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Commissioner of Taxation Annual Report 2007-08 |
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Download the complete Commissioner of Taxation Annual Report 2007-08 in PDF format (NAT 0995, PDF, 2.6MB).
Letter of transmittal
The Hon Chris Bowen MP
Assistant Treasurer and
Minister for Competition Policy
and Consumer Affairs
Parliament House
CANBERRA ACT 2600
Dear Minister
I have pleasure in presenting to you the eighty-seventh annual report of the Australian Taxation Office, covering the financial year 1 July 2007 to 30 June 2008.
This report relates to the wide range of laws that I administer. These include revenue laws, the Australian Business Register and significant aspects of superannuation. The report also includes information on our administration, including the Australian Valuation Office.
In preparing this report, I have addressed all the legislative reporting requirements listed in appendix 1.
Yours sincerely
Michael D’Ascenzo
Commissioner of Taxation
and Registrar of the Australian Business Register
3 October 2008
The Australian Taxation Office (ATO) at a glance
Our role
To effectively manage and shape administrative systems that fund public goods and services and safeguard retirement income for the wellbeing of Australians (see part 1.2: ATO overview).
We are the Australian Government’s principal revenue collection agency (see part 2.2: Our effectiveness indicators).
We are a large payer of government funds (see part 2.2: Transfers).
We administer major aspects of Australia’s superannuation system (see part 2.6: Superannuation).
We are the custodian of the Australian Business Register (see part 2.8: ABR).
Our business intent
To optimise voluntary compliance and make payments under the law in a way that builds community confidence (see 1.2: ATO overview).
Our values
Our values are:
- being fair and professional
- applying the rule of law
- supporting people who want to do the right thing and being fair but firm with those who don’t
- being consultative, collaborative and willing to co-design
- being open and accountable
- being responsive to challenges and opportunities.
These values are aligned with the Taxpayers’ Charter and Australian Public Service Values and Code of Conduct.
Our people
At 30 June 2008 we employed 23,303 ongoing and non-ongoing employees in offices all around Australia.
Our budget
Our operating expenditure budget for 2007–08 was $2,873.9 million.
Highlights
- Net cash collections increased to $270.9 billion, which was $20.9 billion (8.3%) more than last year, and $9.8 billion (3.8%) above Budget forecast.
- We provided $9.3 billion in transfers and payments (not including GST input tax credits and income tax refunds), which was 0.4% less than last year.
- We successfully implemented 42 new legislative measures, including the tax cuts.
- We collected about $42.4 billion in GST for state and territory governments and fully met our commitments to them under the GST performance agreement.
- We met nearly all of our compliance commitments and Taxpayers’ Charter standards.
- Some 80% of individuals and 89% of businesses agree that the ATO is doing a good job, and 81% of tax agents feel that our systems and processes are being improved to make it easy for them to deal with Australia’s tax system.
- The 10th anniversary of e-tax saw more than 1.9 million self preparers lodge their 2007 return electronically, exceeding paper returns for the second year running. We expanded the pre-filling components of e-tax and of the Tax Agent Portal.
Areas for improvement
- We have had to re-plan the schedule for the third and most difficult stage of our change program.
- We were 4.4% over budget.
- We lowered some of our service standards (but increased some others).
Key corporate documents
The Annual report is our main report to Parliament and forms part of our suite of key corporate documents. As an open and accountable administration, we publish these documents to assure the government and the community that the tax and superannuation systems are being effectively and efficiently managed and administered.
Part 1 – Overview
1.1 Commissioner’s review
I am pleased to report that in 2007–08 the ATO delivered to the government and the community, both in terms of revenue collections and benefits provided, and in the quality and professionalism of our work. For example, net cash collections of $270.9 billion were $9.8 billion above Budget forecasts. While the better than planned revenue outcome was mainly attributable to stronger than expected economic conditions, it also reflected generally high levels of voluntary compliance. The $20.9 billion increase in revenue collections in 2007–08 from the previous year is the highest ever absolute annual increase in revenue collections.
We also made very substantial payments to taxpayers of almost $75.5 billion. These payments include income tax refunds, GST input tax credits and $9.3 billion in fuel schemes and social benefits.
These positive outcomes took place in a challenging year, given the difficult stage we are at in our transformational change program, the need to implement a range of new legislative measures following the transition to a new government, higher overall workloads and budget constraints including an increased efficiency dividend. For example we coped with some 2 million registrations, over 12 million telephone calls, over 3 million items of correspondence, 14.5 million tax returns, and 18 million activity statements. While our service standard index was lower this year, partly as a result of our major system changes, we were nevertheless able to maintain the positive trend in our independently conducted surveys of tax agent, business and community perceptions.
Thank you
Our independent integrity advisor rated our performance on our integrity indicators as generally positive. Add to this the PricewaterhouseCoopers’ finding that we have a strong culture of security consciousness about taxpayer information, and the positive feedback from taxpayers and tax agents about our performance, and one can confidently conclude that our people did well on both the ‘what’ and the ‘how’ aspects of our administration in 2007–08. I would like to thank my officers for their efforts.
I would also like to thank the vast majority of people and their agents who have contributed to the high level of voluntary compliance that supports Australia’s tax and superannuation systems.
Living our values
Our organisational values are aligned with the Taxpayers’ Charter, which marked its 10th anniversary on 4 July 2007. Ten years on, we continue to commit to living the charter in all our dealings with the community, particularly in being fair and professional. Our professionalism surveys continue to show improvements across a range of measures, including respect, courtesy and fairness.
This year we celebrated another anniversary with Tax Help now in its 20th year. We are indebted to the 1,380 volunteers representing 47 ethnic backgrounds who offer help to low-income people in 57 languages.
We also launched our reconciliation action plan in 2007–08.
Importantly, our corporate values are providing the impetus for leadership in the way we think and innovate. We are increasing our emphasis on ‘prevention is better than cure’, putting out more flags, so to speak, and on providing practical guidance. Examples of this include more early warning in the form of alerts; the openness in publications such as Wealthy and wise, Tax havens and tax administration, and our annual Compliance program; industry benchmarks for cash economy industries; initiatives to provide more certainty such as annual compliance arrangements and streamlined private rulings; and strategies to promote good governance and sound business practices.
Our small business assistance program exemplifies our corporate value of helping those who are trying to do the right thing. The program provided practical assistance to more than 70,000 businesses in 2007–08.
In a similar vein we continued to make it easier for taxpayers through a range of initiatives. We outlined these in our publication Making it easier to comply. The initiatives included e-tax, used by around 1.9 million people to lodge their 2007 tax returns. We also broadened the range of information that can now be pre-filled to returns, contributing to our goal of minimising compliance costs. This goal is also the main driver for our online channels such as the Tax Agent Portal and our website; for our support of standard business reporting; and our stewardship of the Australian Business Register.
We also have a stronger focus on effectiveness, and have improved our data matching, analytics and profiling capabilities. Together these initiatives lead to more informed risk management and better differentiation.
Meeting the challenges
In a difficult year we met all of our corporate priorities except for our change program, where we experienced delays. The priorities that we met included:
- work on more than 150 new or proposed legislative measures
- meeting 20 of our 24 service standards, and almost meeting the remaining four service standards, achieving overall an index of 1.34 on a benchmark of 1.0
- continuing to reduce the rate of growth in collectable debt
- delivering on our 2007–08 compliance challenges and compliance program – we met 172 of 180 commitments, including those relating to highly wealthy individuals, large business risks, the cash economy, and international risks such as restructure, merger and acquisition activity, and the misuse of tax havens
- meeting our commitments to states and territories on GST
- progress on our integrated skilling curriculum and the development of a workforce plan.
We continued with a ‘community first’ approach to debt, seeking to balance the taxpayer’s individual circumstances with equity for others.
Against a backdrop of a growing revenue base, we were able to reduce the annual growth rate in our stock of collectable debt from 5.4% in the previous year to 1.0%. There was a real reduction in the base of income tax collectable debt by 5.4% and of superannuation guarantee charge collectable debt by 13.4%. The rate of growth of activity statement collectable debt was nearly halved to 6%. Collectable debt as a percentage of total collections was reduced from 4.31% last year to 4.02%. These are excellent results in a generally tightened economic and financial environment; conditions that will make the task more difficult next year.
Project Wickenby, a joint taskforce of Australian Government agencies investigating suspected tax evasion and revenue fraud, made encouraging progress. Results achieved by the taskforce so far send the message that the Australian Government is prepared to bring the collective power of its agencies to bear on abusive activity, and that such activity carries significant consequences. Recent media coverage suggests that this message is building positive community attitudes to voluntary compliance.
In addition we developed strong collaborative arrangements with overseas revenue authorities to better respond to the challenges of a more global economy.
On the downside, despite some progress and the significant efforts of all involved, we fell behind in the implementation of our largely self-funded change program. We are now developing a comprehensive re-plan. In it we will apply the lessons learnt so far, including the need for an earlier lockdown of design and longer lead times to provide for more robust testing.
The deferral of benefits expected from the change program – and the cost of running parallel systems while we make the transition – has affected both our capacity to do more and our financial position. However, the effect on the community has been mitigated by our use of contingencies.
Our financial performance
Our final full-year operating expenditure budget for 2007–08 was $2,873.9 million and our operating expenditure for 2007–08 totalled $3,000.8 million. The final operating loss was $127.0 million (before income tax) which represents a 4.4% overspend against our operating budget.
Midway through 2007–08 we forecast that we would have some difficulty in operating within our expenditure budget for 2007–08. As a result we sought and gained approval from the Minister for Finance and Deregulation for an operating loss of up to $60 million.
Two key factors influenced our final 2007–08 operating loss above that estimate. Labour costs were higher than budgeted, mainly as a result of the staffing levels we maintained over 2007–08 to manage higher overall workloads across the office and the financial impacts of our change program.
The other factor was a number of asset-related financial adjustments associated with our change program. To ensure compliance with relevant accounting standards, we have made adjustments in our financial statements in 2007–08 which included a reduction in the carrying value of assets on our balance sheet as well as the reclassification of some asset-related expenditure. These adjustments do not affect our cash position.
The year ahead
To support delivery of our Strategic statement 2006–10, and to give the government and the community the very best tax and superannuation administration, our areas of strategic focus for 2008–09 are:
- delivering the government’s agenda in terms of our outcome, outputs and effectiveness
- differentiating our strategies to encourage higher levels of voluntary compliance and to reduce compliance costs
- tailoring business processes to make the community’s experience timely, easier and more personalised
- promoting and assisting a capable and well-regulated tax profession
- maximising opportunities for productivity improvements to ensure an efficient, effective and adaptive organisation.
Our Corporate plan 2008–09 provides the pathway for delivering on these objectives. It emphasises the development of necessary capabilities and infrastructure, guided always by our corporate values.
We are seeing some growing uncertainties on the horizon. For example, globalisation, demographic and structural shifts, resource issues, increasing demands and a dampening of economic growth all present significant challenges. As well, new measures may flow from the government’s review of Australia’s tax system which may also test our agility and capability.
