance.
What we have learnt from the scorecard results
We established baseline points against all measures, against which we can compare our performance in later years. This year we met performance targets for all critical success factors.
Key indicators that reflect our success in managing the relationship are as follows:
- Research and intelligence findings indicate increasing satisfaction with our employees, products and services, including telephone services. There has also been a strong uptake of the Tax Agent Portal.
- Our greater awareness of the critical role and importance of agents in the efficient operation of the revenue system. As a matter of course, we now involve agents when developing products and services. We have improved our support for agents by providing lodgment concessions and initiatives to reduce their workloads.
- A comprehensive research program we conducted has contributed to a well-developed view of the agent's world, which we continue to refine through market research. We have incorporated this research into relevant business planning.
- Technical quality reviews, complaint analysis and surveys have helped improve the quality of our tailored advice, products and services.
- Agents' level of satisfaction with our professionalism improved over the year. The relationship manager program has been well received by agents and evaluation of the program's resolution process indicates high levels of satisfaction.
- The relevance and value of our consultative processes were confirmed by an assessment of the benefits of the ATO Tax Practitioner Forum and regional forums, completed in November 2003.
Results for 2003-04 highlighted that next year we need to focus on:
- establishing inter-agency forums to discuss the administration of the revenue system in relation to agents
- providing better services for agents by improving the capabilities of our employees, in particular in relation to advice provided to tax agents by telephone, problem resolution and written correspondence
- continuing to build our capability in data matching and profiling to identify compliance risk cases among both agents and clients, and
- continuing to improve our systems to enable them to provide a whole-of-agent and whole-of-client view so that we can better coordinate our dealings with agents.
Characteristics of satisfaction with our overall service
Tax agents' perceptions of our services are monitored through quarterly market research undertaken by an external research organisation. The valuable feedback we receive from these surveys enables us to gauge how well we are managing our interactions with agents. Results show that we are continuing to improve our services to support agents in their crucial role in the revenue system.
Table 2.39 shows overall satisfaction levels from the last two surveys conducted in 2003-2004.
Table 2.39: Results of tax agent satisfaction surveys, 2003-04 (76 KB)
Tax agents agreed with the following statements (strongly or slightly).
2.8 Minimising compliance costs
The Tax Office framework for examining compliance costs operates at:
- a transactional level, where we focus on making transactions easier, cheaper and more personalised (for more information see part 3.2), and
- a compliance level, where we are working with the community to ensure that the requirements for evidencing compliance are as practical as possible.
In a dynamic business environment it is difficult for the administrators of any law, let alone one as expansive as tax law, to contemplate fully the practicality of administration for all types of taxpayers - from large international corporations to small home-based businesses. This is particularly the case given the past tendency towards more prescriptive or black letter law.
At times this can lead to potentially disproportionate costs because the detailed evidentiary requirements for compliance are out of step with what is reasonably practical for business. At other times, a failure to meet the formalities of compliance can have severe consequences, notwithstanding that there has been substantive compliance with the law.
This has raised the question of the extent to which the general administration powers in the law - which embody the good management rule - can be used to address these issues. Also relevant are our responsibilities under the Financial Management and Accountability Act 1997 to apply resources in an efficient, effective and ethical way. The general approach to interpreting the law reflected in section 15AA of the Acts Interpretation Act 1901 also needs to be considered.
Over the years we have provided guidance on achieving sensible outcomes, for example, in substantiating a range of expenses such as laundry and home office expenses. More recently, our practice statement on the treatment of low-cost assets was designed to enable businesses to substantively meet the requirements of the law without onerous costs.
But we believe that more can be done to reduce compliance costs and have recently formed a partnership with representatives of the National Tax Liaison Group to work on this. One of the group's sub-committees prioritises potential issues raised by practitioners and employees.
When looking at areas where we might use this approach we consider the following:
- the approach should be consistent with achieving the policy intent of the law
- the adopted approach should achieve substantive compliance at reduced cost
- as far as practical, the approach should reflect industry practice
- any resulting risks to revenue need to be appropriately managed
- material adverse impacts on third parties are to be avoided, and
- taxpayers should be able to choose whether to adopt the approach.
We achieve transparency by publishing agreed approaches through a series of practice statements and the feedback from the profession has been very positive. Our challenge is to maintain pace and momentum in providing practical guidance to the community.
To date, we have issued the following practice statements:
- PS LA 2003/8 - Taxation treatment of expenditure on low cost items for taxpayers carrying on a business
- PS LA 2004/1 (GA) - Lodgment opportunity for family trust and interposed entity election
- PS LA 2004/2 (GA) - Application of GST grouping rules to representatives of incapacitated entities
- PS LA 2004/3 (GA) - The valuation of goods taken from trading stock for private use by sole traders or partners in a partnership, and
- PS LA 2004/4 (GA) - Income tax and fringe benefits tax - rewards received under consumer loyalty programs.
Our database holds over 100 possible issues for consideration and we are looking at the following three issues recently endorsed by the National Tax Liaison Group:
- impact of the new foreign currency gains and losses measure on PAYG instalment income
- single notice of GST assessment for multiple tax periods, and
- allowing taxpayers to claim for work-related expenses on a 'reasonable basis'.
If issues raised through this process cannot be addressed administratively, we refer them to Treasury to consider whether a proposal for a legislative response is appropriate.
2.9 An efficient, adaptive Tax Office
In 2003-04 the Tax Office had an operating overspend of $1.66 million, which is equivalent to 0.07% of our overall budget. For an analysis of our financial performance see part 1.3.
We also made significant improvements in our planning and financial management areas. Our governance framework, which is based on clearly stated principles of good governance, describes the models, instruments, mechanisms and/or arrangements that:
- set our purpose
- assign roles and responsibilities
- enable us to deliver on this purpose, including planning processes, policy systems and delegations, and
- assure us that we are delivering, including through reporting processes, internal audit and external scrutineers.
Since publishing the framework in August 2003 we have done a great deal of work to embed the underpinning principles into our everyday work, with a particular focus on:
- developing our corporate management practice statements system, which provides direction, assistance and a single point of reference for employees on what practices to follow, and their obligations in performing corporate management duties
- using the certificate of assurance process, which enables us to demonstrate conformance with all relevant statutory and legislative requirements
- expanding our management arrangements so that we can flexibly respond to our dynamic environment and the demands placed on us, including the development of capability leader roles to focus on efficiency and delivering results, and
- streamlining our corporate committee functions so that we focus on the important issues.
Throughout the year we worked to develop a comprehensive corporate management practice statements system to make sure our planning process addresses new priorities and challenges and maintains our everyday work. This process is underpinned by a financial modelling capability and focuses on productivity improvements.
We have also been identifying improvements to our risk management framework that will lead to a more effective risk management policy and process across the organisation.
2.10 Our social justice and equity programs
The Tax Office's main avenue of reporting on our access and equity achievements is through an annual report to the Department of Immigration and Multicultural and Indigenous Affairs (DIMIA). DIMIA collates such information from all Australian Public Service agencies in its Access and equity annual report, which reports on each agency's achievements in providing services to people from culturally and linguistically diverse backgrounds.
We are a large agency with a diverse taxpayer base requiring access to a range of tax services, information and assistance.
We take seriously the principles of access, equity, communication, responsiveness and effectiveness for audiences from culturally and linguistically diverse backgrounds. Accordingly, we continually seek to gauge and improve our administrative processes and communication activities to meet the needs of these audiences.
During the year we:
- attended major cultural events and provided information
- provided tax return materials in print, cassette tape and electronic format
- maintained access to tax-related websites, including an other language section for translated information
- introduced access to our website for vision-impaired people
- maintained a number of telephone information services that address needs of specific groups in the community, for example, people from a non-English speaking background and hearing-impaired people
- produced information and educational publications and materials in up to 14 languages
- delivered seminars and workshops in various languages and in a wide range of locations, including regional areas
- published public rulings and other interpretive products
- worked with the community to provide Tax Help to low-income taxpayers from 95 different language groups
- placed articles and media releases in ethnic and Indigenous press and radio outlets
- continued to use either qualified tax officers or translation and interpreting services to help non-English speaking taxpayers
- conducted school seminars, and
- conducted regular information programs in a number of languages on 13 radio stations nationally and on television.
2.11 Our purchaser/ provider arrangements
Department of Family and Community Services
The Tax Office provided services to the Department of Family and Community Services for the Family Assistance Office and the Child Support Agency.
The Family Assistance Office administers the family tax benefit, which is a joint venture between the Tax Office, Centrelink and the Health Insurance Commission, with the Department of Family and Community Services having overall responsibility.
Our employees answer enquiries about the family tax benefit and child care benefit and payment options. They also help with completing and lodging claim forms and provide specialised assistance to tax practitioners.
We also work to improve the interactions that claimants and tax practitioners have with the family tax benefit system, and work with the other Family Assistance Office partners towards an effective and efficient operation.
This year there was $243.5 million in family tax benefit entitlement claims through the revenue system to 99,075 claimants. There were also 220,834 top-ups (on reconciliation) totalling $257.4 million. We also verified 3,691,758 incomes for Centrelink.
Department of Health and Ageing
We provided services to the Department of Health and Ageing under a service-level agreement that supports the administration of the 30% private health insurance rebate. This agreement, which was to have expired on 30 June 2004, has been extended by agreement between us and the Department of Health and Ageing, pending its renewal in the near future.
The rebate can be claimed in one of three ways:
- through reduced health insurance premiums
- as a direct cash payment from Medicare offices, or
- as a refundable tax offset through income tax returns.
We are responsible for claims made through income tax returns and also provide data-matching services to detect inappropriate claims, regardless of how they are accessed. During 2003-04 we processed 331,028 claims relating to the year ended 30 June 2003, with the value of the claims totalling $156 million.
Part 3 Highlights and challenges
Download Part 3 in PDF format (614 KB)
Part 3 describes some of our significant achievements as well as many of the challenges we faced during the year. It covers how we are working with taxpayers to make it easier for them to comply, and our compliance program for 2003-04. We have included a number of case studies that will be of interest to a wide cross-section of readers.
3.1 The art of tax administration
The fundamentals of tax administration in Australia are embedded in our system of self-assessment, under which individuals and businesses collect and prepare the information they need to claim their entitlements and meet their tax obligations.
Adopting a self-assessment system reflects the judgment that a system based on reviewing every transaction or event that may have a tax consequence would be too intrusive, time-consuming and costly for everyone involved. Equally, it reflects the reality that effective tax administration is not about collecting every last dollar payable under our tax laws. Rather, it is about optimising collections under those laws in a way that instils community confidence that the system is operating properly.
So tax administration is about managing risk, obtaining the broadest possible influence from our actions, and being able to respond quickly to changing circumstances. But it is also about innovation and cooperation in understanding the taxpaying community, recognising differences and devising approaches accordingly.
The reasoning behind self-assessment is that we can best achieve our business intent with the resources we have by:
- supporting people to do the right thing, and
- concentrating on cases where there is a greater risk of people not doing the right thing, including identifying those operating outside the system.
In November 2003 the Treasurer announced a review of aspects of income tax self-assessment. The review is examining the following aspects of the current system:
- the level of reliance taxpayers can and should be able to place on our advice
- the proper timeframe for amending assessments
- the appropriateness of the length of audits
- the circumstances in which we should examine tax returns earlier
- whether taxpayers are adequately protected from unreasonable delays in enforcing the tax law, and
- the operation of the general interest charge.
We assisted a team in Treasury with the review by providing data about administering the revenue system.
3.2 Making it easier to comply
In its second year of operation, our easier, cheaper and more personalised program continued to focus on making it easier for the community to self-assess their tax obligations.
The program, which became fully operational this year, complements our compliance program. This arrangement recognises the importance of effectively meeting taxpayer needs, while supporting the revenue system. Our work seeks to build open and constructive relationships with the community based on trust, understanding and dialogue.
A continuing and central part of our work in the easier, cheaper and more personalised program is listening to the community. We listen to the tax experiences of a range of people - families, people in rural areas, youth, older Australians, accountants, tax practitioners, software developers and small business operators, among others. We use this feedback in developing, testing and evaluating new products and services.
Listening to the community is not a finite project but a way of continuing to relate to the community in a way that informs the way we work - keeping taxpayers in mind and trying to make their interactions with us easier, cheaper and more personalised.
What we heard in our first year of operation was published in Making it easier to comply, which we released in July 2003. The booklet also details how we are responding to what we heard and how we are working with the community to design products and services that meet their needs. Our listening and co-design approach led to the development of the three-year program outlined in the booklet.
Even though listening and co-designing are intensive activities requiring significant time and resources, we were able to develop a number of improvements and innovations in 2003-04 that are already helping taxpayers and tax agents.
We seek to build open and constructive relationships with the community.
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Taxpayers and tax agents told us they wanted better, faster telephone services; access to more account information online; more certainty in their dealings with us; and letters that are easier to understand and more personalised. They also wanted us to know who they were and their history with us when they telephoned.
To begin to address these needs, we initiated several projects and realigned others. These projects include improved telephone services, easier to understand letters, improvements to the Tax Agent Portal and the launch of a new Business Portal.
Less obvious and longer term improvements we are making include purchasing new technology and replacing many of our current computer systems. More integrated systems will allow us to develop a more complete picture of taxpayers and their needs.
While improved technology is a feature of the easier, cheaper and more personalised program, it is the more intangible features of our work - such as building community confidence and helping people understand their tax obligations - that are the real achievements of this program.
What we have done for tax agents
What we have done for business
What we have done for individuals
What we have done for taxpayers generally
What we have done for tax agents
Tax agent access to waiting times
Tax agents can now check waiting times and call pressure points online before phoning us. This service was introduced in January 2004 and helps support the single premium telephone service introduced for agents in October 2002.
Voice call-back pilot
We also trialled voice call-backs for tax agents this year. Throughout the pilot, agents who called selected queues were given the option of waiting on hold or requesting a call-back when the next tax officer became available. Call-backs were offered once queue waiting times exceeded one minute. Natural language speech recognition and voice recording technology were used to capture the caller's details and play them back to the tax officer, who then contacted the caller. Callers did not lose their place in the queue.
We received favourable feedback from agents involved in the trial. They recommended that the service could be improved by callers being notified of an estimated queue waiting time, and being allowed to nominate a preferred call-back time. We will conduct another pilot next year, incorporating a 'notification of waiting times' function into the call-back option.
Improved Tax Agent Portal
In response to ongoing feedback from tax agents, we made substantial enhancements to the Tax Agent Portal - which was launched in October 2002.
The Tax Agent Portal is a secure website that allows tax agents to access a range of information and services online.
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The portal aims to improve agents' experience when using our website by ensuring they can easily access the information they need in a convenient, efficient and more personalised way.
In Making it easier to comply, we told agents we would deliver a number of improvements over three years. Improvements delivered during 2003-04 give agents the ability to:
- view client income tax, fringe benefits tax, activity statement and instalment accounts, with the ability to look at more detailed information
- transfer account balances between the multiple accounts of a client
- view the details of previously lodged activity statements and prepare and lodge activity statements for clients
- request refunds and transfers
- view a full directory of clients
- view current year lodgment status and due dates for clients
- view more detailed history of portal activity, including transactions undertaken and changes to accounts, and
- further personalise the website and receive alerts on new products, services and changes.
The ability to request refunds of credit balances and receive real-time responses if we are unable to process refund requests was originally due in June but has been rescheduled to August 2004. Other improvements include an improved lodgment deferral form and an update facility for some client registration details.
Tax agents have responded to the improvements we made to the portal this year by increasing their use of the portal. Surveys of agents' use of the portal this year, undertaken in December 2003, April 2004 and July 2004, indicated:
- a significant increase in daily use of the portal (up from 53% in December 2003 to 69% in July 2004)
- a significant increase in the number of agents nominating the portal in their top three preferred channels (up from 60% in December 2003 to 81% in July 2004), and
- an increase in those who strongly agree that the portal has helped their practice (up from 70% in December 2003 to 86% in July 2004), with the total who agree now at 98% (July 2004).
From 1 July 2003 until the end of June 2004, 1,044,983 reports were downloaded.
Based on their use of the portal this year, 82% of agents reported that they had experienced either a decrease in costs (43%) or no change (39%) as a direct result of using the portal.
Case study: I think the portal is just great!
In November 2003 our work in developing the Tax Agent Portal was rewarded when we won the prestigious Queensland Public Sector Award.
The yearly award, presented by CPA Australia - Queensland division, recognises innovation, accountability and transparency in the public sector.
At the award presentation, Queensland President of CPA Australia, David Baldwin, said the Public Sector Awards recognise the important work of members in this key sector.
'Tonight's winner and other award finalists will provide valuable models and examples for other public sector CPAs to follow', he said.
The Tax Agent Portal is a secure website that allows tax agents to access a range of information and services online. The site is designed to provide agents with convenient access to view client information, download reports, submit online forms, and send messages to the Tax Office.
We designed the Tax Agent Portal in response to a strong desire from the accounting, business and finance sectors to be able to access an online self-service library of our products, services, tools and information about the revenue system.
Assistant Commissioner Bill Powell said the award demonstrated the great success of the Tax Agent Portal over the past 12 months.
'On the presentation night a young man who works in a local tax agent firm walked up to me and said, "I want to tell you that I think the portal is just great!"
'In some ways I got a bigger buzz from hearing him say that than accepting the award', Bill said.
What we have done for business
Notification of waiting times
Callers are now advised of the estimated waiting time (to the nearest minute) for their call to be answered if a call to our major telephone services cannot be answered within our preferred standard of two minutes. Callers have been notified of waiting times since 1 April 2004.
New business service
We piloted two specialised support services for taxpayers who are new to business. The first involved developing and implementing an interactive voice recognition option that directed this group to appropriately skilled customer service representatives, who could provide specific information for those starting up a new business.
The second service involved providing case management to those new to business. A more personalised service was achieved by offering taxpayers contact with the same group of customer service representatives over a number of quarterly periods.
The aim of both services is to enhance education and establish voluntary compliance behaviour early.
Specialised services for industry groups
To assess whether we should provide specialised telephone services for particular industries, we trialled an industry approach for the building and construction and primary production industries. The project was co-designed with industry representatives.
Survey results from small businesses that used the pilot indicated their level of satisfaction with the service provided by the industry teams was not very different from their satisfaction with the service provided by other teams in the business contact centre. We have extended the pilot for a further six months to find out how we might improve the service for particular industries.
New Business Portal
Building on the success of the Tax Agent Portal and the demands from business for similar access, Australian businesses were given the option of managing their affairs online when the Commissioner launched the Business Portal in March 2004.
The portal is a new part of our website that gives businesses free, secure online access to their business details. Businesses can use the portal to lodge their activity statements online, check accounts, update registration details and send secure messages to us.
The portal was co-designed with users and 400 businesses participated in a trial of the portal in September 2003. Feedback from those involved in the trial resulted in enhancements to the portal in January 2004 before we made it available to the wider community.
To access the portal, businesses must first install a free Tax Office digital certificate, one of the most advanced security measures available for online transactions. We responded to business concerns about the installation of digital certificates by making it considerably easier for them to install a certificate.
Awareness of the portal rose from 2% before it was launched to 25% immediately after it was launched. By the end of June 2004 there were more than 15,000 registered Business Portal users. We are using feedback from these users to further enhance the portal.
Case study: Business Portal cuts work time by hours
Following the successful launch of the Business Portal in Brisbane on 17 March 2004, small business owners Debi Beever and Graham Bird have been telling businesses across Australia about the benefits of the portal.
Debi is one of 400 small business operators who participated in trials of the portal. Debi said her business, Willard Estate Logistics, is online all the time, and using the Business Portal has cut her work time by hours.
'All accounts are done using the Tax Office's e-Record product', she said.
'I just press a button for the calculations, then log into the Business Portal and enter the information. It's just like sending an email.'
Graeme Bird also participated in the Business Portal trial. As a mortgage broker, Graeme is often out of his office visiting clients.
His job means he needs to check his clients' needs against all the available mortgage products. To do this, Graeme takes his laptop with him when he's on the road.
The Business Portal suits Graeme's way of doing business.
'Not only is the portal a simple process to use which works well, I can access it with my laptop when I'm on the road', he said.
Commissioner Michael Carmody launched the portal to 50 guests, including portal trial participants, Suncorp Metway Ltd and Comalco Aluminium Ltd, and other key business and industry stakeholders.
ATO Online Assistant Commissioner Robert Drummond said he was delighted with the attendance at the launch and hoped guests would begin promoting the portal in the business community.
'We've shown our guests the benefits the Business Portal can provide to their industry groups', he said.
'We now need these people to go back to their particular industry and spread the word. We've already had a few people like the Real Estate Institute put information about the portal in their industry newsletters', he said.
What we have done for individuals
While tax agents and businesses have been an important focus of our efforts, we have also developed a number of initiatives aimed at making it easier for individual taxpayers to comply with their tax obligations. Our products are developed around user-centred design processes and are tested or piloted with various taxpayers before being released.
Personal tax record keeper
Through a pilot project with users, we have been developing the Personal Tax Record Keeper. This product will help individual taxpayers with medium complexity tax affairs, who are not in business, to keep track of their income, deductions and assets during the year. It allows them to keep an electronic record of their income, deductions and asset disposals for the year. This means that when it is time to do their tax return, they will have a complete summary of their tax information to use with TaxPack or e-tax, or to take to their tax agent.
The Personal Tax Record Keeper:
- records common types of income and deductions
- records details of assets purchased and sold, to help with capital gains tax
- rolls over some information from year to year, for example, unsold assets, decline in value information, and
- allows the user to print a summary of their records or export the information into e-tax.
We conducted the first pilot of the software (then called the Easy Tax Organiser) with approximately 80 people from mid-August 2003. A follow-up evaluation survey showed that 75% of users were satisfied or very satisfied with the product and 82% indicated they would probably or definitely use it. We incorporated feedback from the first pilot into a new version, which is being piloted in South Australia with over 1,700 people. We will evaluate the new version in October 2004 and then decide on its long-term viability.
The Personal Tax Record Keeper would complement the record keeping information available on our website at www.ato.gov.au, helping taxpayers understand the records they must keep.
Tax services in shopping centres
We are committed to providing tax services where they are needed most, in an accessible and friendly way. As shopping centres are a communal hub, it is appropriate to use these locations to effectively maximise our interactions with local communities.
We trialled this alternative service delivery program at 15 shopping centres around the country. It was promoted through advertisements in suburban newspapers, posters and public announcements in shopping centres. The program was provided in two to three-week blocks, with the first commencing during mid-July and August 2003, and was re-opened in some sites in late September and early October 2003.
This alternative way of delivering services allows taxpayers to discuss general tax issues face-toface with tax officers, as well as view demonstrations of e-tax and lodge tax returns and other forms such as tax file number applications.
The service means that a number of products are available to raise awareness of tax issues at a time when taxpayers' interest is maximised - after payment summaries are issued in mid-July and towards the end of tax time in October.
A short tax return
Community feedback about the size and complexity of TaxPack led to the development of the short tax return and accompanying guide. It contains only 50 questions, whereas the standard individual return (and supplement) has more than 120 questions.
The short return does not cover the more complex and less used areas such as capital gains tax, rental property income, eligible termination payments, capital allowances (depreciation) or business income.
Our testing showed that taxpayers simply want to pick up their income tax return and start filling it in. They do not want to read the accompanying instructions - and many don't. Yet for the short return to be successful, it is vital that only people eligible to use it do so. This is a focus for our pilot study.
Our evaluation showed that taxpayers were impressed with the telephone lodgment service and the short tax return, finding them to be faster and easier.
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Telephone lodgment service
In 2003 we invited 625,316 taxpayers from South Australia, Western Australia, Victoria and Tasmania who lodged a paper income tax return in 2002 to lodge using a shorter four-page tax return (rather than the standard eight-page tax return). They were also invited to use the telephone lodgment service for their 2003 return. This service allows taxpayers to lodge income tax returns by telephone using speech recognition technology.
During the year we received approximately 118,000 telephone lodgments. We evaluated the service at the end of the 2003 lodgment season and found that there was an overall shift from paper to electronic lodgment. Findings from the evaluation also helped us improve the service, including reducing the call time taken to lodge.
Our telephone lodgment service also allows taxpayers to lodge applications for refund of franking credits or for baby bonus claims.
Case study: making it easier for young Australians
We are not speaking the right language to young Australians, according to the latest research from our Listening to the Community project team who met with community groups across the country last year. The youth audience has been defined as people under 25.
Young Australians are a crucial audience for us because they are the next generation of taxpayers and their lifelong attitudes to tax are likely to be formed from their early tax experiences. To make sure they have a positive, cooperative attitude towards their tax obligations, we need to see that their early experiences are positive.
We ran a co-design workshop with young people in June 2003. Those attending the workshop indicated a strong preference for using the web as their source of information. But they also said that our website didn't meet their needs. Not only did they have difficulty locating the information they wanted, they found it hard to understand once they'd found it.
As a result, we established a youth view team in late 2003 to develop a youth section on our website that would give this audience the information they wanted in a way they could understand. This would help make them aware of their obligations and responsibilities.
This concept of tailoring to a specific audience is part of our efforts to make the tax experience easier, cheaper and more personalised.
The team developed a cleaner look and simpler navigation style to make it easier for young people to find their information.
They wrote some introductory easy-to-understand material that could be linked to more detailed information. This was in response to the message from the workshop that young people wanted short, instructive information supported by examples or scenarios, with links to more detail to allow further investigation.
We tested an early prototype of the youth section with young people in Hobart in March 2004. They were very positive, saying they liked the language and that the scenarios made it very clear what they had to do in common situations. They were also positive about the navigation and provided useful feedback that enabled the team to do further fine tuning.
We plan to do final user testing in Melbourne in August 2004, which will include some participants from the original workshop. This will clearly demonstrate that we are listening to their suggestions and are committed to improving their tax experience.
What we have done for taxpayers generally
New client relationship management system
As taxpayers told us they wanted a faster, more personalised response to their enquiries, we bought a new client relationship management system. The new system consolidates the information we have about a taxpayer and provides access to their history of interactions with us. This should reduce the time and number of calls it takes to resolve issues raised by taxpayers when we start to implement the system in 2004-05.
Letter improvement project
We generate millions of letters a year, many of them generic letters about tax obligations. However, taxpayers told us they wanted more concise, relevant and personalised explanations of their obligations - leading us to review the wording in our letters. The continuing review of our correspondence means that our letters are now easier to understand. This has led to more focused enquiries from taxpayers, enabling us to provide the tailored services they require.
We reviewed the wording of more than 330 letter types this year, compared with 117 last year. The number of letters generated from these improved letter types over both years accounts for more than a third of our total annual output of 55 million letters.
Working in partnership with tax professionals
The National Tax Liaison Group, chaired by the Commissioner, is the peak consultative forum through which we discuss and resolve tax administration issues with tax professionals. All the major accounting and legal professional associations are represented, including the Corporate Tax Association, as well as a representative from Treasury. The group has a strategic focus and is supported by sub-committees that focus on significant, complex or specific areas of tax administration. This year the group met four times and proved to be a very successful means of exchanging information and views. It was instrumental in resolving a number of significant issues about administration of the revenue system.
The minutes of National Tax Liaison Group (and sub-committee) meetings are published on our website as well as by the representative bodies.
Sharing information with others
Taxpayers have told us they want better online services, including the direct exchange of information between our computer systems and theirs. Achieving this involves significant technological development, consideration of issues such as privacy, security and access to information, as well as consulting on what features would best meet taxpayer needs.
To address these issues our interface standard project was successfully completed in March 2004 with the development of the Tax Office interface standard handbook. The standard provides a framework for exchanging information between computer systems - between our internal systems and also with other systems outside the Tax Office.
The first implementation of this standard allows taxpayers to use the Business Portal to take an activity statement directly from their accounting package and lodge it, receiving real-time feedback about whether their activity statement was lodged successfully. Taxpayers will soon be able to lodge directly through their accounting systems, also receiving real-time feedback. Future releases will enable dialogue between the taxpayer's software and the Tax Office to help complete the activity statement.
Since starting to develop the standard, we have been working with other tax administrations, industry representatives and standards bodies, software developers, the Australian Government Information Management Office and other Australian government agencies and state revenue offices.
The aim is to better understand our common information-sharing requirements and combine our resources, skills and knowledge to create a more 'interoperable' environment. Deriving information from many sources will help reduce the cost of compliance and deliver other benefits to taxpayers.
As these developments will allow information to be exchanged more readily, it is critical that taxpayers' privacy, secrecy and freedom of information rights are protected. This is done by us and other agencies involved analysing each case.
As a result of the project, we are seen as one of the leading organisations in this area and our advice and knowledge are regularly sought, both locally and internationally. This is the beginning of a journey that involves working with industry, clients and other agencies to continue to build opportunities and capabilities to better serve taxpayers and their information needs.
Case study: learning from lumberjacks in Tumut
How long does it take to cut down a 30-metre high tree and strip it of foliage?
Tax officers Cheryl Weeks and Scott Wearne were surprised to discover it takes just 30 seconds. They visited Tumut State Forest in New South Wales to conduct research for a public ruling.
Scott said they visited Tumut to find out how the forestry industry operates, and the problems it faces when claiming under the energy grants credits scheme.
Cheryl is writing a public ruling to make it easier for the forestry industry to claim under the scheme.
'The ruling will include certain rules for claiming under the forestry activity', she said.
'If we hear first-hand from the industry what makes things difficult for them in the claiming process, we can help to address these problems in the ruling.'
Phil Townsend, from the National Association of Forest Industries, accompanied Cheryl and Scott on their visit to Tumut, where they met with everyone from forestry workers to haulage personnel and mill managers.
'We spoke to various operators about some of the problems the industry has when making a claim', Cheryl said.
'There were some real issues with the definitions of public and private roads for claiming purposes.'
Under current arrangements, operators can claim a grant only for fuel used on private roads.
'Many forest roads are regarded as public roads because they are used by the locals to access farms and forests, but the industry cannot claim for trips made on those roads', she said.
'This happens even though the industry pays for building and maintaining the roads. With up to half of all forestry industry workers employed on road maintenance, they feel these roads should be treated as private roads for fuel grant purposes.'
The draft ruling was published in May 2004 for public consultation. Cheryl reported that the overall feedback from the forestry industry has been very positive, with the response in relation to public roads being that the ruling is 'fair and logical'. Cheryl is putting the final touches to the ruling and expects it to be formally released in October 2004.
3.3 Our 2003-04 compliance program
Under a self-assessment system, taxpayers must be confident that we will provide them with the information they need to comply with the tax laws and that we will act fairly and treat them according to their individual circumstances. It is equally critical that we check to detect and address non-compliance. So our compliance program must appropriately balance education, help and checking.
Approximately 13,620 people, or over half of our employees, do work relating to compliance, which involves a budget of $1.1 billion.
In addressing compliance risks, we employ a whole range of activities, from advice and support to active compliance. The latter includes programs to prevent, deter and detect non-compliant behaviour to ensure taxpayers meet their obligations.
We have about 5,060 employees providing advice and assistance, including marketing and education. This year it included supporting taxpayers by providing targeted publications, answering more than 11.4 million phone calls and providing 15,000 private binding rulings.
Our enforcement efforts aim to prevent, deter and detect non-compliant behaviour. About 5,460 of our employees are mainly involved in verifying the information we receive from taxpayers. This work yielded $4.7 billion in direct collections this year. A further 3,100 work on debt and lodgment.
As our compliance activities have a major impact, we have taken the view that the community should be able to see what we are doing and have enough information to judge whether our work is appropriate and cost-effective. Making our compliance work transparent allows the community to understand what we are doing and why.
In what we believe is a world first in tax administration, we first published our compliance program in 2002. The second one was published in 2003, including results of the previous year's program. The Compliance program 2003-04 details our planned compliance activities for this year.
Our aim in publishing our compliance program each year is to:
- enhance confidence among the broader community by making our compliance program transparent, thus allowing the community to see if it is balanced, appropriate and cost-effective, and
- alert individuals to areas where they may be exposed to a compliance risk and what they can expect from us.
We launched the compliance toolkit in March 2004, delivering on a commitment we made in our Compliance Program 2003-04. Co-designed with tax practitioners, the toolkit consolidates compliance information in a user-friendly electronic product. It provides a snapshot of our compliance activities, outlining the approach we take and what attracts our attention.
By being open about our compliance activities, we make it easier for tax agents and the community to comply. Agents have told us that they can use the toolkit to educate their clients about meeting their tax obligations.
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We took our approach to using communications to positively influence compliance behaviour a step further with the publication of special booklets focusing on particular areas of interest. These included Large business and tax compliance and Tax havens and tax administration. In these booklets we provide more detail on the risks that concern us and checklists for taxpayers and practitioners so they know what we are focusing on.
Importantly, publishing our compliance program has helped us understand and articulate much more clearly the characteristics of the various segments of the community we deal with, the risks we are most concerned about and why, and what we are doing about them.
In January this year, Commissioner Michael Carmody and Assistant Commissioner ATO Relations Russell Faull attended the Organisation for Economic Cooperation and Development Forum on Tax Administration in Seville, Spain.
Russell gave a speech, 'The taxman meets the marketer', outlining how we use marketing and education to increase compliance.
'The speech was well received', Russell said. 'We are one of the first countries to take such a transparent approach to our compliance activities and other administrations are certainly interested.
'We are striving to make our revenue system understandable for our clients. While the law might be difficult and business transactions intricate, our aim is to mask complexity - making it ours, not theirs. This is a marketing approach.
'It was a risky decision to publish our compliance program in 2002. Much of what we believed promoted compliance in the community was based on our assumption that if people didn't know where we would strike next, they would assume we were everywhere, checking everything.
'Of course, this is not true. Our compliance activities are a balance between the risks we perceive and our available resources. To do otherwise would require a tax officer checking every transaction in a complex, free-market economy. And that would be impossible, not to mention unpalatable.
'By publishing our risk assessments, our strategies and our active compliance program, we exposed just what we were looking at - and, as a result, what we were not looking at!
'So, to engage the community in a system of self-assessment we shifted to better explaining, or marketing, our policies. Publishing the compliance program was also very much directed at influencing people in their approach to meeting their obligations.
'Publishing the compliance program brought a great deal of praise, particularly from critics who thought we had gone soft on compliance. The media began to tell the story for us - a powerful way of getting the message across. Publication of the program is now part of every editor's calendar - an annual marketing opportunity for us.
'Moreover, commentators regularly draw on the program to warn people about trying to cheat on their tax responsibilities.
'The release of companion booklets, Large business and tax compliance and Tax havens and tax administration, took the Commissioner's approach to using communications and marketing to positively influence compliance a step further, by focusing on particular markets and issues.
'It had the further advantage of dispelling myths - that we are soft on the big end of town, and that many are getting away with illegally using tax havens.
'Marketing is making us a more open and accountable organisation, but also one that is not afraid to use marketing to influence compliance behaviour.
'It's a long haul for a revenue authority to be valued and respected by the community it serves. But we are on that journey and recognising and valuing the role that marketing can play.
'We may never complete the journey, but it is the process of undertaking it that is important.'
We launched the compliance toolkit in March 2004, delivering on a commitment we made in our Compliance program 2003-04. Co-designed with tax practitioners, the toolkit consolidates compliance information in a user-friendly electronic product. It provides a snapshot of our compliance activities, outlining the approach we take and what attracts our attention.
By being open about our compliance activities, we make it easier for tax agents and the community to comply. Agents have told us that they can use the toolkit to educate their clients about meeting their tax obligations.
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Because of the size, nature and diversity of the revenue system and the taxpaying community, we broadly separate taxpayers into market segments. This enables us to develop strategies, products and services that best meet the needs of taxpayers in each segment. Highlights and challenges for each market segment this year are set out below. Issues generally apply to all segments, but we have reported against the segment where the highlight or challenge is greatest.
Individuals
Micro-business
Small to medium enterprises
Large business
Non-profit organisations
Government organisations
Individuals
Our compliance efforts for individual taxpayers are primarily aimed at ensuring that people have the information they need to self-assess their tax or entitlements. This year most of our effort for individuals went into providing educational products and support services. We also conducted a range of leveraged verification approaches (for example, data matching) to address key compliance risks.
The number of taxpayers using e-tax - which enables people to lodge their tax return online - grew from 564,847 in 2002-03 to 834,129 in 2003-04. Next year we are expecting over a million people to use e-tax. This year people using e-tax were able to roll over their details from last year and then update with current information. People continue to tell us that e-tax makes doing their tax much easier. We also piloted a short tax return form for 8,000 people with simple tax affairs, which we are extending in 2004-05.
The success of e-tax, a 1999 initiative, continues. Around a million people are expected to lodge electronically using e-tax next year - up from the 834,129 taxpayers who used e-tax or lodged by telephone this year.
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Capital gains tax
Taxpayers failing to report capital gains on the sale of property and shares continued to concern us. This year we matched share and property sales data with the tax returns of approximately 8,500 individuals, raising $3.2 million tax from omitted and incorrectly calculated gains.
We will continue to use external data to help select cases for review, focusing on property sales (including off-the-plan sales) in growth areas, particularly coastal regions.
Work-related expenses
Some individuals are still over-claiming deductions for work-related expenses, although the growth in average annual deductions is slowing. Our analysis shows that there are still risks in certain occupations (including road transport, real estate, entertainment, airline, financial advisory services and travel agents) and for specific deductions (including motor vehicle, travel and self-education expenses). This year we reviewed more than 5,000 taxpayers, including auditing about 1,600, with about 65% of reviews resulting in amendments to work-related expense claims.
Rental deductions
Over-claiming deductions for rental expenses was again a concern. Over 1.1 million taxpayers completed a rental deduction schedule this year and we contacted approximately 20,000 taxpayers about their rental deduction claims.
Next year we will provide better education for those new to rental property investment and follow up those who have not reported gains or have over-claimed deductions.
Data matching
Data matching is a highly leveraged process that enables us to identify compliance issues across the individuals market. Our automated systems allow us to match large volumes of internal and external data, in particular interest, dividend and employment income. During the year we used data matching to review more than 125 million transactions for 8.7 million taxpayers. We followed up 265,547 individuals where external information indicated that some income was not declared in returns. We are continuing to explore how we can better automate and systemise our data matching.
Micro-businesses
We classify businesses with an annual turnover of less than $2 million as micro-businesses. Our compliance approach for these businesses includes helping and educating them to make sure they are aware of their tax, excise and superannuation obligations and are therefore able to comply.
This year more than 2,000 of our field staff dealt with compliance issues covering goods and services tax (GST), pay as you go (PAYG) withholding and instalments, and fringe benefits tax. We visited nearly 27,000 businesses to help them understand and comply with their obligations. We also attended 1,425 events such as expos, seminars and workshops, conferences, field days and community days.
As in previous years, our range of telephone and written advice services were well used. Of the 2.5 million Tax Office publications used by micro-business this year, the top three were:
- Essential tax information for your business or non-profit organisation (753,496)
- Tax basics for small business (152,284), and
- Record keeping for small business (128,255).
The launch of the Business Portal gave businesses more control over their tax affairs. Businesses can view and pay their tax accounts online and those who prepare and lodge their own activity statements can do so electronically. About 15,000 businesses used the portal this year.
For a number of years we have been working to see that new businesses get their tax obligations right from the start. This year we tracked the early lodgment performance of a number of new businesses, telephoning them to provide advice and assistance if they failed to lodge. We found that this approach improved both compliance and taxpayer satisfaction. We will use this approach with all businesses registering from GST in 2004-05 who indicate that they will prepare their own activity statements.
Income tax
During the year we addressed compliance issues such as cash transactions, alienation of personal services income, non-commercial losses, scheme participation and international transactions. We also analysed information received from the community about businesses not complying with their tax obligations.
We also began more generally to analyse micro-businesses, tax agents and their clients, and industries to define behaviours and then identify groups that do not fit within determined boundaries. We analysed a random sample of taxpayers from each group to understand the compliance issues associated with particular groups. The intelligence gained from this analysis will help us develop more comprehensive risk identification and treatment methods.
During the year we became concerned that the marketing of low-documentation loans might attract those who wished to keep their actual income secret from us. A survey of 176 businesses that obtained such loans revealed that up to 70% of them may have understated their income in their tax returns or not lodged returns. We have started full audits of these taxpayers and will assess whether our concerns are justified and what, if any, compliance treatment is required once the audits are completed.
Low-documentation loans require borrowers to supply less documentation (such as pay slips and tax returns) than for traditional loans.
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An ongoing focus since 1997 has been non-resident businesses and individuals participating in arts, entertainment and sporting events in Australia who do not comply with their obligations. In addressing the risks associated with this group of taxpayers we:
- worked with industry associations, promoters and tax agents to understand the environment
- improved our processing systems and staff skilling and used our centre of expertise to enhance our internal capability
- clarified the law through a test case, public and private rulings and providing advice
- enhanced our relationship with treaty partners by exchanging information, doing simultaneous audits and networking, and
- conducted a range of education and communication activities, including conducting seminars and publishing fact sheets.
Our work has resulted in revenue collections of $180.6 million since 1997, including over $30 million collected this year.
We expect the introduction of the PAYG foreign resident withholding measure on 1 July 2004 to mitigate this risk.
Goods and services tax
Our active compliance activities covered about 9% of micro-businesses this year. This included over 24,000 unannounced visits to businesses to check their compliance with registration, lodgment and reporting obligations. We identified few issues, giving us confidence that the revenue system is working as intended.
Businesses incorrectly claiming GST credits continued to be a focus. We examined over 61,000 activity statements, mainly by phoning businesses to verify claims, which resulted in more than 7,100 adjustments.
Excise
We supported the introduction of the energy grants credits scheme on 1 July 2003 with advisory visits to businesses and attendance at events such as rural field days.
We also conducted fuel scheme audits to confirm the accuracy of payments. Approximately 800 audits have been completed, resulting in adjusted claims and penalties. We checked approximately 100,000 claims against a range of risk criteria and adjusted about 8,000 before payment.
The beer industry compliance project, which concentrates on alcohol excise issues, provided a high level of revenue assurance across all market segments. However, it identified issues among micro-businesses, particularly around record keeping.
We used education and, where necessary, checked claims to ensure that correct rebate amounts were being paid.
As part of our strategy to target those avoiding excise on tobacco entering the market, we established a permanent presence in the tobacco-growing regions of North Queensland and Victoria.
We undertook a range of activities in these regions, including:
- implementing a strategy to address the withdrawal of both major tobacco companies from the North Queensland tobacco production industry from the end of the 2003 growing season
- increasing our compliance focus on tobacco producers who we rate as high risk, including growers suspected of receiving significant undeclared cash from selling illicit bales, and
- strengthening probity checks on those applying for an excise licence.
Small to medium enterprises
We classify businesses with a turnover of between $2 million and $100 million as small to medium enterprises. Our compliance approach in this segment has two key elements:
- seeing that these businesses meet their basic tax obligations related to registering, lodging, paying and claiming refunds, and
- analysing and following up information from activity statements, tax returns and other internal and external sources that identify other compliance risks.
This year we increased our coverage of small to medium businesses, with 900 tax officers dedicated to auditing these businesses. We found that the issues confronting medium businesses are similar to those confronting large businesses, so we draw heavily on our experience with large businesses in auditing businesses with an annual turnover of $50 million to $100 million.
Income tax
This year we introduced a project that involved conducting risk reviews of small to medium businesses that have displayed poor economic performance over a sustained period of time. We used financial ratio analysis, effective tax rate comparisons and benchmarking techniques to identify individual businesses, industries or other groups posing the greatest risk.
The project has significantly improved the capability of our employees and our understanding of these businesses. This year we completed over 1,000 reviews and raised over $38 million in tax and penalties. Specific issues we identified were utilisation of losses, capital gains tax and profit shifting, which we have built into next year's compliance program for small to medium businesses.
We maintained a close interest in the building and construction industry, where we have been dealing with a number of compliance risks for some years. This year we conducted enquiries on major building projects and targeted labour-intensive trades such as scaffolding, formwork, steel fixing and labour hire companies. We raised around $80 million in tax and penalties from our compliance activities among small to medium businesses in this industry, including GST and income tax.
We are implementing the recommendations of the Royal Commission into the Building and Construction Industry. Part of our response was to establish the Building and Construction Industry Forum, which includes key players from the industry. We are also working with state revenue offices and with other government agencies.
We continued to identify and address serious instances of phoenix practice across all types of business activity. This occurs when directors of companies transfer their business to a new entity, leaving the former entity unable to discharge its debts to creditors, such as the Tax Office. Typically, the directors and shareholders of the former company are the same as in the new company.
We have improved our ability to detect these practices early, maintaining a particular focus on the building and construction industry and on other industries characterised by large labour costs. We continued our work with the Australian Federal Police and the Director of Public Prosecutions to see that the worst offenders are brought before the courts. This year we raised around $40 million in tax and penalties by targeting the more outstanding forms of phoenix behaviour among small to medium businesses.
Goods and services tax
We undertook more than 26,000 compliance activities among small to medium businesses this year, generating nearly $300 million of net GST revenue. We focused on industries, issues and entities that were identified as risks according to our criteria, taking a balanced approach that included educational programs, audit activities, risk reviews, and lodgment and refund integrity work.
Our reviews concentrated on the whole business, including all entities within a group and related entities such as self managed super funds and individual business owners. During the reviews we invited businesses to voluntarily correct their tax liabilities where necessary.
We continued to identify taxpayers who claim GST credits for acquisitions or activities that do not qualify for a credit, for example, acquisitions from an unregistered entity, or purchases related to an activity that does not qualify for a tax credit such as residential rental property. This year we adjusted GST credit claims to the value of $60 million.
By maintaining our focus on industries that operate in the cash economy, in particular hotels and clubs, building and construction, motor vehicle retailing and clothing and textiles, we generated $14 million of additional GST revenue.
This year we used a range of internal and external data sources to identify clients who disposed of business assets, and we then wrote to or visited them, raising more than $8 million.
Large business
The large business market comprises around 1,450 businesses with an annual turnover of more than $100 million and around 700 high wealth individuals (and associated entities) who control more than $30 million in assets. We continued to take a whole-of-enterprise view of this segment, tailoring our compliance activities to the nature and extent of any revenue risks and the attitude of the enterprise to tax compliance.
For more information about our activities among high wealth individuals, see part 3.
Income tax
We improved our systematic risk profiling of all large businesses in relation to economic and tax performance, productivity analysis and investor return analysis. We have further developed our screening processes to provide more assurance that we are focusing on the greatest risks.
This year we increased our contact with large business through our program of compliance risk reviews, undertaking 498 fieldwork risk reviews, 194 risk reviews of high wealth individuals, and an additional 225 specific enquiries and monitoring or watching briefs of large businesses.
Fieldwork risk reviews involve collecting information and analysing, validating or otherwise explaining it. They involve face-to-face contact between tax officers and taxpayers and aim to maintain the integrity of the revenue system by helping taxpayers stay on track with their tax obligations.
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Our work identified risks around international transactions, capital gains, capital and revenue losses, and corporate financing. We are also looking at a number of potential aggressive tax planning arrangements that involve the creation, disposal and financing of intangible property, service fees paid to offshore associates, valuation of assets and loss creation arrangements.
We made our risk assessment processes more transparent by publishing Large business and tax compliance (June 2003) and Tax havens and tax administration (February 2004), which explain the type of tax planning that attracts our attention and what taxpayers can expect us to challenge.
With the transition to the new consolidation regime, we did about 20 fieldwork risk reviews specifically to look for compliance risks arising from this measure. The reviews focused on compliance with the membership rules, the single entity rule, the origin, transfer and use of losses, the steps and processes used to re-set the cost base of assets, the capital gains tax outcomes, the market valuation processes used, and the basis for unusually high capital allowance deductions. Our compliance focus centred on the potential use of structuring, ownership and funding arrangements to obtain tax benefits from consolidating a group that are beyond those intended by the law.
We completed 133 audits of large business groups, an increase on last year, with many audits covering a number of previous year activities. Some large businesses previously under audit have demonstrated a willingness to meet their outstanding tax obligations and improve their tax risk management and compliance assurance processes. Collections from our audit activities were significantly higher than in previous years, with a fair proportion coming from audits done over recent years where a dispute has been settled or we have won a court decision.
This year we entered into 23 advance pricing arrangements relating to international transfer pricing issues for future income years. Although four fewer than last year and two less than planned, this was still a major achievement given that six of the current year cases completed were complex bilateral agreements between the Tax Office, large business groups and the respective overseas tax administrations.
Transfer pricing involves profit shifting to avoid tax.
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We continued to work with large business, industry and tax representative bodies and tax professionals to achieve a cooperative approach to compliance. This included working with all the peak industry bodies and professional associations to:
- co-design a more comprehensive risk assessment product to help large business evaluate and manage their risks against the broad criteria set out in Large business and tax compliance. The product will focus on a checklist of factors that will attract our attention and the features of tax planning that we can be expected to challenge, and
- develop a framework for forward compliance arrangements between us and large business that better integrates compliance assurance approaches across income tax, GST, the various withholding taxes, excise and superannuation obligations.
A number of our activities influenced large business risk management by highlighting the need to consider tax issues in corporate governance. We presented speeches on this subject to a number of public forums and the Commissioner wrote to the boards of 1,500 Australian publicly listed companies in January, providing some practical guidance on managing the tax risks associated with major transactions or arrangements.
Implications for large business from ongoing tax reform (including the new consolidation regime, review of international tax arrangements and the taxation of financial arrangements) saw us investing heavily in education and skilling for the new measures and implementing a range of compliance strategies to ensure the measures have their intended effects.
Goods and services tax
In managing GST compliance, we continued our program of activities designed to ensure a comprehensive understanding of the complexity and diversity of GST risks for large business, and that they meet their GST obligations.
We identified that unusual or one-off transactions and lack of investment in accounting systems and controls are two significant areas contributing to GST adjustments. Our fieldwork also highlighted that we should focus on GST issues associated with mergers and acquisitions and financial supplies next year.
Tax officers dedicated to tax avoidance issues discovered a number of schemes that potentially manipulate the GST second-hand, property margin and timing provisions. We issued taxpayer alerts and rulings related to aggressive tax planning and continue to examine these schemes. We expect our early intervention to deter others from taking part in these or similar schemes.
Excise
Fuel substitution leads to low excise fuel finding its way into the transport fuel market. So we conducted fuel tests to obtain information about the extent of concessional fuel in the retail market and are using the results to assess and identify further risks. This includes identifying and treating hot spots early. We also continued to liaise closely with key industry bodies and major petroleum manufacturers.
Our systems-based audits of large excise payers provided assurance that we are collecting the correct amount of excise revenue.
Non-profit organisations
Non-profit organisations are highly compliant, but their level of knowledge about the revenue system can be low. Our primary approach is relationship management, combined with help and education.
This year it came to our attention that some taxpayers that are not genuine non-profit organisations have incorrectly enjoyed a range of GST, income tax and fringe benefits tax concessions. We contacted over 800 clubs to clarify their income tax status as part of a continuing program to understand the level of compliance among non-profit organisations.
We worked closely with industry partnerships and peak bodies to reduce risk in implementing the new charities measures.
Goods and services tax
We identified that non-profit organisations have difficulty in knowing when to account for GST on grants. There is also a risk where supplies are made for less than market value, particularly in relation to university accommodation. We worked collaboratively with these organisations, through the Charities Consultative Committee and other bodies, to make it easier for them to comply in these areas.
We worked to discover the drivers of non-registration, and the risks associated with it. We also need to understand why entities voluntarily register and determine our response to the high number of voluntary registrants.
Government organisations
We are working with the Department of Finance and Administration to help Australian government agencies comply with their superannuation guarantee obligations, particularly in relation to contractors and consultants. Guidelines and a survey were issued to 172 agencies, asking them to review their superannuation arrangements for contractors and consultants. Seminars have been conducted and visits are available to agencies needing further assistance. The Australian National Audit Office is reviewing compliance by federal government agencies with fringe benefits tax and superannuation guarantee obligations.
This year we reviewed superannuation paid by government agencies, and focused on GST risks around non-standard transactions. These included the disposal of land, the use of recipient created tax invoices, and distinguishing between grants and appropriations.
A number of compliance features do not apply specifically to only one market segment, but go across two or more. This year we focused on:
- superannuation, see below
- evasion and fraud, see part 3
- aggressive tax planning, see part 3
- international tax issues, see part 3 and
- overdue debt and late or non-lodgment, see part 3.
Superannuation
Evasion and fraud
Cash economy
Illicit tobacco
Those outside the system
Aggressive tax planning
International tax issues
Overdue debt and late or non-lodgment
Superannuation
Superannuation contributions surcharge
The majority of member contribution notices are received from superannuation funds and processed by us within an appropriate timeframe. We generate an assessment where an individual's income exceeds the threshold for superannuation surcharge purposes. A small percentage of member contribution notices are not processed or assessments not issued due to a contribution notice failing one or more exception conditions. The largest source of exceptions is the absence of a tax file number on the member contribution notice. Another source of exceptions is where an individual has transferred to another fund and we have been unable to redirect the assessment to the new fund.
Over a number of years a backlog of over 10 million exception cases from these and other causes has accumulated. While in most cases there will be no superannuation surcharge payable as the individual taxpayer will not meet the surcharge income threshold, we estimate that the surcharge will apply in approximately 200,000 cases. Our 2003-04 financial statements include an estimate of $323 million for this revenue.
The backlog of exception cases has delayed the recognition and collection of this surcharge revenue. However, as this revenue is collected from superannuation funds holding member contributions, we should still be able to collect most of it. As with all revenue yet to be collected, we have included some provision for amendments and doubtful debts, representing approximately 12% of the revenue, in our 2003-04 financial statements.
The Australian National Audit Office has been unable to form an opinion on the revenue and associated provision estimates in the 2003-04 financial statements. As the exceptions are processed and, where applicable, assessments issued, the revenue will crystallise, replacing the estimates included in this year's financial statements.
We have established a taskforce to resolve the backlog of cases and set up a process for dealing with future cases. We plan to have most of the exceptions processed by February 2005.
We will manage surcharge assessments that result from resolving the backlog to take account of special circumstances of taxpayers, including situations where pursuing the associated debt would be inequitable.
The Australian National Audit Office has been unable to form an opinion about our accounting for superannuation surcharge as it applies to unfunded defined benefit schemes. These schemes, which largely cover Australian government and state public service employees, are required to maintain records of superannuation surcharge applying to their members. We have not undertaken compliance activities to verify the adequacy of the fund records, but will do so in 2004-05.
Superannuation guarantee
This year we encountered significant difficulties in introducing a new computer system to support the new quarterly superannuation guarantee system. The computer system was to be introduced in December 2003 but was still not fully functional by June 2004. Some improvements were made in June 2004 that resulted in simpler payments being processed. However, assessments and more complex payments were still not able to be made by June 2004.
As a consequence, our ability to assess employer liabilities and transfer payments to superannuation funds on behalf of employees has been severely limited. At 30 June 2004 we had 5,676 audit assessments and 9,036 voluntarily lodged employer statements not issued, and payments of $147 million not transferred to funds. This means that payments are not in employees' superannuation fund accounts. We estimate that approximately 177,240 individuals may be affected and have raised a provision of $7.6 million in our 2003-04 financial statements to compensate these individuals for lost interest, so ultimately they will not be disadvantaged.
The financial impacts of these delays on superannuation guarantee revenue and expenditure have been estimated and brought to account in our 2003-04 financial statements. This is disclosed in note 2.3 to the financial statements. In the absence of the fully functioning system, the Australian National Audit Office has been unable to verify the accuracy of our estimate for superannuation guarantee revenue and expenditure.
At the time of preparing this report, the computer system had been corrected and is able to process assessments and payments. We expect to clear the backlog during 2004-05. As we process the backlog of cases, the difference between the estimate made in this year's financial statements and the actual values of assessment and payment statements will be recognised in 2004-05. We will compensate those inconvenienced by the delay. There is not expected to be any loss of revenue or employee benefit once this is completed.
Self managed superannuation funds
This year we audited a statistically valid sample of self managed super funds as part of our research to understand the compliance behaviour of funds. This provided information on a range of indicators that we are now using to select for audit self managed funds that are at a high risk of not complying.
Similarly, we researched the capability of auditors of self managed funds in order to develop a compliance program for approved auditors. We now have detailed information about auditor capability and are working with the professional accounting associations to enhance approved auditors' knowledge and understanding of the requirements of self managed funds. We are using an educational approach, such as seminars and publications, as well as recommending that auditors at risk undergo remedial training.
We started developing a risk-rating tool for self managed funds that uses information from the above research, together with details of lodgment patterns, debt patterns and general compliance patterns of funds. This allows us to consider a range of internal and external factors to select high-risk funds for compliance audits.
During the year we identified a number of arrangements promoting the use of self managed superannuation funds to gain illegal access to preserved superannuation. The promoters of these schemes help individuals transfer their superannuation out of industry or public funds into a self managed fund.
There are a variety of early access schemes. One type involves a promoter encouraging individuals to transfer their superannuation into a fund set up and controlled by the promoter. Another involves a promoter urging individuals to set up their own self managed fund and advising them that, as trustees of the fund, they have the power to withdraw money as they see fit. In each instance the promoter charges a sizeable fee for providing this service - often 20% or more of the fund's assets.
In response, we delivered tailored key messages to relevant parties, including a joint media release with the Australian Securities and Investments Commission warning the public to be aware of promoters offering to arrange early access to superannuation.
We also liaised with the superannuation industry to stop superannuation being transferred into suspect self managed funds and:
- froze the assets of superannuation funds involved in early access
- removed more than 10 self managed funds from our register of complying superannuation funds
- disqualified several trustees, with further disqualifications pending, and
- assessed the tax liability of participants who have received superannuation benefits illegally.
We also created a joint taskforce with the Australian Securities and Investments Commission and throughout the year referred a number of suspicious promoter activities to them for investigation and action. A number of promoters have already been severely penalised and the most serious offenders have been jailed.
Evasion and fraud
Most taxpayers try to do the right thing in terms of their tax obligations. But a small minority are determined not to comply and, in some cases, directly undermine the revenue system.
Evasion occurs where taxpayers deliberately conceal or understate income. Evasion is a serious matter and can result in heavy penalties and prosecution.
Fraud occurs when a financial benefit is dishonestly obtained (or attempted to be obtained) where there is no entitlement, for example, lodging an activity statement to claim a refund of non-existent GST credits. Fraud is a serious criminal matter and can result in heavy penalties and up to 10 years imprisonment.
This year we concentrated on the cash economy, illicit tobacco, and those operating outside the revenue system.
Cash economy
The cash economy program remained a high priority. We continued to ascertain that people in business were in the revenue system and meeting their obligations for reporting their income, and that any omitted income was detected. This ultimately benefits all businesses as it allows them to compete on an equal basis.
The year saw a continuation of our active compliance program, which included checking a significant number of industries and businesses to see they were meeting their income tax, GST, PAYG and excise obligations. This was supported by a suite of graduated compliance work, ranging from walk-ins and mailouts through to real-time reviews and comprehensive audits. We also concentrated on matching our information with information from third parties.
Some 600 field officers were dedicated to projects specifically targeting the cash economy, supplemented by a further 2,400 field officers who focused on cash economy risks and issues not specifically within the cash economy program.
Potential high-risk industries within the cash economy were a particular focus for our field activities. We selected these industries based on a range of information, such as field intelligence, risk assessment, community information and financial performance analysis. The industries included:
- cafes, restaurants and takeaways
- property, building and construction
- bartering
- taxis
- cleaning services
- fishing
- clothing and textiles
- clubs and pubs, and
- scrap metal.
We also looked closely at a number of other industries, including tourism, liquor wholesaling and manufacturing, motor vehicle retailing, and gold bullion, art and antique dealing. During the year we started to examine low-documentation loans, matching our information with information from third parties to identify high-risk cases. We also completed reviews of the hairdressing and computer retailing industries early in the year.
We contacted 55,000 businesses as part of our cash economy compliance work, including visiting around 20,000 as part of the above industry projects.
We also continued to investigate instances of more blatant evasion, undertaking more than 27 successful fraud prosecution cases during the year. Almost 100 fraud cases involving cash economy issues were investigated.
Financial analysis of activity statements, income tax returns and industry data enables us to identify businesses operating outside industry norms. This year we increased the number of industries covered by such analysis from about 30 to over 300. In 2004-05 we will publish industry norm data calculated from activity statements, which will complement the data calculated from income tax returns that we presently publish.
Australian business number
The Australian business number (ABN) and Australian Business Register continue to help reduce non-compliance in the cash economy.
The 'no ABN withholding' obligations for business-to-business transactions have had a positive effect, with businesses generally unwilling to deal with suppliers who do not provide a tax invoice or quote an ABN.
Over 50,000 activity statements that included amounts withheld from entities that failed to quote an ABN have been lodged since the new revenue system started in July 2000. During that time, some $163.4 million has been withheld from payments because no ABN was quoted.
Our analysis of a sample of larger withholding cases revealed that almost 50% of suppliers registered for an ABN after having tax withheld from a payment. This included people and entities that had been operating outside the system for some years. We continue to check that remaining businesses operating without an ABN are meeting their tax obligations.
Other ABN integrity activities during the year included:
- sampling tax invoices to ensure that valid ABNs were being quoted - we found that tax invoices were generally being prepared correctly, with valid ABNs quoted
- undertaking matching exercises to check that existing small businesses had registered for an ABN/GST and were disclosing income
- matching ABN registration information with lodgment histories to identify businesses that registered under the new revenue system but had not previously lodged income tax returns
- using information from third party sources such as banks, grant payments and business registers to check that businesses had lodged correctly and reported the correct income
- requesting lodgment of previous year income tax returns, with at least 190,000 years of tax returns requested as a direct result of ABN matching activity. To 30 June 2004 we have raised some $210 million in net tax and penalties as a result and, importantly, these businesses are now back in the revenue system, and
- working with other government agencies to incorporate the ABN into their business registration processes.
Working with others
Cash Economy Taskforce
In managing the cash economy, we benefit from the expertise and advice of the Cash Economy Taskforce, an advisory group comprising academics, industry peak body representatives, small business operators and relevant government agencies.
The full taskforce met twice during the year, complemented by a number of smaller focus group meetings.
The taskforce concentrated on completing its third report, The cash economy under the new tax system, which was published in September 2003. It was the taskforce's first report since the introduction of the new revenue system on 1 July 2000.
While the report assessed the impact of the new revenue system on the cash economy, a special focus was on dealings between businesses and consumers. The report contained 38 recommendations, including 10 related to business-to-consumer dealings. The Commissioner agreed to implement all of the recommendations, subject to a few requiring further research to determine their feasibility.
We had implemented most of the initiatives arising from the report's recommendations by 30 June 2004, with the rest largely due for completion by the end of 2004. They included introducing an activity statement payment card for the taxi industry and a formal code of conduct for the scrap metal industry. Another initiative is promoting mandatory quoting of an ABN to state and territory agencies, with early results seeing it being used by the New South Wales Police for the security industry.
We continued to place a high emphasis on learning from external sources and research. These included our community and business surveys, working with the Centre for Tax System Integrity at The Australian National University, and industry-based research.
Case study: making it easier for taxi drivers to comply
We are committed to making it easier and cheaper for businesses to meet their tax obligations and have worked with various businesses to achieve this. Taxi drivers are finding it much easier to comply following the introduction of activity statement payment cards in March 2004.
We issued the plastic payment card, similar in size to a credit card, to around 40,000 accredited taxi, hire-car and limousine drivers. Developed in partnership with the taxi industry, the payment card gives drivers the option of making advance payments towards their activity statement liability, thus making it easier for them to meet their GST and other activity statement responsibilities.
The card helps with cash flow management by allowing drivers to make payments as they can afford to, rather than having to find a lump sum when they lodge their activity statement at the end of the month or quarter. Drivers using the cards can make payments at their local post office, or over the phone or internet using BPAY.
Some 5,300 cards have already been used, including one card that has been used to make 49 payments. Initial data shows a 350% increase in use over the alternative paper voucher system. Early indications are that drivers have made around 13,000 payments, totalling some $5 million.
Rob Walsh, Assistant Commissioner for the Cash Economy, said that 'the card demonstrates the Tax Office's commitment to working with industry to address compliance problems and making it easier for businesses to comply with their obligations. The feedback we are getting from drivers is overwhelmingly positive.'
He added, 'Piloting the card is also part of our commitment to implement the recommendations in the Cash Economy Taskforce's third report. Given the early results, we are optimistic about expanding the use of the card to other industries.'
Working with stakeholders
The Cash Economy Inter-agency Working Group met regularly during the year, fostering joint activities, extending cooperation and improving the exchange of information between agencies. There are now a range of joint agency activities, with a particular focus on tax evasion in the cash economy.
Using our research, together with findings from field and associated activities, we will continue to work with industry and other groups to identify appropriate responses to cash economy risks. We will also continue to work with the Australian Bureau of Statistics, Australian and international academics, and overseas revenue offices to analyse the size and structure of the cash economy.
Communication
Regular consultation has been an integral feature of our cash economy projects. This ensures we include industry representatives when delivering key messages and developing effective and practical compliance solutions for their industry.
Our participation in various trade or business exhibitions, seminars and conferences provided an opportunity to deliver an appropriate mix of help and education and more hard-edged compliance messages. The key topics we promoted, which reflected the major areas of concern identified by the Cash Economy Taskforce, were:
- record keeping
- cash flow management
- ABN integrity, and
- correct invoicing.
We supported over 250 events this year, including:
- a number of trade shows, such as Fine Food Australia (cafes, restaurants and takeaways), Designedge Trade Expo (clothing and textiles), and business opportunities and franchising expos (new and intending businesses)
- seminars for new builders applying for a builders licence through a TAFE
- seminars for tax practitioners about the cleaning industry, and
- a range of other activities in the property, building and construction sector, for example, the Designbuild Australia Trade Exhibition, a national building and construction industry conference, and our property and construction industry partnership.
Illicit tobacco
We continued to combat the risk from illicit tobacco, commonly known as chop-chop.
In 2002 we developed a comprehensive strategy as a result of anecdotal and police evidence showing the illegal tobacco market was growing at an alarming rate. The strategy involved selecting 13 specialised compliance officers to help implement the strategy.
It recognised that established legal growers were the source of up to 95% of the tobacco reaching the illegal market. Our early work therefore involved gathering intelligence on growing procedures so that we could identify and then manage potential situations where tobacco could be diverted to the illicit market.
As new intelligence was gathered, we decided to base permanent teams in the two main tobacco-growing areas in Australia - North Queensland and Victoria - to analyse crop yields and carry out compliance checks.
Our tobacco strategy covers all aspects of tobacco, not simply growers, with activities also focusing on manufacturers, distributors and retailers of illegal tobacco. Some of these activities include using satellite imagery to identify illegal tobacco crops, working closely with the police in joint raids, and educating retailers about the penalties and risks associated with selling chop-chop.
This year our strategy continued to make a significant impact on the illicit tobacco market, with:
- the price of illicit tobacco bales increasing from approximately $7,000 to $8,000 for a 100-kilogram bale, with isolated reports of prices up to $10,000 a bale
- an increase in the number of convictions, from 67 to 83, and
- an increase in custodial sentences, from 11 to 33.
Awareness of our enforcement activity is also evident in the tactics of those engaging in illicit tobacco activity, for example, smaller vehicles and hire vehicles are increasingly being used in attempts to evade detection and seizure.
A significant development has been cancelling most tobacco producer licences in the Queensland growing region. This occurred because tobacco manufacturers have declined to purchase tobacco from this region, so there is no viable legitimate market for the product.
Cancelling producer licences will affect the diversion of legal tobacco to the illicit tobacco market. We are continuing to monitor the Queensland growing region to see that no illegal growing occurs, and the Victorian growing region to stop tobacco being diverted from that area to the illicit market.
Case study: working on the farm
When we were developing a tobacco strategy, we realised that we had limited resources to address a fairly big risk. We had to make significant inroads into the illicit tobacco market and do this with a team of less than 25 people spread across Australia.
Hard facts and figures show that our approach was successful, so how did such a small team achieve such amazing results?
'We knew that legal growers were the source of up to 95% of the tobacco reaching the illegal market, but we didn't know how it was being diverted and at what point in the growing cycle', said Margot Rushton, Assistant Commissioner Excise.
'We knew we had to improve our knowledge of tobacco growing to stand a chance of being successful.
'We decided that the best way for people to understand the ins and outs of tobacco growing was to live it. So we hand-picked 13 compliance officers and sent them off to spend two weeks on a tobacco farm, living the life of a tobacco farmer', said Margot.
'These two weeks were probably the most intense and valuable training we could have got to help us understand the tobacco growing cycle', said Mark Stephenson, one of the officers who spent time on the farm.