Our priorities are to invest, to the extent that we can, in people, technology, and the re-engineering of our business processes. Additional government funding relating to income tax will help us progress along this path. However, it also brings substantial commitments and is subject to a range of underlying assumptions, including the ability to recruit and develop people with relevant skills. We are also refreshing our infrastructure, particularly our managed network services, end-user computing and centralised computing; but we would like to do more so as to be responsive to future challenges and opportunities.
Our compliance program 2008–09 exemplifies an open and accountable administration that seeks community input. The program contains both help and deterrence strategies to manage risks, consistent with our Compliance model.
We are also updating the public commitments outlined in our ‘easier, cheaper and more personalised’ program to take into account delays in the change program. We apologise for the inconvenience this may cause as we build for the future. The challenge for us will be to increase productivity in order to fund the wide canvas of our administration. At the same time we must leverage off our new systems and new thinking in ways that optimise the value we add to our nation.
What is most pleasing
It is pleasing that the recent Joint Committee of Public Accounts and Audit Report 410 on tax administration endorsed our Compliance model and risk-based approach to compliance. The Committee found that the ATO has been reasonably successful in balancing fairness and efficiency. It noted improved performance and considered that the ATO is responsive to the challenges of its important but difficult work.
The Committee noted my belief that the most important task for the ATO is to maintain and enhance the generally high levels of voluntary compliance we enjoy in this country. This positive culture of compliance is dependent on community attitudes, including perceptions about the fairness and integrity of the laws we administer; on a capable tax profession; and on trust and confidence in our administration.
So it is most pleasing that 80% of those in our latest community survey rated the ATO as doing a good job.
Michael D’Ascenzo
Commissioner of Taxation
Snapshot: Awards
In 2007–08, the ATO received a number of awards and recognition, including:
- SAI Global, Australian Business Excellence Award for governance, recognising the ATO integrity framework
- Australasian legal business law awards, government in house legal team of the year
- the Corruption Prevention Network, Commonwealth public sector category, first prize for the tools and techniques we use to detect and prevent corruption
- the Australasian Reporting Awards, silver award for distinguished achievement in reporting
- the Safety, Rehabilitation and Compensation Commission Safety Awards, highly commended for best solution to an identified workplace health and safety issue category, for our psychological wellbeing initiative
- the Hitwise Australian Online Performance Awards 2007, business and finance category, most popular website in accountancy (Tax Agents Portal) and business information (www.ato.gov.au)
- Avant Card of the Month, June 2008, winner for our set of four postcards raising community awareness of lost superannuation
- the 2008 Contact Center World (Asia Pacific) Awards for best technology and innovation, finalist for an internal solution
- Australian Teleservices Association, Queensland winner for client contact centre
- Helpdesk Association of Australasia Award recognising the IT service desk.
In addition, a number of individual tax officers received awards:
- Chief internal auditor Bruce Turner received the 2008 Bob McDonald Award from The Institute of Internal Auditors – Australia
- Amy Leiper received the Commissioner of Taxation Prize for best performance, Bachelor of Taxation, Australian School of Taxation, University of New South Wales
- Kathy McDonald, Australian Teleservices Association, Team Leader (NSW)
- Lucy Barratt, Australian Teleservices Association, Teleprofessional (SA)
- Gai Tumeth, Australian Teleservices Association, Teleprofessional (QLD)
- Mereoni Vuki, Australian Teleservices Association, Teleprofessional (VIC).
1.2 ATO overview
Role and functions
The ATO is the main administrator of Australia’s revenue system and of significant aspects of our superannuation system. Taxation provides the funding for public goods, services and infrastructure as well as implementing social and economic policies. Superannuation secures retirement income for Australians.
With the involvement of the community, the ATO endeavours to administer these systems fairly and effectively, creating an environment that promotes high levels of voluntary compliance (including accessibility to entitlements) at minimum cost to taxpayers and their agents.
We help people to understand their rights and obligations; assist their agents; and make it as easy as possible for them to comply. While we support the majority of people and their agents who are trying to do the right thing, we have a responsibility to apply the law firmly to people who don’t. We are increasing our ability to differentiate the causes of non-compliance and we co-design strategies to address these risks.
We administer legislation governing taxes, superannuation and the Australian Business Register. Specifically, we administer:
- income tax, including pay as you go (PAYG) withholding and instalments, and capital gains tax (CGT)
- fringe benefits tax (FBT)
- goods and services tax (GST)
- wine equalisation tax
- luxury car tax
- excise duty
- petroleum resource rent tax
- fuel grants and benefit schemes
- higher education collections, jointly with the Department of Education, Employment and Workplace Relations
- aspects of superannuation, including the superannuation guarantee, small superannuation accounts, lost members, superannuation co-contribution and self-managed superannuation funds
- the Australian business number and Australian Business Register
- tax file numbers
- infrastructure borrowings tax offset scheme, jointly with the Department of Infrastructure, Transport, Regional Development and Local Government.
We also support the delivery of community benefits, including:
- private health insurance
- family assistance (ceased 30 June 2008)
- valuation services, through the Australian Valuation Office (AVO)
- cross-agency support, such as providing data to the Australian Bureau of Statistics.
We have a comprehensive corporate governance and reporting framework, as well as a robust integrity framework, all modelled on public service best practice.
Our organisational structure
The Commissioner of Taxation, Michael D’Ascenzo, is responsible for administering a wide range of revenue and superannuation legislation through authority vested in him by Parliament. Appendixes 3 and 4 provide further information on the Commissioner’s authority, general responsibilities and discretionary powers.
The Commissioner has a separate and distinct role as the Registrar of the Australian Business Register.
The Commissioner, three Second Commissioners (statutory officers) and three senior executives make up the ATO Executive.
At 30 June 2008 the Second Commissioners were:
- Jennie Granger, who leads our compliance program, which develops and implements strategies to ensure individuals and businesses comply with their tax, excise and superannuation obligations.
Jennie was appointed Second Commissioner in 2002. During her varied career with the ATO, she has also achieved international repute, for example, recently presenting to the Hungarian tax agency as a representative of the International Monetary Fund.
- Bruce Quigley, who has overall responsibility for the interpretation of tax and superannuation laws and oversees the implementation of relevant new policy. He also has a leadership role for our people, financial, governance and integrity activities and the AVO.
Bruce joined the ATO in 1972 and was appointed Second Commissioner in 2006. His long and varied career includes extensive income tax and indirect tax experience (including with the New Zealand Inland Revenue Department) and he is recognised as an international expert on GST.
- Bill Gibson, Second Commissioner (acting), who oversees our information and communication technology and our ‘easier, cheaper and more personalised’ (change) program, which aims to improve how the community interacts with us through effective information technology service delivery.
Bill has public and private sector experience, having worked for Qantas in a range of IT roles before joining the ATO as our first Chief Information Officer in 2003. He was appointed acting Second Commissioner in November 2007.
The three senior executive members of the ATO Executive were:
- Greg Burgoyne, Chief Finance Officer and head of the people and place program, who leads development and delivery of financial services, ensuring we are a sustainable organisation with a high degree of financial integrity
Greg joined the ATO as Chief Finance Officer in January 2008. He spent the previous 18 years working with Shell Australia.
- Raelene Vivian, Chief Operating Officer, who manages our transaction processing and debt collection operations, leads client contact service delivery and ensures the integrity of our revenue and collection systems.
Raelene joined the ATO in 1980 and was appointed Chief Operating Officer in February 2008. She has led major change programs including the review of self assessment and Better Super.
- David Diment, First Assistant Commissioner, who leads our people program, which provides a healthy, engaged, high-performing workforce and a values-based culture of high integrity.
In recent years David has focused on human resource matters, and was appointed to his current role in April 2008, having previously worked in a wide range of areas in the ATO.
The ATO Executive is supported by organisational, consultative and advisory committees as outlined in Part 3. Many of these committees, panels and forums include private and public sector experts.
The ATO also has an independent integrity adviser, Professor Robin Creyke and a Special Adviser, the Honourable Daryl Davies QC.
See part 3.1 for more information about the people who lead our organisation.
Part 2 – Report on performance
2.1 Introduction
Our outcome and outputs
Our outcome outputs framework sets out our commitments to government. Each year, details of the framework are outlined in the Portfolio Budget Statements, along with relevant performance information.
We contribute to Treasury’s overall outcome of ‘strong, sustainable economic growth and the improved wellbeing of Australians’. We are responsible for delivering:
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.
Figure 2.1.1: shows the relationship between what we are required to do, how we do it and how we performed.
FIGURE 2.1.1: Reporting our performance
Our outcome describes the overall impact the government expects from the operations of the ATO. To help achieve it we identified five outputs. We report on our performance against the agreed outcome and outputs in our annual report. The five outputs are:
- Output 1: shape, design and build administrative systems (see part 2.3)
- Output 2: management of revenue collection and transfers (see part 2.4)
- Output 3: compliance assurance and support for revenue collection (see part 2.5)
- Output 4: compliance assurance and support for transfers and regulation of superannuation funds (see part 2.6)
- Output 5: services to governments and agencies (see part 2.7).
Note: Our outputs 1 to 5 are described in the Portfolio Budget Statements as Outputs 1.1.1 to 1.1.5.
We have divided our outputs into sub-outputs. We report against the sub-outputs for internal governance purposes.
While our outcome outputs framework relates more to the business aspects of our work, we also have four enabling outputs that relate to the internal support and capabilities we need to deliver these outputs. See part 3.
FIGURE 2.1.2: Our outcome outputs framework, 2007–08
Resources
TABLE 2.1.1: Resources, 2007–08(a)
2.2 Our effectiveness indicators
We use four effectiveness indicator groups to measure how effective we are in achieving our outcome:
- deliver to government
- maintain community confidence
- improve ease of compliance
- efficient, ethical and adaptive organisation.
Deliver to government
Table 2.2.1 shows how we performed against this effectiveness indicator in 2007–08.
TABLE 2.2.1: Deliver to government, 2007–08
Effectiveness indicator |
Performance |
Revenue collections as a per cent of budgeted revenue |
Collections exceeded Budget estimate by 3.8% |
Actual transfers as a per cent of budgeted transfers |
Transfers are stable |
Overall levels of compliance improved |
Compliance levels improved |
Implementing new policy measures and specifically funded activities efficiently and effectively |
All new policy measures and specifically funded activities implemented on time. |
Revenue collections
Total cash receipts collected by the Tax Office exceeded the 2007 Budget forecasts for 2007–08 by $9.8 billion, or 3.8%. The three major contributors were superannuation funds, pay as you go (PAYG) withholding and other individuals. Collections from superannuation funds exceeded the forecast by $3,774 million (45.6%) following very strong growth in contributions and capital gains tax in the 2006-07 income year. PAYG withholding collections exceeded the forecast by $3,292 million (3.0%), reflecting stronger than anticipated wages growth coupled with significantly higher than expected employment growth. Collections from other individuals exceeded the forecast by $2,905 million (10.9%) following growth in unincorporated business income and capital gains tax.
Company tax collections were below the forecast by $1,264 million (2.0%) due to the recent slowing in corporate profitability growth. Collections from goods and services tax (GST) were $549 million (1.3%) above forecasts. Stronger petroleum and crude oil collections pushed collections from excise higher than forecast by $787 million (3.4%). Fringe benefits tax collections were $194 million (4.8%) lower, while refunds to individuals were $241 million (1.2%) higher than forecast.