'We were able to see the points in the cycle where it was easiest to divert tobacco to the illegal market and make sure that our fieldwork and audits took account of this new knowledge', he said.
As a result of the knowledge the compliance officers gained during their time on the farm, a decision was made to base a permanent team in the two main tobacco-growing areas in Australia - North Queensland and Victoria. This meant people were on the spot, throughout the year, to analyse crop yields and gather intelligence.
'Of course, this was just one element of the strategy but one that played a really important role. We continue to make sure our intelligence is first rate and that our strategy remains fluid and reacts to changes in the illicit and legal markets. I am so proud of the work my small team has achieved, I couldn't be happier', Margot said.
Those outside the system
This year we established a dedicated team and used more timely and comprehensive analysis of our data and third party data to identify and deal with people and entities operating outside the revenue system. We focused on identifying potential data sources and streamlining our data matching.
The team also identified taxpayers who are registered in the revenue system but persistently fail to lodge and pay, referring them to the appropriate area to enforce lodgment and payment.
As part of improving our ability to match third party data, we:
- established a planning and governance structure to ensure that we evaluate all data-matching projects from a whole-of-organisation perspective, and
- used Annual Investment Income Report data to identify people who are receiving interest and dividends but are not participating in the revenue system when required to.
Case study: fighting the crime of the millennium
Our Tax File Number Integrity and Serious Non-Compliance teams play a crucial role in curbing identity crime.
Identity crime is a growing problem. According to a study by the Securities Industry Research Centre of Asia-Pacific (SIRCA), a non-profit financial services research organisation, identity crime costs the Australian community more than $1 billion a year.
The study showed that false and stolen identities are used in an escalating range of criminal activity around the globe, including illegal immigration and defrauding banks and government.
John McNamara, Assistant Commissioner Field Services, said the Tax Office is instituting a number of measures to curb what has been described as 'the crime of the millennium'.
'We've implemented a revised proof of identity process for individual tax file number applications, and we are working with other agencies to develop a consistent approach to tax file number applications where the applicant cannot produce the standard documentation', he said.
'We're also part of other work across agencies at both policy and operational levels aimed at combating identity crime from a whole-of-government perspective.'
Some criminal groups now offer a false identity service where false documentation, which exceeds the 100-point verification system, can be bought for between $4,000 and $6,000.
The SIRCA report supports a series of broader Australian government initiatives, including:
- a common set of high-integrity proof of identity documents to be used by government agencies
- an online document verification service for government agencies, and
- enhanced data matching across government agencies to detect fictitious identities and cleanse registers.
The report was based on extensive consultation with 120 public and private sector organisations. It was funded by the Tax Office, the Department of Family and Community Services, the Department of Immigration and Multicultural and Indigenous Affairs, state and territory transport and road authorities, and the Australian Bankers' Association.
We are also part of a group of academics, Australian and state government agencies, and the financial sector conducting ongoing research on control systems for identity fraud, profiling of identity fraud, cost of identity fraud and crime policy reform.
Community assurance projects
One aspect of our work involves examining various professional groups to ensure their members are participating in the revenue system. While our work with the legal profession continues, we also finished matching membership records of accounting and architectural associations against our records to identify individuals in these professions who:
- are operating outside the revenue system
- have never lodged tax returns, or
- have consistently failed to lodge or pay for a number of years.
Our work indicated that most members of these professional groups are registered in the revenue system.
We matched membership records of state architects' boards with our records. While we did not identify any major issues, we did identify three individuals without a tax file number. Two of these individuals were required, and have since submitted, outstanding income tax returns. Both cases are still being reviewed.
In matching membership records of accounting professional associations with our records, we identified a number of people who had failed to lodge returns.
We are still analysing these cases, together with one accountant we identified as not having a tax file number.
We are following up outstanding lodgments for those taxpayers representing the greatest risk.
Other data-matching projects
Over the course of the year we increased our use of data matching as a key tool in detecting and bringing to account those who do not comply with their tax obligations. We used various data sources, ranging from our own data and state government agency holdings to data held by various licensing and professional bodies. These include:
- Annual Investment Income Reports
- the Australian Securities and Investments Commission
- the Australian Transaction Reports and Analysis Centre (AUSTRAC)
- the Australian Electoral Commission
- the Tax Evasion Referral Centre, which receives information from the community about suspected tax evasion, such as the cash economy, and
- PAYG withholding records such as employer payment summaries.
We have enhanced our data-matching systems so that we can match information on a regular basis, rather than using a one-off approach. This means we can match information progressively during the year, including both internal and external information that is lodged late.
Some of the data-matching activities that contributed to our compliance activities this year were:
- matching activity statement information to see that corresponding income tax returns were lodged and income reported
- matching tax invoice data with lodgment and registration records
- checking details in annual PAYG withholding reports provided by payers to see that amounts withheld because an ABN was not quoted were correctly reported
- working with Centrelink to analyse Customs data on importers of used cars who appeared to be operating businesses without appropriate licensing and failing to lodge returns or declare appropriate levels of income
- doing compliance checks on employers paying workers compensation premiums - these include ABN, GST and PAYG withholding registration where required, as well as compliance with lodgment and superannuation guarantee obligations
- using AUSTRAC data to detect cash transactions that have not been brought to account, and
- obtaining information about the potential omission of income related to art, antiques and gold dealings, bartering, accountants, architects, the horse-racing industry, and pubs and clubs.
Cash economy projects, including those in the property and construction, taxi, barter and New South Wales horse-racing industry, used data matching to detect people in these industries who are operating outside the system. We also used data matching to check the lodgment, payment and accuracy of information returned for these industries. We found high levels of non-compliance in the horse-racing industry, with some members having a very poor history of lodging returns.
Next year we will focus on broad income and wealth-based data sources such as state revenue offices and the Annual Investment Income Report to identify those operating outside the system. We will also review compliance issues associated with non-residents we identify through our data matching, focusing on non-registration.
Legal profession project
This year we continued our work with the legal profession and expanded our focus to ensure that solicitors throughout Australia are registered for tax purposes and meeting their lodgment and payment obligations. This supplements our previous work with barristers.
We made significant inroads in improving compliance in the legal profession, and have noted positive changes in the attitudes and behaviour of barristers and solicitors towards meeting their tax obligations.
During the year we built and maintained relationships with professional and regulatory bodies in every state and territory. We explored opportunities for regulators to educate their members on how to comply with their tax obligations, and the consequences of failing to comply. We included tax compliance messages for barristers and solicitors in the publications of peak regulatory bodies.
Changes to laws governing the legal profession in other states and territories are also occurring. In many states, tests for fitness to practise now incorporate compliance with tax obligations, and events such as bankruptcy and prosecution for tax and other offences must be disclosed to regulators.
Lodgment and debt levels
We continued to reduce the number of outstanding tax returns from the legal profession, with only 172 of 1995 to 2002 tax returns still outstanding at 30 June 2004 for barristers nationally. As part of our enforcement strategy, we asked 60 New South Wales barristers with a poor history of lodging to lodge their 2003 returns by 31 October 2003, irrespective of whether they engaged a tax agent. Of these, 27 lodged on time, 25 lodged after the required due date and only after we followed them up, and we are pursuing eight who are still to lodge.
In relation to solicitors, our work indicates that 12,214 tax returns are outstanding nationally for 1995 to 2002, constituting 4.1% of all returns expected for this period. We are following up those cases representing the greatest risk.
The debt for barristers nationally is $65.1 million, up from $51.6 million last year. This increase is attributed to a rise in disputed debt. Approximately $48 million (74%) relates to debts of more than $100,000. The debt for solicitors nationally is $180.4 million, with $122.4 million (67.8%) relating to solicitors with a debt of more than $100,000 (6.7% of cases).
Bankruptcy
During 2003-04 we identified seven instances of bankruptcies by barristers and seven by solicitors nationally. Two of the identified bankruptcies involved a barrister and solicitor who have previously been bankrupt. We continue to vigorously pursue barristers who appear to use bankruptcy to avoid paying tax. We work closely with trustees and are funding them to investigate and pursue litigation in such cases.
Prosecutions
During the year we referred 439 new cases involving lawyers and their associates (mostly New South Wales solicitors) for prosecution for failing to comply with a demand to lodge a tax return or supply information under a statutory notice.
Of the cases actioned during the year, 54 individuals were convicted and court fines of more than $124,000 were imposed. In another 248 cases, returns were lodged before a summons was issued, and so the matter did not proceed to prosecution. A further 31 individuals were subject to section 19B of the Commonwealth Crimes Act 1914, where offences were found but convictions were not recorded. We are proceeding with prosecution action in the remaining cases.
Forensic accounting
We use forensic accounting to determine the amount of income where income is not declared or is not readily traceable but there are significant assets. We can then raise default assessments based on what we determine the taxable income to be, and enforce payment of the assessments and associated penalties.
In looking for indications of evasion and fraud, our auditors compare data from various sources with the books and records of taxpayers to identify anomalies. This includes comparing activity statement information with tax return information, comparing registration data with third party databases, using the significant and suspicious transactions and transfer reports provided by AUSTRAC under the Financial Transaction Reports Act 1988, and analysing information provided by law enforcement and other government agencies.
For example, this year our auditors used forensic accounting to determine that a taxpayer's income over the last five years should have been several million dollars higher than what was reported on their tax returns. Our auditors discovered that the taxpayer, who came to our notice through the newspapers when they were buying a multi-million dollar property:
- had been involved in a number of properties for many years, and in several other developments through associated entities, yet had never reported capital gains (detected using land title records)
- owned several luxury cars (detected using motor registry records), and
- regularly made cash deposits and withdrawals of $10,000 or more (detected using AUSTRAC data and other financial data).
We gather information directly from the people involved by requiring them to produce documents and answer questions. We can visit their premises and take copies of documents. If there is a possible criminal offence, we may work with other agencies such as the Australian Federal Police or the Australian Crime Commission. We also use search warrants obtained by those agencies to gather evidence.
Case study: cheating doesn't pay
Two instances this year show the dangers of trying to defraud the revenue system.
The first instance involved Mr Steven Hart, a Brisbane accountant and the former head of Harts Australasia. He bought a company that had gone into liquidation with tax losses and purportedly transferred these losses to offset a client's profits, substantially reducing its taxable income.
After identifying Mr Hart as a compliance risk, we undertook a joint investigation with the National Crime Authority (now part of the Australian Crime Commission) into his activities.
Steven Hart was found guilty at trial of two charges of defrauding the Commonwealth of a total of $190,942 in 1996 and 1997. He was jailed for four years in the Brisbane District Court.
District Court Judge Keith Dodds said Mr Hart was an experienced tax agent who used dishonest means to lower his client's taxable income. Justice Dodds stressed the important role tax agents had under the self-assessment system and the reliance placed on them to be honest when preparing tax returns for their clients.
The second instance involved three advisers to a tax-avoidance scheme who were jailed for five years each for attempted tax fraud of around $26 million.
Perth-based accountants Walter Tieleman and Sean Pearce and Melbourne accountant Stephen Wharton were found guilty at trial of conspiring to defraud the Commonwealth.
In jailing the men, Western Australian Supreme Court Judge John McKechnie said a warning must be sent to others in the industry that fraud cannot be tolerated.
'These men used their professional qualifications and expertise to arrogantly defraud the Commonwealth', he said.
The trial followed a joint investigation by the Tax Office and the Australian Crime Commission.
Australian Crime Commission Chief Executive Officer Alastair Milroy said at the time that the court result was an excellent outcome.
'This is a credit to the multi-agency taskforce set up to target organised revenue fraud on the Commonwealth. Once again we have a fine example of the Australian Crime Commission working in partnership with the Tax Office to achieve the best possible result', Mr Milroy said.
Earlier this year the scheme's promoters, Tarek Wahby and Lawrence Aistrope, pleaded guilty to a similar charge and were each sentenced to four-year jail terms.
Aggressive tax planning
Aggressive tax planning undermines the integrity of the revenue system and community confidence in the fairness and equity of that system.
We use an end-to-end process for managing aggressive tax planning, which involves intelligence gathering, risk assessment and analysis through to legal proceedings and debt recovery. We take an integrated approach by examining the scheme, the promoter and associates, and the participants.
This year we continued to detect aggressive tax planning and to intervene where there was an identified risk to the revenue system. Our focus extends to arrangements to avoid any type of tax, superannuation obligation or excise duty. While our intelligence indicated that the promotion of mass marketed schemes continues to be subdued, we have identified a number of aggressive arrangements tailored to individual taxpayers' circumstances.
Some of the arrangements we examined this year involved capital gains tax, write-off of intangible property, various forms of financing arrangements, and international transactions, including cross-border arrangements that exploited debt and equity rules. We also looked at various aggressive arrangements involving GST and schemes designed to exploit the superannuation laws.
During the year we also finalised audits of some schemes that have been marketed and implemented in recent years. These schemes were generally marketed to a select group of taxpayers through a network of agents linked to the promoter. Some schemes used offshore structures that involved claims for pre-paid management fees for marketing services through the internet. Many of the schemes involved limited recourse financing arrangements.
The decision of the High Court in May in the Hart case, which involved a split loan arrangement, clarified how the general anti-avoidance provisions in the income tax law apply to transactions that have a broad purpose of achieving some commercial end but are structured in a way that is tax driven.
During the year there were other important decisions about the general anti-avoidance provisions handed down by the Federal Court. These are discussed in part 5.3.
Review by the Auditor-General
In January this year the Australian National Audit Office released its report into our management of aggressive tax planning. The report endorsed our approaches, including improved intelligence gathering and analysis and more timely information and warnings for the public. It concluded that we have the strategies, structures and processes in place to effectively manage aggressive tax planning, but made five recommendations to further improve the effectiveness of our approaches. We agreed with these recommendations and are implementing them.
Inspector-General of Taxation
The first review to be carried out by the newly appointed Inspector-General of Taxation was to consider our approach to administering the general interest charge in disputed tax situations, particularly focusing on employee benefit arrangements.
Joint international taskforce
In April this year we announced the establishment of the Joint International Tax Shelter Information Centre, a joint taskforce with Canada, the United Kingdom and the United States, aimed at addressing challenges around aggressive tax planning. An initial focus of the taskforce's work will be to look at how corporations and individuals use financial products and arrangements in aggressive tax planning schemes to reduce their tax liabilities.
The purpose of the taskforce is to:
- provide support to the tax administrations of each country by identifying and understanding aggressive tax planning schemes and those who promote them
- share expertise, best practice and experience in tax administration to combat aggressive tax planning schemes
- exchange information on tax schemes in general, and on specific schemes, their promoters and investors, consistent with the provisions of bilateral tax conventions, and
- enable each administration to better address tax schemes promoted by firms and individuals who operate without regard to national borders.
We continued to focus on tax haven arrangements, with an important focus being to identify promoters of schemes that involve tax havens.
Communicating our view
We continued to advise the community of the risks associated with aggressive tax planning by:
- releasing the Compliance program 2003-04 and Tax havens and tax administration, which outline the risks we are seeing and the serious consequences of using tax havens in an attempt to avoid or evade tax
- issuing 10 taxpayer alerts
- placing matters of current interest on our website at www.ato.gov.au/atp, which also contains information about alerts, court cases, media releases, rulings and descriptions of schemes, and
- providing our views through speeches, interviews, media releases and articles advising people of the risks of aggressive tax planning.
Superannuation
Superannuation schemes became an increasing focus this year as we identified a number of arrangements promoting the use of self managed superannuation funds to gain illegal early access to preserved superannuation. For more information see part 3.3.
Goods and services tax
We are seeing more aggressive tax planning arrangements that involve GST. This year we identified schemes involving property, second-hand goods, timing and barter arrangements. We sought to counter this by releasing six taxpayer alerts to warn the community about these arrangements.
We have pursued those responsible for some of these schemes and two company directors involved in 'sales' to related parties were convicted and jailed. These 'sales' were at inflated values and designed to take advantage of GST credits by manipulating a timing advantage between a vendor using a cash basis of accounting and a purchaser using a non-cash basis of accounting.
We also investigated property schemes that manipulate GST joint venture, grouping and going concern concessions to avoid GST on the sale of new residential property or reduce the margin on which GST is paid. Such schemes will be contested using the GST general anti-avoidance provisions.
We continued to focus on tax agents and advisers who are either actively involved in promoting schemes or have a history of doing so.
Employee benefit arrangements
During 2003-04 the courts upheld our views about an offshore superannuation scheme and an employee benefit trust scheme. There are now six cases involving various categories of employee benefit arrangements where the courts have confirmed that these schemes are not tax-effective.
In the Walstern case the Federal Court agreed that the sole purpose of the contribution to a New Zealand based superannuation fund was not to provide superannuation benefits for employees. The court also held that fringe benefits tax applied to the contributions, although we indicated that we did not intend to collect both income tax and fringe benefits tax debts.
The Spotlight Stores case involved an employee benefit trust arrangement in which deductions were claimed for contributions to an employee incentive trust that would benefit arm's length employees in future years. The claimed amounts were contributed well in advance of when they were required and mostly returned to the employer by way of a round robin loan-back arrangement. The Federal Court held that the general anti-avoidance provisions in Part IVA of the income tax law applied to strike out the claimed deductions. The court concluded that the case 'is one in which "a flurry of activity around the end of the tax year" in establishing and carrying out the Pt IVA Scheme is clearly aimed at obtaining a substantial deduction in that year'. (Merkel J in Spotlight Stores Pty Ltd v Federal Commissioner of Taxation [2004] FCA 650.)
It is disappointing to see that new employee benefit arrangements, which are variations of previous schemes, are still being marketed, with some involving international transactions. In one newly identified scheme almost 50% of the participants were involved in earlier iterations of employee benefit arrangements. During the year we raised amended assessments to deny the deductions claimed in respect of these schemes.
Mass marketed investment schemes
We continued to process settlements arising from the 14 February 2002 offer, with around 39,000 participants settling their dispute. This involved around 63,000 investments in 200 different schemes.
At 30 June 2004 we had determined 982 objections of those participants who did not settle, with around 1,200 remaining to be determined.
The Federal Court handed down decisions in two further 1990s mass marketed investment schemes during 2003-04. In these cases, Puzey and Sleight, the Full Federal Court confirmed our view that the deductions claimed were not allowable. Both taxpayers have filed an application for special leave to appeal to the High Court.
In another case, Cooke & Jamieson, the Full Federal Court held that the taxpayers' claims were allowable. This case involved a 1980s horticultural scheme and did not have the same financial arrangements as the typical mass marketed agricultural scheme of the 1990s. For this reason, we believe that the relevance of this decision is minimal.
Service trust arrangements
We continued to review service trust arrangements. In addition to conducting audits, we also sent questionnaires to 56 accounting and legal firms to identify the scope and intent of their service trust arrangements. After analysing their responses, we decided to audit further cases in 2004-05.
We have also been preparing a public ruling to give taxpayers practical guidance on the deductibility of fees paid to related service trusts.
Promoters
Our promoter taskforce continued to examine higher risk promoters, who are increasingly designing arrangements that use offshore entities to provide services. In some cases a number of countries are used, not all of which are tax havens. This can provide a cloak of legitimacy to arrangements that are actually tax avoidance structures.
The taskforce works closely with other areas in the Tax Office, including the Tax Haven Taskforce, and other agencies to ensure a coordinated approach to examining promoters.
During the year the taskforce undertook 50 access visits without notice to premises associated with 26 promoters. While the visits confirmed that tax avoidance arrangements are not generally being mass marketed, we did identify structures and arrangements tailored to meet specific clients' circumstances.
Many promoters have a generally poor record of personal tax compliance. During the year the taskforce:
- demanded that 518 promoters and related entities lodge returns, resulting in assessments of $9.4 million
- raised $80 million in tax and penalties in amended assessments as a result of audits
- required 233 entities controlled by promoters to lodge early and expanded tax returns, and
- participated in joint investigations of 36 promoter cases with other government agencies, including 8 superannuation arrangements.
Case study: greed plus tax haven equals dodgy tax advice
We recently acted on a tip-off about a highly dubious tax haven scheme being promoted to small to medium enterprises.
A tax professional contacted us after discovering the scheme in a new client's tax records. The scheme offered big tax benefits on a very shaky basis - round robin financing to a tax haven entity would help the business expand!
When officers from our promoter taskforce interviewed the taxpayer they quickly realised that the scheme was not a one-off - many others were likely to be involved.
The scheme was quite simple - the client was invoiced for 'business expansion services' by a tax haven entity, and then the money forwarded was returned a few days later as an unsecured loan and the client could purportedly claim the invoiced amount as a tax deduction. On this flimsy basis the client would typically claim a deduction for $250,000. The promoter did quite nicely too, charging around $15,000 for a deduction of this size.
We acted swiftly to end the party for the promoter. The high risk in this case meant that we took access without notice to the promoter's records. This resulted in many clients coming forward to disclose their involvement in this and other similar arrangements. The promoter's website promoting offshore tax structures also disappeared! And look what happened to his trust account after we used our access without notice powers!
Product rulings
Product rulings continue to be an integral part of our strategy for managing tax-effective investments. They provide certainty to the community about the deductions that participants in tax-effective investments can claim, provided the investment project is implemented as described in the product ruling.
We issued 63 product rulings relating to managed investment arrangements and films this year, as well as 19 single-issue product rulings dealing with non-commercial losses.
In 39 cases, 8 of which related to non-commercial losses, we were unable to give a favourable ruling. This represented a decrease on last year and indicates the effectiveness of the product ruling system as a strategy for managing tax-effective investments.
We also issued 28 product rulings relating to financial products during the year. These broadly involved capital-protected products to buy listed shares, including listed instalment warrants.
We reviewed 42 arrangements that had been issued with a product ruling, taking further action on 13 arrangements. In some cases this involved withdrawing the ruling. We also reviewed 54 applications for product rulings, including cases where we had declined to provide a favourable product ruling and others where the ruling application was withdrawn. In four of these cases the project had proceeded without a product ruling. We are reviewing these to determine the tax consequences for investors in those arrangements.
High wealth individuals
Our High Wealth Individuals Taskforce continues to manage the compliance of approximately 700 wealthy individuals and their 17,000 associated entities. The taskforce completed 194 risk assessments during 2003-04, with higher risk taxpayers being required to either lodge expanded tax returns or provide financial statements. Some were subject to audit. The taskforce completed 33 audits during the year and there were 51 audits in progress at 30 June 2004.
Revenue
The taskforce raised $208 million in tax, penalties and interest in 2003-04, $178.5 million of which is subject to dispute. The taskforce collected revenue of $391.4 million, with an additional $9.2 million being collected outside the taskforce from audits of entities controlled by high wealth individuals. Table 3.1 summarises the total revenue collections since the taskforce's inception in 1997.
Compliance activity by the taskforce also resulted in reduced revenue losses of $195.3 million and capital losses of $55.8 million during the year. The disallowance of losses should increase the level of tax paid in future years. Table 3.2 summarises the results of loss adjustments since 1997-98.
Figure 3.1 demonstrates the real growth in tax payable on original assessments issued to high wealth individuals and associated entities from 1994-95. The growth in gross domestic product over the same period is provided for comparison.
The analysis ignores amended assessments, which are often the result of audit activity. There are a number of factors that will influence the growth in the amount of tax payable, including an improvement in voluntary compliance by high wealth individuals and their associates. We believe that some of this improvement is due to the work of the taskforce.
Arrangements under review
The taskforce continues to review a number of tax planning arrangements, often tailored to the circumstances of the particular group. Issues include:
- arrangements that seek to limit the amount of capital gains tax payable, including schemes to inflate the cost base of assets and non-arm's length transactions to minimise the consideration received on disposal of an asset
- deductions claimed for intellectual property schemes
- non-inclusion of income through purported employee share acquisition schemes, and
- the use of offshore structures and arrangements to avoid or evade tax payable in Australia. These include arrangements to avoid the controlled foreign companies provisions of the law.
International tax issues
We continued to maintain our focus on international issues to ensure that Australia obtains its fair share of tax and that global profits are properly allocated.
Working with others
We take part in major international forums involving tax administration to ensure that Australia's views are reflected on issues such as tax haven bank secrecy, e-commerce, treaty interpretation and transfer pricing (profit shifting to avoid tax). Forums include the Organisation for Economic Cooperation and Development; the Pacific Association of Tax Administrators; the Study Group for Asian Tax Administration and Research; and the Commonwealth Association of Tax Administrators.
We also support other tax administrations through technical assistance and other programs, working with AusAID and other agencies such as the Department of Foreign Affairs and Trade and the Attorney-General's Department. This year we assisted various Asia-Pacific countries, including China, Korea, Vietnam and Malaysia, with a range of tax administration issues such as transfer pricing and GST.
Australia currently has treaties with 42 countries, allowing us to exchange information about tax issues and transactions. This year we started negotiating tax information exchange agreements with cooperative tax havens to enable the exchange of financial and other tax-related information about Australian citizens. We approached 33 tax haven countries to negotiate agreements, and have commenced formal negotiations with Antigua and Barbuda, Bermuda, Guernsey, Jersey and the Isle of Man.
On 23 April 2004 we signed a memorandum of understanding with Canada, the United Kingdom and the United States to set up a joint taskforce, the Joint International Tax Shelter Information Centre, to increase cooperative global approaches.
Tax havens
Tax havens are used legitimately to provide finance, insurance, broking, holding company and head office services that are facilitated by modern communications. However, we are concerned about schemes and arrangements where taxpayers exploit the secrecy laws of tax havens in an attempt to conceal assets and income subject to tax in Australia.
We continued to focus on tax haven arrangements being used to avoid tax on either Australian or foreign source income. This year we sent over 1,100 questionnaires to individuals and entities that deal with tax havens, identifying a number of issues and complex arrangements that we will follow up with audits.
Working with AUSTRAC and analysing the data they provide also helps us identify those who try to avoid their tax obligations by using tax havens.
In February 2004 we published Tax havens and tax administration, which looks at tax havens, the potential risk areas for taxpayers, and how we identify and investigate tax haven arrangements.
Global profit allocation
The number and value of related-party international dealings continued to grow strongly, reflecting the increasing globalisation of the Australian economy. We estimated such dealings (excluding loans) to be worth more than $150 billion this year. The potential for multinational companies to shift profits through various related-party dealings means that this remains a key focus.
We increased our concentration on transfer pricing risk assessment and audits, completing more than 80 risk assessments and 20 transfer pricing audits during the year.
We expanded our work to cover transfer pricing among small to medium enterprises. This included piloting a booklet, International transfer pricing: a simplified approach to documentation and risk assessment for small to medium businesses, with selected taxpayers and their intermediaries. We are now using it in a much wider education campaign.
We continued to promote advance pricing arrangements with taxpayers, which are designed to provide greater certainty for all parties while reducing compliance costs and the risk of an audit and penalties. This year we completed 23 advance pricing arrangements and now have 117 arrangements with taxpayers. We also completed 10 mutual agreement procedures where we seek to resolve cases of potential double taxation with other tax administrations.
Case study: catching a tax dodger
The Tax Office and the United States (US) Internal Revenue Service recently flushed out a US tax avoider who was washing millions through an Australian bank account.
This story has all the hallmarks of a great crime story - tax havens, horse-racing systems, dual citizenship and foreign bank accounts. And when our Serious Non-Compliance audit team in Dandenong connected these pieces with a US resident's Australian bank account, they decided to call the Internal Revenue Service, our counterpart in the US.
This tax avoider's problems started when our Dandenong team audited a professional gambler who had developed a program to select winning horses for a business that operated from an offshore tax haven.
The gambler was a non-resident for Australian tax purposes and, even though he and his wife were living in the United States, the revenue from their business was going into an Australian bank account.
AUSTRAC records showed that $18 million had gone into his Australian accounts. Our auditors' task was to work out if the tax haven cash was assessable income for income tax purposes.
When it was established that he should be treated as a non-resident for Australian tax purposes, and that he might be avoiding tax in the US, we decided it was time to pass on the results of the audit to the Internal Revenue Service.
In December last year the information was passed on under the exchange of information provisions of the Australia - United States Double Tax Convention - and an individual with dual Australian-American citizenship received a big tax bill from the Internal Revenue Service.
Paul Duffus, First Assistant Commissioner International Strategy and Operations, received a letter from the Director, International, of the Internal Revenue Service, expressing their gratitude.
This case demonstrates how effective communication within the Australian revenue system and the information exchange provisions with our international counterparts can be.
New measures
Review of International Tax Arrangements
In the 2003 Federal Budget the government announced changes to international tax law to improve the competitiveness of Australian companies and enhance the attractiveness of investing in Australia by reducing tax and compliance costs. This will see fundamental changes to a wide range of areas, including controlled foreign companies, foreign investment funds, managed funds, capital gains tax and interest withholding tax.
This year we focused on reviewing compliance measures associated with the Review of International Tax Arrangements to ensure the government's policy objectives are met, and that tax benefits are not obtained beyond those intended by the law.
Non-residents
The government has introduced new foreign resident withholding arrangements which aim to overcome risks relating to certain non-residents. On 11 May 2004 the Minister for Revenue and Assistant Treasurer announced that the first three groups of payments to be covered by the new arrangements cover casino junket tour operators, sportspeople and entertainers and their support staff, and building and construction contractors. We are working to ensure that anyone who may be affected is informed of the new arrangements, and that the arrangements are properly implemented.
Clarifying the law
The main provision giving a tax exemption to individual taxpayers on foreign employment income is covered by section 23AG of the Income Tax Assessment Act 1936. The Lopez case helped clarify that income from independent personal services, such as consultancy and management fees, is not exempt under section 23AG.
We released Taxation Ruling TR2003/12 on 1 October 2003 to provide guidance to individuals who migrate to Australia before reaching retirement age on the tax treatment of benefits they transfer from their overseas employer-sponsored superannuation scheme. The ruling clarifies the tax treatment of such transfers between individual funds maintained overseas, and transfers from overseas funds to Australia.
AUSTRAC data
We continued our collaboration with AUSTRAC in enhancing the value and use of AUSTRAC data. This year our searches of the AUSTRAC database increased by 60% over last year. Table 3.3 shows how we used the data this year.
Table 3.3: Our use of AUSTRAC data, 2003-04 (33 KB)
AUSTRAC data is a primary source of information in examining tax haven arrangements and other transactions used to reduce, avoid or evade tax. It is also a valuable source for many risk assessment and case selection activities. Some examples of the way we use AUSTRAC data are:
- monitoring and detecting cash economy and GST transactions
- identifying offshore schemes
- examining arrangements where salary income is paid offshore, and
- obtaining more information in specific cases.
AUSTRAC data has helped us raise income tax assessments and collect debt and, in some cases, contributed to prosecution activity. Over the past four financial years we raised assessments of $279 million as a direct result of information obtained from AUSTRAC.
Case study: beware the tax haven taskforce
Taxpayers can now be caught out under a system that marries AUSTRAC data and Tax Office data, part of the work of the Tax Haven Taskforce.
In 2003-04 data matching of this kind led to a taxpayer paying over $5 million in additional tax and general interest.
We issued a questionnaire to the taxpayer about money transferred to directors and relatives from a tax haven.
On the advice of their accountant and lawyer, the taxpayer ended up making a full disclosure to us of undeclared capital gain of more than $9 million. They even told us about the interest income received from the tax haven.
The taxpayer, an Australian company, conducted a consulting business in Australia. It also held a 60% shareholding in a non-resident subsidiary that provided a similar service in another country.
The consulting business was sold to a company based in the United States for $17 million. Before the sale, the Australian company sought tax advice and structured a complex arrangement to eliminate the capital gains tax payable in Australia on the sale of the business.
As part of the arrangement, the Australian company entered into a contract to acquire the remaining 40% shareholding in its non-resident subsidiary for an inflated amount of $11.4 million.
Subsequently, the non-resident vendor shareholder reacquired all of the non-resident subsidiary's shares for $1, creating a capital loss for the Australian company. The Australian company declared the capital gain from the sale of the business, but this was offset by the capital loss claimed on the sale of its subsidiary.
With data matching we easily revealed that the taxpayer paid only $2 million for its 40% share - the remaining $9.4 million went to directors of the Australian company and their relatives via a third party bank account in a tax haven. At the time, it was claimed that this was at the written request and direction of the non-resident vendor shareholder.
Through matching AUSTRAC and Tax Office information we tracked the whole dubious sale.
Overdue debt and late or non-lodgment
The primary feature of an effective tax administration is a high level of compliance with requirements to lodge information. Information supports our compliance activities and the accurate determination of tax liabilities. Timely lodgment accompanied by payment lessens the potential for growth in tax debt.
We contact late or non-lodgers by letter, telephone or a visit and they may incur a penalty for lodging late or failing to lodge. In some instances we prosecute where we have requested lodgment and a taxpayer fails to comply. After first providing a warning, we may impose penalties for failure to lodge on time. During the year we issued more than 1 million warning letters. Almost 370,000 penalties were imposed, with a value of around $165 million. By matching information from a range of internal and external databases, we have identified people who have not lodged income tax returns or activity statements.
These approaches have led to more activity statements being lodged on time, and considerable success in securing lodgment of overdue activity statements and income tax returns. During 2003-04 we accounted for approximately 2.15 million overdue activity statements and 476,000 overdue income tax returns.
This activity has increased the amount of revenue collected. While some additional collectable debt has been established, the value of collectable debt increased by only 9% in 2003-04 compared to an increase of 25% last year. The effectiveness of our debt management has significantly improved, with an increase in the volume and value of debt collections. In particular, we have considered possibilities for assisting small businesses to manage their debts.
Many small businesses meet their current lodgment and payment obligations but experience difficulties in finalising outstanding debts. Typically, these businesses are viable but may have difficulties with record keeping or cash flow management. At the end of 2003-04 we offered them an opportunity to clear past debts.
Under this initiative we are offering reduced interest rates and flexible payment options on outstanding tax owed by eligible small businesses and individuals at 30 June 2003. The concessions are available provided they pay by direct debit and meet current and future lodgment and payment obligations.
This is a one-off opportunity for eligible businesses and individuals to pay their debts on favourable terms or face firm action by us. We are sending offers directly to eligible people, with a response required within 28 days of receiving the offer. The initial response from the community has been very positive, with many people contacting us before we sent them an offer.
During the year we continued to focus on those who persistently remain in or fall into debt, particularly those with a history of not meeting payment obligations. Our debt recovery work was supported by our efforts to ensure that our employees continue to display the skills and professionalism required to assist businesses and others with their outstanding tax debts.
The value of debt finalised at 30 June 2004 was $53.14 billion, an increase of 11.5% over last year. Overall debt collections improved significantly, with $40.41 billion collected this year compared with $37.75 billion for the same period last year. At the same time, the value of total debt on hand reduced by 1.6% to $16.93 billion. For the first time in more than five years total debt on hand reduced in value. This can be compared with an increase in value of total debt of 24% last year.
3.4 Partnering with the community
The Tax Office convenes a number of consultative forums, which give our stakeholders a voice in how the revenue system is administered. These forums include professional advisory committees, liaison groups, expert panels and industry partnerships.
Our consultation with stakeholders helps us understand particular taxpayer circumstances, behaviours and risk profiles. This enables us to better meet taxpayer needs through our activities, products and services, thereby making it easier for them to comply with their tax obligations.
Consultative forums are one way we establish and maintain a relationship of mutual trust and respect with the broader community. They demonstrate to our stakeholders that we are open and accountable to them.
Tax profession consultative forums
We conduct regular meetings to consult with tax practitioners and members of the major accounting, tax and legal professional associations.
The peak consultative forum is the National Tax Liaison Group, which has been operating for 20 years and has representatives from tax, legal and accounting professional associations, Treasury and the Tax Office.
The ATO Tax Practitioner Forum reports to the National Tax Liaison Group and deals with the day-to-day administrative and operational issues affecting tax practitioners. The forum provides the opportunity for a candid exchange of views and for all parties to gain a mutual understanding of the impacts of tax administration. Membership includes eight tax practitioners (representing the tax practitioner community), representatives from the eight major tax and accounting professional associations and two representatives from the large volume statement and return preparer groups. The forum meets quarterly and usually holds one meeting in a regional location.
The forum sponsors working parties which concentrate on specific areas of administration, for example, accounting, lodgment and tax reform.
There are also eight state-based regional tax practitioner forums across Australia in Adelaide, Brisbane, Canberra, Hobart, Melbourne, Perth, Sydney and Townsville.
Industry partnerships
This year we operated partnerships with key industries and sectors, including property and construction, tourism, telecommunications, primary production, health, education and charities.
Members of industry partnerships come from industry and professional associations, the tax profession, government and specific interest groups. We invite these organisations to nominate their representatives for the partnerships. Membership is reviewed annually.
The main purpose of the industry partnerships is to facilitate an open exchange of views and information and enable us to work cooperatively with specific industries and sectors to:
- address issues about the administration of the revenue system
- identify ways to minimise the costs of compliance by better designing the system and helping people meet their obligations
- develop better strategies to deal with compliance risks
- better understand and meet taxpayer needs
- increase the community's understanding of how the revenue system is administered, and their confidence in it, and
- improve our service delivery and performance.
Indigenous Tax Advisory Group
The Indigenous Tax Advisory Group, established in August 2003, advises us on issues of concern to Indigenous communities and helps us collaboratively address the compliance issues confronting Indigenous people, community organisations and business owners.
It provides feedback to us on the information and education needs and preferences of Indigenous communities and has itself become a way to get tax messages and information to Indigenous taxpayers.
The group's membership includes representatives from Aboriginal artists and business associations, tax agents, land councils, the Torres Strait Regional Authority, the Office of the Registrar of Aboriginal Corporations, Centrelink and other agencies.
Bookkeeper Industry Advisory Group
Small businesses increasingly rely on bookkeepers to help them meet their tax obligations.
In November 2003 we sponsored a symposium to facilitate a broader discussion of the issues facing this rapidly growing sector. This followed bookkeeper groups raising concerns with us about accreditation and quality assurance. Stakeholders represented at the symposium included bookkeepers, tax agents and professional associations. The symposium recommended a formal industry partnership.
As a result, in May 2004 we formed a Bookkeeper Industry Advisory Group to work with the industry to ensure bookkeepers operate correctly while providing a service to small businesses. Membership includes a number of representative associations, franchises and networks.
Corporate Consultative Committee
The Corporate Consultative Committee is a high-level forum for large business and us to consult on issues of mutual concern about the management and administration of the corporate tax system. Under its umbrella are a range of sub-committees and other tax forums that address specific industries or issues. Such forums provide an opportunity for regular and ongoing consultation on tax administration issues, as well as the opportunity for corporate taxpayers to participate in co-design processes.
The committee's most recent forums covered issues such as environmental scanning, compliance product design, consolidation and client relationships. The committee also provided input into the Large Market Information Collection Project.
Large business members of the committee include the:
- Corporate Tax Association
- Business Council of Australia
- Australian Chamber of Commerce & Industry
- Australian Industry Group
- Minerals Council of Australia
- Australian Retailers' Association
- Investment & Financial Services Association
- Australian Bankers' Association
- Insurance Council of Australia, and
- Property Council of Australia.
Personal Tax Advisory Group
The Personal Tax Advisory Group meets regularly to discuss the administration and delivery of services and products we provide. This year the group, and the broader membership of the organisations represented on it, was involved in user testing the 2004 short income tax return form, compliance letters and a record keeping tool to help individuals.
In March 2004 a Capital Gains Tax Sub-Group was established to review educational products about capital gains tax, with the aim of raising taxpayer awareness of the implications of transactions involving capital gains.
The group has members from a cross-section of organisations representing the key individual taxpayer groups, including:
- youth
- families
- employees and contractors
- investors
- regional and rural taxpayers
- older Australians, and
- people from a non-English speaking background.
Small Business Advisory Group
The Small Business Advisory Group provides a forum for us to consult with small to medium business operators about tax issues affecting them. Members come from new and established businesses, and work in a mix of computerised and non-computerised environments. A typical member could be a retail operator, a primary producer or a private education provider.
The group considers a range of tax issues, including those associated with implementing new tax measures. Members are encouraged to provide their honest feedback, allowing us to directly hear the views and concerns of small to medium businesses. The group also plays a significant role in critiquing the content, feel and layout of our business products. Through this process, members have been able to influence our products and services, help shape the revenue system, and contribute to our easier, cheaper and more personalised program.
During the year individual members were invited to participate in smaller reference groups and co-design sessions. They were extensively involved in co-design sessions and user clinics in the redevelopment of our website and development of the Business Portal.
Members were able to talk to us about:
- how a small business operator might navigate our website
- the type of information a small business operator might look for on our website
- the type of transactions a small business operator might use our website for
- what they would like to see on the portal and how they would like to use it, and
- their initial reaction to the first release of the portal.
Commissioner's Small Business Consultative Group
The Commissioner's Small Business Consultative Group is a peak consultative group representing industry, business operators and tax practitioners.
The group plays a significant role in advising the Commissioner about tax and superannuation administration issues affecting business. Where appropriate, members seek input from their business colleagues, industry networks and association members on issues affecting their specific industry.
We look for opportunities to involve the group in existing programs and new initiatives, such as common activity statement errors, and the easier, cheaper and more personalised program.
Case study: tax help in Arnhem Land
Case study: tax help in Arnhem Land
In April 2004 Broni Mudge and Deidre Barrett from the Client Access and Education Unit trained volunteers in Arnhem Land to provide Tax Help to neighbouring Indigenous communities. The volunteers will also work closely with Centrelink as a referral point for clients.
Deidre said educating people about the baby bonus was a big part of this year's Tax Help training.
'It makes a difference when people have someone who can point it out to them and it's a very simple form to fill out - and it means an extra $500!'
In one training session Deidre and Broni conducted, Tax Help volunteers from five remote Indigenous homelands committed to three days of training, with each homeland centre expected to process about 60 tax returns.
Deidre said having people within a community able to help fill out tax returns helps low-income earners.
'Tax Help in remote communities makes the revenue system much more accessible', she said.
The Tax Help program has now been providing community-based tax assistance for over 16 years.
During 2003-04 almost 1,900 volunteers operated out of 1,000 centres, providing free assistance to low-income earners with their tax returns and baby bonus claims.
Around 40% of the centres helped taxpayers lodge through e-tax, while the remainder lodged the short tax return.
This year we recruited volunteers for 40 centres catering specifically for Indigenous communities. Centres are now operating in new areas such as Cherbourg (Queensland), Walgett (New South Wales) and a variety of remote communities in the Northern Territory and Western Australia.
Tax Help is available for all low-income people earning less than $35,000 a year from non-business income.
To find out where your nearest Tax Help Centre is located, call 13 28 61.
Public rulings remain the principal means for communicating our view of the law to the community.
In addition to working with industry partnerships and independent technical experts to help formulate our public rulings, we introduced rigorous internal procedures to ensure the most important issues are being addressed in our public rulings program.
We have three areas involved in technical decision making - the business lines, centres of expertise and the Tax Counsel Network. Each area has designated responsibilities, which are designed to contribute to an overall robust interpretation of the law, an essential feature of efficient tax administration. The Tax Counsel Network has primary responsibility for resolving the most important issues.
We also receive professional advice on technical issues from external legal experts, for example, through the appointment of the Honourable Daryl Davies QC to the role of Special Counsel. Mr Davies provides us with advice and assistance on matters that are critical to administering the revenue system, with an emphasis on matters of principle and policy. This advice helps us base our view on the proper interpretation of the law to better serve the community.
To improve the risk management of complex and uncertain areas of the law, we instituted a process for allocating critical and high-risk issues to the most senior technical officers in the Tax Counsel Network to resolve. This has resulted in the publication of several key public rulings to provide taxpayers with certainty to meet their obligations.
We address relevant community and industry concerns when we develop public rulings, and also receive comment from the internal and external independent members of our rulings panels before we issue both draft and final versions of public rulings. Our public rulings go through a rigorous process to engage in extensive consultation with internal and external stakeholders before we publish our final view of the law. This level of consultation is consistent with our aim of world best practice in tax administration.
In addition to our flagship public rulings, we provide private rulings, interpretive decisions, other binding advice and general correspondence. Taxpayers may also request reviews of our decisions about their private rulings and assessments. Our ways of providing advice are designed to help make taxpayers' experiences easier, cheaper and more personalised.
We take our role of administering the tax law seriously and take care to consider taxpayers' concerns to ensure the law works both practically and in the way it was intended by government. We achieve transparency through our practice statements, which operate as instructions for our employees on our approach in certain situations.
Our processes and consultative methods are essential in developing a coherent fabric of law and practice that provides the community and government with greater confidence in the integrity of the revenue system.
Taxpayers benefit from a revenue system with integrity through lower compliance costs and certainty in their tax affairs. This improves voluntary compliance.
We are committed to improving our technical decision-making processes for the benefit of the community as a whole.
Expert panels
There are a number of expert panels, comprising not only tax officers but also members of the tax profession from private enterprise and academia. The role of these panels is to ensure:
- that the Commissioner's interpretation of the laws he administers reflects a thorough understanding of taxpayers' circumstances, commercial realities and so on, and takes into account alternative views. Panels that fill this role include the Public Rulings Panel, International Tax Rulings Panel, Indirect Taxes Rulings Panel and the Part IVA Panel
- the integrity of our process for selecting and funding test litigation cases to resolve issues important to administering the revenue system. We consult the Test Case Litigation Panel before deciding which cases to support. The panel comprises senior tax officers, as well as two members of each of the legal and accounting professions who provide external professional guidance, and
- the integrity of the results of the twice-yearly quality reviews of a random sample of our interpretive decisions. This involves various technical quality review panels.
The Heads of Commonwealth Operational Law Enforcement Agencies Forum seeks to increase the effectiveness of the Australian Government's law enforcement and regulatory framework by raising matters of mutual interest in a consultative and cooperative forum with member agencies and departments.
This is a biannual consultative forum that includes the main law enforcement and regulatory agencies. Membership includes the Australian Crime Commission, Australian Federal Police, Australian Competition and Consumer Commission, Attorney-General's Department, Australian Prudential Regulation Authority, Australian Securities and Investments Commission, Australian Taxation Office, AUSTRAC, Australian Customs Service, Department of Immigration and Multicultural and Indigenous Affairs, and the Commonwealth Director of Public Prosecutions.
Recent matters discussed include identity crime, fraud, money laundering, high-tech crime, corporate crime and corruption.
We are represented on the forum by the Commissioner, Mr Michael Carmody, and the Deputy Commissioner Serious Non-Compliance.
Part 4 Other responsibilities
Download Part 4 in PDF format (55 KB)
Part 4 reports on the statutory authorities that come under our jurisdiction - the Australian Valuation Office and the Development Allowance Authority.
4.1 Australian Valuation Office
The Australian Valuation Office (AVO) is the Tax Office's only commercial business service line.
Our vision is to be the 'valuer of choice' for government by using our broad expertise to solve problems and help our customers make informed decisions.
We are one of Australia's largest valuation practices, with 122 staff in 11 offices around Australia. We compete on a fee-for-service basis with a very competitive private sector to provide government agencies with policy and strategic advice on valuation and related issues. This advice covers a wide range of sensitive and confidential areas and helps government agencies contain outlays and optimise revenue.
Key elements of our success in 2003-04 included:
- maintaining our consistent record of making an annual profit
- appointing Dr David Parker as the first General Manager from the private sector in our 94-year history
- the Australian Government Competitive Neutrality Complaints Office finding that our operations are consistent with competitive neutrality principles, and
- researching and developing new products and processes to help achieve our vision.
Customers
We continued to build on the sound relationships we have developed with key customers. By adding value to customers' operations, we succeeded in renewing our relationships with Centrelink and the Northern Territory and Australian Capital Territory governments. However, if we are to maintain the support of such key customers, we must continue to provide a high-quality and competitively priced service that aligns with their needs and expectations.
In 2003-04 we succeeded in obtaining contracts from National Australia Bank, the Australian Broadcasting Corporation, Aboriginal and Torres Strait Islander Services, and the Queensland State Government. This followed the development of a coordinated suite of marketing products and the appointment of focused business development officers.
Operations
Changing our work practices and refocusing our culture of total customer service to embrace a national approach to performance management have continued to improve our outcomes.
We have sustained our competitive position by managing overheads, introducing greater efficiencies, using information and communications technology strategically, and consolidating our product lines into mass appraisal, specialist valuations, plant and equipment valuations and corporate valuations.
People
Following his appointment as General Manager, Dr Parker undertook a 'journey of discovery'. He visited all AVO offices and met our employees, listening to their views on the organisation's strengths, weaknesses, opportunities and threats. He also heard about their likes and dislikes and other matters needing attention.
Based on employees' feedback, we introduced an internal document, It's your choice. This provided an opportunity for them to choose where they would like to work and new career paths for those wishing to develop management or marketing skills.
We improved employee communications by introducing a series of monthly and quarterly national teleconferences to update various groups on operations and business plan progress.
The teleconferences complement the monthly meetings held in each office.
Performance
Details of the AVO's financial performance are in appendix 7.
4.2 Development Allowance Authority
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 Commissioner of Taxation holds the office. During the year the authority's powers were delegated to a senior executive tax officer.
The authority administers two investment incentive schemes - the Development Allowance and the Infrastructure Borrowings Tax Offset Scheme. These schemes were designed to make the Australian economy more internationally competitive.
Development Allowance
The Development Allowance provides a tax deduction of 10% of the value of an eligible investment, in addition to depreciation. The concession was subject to a statutory time limit, which has now expired. To qualify for the Development Allowance, eligible property must have been first used or installed ready for use before 1 July 2002.
Infrastructure borrowings tax offset scheme
The Infrastructure Borrowings Tax Offset Scheme provides Australian government support for genuine infrastructure investment in Australia. This scheme replaced the Infrastructure Borrowing Scheme, which closed to new projects in February 1997.
Legislation giving effect to the scheme is contained in Division 396 of the Income Tax Assessment Act 1997. We jointly administer the scheme with the Department of Transport and Regional Services.
The scheme provides a tax rebate for approved infrastructure to the resident infrastructure lenders. In return, 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.
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 Australian Government, represented by the Minister for Transport and Regional Services.
The selection of projects is based on the limited funds available, the eligibility requirements, and the relative merits of projects. No applications were called for in the year ended 30 June 2004.
In the 2004 Federal Budget the Treasurer announced that the scheme is being phased out and that no further applications will be called for.
Part 5 Management and accountability
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Part 5 explains our management practices, including our corporate governance framework, and external and internal scrutiny.
5.1 Corporate governance
The Tax Office corporate governance approach is directed at achieving our overall outcome and enhancing community confidence in the organisation through clear, strategic direction, decisions and actions.
Our corporate governance policy and processes are outlined in a corporate policy document, ATO governance framework, published in August 2003. Our governance framework outlines the key processes through which the Commissioner, as Chief Executive, controls the organisation. This internal document is available to all employees on our intranet. Key components are:
- our outcome and outputs framework, which sets out what we deliver, and
- our integrity framework, which provides the context for how we achieve our outcome.
Practising good governance enables us to maintain community confidence and trust by meeting community expectations of probity, accountability and openness. This, in turn, leads to higher levels of voluntary compliance.
The ATO governance framework is based on clearly stated principles of good governance and describes the models, instruments and arrangements that:
- are required to achieve our purpose, including
- mechanisms to set direction (for example, our strategic statement and plan)
- mechanisms and processes for managing our governance environment (for example, conformance, leadership, communication, risk management and evaluation), and
- administrative arrangements (for example, rules, instructions and delegations)
- are used to manage the organisation, including key roles and responsibilities of senior management committees, organisational units and/or individuals, and
- assure internal and external stakeholders that we are achieving corporate objectives and conforming to all requirements.
The framework emphasises the importance of maintaining high standards of propriety and probity, based on honesty and objectivity. This is highlighted by the prominence given to the integrity requirements of the organisation.
Since publishing the framework, we have concentrated on incorporating the underpinning processes into our everyday activities. We have particularly focused on improving the corporate management practice statements system and certificate of assurance process, developing the skills of our managers, and streamlining our corporate committee functions.
Our integrity framework
Our integrity framework
Our integrity framework provides the basis for demonstrating that we set and meet high standards of internal integrity. While key components of the integrity framework are embedded in our governance framework, integrity issues are addressed in the specific outcomes, outputs, tasks and measures set out in relevant parts of the sub-plans that underpin our strategic statement.
Integrity principles underlie the development and implementation of our policy and processes, providing internal and external confidence in our conformance and performance, and informing sound decision making. These policies and processes are subject to ongoing review as community expectations and external obligations and policies change.
Our integrity framework, together with fraud prevention and control measures and reports from the various committees, enable the ATO Executive to monitor the internal integrity of the organisation.
In April 2004 we nominated our integrity framework for a Commonwealth Association for Public Administration and Management award. The awards recognise outstanding achievement and best practice in corporate governance. We were one of 31 semi-finalists out of 154 submissions from 14 countries.
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Integrity Adviser
To ensure continuity of knowledge and foster integrity measures to become part of our everyday activities, Peter Kennedy was re-appointed as our external Integrity Adviser in 2003 until 8 October 2004. This follows his initial two-year appointment in July 2001.
The Integrity Adviser is treated as a member of the senior executive team and has access to all our (non-taxpayer) information, people and processes. Specific responsibilities include providing a monthly report to the ATO Executive on current issues and our performance against agreed integrity indicators, and meeting regularly with the responsible Second Commissioner. He is also a member of the Audit and Integrity Advisory committees and the people and place sub-plan executive, and attends senior management meetings.
The Integrity Adviser does not otherwise take part in managing the Tax Office, except as agreed by the ATO Executive.
During 2003-04 the role was refocused to advise senior executive officers on how to incorporate integrity principles and activities into the everyday work of the organisation, using governance processes such as corporate management practice statements and certificates of assurance. We expect the role of Integrity Adviser to continue, with this greater focus on advising rather than developing and implementing integrity measures.
Corporate management practice statements
Under our governance framework, corporate management practice statements provide assistance and a single point of reference for our employees on what directives to follow and their corporate management duties.
In translating existing policies and developing new policies in accordance with external obligations and requirements, we issued 21 corporate management practice statements this year, taking the total to 30. Another 50 are in various stages of drafting, consultation and approval.
Topics covered in corporate management practice statements reflect key aspects of our work where principles of good governance must be applied to achieve a highly performing and well-governed organisation. Topics covered include:
- our workplace diversity program
- conflict of interest in the workplace
- our working relationship with the Australian National Audit Office (ANAO)
- continuity of work in the event of disruptions
- proper use of information and communication technology facilities, and
- provision of formal advice to Treasury.
One of our challenges has been to raise awareness of corporate management practice statements throughout the organisation. We are doing this through various means, such as our weekly electronic staff newsletter.
Certificates of assurance
Providing certificates of assurance to the Commissioner gives assurance that we are conforming with a broad range of internal and external integrity matters. This regular process enables us to demonstrate conformance with all relevant statutory and legislative requirements. The certificates of assurance note:
- the integrity matters that are required to be assured
- the level to which we have complied with the matters, and
- the basis on which the assurance is given.
There are 42 individual certificates of assurance covering 24 assurance matters, for example, financial conformance. The certificates of assurance address 83 pieces of legislation, 22 other external requirements such as best practice guides, and 92 internal requirements, including approved and proposed corporate management practice statements.
National Program Managers provide assurance for the activities for which they have corporate responsibility. The assurances are supported by processes or other evidence-gathering activities that provide support for the assertions being made in the certificate. The Integrity Adviser reviews all certificates to ensure the integrity of the process.
During the past year the process has enabled us to increase our focus on detailed action plans supporting policy documentation, processes and ongoing controls in areas requiring attention.
Managing risk across the Tax Office underpins our corporate governance. It is also an integral part of our strategy and planning process and the deliberations of the ATO Executive and sub-plan executives. Identifying risks helps us establish priorities and plan and allocate resources to achieve our objectives.
Our risk management methodology involves identifying, assessing and managing risks that could affect our ability to optimise collections and make payments under the law in a way that instils community confidence that the system is operating effectively. As we work in an environment where it is not practical to materially treat all risks, our approach is to ensure that we identify and take steps to properly manage the highest risks, as well as monitoring lesser risks to prevent them from increasing.
Our approach to risk management is guided by the Australian New Zealand risk management standard AS/NZS 4360:1999 and CPA Australia's Better practice guide for the public sector on enterprise-wide risk management.
Each sub-plan assesses risks in accordance with their policy for setting priorities. Risks are analysed to estimate their likelihood and potential consequences, and unacceptable risks are reviewed and ranked in order of priority. Each sub-plan develops a risk statement, which is considered at Plenary Governance Forum meetings.
Under the Australian Public Service (APS) code of conduct, all employees are required to act ethically. The Commissioners seek assurance of this through an integrated approach that involves:
- developing and maintaining a policy framework on integrity-related issues, including the APS values and code of conduct
- reviewing our processes and systems to maintain the highest level of integrity, for example, by using technology to detect inappropriate emails
- developing and delivering interactive fraud and ethics awareness programs to promote corporate values and appropriate behaviour
- investigating and addressing misconduct, and
- having various complementary reporting arrangements to oversee integrity indicators, including to the ATO Executive, the Integrity Adviser, the Integrity Advisory Committee and the Audit Committee.
During 2003-04 we enhanced the role of our Official Conduct Team, which helps managers ensure that the APS values and code of conduct are properly applied in the Tax Office. The team helps manage any misconduct through education and early intervention, thus ensuring that we apply sections 10 and 13 of the Public Service Act 1999 and promote an ethical workplace.
We participated in a number of inquiries conducted by parliamentary committees. We made two formal submissions and attended public hearings of the Joint Committee of Public Accounts and Audit, the Senate Standing Committee on Economics, and the Senate Standing Committee on Employment, Workplace Relations and Education.
We were also required to attend three Senate Economics Legislation Committee hearings, at which we took 77 questions on notice.
5.2 Management arrangements
Tax Office management arrangements enable us to flexibly respond to our dynamic environment and the demands placed on us by:
- establishing strategic priorities for the organisation, ensuring that we take a whole of revenue system view, not just a Tax Office view
- structuring our work so that we best match our skills, expertise and knowledge with a particular taxpayer base and/or risk
- working in a coordinated way across the organisation and exploiting synergies, and
- assuring ourselves that we are not only delivering on our outcome, but also working in a way that is consistent with APS values.
The management arrangements shown in figure 5.2 describe our structural framework, which will continue to evolve so that we can respond to changing demands. Figure 5.1 illustrates the key relationships between our different management elements.
The main purpose of annual reports is accountability. We took out the premier annual report award for 2002-03, judged by the Institute of Public Administration Australia, for Australian government departments and agencies reporting under the Financial Management and Accountability Act 1997.
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To oversee management of the organisation, the Commissioner of Taxation, as Chief Executive, has created the ATO Executive, which comprises himself as the Chair and the three Second Commissioners.
The ATO Executive has specific responsibilities, including:
- developing strategic directions for the organisation
- approving our strategic statement and plan
- monitoring overall delivery against our commitments and initiating corrective action where necessary
- approving necessary resource shifts between sub-plans
- acting as the steering committee for the Easier, Cheaper and More Personalised Change Program, and
- assuring Parliament, government and the community that the integrity of the Tax Office is being maintained. This includes assurance of our performance and integrity through reports from various forums and committees, such as the Plenary Governance Forum, and the Audit, Integrity Advisory and Finance committees.
In performing this role, the Executive reviews key financial (such as revenue and budget) and non-financial (such as service standards and heartbeat reports) performance indicators, and performance against sub-plans. It also considers reports from the Integrity Adviser on our performance against a range of integrity indicators. The Executive approves key practice statements and looks at a range of submissions that affect our strategic direction.
The Executive's meeting agenda was realigned during the year to provide a formal mechanism for focusing on specific areas of interest, such as strategic risks, opportunities and shifts. The Executive meets monthly and table 5.1 shows attendances for 2003-04.
The Tax Office Plan represents our strategic-level thinking and enables us to establish and oversee strategic priorities, taking both a whole of revenue system and whole of Tax Office view. Because of the diversity of our operations, the plan is divided into five sub-plans. The sub-plans are accountable for outcomes, while setting priorities and providing associated resources for our business and service lines.
Our five sub-plans reflect strategic groupings of the work we do:
- the compliance sub-plan covers our core work of supporting revenue management and provides assurance that the system is working as intended
- the easier, cheaper and more personalised sub-plan focuses on improving taxpayers' experience
- the operations sub-plan manages revenue collections and transfers, and
- the information technology and people and place sub-plans are our two key internal support areas.
The five sub-plans enable the ATO Executive to deliver a strategic vision of the organisation and the revenue system and oversee strategies, design, planning and delivery across the organisation. The Australian Valuation Office prepares its own plan (see part 4.1).
The sub-plans enable us to plan and budget to shift the overall focus of our work. For example, over the past two years the Executive has deliberately increased the compliance focus and allocated resources accordingly.
The creation of the easier, cheaper and more personalised sub-plan reflected our need to strategically focus on improving taxpayers' experience. It has enabled us to establish and manage priorities for improving this key aspect of our work. It has also enabled the Executive to allocate resources to ensure there is the right balance between the work we need to deliver now and shaping the organisation's capability to achieve a sustainable revenue system.
The planning and budgeting process is designed so that issues of strategic significance are escalated to the ATO Executive. Changes throughout the year that affect sub-plan outcomes or have an impact across sub-plans require Executive sign-off, while sub-plans can approve less significant variations.
The sub-plan executives focus on common goals and risks, enabling us to develop strategies across lines and reduce the duplication between lines.
A range of corporate committees support the ATO Executive and sub-plan executives by providing a strategic focus on particular issues and/or fulfilling a valuable assurance role.
A primary focus of some of these committees, such as the Audit and Integrity Advisory committees, is to provide additional assurance to the Commissioner and the Executive that our processes and practices conform to expected behaviour and values, and that undertakings (for example, audit recommendations) are met. These committees provide a check and balance so that issues are not overwhelmed by competing priorities.
Other committees are designed to see that senior managers focus on issues integral to our success, such as public rulings, policy input and broader design considerations (for example, the Policy Implementation Forum). These committees are chaired by Second Commissioners.
Some committees include experts external to the Tax Office.
The way these committees interact with the rest of the organisation varies from issue to issue. Based on intelligence or briefings, a committee may ask a senior executive to explain certain actions (or inaction) or direct that certain work be commenced. More commonly, the Executive and sub-plan executives refer key policies and issues to these committees for advice and/or endorsement.
In June 2003 our corporate committees were expanded to include committees based on client market segments and products.
Corporate Design Forum
Plenary Governance Forum
Audit Committee
Integrity Advisory Committee
Finance Committee
Easier, Cheaper and More Personalised Committee
Market and product committees
Corporate Design Forum
In late 2003 the Commissioner approved a strategy aimed at ensuring that the Corporate Design Forum maintains its original focus of reviewing and contributing to the development of our strategic directions and corresponding capabilities. The forum meets monthly and is chaired by the Commissioner. It includes Second Commissioners, National Program Managers and Deputy Chief Tax Counsels. Other advisers attend by invitation. Table 5.2 shows the members of the forum and the meeting attendance rate for 2003-04.
Plenary Governance Forum
The Plenary Governance Forum reviews our overall performance against our commitments to the Commissioner, Minister for Revenue and Assistant Treasurer, Parliament and the community.
The forum reviews the individual performance of the five sub-plans and the Australian Valuation Office, as well as conformance with statutory and other obligations. It considers reports on other aspects of our governance framework, such as those from the Chief Finance Officer, Integrity Adviser and corporate assurers. Each business and service line contributes information to the relevant sub-plan as an integral part of this organisational performance reporting process.
During the first half of the financial year the Plenary Governance Forum considers matters relevant to developing sub-plans and to the Australian Valuation Office, for example, key imperatives, priorities and budget. It then looks at how the various plans perform against their commitments and budget, while also considering other significant management matters such as agency agreements. The forum addresses the extent of conformance against each element of our internal integrity framework through the certificate of assurance process.
The Plenary Governance Forum is held every three to four months, with a mid-year review in December and end-of-financial-year review. It is chaired by the Commissioner. Table 5.3 shows the members of the forum and the meeting attendance rate for 2003-04. Other advisers may be invited to attend the whole forum or specified sessions.
Audit Committee
The Audit Committee, as required under the Financial Management and Accountability Act 1997, oversees internal governance and assurance policy to monitor and evaluate internal controls. It oversees implementation of ANAO and internal audit recommendations, as well as internal reviews and action items that support governance.
The committee's activities include:
- assessing the effectiveness of our control framework
- promoting increased efficiency, effectiveness and ethical conduct
- improving the objectivity and reliability of our internal management information
- overseeing our published financial information, and reviewing our financial statements
- approving the annual internal audit plan
- overseeing our relationship with our external auditor, the ANAO
- overseeing the development and implementation of fraud control plans, and
- liaising and interacting with the Integrity Advisory Committee on its recommendations to promote an ethical culture and enhance our internal integrity framework.
The Audit Committee is chaired by the Second Commissioner (Law). Table 5.4 shows committee members and the number of meetings they attended in 2003-04.
External representatives such as Tony Ayers AC bring experience and independent advice to the committee. This ensures that accountability and transparency are evident in decision making and that community confidence is upheld. The Chief Finance Officer and the Assistant Commissioner, Internal Assurance Branch, as well as ANAO representatives, also attend certain meetings to report on their respective activities and provide technical advice to the committee.
The Audit Committee meets a minimum of five times each calendar year. Four meetings are general purpose meetings, while a fifth special meeting determines whether our financial statements should be recommended to the Commissioner for signing.
The Audit Committee standing agenda for this year included regular and ad hoc reports on matters such as ANAO and internal audits, financial accounting, security of our computer systems, fraud control plans and future work programs.
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Integrity Advisory Committee
The Integrity Advisory Committee advises the Commissioner on how we make sure we remain an integrity-based organisation, and are recognised as such. The committee does this by advising on potential integrity issues arising from our risk framework (including internal and external perceptions of our integrity) and recommending ways to address risks to integrity. Committee advice is provided within the context of our internal integrity framework.
Specifically, the committee's functions include:
- advising on activities concerned with upholding and fostering APS values, promoting compliance with the code of conduct, preventing fraud, managing the ethical challenges associated with various relationships, and emerging issues relevant to sustaining our integrity
- dealing with issues concerned with enhancing community confidence in our integrity
- understanding innovations and emerging trends in public sector administration and accountability, and
- determining whether our endeavours to sustain an integrity-based organisation are realistic, achievable and accord with best practice.
The committee develops a forward work program, which in the past year included our performance management system, integrity in recruitment, our governance framework, and resolving potential intractable workplace issues.
The quarterly meetings of the Integrity Advisory Committee are chaired by the Second Commissioner (Law). Table 5.5 shows committee members and the number of meetings they attended in 2003-04.
Finance Committee
The Finance Committee shapes our capability in financial management. Its role is to:
- develop a finance strategy and financial management principles and see they are applied
- champion best practice and see that financial management is coordinated
- build and enhance our financial management capability
- oversee the integrity of our financial system
- identify strategies for harnessing efficiencies to fund investment and development opportunities while seeing our work is appropriately resourced, and
- continue to analyse our current and forecast financial picture (including cost and revenue drivers) relative to our budget and expenditure and provide advice to the ATO Executive, Chief Finance Officer and the five sub-plans.
The Finance Committee meets monthly and holds special meetings when necessary. It is chaired by a National Program Manager under the sponsorship of the Commissioner.
Table 5.6 shows the committee members and the number of meetings they attended in 2003-04. In addition to committee members, advisers attend meetings to provide advice and other financial modelling.
Easier, Cheaper and More Personalised Change Program Steering Committee
The steering committee is the key internal decision-making and steering forum for managing our easier, cheaper and more personalised program. Its activities include:
- setting directions and outcomes
- setting priorities and allocating resources
- endorsing scope, strategy and design for the program, and
- integrating program initiatives with our plan and sub-plans.
Table 5.7 shows the membership of the steering committee and the number of meetings they attended in 2003-04.
Market and product committees
In June 2003 we expanded our corporate committees to include committees based on our market segments and products. Their primary role is to synthesise intelligence and advise sub-plans on strategy.
Market committees cover individuals, micro-businesses, small to medium enterprises, large business, and non-profit and government organisations. Product committees cover goods and services tax (GST), income tax, superannuation and excise.
By using a health of the system assessment process, these committees can synthesise intelligence (including external assessment and performance indicators) and focus on risk assessment and the effectiveness of treatment strategies. They can then provide strategic advice based on an overall system assessment. They are supported by focus areas that represent high risk - aggressive tax planning, debt and lodgment, international tax, the cash economy, and fraud and evasion.
The Second Commissioner (Compliance) determines the chairs of these committees. They are chaired by a National Program Manager and have members from all relevant areas, usually from senior executive (SES) and executive level 2 (EL2) ranks.