Petroleum resource rent tax collections were $204 million (10.8%) below forecasts after higher than expected exploration expenditures and lower than expected production. Tables 2.2.2 to 2.2.3 and figures 2.2.1 to 2.2.2 show details of our collections.
TABLE 2.2.2: ATO net cash collections, 1998–99 to 2007–08(a)
FIGURE 2.2.1: Revenue types as a percentage of total collections, 2006–07 to 2007–08
FIGURE 2.2.2: Refunds of tax collected, 1998–99 to 2007–08
TABLE 2.2.3: Amount refunded, by type of tax, 1998–99 to 2007–08
Transfers totalled $9.3 billion in 2007–08. We conduct various grants, benefits, tax offsets and redistribution programs, sometimes in conjunction with other government agencies, to administer a range of government policies. The most significant in dollar terms are the various fuel schemes that assist users of different types of fuels, mainly for business purposes. These schemes, which include the fuel tax credits scheme, fuel sales grants scheme, product stewardship for oil program and cleaner fuels grants scheme, totalled $4.8 billion in 2007–08.
Transfers assisting families and individual taxpayers include the family tax benefit, baby bonus and private health insurance rebate. In 2007–08, payments of these benefits totalled almost $2.5 billion. Superannuation co-contribution payments ($1.2 billion) provide the mechanism for certain superannuation transfers, while the research and development tax offset ($333 million) and large-scale film production tax offset ($69 million) provide targeted assistance to industry. Distributions of the superannuation guarantee entitlements ($323 million) are classified as an expense administered on behalf of the government.
In 2007–08 total payments and transfers made by the Tax Office fell by $37 million (0.4%). The one-off doubling of the superannuation co-contribution during 2006–07 produced a higher level of payments and transfers and after allowing for this effect there would have been growth from 2006–07 to 2007–08.
Table 2.2.4 and figure 2.2.3 detail our administered expenses.
TABLE 2.2.4: ATO administered payments, 2000–01 to 2007–08
FIGURE 2.2.3: ATO administered payments, 2001–02 to 2007–08
Improved revenue compliance
It is very difficult to determine the precise impact of ATO compliance activity (both assistance and deterrence) on collections due to the many variables that affect revenue performance. Taking account of a number of indicators, including collections significantly above Budget forecasts and favourable community survey results, suggests that we are succeeding in our effort to not only maintain but improve overall levels of compliance.
New policy measures
In 2007–08, Parliament passed 13 Bills that changed the laws we administer, incorporating 42 new measures.
ATO administration and support products were in place on time for nearly all new measures that began during the year or on 1 July 2008. The sole exception was due to an information technology problem that caused a delay to letters to employees on the progress of superannuation guarantee enquiries.
Working with Treasury to implement the Australian Government’s election commitments continues to be a focus. For example, the ATO has worked closely with Treasury to resolve necessary matters of detail to implement the new first home saver accounts and the 50% education tax refund.
Our policy implementation forum oversees all new policy projects to ensure they are implemented effectively and in line with the legislative intent. The forum provides high level input to the design of administrative systems for new law, including informing the community about tax or superannuation changes. The forum also endorses risk mitigation strategies where changes apply retrospectively.
At the end of 2007–08 there were 166 projects reporting to the forum.
Specifically funded activities
In 2006–07, the government agreed to provide $445.3 million funding over five years to implement the Better Super measure. In 2007–08, a further $81.7 million funding was provided to implement this measure. We are broadly on track to implement this measure within the funding provided.
Maintain community confidence
Table 2.2.5 shows how we performed against this effectiveness indicator in 2007–08.
TABLE 2.2.5: Maintain community confidence, 2007–08
Effectiveness indicator |
Performance |
Maintain performance against Taxpayers’ Charter |
|
|
79% of taxpayers were ‘satisfied’ or ‘very satisfied’ with the professionalism of our employees. |
|
We met or exceeded annual benchmarks in 20 of our 24 service standards. We achieved an overall index of 1.34 against a benchmark of 1.0. Note that we reduced some of our benchmarks in 2007–08. |
|
Our result was 86.6% ‘A’ rates (above benchmark of 85%) and 94.4% for ‘Pass’ rates (slightly below the benchmark of 95%). |
|
We exceeded the benchmark for our two service standards, having increased one of the benchmarks in 2007–08. |
The relationship we seek with the community is one based on mutual trust and respect. The Taxpayers’ Charter helps us to build this relationship. It puts ATO values into practice in our dealings with the community.
Table 2.2.6 outlines what we undertake to do in our relationship with the community.
TABLE 2.2.6: Our relationship with the community
From our values |
Translated in our charter |
Being fair and professional |
|
Supporting taxpayers who want to do the right thing and being fair but firm with those who don’t |
|
Being consultative, collaborative and willing to co-design |
|
Being open and accountable |
|
Following the Taxpayers’ Charter
In 2007–08, the Australian National Audit Office (ANAO) undertook the Taxpayers’ Charter Follow-up Audit. The audit assessed how well we implemented the nine recommendations from the ANAO charter audit in 2004–05. They concluded that we had progressed well and also made four recommendations for further improvement, which we are implementing.
One area which we ourselves highlighted for improvement in 2006–07 was our written correspondence. In 2007–08, we paid particular attention to this and made a concerted effort to improve the tone of letters and to make our language plain and clear.
Taxpayer and tax agent perceptions of ATO professionalism and service
Our main research measures and tracks taxpayer and tax agent perceptions of ATO professionalism and service and includes the:
- community perceptions survey
- business perceptions survey
- professionalism survey
- tax agent research program.
We make the results of our surveys public. For more information, see Quick links
Broadly these surveys showed a positive trend in community, business and tax agent perceptions on our performance and our professionalism.
Community perceptions survey
Community perceptions of the ATO’s administration of the tax system continue to be high, with 80% of respondents in 2008 agreeing that we are doing a good job. Perceptions of the service and assistance we provide are also high with around two-thirds of respondents considering that our staff are helpful, responsive and look for new ways to assist taxpayers.
While there has been a marginal decline in community agreement that the effort involved in completing their tax returns is less now than in previous years, the reason for this is not clear given the positive response to e-tax and pre-filling of returns.
TABLE 2.2.7: Community perceptions survey results, 2003–04 to 2007–08
Business perceptions survey
Business perceptions of their experiences with ATO assistance remained relatively stable between May 2007 and May 2008, with the exception of the measure ‘the Tax Office looks for new ways of doing things to help taxpayers’. This measure decreased significantly between the November 2007 and May 2008 surveys, although the reason for this is unclear. Nevertheless, the long term trend for all these measures has improved consistently since tracking began in June 2004, and an 89% agreement with the statement ‘Overall I think the Tax Office is doing a good job’ is exceptionally high.
TABLE 2.2.8: Business perceptions survey results, May 2007 to May 2008
Professionalism survey
The overall professionalism performance score for the ATO in May 2008 was 3.99 out of 5.00, consistent with the score achieved in the previous survey (4.00) and 0.29 above the benchmark score (3.70). This translates to an overall average of 79% of respondents surveyed being ‘satisfied’ or ‘very satisfied’ with the professionalism of our employees.
The scores in May 2008 for the nine characteristics of professionalism were also all above the benchmark, with seven of the nine characteristics achieving a score of 4.00 or greater. The characteristic with the highest mean score was ‘respectful and courteous’ (4.30) while the lowest mean score was for ‘understood needs’ (3.92).
All characteristics of professionalism scores in May 2008 were consistent with the strong results in the November 2007 survey. The characteristic ‘Communicated clearly’ was the only characteristic to increase significantly, from 4.02 to 4.08, perhaps in part a reflection of our letter improvement project.
Table 2.2.9 shows we achieved a score above the benchmark (3.70 out of 5) for all nine characteristics of professionalism in the last three surveys.
TABLE 2.2.9: Characteristics of professionalism (total ATO), May 2007 to May 2008
Tax agent research program
Since 2003 we have monitored tax agents’ overall levels of satisfaction with services every two years as part of a state of the industry research project.
This research monitors trends in the tax agent profession, including environment, relationships and concerns. Table 2.2.10 shows the results since 2003.
TABLE 2.2.10: Tax agent satisfaction with services, 2003 to 2007
Question requiring an upward |
Percentage of respondents | ||
2003 |
2005 |
2007 | |
Taking into account all your contacts with the Tax Office over the past 6 months, how satisfied or dissatisfied are you with the overall service you have received from the Tax Office? |
39 |
70 |
78 |
NOTE
This report will be replaced in 2008–09 by an annual tax agents perception survey.
The Tax Agent Portal introduced in June 2007 as part of our change program was the main reason for the re-establishment of a healthy relationship with tax agents, who play an important role in the effective operation of Australia’s tax and superannuation systems. Continued improvement in satisfaction levels suggests that our strategies in relation to tax practitioners are on the right track.
Corporate service standards
We now have 24 service standards to measure how we perform in various areas. Table 2.2.11 shows how we performed against the service standards in 2007–08 compared to last year. For our monthly performance against the service standards see Quick links
We reviewed the service standards and benchmarks to take account of the effects on our work of the continued implementation of our change program. As a result, we lowered some of our benchmarks for 2007–08 to acknowledge potential productivity dips (but also increased some others). We have been realistic and open with taxpayers and their agents about what service standards they could expect when dealing with us in 2007–08 and moving into 2008–09.
We reported our new service standard ‘resolution of complaints’ externally in 2007–08, ensuring accountability and transparency against a key commitment in the Taxpayers’ Charter.
TABLE 2.2.11: Our performance against service standards, 2006–07 to 2007–08
Our full-year performance shows that we managed our commitments to taxpayers annual benchmarks in 20 of our 24 service standards and achieved an overall index of 1.34 on a benchmark of 1.0. This is an increase on last year’s index performance of 1.10, but this good result needs to recognise that we lowered some of our benchmarks.
With some of the service standards that exceeded the annual benchmark we nevertheless experienced difficulties in achieving all monthly benchmarks.
We did not achieve annual benchmarks for the following service standards this year:
- paper tax returns (0.4% below benchmark)
- telephone general enquiries (5.9% below benchmark): key contributing factors were technology infrastructure problems, including power outages outside our control in two of our largest sites during the peak month of July; high staff movements, particularly through promotion; and increased handling times of calls due to a higher proportion of new staff than planned and more complex enquiries
- paper amendments (1.6% below benchmark)
- clerical and administrative errors (13.1% below benchmark): a key contributing factor was the implementation of new systems, but the impact on taxpayers was minimal.
The main area of concern relates to telephone general enquiries where higher than expected call numbers, and longer than planned average handling times hampered our performance. Mitigation strategies now include auto call back facilities, external overflow call centre capabilities and ongoing improvements to self-help services. We remain committed to improving our service standards as our new systems come online.
Technical quality review
We review the technical quality of our interpretative decisions to ensure we provide clear, complete, accurate and consistent advice and guidance.
The technical quality review is one way of assessing our performance. It also identifies systemic issues that require attention in order to improve the quality of our decisions. The technical quality review assesses such things as information technology systems, work practices and staff skilling needs.