The Income Tax Steering Committee illustrates the role of product committees. In ascertaining the potential impact of the review of self-assessment proposals, it draws on the advice of:
- business lines experienced in delivering services to the community
- market segment committees, about how the review proposals are likely to affect our administration in each segment, and
- other revenue product committees, to understand the impact of the review proposals on these products, particularly given the interrelationships between many of our products.
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Business lines enable us to structure the way we provide services so that we best match our skills, expertise and knowledge to:
- our revenue products
- the market segments within those products, and
- our capabilities/processes.
For example, the substantial differences in dealing with individuals, small business and large business on income tax issues have resulted in separate lines dealing with these market segments.
Our service lines reflect groupings of strategic skills and knowledge, for example, information technology, resource management and human resource skills. While some agencies may have only one corporate area, our size and diversity necessitate separate service lines. Figure 5.3 illustrates our organisational structure at 30 June 2004.
Figure 5.3: Our organisational structure, at 30 June 2004 (86 KB)
During 2003-04 we made the following changes to our structure to reflect changing demands.
- On 1 July 2003 we created the Serious Non-Compliance business line to strengthen our ability to effectively deal with tax evasion and fraud. The line operates largely under the compliance sub-plan.
- On 11 September 2003 we established ATO Business Solutions to provide integrated technical and administrative advice and services to the organisation. The line operates under the easier, cheaper and more personalised sub-plan.
- On 20 October 2003 we consolidated ATO Technology and Applications Solutions to form Information and Communications Technology. The new line operates under the information technology sub-plan and is responsible for providing quality technology solutions.
- For management purposes, on 1 December 2003 we divided the Office of the Chief Tax Counsel into the Tax Counsel Network and a new Office of the Chief Tax Counsel. The Tax Counsel Network provides technical leadership and is accountable for major technical decisions, including leading strategic litigation. These areas operate under the compliance sub-plan.
- On 1 December 2003 we moved ATO Complaints and Parliamentary Services into the Policy Management Division to provide more focused services to government, including ministers, the Commonwealth Ombudsman and the Inspector-General of Taxation.
- On 12 December 2003 we realigned the Internal Assurance Branch to report administratively to Policy Management Division (it previously reported to the Office of the Commissioners). The branch operates under the people and place sub-plan and provides internal audit, fraud prevention and control, and security policy services, and manages our relationship with the ANAO.
- On 1 January 2004 we amalgamated the ATO People sections of our ATO Relations and ATO Resource Management lines, in recognition of the need to bring together our people and human resource activities. The restructured line provides an increased focus on people strategies needed to support our easier, cheaper and more personalised program, as well as our work and people. It operates under the people and place sub-plan.
The integrity of tax interpretation is essential to our credibility and success. In recognition of the risks associated with providing tax advice and the expertise required, we employ three Deputy Chief Tax Counsels.
Also, recognising that specialist skills and knowledge are required to deal with significant risks to the revenue system, we have appointed extra senior managers to focus on particular risks in areas such as international strategy and aggressive tax planning.
Office of the Commissioners
ATO Resource Management
Office of the Chief Tax Counsel
Policy Management Division
Large Business and International
Small Business
Personal Tax
Excise
Superannuation
Goods and Services Tax
Serious Non-Compliance
ATO Relations
ATO People
Information and Communications Technology
Operations
Business Solutions
Easier, Cheaper and More Personalised Change Program
Office of the Commissioners
The Office of the Commissioners comprises the ATO Executive (the Commissioner and Second Commissioners), the Integrity Adviser, the Compliance Program Coordination team and the Aggressive Tax Planning Management Unit.
In 2001 we appointed an external Integrity Adviser to advise us on our integrity framework and our conformance with that framework. While the role is independent of the Tax Office, it sits within this business line for administrative reasons.
The Compliance Program Coordination team supports the compliance sub-plan executive by driving compliance management processes, including planning, reporting, budgeting, risk management and communication. This involves bringing together the market segment, revenue product, capability, focus area and business line views of compliance to inform strategic and operational decision making.
The Aggressive Tax Planning Management Unit provides strategic direction and leadership and a coordination and support role for the Aggressive Tax Planning Steering Committee. Major focus areas include leadership, relationship management, communication and education, and corporate support. The support includes reporting, planning, budgeting and a secretariat function.
ATO Resource Management
ATO Resource Management provides a range of services to support our decision-making processes. It also provides corporate capabilities and infrastructure, including facilities, property, records management, corporate systems, procurement and contract management, and business continuity management. The line primarily operates under the people and place sub-plan, with some areas operating under the compliance and information technology sub-plans.
Financial responsibilities include reporting both administered and departmental items, forecasting and monitoring revenue, advising on revenue implications of policy changes, preparing budget estimates, management accounting and costings, and providing a financial management policy and framework for the organisation.
The line is also responsible for our governance and planning processes.
Office of the Chief Tax Counsel
During 2003-04 we restructured the Office of the Chief Tax Counsel to separate the Tax Counsel Network from the rest of this area. The new arrangements aim to increase the management focus on our legal services and overall capability to give timely and quality written advice on tax laws.
The Office of the Chief Tax Counsel operates under the compliance, people and place, and information technology sub-plans and is responsible for settling our view on major legislative interpretation issues across all of our responsibilities. It also provides in-house legal services (including the strategic management of litigation, freedom of information policy, compensation claims, legal and professional privilege, and access policy). Other responsibilities include management of procedural and systems infrastructure and quality assurance processes for technical advice; management of priority technical issues and the public rulings program; tax law skill development and accreditation for technical interpretation; and management of information services, including libraries.
Policy Management Division
The Policy Management Division's original focus of shaping, designing and building administrative systems so that new policy is implemented effectively and on time has expanded to include services to government, internal assurance and fraud, and complaints. The division now manages our relationship with:
- the Treasurer, the Minister for Revenue and Assistant Treasurer and other ministers and parliamentary committees
- Treasury
- the Board of Taxation
- the Inspector-General of Taxation
- the Commonwealth Ombudsman, and
- the Auditor-General.
This brings together the management of all relationships involving external scrutiny of tax administration, providing better intelligence about areas requiring improvement or change.
The division also contains our Internal Assurance Branch, which provides internal audit services, fraud prevention and control, and security policy management.
The division operates under the compliance and people and place sub-plans.
Large Business and International
The Large Business and International line administers the income tax system for large business groups with a turnover of around $100 million or more and high wealth individuals who, together with their families and business entities, control more than $30 million in assets. The line operates under the compliance sub-plan.
Large Business and International conducts a range of programs that cover interpretation, help and education, research and risk assessment, and audit activities. The line is also responsible for managing our approach to international tax matters to see that Australia obtains its fair share of tax in an increasingly globalised economy.
These programs give us insights into compliance behaviour and contribute to law development and administrative design. They also enable us to better support, facilitate and encourage corporate citizenship and cooperation between the Tax Office and taxpayers.
Small Business
The Small Business line administers the income tax system for business taxpayers across the following market segments:
- micro-businesses - those with an annual turnover of less than $2 million
- small to medium enterprises - businesses with an annual turnover of between $2 million and $100 million (the line became fully accountable for this market in March 2004), and
- non-profit and government organisations.
The line operates primarily under the compliance sub-plan. It provides a range of advisory services and products to help taxpayers and tax professionals understand and comply with their income tax obligations. Decisions are made on a risk management basis, which helps target audit and verification work, particularly among businesses that are not complying. These activities help meet our commitments to government and maintain community confidence in the integrity of the revenue system within the small business market.
Personal Tax
The Personal Tax line manages the part of the income tax system that deals with approximately 10 million individual taxpayers. It operates primarily under the compliance sub-plan.
The line aims to ensure that it is easier and cheaper for individual taxpayers to meet their tax obligations and claim their entitlements. It provides assistance through telephone, written and face-to-face advisory services, as well as online products and publications such as e-tax, online calculators and TaxPack.
Personal Tax uses a risk management approach to achieve an appropriate balance between help, education, audit and verification activities. Its active compliance work includes coordinating our data-matching program, which matches data from external organisations and other government agencies with tax return information to support compliance activity.
The line is also responsible for managing our relationship with more than 25,000 registered tax agents and around 9,500 practices, as well as a range of intermediaries. Services to agents were improved this year by enhancing the Tax Agent Portal, establishing relationship managers to support individual practices, and publishing an electronic compliance toolkit to help agents understand our compliance activities.
Excise
The Excise line has two distinct functions - collecting revenue and distributing revenue. It operates under the compliance and operations sub-plans.
The line collects revenue in the form of excise on the domestic production of tobacco, petroleum, oils and lubricants and all alcoholic products except wine. Excise also collects wine equalisation tax, a tax on the wholesale sale of wine.
The Excise line distributes revenue to the community in the form of benefits. These are mainly through fuel grants that help reduce business costs to selected industries or retail prices for consumers. On behalf of the Department of the Environment and Heritage, the line also administers the product stewardship for oil program, which encourages the recycling of lubricants and other waste oils that would otherwise have to be disposed of.
Superannuation
The Superannuation line administers compliance with the superannuation guarantee legislation and collects the superannuation guarantee charge from employers who fail to make the required contributions to complying superannuation funds. It also administers the superannuation surcharge and compliance with income tax legislation for small, medium and self managed superannuation funds, including taxation of superannuation contributions, investment income and benefits. The line regulates self managed superannuation funds.
The implementation of new legislation, such as the departing Australia superannuation payment, quarterly superannuation guarantee and the Super Co-contribution, also falls under the responsibility of the Superannuation line.
Other responsibilities include administering the reasonable benefit limit system, the Superannuation Holding Accounts Reserve, the Lost Members Register and unclaimed superannuation monies (where states do not have appropriate legislation).
The line operates under the compliance, operations, information technology and people and place sub-plans.
Goods and Services Tax
The GST line has primary responsibility for managing GST, luxury car tax and the legacy wholesale sales tax that ceased when GST was introduced on 1 July 2000. The line operates under the compliance sub-plan.
The line has direct responsibility for maintaining the integrity of the revenue system in these areas and for delivering a comprehensive range of services covering help and education, interpretation and compliance activities, including fieldwork to verify compliance. GST conducts fieldwork to verify compliance in relation to other taxes and payments reported on an activity statement, including pay as you go (PAYG) obligations.
Serious Non-Compliance
The Serious Non-Compliance line was formed on 1 July 2003 with the amalgamation of some existing resources from the Small Business, Excise and Operations lines. It is resourced under the compliance, operations, and people and place sub-plans.
Serious Non-Compliance deals with more extreme revenue evasion and fraud (including excise evasion), those outside the system and other serious non-compliance practices. It provides a corporate capability to deal with taxpayers who demonstrate extremes of evasion, disengagement and a strong resistance to meeting their tax obligations. This behaviour is manifested by criminal, fraudulent and persistent abuse of revenue systems.
The Serious Non-Compliance line has strong partnerships with external enforcement and regulatory agencies, particularly the Australian Crime Commission, Australian Federal Police and the Director of Public Prosecutions.
ATO Relations
ATO Relations was repositioned on 1 January 2004 to focus on leading and managing our interaction with the community. It operates under the compliance sub-plan.
ATO Relations is the home of a number of corporate instruments and processes used to guide Tax Office interactions, including:
- the taxpayers' charter, which outlines the rights and responsibilities of both the community and the Tax Office
- our brand framework, which underpins the principles of the taxpayers' charter and compliance model
- relationships with key community groups, including through the media
- marketing and education strategy and product research
- channel strategy and migration, which defines the channels we use to deliver products to the community, while reducing the compliance costs and improving taxpayers' experience, and
- content management, which manages the publication and presentation of our written and electronic information.
ATO People
Funded primarily through the people and place sub-plan, ATO People was restructured on 1 January 2004 to provide an integrated approach to the people issues that are critical to enabling us to deliver services to the community.
ATO People works in partnership with different areas in the organisation to develop, implement, maintain and enhance:
- our employment framework, including agency agreements
- workforce strategies, including developing and implementing the professional streams framework and an integrated approach to workforce planning across the organisation
- systems and strategies to provide an integrated approach to improving the performance, conduct, safety and wellbeing of employees (including developing and implementing a suite of corporate management practice statements to clearly articulate our policy and practice), and
- the professionalism and productivity of our workforce through professional development of our managers and employees, and providing advice and support.
Key priorities for the line include ensuring employees have the tools and skills to do their jobs; our managers and leaders have the capability to lead, manage and support employees; and our corporate management effectively and efficiently leads the organisation in delivering outcomes, and knows how well the people system is supporting those outcomes.
Information and Communications Technology
Established in October 2003, the Information and Communications Technology line focuses on providing services through the efficient delivery of resilient and quality technology solutions. Together with Business Solutions, the line works to understand our drivers and priorities so that we have the necessary technological support for business solutions. It operates under the information technology sub-plan.
Operations
The Operations business line is the major part of the operations sub-plan and is responsible for:
- administering the Australian Business Register (which includes the Australian business number) and tax file numbers
- processing returns and payments
- capturing and recording information to help taxpayers meet their obligations
- managing and maintaining taxpayer accounts
- managing the tax practitioner lodgment program
- collecting revenue for government by enforcing lodgment of returns and collecting debt, and
- developing and implementing our administrative policy in partnership with the community.
Registering correctly, meeting lodgment obligations, reporting correct information and paying on time are fundamental to successful tax administration. The Operations line pays particular attention to the entry points into the revenue system (the tax file number and the Australian business number registers) and to managing taxpayers' accounts so that we are helping the right taxpayers and enforcing compliance with tax obligations.
The primary characteristic of an effective tax administration is a high level of compliance with requirements to lodge information. This provides the cornerstone for accurately determining tax liabilities and carrying out compliance activities.
There is always a risk that taxpayers may fall behind with their tax obligations and accumulate debt, especially with small businesses, so Operations places a high priority on helping taxpayers lodge on time and avoid debt.
The line also manages a small number of debts from previous systems, such as pay as you earn, the prescribed payments system and sales tax.
Business Solutions
Established in September 2003, ATO Business Solutions is one of two business lines set up under the easier, cheaper and more personalised sub-plan.
In accordance with our strategic directions, Business Solutions:
- sees that proposed changes and associated plans are aligned with organisational priorities
- sees that all aspects of a change (such as business processes and systems design) are integrated, and that the intended outcomes of the change are achieved
- integrates change initiatives in line with how we work (now and in the future), and
- documents the design, making it easily accessible throughout the organisation, and using the information to gather intelligence about strategic design issues.
Business Solutions is also responsible for developing the administrative design capability across the organisation. This includes design methodology and tools, skilling programs and professional development. Other key activities include developing online security processes, as well as whole-of-government online services.
Easier, Cheaper and More Personalised Change Program
The Easier, Cheaper and More Personalised Change Program is the second business line set up under the easier, cheaper and more personalised sub-plan. It aims to make it easier for taxpayers to comply by developing and delivering improved client product and service experiences, and improved and more sustainable capabilities.
The line is responsible for managing all procurement related to the program, and the associated relationship and contract management. It is also responsible for ensuring that project management capabilities are developed across the organisation.
Capabilities are groupings of our key resources around skills and/or particular work, such as providing advice. In most instances, our business and service line arrangements dictate a natural owner of a capability or process. For example, in the operations area there are four core processes (client accounting, payment and product processing, registrations, debt collection and lodgment enforcement) that are overseen by owners who are accountable for delivering work within that process. However, in the compliance area some of these capabilities (for example, active compliance, provision of advice) cut across lines to collectively meet the particular needs of a market or risk. We have appointed leaders for these key capabilities to ensure we reap the benefits of managing these areas as one capability.
Capabilities are the skills, knowledge and attributes required for the range of jobs throughout the organisation. Defining capabilities helps us understand how efficient and effective we are, identify where we can improve, and systematically implement improvements.
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Capability leaders focus on efficiency and delivering results, including:
- seeing there is coordination between lines
- identifying and recommending improvements to processes, including support systems and productivity improvements
- working with the Easier, Cheaper and More Personalised Change Program to develop technology and processes that support the capability, and
- developing capability views for skilling, planning, performance reporting and relevant assurance processes.
One of our capabilities in the compliance area includes the provision of written advice which has helped us understand workloads and stocks of work across all our written advice products and all areas of compliance. As a result we have developed and implemented strategies to reduce backlogs of cases.
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5.3 External and internal scrutiny
Litigation
Inspector-General of Taxation
Commonwealth Ombudsman
Federal Privacy Commissioner
Australian National Audit Office
Litigation
Litigation forms an important part of our compliance and dispute resolution program, and clarifying the law helps us administer the revenue system. During 2003-04 the Commissioner was involved in litigation in the High Court, the Federal Court, the Federal Magistrates Court, the Administrative Appeals Tribunal and the Small Tax Claims Tribunal.
The Commissioner was successful in 68% of non-debt substantive tax court cases, while another 23% were decided wholly in favour of the taxpayer. The remaining 9% of cases were decided partly in favour of each party.
In the Administrative Appeals Tribunal and the Small Tax Claims Tribunal, the Commissioner's decision was wholly upheld in 69% of cases, while 11% of decisions were in favour of the taxpayer. The remaining 20% were decided partly in favour of each party.
Test case program
We fund a test case litigation program to help clarify tax law. The aim of the program is to provide financial assistance to taxpayers involved in litigation where the outcome is likely to resolve tax issues and develop a legal precedent that is relevant to administering the revenue system.
Of the 21 applications for test case funding considered by the Test Case Litigation Panel in 2003-04:
- funding was approved for five cases, and
- funding was declined in 16 cases.
Judgments in the Hart and Spotless Stores cases outlined below were delivered in relation to funded cases.
Law now clear on split loans
The High Court decision in Commissioner of Taxation v Hart upheld our view that the extra interest expense allocated under a split loan facility to finance the purchase of a rental property is not deductible. The court's unanimous decision provided guidance to both us and the community on the operation of the general anti-avoidance provisions in Part IVA of the income tax law.
A typical split loan is a loan taken out with a financial institution that is split into two accounts. One account is usually for investment purposes and the other private. Interest on the investment account is left unpaid and allowed to compound while all the funds are used to pay off the capital on the private home loan more quickly. The effect of these arrangements is that the taxpayer can claim a greater tax deduction for the interest on the investment account than would be the case with a conventional loan.
Significantly, the court affirmed its earlier decision in Spotless Stores Ltd v Federal Commissioner of Taxation that the presence of a commercial outcome from the scheme does not determine the answer to the question of whether there was a relevant tax purpose.
Superannuation entitlements for casual employees
The High Court considered the issue of casual workers being paid superannuation contributions on their overtime payments in the case of Australian Communication Exchange Ltd v Deputy Commissioner of Taxation. We had argued that the employer should have to pay the 9% superannuation guarantee charge on wages paid to casual employees, irrespective of whether that work was performed within or outside of ordinary working hours. But the court held the employer did not have to pay superannuation contributions on overtime payments for casual employees. It held the employer had complied with its obligation to pay superannuation contributions under the award.
Alienation of personal services income test case program
In March 2003 we announced that we would fund a program to test the application of the anti-avoidance provisions of the income tax law to the alienation of personal services income (also known as income splitting). This followed widespread calls for our view of the law (expressed in a number of tax rulings stretching back to the 1980s) to be tested in today's commercial environment. The program is being conducted in consultation with tax practitioners and tax professional bodies and is expected to provide guidance to taxpayers on how the law operates.
Significant cases
In addition to the cases funded by the Commissioner under the test case program, there were a number of other significant cases decided by the courts.
Ambulance Service not a public benevolent institution
In Ambulance Service of New South Wales v Deputy Commissioner of Taxation, the Full Federal Court considered the issue of whether the Ambulance Service of New South Wales was a 'public benevolent institution' for the purposes of exemption from liability to fringe benefits tax. The court held the ambulance service was not a public benevolent institution because it was constituted under the Ambulance Services Act 1990 and it was inappropriate to characterise activity organised or controlled by government as activity of a public benevolent institution according to its established meaning.
Full tax deductions denied in tea tree scheme
In Federal Commissioner of Taxation v Sleight, the Full Federal Court considered whether a taxpayer was entitled to a deduction for his half share of the total deductions claimed by him and his wife from an investment in the Northern Rivers Tea Tree Oil project in the 1995 income year. The court found that we had correctly applied the anti-avoidance provisions to disallow the deductions claimed. It found the taxpayer's dominant purpose for entering into the scheme was to obtain a tax benefit and Part IVA of the income tax law operated to deny the deduction claimed. In overturning the original finding that the overall commercial objective of the scheme saved it from the application of Part IVA, the court considered the taxpayer's objective, rather than subjective, purpose in entering into the scheme. This decision affirmed our application of the anti-avoidance provisions to tax benefits claimed in association with tax avoidance arrangements characterised by such features as limited recourse loans and round robin financing arrangements.
Offshore superannuation scheme not tax-effective
In Walstern v Federal Commissioner of Taxation, the Federal Court considered whether an offshore superannuation scheme was tax-effective. It ruled that contributions to an offshore superannuation fund were not deductible because they were not made for the sole purpose of providing superannuation benefits for any employees of the company. No employees were members of the fund when the contributions were made and the objective purpose of the contributions was to benefit the principals of the company. Although the court also found that fringe benefits tax did not apply to the contributions, it did apply when the trustee of the fund allocated a share of the contributions to the accounts of the principals under an arrangement between the trustee and the company. The court confirmed the income tax penalty assessed was properly payable because the company's claim for deductibility was not reasonably arguable, but remitted the fringe benefits tax penalty to the Commissioner to reconsider.
Capital gains tax on unrealised profits
In Sun Alliance Investments Pty Ltd (In Liquidation) v Federal Commissioner of Taxation, the Full Federal Court considered whether an unrealised gain recognised in a company's books of account comprises 'profits that were derived' for capital gains tax purposes. Tax law is intended to reduce the capital loss a corporate taxpayer would otherwise obtain on the disposal of shares where that taxpayer has previously received rebatable dividends attributable to profits made before the shares were acquired. It does this by decreasing the reduced cost base of shares held by a corporate taxpayer by the amount of any rebatable dividend paid in respect of those shares that can reasonably be attributable to profits derived before the shares were acquired. The Federal Court held that all of the unrealised gains in dispute were 'profits that were derived' in the relevant sense. But the Full Federal Court found the statutory test was not satisfied in respect of the unrealised gains on certain shares listed on the Australian Stock Exchange. However, it also found the test was satisfied in respect of unrealised gains made on certain land and buildings as the gain had been effectively 'locked in' under a contractual arrangement. We have sought special leave to appeal the decision to the High Court.
GST on the sale of a motel renovated into strata title units
In Marana Holdings Pty Ltd v Federal Commissioner of Taxation, the Federal Court considered whether the sale of property acquired by developers as a motel and renovated into strata title units and sold in the retail market was a taxable supply for the purposes of the GST Act. The court considered the meaning of the terms 'residential premises' and 'occupied as residence'. It found the retail sale was a taxable supply of 'new residential premises' and that the sale was not input taxed as the premises were not residential premises. The effect of the decision is that the developers are required to pay GST at the retail level and are entitled to GST credits on acquisitions. This decision is on appeal to the Full Federal Court.
Court rules on time limits for transferring losses among companies
In Commissioner of Taxation v Asiamet (No. 1) Resources Pty Ltd, the Full Federal Court considered whether our decision not to allow an extension of time for certain loss transfer agreements to be made under the Income Tax Assessment Act 1936 was valid. It looked at whether there had been a valid exercise of the Commissioner's discretion. The court held that the decision maker had incorrectly accepted as a guiding principle that a common state of knowledge automatically exists in corporate groups of this kind. However, despite that finding, it did not see there was anything controversial or heretical in a conclusion that a common state of knowledge may exist on the facts in a particular case. Significantly, however, although dismissing our appeal, the court upheld the policy in Taxation Ruling TR 98/12 that, in considering whether to allow an extension of time to transfer losses, the Commissioner can take into account the conduct of the taxpayer that gave rise to an adjustment to income, such as the application of Part IVA. The court accepted that this is a factor that would generally 'weigh heavily' against a favourable exercise of the discretion.
Inspector-General of Taxation
The Inspector-General of Taxation is tasked with reviewing whether the administrative systems we establish embody the principles of good tax administration - including simplicity, transparency, efficiency and fairness. The Inspector-General reports through the Treasury Ministers and is independent of both the Treasury and the Tax Office. We are committed to working cooperatively with the Inspector-General through a relationship based on mutual respect.
The Inspector-General publicly released his first report in February 2004, based on findings about taxpayer concerns, gained from community consultation. He also initiated reviews of:
- the remission of general interest charge for groups of taxpayers in dispute with us (January 2004)
- the administration of GST refunds arising from lodged activity statements (March 2004), and
- our small business debt collection practices (April 2004).
We are continuing to develop processes to provide timely and value-added input into the reviews and our working relationship with the Inspector-General.
Commonwealth Ombudsman
Our relationship with the Commonwealth Ombudsman is built on mutual trust and respect and we aim to be as open and responsive as possible, recognising the important feedback external scrutineers provide in improving our operations. We manage our relationship though regular meetings and briefings, ensuring that the Ombudsman has direct access to nominated senior officers. This informal arrangement is supported by more formal protocols and procedures that allow us to track and manage Ombudsman referrals until they are resolved.
Under the Ombudsman Act 1976, the Ombudsman can investigate taxpayer complaints against us and conduct 'own motion' investigations. The Ombudsman can also record instances of identified agency error or deficiency in cases he has investigated.
As a general administrative practice, the Ombudsman may exercise his discretion and choose not to investigate a complaint if a complainant has not already approached us directly. The Ombudsman must be satisfied that we will handle such complaints effectively and efficiently.
Investigations for clients
In 2003-04 the Ombudsman received 1,711 complaints about the Tax Office, compared with 1,909 last year. There has been a steady reduction in the number of complaints about us since 1998-99, which the Ombudsman has indicated is due primarily to the declining number of complaints about mass marketed schemes and the bedding down of the new revenue system. The Ombudsman finalised 1,904 individual complaint issues and found error or deficiency by us in 17% of the 24% of cases investigated. Figure 5.4 shows the major issues investigated.
The main causes of concern for taxpayers approaching the Ombudsman were:
- our lack of timeliness in dealing with issues they raised, for example, in issuing objection decisions and private binding rulings
- the belief that we make unreasonable or incorrect conclusions, particularly in relation to penalty decisions, and
- the onerous demands placed on them in trying to meet their tax obligations.
Own motion investigations
There were two own motion investigations in progress during the year.
Own motion investigation into Tax Office use of entry and search powers
On 6 April 2000 the Senate Standing Committee for the Scrutiny of Bills recommended that the Commonwealth Ombudsman undertake a regular, random sample audit of our use of entry and search powers to ensure we were exercising those powers appropriately. During the year the Ombudsman continued his own motion investigation into our use of entry and search powers.
Own motion investigation into freedom of information request processing
On 10 May 2004 the Ombudsman advised the Commissioner of his intention to conduct an own motion investigation into the quality of freedom of information request processing across a number of government agencies, including the Tax Office. At 30 June 2004 this investigation was in its preliminary stages.
Federal Privacy Commissioner
Consistent with the Privacy Commissioner's stated approach, we have continued to assess and manage most of our privacy issues. In doing so, we have applied the Privacy Act, the secrecy provisions in tax law, and the interpretive materials and guidelines published by the Privacy Commissioner. Where significant issues arose, we consulted with the Office of the Federal Privacy Commissioner (OFPC).
We resolved the small number of individual complaints referred to us by OFPC that were still outstanding at 30 June 2003. During the year, OFPC contacted us directly about two new individual complaints it had received and these were unresolved at 30 June 2004.
We reported six significant incidents that could compromise personal information we held. The incidents arose from errors in printing or mailing correspondence, or the unintended misdirection of electronic material. In consultation with OFPC, we acted to resolve these incidents, including notifying affected taxpayers.
We undertake data matching using data from external sources. Generally, our aims are to identify and address potential non-compliance with tax obligations, promote voluntary compliance by publicising data-matching activities and their outcomes, and strengthen community confidence in the integrity of the revenue system. We have developed and publicised protocols for our data matching, in accordance with the Privacy Commissioner's Use of data matching in Commonwealth administration guidelines (February 1998). This year we successfully consulted with OFPC in preparing many specific protocols to ensure that protocol documents and the processes they describe meet the guidelines.
Australian National Audit Office
During 2003-04 the ANAO finalised nine audits in relation to the Tax Office. These are discussed below.
ANAO Audit Report No. 58: Financial statement audit - Control structures as part of the audit of financial statements of major Australian government entities for the year ending 30 June 2004
This report provides the Australian Government with an assessment of the internal control structures within major entities, including governance arrangements, information systems and control procedures. It relies on audit findings from the interim phase of the financial statement audits of major Australian government public sector entities for 2003-04.
The objective of the audit was to assess the reliance that the ANAO can place on control structures to produce complete, accurate and valid information for financial reporting purposes.
Audit issues specific to the Tax Office were whether we would be able to meet whole-of-government reporting timetables given that we had not finalised new processes for preparing financial statements.
The audit also identified nine moderate control risk issues for management attention. They related to:
- improvements required to reconciliations within the administered accounts
- improvements required to managing special accounts and assets held in trust
- updating the certificate of compliance relating to the payment of public money to reflect the full breadth of the processes
- improvements required to managing debt in relation to the superannuation surcharge attributed to unfunded defined benefit scheme super funds
- improvements required to service-level agreements governing the relationships we have with major service providers and other Australian government agencies
- resolution of the reporting obligations we have for paying the family tax benefit through the revenue system
- improvements to the costing methodology used to value internally generated software
- review of the economic drivers used to calculate the revenue reported in the economic transaction section of our financial statements, and
- assurance that the processes and procedures in place to govern information technology change management are adhered to.
We are working to address the deficiencies identified by the ANAO.
Following this audit, the ANAO identified a range of additional audit concerns which are set out in our audit certificate on the 2003-04 financial statements included in Appendix 6.
ANAO Audit Report No. 55: Protective security audit - Management of protective security
The objective of this audit was to assess whether protective security functions in selected organisations, including the Tax Office, were being effectively managed. The audit assessed whether protective security arrangements:
- were designed within the context of the business framework and the related security risks identified by the organisation, and
- provided an appropriate level of support for the organisation's operations and delivery of its services.
The ANAO's overall conclusion was that, at the time of the audit, not all the audited organisations had sufficient and reliable processes to effectively manage their protective security functions. However, it found that we had 'sound and better practices' in relation to the protective security environment, security risk management, and information, monitoring and review. Overall, we compared well against the other agencies audited, with most 'better practice' findings relating to us. The ANAO also acknowledged initiatives we had taken (since implemented) to improve protective security management.
The ANAO concluded that there was room for improvement and made four recommendations in the report tabled in Parliament, with a further two recommendations in the management report presented to us. We have agreed to implement all recommendations.
ANAO Audit Report No. 48: Performance audit - The Australian Taxation Office's management and use of Annual Investment Income Reports
The objective of this audit was to assess how well we manage and use Annual Investment Income Report (AIIR) data in tax administration.
The ANAO drew the following conclusions:
- While the AIIR data-matching program has proven to be an effective compliance tool in the individuals taxpayer market segment, a more strategic approach focused on optimising the compliance value of AIIR data is now warranted.
- Relatively low-cost initiatives taken at the data receipt stage would improve compliance and optimise the collection of tax revenue.
- Several initiatives have been implemented to improve the management and use of AIIR data, including a number of steps aimed at improving AIIR lodgment compliance and awareness amongst investment bodies, and the creation of data integrity teams responsible for improving the quality of data sent in by investment bodies.
The ANAO made eight recommendations to address these issues. We have agreed to the recommendations and have started to implement them.
ANAO Audit Report No. 33: Performance audit - The Australian Taxation Office's collection and management of activity statement information
The objective of this audit was to assess our collection and management of activity statement information.
The ANAO drew the following conclusions:
- If not managed well, collecting and processing activity statement information could not only undermine community confidence in our administration, but also impact adversely on revenue collections.
- There has been community criticism of our management of activity statements. We have devoted significant resources to addressing these concerns, and have made progress, as evidenced by the results of independent surveys and the decrease in the number of complaints received about activity statements over the last 12 months.
- Although there is still progress to be made in implementing 'ideal' activity statement systems, current systems, processes and controls provide a sound basis for the efficient and effective administration of activity statements.
The ANAO made nine recommendations aimed at strengthening our documentation, risk management and planning practices. We agreed with recommendations 1 to 8, and parts 1 and 2 of recommendation 9 and the intent of part 3 of recommendation 9, putting forward an alternative course of action to achieve this intent.
ANAO Audit Report No. 31: Business support process audit - The Senate Order for departmental and agency contracts (financial year 2002-03 compliance)
The objective of this audit was to assess agency performance in relation to compiling the internet listings required by the Senate Order and the appropriateness of the use of confidentiality provisions in Australian government contracts. We were one of six agencies selected for detailed review.
The ANAO drew the following conclusions:
- We had placed a list of contracts on our website by the due date and complied with the requirements of the Senate Order, but there was scope for improving the presentation of the list.
- The processes used to compile the internet listing were likely to lead to lists being complete in terms of the number of contracts listed.
- The determination of what information should be protected as confidential was made when a contract was placed on the internet listing, instead of when the contract was being entered into. As a result, the reasons why a contract was listed as containing confidential information were based on the views of people compiling the list, and often did not reflect information in the contract.
- Only one of seven of our contracts listed on the internet as containing confidential provisions was listed appropriately. The remaining six contracts did not specify what information in the contract was to be protected as confidential and, in the ANAO's view, did not contain any information that could be considered confidential.
We agreed with the ANAO findings and are addressing the issues raised in the report.
ANAO Audit Report No. 30: Performance audit - Quality internet services for government clients - Monitoring and evaluation by government agencies
The objective of this audit was to examine the adequacy of selected agencies' approaches to monitoring and evaluating internet-delivered government programs and services, and identify better practices and opportunities for improvement. We were one of five agencies selected for review.
The ANAO drew the following conclusions in relation to the audited agencies (including the Tax Office):
- Audited agencies did not have specific agency-level policies, including clear responsibilities for monitoring and evaluating websites, portals and internet-delivered services.
- In most instances, clear objectives for websites and portals had not been articulated, and little user research had been conducted. As a result, most agencies are putting in place measures to ensure a more holistic and strategic view of internet services and online communication with their clients.
- In relation to individual internet-delivered services or programs, information is routinely being collected, analysed and applied to improve service delivery, but there is considerable scope for improving the quality of that information.
- Overall, current agency approaches to monitoring and evaluating internet services are not adequate, but agencies are making considerable efforts to improve monitoring and evaluation of this potentially key strategic tool.
The ANAO made five recommendations aimed at improving monitoring and evaluation of internet-delivered government programs and services. We agreed with all recommendations and have started to implement them.
ANAO Audit Report No. 23: Performance audit - The Australian Taxation Office's management of aggressive tax planning
The objective of this audit was to assess how well we manage aggressive tax planning, including whether we had:
- identified lessons from our experience with aggressive tax planning, particularly mass marketed investment schemes and the identification and treatment of promoters, to improve our administration of aggressive tax planning, and
- implemented effective mechanisms to gather and analyse relevant, real-time intelligence from our sources and external stakeholders, and provide taxpayers with early warnings of concerns about possible tax arrangements.
The ANAO drew the following conclusions:
- Managing aggressive tax planning well is a complex, ongoing task. It is a priority area for us, as well as being a test of tax administration that bears on the integrity, efficiency and effectiveness of the operations of the whole revenue system.
- Aggressive tax planning is by nature a 'grey' concept. Managing it may therefore require subjective judgments and legal interpretation. There is also an important social dimension to managing compliance in that community views of what constitutes aggressive tax planning may differ from our view and may change.
- There have been problems in the past with our management of aggressive tax planning. Consequently, the matter has been the subject of keen public and parliamentary interest and other external review. Our strategic approach reflects the lessons learned. Overall, we have developed the necessary strategies, structures and processes to effectively manage aggressive tax planning.
- We have responded positively to problems in managing aggressive tax planning, making considerable efforts since 1999 to improve the way we manage it.
The ANAO took these responses into account when drafting the audit's five recommendations. We have agreed with these recommendations and have started to implement them.
ANAO Audit Report No. 22: Audits of the financial statements of Australian government entities for the period ended 30 June 2003 - Summary of results
The objective of this audit was to provide Parliament with independent assurance about financial controls and results, and to suggest improvements to public administration for better performance.
In undertaking its audit of our 2002-03 financial statements, the ANAO issued a qualified audit opinion, the qualification being about an ongoing disagreement about the accounting treatment of leased computer equipment.
The ANAO's audit also made the following recommendations about our financial and control environment:
Findings about running of the Tax Office
- We need to formally implement business continuity management policies and standards, complete testing of the business continuity management and disaster recovery plans, and develop, implement and test a disaster recovery plan for mid-range computing platforms.
- We need to improve the process for costing internally generated software, and provide guidance on how to apply it consistently.
- We need to improve the administration and reporting of Comcare trust balances.
Findings about financial management of tax revenue
- We brought to account for the first time an amount of accrued revenue in relation to superannuation surcharge to be collected from unfunded defined benefit scheme members.
- We need to follow up on differences between reporting balances of unpaid superannuation surcharge from unfunded defined benefit fund members.
- We had developed the economic transactions method for estimating tax revenue only for heads of tax revenue that were material to our financial statements. Otherwise, we calculated smaller heads of revenue using the tax liability methodology. During preparation of the 2002-03 financial statements, an amount of revenue previously unaccounted for was brought to account, making the surcharge revenue line a material amount in the financial statements. Consequently, the ANAO required that we develop an economic transactions method estimation process for the superannuation surcharge. In reviewing this new estimation model, the ANAO recommended that we review for consistency all economic models used in calculating economic transactions method estimates of revenue.
- We need to improve our quality assurance process that supports the preparation of financial statements.
- Bank reconciliations and the reconciliations between major business systems and SAP have now been completed satisfactorily, except for the fringe benefits tax system reconciliation with SAP, which did not have any material impact on the financial statement balances.
- A staged introduction of the legislation resulting from the new revenue system created a gap in the law for allowing franking deficit tax paid by companies to be offset. As a consequence, at 30 June 2003 we had allowed credits for franking deficit tax offsets of approximately $200 million without the supporting legislation in place. At the time of the audit, the amending legislation, which retrospectively allowed for the franking deficit tax offset, was being considered by Parliament. In addition, once we became aware of this issue, relevant company assessments were stopped on 15 June 2003.
The ANAO also found that:
- processes need to be implemented to maintain reconciliations between our records and Australia Post records for revenue collection
- certificates of compliance need to cover end-to-end financial processes
- there is a need to establish or update service-level agreements with other organisations
- the provision for doubtful debts and credit amendments under $1 million requires more supporting documentation and rigour, and
- information technology change management and documentation processes relating to the instalments processing system and fringe benefits tax were not undertaken in accordance with the corporate process.
We have initiated remedial action to address all issues raised and are continuing to improve our internal control structure through a program of financial and business improvements.
ANAO Audit Report No. 1: Performance audit - Administration of three key components of the Agriculture-Advancing Australia (AAA) Package
The objective of this audit was to assess the adequacy of the Australian Government's administration of three key components of the AAA package, with the Tax Office being one of the agencies involved in administering the scheme.
The ANAO drew the following conclusions:
- Many aspects of administering the AAA programs examined are well managed and the programs have been well promoted. However, there are some weaknesses in administration, most notably relating to strategic management and compliance arrangements, which require strengthening for more effective outcomes.
- The absence of a documented agreement on the administrative arrangements between the Department of Agriculture, Fisheries and Forestry and the Tax Office for the Farm Management Deposits Scheme has contributed to communication shortcomings that have affected the administration of the scheme. A more systematic approach to risk management, along with an agreed approach to compliance, is also required to appropriately address program integrity.
- Performance information indicates that the programs have been successful in addressing desired outcomes.
The ANAO made nine recommendations aimed at strengthening the overall administration of the AAA package.
Recommendations 6 to 8, which relate to the issues outlined above, are relevant to us. Together with the Department of Agriculture, Fisheries and Forestry, we have agreed to the recommendations and have started to implement them.
ANAO audits in progress
At 30 June 2004 the following audits relating to the Tax Office were in progress:
- the 2003-04 financial statements audit
- four business support process audits
- four performance audits specific to the organisation (two of these being at the preliminary study stage), and
- two cross-agency audits.
Internal audit
Fraud prevention and control
Charges against a former senior tax officer
Security
Internal audit
We undertake internal audits to help our lines fulfil their corporate governance and accountability obligations. These audits are sourced from our annual internal audit program, which is approved and overseen by the Audit Committee. The program is based on:
- strategic and operational risk assessments
- past risk assessment and assurance review outcomes
- issues raised by past reviews conducted by the ANAO, and
- consultation with both the ATO Executive and senior line managers.
This year we completed 60 audits under the program. Audit coverage included reviews of our systems and processes, and pre and post-implementation reviews of systems under development, including our easier, cheaper and more personalised program. It also included specific audit reviews requested by management to assist with their operations and systems.
Fraud prevention and control
We continued to promote an ethical workplace culture and environment through a suite of fraud prevention and control initiatives. These included conducting fraud prevention and ethics training, planning for fraud control and investigating matters for potential internal fraud.
We deliver fraud prevention and ethics training using two innovative interactive CD presentations:
- Judge for yourself, a program dealing with accessing taxpayer records, APS values and code of conduct, gifts, protecting assets, integrity, conflict of interest, misusing corporate credit cards, travel, whistle blowing and probity, and
- Play it again Sam, a program dealing with conflict of interest in situations such as recruitment, contracting, outside employment, misuse of power, gifts and benefits.
This year more than 5,400 employees participated in the first of these presentations and over 6,900 participated in the second.
During the year we started developing another product, Make the right choice. It is designed to replace Judge for yourself and Play it again Sam and is expected to be ready in 2004-05.
These products are supplemented by:
- an online e-learning package that covers information technology security, information security, fraud awareness, ethics and privacy. This product is specifically aimed at giving new employees the information they need in their role as tax officers and more than 9,000 employees completed the package this year, and
- a Guide to fraud control and related policy statements for all employees.
The Commonwealth fraud control guidelines require us to have a current and effective fraud control plan to address internal and external fraud. We have adopted a 'rolling plan' approach to producing our fraud control plans, enabling us to combine a number of plans that together address our fraud risks. By 31 December 2003 we had completed our fraud control plan for the 2002-03 two-year cycle and by 30 June 2004 the 2004-05 cycle was well under way in accordance with an approved work plan.
During the year we reviewed our internal controls aimed at mitigating the risk of tax officers committing tax fraud. The methodology included benchmarking private sector organisations, self audit, surveys, interviews and focus groups. While identifying many positive attributes of our internal fraud control framework, the review also identified areas for improvement. We are implementing the review's recommendations.
We investigate or action all allegations of fraud and serious misconduct by our employees, working with other law enforcement agencies where appropriate. Approximately 60% of cases reported each year are found to be unsubstantiated, and the remainder are referred for criminal prosecution or misconduct proceedings.
As table 5.8 illustrates, we investigated 408 allegations during the year, compared with 388 in 2002-03. Of these, 22 were allegations of fraud. We attribute part of the trend to heightened awareness and a more robust prevention and detection environment.
Table 5.9 shows how we prevent, detect, investigate and prosecute fraud.
Charges against a former senior tax officer
During 1999-2000, together with the Australian Federal Police we investigated allegations of misuse of our private binding rulings, leading to a former senior tax officer being charged with a number of offences. The matter is currently before the courts.
Security
During 2003-04 we continued to monitor our compliance with the Commonwealth protective security manual and implement appropriate policies and standards to protect our employees, information and assets.
We monitor our adherence to security standards through a national program of site security audits. This is supplemented by periodic security checks across the organisation to ensure that sensitive taxpayer data and valuable assets are being properly secured after business hours. We have also implemented the recommendations of a comprehensive review of the security of information technology facilities conducted in October-November 2003.
A high priority continues to be processing security clearances for employees who work with sensitive information. At June 2004 we had 4,995 employees with security clearances.
This year we participated in a cross-agency audit of the management of protective security conducted by the ANAO and we are implementing the recommendations from the audit.
5.4 Managing our people
The Tax Office has a large, diverse workforce located throughout the country. At 30 June 2004 we employed 21,009 ongoing and non-ongoing employees under the Public Service Act 1999.
While having employees located across Australia provides operational challenges for employees and managers, it gives a presence across the nation for taxpayers and gives us access to the national labour market.
The size, location and make-up of our workforce are shown in the following tables. Table 5.10 provides a breakdown of employees by gender and classification for 2003-04, while table 5.11 provides the 2002-03 figures. Table 5.12 shows which area of the organisation these people are working in and compares this with last year. Table 5.13 provides information about where in Australia our people work, together with comparative information from last year.
Table 5.10: Employees, at 30 June 2004 (46 KB)
Table 5.11: Employees, at 30 June 2003 (45 KB)
Table 5.12: Employees, by line, at 30 June 2003 and 2004 (76 KB)
Table 5.13: Employees, by location, at 30 June 2003 and 2004 (59 KB)
Figure 5.5: Map showing employee numbers, by location, at 30 June 2004 (61 KB)
Some interesting features of our workforce demographics are that:
- the gender profile remained much the same as last year, with women representing approximately 52% of our workforce
- the age profile rose 3% in 2003-04, with approximately 61% of employees now aged 40 or older
- the two largest lines were Operations and GST, representing 32% and 16% of all employees respectively, and
- turnover continued to be low, with a 4.5% separation rate for ongoing employees, compared with 4.4% in 2002-03.
In 2003-04 our people strategy focused on delivering services to manage our people, recognising and meeting the different needs of the organisation, our managers and employees. We have concentrated on creating a workforce that is skilled, equipped and committed to the Tax Office. The strategy encourages both excellence and conformance by providing a work environment that supports the APS values and code of conduct.
Our people and place system framework, shown in figure 5.6, depicts the range of services we have provided for employees. It illustrates the different elements of the system and the interrelationships and dependencies between them.
The business needs of the compliance and operations programs, together with the easier, cheaper and more personalised program, defined our priorities for people and place in 2003-04.
Workforce design
Workforce planning
Recruitment management services
Skilling and learning
Performance management system
Rewards and recognition
Knowledge sharing
Career development
Separation
Workforce design
The complexity and diversity of our work and the dynamic nature of the environment in which we operate influence our approach to and emphasis on workforce design.
To ensure that we have a workforce with the right skills, knowledge and experience to enable us to achieve our outcomes now and in the future, we view our workforce in terms of work types. This enables us to tailor different workforce management and development approaches to the various work types. We refer to these work types as professional streams. They provide the framework for our activities in workforce design and planning, succession management and career planning, recruitment and deployment, and performance management.
We have identified 15 professional streams and this year focused on the five priority streams of advice (law), active compliance, debt and lodgment, information technology, and management and leadership.
Workforce planning
In 2003-04 we took a reinvigorated approach to workforce planning, implementing a corporate workforce planning framework. Workforce planning is a significant activity in an organisation as large as ours, so we have continued to develop workforce plans through our sub-plans, with a view to bringing them together to form a plan for the entire organisation. This approach is supported by our professional streams framework, and is helping us to better align our workforce decisions and budgets at the program level.
As we continue to develop and implement our easier, cheaper and more personalised program, there will be changes in the work some of our people do. We are focusing on understanding those impacts and identifying strategies to support our people through those changes.
We also have a better understanding of the current and future work that may be done in our regional offices. This enables us to plan, and will help regional employees understand their career options.
Recruitment and deployment
To support our business intent, our recruitment strategies focused on filling a range of ongoing and non-ongoing positions in our compliance and operations areas.
We conducted a number of large-scale recruitment campaigns to meet workforce requirements in our compliance, telephony and data capture areas. We took a capability-based approach, for example, recruiting field staff to meet the needs within a number of different areas. This has enabled us to fill a range of positions across the organisation and reduced the duplication of recruitment processes that would otherwise compete for people with similar capabilities. We increased our use of external recruitment service providers to support these large recruitment campaigns.
As an indication of the scale of activities undertaken during the year, we:
- engaged 567 ongoing and 1,208 non-ongoing employees
- let 1,034 short-term contracts
- extended 2,591 non-ongoing contracts, and
- promoted 998 employees, with 11 decisions to promote people being overturned through promotion review.
Skilling and learning
We devote significant resources to meeting agency agreement commitments so that all employees have the opportunity to develop the skills they need to do their job. Increasingly, skilling and learning are delivered through sub-plans and aligned to our professional streams framework.
In 2003-04 there was considerable improvement in prioritising and coordinating tax technical skilling.
This year also saw significant attention and effort focused on supporting our leaders and managers, including:
- identifying a management and leadership professional stream to understand our strengths and needs, and focus our activities
- implementing a dedicated telephone helpline for our managers to provide them with the advice and assistance they need to perform more effectively. The helpline was launched to all managers in July 2004, providing them with a single point of entry for support and advice on a wide range of human resource issues. Most enquiries are handled at the initial point of contact, with more complex issues passed to subject matter experts. The helpline operates from 8am to 6pm on business days, and
- introducing a practical training and development program, Managing for success, to ensure our managers have the knowledge, skills and capabilities to effectively manage themselves, their business, and people in the workplace, including people within and outside the Tax Office. The program, which is being delivered to all managers, provides tailored programs and products to meet the needs of managers in different work areas.
The development, delivery, support and evaluation of e-learning products and systems play a key role in the skilling of our people, providing an alternative to face-to-face and on-the-job learning. While we do not yet know what demand for online products our easier, cheaper and more personalised program will create, we believe it is likely to become the main driver in setting e-learning priorities for the near future.
We established a Learning and Professional Development Forum during the year to assess priorities and resource allocation across learning and professional development and make recommendations to relevant sub-plan executives. This forum will manage a quarterly work program across all sub-plans and provide input to our annual planning process.
Performance management system
In 2003-04 we improved the link between our performance management system and other systems within the organisation by:
- aligning the assurance process for EL2 and SES performance pay with our sub-plan approach to planning and assessing performance
- incorporating core capabilities identified for our professional streams into relevant performance documents and personal development plans, and
- aligning base pay reviews for EL2 employees with their individual performance assessments.
Our annual performance environment survey indicated that 76% of employees agreed that the performance management system is valuable. The online census, in which 10,216 employees (49%) participated, indicated that 92% of employees have a performance and development agreement and/or team plan, and 88% reported they had a mid-year review, a significant increase on last year. There was a slight decrease in participation by senior executives in multi-source feedback (90%), with EL2 participation higher at 95%.
Rewards and recognition
Our employee reward and recognition scheme recognises the contribution of individuals and teams to achieving our outcome for the year. The first annual cycle of reward and recognition events was completed with the presentation of the Commissioner's Awards on 10 December 2003. The winners were:
- Richard Drummond, for excellence in leadership
- Renate Loizos, for excellence in client service
- Elizabeth Horvath, for technical excellence, and
- the Tax Agent Portal Project Team for excellence in innovation.
Events during the year included end-of-financial-year recognition, line awards, Australia Day achievement awards, and recognition for years of service and on separation. We expect a review of the scheme, undertaken as part of our agency agreement requirements, to result in a number of improvements.
Knowledge sharing
We develop and implement communication strategies to make sure our people are aware of key messages and any action required. Relevant information is shared using the most appropriate internal communication channels.
Our internal weekly electronic magazine, Newsextra, is one of the main channels for sharing corporate messages and information across lines and regions. Contributions are welcomed from anyone and the letters section encourages participation and interaction.
Career development
We use the APS Commission's senior executive leadership capability framework as the basis for selection, performance appraisal and development of our leaders at the SES and EL2 levels.
In 2003-04 we helped identify career paths for our people through our professional streams work. We identified five professional streams for building individual and organisational capability - advice (law), active compliance, debt and lodgment, information technology, and management and leadership. Together they represent more than two-thirds of our workforce.
The core capabilities for these streams have been included in relevant performance documentation, such as learning and development plans, and form the basis for learning and development products to support our people.
The advice (law) stream exemplifies the work done within each of the professional streams. Within the stream we developed role profiles for the different types of work associated with providing written advice. We established assessment and assurance processes so that we and the community can have confidence in the capability of our people to provide quality advice. These processes include programs to address identified gaps and enable people to move from one type of work to another within the stream.
We have also implemented EL2 and SES leadership development programs, focusing on supporting the career development of high-potential employees to strengthen the organisation. These programs include selecting 23 band 1 SES and 46 EL2s, who have been identified as having high potential to develop as leaders, to take part in a three-year program. The program links into our overall succession management framework to make sure we have a strong pool of candidates for senior leadership positions to meet current and future challenges.
This year we were more focused in developing our graduates to ensure they can meet our evolving needs. Their coursework, redesigned last year, is being further refined and integrated to put more emphasis on workplace skills.
We continued last year's successful initiative of recruiting both information technology and compliance graduates to the corporate program. The integration across the disciplines has provided all graduates with a much broader opportunity to network and is already paying dividends in increased awareness and cooperation across work areas and functions.
We also recruited to the program a number of tertiary qualified internal employees at the APS 2 and APS 3 levels, providing them with similar developmental career opportunities. Their experience will be invaluable to new starters and will help meet our business needs.
The success of our approach to developing graduates is evident in the level of satisfaction and high retention of our graduates, the increasing interest shown by both internal and external applicants in the program, and our commitment to fund future programs.
In developing our workforce we also endeavoured to develop our capability to more effectively interact with key external stakeholders. By participating in mentoring programs such as the Women in Law Enforcement Strategy and Senior Women in Management, our people develop their skills, bring a fresh perspective to the organisation, and develop valuable networks that help improve our processes.
Secondment programs such as Working in the Senate and placements, for example, with the Department of Prime Minister and Cabinet, enable us to better understand the operations and requirements of agencies we regularly interact with, and to develop networks to more effectively deliver services.
Separation
During the year 924 people who held ongoing positions left the Tax Office, representing a separation rate of 4.5%. This included:
- 569 resignations
- 142 age retirements
- 25 redundancies, and
- 16 dismissals.
We actually have a low level of separations, with 17% (160) of those leaving in the 50-54 age category and 32% (299) entry level APS 3 employees, many from our client contact centres. Table 5.14 shows a list of separations by line.
Table 5.14: Employee separations, by line, 2003-04 (46 KB)
Security
We formally established the Tax Office Security Committee in 2004 to focus on developing a holistic and integrated approach to our physical, information, personal and information technology security. The committee is responsible for developing our security policy and overseeing protective security matters within the organisation. It meets the requirement of the appointment of a security executive as outlined in the Commonwealth protective security manual.
We implemented the following two major initiatives during the year to improve the physical security of our people and offices:
- a national digital pass and warrant system, which enhances integrity through improved security features in the method of pass, warrant and ID production. We no longer outsource the production of warrants, reducing the opportunity for duplication and misuse, and
- a national security coordinator position to ensure that consistent and improved security processes are introduced. The position provides a centralised contact point with specialised knowledge, and provides quality assurance of security at each site.
Information services
This year we continued to improve access to critical legal and business information resources to support technical decision making. As a result of a wide-ranging review of how legal information is provided, we increased our effort to provide employees with skilling in information research. A usability assessment of ATOlaw, our internal database of policy and legal material, resulted in a major redevelopment to make the database easier and more intuitive to use. Changes are scheduled for release in the second half of 2004.
Throughout the year enhancements have been made to the Legal Database, the public version of ATOlaw, to significantly improve the search functionality and provide an email subscription facility.
We are planning significant changes over the next three years to how we provide information to support research. Electronic library services to desktops will provide equitable access to information across all sites and reduce the reliance on print-based libraries.
Certified agreements and Australian workplace agreements
Productivity
Non-salary benefits
ATOconcern
Certified agreements and Australian workplace agreements
Certified agreements
The certified agreements covering our employees - the Executive level 2 agreement 2002 and the General employees' agreement 2002 - both nominally expired on 30 June 2004.
The Executive level 2 agreement 2004 and the General employees' agreement 2004 were certified by the Australian Industrial Relations Commission on 1 July 2004. On 30 June 2004 there were 20,758 employees covered by these agreements, as shown in table 5.15.
A separate agreement covering the Australian Valuation Office has a nominal expiry date of 30 June 2004. The Australian Valuation Office is seeking to roll over the agreement for up to 18 months, with a view to negotiating a new agreement more appropriate to its future operations.
Our 2004 agreements consolidate the terms and conditions of employment into a single source for each employment group. While providing employees with benefits in terms of pay and conditions, the agreements support productivity improvements by linking pay increases to demonstrated improvements in corporate outcomes. Key design features of the new agreements include:
- a link to productivity for all our activities and for individual performance
- increased client service standards as set out in the service standards in the agency agreement, and
- improved arrangements for communicating and consulting with employees and their representatives.
Australian workplace agreements
All our permanent SES employees are employed under Australian workplace agreements. EL2 employees acting on higher duties as senior executives are offered an Australian workplace agreement if the higher duties continue for 12 weeks or longer. As table 5.16 shows, on 30 June 2004 there were 29 non-SES employees covered by individual Australian workplace agreements. These agreements are predominantly in the information technology sub-plan and are used primarily to address specific recruitment or retention issues.
The agreements include benefits relating to motor vehicles, parking, semi-official phones, mobile phones, airline lounge membership and some spouse travel. Senior executives who do not use these benefits can cash them out through their salary.
Achievements
We can report a number of achievements for 2003-04:
- a strong voter turnout of 77% in both the 2004 general agreement and EL2 agreement, and a very solid 'yes' vote of 85% for the general agreement and 88% for the EL2 agreement, and
- high levels of activity and a continuing effort to improve relationships, including an increase in consultation at the line and corporate levels.
Productivity
The Commissioner approved a 2% pay rise in November 2003 and a further 2.5% productivity pay rise in May 2004 under clauses 8.1A of the general agreement and 8.2 of the EL2 agreement. The pay rises were based on our results against corporate goals to 30 April 2004.
Non-salary benefits
We provide the following non-salary benefits to our employees:
- SES - motor vehicles for private use, semi-official phones, airline lounge membership and travel for spouse once a year
- EL2 employees - reimbursement (up to $750 a year) for purchase of items or services that maintain or increase their professionalism, and airline lounge membership, and
- general employees - airline lounge membership.
ATOconcern
ATOconcern is an independent, confidential and impartial service for all our employees, through which they can raise issues that affect them or the workplace.
During 2003-04 ATOconcern met the corporately endorsed quality assurance standards for dealing with areas within the organisation.
This year approaches to ATOconcern grew by 8% to 770, up from 710 in 2002-03. Most concerns related to workplace conflict and recruitment issues. Although the number of reported cases did not increase significantly this year, the cases referred were considered more complex and required more effort to resolve. We expect the continued rollout of the Managing for success program during 2004-05 to address a number of the management-related issues employees have raised with ATOconcern.
During 2003-04 ATOconcern introduced some more conflict resolution techniques, with managers and employees now having access to mediation, facilitation and workplace conferencing. While the time allocated to these complaint resolution techniques was less than 1% of the total resources allocated to ATOconcern, they have successfully prevented issues becoming intractable and have helped manage discontent in the workplace. Feedback has been very positive from areas where interventions such as workplace conferencing have been delivered.
With the improved feedback received on workplace conferencing and a communication strategy scheduled for implementation in early 2004-05, we expect the demand for these services to increase.
These conflict resolution techniques are designed to complement formal complaint processes in the people and place system framework, and our employee assistance program that has operated for a number of years.
This section describes our general occupational health and safety (OH&S) initiatives.
This year we met our obligations under the Occupational Health and Safety (Commonwealth Employment) Act 1991 in terms of having:
- an OH&S policy (which is being reviewed and updated)
- an OH&S agreement (currently being re-negotiated) that allows for consultation and communication with all employees, their health and safety representatives and relevant unions
- a national committee and business line committees that meet quarterly to plan, develop and implement OH&S initiatives, particularly relating to injury prevention, and
- designated trained work groups and health and safety representatives.
We undertake OH&S risk assessments:
- before implementing any major projects that may affect an employee's health
- to regularly review existing practices in all work areas, and
- to review existing policies and systems used by employees.
We have developed and implemented OH&S training programs for new employees, existing employees, managers, and health and safety representatives to help them understand their OH&S responsibilities.
During the year we started to improve reporting for the organisation as a whole and for business lines in particular so that we can make informed decisions about OH&S issues. The improved reports provide trend information to highlight prevention opportunities, and detailed case information for managers to help injured employees return to work quickly.
In 2003-04 the Commissioner signed agreements with Comcare to:
- see that senior management takes a lead in preventing and managing workplace injury
- see that employees get appropriate medical and rehabilitation services as early as possible following an injury, and
- reduce the incidence and duration of workplace injury in accordance with the National Performance Improvement Targets.
We are implementing the following key initiatives:
- greater accountability by local OH&S committees for managing OH&S in different areas
- an improved manager training package to provide managers with the knowledge and capabilities needed to prevent and manage workplace risks and injury
- a risk evaluation of our work practices and work environment to identify and assess associated health, safety and wellbeing risk factors, and
- pilot strategies to prevent psychological injuries, based on investigating factors associated with their development.
We have a wellbeing program aimed at improving the general health of our employees. People can attend onsite activities, including health awareness sessions, regular exercise classes, health screening (for example, for diabetes, blood pressure, body fat) and seated massages.
A focus this year was raising awareness of depression and equipping managers with the skills to recognise depression in the workplace.
Yet despite our OH&S initiatives in 2003-04, the injury rate and incapacity rate continued to increase, as shown in tables 5.17 and 5.18.
Table 5.17: Injury rate, by premium year, 2000-01 to 2003-04 (42 KB)
Table 5.18: Incidence of injuries per 1,000 full-time equivalent employees, by premium year, 2000-01 to 2003-04 (45 KB)
The increased injury rate has contributed to an increase in our workers compensation premium. But the premium increase is also a result of increased claim costs, mainly because people are unfit for work for longer.
The premium we paid to Comcare increased from $17.4 million in 2003-04 to $26.4 million in 2004-05. The premium represents 1.89% of our salary payments and, while higher than the Australian government average of 1.63%, compares favourably with other large organisations.
During 2004 Comcare advised all Australian government agencies that the key factors putting upward pressure on overall premium rates were more accepted claims for psychological injuries, longer time off work, and increasing medical costs. We are continuing to develop and implement strategies to reduce our Comcare premium.
Outlook to 2012
Section 74 of the Occupational Health and Safety (Commonwealth Employment) Act 1991
Preventing and managing work-related injury
Outlook to 2012
In 2003-04 we adopted five targets, including four set by Comcare, to improve our performance by 2012. We are committed to meeting these targets and are focusing on reducing the number of injuries and the average period of incapacity. Our early performance against the Comcare targets is outlined below.
Target 1 - 40% reduction over 10 years (to 2012) in the incidence rate of claims with 5 or more days incapacity
Table 5.19 shows that the incidence rate of injury resulting in five or more days of incapacity increased slightly in 2003-04. We have significantly increased our activity around early intervention and expect improved results in 2004-05.
Target 2 - No traumatic workplace fatalities
There were no fatalities in 2003-04.
Target 3 - 40% reduction over 10 years (to 2012) in the incidence rate of weeks lost due to injury
Table 5.20 shows that the incidence rate of leave following injury increased in 2003-04 and indicates a trend for increasing time lost due to injury. Some of this lost time is due to claimants with a date of injury in previous financial years having further leave as a result of their injury. Our early intervention strategies should also affect this target in 2004-05.
Target 4 - 90% reduction over 10 years (to 2012) in the average number of weeks taken for return to work activity to commence
Table 5.21 shows that our performance has improved since 2002-03. We are referring claims for assessment approximately five weeks earlier than at the same time in 2002-03.
Target 5 - 60% reduction over 10 years (to 2012) in the average number of days taken to lodge a claim
Table 5.22 shows that there was a slight improvement in lodging workers compensation claims early in 2003-04. On average, claims reached Comcare seven days earlier than they did in 2002-03.
Section 74 of the Occupational Health and Safety (Commonwealth Employment) Act 1991
The following information details our responses to our legal obligations under section 74 of the Occupational Health and Safety (Commonwealth Employment) Act 1991 (the OH&S Act).
Section 74(1)(c)
Our OH&S policy is being reviewed by the National Executive for Health, Safety and Wellbeing and will be issued in the first quarter of 2004-05 as a corporate management practice statement. The policy incorporates the high-level statement of the commitments by the Commissioner, and the responsibilities of senior management, managers and employees in developing a safe work environment.
The principles that underpin the policy are:
- Everyone has a right to a safe and healthy workplace.
- We recognise our responsibilities to eliminate injury, and support and rehabilitate injured employees.
- The overall physical and psychological wellbeing of employees is important in creating a rewarding and productive workplace.
- A strong and open relationship based on consultation with unions, health and safety representatives and employees.
Once finalised, this policy will be available to all employees through our intranet.
The National Executive for Health, Safety and Wellbeing has representatives from management and unions and is responsible for OH&S direction in the Tax Office. The forum convenes regularly and meets legislative requirements. It receives reports and feedback from all business and service lines to confirm conformance with the legislative requirements and monitor the progress of OH&S initiatives in the workplace.
All lines have an OH&S committee, with representatives from unions and line management, and an organisational health consultant. These committees meet quarterly and provide leadership on OH&S issues for each line. We are looking for opportunities to align committees to professional streams, sub-plans or capabilities and will consider this over the next two years.
There are safety forums in all sites, which meet quarterly. These forums bring together regional facilities managers with local managers and health and safety representatives to deal with local site accommodation and environmental issues.
Designated work groups have been defined for all lines, and positions for health and safety representatives identified.
In most lines these positions are filled, although some will be finalised in the first quarter of 2004-05.
We have an OH&S agreement, with a new agreement being negotiated with unions that will be finalised in the first quarter of 2004-05. The main features of the new agreement include:
- formalising the whole-of-health focus, including the wellbeing focus with the safety and health approaches in health prevention, and introducing injury management approaches into a formal document
- providing accountabilities and outcomes at each committee or forum level, built on their ability to develop, implement and monitor health-related activities based on risk management, and
- introducing an issues referral clause as a result of feedback from committees for assistance in resolving issues.
Section 74(1)(d)
In 2003-04 we took the following preventive measures aimed at ensuring the health and safety of our employees.
- Implemented the Employer Statement of Commitment and Comcare Performance Targets.
- In accordance with the National OH&S Strategy 2002-2012, developed by the National Occupational Health and Safety Commission, the Commissioner has signed the following agreements with Comcare:
- Employee statement of commitment, which focuses on senior management leadership, involvement and commitment in preventing and managing work-related injury, and
- Performance improvement targets, which outline the yearly targets for improved performance in:
- - preventing workplace injury and death
- - limiting absenteeism resulting from workplace injury
- - minimising the time between injury occurrence and the date rehabilitation commences, and
- - minimising the duration from the date of injury to the date a claim is received in Comcare.
Performance against these targets is measured and monitored by senior management at the relevant forums.
- Conducted risk assessments before introducing major changes in lines or to policies and practices. In particular, we are making risk assessments part of the easier, cheaper and more personalised program so that any new systems support a safe working environment.
In 2003-04 our health consultants received specific training in safety audit processes from Comcare to enable them to audit OH&S systems in work areas. These audits have commenced and will be rolled out progressively throughout 2004-05.
- Developed a self paced e-learning package, Becoming a safer workplace, for all employees to ensure they understand their rights and responsibilities in relation to injury prevention and management. All employees are required to complete the e-learning package by June 2005.
- Developed a module focusing on injury prevention and management within our new manager training program, Managing for success. Called 'Managing people - ensuring a safe and healthy workplace', and currently being piloted, this module will require all managers to complete:
- the self-paced e-learning package, Becoming a safer workplace, and
- a half-day workshop involving group discussion of relevant case studies.
- Implemented two national wellbeing programs to raise manager awareness of depression and equip them with the skills to deal with it in the workplace. These programs are:
- Beyond blue, the national depression initiative, and
- Heart math program, designed to improve managers' performance by managing stress.
- In conjunction with Comcare, an organisational psychologist has been engaged to:
- investigate the factors contributing to the development of employee psychological injuries
- develop strategies that will mitigate these factors, and
- conduct a pilot program to implement and monitor these strategies.
Section 74(1)(e)
This year there were 55 notifiable incidents under section 68 of the OH&S Act, as shown in table 5.23.
Table 5.23: Notifiable incidents, 2002-03 to 2003-04 (35 KB)
Section 74(1)(f)
This year there were:
- no provisional improvement notices issued under section 29
- no investigations carried out under sections 41 and 44
- no tests conducted on any plant, substance or thing under section 44
- no directions given under section 45
- no prohibition orders under section 46, and
- no improvement notices issued under section 47.