Our reviews show that our ‘A’ and ‘pass’ rate percentages have remained relatively high since the March to August 2004 technical quality review process. Our August 2007 to January 2008 results shows a decrease from the previous result and the overall trend, and we have taken remedial action. The overall result for the 12-month period is 86.6% for the ‘A’ rate (above the benchmark) and 94.4% for ‘pass’ (slightly below the benchmark).
Table 2.2.12 shows the results of our technical quality reviews since March 2004.
TABLE 2.2.12: Technical quality reviews, March 2004 to January 2008
Complaints
We respect the right of people to make a complaint if they are not happy with our decisions, service or actions. We provide an active service to resolve complaints and try to learn from the experiences of those who complain. For more information about our complaints service see Quick links
Working with the Commonwealth Ombudsman, the ATO’s management of complaints is now regarded as best practice.
The following information relates mainly to complaints received through our advertised complaints phone line 13 28 70, tax agent phone line, fax, letter or our online form. It covers complaints handled by business areas and our specialised complaints section, as well as general feedback from the community.
In 2007–08 we received 17,936 complaints and items of feedback. This was a 1.5% increase from last year.
The main reasons for complaints were:
- problems accessing ATO services, particularly call centres, with phones busy or calls cut off (18.3%); note our mitigation strategies in relation to general telephony
- delays in refunds, mostly income tax refunds, taking longer than 28 days (18.2%); in relation to these, note our work on refund integrity
- inadequate information and advice, mostly about phone or written advice not received when requested and/or incomplete, poor or incorrect advice (15.9%); in relation to these, note our quality reviews
- income tax amendments or activity statements not processed within published timeframes or not giving the correct result (14.6%); in relation to these, note our service standards.
Commonwealth Ombudsman annual report 2007–08 ‘The ATO has done much to establish and enhance fair and responsive remedial mechanisms that can remedy mistakes or systemic issues that occur. In addition to statutory objection and appeal rights regarding assessment and related decisions, the ATO’s own complaint handling mechanism operates to improve administration and service to taxpayers. The ATO works effectively with the Taxation Ombudsman and is receptive to issues raised and recommendations made’. |
Helping those with special needs
As part of our commitment to helping all taxpayers meet their obligations and claim any entitlements, we provide specialised services for taxpayers with special needs.
The products and services that we delivered for people from a non-English-speaking background and Indigenous Australians included:
- 544 in-language radio programs on tax topics broadcast in up to 22 languages nationally on SBS and on regional community radio stations
- specific tax articles for the Indigenous press
- personalised tax help in a number of languages from bilingual community relations officers and from our Tax Help volunteers
- 23 in-language information products disseminated through ethnic media, multicultural community organisations and festivals
- one-on-one assistance for multicultural communities provided at community festivals, and 132 in-language seminars on topics reflecting community feedback
- working with Indigenous non-profit organisations to reduce non-lodgment of business activity statements from 14% in 2006–07 to about 8% in 2007–08
- bi-monthly tax segments for National Indigenous Radio Service news feed to about 150 radio stations around the country, particularly in remote areas
- redesigning the Super and Us Mob booklet.
Products and services that we delivered to people with disabilities included:
- information on our website in screen-reader friendly html or rich-text formats
- cassette tapes or CD audios of key products, including TaxPack, TaxPack supplement and TaxPack for retirees
- e-tax compatibility with common screen-reading software and usable by visually impaired taxpayers to complete their tax returns online.
Improve ease of compliance
Table 2.2.13 shows how we performed against this effectiveness indicator in 2007–08.
TABLE 2.2.13: Improve ease of compliance, 2007–08
Effectiveness indicator |
Performance |
Take-up rate of new or improved products, services and channels |
In 2007–08, the number of income tax lodgments increased by 4% (568,041). Overall, electronic income tax lodgment increased by 6%, with a small reduction in the number of paper lodgments. While electronic income tax lodgments have increased, there is still a significant number of paper transactions. |
Corporate survey results |
75% of businesses agreed the ATO tries to make complying with business tax obligations easy. |
Take-up rate of new or improved products, services and channels
Electronic channels result in quicker outcomes for taxpayers compared to paper, and can reduce compliance costs. Use of electronic channels also benefits the ATO by reducing manual effort and improving data integrity.
Trend in percentage of income tax returns lodged electronically
Overall there has been an increase in electronic lodgments with a slight decrease in the number of paper lodgments. This increase can be attributed to the growing use of e-tax, pre-filling and the e-tax CD pilot.
Target: 95% of all income tax returns received electronically.
88% of individual income tax returns were lodged electronically. This is 7% below target, but an increase of 6% from 2006–07.
94% of non-individual income tax returns were lodged electronically. This is 1% below target, but an increase of 5% from 2006–07.
The volume of individual and non-individual income tax returns lodged electronically increased by 6% compared to last year.
Trend in percentage of activity statements lodged electronically
The volume of original and revised activity statements lodged electronically increased by 7% compared to last year.
Target: 47% of original lodgments and 60% of revision statements to be received via electronic channels.
46% of original activity statements were lodged electronically. This is 1% below target, but an increase of 7% from 2006–07.
63% of revised activity statements were lodged electronically. This is 3% above target and a 21% increase from 2006–07.
Electronic lodgment of original and revised activity statements across both the tax agent and business portals increased by 29%. This was due to portal improvements in September 2007, including making three additional activity statements available electronically and allowing business activity statement (BAS) service providers to lodge activity statements via the portal.
Trend in the number of logins (new and total) to the Business Portal
Target: an increase in business dealing electronically with the ATO.
Business Portal use has experienced a 24% growth from 2006–07 to 2007–08.
The total number of business logins has increased from 1,592,717 to 1,973,208.
Trend in the number of logins (new and total) to the Tax Agent Portal
Target: an increase in tax agents dealing electronically with the ATO.
Tax Agent Portal use has experienced a 70% growth from 2006–07 to 2007–08.
The total number of tax agent logins has increased from 12,797,726 to 21,699,208.
Trend in the percentage of taxpayers who pay electronically
Target: 36% of all payments to be received via the BPAY system.
39% of payments were made using BPAY electronically via the taxpayer’s financial institution.
The number of payments increased by 763,197 in 2007–08. There were 18% more payments through BPAY, 14% more through direct credit and a 7% increase in electronic payments.
The shift towards BPAY is attributed to improved payment information and the provision of personalised payment slips for download via the tax agent and business portals, as well as our marketing activities.
Trend in the number of active digital certificate holders
Target: an increase in certificate holders.
Active digital certificate growth rose by 10%, compared to a 16% growth in 2006–07.
The demand for primary digital certificates continues to grow, albeit at a slower rate, allowing more taxpayers secure electronic interaction with us. In addition, we are emphasising, with varying degrees of success, the use of secondary certificates. Secondary certificates allow a primary certificate holder to authorise others in their business to interact with us. This is an essential pre-condition for more online transactions between businesses and government, with a view to reducing red tape and improving competitiveness.
Efficient, ethical and adaptive organisation
Table 2.2.14 shows how we performed against this effectiveness indicator in 2007–08.
TABLE 2.2.14: Efficient, ethical and adaptive organisation, 2007–08
Effectiveness indicator |
Performance |
Manage the ATO within budget |
4.4% over budget |
Sound governance system |
SAI (Global) Australian Business Excellence Award for Governance |
Capable and engaged workforce
|
We continued to build and sustain a capable and engaged workforce by:
|
Manage the ATO within budget
In 2007–08 our operating expenditure was 4.4% over budget (compared to 2.3% below budget in 2006–07). This result was outside our target to manage within 2.0% of budget.
The primary factor that influenced our final 2007–08 operating loss was the impact of the change program. As the ATO repositions itself to deliver efficiencies to taxpayers and tax agents, as well as meeting a changing legislative environment, there has been a delay in the delivery of the change program. These delays have resulted in both additional unplanned labour and design costs as well as costs of maintaining legacy systems and processes. Additionally, there have been a number of adjustments in 2007–08 that have been accounted for that reduce the carrying value of IT assets. These adjustments were necessary to comply with relevant accounting standards. Not all of these adjustments impact on our cash reserves as the asset write down component is a non-cash adjustment. Steps have been taken to reschedule the change program and incorporate the financial impact of any amendments in our 2008–09 budget.
Our underlying financial performance remains robust with all aspects of the business (other than the impact of the change program) operating within the agreed operating budget.
Sound governance system
In 2007–08, we continued to strengthen key components of our governance framework to achieve a sound agency-wide system, comprising risk management, budgeting, reporting and assurance, as shown in figure 2.2.4.
FIGURE 2.2.4: ATO integrated cycle of risk, planning, budgeting and reporting
Capable and engaged workforce
This year we implemented a number of initiatives to build workforce sustainability. We created the first version of our integrated workforce plan, revised our succession management strategies and improved our approaches to recruitment, talent management, retention and secondment policies, coaching and mentoring.
We developed a capability framework common to employees at all levels: our integrated curriculum project drew together our programs and products into a corporate curriculum for job readiness, starting with our technical workforce. We also established a leadership and management framework that addresses the skills required at all levels of leadership, from the emerging to the accomplished.
Our health and safety early intervention and prevention strategies continue to deliver results. There was a 40% decrease in the number of compensable injuries compared with 2006–07. The average costs for claims where there was early intervention were less than for claims where there was no early intervention.
Part 3.3 contains our report on managing our people.
2.3 Output 1 - Shape, design and build administrative systems
This output involves:
- providing advice on the administrative, compliance and interpretative aspects of the laws administered by the ATO in relation to new government policy, including advice on costings, modelling and revenue forecasting
- identifying, developing or enhancing business practices and processes within the ATO to implement new law or internal initiatives related to administering relevant laws
- advising Treasury in areas where relevant laws do not operate in accordance with their policy intent, or where compliance costs are higher than expected.
Highlights
The ATO/Treasury protocol on working arrangements between the two agencies was revised, agreed and published for the first time. The protocol clarifies the roles and responsibilities of each agency in providing advice to government on matters of tax policy and administration.
Significant work on tax proposals and issues during the federal election led to comprehensive briefings and a relatively smooth transition following the change in government.
While our information technology capabilities were stretched as we progressed with our internal change program we were still able to deliver new legislative measures although, on our advice, the government deferred one possible proposal.
We bedded in Releases 1 and 2 of our change program, and their range of new capabilities provides us with an organisation-wide system and business processes for managing our case, contact and correspondence work. These two releases delivered their intended outcomes, but there were minor delays in some deliverables against their original schedule. We also made further improvements to the tax agents and business portals.
We are now progressively delivering the final, and most difficult phase of our change program, Release 3, which has required some significant rescheduling to accommodate a range of factors. These factors included taking into account other internal and external events that have arisen during the life cycle of the program, including new policy such as Better Super and First Home Saver Accounts. Release 3 is intended to replace our fragmented, legacy core processing and accounting systems with an integrated core processing enterprise platform. The new platform will provide a more robust foundation for future tax and superannuation administration.
We are currently deploying the integrated core processing platform and its implementation for fringe benefits tax. We expect implementation for superannuation, income tax, activity statements, goods and services tax and excise to take place progressively over the next two calendar years.
In 2007–08, we had higher numbers of e-tax lodgments than in previous years. Pre-filling now includes a much wider set of information from government, financial institutions and employers. Pre-filling is also heavily used by tax professionals via the Tax Agent Portal.
Significant factors influencing performance against Output 1
In 2007–08, 16 tax and superannuation Bills were introduced to Parliament, with 13 Bills passing to become new law. These 13 Bills dealt with 42 tax measures. In the 2008 Budget the government announced more than 50 new tax measures. As a result we have devoted significant resources to advising on and implementing the government’s program, which remains a priority for us.
This year we did a good deal of work assessing potential impacts of election commitments by the major political parties. This was to ensure our readiness to implement new measures, regardless of the election result. This involved some redeployment of scarce information technology resources to assess what affect potential new policy might have on our change program. Since the election, we have worked extensively with Treasury and other agencies developing the detail for implementation of the government’s commitments.
Post-budget assessments indicate that we will continue to experience considerable pressure on the delivery of our information technology systems in 2008–09. This reflects our significant work program, including implementing the government’s tax policy changes, our own internal business process improvement program (the change program) and our contribution to whole-of-government improvement initiatives. The volume and timing of legislative change requires us to build changes into our proposed integrated core processing platform, as well as making the changes in our existing legacy systems as a contingency. Software developers face similar pressures to update products that support taxpayers and their agents to meet their obligations or to access benefits.
Our role of providing interpretative advice to Treasury on law design has added extra pressure on our tax law technical capability. This is in addition to a rising demand for these specialist skills.
Snapshot: Tax cuts delivered
Tax cuts announced in the 2008 Budget were delivered to the majority of individual taxpayers through the amount withheld by their employers under the pay as you go (PAYG) withholding system. The amount withheld by employers is generally determined either using payroll software provided by software producers or from the PAYG withholding tax tables that we publish.
To ensure that salary and wage earners received the tax cut on the first pay day after 30 June 2008, we updated the formulas used to calculate the withholding amounts and 27 withholding schedules.
We also implemented several significant changes to the PAYG withholding schedules to allow for election promises and other measures announced in the Budget. These were to halve the low income tax offset to be paid through the amount withheld and removing the delivery of the family tax benefit from the PAYG withholding system. We consulted with software producers on the best method of delivery to incorporate the low income tax offset changes into the PAYG withholding schedules.
We tabled the updated formulas and schedules in Parliament on 26 May 2008. And we mailed the PAYG withholding schedules to 910,000 employers in early June for adoption on 1 July 2008. We recognise the importance of software developers and the role they play in the administration of the tax and superannuation systems, and we work closely with them through our software developers consultative group.
Output 1 performance
TABLE 2.3.1: Output 1 – Shape, design and build administrative systems, 2007–08
Quality and quantity measures | |
Measure |
Performance |
Number of administrative advice and costings provided and managed to help shape the Government’s program |
We provided 694 formal advices to Treasury. There were 220 pieces of advice on the compliance costs, departmental impacts and revenue costings of new policy proposals. The remainder covered a range of issues, including our advice on situations where the law does not seem to be working as intended, as well as advice on the development of new tax laws. We also provided 53 responses to data requests. |
The program delivering easier, cheaper and more personalised service is implemented in accordance with schedule and costs |
In July 2007 we released a new system to author, approve, maintain and publish information for our internal and external websites. This completed the deployment of Release 2 functionality. In February 2008, we updated our existing Siebel workflow and case system and outbound system to better integrate with the proposed new integrated core processing system. From April to June 2008, we began deploying the new integrated core processing (ICP) system for fringe benefits tax. This is an important first step for deploying the change program ICP system. |
Delivering the change program
Producing systems to support the breadth of tax and superannuation products and processes is a complex task and risk levels are high. To minimise delays and faults, we provide a safety net by keeping our existing systems running until new systems are fully tested. However, this comes at an additional cost which is unfunded.
Treasury is satisfied with the timeliness and quality of the ATO’s input to the development of taxation policy and laws in relation to costings, modelling and forecasting work |
Feedback from Treasury indicates that they are satisfied with the quality and timeliness of our advice and assistance. Our commitment of resources to this work is increasing given that the drafting instruction role relies critically on our interpretative and administrative skills. |
Responsiveness
A critical element in tax administration is to be responsive to changes arising in the course of policy development.
One example of how we responded to changes in government policy is the work done to communicate certain fringe benefits tax changes announced in the 2008 Federal Budget, with effect from Budget night 13 May 2008. The ATO website was quickly updated and scripts provided for our call centres so that callers could be advised about the changes. We also worked to explain the changes to a number of forums with an interest in fringe benefits tax issues, including the National Tax Liaison Group, Charities Consultative Committee, States and Territories Industry Partnership and Associations Industry Partnership. We also worked closely with Treasury in the design of related law changes that were introduced to Parliament and passed by 30 June 2008.
Another example was in April 2008 when the government decided to increase the excise rate on ready-to-drink alcoholic beverages from $39.36 to $66.67 per litre of alcohol. The Commissioner published a notice of intention to introduce a tariff proposal in a special Gazette on Saturday 26 April 2008. On Monday 28 April we contacted all affected taxpayers and key industry representatives by phone and follow-up email to provide information about the impact the tariff proposal would have on weekly returns. Taxpayers received the information to manage their tax affairs when they needed it and were able to correctly meet their lodgment and payment obligations.
The program is delivering easier, cheaper and more personalised service in accordance with the agreed intent and outcomes, enabling delivery of promised improved user experience |
We have delivered releases 1 and 2 of the change program but release 3 is running behind schedule, albeit that the original plan has had to be extended to include legislative measures such as Better Super. |
Administrative systems are in place and support products provided for taxpayers and their advisers on time and on budget for implementation of new law |
We implemented 42 tax measures from 13 Bills. In all but one instance, administrative systems and support products for taxpayers and their agents were in place to ensure implementation of changes in tax laws to 30 June 2008. The one exception related to the issue of system-generated responses to superannuation guarantee enquires from employees. We have since rectified the problem. |
ATO evaluates the alignment of the change program to our strategic business outcomes and how the alignment progresses or supports them |
The alignment is evaluated and reported in our Making it easier to comply booklet. We updated this booklet in 2007–08. |
2.4 Output 2 - Management of revenue collection and transfers
Output 2 reflects our role in managing client contact, revenue collection and payments we make to taxpayers and others.
We facilitate taxpayer dealings with us as they:
- enter the tax and other systems we administer through the appropriate registrations
- receive and provide the required information
- make payments
- receive refunds or other payments, or are notified of their obligations and entitlements
- engage with us in relation to outstanding obligations and on any remedial action taken.
Highlights
We processed more than 76 million forms and other transaction requests. We saw a 5% shift across all paper lodgments to electronic lodgments.
For the third year in a row, we have reduced the amount of collectable debt against a context of increasing collections. Collectable debt grew by 1.0% this year, down from the 5.4% growth in 2006–07. We also saw real reductions in both superannuation guarantee charge collectable debt (down 13.4%) and income tax collectable debt (down 5.4%). Nevertheless, micro enterprise debt, which is about two-thirds of total collectable debt, remains a major concern, and may increase if there is a downturn in the economy.
We also made progress towards implementing a new business model for our operational work. The model focuses on establishing a more cost effective, efficient service that promotes self service and voluntary compliance. Areas of improvement ranged across business processes, system support and more innovative approaches to our work. These include:
- continued enhancement of our inbound and outbound capabilities through further investment in dialler technology, auto call-back initiatives, developing external overflow call centre capability, 24 hour, seven day a week self-help services and the use of external collection agencies
- developing new scripts for our client contact areas
- trialling new ways of working and cross skilling our staff to build a more agile workforce, and using more flexible recruitment strategies.
In May 2008, we began implementing our new ICP system for processing fringe benefits tax returns. While there were some issues bedding down the new system, the benefits were noticeable, with 26% of these returns requiring some level of intervention compared to 70% under the old system. This is an early indicator of the benefits that later releases of the change program should bring to our processing capability. Although implementation issues delayed our processing of fringe benefits tax returns, tax agents worked with us to reduce the impact on taxpayers. This was assisted, too, by a general extension of the due date for lodgment of fringe benefits tax returns.
Significant factors influencing performance against Output 2
Our operating environment changed substantially with several releases of our change program. This required a heavy investment in resources for planning, training and revising business processes. The delay of change program releases also placed extra pressure on our financial position, as the delays meant a deferral of expected savings and productivity improvements. Our capacity to meet service standards, particularly in telephony, was adversely affected by funding issues, system issues, infrastructure down time, peak workloads, more complex work, increased workloads and high staff turnover. Nevertheless, as a result of the improvement initiatives, we were able to maintain reasonable service standards.
Snapshot: Making your call our priority
Our new ATO priority routing initiative has allowed us to maximise the potential of our call management capability. We developed the requisite routing algorithm with the University of Adelaide.
Since introducing priority routing, we have delivered a better service to our high priority queues, particularly tax agents. This initiative was recognised as a finalist in the 2008 Contact Center World (Asia Pacific) Awards for best technology innovation – internal solution.
Output 2 performance
TABLE 2.4.1: Output 2 – Management of revenue collection and transfers, 2007–08
Quality and quantity measures | |
Measure |
Performance |
Dollar value of revenue collected* |
We collected cash (net) of $270,862 million in 2007–08, an increase of $20,852 million (or 8.3%) over 2006–07. We raised revenue* of $278,071 million in 2007–08, an increase of $23,250 million (or 9.1%) over 2006–07. |
The largest increase occurred in PAYG withholding collections which grew by around $6,863 million (6.4%) over 2006–07 reflecting stronger than anticipated wages growth coupled with significantly higher than expected employment growth. Company tax collections grew by $4,596 million (8.0%). This reflects the strong broad based growth experienced across industries.
Tax on contributions and earnings of superannuation funds increased by $3,842 million (46.8%) over 2006–07, reflecting strong growth in contributions and significant capital gains tax growth. Other individuals also experienced significant growth with an increase of $3,728 million (14.5%) following growth in unincorporated business income and capital gains tax.
GST collections exceeded last year by $2,839 million (7.2%) due to the solid demand for goods and services through the year. Excise collections also increased by $978 million (4.3%) reflecting stronger petroleum and crude oil collections. Petroleum resource rent tax collections increased by $176 million (11.7%) reflecting in part, higher oil prices.
Tables 2.2.2 and 2.2.3 and figures 2.2.1 and 2.2.2 provide details of collections and reflects, in part, the effectiveness of our operations.
* See appendix 15, note 17, for a further breakdown of revenue.
Dollar value of revenue transferred |
We administered $9,271 million of transfers in cash for grants, benefits, tax offsets or distributions of superannuation contributions. This represents a decrease of $37 million (0.4%) over 2006–07. |
The largest increases came from the fuel tax credits scheme which grew by $269 million (6.1%). Superannuation co-contributions fell by $691 million (36.2%) because of the one-off doubling of the superannuation co-contribution payment during 2006–07 and resulted in a small decline in overall transfers.
Number of registrations processed |
We processed 1,522,216 registrations, including:
|
Tax registrations
Overall registrations have increased by 0.9% compared to 2006–07. Registrations for:
- business tax file numbers decreased by 8%
- individual tax file numbers increased by 9%
- GST registrations decreased by 14%
- PAYG withholding registrations decreased by 6%.