Preventing and managing work-related injury
Table 5.24 shows our performance against the Safety, Rehabilitation and Compensation Commission's performance indicators, by financial year.
Table 5.24: Safety, Rehabilitation and Compensation Commission's performance indicators, 2000-01 to 2003-04 (51 KB)
As can be seen, the incapacity rates for all measures are continuing to increase, except for injuries with five or more days of incapacity. This measure is likely to continue rising as late claims (with updated costs and incapacity periods) result in slight upward variations from year to year. The duration from date of injury to the date the claim is received in Comcare appears to be decreasing, but is also likely to rise as further claims are submitted.
Senior executive remuneration
The Remuneration Tribunal sets the Commissioner's remuneration, while the Commissioner determines the remuneration for the Second Commissioners, within a framework set down by the tribunal. The Commissioner also sets actual remuneration and conditions for our SES employees through sub-plan remuneration committees.
Sub-plan remuneration committees allocate senior executives to a pay zone based on the work value of the position/role, and the internal and external 'marketability' of the position and the executive.
In assessing market factor ratings, sub-plan remuneration committees address:
- the challenge of the executive's present task
- the executive's level of competency
- external market pressure relating to both the executive and their job, and
- the impact of the executive on the Tax Office and the value of the executive to the organisation.
In 2003-04 minimum salaries for senior executives were $101,400 - $120,300 for band 1 and $124,900 - $149,800 for band 2. Final terms and conditions of employment, including salary, are negotiated through individual Australian workplace agreements.
Note 14 to our financial statements gives the number of executives whose total remuneration falls within each $10,000 band (starting at $100,000) and the aggregate remuneration paid to all executives.
Other employee remuneration
Table 5.25 indicates the salary range for different employee classifications at 30 June 2004.
Table 5.25: Salary ranges, by broadband classification, at 30 June 2004 (40 KB)
Performance pay
Performance pay is available to senior executives and EL2 employees.
The first 5% of performance pay represents salary 'at risk' for SES band 1 and EL2 officers. For SES band 2 officers, the first $5,000 represents salary 'at risk'. That is, even though it is not paid fortnightly, it is part of the total salary an EL2 or SES officer is entitled to if they perform their job effectively.
During 2003-04:
- 207 SES officers out of a possible 214 received performance pay for their performance in 2002-03, and
- 1,349 EL2 officers out of a possible 1,421 received performance pay for their performance in 2002-03.
The total amount of such performance pay was $1,699,864 for SES officers, and $6,786,224 for EL2 officers.
The 'at risk' component accounts for $959,859 (56%) of performance payments at the SES level, and $4,503,343 (66%) at the EL2 level. In total, $5,463,202 (64%) of the $8,486,088 total cost of performance payments to SES and EL2 officers is payment of salary 'at risk'.
Table 5.26 shows the number of SES and EL2 employees who received performance pay this year.
Table 5.26: 2002-03 performance payments paid in 2003-04, by classification (50 KB)
5.5 Managing information technology
In 2003-04 we restructured our information technology (IT) functions to use resources more effectively and efficiently. We separated the design function from the delivery arm, creating two business areas - Business Solutions and Information and Communications Technology. Structurally, these two key areas now drive our IT function, working together to successfully achieve our goals.
Business Solutions is involved from the earliest stage of an IT project through to completion of the detailed design. It provides services in the testing phase, ensuring the product works for the user and that the intent of the project is maintained. Information and Communications Technology also provides expertise early in key areas such as infrastructure and security, but is mainly involved in delivering the required services. All areas join together at the end of a project to review the work, measure the results and assess how well the project ran.
In 2003-04 the IT area managed:
- 23,832 office workstations
- 3,061 mobile (fieldwork) computer kits
- 2,078 laptops
- 1,546 printers
- 27,885 telephone handsets, and
- 7,403 mobile phones.
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Like most large organisations, we have a substantial and diverse investment in information and communications technology, comprising computing and communications infrastructure, software and people. We have a large number of administrative and business applications that are used for the overall administration of the revenue system, as well as for our internal administration.
Approximately 70% of our IT budget is dedicated to providing IT products and services that support our everyday work, in particular our compliance and operations work and the easier, cheaper and more personalised program.
To see that our systems remain reliable and meet current business and legislative requirements, we put a great deal of effort into supporting and maintaining our software applications. Many improvements are needed every year to keep pace with new requirements - often as a result of changes to tax law.
The nature and sophistication of the threats to our IT systems are continually changing and we have to maintain adequate protection. We must also protect the privacy and accuracy of taxpayer data we hold, and prevent fraud and other forms of tampering and theft. It is a measure of the success of our efforts that there were no successful virus attacks on our systems and no unauthorised tampering with data or systems during 2003-04. We have a section dedicated to maintaining the high level of protection, privacy and data integrity expected of us by both taxpayers and the government.
As with most large IT organisations, we closely monitor new developments and opportunities in the rapidly changing IT environment so that we make use of the best available products and services in the marketplace. We also develop standards so that new developments and changes to our systems fit into a well-established IT environment.
We have outsourced significant areas of IT to the private sector - EDS provides a substantial percentage of the infrastructure services and support, while a combination of Telstra and Damovo supply all voice services. These arrangements allow us to control expenditure and see that contracted service levels are maintained. We are continuing to monitor the appropriateness of these arrangements and will adjust as necessary.
IT transformation program
In 2003 we engaged the services of an IT strategic adviser to assess the state of our IT systems. The aim was to give us solid direction to enable us to provide stable and reliable IT solutions for the future and reposition the IT business as taxpayer-focused and responsive to taxpayer needs.
The IT strategic adviser identified the following six focus areas as critical to the success of the IT transformation program:
- Dealing with customers - have IT operations that are taxpayer-focused and operate efficiently and transparently. Meet taxpayer needs through a set of strategies and directions for technology that are aligned with the strategic needs of the organisation.
- Capabilities of our people - actively develop the capabilities of our employees to support IT operations that are well-aligned and focused on the needs of taxpayers.
- Strong leadership - embrace strong leadership at all levels throughout IT operations to enable us to achieve our full potential.
- Disciplined and mature processes essential to our strategic direction - have resilient operations that enable us to deliver reliable and consistent projects and high-quality applications software.
- Technology directions - have a flexible and reliable technology portfolio that is responsive to our organisational needs in helping taxpayers comply with their obligations.
- Governance of IT operations - have technology operations that are transparent and well-controlled, and aligned with our corporate priorities.
Under our IT transformation program, we have made significant changes in our IT approach, with a view to becoming a more responsive and taxpayer-oriented organisation. These initiatives are already creating positive outcomes and will continue to do so in the coming year.
While delivering on our everyday business, our guiding strategy is to improve compliance by minimising compliance costs through IT. We are doing this by:
- providing secure access to tax information that is simple, concise and relevant
- enabling businesses to interact with us online and giving them online access to information about their individual relationship with us, and
- providing access to commercial services that are practical and convenient, and fit in with the way businesses operate and the service times taxpayers expect.
An example of how we are minimising compliance costs through IT is our eGrant service, which means that truck drivers no longer have to spend time and money filling out claim forms to receive their fuel grant payments. Instead, the fuel provider automatically sends fuel transaction details to us when they generate a trucker's monthly invoice and the trucker automatically receives their payment.
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During 2003-04 we continued to develop and release IT online applications for taxpayers.
The e-tax electronic income tax lodgment system has delivered major benefits to individual taxpayers by speeding the processing of returns and making the job of completing a tax return easier and more accurate. The number of people using e-tax is testament to its success, with over 830,000 individual taxpayers using it in 2003. We expect this number to increase to more than a million in 2004.
Enhancements to the Tax Agent Portal now allow tax agents to directly access their clients' accounts online, making their work easier and more accurate and lowering costs for both agents and us.
We have also released the Business Portal, which enables small businesses to submit activity statements online. It is part of an ongoing effort to improve our service to this important group of taxpayers.
The easier, cheaper and more personalised program calls for new ways of working that require new technological solutions. This provides us with an opportunity to overhaul our information and communications technology and next year we will start to build a new technological foundation for the Australian revenue system. As part of this process, we are retiring many of our core systems that have served us well in the past but do not readily support the future vision of tax administration.
In the next few years there will be many opportunities for our people to gain new skills and knowledge as they build the foundation for our new information and communications technology, and continue to operate and refine it. Our professional streams project is a way of ensuring we have the workforce capability we need to deliver services to the community now and in the future.
Within the IT professional stream we identified three career paths - project management, business analysis and IT technical. Through our work in this stream we aim to:
- improve our capability to manage our IT workforce needs by helping employees obtain the skills and knowledge required to deliver current and future technology solutions to support our business outcomes, and
- see that our employees have career paths within our IT organisation, and can develop and attain the relevant skills to manage their careers.
5.6 Managing purchasing and assets
Procurement
During 2003-04 we continued to adhere to the principles and policies of the Commonwealth procurement guidelines when undertaking procurement. The guidelines are applied through the Chief Executive's Instructions and supporting guidance documentation. We also continued to review our standard request for tender and contract documentation to ensure that the clauses and requirements reflect government policy requirements.
Our primary objective is to improve the efficiency and effectiveness of the 'procure to pay' process, including contract management. We aim to balance the benefits of goods and services to be purchased against their costs and risks so that we achieve the best available value for money.
All complex procurement is managed through specialised units by qualified procurement officers to ensure that Australian government and Tax Office policy is adhered to. We engage independent probity advisers and auditors for significant procurement activities.
People employed in the procurement units must be trained in conducting procurement and have a Certificate IV in Government and Procurement. We continued to develop and refine the procurement and contract management training program through workshops on contract management.
To streamline procurement processes and reduce administrative costs for both us and suppliers, we use the government's electronic AusTender system, consolidate supplier accounts to reduce invoice processing costs and payment times, and establish national contracts for property management, voice services, recruitment services, workstations, furniture, training services and project management for general corporate functions.
Initiatives to ensure that terms of payment are met include an employee awareness program and a review of the procurement process, including examining the more efficient use of credit cards.
We have strengthened our assurance and reporting processes to comply with government requirements. This includes listing contracts of $100,000 or more on our website in accordance with the Senate Order on Departmental and Agency Contracts.
We continue to meet the level of involvement of small to medium enterprises and industry development obligations under the information technology outsourcing arrangement.
Asset management
Many assets used to conduct our work are leased, and managed by an outsourced service provider. These arrangements were reviewed through the year and we decided to continue with them. We have policies and procedures to effectively and efficiently manage the changing profile of the remaining assets.
While our asset accounting function is centrally controlled, the day-to-day management of assets is decentralised to regional locations.
During the year we commenced a major program to build and deliver new capabilities, which involves developing new software. This internally developed software has become one of our major asset classes. After being developed by the easier, cheaper and more personalised program and Information and Communications Technology areas, it is managed by the line identified as being the business system owner.
Financial management
The Financial Management and Accountability Act 1997 provides the framework under which we develop accounting policies and procedures for assets.
Assets with an acquisition cost over the specified amounts in the Chief Executive's Instructions are recognised in our financial statements. On the other hand, portable items with values below the asset recognition threshold that can be easily moved and converted for personal use and are susceptible to theft or loss are registered for physical control purposes, but not recognised in the financial statements.
Asset recognition thresholds, frequency of revaluations, depreciation and amortisation, estimating useful lives, the recoverable amount test and impairment of assets are discussed in detail at note 2.13 to our financial statements.
We consider that providing information technology services conforms with the characteristics of an operating lease and, accordingly, do not recognise leased assets in our financial statements. Leased assets are discussed in detail at note 2.8 to our financial statements.
5.7 Providing access to people with disabilities
We have formalised our commitment to our obligations under the Commonwealth Disability Strategy and the Disability Discrimination Act 1992 by developing a disability action plan. The plan is incorporated into our workplace diversity program (which was endorsed by the ATO Executive in June 2004).
The plan articulates the activities, performance measures and reporting mechanisms that will enable us to meet our reporting requirements under the Commonwealth Disability Strategy. We meet these obligations by constantly reassessing our performance in providing services to people with disabilities within and outside the organisation.
We have made significant progress in a number of areas by:
- developing a program to enable vision-impaired taxpayers to interact with our website
- continually upgrading adaptive technology for use by our employees with disabilities, and
- regularly consulting with disabled members of the community and their representative groups to ensure that the needs of people with disabilities are considered when developing new or revised programs and policies.
We report performance against all five roles identified by the Commonwealth Disability Strategy as possibly being performed by Australian government organisations - policy adviser, regulator, purchaser, provider and employer.
Because of delays in finalising our workplace diversity program, which incorporates our disability action plan, we cannot report on performance against the measures included in the plan. We have, however, included the proposed measures below and will report against them in future annual reports. The plan also identifies the responsibilities and accountabilities of various Tax Office positions and areas in relation to the performance indicators.
Disability action plan
Our role as policy adviser
Policy advisers develop policy for Australian government programs and services. This role requires consideration of the different needs of various groups and sectors and the desired impacts and outcomes for the community.
Our role as regulator
Regulators enforce legislation or other government rules that influence the way people behave. We perform the following regulatory functions:
- compliance monitoring
- complaint management, and
- investigation of possible fraud.
Our role as purchaser
Purchasers nominate providers and any outputs that need to be purchased to achieve desired policy and program outcomes. All Australian government organisations must consult with people with disabilities to ensure their needs are met when purchasing goods and services that may have a direct impact on these people's lives.
Our role as provider of services
Providers deliver the services they have been contracted to provide by managing resources effectively and developing and marketing services to consumers and purchasers. To meet these requirements, organisations must have:
- established mechanisms for quality improvements and assurance
- a service charter
- mechanisms for considering consumer satisfaction, and
- established complaints/grievance mechanisms.
Our role as employer
When recruiting employees, we make every effort to accommodate the requirements of people with disabilities who apply for advertised positions. We do this by modifying our testing/assessment and interview procedures. We provide constant support for employees with disabilities to help them achieve their potential in the workplace.
5.8 Ecological and environmental performance
We remain committed to our responsibilities for energy and environmental management. We constantly liaise with the Australian Greenhouse Office and our property providers to look for further initiatives in these areas.
Energy management
During 2003-04 our total leased space remained similar to last year. Employee numbers did fluctuate significantly, with an overall increase in the average number for the year.
Most sites were at or near leasehold capacity so our use of space was very efficient. Not all energy consumption figures were available at the time of preparing this report. We expect to consume 8,150 megajoules per person for tenant, light and power, which is a reduction on last year's figure and well under the government target of 10,000 megajoules per person. We also reduced our consumption figures for central services this year, achieving 418 megajoules per square metre. This compares to 448 megajoules per square metre last year and is well under the government target of 500 megajoules per square metre.
We are continuing to refurbish some of our major sites. The refurbishment will mean these sites can house many more employees over the given leased space, which will further reduce our energy intensity figures.
Environmental management
During 2003-04 we developed an environmental management system, which will help our environmental coordinator identify any environmental risks caused by our work and limit the impact of these risks. We made steady progress in rolling out the system nationally during the year.
Environmental reviews of major sites in the Australian Capital Territory, Western Australia, South Australia and Victoria considered:
- consumption of goods, energy and water
- generation of waste, and
- emissions to air, water and land.
We implemented a number of environmental initiatives arising from the review, such as amending our purchasing guidelines to incorporate environmental considerations and establishing or investigating a number of new recycling programs. Together with a campaign to help our employees be more environmentally aware in the workplace, these initiatives are helping us to be a good environmental manager.
In addition, we will issue a corporate management practice statement in early 2004-05 to reinforce the support and commitment of the senior executive and provide further direction for continually improving our environmental performance.
Appendix 1 - Summary of performance information
Download Appendix 1 in PDF format (214 KB)
Table A1.1: Deliver to government (91 KB)
Table A1.2: Maintain community confidence (769 KB)
Table A1.3: Minimise compliance costs (within Tax Office control) (101 KB)
Table A1.4: Efficient and adaptive organisation (81 KB)
Table A1.5: Output 1.1.1 - Shape, design and build administrative systems (142 KB)
Table A1.6: Output 1.1.2 - Management of revenue collections and transfers (108 KB)
Table A1.7: Output 1.1.3 - Compliance assurance and support for revenue collection (1328 KB)
Table A1.8: Output 1.1.4 - Compliance assurance and support for transfers and regulation of superannuation funds' compliance with retirement income standards (905 KB)
Table A1.9: Output 1.1.5 - Services to governments and agencies (82 KB)
Appendix 2 - Freedom of information
Download Appendix 2 in PDF format (92 KB)
This appendix provides information required under the Freedom of Information Act 1982 (the FOI Act), which stipulates that Australian government agencies must 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 held by the agency, and
- how people can gain access to information held by the agency.
The Tax Office is part of the Treasury Portfolio, and the Commissioner of Taxation has the status of Secretary of a Department.
Our main function is to administer legislation imposing taxes and excise (other than customs duty). We also work with appropriate departments on policy matters relating to tax and excise.
Responsibility for administering a range of tax and superannuation legislation is vested by Parliament in the Commissioner of Taxation. The Commissioner's authority 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 (that is, 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.
Under section 8 of the Taxation Administration Act 1953, nearly all the powers and functions under the tax Acts have been delegated to other tax officers. These officers include staff in National Office and branch offices who, from time to time, occupy or perform the duties of specified senior officers. Employees performing such duties authorise subordinate officers to make decisions on their behalf, subject to various terms and conditions.
At 30 June 2004 the organisation employed 21,009 people. The National Office is in Canberra. There are 23 branch and regional offices (with public access) located throughout Australia. Our employees are housed in about 62 buildings nationwide.
Part 5.2 includes an organisational chart and describes the functions carried out by our lines.
In 2003-04 the main areas of legislation administered by the Tax Office were:
- income tax
- fringe benefits tax
- goods and services tax
- higher education funding
- the Medicare levy
- the superannuation guarantee
- small superannuation accounts
- superannuation contributions tax
- excise duty, and
- the Australian business number and Australian Business Register.
While we do not have any formally established non-statutory bodies, we have a large number of committees set up to help us consult 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 Tax Office and professional body liaison forums operating at regional and national levels.
We also have consultative committees with external participation. These include the International Tax Rulings Panel, the Public Rulings Panel, the Test Case Litigation Panel, the GST Rulings Panel and the Part IVA Panel (relating to general anti-avoidance provisions).
We produce and/or retain numerous documents, including some that are available for inspection and/or purchase, and others that are available free of charge.
Some documents are generally available, while others are available under the FOI Act. 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 under sections 263 and 264 of the Income Tax Assessment Act 1936. Subject to privacy and FOI considerations, this information is available on request.
We hold the following categories of documents:
- agendas for, and minutes of, meetings of senior officers within the Tax Office (for example, reports on conferences and departmental committee meetings)
- ministerial, interdepartmental and general correspondence papers
- internal administration papers and records
- tax law and management policy documents, including recommendations and decisions
- reports relating to research and projects undertaken within the Tax Office
- copies of 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 us
- copies of instruments of delegation given to, or by, the Commissioner of Taxation
- requests for legal advice and copies of notes of advice provided
- briefing papers prepared for, and submissions to, the Treasurer, the Minister for Revenue and Assistant Treasurer, or the government of the time
- answers to parliamentary questions
- correspondence, reports and other documents relating to the structure of all or part of the Tax Office and the number, size and location of branch offices
- correspondence, reports and other documents concerning our human resource management
- training materials, including videotapes
- FOI request files and papers relevant to considering 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 the number of income tax returns lodged, the number and types of assessments issued, and tax revenue collected
- reports and associated working papers resulting from internal audit reviews
- manuals (covering topics such as audit, computer training, Department of Finance and Administration, personnel, appeals, FOI)
- returns of income and associated papers
- accounting records
- speeches by senior 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
- tax rulings and determinations
- superannuation guarantee rulings and determinations
- GST rulings and determinations
- sales tax and miscellaneous rulings, and
- Tax Office Plan.
The following documents are available for inspection and/or purchase by the public (or a section of the public) in line with arrangements we have made.
- Income tax returns and associated papers. Branch and regional offices process returns lodged by all classes of taxpayers (individual, trust, company, superannuation fund and so on). Returns are retained and taxpayers may obtain copies of their own returns, although paper returns are periodically destroyed under a formal destruction program, so some returns are no longer available.
- Rulings and determinations. Copies of tax, superannuation and other relevant rulings and determinations are available in National Office 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 ready reckoner helps individuals work out the tax they owe on their incomes for the relevant income year.
- Commissioner of Taxation annual report. This report is tabled in Parliament and the latest edition can be viewed on our website.
- Taxation statistics. This publication presents a range of tax statistics and has an accompanying CD-ROM. The set can be viewed on our website.
- Handbooks and manuals (with exempt material excluded).
- Lists of funds accepted for the purposes of the gift provisions under the Income Tax Assessment Act 1936.
Each year we produce numerous documents that are available free of charge, on request, from any of our offices (see Tax Office addresses for locations and contact details).
These documents include:
- brochures and booklets explaining tax topics and various elements of the revenue system
- guides to taxes we collect, explaining people's rights and obligations under the legislation
- brochures and booklets on the taxpayers' charter
- guides on how to complete income tax return forms (in English and other languages)
- income tax return forms, and schedules for use with return forms
- TaxPack 2004, TaxPack 2004 supplement and Retirees TaxPack 2004
- procedural documents and forms for pay as you go (PAYG) withholding payers
- tax tables for PAYG withholding
- application forms (such as those used to register as a PAYG withholding payer, to apply for relief from payment of tax, or for exemption from debits tax, eligibility for forming a consolidated group, or to register for the new revenue system)
- forms relating to superannuation
- forms, information sheets and information booklets relating to diesel and fuel rebate and grant schemes
- application forms and information materials relating to excise, and
- a number of topical fact sheets.
Many documents also appear on our website at www.ato.gov.au. Also, TaxPack refers to about 50 publications that can be ordered, free of charge, by calling our publications distribution service on 1300 720 092.
Procedures
Enquiries about FOI matters can be directed to FOI officers.
Applicants may discuss the nature and scope of an intended request or seek advice on FOI matters. Whenever possible, an FOI officer will help applicants identify relevant documents.
If applicants seek access to a document that is deemed to be exempt or to contain exempt material, then 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, together with a statement advising the applicant of their rights to request that the decision be reviewed.
Facilities for access
We provide facilities at our National Office and at each branch office where applicants can inspect documents they have been given access to under the FOI Act.
If applicants cannot come into one of our offices, we can make a document available through the post. Information about facilities for access by disabled people can be obtained by contacting an FOI officer at one of our branch offices.
National Office
The Manager
Freedom of Information Unit
Australian Taxation Office
PO Box 900
Civic Square ACT 2608
Ph (02) 6216 2216
New South Wales/Australian Capital Territory
The Manager
Freedom of Information Unit
Australian Taxation Office
GPO Box 4889
Sydney NSW 2001
Ph (02) 9374 2657
Queensland
The Manager
Freedom of Information Unit
Australian Taxation Office
GPO Box 869
Brisbane QLD 4001
Ph (07) 3213 5408
South Australia/Northern Territory
The Manager
Freedom of Information Unit
Australian Taxation Office
GPO Box 2934
Adelaide SA 5001
Ph (08) 8208 3123
Victoria/Tasmania
The Manager
Freedom of Information Unit
Australian Taxation Office
GPO Box 1797Q
Melbourne VIC 3001
Ph (03) 9285 1515
Western Australia
The Manager
Freedom of Information Unit
Australian Taxation Office
GPO Box C109
Perth WA 6839
Ph (08) 9268 5257
Callers outside capital cities may phone 13 28 69 and ask for the Freedom of Information Unit.
At the beginning of the financial year, we had 133 requests for documents under the FOI Act. During the year we received an additional 496 requests.
A total of 485 cases were finalised. Applicants withdrew another 74 requests before a decision on access was made.
Full access was allowed in 109 cases, while part access was allowed in 296 cases. Access was refused in 80 cases and 21 of these matters were appealed to the Administrative Appeals Tribunal.
At the end of the year, 70 cases remained on hand.
Appendix 3 - Legislative requirements
Download Appendix 3 in PDF format (37 KB)
The following legislative requirements have been addressed in preparing this report:
section 14(1)
|
of the Income Tax Assessment Act 1936 and Income Tax Assessment Act 1997
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sections 3B(1), 3B(1AA) and 3B(1A)
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of the Taxation Administration Act 1953 and corresponding provisions of the general taxing statutes of Australia
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section 4(1)
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of the Fringe Benefits Tax Assessment Act 1986
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section 29(1)
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of A New Tax System (Australian Business Number) Act 1999 in the Commissioner's capacity as Registrar
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sections 64(1) and 64(2)
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of A New Tax System (Goods and Services Tax) Act 1999
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sections 64(1) and 64(2)
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of A New Tax System (Goods and Services Tax Transition) Act 1999
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sections 64(1) and 64(2)
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of A New Tax System (Luxury Car Tax) Act 1999
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sections 64(1) and 64(2)
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of A New Tax System (Wine Equalisation Tax) Act 1999
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sections 64(1) and 64(2)
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of A New Tax System (Wine Equalisation Tax and Luxury Car Tax Transition) Act 1999
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section 6
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of the Debit Tax Administration Act 1982 (to be abolished from 1 July 2005)
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section 93
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of the Small Superannuation Accounts Act 1995
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section 31
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of the Superannuation Contributions Tax (Assessment and Collection) Act 1997
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section 27
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of the Superannuation Contributions Tax (Members of Constitutionally Protected Funds) Assessment and Collection Act 1997
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section 54
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of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003
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section 44
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of the Superannuation Guarantee (Administration) Act 1992
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section 41
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of the Superannuation (Unclaimed Money and Lost Members) Act 1999
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section 3B(1B)
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of the Application re Development Allowance Authority Act 1992
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section 7
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of the Taxation (Interest on Overpayments and Early Payments) Act 1983
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section 22
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of the Termination Payments Tax (Assessment and Collection) Act 1997
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section 16(1)
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of the Petroleum Resource Rent Tax Assessment Act 1987
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section 9A
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of the Tobacco Charges Assessment Act 1955
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Appendix 4 - Consultancy services
Download Appendix 4 in PDF format (120 KB)
The following list summarises the 169 consultants the Tax Office engaged during 2003-04 who were paid $10,000 or more, their services, the payments made, the selection process and the reason for each consultancy. All amounts have been rounded to the nearest dollar.
The total cost of these consultants was $32,024,060.