The proportion of individual tax file number applications for permanent migrants and non-residents with working visas continued to grow steadily, forming about 60% of all new registrations in 2007–08.
From 1 July 2007, the GST threshold increased from an annual turnover of $50,000 to $75,000. This has contributed to a reduction in new registrations and an increase in GST registrants leaving the system.
Number of records maintained |
We processed 20,692,316 updates to the tax file number register. 354,440 digital certificates were maintained to support electronic interaction through the tax agent and business portals. |
Records
There has been a marked increase in the number of updates processed, up 23% from 2006–07. We continue to match our data with some external databases to check that tax file number holders are still active in the community. We remove inactive records.
The demand for primary digital certificates continues to grow, giving more taxpayers secure electronic interaction with us.
Number of accounts managed |
22,573,729 accounts managed. |
Accounts managed
There has been an increase of 2% in the number of accounts managed.
Although the volume of account management activities increased, we maintained service delivery through a number of process improvements.
Number of refunds issued |
12,690,659 refunds issued, including:
There has been little change (0.3%) to the overall number of refunds issued, although total value of refunds increased by 14%. For the first time, during a peak processing period, we issued all superannuation co-contribution payments on time and the ATO did not have to pay any interest. |
Number of payments processed |
19,180,378 payments processed, comprising:
|
Number of products processed |
39,620,221 products processed, comprising:
|
Activity statements and income tax returns
There has been a 2% increase in activity statements processed and a 4% increase in income tax returns processed. The number of taxpayers lodging returns electronically continues to rise, however paper lodgments have only decreased marginally. The main shift in channel use is the increase of e-tax, with a less significant decrease in individual paper lodgments.
We sent SMS lodgment reminder messages to 200,788 taxpayers who had lodged by e-tax or paper in 2006 but had not yet lodged by October 2007. We recorded an increase in e-tax take up and a flattening out of the traditional late October e-tax peak as a result.
There have been a number of improvements in relation to the pay as you go instalments (PAYGI) system. These include providing an interactive voice recognition platform for annual payers to make their election, refreshing a range of PAYGI information publications and incorporating further PAYGI functionality in both the tax agent and business portals.
Fringe benefits tax returns
Figures for 2007–08 are in line with expectations and reflect a slight decrease on last year, consistent with the general downward trend in fringe benefits tax registrants.
Superannuation forms
Figures for 2007–08 are in line with expectations and similar to last year.
Our extensive letter and telephone campaigns encouraged fund members to keep track of their superannuation and stay in contact with their funds. One of our aims was to reduce the number of entries in our lost member register. We also identified superannuation accounts without a tax file number and wrote to account holders advising we would forward their tax file number to the superannuation fund unless they requested us not to. More than 99% of letter recipients accepted the offer, helping to reduce the tax payable on their accounts.
Tax file number declarations
The number of tax file number declarations recorded on the ATO data matching system is less than in 2006–07.
Number of debt cases finalised |
1,851,501 debt cases finalised. Table 2.4.2 shows debt collection results for the past four years. |
Debt cases finalised
Debt collection performance improved significantly compared with last year. The number of cases finalised increased, up 17.6% from 2006–07 to 2007–08. We negotiated some 643,474 promises to pay by instalments, to the value of just over $13.2 billion.
We continued to emphasise early intervention and engagement with taxpayers. We encouraged taxpayers who fell behind or were having difficulties with their debts to contact us at an early stage, before their debts became unmanageable. Early intervention makes it easier for taxpayers to get back on track and improves prospects for business viability. Nowhere is the value of this approach more evident than in the case of unpaid superannuation guarantee charge owed by employers, where early intervention has led to better outcomes for employees.
Our community first commitment ensures that we make fair and consistent decisions based on a consideration of each taxpayer’s individual circumstances.
In taking firmer action to maintain a level playing field, we use the full range of available legislative and administrative options, including garnishee notices, director penalty notices and statutory demands, and in some instances, bankruptcy or liquidation proceedings. For example, we increased the use of garnishee notices by almost 40% in 2007–08.
Using an extra $125.7 million over four years from the 2007 Federal Budget, we increased our debt collection capacity, focusing on aged debt (more than two years old) and superannuation guarantee charge debts. We finalised 29,879 superannuation guarantee charge debt cases and collected $186.6 million of superannuation guarantee charge to the benefit of employees, a 34% increase from last year. We also finalised 12,470 aged debt cases in 2007–08, collecting $248.2 million.
Collectable debt compared with total collections |
Total collectable debt of $22.11 billion at 30 June 2008 comprised:
Table 2.4.3 summarises our results in terms of collectable debt as a percentage of total collections. Figure 2.4.1 shows the percentage value of the amount of debt collected in each market segment. |
Slowing the growth rate of collectable debt
Against a background of increased revenue collection and a challenging operating environment, we continued to slow the growth rate of collectable debt from 5.4% in 2006–07 to 1.0% in 2007–08. This is reflected in the percentage of collectable debt to total collections for 2007–08, which was 4.02% at 30 June 2008 compared to 4.31% the previous year.
This is the lowest growth rate of collectable debt since the introduction of the new tax system.
We reduced the actual levels of income tax and superannuation guarantee charge collectable debt by 5.4% and 13.4% respectively. We also reduced the growth rate of activity statement debt to just over half the 2006–07 rate.
We achieved these results through a community first, risk-based approach to debt collection, focusing on early intervention and engagement with taxpayers. This focus is reflected in the increased number of contacts made by our staff, now assisted by dialler technology, and the number of cases referred to external collection agencies. Results included:
- over 717,000 conversations with taxpayers by our early-intervention staff in 2007–08, more than three times the number in 2006–07
- between November 2007 and 30 June 2008, referring 196,230 debt cases to external collection agencies, resulting in $110.2 million collected on our behalf.
We are further refining our risk profiling capability to ensure we treat taxpayers according to their individual circumstances. Our research program into tax debt is looking at areas such as the characteristics of micro enterprise tax debtors and developing a framework with private and public partners to examine the impact of macro-economic factors on tax debt.
As most of the collectable debt continues to be in the micro enterprise market (66%), this segment will remain a focus of our debt collection and business assistance strategies for 2008–09.
TABLE 2.4.2: Debt collection results, 2004–05 to 2007–08
TABLE 2.4.3: Collectable debt compared with total collections, 2004–05 to 2007–08
FIGURE 2.4.1: Proportion of debt collected by market segment, in percentage terms, 2007–08
TABLE 2.4.1: Output 2 – Management of revenue collection and transfers, 2007–08 continued
Number of information products delivered |
General enquiries
|
Telephony
These activities are subject to a corporate service standard, reported in table 2.2.11.
Most calls were answered in two minutes and 48 seconds. ATO priority routing ensured we met service expectations for calls from tax practitioners. Average wait time for these calls was slightly more than last year (two minutes and 43 seconds in 2006–07). Our self-help services are available 24 hours a day, seven days a week and continued to receive more calls than previously, while more transactions were completed successfully without the need for operator assistance. Service for general calls was affected during our peak period (July to October) by some isolated incidents that resulted in slow response times, increased average handling time and incorrect call delivery. However, we were still able to achieve a general service result only slightly below target.
A high attrition rate meant we had to continue recruiting, resulting in a higher than expected proportion of new staff. This affected staff availability and average handling times as new staff settled in. Flexible working arrangements, including part-time and casual employment, have helped to supplement our workforce. We also introduced a new scripting methodology and new integrated quality framework, focusing on the whole client experience and outcome.
Inbound correspondence
With the continued improvement of our systems, we are now able to report on all inbound correspondence. In previous years we reported only ‘reply required’ correspondence. Correspondence received through a broad range of channels, including letter, fax and online portals is now captured and reported as part of release 2 of our change program, allowing for better management of our responses.
Performance to service standards |
See table 2.2.11 for details of our performance against service standards. |
Taxpayer perceptions of professionalism in related areas against benchmark |
See table 2.2.9. |
Output 2 reporting on specific legislation
Taxation (Interest on Overpayments and Early Payments) Act 1983
During 2007–08 we paid $353 million in interest on overpayments and early payments under the Taxation (Interest on Overpayments and Early Payments) Act 1983. This compares to $263 million in 2006–07. The increase is due to large value interest payments to a relatively small number of entities (mainly large companies) following internal assessment reviews or decisions by courts or tribunals.
2.5 Output 3 - Compliance assurance and support for revenue collection
Output 3 reflects our role in achieving high levels of voluntary compliance with Australia’s tax and superannuation laws, and in administering access to entitlements under those laws.
As a general approach, we aim to intrude as little as possible on the majority of the community and businesses who want to meet their obligations, other than as a source of assistance, while at the same time being highly visible to those who are reluctant to do so.
Under Output 3 we:
- publish our Compliance program and complementary booklets, alerting the community, business and their agents to issues they should be aware of and what practices and activity will attract our attention
- provide information, guidance and self help tools, answer questions and inform taxpayers and their agents of new developments and our view of the law on contentious issues
- provide certainty to taxpayers through the public rulings, and private binding and reviewable ruling systems
- provide easy and effective ways for people to send us information, make payments and receive refunds
- encourage people to self correct so as to take advantage of remissions in penalties
- apply a risk management approach to deter, detect and deal with non compliance and promote voluntary compliance in relation to the tax laws.
Highlights
In consultation with the Council of Small Business of Australia and our small business consultative groups, we looked for practical ways to help small businesses start on track, stay on track or get back on track.
This assistance that we provide, developed in consultation with small business, includes:
- paper and web based information products
- telephone services such as the business tax infoline – we answered 2,348,865 general calls from business and an additional 627,284 business calls from tax practitioners
- online service and support tools, such as the Business Portal, tax and superannuation calculators
- an electronic record keeping tool – we distribute around 130,000 free copies of e Record annually
- tax seminars and workshops in all capital cities and many regional centres – around 1,000 events this year
- business assistance visits to new and existing businesses
- an outbound educational phone service to support taxpayers who are new to business or taking on a new role
- regional and remote assistance covering 175 locations delivered through 79 service providers.
Our small business assistance program provided direct help with tax and superannuation to around 72,000 businesses, including more than 7,600 assistance visits to new and emerging businesses.
We know some taxpayers experience cash flow difficulties that prevent them from paying their tax on time. Our approach to managing tax debt is prevention first, followed by early intervention should problems develop and persist. In 2007–08, we helped more than 10,000 businesses with their tax debts, addressing problems before business viability was threatened.
The cash economy introduces unfair practices that adversely affect many small businesses and place an extra burden on the vast majority of businesses that abide by the rules. Detecting unreported cash transactions is a priority for the ATO and, year by year, we are improving our capability to deal with it.
Technology advances make it harder for cash economy operators to remain hidden. The combination of technology and growing multi agency cooperation enhances our ability to use federal and state government data to match against our tax records. This is particularly useful in pinpointing conspicuous consumption out of step with declared income – the behavioural side to our cash economy strategy. We obtain records of purchases of luxury goods like cars, boats, planes and racehorses and compare them against income declared by the purchaser.