Key
Selection codes
- Advertised publicly
- Selective tendering process
- Not advertised because a contract already existed
- Direct selection/sole source
- Joint venture
- Consultants register/panel
Reason codes
a Specialised skills were not available within the Tax Office in the required timeframe
b Need to access high-technology experience
c Limitations on executive time
d Lack of in-house resources
e Need for independent review
f Need for independent change agent or facilitator
Consultant
|
Task
|
Value ($)
|
Method/ reason
|
90 East (Asia Pacific) Pty Ltd
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Conduct threat risk analysis for secure email proof of concept
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19,800
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4a
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90 East (Asia Pacific) Pty Ltd
|
Conduct threat risk analysis of the e-tax application
|
64,350
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2a
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90 East (Asia Pacific) Pty Ltd
|
Conduct threat risk analysis of the print portal
|
17,800
|
2a
|
90 East (Asia Pacific) Pty Ltd
|
Conduct threat risk analysis of the mobile lite platform
|
19,800
|
2a
|
2nd Road Thinking Systems
|
Review design in the Tax Office
|
44,629
|
4e
|
Accenture Australia Holdings Pty Ltd
|
Define a high-level preferred design for the Distributed Systems Environment, a transition approach and effectiveness measures
|
64,967
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2a
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Accenture Australia Holdings Pty Ltd
|
Assist Tax Office to meet commitment to provide a single income tax, fringe benefits tax and IIA account to tax agents and business for interim single account
|
2,259,873
|
6a
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Accenture Australia Holdings Pty Ltd
|
Assist Tax Office to meet commitments to provide a single income tax, fringe benefits tax and IIA account to tax agents and business for account reconciliation/sweeper project
|
360,150
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6a
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Accenture Australia Holdings Pty Ltd
|
Provide broad design, development and other services for the easier, cheaper and more personalised program (Work order 1)
|
740,520
|
1b
|
Accenture Australia Holdings Pty Ltd
|
Provide strategic and operational advice and assistance in the management and integration of the easier, cheaper and more personalised program (Work order 2)
|
381,643
|
1b
|
Accenture Australia Holdings Pty Ltd
|
Provide analysis, design, development and other services for the easier, cheaper and more personalised program (Work order 3)
|
6,343,074
|
1b
|
Accenture Australia Holdings Pty Ltd
|
Provide implementation of and support for environments required to support the delivery of phase 2 of the easier, cheaper and more personalised program (Work order 4)
|
230,645
|
1b
|
Accenture Australia Holdings Pty Ltd
|
Install the Tax Administration System as a design, education and stakeholder engagement tool (Work order 5)
|
187,000
|
1b
|
Accenture Australia Holdings Pty Ltd
|
Establish the development and product test environments to support December 2004 easier, cheaper and more personalised program release (Work order 6)
|
550,000
|
1b
|
Accenture Australia Holdings Pty Ltd
|
Deliver improvements to call management, online functions, content and document management tools and channel delivery to support the December 2004 release of the easier, cheaper and more personalised program (Work order 7)
|
16,500
|
1b
|
Accenture Australia Holdings Pty Ltd
|
Conduct easier, cheaper and more personalised program impact analysis
|
307,813
|
6a
|
Accenture Australia Holdings Pty Ltd
|
Develop a Tax Agent Portal pilot
|
346,275
|
6bf
|
Accenture Australia Holdings Pty Ltd
|
Develop a Business Portal pilot
|
1,080,783
|
1b
|
Agriculture Victoria Services
|
Analyse tobacco seed and provide expert evidence in prosecution
|
12,319
|
4abe
|
Allen, Ken
|
Review Australia's double tax agreements and other aspects of improving Australia's international tax regime
|
102,947
|
3,6a
|
AMS Management System Australia Pty Ltd
|
Develop a channel strategy
|
693,000
|
2a
|
AMS Management System Australia Pty Ltd
|
Develop a workflow management strategy
|
800,000
|
6d
|
Analysis Group Economics
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Provide economic opinion and advice on transfer pricing arrangements
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114,605
|
6a
|
Aquitaine Consulting Pty Ltd
|
Provide IT Strategic Adviser services
|
575,102
|
2b
|
Astor-Smith Event Management
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Provide event coordination for the 34th Study Group on Asian Tax Administration and Research (SGATAR) meeting
|
15,400
|
2ad
|
Australian Public Service Commission
|
Prepare and deliver a two-day orientation program for SES officers
|
10,900
|
6f
|
Ayers, AJ
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Provide services as external member of the Tax Office's Audit Committee
|
15,400
|
4f
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Barr, Eric
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Provide forensic accounting services in prosecutions
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73,098
|
4ae
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Bayley and Associates Pty Ltd
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Provide training in evaluation techniques for request for information and request for tender
|
13,530
|
4a
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Betrusted Pty Ltd
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Provide Business Portal and Tax Agent Portal audit log analysis
|
34,650
|
2a
|
Beyond Blue
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Deliver a program of workshops to assist managers to identify and manage depression in the workplace
|
60,000
|
4ad
|
Burges, Kevin
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Provide services on the International Tax Rulings Panel and the Public Rulings Panel
|
102,618
|
3,6ae
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Burston, Rick
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Provide advice on the impact of Tax Office changes to forms and payment processes for tax agents
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15,980
|
6
|
Butlin & Lloyd Pty Ltd
|
Provide design facilitation services
|
280,877
|
6adf
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Cap Gemini
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Progress product concepts identified as part of the Listening to the Community process
|
85,234
|
4a
|
Castelain Pty Ltd
|
Review multi-function card request for tender
|
58,212
|
4ae
|
Charles Sturt University
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Provide fraud training services
|
221,503
|
1abd
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CIT Solutions Pty Ltd
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Develop a work-based model for the Tax Office graduate program
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15,675
|
6a
|
Clarke, Chris J
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Provide services on the GST Technical Quality Review Panel
|
18,875
|
3e
|
CMG IT Services Pty Ltd
|
Conduct threat risk analysis on the lost account system
|
14,300
|
2,6a
|
CMG IT Services Pty Ltd
|
Conduct threat risk analysis of online information system
|
10,512
|
2,6a
|
CMG IT Services Pty Ltd
|
Conduct threat risk analysis on secure email, phase 2.1
|
19,800
|
2,6a
|
CMG IT Services Pty Ltd
|
Conduct threat risk analysis on the Business Portal
|
33,000
|
2,6a
|
CMG IT Services Pty Ltd
|
Conduct vulnerability scan and penetration testing of ato.gov.au web applications
|
52,800
|
2,6a
|
CMG IT Services Pty Ltd
|
Conduct threat risk analysis on the Tax Office to Australian Bureau of Statistics link via Fedlink regarding access to the Australian Business Register
|
27,850
|
2,6a
|
CMG IT Services Pty Ltd
|
Conduct threat risk analysis of Tax Evasion Referral Centre secured form
|
27,450
|
2,6a
|
Cognos Pty Ltd
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Provide implementation services for Adaytum software
|
23,008
|
3a
|
Cognos Pty Ltd
|
Implement new budget planning and report system
|
83,475
|
3ab
|
Computer Associates Pty Ltd
|
Undertake scoping activity for implementation of the mainframe access control system
|
12,078
|
3a
|
Cooney Consultants
|
Provide advice on cultural and integrity issues
|
254,157
|
3af
|
Corporate Diagnostics Pty Ltd
|
Develop and conduct GST staff survey
|
14,351
|
4a
|
Corporate Diagnostics Pty Ltd
|
Develop baseline culture survey for the Excise line
|
16,836
|
6a
|
Corporate Diagnostics Pty Ltd
|
Design and analyse the Small Business line people survey
|
28,302
|
4ae
|
Corporate Diagnostics Pty Ltd
|
Develop the Large Business and International line people and business model and census
|
52,397
|
3e
|
CPT Global Ltd
|
Review mainframe resources
|
100,000
|
2a
|
Crystal Decisions
|
Implement the Crystal Reporting Infrastructure
|
23,148
|
3abd
|
Cultural Partners
|
Provide non-English speaking background strategic advice and communication services
|
153,281
|
2ad
|
Dascem Holdings Pty Ltd
|
Develop environmental management system for Tax Office, including policy, procedures, registers and in-house training
|
39,720
|
2a
|
DBM Consultants Pty Ltd
|
Undertake a benchmarking study for letters project
|
32,203
|
4e
|
Deakin University
|
Provide research services on tax technical matters
|
85,088
|
4b
|
Deloitte Consulting Pty Ltd
|
Review ATO Technology's financial commitments
|
62,383
|
2e
|
Deutsch, Robert
|
Provide services on the Public Rulings Panel
|
80,516
|
6e
|
Deutsch, Robert
|
Present a workshop on attribution of foreign source income
|
11,595
|
4f
|
DJC Consulting
|
Provide technical and strategic support to the Consolidation Centre of Expertise
|
97,417
|
2a
|
Egon Zehnder International
|
Undertake performance appraisals for SES band 2 officers
|
57,062
|
4abd
|
Electronic Warfare Associates
|
Conduct threat risk analysis and penetration test of e-tax 2004
|
38,497
|
6e
|
Electronic Warfare Associates
|
Conduct threat risk analysis of the Excise collections system
|
47,321
|
2,6a
|
ENS International
|
Providing training in influencing and negotiation skills (pilot course)
|
30,370
|
4a
|
Ernst & Young
|
Review fringe benefits tax information and provide systems and processing advice
|
51,231
|
2ad
|
Evans-Smith & Dando Pty Ltd
|
Provide information design and editing services associated with producing information guides across a variety of new tax measure topics
|
208,137
|
3a
|
Fehily, Ken
|
Provide services on the GST Rulings Panel
|
81,219
|
3e
|
Freebody Cogent Pty Ltd
|
Review GST administration cost attribution arrangements
|
26,473
|
1adf
|
Freebody Cogent Pty Ltd
|
Provide strategic advice on future directions of the Tax Office costing framework
|
53,039
|
1ade
|
Freebody Cogent Pty Ltd
|
Provide financial advice on property management services request for tender process
|
39,817
|
3ade
|
Freebody Cogent Pty Ltd
|
Provide financial advice on courier, Billpay and BPAY request for tender
|
10,938
|
6a
|
Fujitsu Australia
|
Provide IT infrastructure library and IT service management services
|
342,085
|
2a
|
Fujitsu Australia
|
Provide a future state model and transition strategy for project management in the Tax Office
|
163,603
|
1,2ad
|
Fujitsu Australia
|
Develop and implement the IT service management improvement program
|
3,890,627
|
2a
|
Gartner Australasia Pty Ltd
|
Conduct a study in open source software
|
52,572
|
2a
|
Gartner Australasia Pty Ltd
|
Provide market intelligence in relation to IT suppliers
|
15,000
|
4a
|
Gartner Australasia Pty Ltd
|
Conduct market research and analysis of wide area network services
|
22,000
|
4a
|
Gartner Australasia Pty Ltd
|
Validate and confirm the impact of the current leading application environment of Java 2 Enterprise Edition and .Net platforms in the Tax Office
|
28,600
|
3be
|
Gartner Australasia Pty Ltd
|
Review statement of requirements for easier, cheaper and more personalised program request for tender and request for information
|
19,820
|
3ae
|
Gartner Australasia Pty Ltd
|
Provide independent review of analytical bridging project Teradata consultancy
|
22,805
|
1,2e
|
Giffnock Consulting Pty Ltd
|
Provide services on certain financial transactions between Australian and offshore operations
|
17,435
|
4a
|
Gilfast Pty Ltd
|
Provide design facilitation services and mentoring and skills transfer
|
225,181
|
6df
|
Golsby-Smith Consulting
|
Design and implement a strategic management reporting system and framework
|
288,578
|
4,6a
|
Grosvenor Management Consulting
|
Provide industry advice for the property request for tender
|
215,956
|
4ae
|
Harris Smith & Associates
|
Co-design a mentoring framework based on current research and analysis of stakeholder data
|
32,751
|
6d
|
Hoffmann Donohue Pty Ltd
|
Build design capability for Tax Office and develop a co-design process
|
182,622
|
6d
|
Hoffmann Donohue Pty Ltd
|
Coordinate a distributed design capability for the Tax Office
|
138,765
|
6d
|
Hoffmann Donohue Pty Ltd
|
Provide design facilitation, user-based design and information design services
|
109,353
|
6d
|
InfoCLEAR Consulting Pty Ltd
|
Assist in developing the guidance statement for OECD task group 4, 'Influencing taxpayer behaviour'
|
51,616
|
6
|
InfoCLEAR Consulting Pty Ltd
|
Provide information design services for the preparation of the project management and design guides
|
202,431
|
6de
|
Intelligent Business Research Services
|
Prepare a market research/analysis report for the provision of bulk printing and dispatch services market
|
10,450
|
2a
|
Intelligent Business Research Services
|
Assess the market for an independent assurer
|
38,720
|
4e
|
Interaction Consulting
|
Provide coaching services for SES officers
|
16,646
|
6d
|
International Safety Emergency
|
Provide business resumption services
|
26,773
|
2ae
|
IPS Worldwide
|
Research and investigate causal factors of depression within the Tax Office
|
47,550
|
2ad
|
IT Newcom Pty Ltd
|
Undertake mainframe benchmarking
|
54,000
|
2a
|
John Price & Associates Pty Ltd
|
Undertake a quality management audit and provide industry advice on request for tender
|
29,206
|
4a
|
Julia Ink Pty Ltd
|
Provide media strategy consultancy services
|
22,028
|
4ad
|
Kennedy, Peter
|
Provide Integrity Adviser services
|
171,585
|
3f
|
Knowledge Pond
|
Provide advice on the restructure of the Legal Services Branch
|
55,064
|
2e
|
KPMG
|
Undertake an independent review of debt management cases
|
49,650
|
6e
|
KPMG
|
Undertake an audit of progress in implementing results of Sherman report and Australian National Audit Office recommendations
|
93,920
|
4e
|
Lamb, Peter John
|
Provide advice on operational aspects of serious non-compliance work
|
21,241
|
4ae
|
Landini Associates
|
Design a corporate identity system for the Tax Office
|
920,461
|
1a
|
La Scala, Frank
|
Provide tax technical services on international tax matters
|
23,715
|
3,6a
|
Lonergan Edwards & Associates Ltd
|
Provide advice on share valuation
|
60,301
|
3abe
|
Low, Barry
|
Provide services for the production of the Technical Quality Review report
|
10,719
|
3,6e
|
Macquarie Institute Australia
|
Deliver a stress management program, including pre-workshop survey, day program and post survey
|
55,954
|
4a
|
Management Information Principles
|
Conduct data quality assessment for information management
|
175,505
|
1,2ab
|
Marketing Systems (Aust) Pty Ltd
|
Provide services on the International Tax Rulings Panel
|
64,015
|
3,6ae
|
McPherson Consulting Pty Ltd
|
Investigate particular management issues
|
16,500
|
4e
|
Mercer Human Resource Consulting
|
Provide remuneration and classification services
|
95,712
|
6ade
|
Merry Beach Conferences Pty Ltd
|
Provide human relations services
|
49,670
|
4ae
|
Meta Group Asia Pacific
|
Undertake benchmarking of distributed systems
|
60,500
|
2a
|
Meta Group Australia Holdings Pty Ltd
|
Provide an independent IT architecture assessment
|
22,000
|
2a
|
Michael Green Pty Ltd
|
Provide professional advice on an audit case
|
16,275
|
3,4a
|
Millar, Rebecca
|
Provide services on the GST Rulings Panel
|
13,953
|
3e
|
MKRL Consulting (ACT) Pty Ltd
|
Redesign dual arm secure Tax Office firewall
|
107,927
|
4a
|
Mohane Consulting
|
Manage program integration, interdependencies, critical path and risk
|
275,678
|
4ad
|
Momsen, James
|
Provide services on the Public Rulings Panel
|
10,492
|
6e
|
Montague Leong Design Pty Ltd
|
Provide services to help understand the client experience when interacting with the Tax Office
|
64,113
|
6a
|
Montague Leong Design Pty Ltd
|
Facilitate business plan design for Legal Services Branch
|
26,328
|
6a
|
Montague Leong Design Pty Ltd
|
Provide information design for forms
|
16,000
|
6,4a
|
Montague Leong Design Pty Ltd
|
Provide information design mentoring and skills transfers
|
45,802
|
6de
|
NCR Australia Pty Ltd
|
Conduct data mining and profiling
|
267,954
|
2b
|
Pathways to Performance
|
Conduct research and report on the wider change management and cultural issues around project management in the Tax Office
|
50,105
|
6ad
|
Pathways to Performance
|
Provide coaching services for SES officers
|
66,462
|
6d
|
People & Task
|
Review senior personnel in the Office of the Chief Tax Counsel
|
14,339
|
4e
|
PriceWaterhouse Coopers
|
Provide services on the Indirect Taxes (Excise) Rulings Panel
|
13,910
|
4b
|
PriceWaterhouse Coopers
|
Investigate the Billpay process
|
83,906
|
2ae
|
PriceWaterhouse Coopers
|
Undertake security compliance audit of Tax Office gateway
|
232,100
|
2,6a
|
PriceWaterhouse Coopers
|
Develop four audit strategies
|
77,000
|
2,6a
|
PriceWaterhouse Coopers
|
Conduct threat risk analysis on uni-centre service desk rollout to DEVnet
|
19,360
|
2,6a
|
RCP Asia Pty Ltd
|
Develop a project planning methodology outline, process analysis and task allocation
|
158,400
|
2abf
|
RISC Pty Ltd
|
Provide professional advice on an energy and resources case project
|
84,961
|
4e
|
SAP Australia
|
Examine the scope of the HR redesign project and provide a functional fit of the SAP product suite to Tax Office business requirements
|
44,488
|
5b
|
Sherton Pty Ltd
|
Provide advice on structure and management arrangements for serious non-compliance
|
70,277
|
4e
|
Sicore International
|
Undertake ATO Resource Management client satisfaction survey
|
34,452
|
6e
|
Stamford Interactive Pty Ltd
|
Provide user research services for time management system
|
38,618
|
6ae
|
Strategic Journeys
|
Develop a cohesive and documented planning framework and associated implementation plan
|
20,980
|
6aef
|
Sunahama Pty Ltd
|
Assist in developing/building the Tax Office and Australian Valuation Office capability in relation to market and business valuations
|
28,267
|
4adf
|
Synergetic Learning
|
Facilitate team-building program
|
10,023
|
3a
|
Systemic Development Assoc Pty Ltd
|
Review, develop and deliver the Strategic Leadership Program and deliver the Operational Leadership Program, including soft systems methodology
|
155,697
|
4,6a
|
The Australian National University
|
Undertake taxpayer compliance motivational behaviour research through the Centre for Tax System Integrity
|
760,800
|
3a
|
The Australian National University
|
Provide advice to the Cash Economy Taskforce
|
10,800
|
4
|
The Hiser Group
|
Assist in developing the conceptual design for the Simulation Centre
|
11,020
|
4,6d
|
The Hiser Group
|
Redesign the ATOlaw website
|
57,439
|
6a
|
The Hiser Group
|
Assist in developing a single view on ato.gov.au for the Tax Office's youth market
|
17,684
|
6,4abde
|
The Hiser Group
|
Conduct user research and develop a user interface for web-based tools and calculators
|
11,500
|
6a
|
The Hiser Group
|
Redesign of ato.gov.au
|
73,575
|
6d
|
The Hiser Group
|
Redesign the Tax Agent and Business Portal interfaces
|
159,420
|
6d
|
The Hiser Group
|
Identify the business goals for the Tax Office internet services user interface/user experience
|
26,000
|
6d
|
The Leader Factor Pty Ltd
|
Design, develop and implement a talent pool program for potential candidates for senior leadership positions
|
424,348
|
6ad
|
The Teleran Group
|
Provide coaching services for SES officers
|
58,862
|
6d
|
TPI Asia Pacific
|
Assess mid-range services request for tender risk
|
52,239
|
4a
|
TT Legal
|
Provide services on the GST Rulings Panel
|
108,329
|
3e
|
Turnbull Porter Novelli Pty Ltd
|
Develop and implement the public relations strategy for the Super Co-contribution campaign
|
80,177
|
2a
|
Unisys
|
Undertake distributed systems environment review
|
158,211
|
1a
|
University of New South Wales
|
Develop a compliance office audit and accounting program
|
1,103,444
|
2a
|
University of New South Wales
|
Develop a finance issues classification model
|
27,500
|
6e
|
URBIS JHD Pty Ltd
|
Conduct ATO Resource Management staff satisfaction survey
|
14,080
|
6e
|
Utility Services Corporation Ltd
|
Conduct threat risk analysis of ATOassist
|
41,000
|
2,6a
|
Vann, Richard
|
Provide services on the GST Rulings Panel and the International Tax Rulings Panel
|
131,550
|
3,6ae
|
Walter Turnbull
|
Provide probity advice for easier, cheaper and more personalised program procurement
|
67,682
|
2ae
|
Workwords Consulting Pty Ltd
|
Review design guide
|
11,530
|
6e
|
Appendix 5 - Advertising, direct mail, market research and media placement
Download Appendix 5 in PDF format (55 KB)
Advertising
Organisation
|
Initiative, event or product
|
Total cost ($)
|
Campaign Palace
|
Concept development for Super Co-contribution
|
303,171
|
hma Blaze
|
Creative development for the departing Australia superannuation payment
|
54,829
|
Direct mail
Organisation
|
Initiative, event or product
|
Total cost ($)
|
Toll Logistics
|
Preparation and mailout of agency material
|
3,092,199
|
Market research
Organisation
|
Initiative, event or product
|
Total cost ($)
|
AC Nielsen Pty Ltd
|
Business perceptions survey and customer satisfaction index
|
96,625
|
AC Nielsen Pty Ltd
|
Business compliance experiences with the business activity statement
|
169,644
|
AC Nielsen Pty Ltd
|
Cash economy survey of restaurant and cafe industry
|
6,000
|
AC Nielsen Pty Ltd
|
Research into business views on the cash economy
|
39,380
|
AC Nielsen Pty Ltd
|
Business activity statement lodgment awareness
|
19,910
|
Blue Moon Research Pty Ltd
|
Research for the cash economy community survey
|
80,000
|
Chant Link & Associates
|
Research for the quarterly superannuation guarantee
|
127,602
|
Colmar Brunton Social Research
|
Tax Office staff professionalism survey
|
314,134
|
Colmar Brunton Social Research
|
Research about Listening to the Community initiatives
|
84,682
|
Cultural Perspectives Pty Ltd
|
Research into the tax information needs of clients from non-English speaking backgrounds
|
126,533
|
DBM Consultants Pty Ltd
|
Research to review a selection of superannuation system generated correspondence
|
31,900
|
Eureka Strategic Research
|
Research into review of the Centre for Tax System Integrity
|
17,985
|
Newton Wayman Chong
|
Research to measure the success of the Business Portal launch
|
52,000
|
Newton Wayman Chong
|
New to business research
|
33,785
|
NFO Donovan Research
|
Research into the continuation of telephone lodgment services
|
42,110
|
Quantum Market Research
|
Research to evaluate promotion of ATO Online lodgment
|
23,320
|
Roy Morgan Research
|
Research into simplified record keeping practices for the energy grants credits scheme
|
44,770
|
Roy Morgan Research
|
Research into factors driving the lodgment of income tax returns
|
65,540
|
Taylor Nelson Sofres
|
Research to develop an understanding of the tax practitioner environment and relationship with the Tax Office
|
60,082
|
The Research Forum
|
Research for the Activity statement update
|
24,300
|
Worthington Di Marzio
|
Research into Business Portal supplement and advertising concepts
|
21,780
|
Worthington Di Marzio
|
Research to evaluate target audience reaction to television and advertising concepts of BAS lodgment
|
7,920
|
Worthington Di Marzio
|
Research for the Super Co-contribution
|
265,877
|
Milward Brown Australia
|
Annual community perceptions survey
|
87,816
|
Media placement
Organisation
|
Initiative, event or product
|
Total cost ($)
|
Universal McCann
|
Media planning and buying for campaign advertising
|
4,495,457
|
hma Blaze
|
Media planning and buying for non-campaign and routine advertising
|
7,986,400
|
Appendix 6 - Australian Taxation Office financial statements
Download Appendix 6 in PDF format (1011 KB)
Appendix 7 - Australian Valuation Office financial statements
Download Appendix 7 in PDF format (612 KB)
Appendix 8 - Other matters
Download Appendix 8, 9 and 10 in PDF format (499 KB)
Corrections
The following errors appeared in the 2002-03 annual report.
(Page 53)
Table 2.7 Debt collection results 1999-2000 to 2002-03
Reference to 'Value of cases on hand at 30 June ($b)' reported for the years 2001-02 and 2002-03 of $14.05 billion and $17.29 billion respectively includes the tax not yet due component. The values should be $13.89 billion and $17.21 billion respectively, as shown in table 2.7 on page 43.
(Page 211)
Reference to 1,910 complaints about the Tax Office received by the Ombudsman's Office should read 1,909.
Appendix 9 - List of tables
Download Appendix 8, 9 and 10 in PDF format (499 KB)
Table 1.1:
|
Our performance against service standards, 2002-03 to 2003-04
|
Table 1.2:
|
Resources for Outcome 1, 2003-04
|
Table 2.1:
|
Total revenue collections, by head of revenue, 1994-95 to 2003-04
|
Table 2.2:
|
Amount refunded, by type of tax, 1995-96 to 2003-04
|
Table 2.3:
|
Overview of capital gains tax collections, 2000-01 to 2002-03
|
Table 2.4:
|
GST collections, by broad industry type, 2003-04
|
Table 2.5:
|
Comparison of actual 2002-03 results, 2003-04 budget estimates and actual results (cash basis)
|
Table 2.6:
|
Comparison of actual 2002-03 results, 2003-04 Budget Administered Outlay estimates and actual results (cash basis)
|
Table 2.7:
|
Debt collection results, 2000-01 to 2003-04
|
Table 2.8:
|
Collectable debt compared with total collections, 2000-01 to 2003-04
|
Table 2.9:
|
Amounts transferred through excise schemes, 2001-02 to 2003-04
|
Table 2.10:
|
Funds transferred to other agencies, 2003-04
|
Table 2.11:
|
Changes in the Superannuation Holding Accounts Reserve, 1999-00 to 2003-04
|
Table 2.12:
|
Superannuation Lost Members Register accounts, 1999-00 to 2003-04
|
Table 2.13:
|
Percentage of cases awarded a pass for professional excellence, by line or branch, 2003-04
|
Table 2.14:
|
Percentage of cases awarded an 'A' for professional excellence, by line or branch, 2003-04
|
Table 2.15:
|
Channels used in achieving results, 2003-04
|
Table 2.16:
|
Active compliance results, by revenue product, 2003-04
|
Table 2.17:
|
Active compliance results, by market segment, 2003-04
|
Table 2.18:
|
Active compliance results, by individuals market segment, 2003-04
|
Table 2.19:
|
Active compliance results, by micro-business market segment, 2003-04
|
Table 2.20:
|
Active compliance results, by small to medium enterprise market segment, 2003-04
|
Table 2.21:
|
Active compliance results, by large business market segment, 2003-04
|
Table 2.22:
|
Active compliance results, by non-profit market segment, 2003-04
|
Table 2.23:
|
Active compliance results, by government market segment, 2003-04
|
Table 2.24:
|
Superannuation guarantee compliance results, 1999-00 to 2003-04
|
Table 2.25:
|
Superannuation surcharge net collections, 1999-00 to 2003-04
|
Table 2.26:
|
Prosecution activity, by revenue product, 2003-04
|
Table 2.27:
|
Prosecution activity, by market segment, 2003-04
|
Table 2.28:
|
Results of work to detect tax agents operating illegally, 2002-03 to 2003-04
|
Table 2.29:
|
Agencies we work with
|
Table 2.30:
|
Categories of offence, 2003-04
|
Table 2.31:
|
Requesting agencies, 2003-04
|
Table 2.32:
|
Details of Commissioner's decisions in release from debt cases, 1 September 2003 to 30 June 2004
|
Table 2.33:
|
Details of Taxation Relief Board decisions in release from debt cases, 1 July to 31 August 2003
|
Table 2.34:
|
Our relationship with the community
|
Table 2.35:
|
Key performance measures against the taxpayers' charter
|
Table 2.36:
|
Community perceptions survey results, significant positive changes, 2002-03 to 2003-04
|
Table 2.37:
|
Community perceptions survey results, 1999-00 to 2003-04
|
Table 2.38:
|
Breakdown of complaint and feedback items received via the complaints line, 2002-03 to 2003-04
|
Table 2.39:
|
Results of tax agent satisfaction surveys, 2003-04
|
Table 3.1:
|
Revenue outcomes for high wealth individuals and associated entities, 1996-97 to 2003-04
|
Table 3.2:
|
Adjustments to losses claimed by high wealth individuals and associated entities, 1997-98 to 2003-04
|
Table 3.3:
|
Our use of AUSTRAC data, 2003-04
|
Table 5.1:
|
ATO Executive members and meeting attendance, 2003-04
|
Table 5.2:
|
Corporate Design Forum members and meeting attendance, 2003-04
|
Table 5.3:
|
Plenary Governance Forum members and meeting attendance, 2003-04
|
Table 5.4:
|
Audit Committee members and meeting attendance, 2003-04
|
Table 5.5:
|
Integrity Advisory Committee members and meeting attendance, 2003-04
|
Table 5.6:
|
Finance Committee members and meeting attendance, 2003-04
|
Table 5.7:
|
Easier, Cheaper and More Personalised Change Program Steering Committee members and meeting attendance, 2003-04
|
Table 5.8:
|
Allegations of fraud and serious misconduct against our employees, 2002-03 to 2003-04
|
Table 5.9:
|
Fraud prevention and detection in the Tax Office
|
Table 5.10:
|
Employees, at 30 June 2004
|
Table 5.11:
|
Employees, at 30 June 2003
|
Table 5.12:
|
Employees, by line, at 30 June 2003 and 2004
|
Table 5.13:
|
Employees, by location, at 30 June 2003 and 2004
|
Table 5.14:
|
Employee separations, by line, 2003-04
|
Table 5.15:
|
Certified agreements, at 30 June 2004
|
Table 5.16:
|
Australian workplace agreements, at 30 June 2004
|
Table 5.17:
|
Injury rate, by premium year, 2000-01 to 2003-04
|
Table 5.18:
|
Incidence of injuries per 1,000 full-time equivalent employees, by premium year, 2000-01 to 2003-04
|
Table 5.19:
|
Actual performance against target 1
|
Table 5.20:
|
Actual performance against target 3
|
Table 5.21:
|
Actual performance against target 4
|
Table 5.22:
|
Actual performance against target 5
|
Table 5.23:
|
Notifiable incidents, 2002-03 to 2003-04
|
Table 5.24:
|
Safety, Rehabilitation and Compensation Commission's performance indicators, 2000-01 to 2003-04
|
Table 5.25:
|
Salary ranges, by broadband classification, at 30 June 2004
|
Table 5.26:
|
2002-03 performance payments paid in 2003-04, by classification
|
Table 5.27:
|
Disability action plan - our role as policy adviser
|
Table 5.28:
|
Disability action plan - our role as regulator
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Table 5.29:
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Disability action plan - our role as purchaser
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Table 5.30:
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Disability action plan - our role as provider of services
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Table 5.31:
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Disability action plan - our role as employer
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Table A1.1:
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Deliver to government
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Table A1.2:
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Maintain community confidence
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Table A1.3:
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Minimise compliance costs (within Tax Office control)
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Table A1.4:
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Efficient and adaptive organisation
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Table A1.5:
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Output 1.1.1 - Shape, design and build administrative systems
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Table A1.6:
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Output 1.1.2 - Management of revenue collections and transfers
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Table A1.7:
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Output 1.1.3 - Compliance assurance and support for revenue collection
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Table A1.8:
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Output 1.1.4 - Compliance assurance and support for transfers and regulation of superannuation funds' compliance with retirement income standards
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Table A1.9:
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Output 1.1.5 - Services to governments and agencies
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Appendix 10 - List of figures
Download Appendix 8, 9 and 10 in PDF format (499 KB)
Figure 1.1:
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Breakdown of our 2003-04 expenditure
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Figure 1.2:
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Breakdown of work done by our average actual full-time equivalent employees, 2003-04
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Figure 1.3:
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Revenue collections, 1994-95 to 2003-04
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Figure 1.4:
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Company collections, 1994-95 to 2003-04
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Figure 1.5:
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Cumulative growth in company tax, total collections and gross domestic product, 1986-87 to 2003-04
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Figure 1.6:
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Variation of total collections (excluding GST) from budget estimate, 1994-95 to 2003-04
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Figure 1.7:
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Collectable debt as a percentage of total collections, 1995-96 to 2003-04
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Figure 1.8:
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Number of debt cases finalised, 1994-95 to 2003-04
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Figure 1.9:
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Net cost to collect $100, 1994-95 to 2003-04
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Figure 1.10:
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Our employees, at 30 June, 1994-95 to 2003-04
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Figure 1.11:
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Our expenses, by program, 2003-04
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Figure 1.12:
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Our operating expenses, 2003-04
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Figure 1.13:
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GST as a proportion of our total expenses, 2003-04
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Figure 1.14:
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Our business model
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Figure 1.15:
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The taxpayers' charter, compliance model and brand
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Figure 2.1:
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Our outcome and output groups
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Figure 2.2:
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Total revenue collections, 1994-95 to 2003-04
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Figure 2.3:
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Revenue collections as a percentage of total collections, 2002-03 and 2003-04
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Figure 2.4:
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Revenue collections, by head of revenue, 1994-95 to 2003-04
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Figure 2.5:
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Revenue collections from other taxes, by tax, 1994-95 to 2003-04
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Figure 2.6:
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Total refunds of revenue, 1994-95 to 2003-04
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Figure 2.7:
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Capital gains tax collections, 1993-94 to 2002-03
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Figure 2.8:
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GST collections, by broad industry type, 2003-04
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Figure 2.9:
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Percentage value of debt collections, by market segment, 2003-04
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Figure 2.10:
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Tax, penalties and interest raised, by market segment, 2002-03 to 2003-04
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Figure 2.11:
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Cash collections, by market segment, 2002-03 to 2003-04
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Figure 2.12:
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Tax payable vs gross domestic product, 1993-94 to 2002-03
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Figure 2.13:
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Gross income vs gross domestic product, 1993-94 to 2002-03
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Figure 2.14:
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Tax payable to total income, 1993-94 to 2002-03
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Figure 2.15:
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PAYG withholding vs compensation of employees, 1991-92 to 2003-04
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Figure 2.16:
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Community perceptions survey results, 1999-00 to 2003-04
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Figure 2.17:
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Community perceptions survey results, 1999-00 to 2003-04
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Figure 2.18:
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Community perceptions survey results, 1999-00 to 2003-04
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Figure 2.19:
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Top five complaint issues, 2003-04
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Figure 2.20:
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Percentage of taxpayers satisfied/very satisfied with the professionalism of our employees, 2000-01 to 2003-04
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Figure 3.1:
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Growth trends in tax payable by high wealth individuals and associated entities, 1994-95 to 2002-03
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Figure 5.1:
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Key relationships between management elements
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Figure 5.2:
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Our planning and governance framework
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Figure 5.3:
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Our organisational structure, at 30 June 2004
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Figure 5.4:
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Top five issues investigated by the Ombudsman for the 12 months ended 30 June 2004
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Figure 5.5:
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Map showing employee numbers, by location, at 30 June 2004
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Figure 5.6:
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Our people and place system framework
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Tax Office addresses
Download the Tax Office addresses in PDF format (4 KB)
The Tax Office occupies office space in 62 buildings in Australia. Only buildings that provide public access are listed here.
For the cost of a local call, most of our offices with public access can be contacted by telephone. The general enquiries number is 13 28 61.
Australian Capital Territory
Canberra
|
Ground Floor, Ethos House
28-36 Ainslie Avenue
Canberra
GPO Box 9990
Canberra 2601
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New South Wales
Albury
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567 Smollett Street
Albury
PO Box 9990
Albury 2640
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Chatswood
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Shop 43, Lemon Grove Shopping Centre
441 Victoria Avenue
Chatswood
GPO Box 9990
Sydney 2001
|
Hurstville
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First Floor, MacMahon Plaza
14-16 Woodville Street
Hurstville
PO Box 9990
Hurstville 2220
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Newcastle
|
266 King Street
Newcastle
PO Box 9990
Newcastle 2300
|
Parramatta
|
Ground Floor, Commonwealth Offices
2-12 Macquarie Street
Parramatta
PO Box 422
Parramatta 2123
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Penrith (by appointment only)
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121-125 Henry Street
Penrith
PO Box 1400
Penrith 2740
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Sydney
|
Podium Level, Centrepoint
100 Market Street
Sydney
GPO Box 9990
Sydney 2001
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Wollongong
|
93-99 Burelli Street
Wollongong
PO Box 9990
Wollongong 2500
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Queensland
Brisbane
|
280 Adelaide Street
Brisbane
GPO Box 9990
Brisbane 4001
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Chermside (by appointment only)
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10 Banfield Street
Chermside
PO Box 9990
Chermside 4032
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Townsville
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Stanley Place
235 Stanley Street
Townsville
PO Box 9990
Townsville 4810
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Upper Mt Gravatt
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Nexus Building
96 Upper Mt Gravatt-Capalaba Road
PO Box 9990
Upper Mt Gravatt 4122
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Victoria
Casselden Place
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2 Lonsdale Street
Melbourne
PO Box 9990
Moonee Ponds 3039
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Cheltenham
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4A, 4-10 Jamieson Street
Cheltenham
PO Box 9900
Dandenong 3175
|
Dandenong
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14 Mason Street
Dandenong
PO Box 9990
Dandenong 3175
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Geelong
|
92-100 Brougham Street
Geelong
PO Box 9990
Geelong 3220
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South Australia
Adelaide
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91 Waymouth Street
Adelaide
GPO Box 800
Adelaide 5001
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Northern Territory
Alice Springs
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Level 1
Jock Nelson Centre
16 Hartley Street
Alice Springs
GPO Box 800
Adelaide 5001
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Darwin
|
24 Mitchell Street
Darwin
GPO Box 800
Adelaide 5001
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Tasmania
Hobart
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200 Collins Street
Hobart
GPO Box 9990
Hobart 7001
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Launceston (Retirement Service Centre)
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54 Cameron St
Launceston 7250
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Western Australia
Northbridge
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45 Francis Street
Northbridge
GPO Box 9990
Perth 6848
|
Download Abbreviations in PDF format (33 KB)
ABN
|
Australian business number
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ABS
|
Australian Bureau of Statistics
|
ACT
|
Australian Capital Territory
|
AGS
|
Australian Government Solicitor
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AIIR
|
Annual Investment Income Report
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ANAO
|
Australian National Audit Office
|
APS
|
Australian Public Service
|
ASIO
|
Australian Security Intelligence Organisation
|
ATO
|
Australian Taxation Office
|
AUSTRAC
|
Australian Transaction Reports and Analysis Centre
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AVO
|
Australian Valuation Office
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Customs
|
Australian Customs Service
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DIMIA
|
Department of Immigration and Multicultural and Indigenous Affairs
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DPP
|
Director of Public Prosecutions
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EL2
|
Executive level 2
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ETP
|
Eligible termination payment
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FOI
|
Freedom of information
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GDP
|
Gross domestic product
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GST
|
Goods and services tax
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HECS
|
Higher Education Contribution Scheme
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IT
|
Information technology
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OFPC
|
Office of the Federal Privacy Commissioner
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OH&S
|
Occupational health and safety
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PAYE
|
Pay as you earn
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PAYG
|
Pay as you go
|
SES
|
Senior executive service
|
SFSS
|
Student Financial Supplement Scheme
|
US
|
United States
|
Download the Glossary in PDF format (126 KB)
Access without notice
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Access without notice is the right of full and free access to buildings, books, documents and other papers without notification.
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Audit
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Audit involves action to determine the correct tax position of a person or entity.
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Brand
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A brand is the combined set of impressions and expectations that a customer has of an organisation or a company.
Our brand is a mixture of tangible and intangible attributes, symbolised by our name and logo, which create influence and generate value for our organisation.
At the heart of our brand are a clear brand intent, positioning and qualities, supported by a design system that ensures a consistent and continuous brand style and presentation across all of our communication, products and services.
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Capabilities
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Capabilities are the skills, knowledge and attributes required for the range of jobs throughout the Tax Office. Defining capabilities helps us understand how efficient and effective we are, identify where we can improve, and systematically implement improvements.
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Collectable debt
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Collectable debt is debt that is not subject to dispute or insolvency. This amount also excludes debt that is not yet due.
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eRespond
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eRespond is an automated system for responding to taxpayers' tax questions and their requests for information by email.
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Exceptions
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Exceptions alert our employees to manually investigate why automatic processing did not occur.
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Fieldwork risk reviews
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Fieldwork risk reviews involve collecting information and analysing, validating or otherwise explaining it. They involve face-to-face contact between tax officers and taxpayers and aim to maintain the integrity of the revenue system by helping taxpayers stay on track with their tax obligations.
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Garnishee
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A garnishee is a formal notice the Commissioner issues to a third party that owes money to a taxpayer who has a tax debt. The third party then has to pay money to the Commissioner, rather than to the taxpayer. This amount is used to reduce the taxpayer's tax debt.
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Investigation
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Investigation involves action to examine if a person may have committed a criminal offence, and to gather supporting evidence.
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Low-documentation loans
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Low-documentation loans require borrowers to supply less documentation (such as pay slips and tax returns) than for traditional loans.
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Other individuals
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Collections from other individuals comprise income tax and Medicare levy paid by individuals that are not collected through the PAYG withholding system. They include PAYG instalments, balances payable on assessment and payments arising from audits.
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Portal
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A portal is an online means for taxpayers to access information and services and deal with us. So far we have developed two portals - the Tax Agent Portal and the Business Portal.
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Revenue products
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Revenue products are the different elements of the revenue system, with the main ones being income tax, goods and services tax, superannuation and excise.
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SuperMatch
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SuperMatch is an online tool that allows superannuation funds to check their member details against the Lost Members Register, the Superannuation Holding Accounts Reserve and unclaimed superannuation guarantee vouchers.
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SuperSeeker
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SuperSeeker allows individuals to search the Lost Members Register, the Superannuation Holding Accounts Reserve and unclaimed superannuation guarantee vouchers to match their details against lost superannuation accounts.
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Transfers
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Transfers are movements of money that is not revenue, for example, tax offsets, grants, superannuation guarantee vouchers and benefits distribution.
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Last Modified: Monday, 10 October 2005
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