We are drilling more deeply into areas that our compliance program has shown over the years to be most prone to the cash economy. We work with industry and professional bodies to develop benchmarks or industry norms reflecting normal business costs and income. These benchmarks are published by the ATO and trade associations. They can be used by businesses to check their compliance risk and self correct where necessary. Where businesses do not fit within their trade industry benchmark, we take a closer look to see if their activities involve non reporting or under reporting of income. Another highlight is the significant reduction in priority tax technical issues without an ATO view.
Help available for flood victims Maitland Mercury, 4 July 2007, page 17 ‘The Tax Office has assured people affected by the floods in NSW that they do not need to worry about their tax at this time.’ |
Significant factors influencing performance against Output 3
The labour market continued to be tight this year and in the first six months we had difficulty in recruiting sufficient staff to fully implement our business strategies. We were also heavily involved in the planning and delivery of Release 3 of our change program.
Output 3 performance
TABLE 2.5.1: Output 3 – Compliance assurance and support for revenue collection, 2007–08
Quality and quantity measures | |
Measure |
Performance |
Information products |
Publications
|
Our research showed that:
- 84% of the community felt we provided the information and tools needed to manage their tax affairs (community perceptions survey, June 2008)
- 74% of businesses rated our advice and information as ‘good’ or ‘excellent’.
Business people told us our advice and information was clear, accurate, consistent, timely and provided the information needed to manage their tax affairs (business perceptions survey, May 2008).
Tax agents said the information and assistance we provided:
- helped them deal with the tax system (96% agreed)
- was tailored to suit their needs (85% agreed)
- was accurate (89% agreed)
- was consistent (80% agreed)
(wave 14 of the biannual tracking of tax agents’ perceptions of service and use of channels, March 2007).
Note: We finalised biannual tracking research in March 2007 and will replace it in 2008–09 with the annual tax agents perceptions survey.
Information products |
Media events/campaigns
|
Maintaining community confidence is an essential part of good tax and superannuation administration. Accurate, balanced media coverage is one way to achieve this. Media coverage is a good way to inform the community of the assistance we provide as well as giving tips on what to look out for. To this end, we work closely with journalists from mainstream, industry, consumer and professional media.
Information products |
Education programs
Special audiences Our multilingual employees conducted 101 community visits, 23 advisory sessions, 132 seminars and attended 21 community events. We convened one non-English speaking background community advisory forum and attended 15 government agency forums. We arranged the broadcast of more than 540 tax segments through SBS and community radio in 22 languages. We translated 23 of our publications or editorials and they appeared on our website and in more than 27 issues of newspapers in languages other than English. |
The Tax agents’ services guide provides tax agents with contact details and options to access ATO services. More than 8,100 copies of the guide have been supplied to tax agents. In 2008 we have improved our regular communications by replacing the online bulletin with tax practitioner webcasts, a new series of video-streamed presentations on our website. The first two of five were released on 3 March (13,500 hits) and 28 April (6,800 hits). Topics included business-exit issues, salary sacrifice to superannuation, and information on personal services income. Both webcasts featured a tax agent question-and-answer segment. Tax practitioners ordered 1,400 DVDs of the first webcast and 756 of the second. We conducted over 4,200 visits to tax agents through the relationship manager program. In addition, we resolved 4,669 issues raised by tax agents.
Information products |
Consultative forums More than 50 ATO consultative forums met in 2007–08, including the:
|
Consultative forums are our key way of working with the community and stakeholders on law interpretation, compliance activities and administrative policy and practice.
Evaluation of selected ATO information products from a taxpayer perspective, both pre and post implementation delivery |
See table 2.2.7. |
For tax time 2007, we undertook a major communications campaign focused on areas of attention for taxpayers. The campaign included practical tips for getting it right and information about the availability of e-tax and pre-filling.
We sent email, SMS and personalised postcards promoting e-tax to 1,015,110 taxpayers. These methods are cost effective and enable tracking of the number and methods of lodgment. Of 452,923 taxpayers who received our e-tax promotional email, 77% specifically used e-tax and 87% lodged online (e-tax or tax agent).
We sent personalised postcards to 361,399 new entrants, using language to suit our target audiences of 14-to-24 year olds and people from non-English speaking backgrounds. This promotion attracted 59,421 new entrants to e-tax rather than the paper TaxPack, a saving of about $457,000 in processing costs.
Overall, we have seen a 19% increase in e-tax lodgments between 2006 and 2007.
Interpretation products |
Binding advice We provided:
|
Private rulings
Requests for private rulings and administratively binding advice continue to decline. This trend is in keeping with broader availability of telephone assistance and web-based one-to-many information products. In the large business market, the tighter credit market and USA sub-prime crisis have led to fewer large transactions and a slight decrease in private ruling requests.
We present below our performance, as measured against the service standard of 80% finalised within 28 days or by negotiated due date. Table 2.5.2 shows the number of private rulings in the major categories.
TABLE 2.5.2: Private ruling cases completed, 2007–08
While the precise proportion of ruling requests lodged by tax agents cannot yet be determined, table 2.5.3 shows indicative numbers. We are working to refine this information for future reports.
TABLE 2.5.3: Completion of private ruling requests lodged by tax agents and taxpayers, 2007–08
Public rulings
Our public rulings program sets out the expected draft and final publication dates for rulings and determinations we are planning to issue. The program covers a range of topics, including income tax, international and GST (under Output 3), and superannuation and fuel tax (under Output 4). We continue to work to improve the timeliness of public rulings.
The public rulings steering committee has representatives from the National Tax Liaison Group (NTLG) and the ATO. The committee helps prioritise topics on the public rulings program. Various NTLG sub-committees also suggest topics and issues they consider important.
An electronic survey form is available on each final taxation ruling and determination, allowing the community to give us feedback on the readability, quality and effectiveness of our public rulings. We also use the information gathered from these surveys to complete post-implementation reviews of our more significant public rulings.
TABLE 2.5.1: Output 3 – Compliance assurance and support for revenue collection, 2007–08 continued
Interpretation products |
Guidance products We provided:
|
‘Interpretative guidance’ materials are not binding on the Commissioner because they do not go through the same rigour as public rulings.
Law administration practice statements are instructions to ATO staff that are also publicly available through the ATO legal database. They assist staff on the approaches to take when seeking to apply the laws we administer.
The Law administration practice statement program details topics on which practice statements are being developed. The public rulings steering committee helps prioritise topics on this program.
An ATO interpretative decision is part of the precedent set in our legal database. They help our staff ensure consistency of advice or the application of the law in relation to similar factual situations.
Interpretation products |
Law assurance
|
Priority technical issues
Priority technical issues are our most complex or significant technical issues, identified as a priority because of their associated risk (revenue or confidence in the tax or superannuation system). The resolution of a priority technical issue can involve one or more strategies, including a public ruling or law administration practice statement, through litigation, or through advice to Treasury on possible law change.
During 2007–08 we implemented a number of initiatives to improve priority technical issue processes, including greater focus on project management as well as intervention by senior officers where progress has stalled. These initiatives have resulted in a 20% reduction in the number of priority technical issues on hand and a 48% reduction in those priority technical issues which are more than six months old without an ATO view.
At 30 June 2008, 26 out of 192 priority technical issues (14%) were aged over six months with an ATO view yet to be established. This compares with 50 out of 236 (21%) at 30 June 2007.
Percentage of technical advice passing quality assurance – trend over time |
97.2% of our technical advice, which includes four general categories – rulings, objections, active compliance and other interpretative advice, passed technical quality reviews, with a 92.7% ‘A’ rate for February to July 2007. For August 2007 to January 2008, the rates were 91.5% ‘Pass’ and 80.5% ‘A’ (this is the combined value from Outputs 3 and 4). |
Interpretation products |
Objections, disputes and reviews We completed 14,106 objections, disputes and reviews. This was an increase from the previous year. |
Performance to service standards |
82.9% of specified interpretation products met service standards. This is 50,052 products out of a total of 60,371. The percentage of interpretation products meeting service standards has decreased by 4.1 percentage points since 2006–07. See table 2.2.11 |
Prevention is better than cure ‘There have been significant changes in the community in how people earn their income and what claims they can make – all of which means many have more complex tax affairs than in the past’ – Second Tax Commissioner Jennie Granger, speaking to the National Institute of Accountants NSW State Congress and Business Expo, Sydney, 4 June 2008 |
Output 3 active compliance results
The aim of active compliance activities is to deter, detect and address poor or non-compliance and ensure that taxpayers who comply with their obligations are not at a personal or commercial disadvantage relative to those who seek not to comply. Accordingly, it is the indirect effects of our active compliance activities that are more important than the direct results (revenue and penalties), although the former is difficult to measure.
The nature and level of risk can vary according to the type of taxpayer. We separate compliance risks into six market segments so that we can differentiate our responses according to the level of risk presented by the characteristics and circumstances of different taxpayers. The market segments are:
- individual taxpayers
- micro enterprises – businesses with an annual turnover below $2 million
- small to medium enterprises – businesses with an annual turnover of between $2 million and $250 million
- large businesses – business groups with an annual turnover above $250 million
- non-profit organisations
- government organisations.
In 2007–08, the threshold for the small to medium enterprises market segment was increased from a turnover of $100 million to $250 million to enable a stronger focus on businesses with a turnover in that range.
TABLE 2.5.1: Output 3 – Compliance assurance and support for revenue collection, 2007–08 continued
Quality and quantity measures | |
Measure |
Performance |
Evaluation of ATO risk management and strategic intelligence |
Booz Allen Hamilton reviewed our strategic intelligence model and recommended a series of improvements in our strategic intelligence capability. These improvements will be delivered through a proposed Evidence, Litigation and Intelligence Management program and improvements in our professional development program. Ernst & Young completed a review of our Performance Management Framework for risk and intelligence. The review recommended developing a new set of performance measures for evaluating the effectiveness of our risk management and intelligence processes. |
Our approach to active compliance
How intensively we scrutinise a taxpayer’s affairs depends on the level of risk to the effective operation of the tax and superannuation systems. Where we identify a serious or widespread risk, we increase our level of attention to that risk. As we operate on a risk-management basis it is important for taxpayers and their representatives to keep us informed of emerging risks, to complement our own risk-assessment activities. We make this invitation in our annual compliance program and in our consultative forums.
We also use a range of mechanisms to identify and evaluate emerging risks. For example, large businesses come under intense scrutiny, given the size and complexity of their transactions. At the same time, we differentiate between taxpayers who are trying to do the right thing and those who are not, in accordance with our compliance model. Depending on the causes of non-compliance, the circumstances of the taxpayer and the level of culpability involved, the appropriate response could be to review the taxpayer’s financial affairs, to audit the taxpayer or to refer the matter to the Commonwealth Director of Public Prosecutions (CDPP) for prosecution for deliberate acts of evasion or fraud.
TABLE 2.5.1: Output 3 – Compliance assurance and support for revenue collection, 2007–08 continued
Quality and quantity measures | |
Measure |
Performance |
Taxpayer perceptions of professionalism in related areas against benchmark |
See table 2.2.9. |
Results
We report our active compliance results under both Output 3 and Output 4. This section contains the results for Output 3.
Table 2.5.4 shows our active compliance results by revenue product, while table 2.5.5 shows the same results by market segment. Superannuation surcharge compliance results are reported as part of Output 4. Active compliance activities on superannuation funds’ income tax obligations are included under Output 3.
The outcome of some active compliance activity is to protect revenue in the future, for example, by reducing (where appropriate) carried-forward losses. This year our active compliance activities protected an estimated $2.06 billion in revenue (this amount is shown separately in tables 2.5.4 and 2.5.5).
TABLE 2.5.4: Active compliance results, by revenue product, 2007–08
TABLE 2.5.5: Active compliance results, by market segment, 2007–08
Table 2.5.6 shows the tax, penalties and interest that applied as a result of our field visits, phone calls and letters this year.
TABLE 2.5.6: Active compliance results, by channel, 2007–08
TABLE 2.5.7: Type and number of case types completed in the field channel, 2007–08
Credit amendments made during 2007–08 reduced liabilities by about $623 million. These amendments resulted from resolving disputes related to liabilities raised in all previous years. For example, figure 2.5.1 shows the amount of total net liabilities we have raised for income tax matters in the large business market segment each year over the last four years and the credit amendments resulting from the resolution of disputes and other adjustments. Disputes can take several years to resolve. Consequently the value of total liabilities reported as credit amendments will vary over time and therefore the proportion reported in successive annual reports will change.
FIGURE 2.5.1: Value of credit amendments against total liabilities for income tax in the large business market segment, 2004–05 to 2007–08
Output 3 compliance challenges
We exceeded our commitments to government under the Output 3 compliance challenges for liabilities and cash, and met our commitment for coverage. Table 2.5.8 shows the Output 3 compliance challenges.
TABLE 2.5.8: Output 3 – Compliance challenges, 2007–08
Issue |
Activity |
Individual taxpayers |
The additional funding helped us to focus on addressing growing risks involving:
|
Employer obligations |
The additional funding helped us to:
|
Small and medium enterprises |
The additional funding enabled us to undertake more tax performance reviews and audits of small to medium enterprises, including assessing tax performance against economic performance. |
Leveraging through tax agents |
The additional funding allowed us to continue to leverage compliance through tax agents by:
|
Serious non-compliance
In 2007–08, we continued our focus on serious evasion and tax fraud. This work, including Project Wickenby, tends to be project based, strategic and has greater cross-agency involvement. Our activities included:
- 314 audits completed
- 171 investigations completed
- 83 briefs of evidence provided to the Commonwealth Director of Public Prosecutions (CDPP)
- 5 briefs of evidence provided to the Australian Government Solicitor.
Action in tax-related matters under the Proceeds of Crime Act 2002 resulted in:
- $19.8 million of restrained assets
- $3.6 million of confiscated assets
- $5.8 million recovered from asset sales.
Of the overall totals achieved through active compliance activities, Project Wickenby resulted in tax liabilities of $140 million being raised in 2007–08 and $53 million collected, with $13.3 million restrained and $1.5 million confiscated under the Proceeds of Crime Act. An additional $47.3 million was restrained pursuant to Section 10A of the Criminal Assets Recovery Act 1990 (NSW).
Snapshot: Tax havens
Misuse of tax havens was a focus in 2007–08 as we implemented a multi-faceted strategy to tackle non-compliance. This included cooperating with our international treaty partners to focus on havens of common interest, and publishing our latest Tax havens and tax administration booklet in October 2007.
We worked with some major Australian financial institutions and, in a pilot program, asked their overseas subsidiaries or branches in Vanuatu to write to their Australian customers informing them how to make a voluntary disclosure, if required, of any undeclared offshore income under our offshore voluntary disclosure initiative.
To further encourage voluntary compliance, we wrote directly to more than 3,500 taxpayers where we knew they had a debit or credit card issued by an offshore or tax haven-based financial institution, or where they had made a high-risk funds transfer identified through AUSTRAC, the Australian Transaction Reports and Analysis Centre. Under this offshore voluntary disclosure initiative, in less than one year there have been 858 disclosures of $36 million in previously undeclared taxable income from a wide range of taxpayers.
These initiatives are supported by a sophisticated and coordinated active compliance program across taxpayers in all market segments. We use a range of compliance approaches, including letters prompting taxpayers to lodge offshore voluntary disclosures and telephone calls requesting information. More serious cases involve the use of formal powers, including risk assessments and audits of both those involved and those promoting offshore avoidance arrangements. Where appropriate we refer cases for civil or criminal investigation and prosecution using whole-of-government taskforce investigations under Project Wickenby.
Prosecutions
TABLE 2.5.1: Output 3 – Compliance assurance and support for revenue collection, 2007–08 continued
Quality and quantity measures | |
Measure |
Performance |
Active compliance products |
Prosecutions 2,654 cases were successfully prosecuted of a total of 3,022 taken to court. The 2,654 successful prosecutions comprised:
|
The conviction rate for serious non-compliance cases increased to 100%, compared to last year’s results of 98%. In 2007–08, the overall custodial sentence rate was 60%, with 46 custodial sentences from 77 convictions, which includes one successful prosecution under Output 4. This is consistent with 60% in 2006–07 and 56% in 2005–06.
Reparation orders for serious non-compliance were up slightly from $3.8 million in 2006–07 to $4.3 million this year. Court fines for serious non-compliance dropped from $63,000 to $37,200.
Regulation of tax agents
The regulation of tax agents is a matter for both the Commissioner and state-based Tax Agents’ Boards. In 2007–08:
- one tax agent was prosecuted under section 134.2 of the Criminal Code Act 1995 for obtaining financial advantage by deception
- a further eight agents were referred for prosecution for providing false or misleading statements
- 15 persons were prosecuted for breaches of sections 251L and 251O of the Income Tax Assessment Act 1936 for not being registered as tax agents and charging a fee or advertising as tax agents
- 62 tax agents were prosecuted who had not met their own tax lodgment obligations under sections 8C and 8H of the Taxation Administration Act 1953
- 149 agents were referred to the various boards for misconduct, resulting in 13 cancellations of registration and three suspensions in accordance with section 251K of the Income Tax Assessment Act 1936.
Output 3 reporting on specific legislation
Income tax
Settlements
A settlement involves an agreement or arrangement between parties to finalise matters in dispute. In this context this includes disputes that arise prior to formal assessments being raised such as following a taxpayer’s consideration of an ATO position paper. Settlements usually involve the need to balance competing considerations and always call for judgment and common sense. Settlements reflect the need for reasonable and sensible administration and good management of the tax system.
A settlement reflects agreement on the proper application of the law, both in cases where a liability is raised and in cases where a liability is proposed. Settlements are evidenced by a written agreement between the parties, usually in the form of a deed of settlement. A settlement of the amount of a liability does not include compromising a debt where the ATO agrees to accept less than the agreed amount in finalisation of a debt.
The Code of Settlement Practice provides guidelines for settling disputed tax liabilities or entitlements and outlines the processes that tax officers must follow.
Settlements under the Code of Settlement Practice are registered on the Tax Office’s Settlements Register. Such settlements are subject to the biannual technical quality process and are graded against adherence to the Code. This and other checks and balances outlined in the Code assure the probity and integrity of our settlement decisions.
Table 2.5.9 shows the number of settlements registered this year.
TABLE 2.5.9: Number of settlements registered, 2007–08
Table 2.5.10 shows the profile of all settlements registered, by market segment, this year.
TABLE 2.5.10: Profile of settlements registered, by market segment, 2007–08
The settlement variances in some market segments are larger than others due to the size of the transaction or issue and the complexity of factors in those cases including the evidentiary and legal issues which may have been in contention. Senior tax officers were involved in reviewing our large variance cases in the course of them being settled, as well as the application of other checks and balances.
Reasons for settlement
The main reasons for settling non-scheme cases include:
- having considered the further information provided by the taxpayer in response to the preliminary views outlined in a position paper, there is agreement on the proper application of the tax law that is different from the ATO’s preliminary views
- there were complex factual or quantum issues in contention, or evidentiary difficulties, or there was genuine uncertainty about properly applying the law to the facts, sufficient to make the case problematic in outcome or unsuitable for resolving through the Administrative Appeals Tribunal or the courts – for example, where the issue was peculiar to a particular taxpayer, and the opposing positions were each considered reasonably arguable. This was particularly so where the settlement included an agreed future approach
- the settlement would cost-effectively achieve compliance by the taxpayer, group of taxpayers or section of the public, for current and future years
- costs of litigation were out of proportion to the possible benefits, considering the prospects of success, including collecting the tax, and likely award of costs, assessed as objectively as possible.
The Code of Settlement Practice is available on our website at Quick links
AusIndustry
We jointly administer the Research and Development Tax Concession program with AusIndustry (part of the Department of Innovation, Industry, Science and Resources). This year 6,806 companies registered their research and development (R&D) activities with AusIndustry to obtain concessional deductions or an R&D tax offset under this program. These registrations were in respect of reported R&D expenditures totalling $11.6 billion. Of these, 2,846 registrants were small companies that indicated an intention to claim the R&D tax offset in lieu of a tax deduction; these companies reported R&D expenditure totalling $900.7 million. The value of R&D tax offsets claimed for this and prior years is reported in Table 2.2.4. In addition, 1,711 companies indicated they intended to access the 175% Australian incremental concession which is available to companies that increase their level of R&D over the previous three years.
The venture capital measures provide incentives for Australian and foreign residents to invest in relatively high-risk, start-up and expanding businesses that may find it difficult to attract finance through existing commercial sources. There are currently 35 fully registered venture capital limited partnerships and one early stage venture capital limited partnership.
The Pooled Development Funds Program closed to new applications for registration on 21 June 2007 due to the expansion of the venture capital measure. There are 79 registered pooled development funds.
National Tax Equivalent Regime
The National Tax Equivalent Regime is an intergovernmental arrangement that notionally applies federal income tax laws to nominated state and territory government businesses. Under the regime, the states and territories collect the income tax equivalent liabilities from each business, as determined by the Commissioner.
In 2007–08, we continued to administer the National Tax Equivalent Regime in line with the memorandum of understanding with state and territory governments. This included completion of the 29 risk reviews agreed in the previous two-year National Tax Equivalent Regime compliance plan (2005–06 and 2006–07), as well as making a start on the six risk reviews agreed in the 2007–08 work plan. We also responded to 22 private ruling requests lodged by entities in the regime.
The ATO has found general compliance levels, compliance attitudes and cooperation levels to be high among the reviewed National Tax Equivalent Regime groups. A small number of these groups have made voluntary debit self-amendments to their return on specific issues identified as a result of our reviews and we are working with others to resolve any outstanding matters.
Fringe benefits tax (FBT)
We collect about $3.9 billion annually from some 72,000 employers under the Fringe Benefits Tax Assessment Act 1986. Car and expense payment fringe benefits together comprise just over 63% of fringe benefits tax revenue. Around 1.475 million employees receive fringe benefits; annual reportable benefits exceed $9.7 billion.
FBT has relatively high compliance costs for employers. The tax often requires an employer to meet a range of specific valuation, substantiation, capping and employee-based record-keeping rules for the different benefit types. This adds to the general complexity and compliance cost of the system.
The key risks we manage within the FBT system are motor vehicle benefits, expense benefits and exemptions, concessions and capped benefits. Increasingly, employers are using the services of specialist third-party salary-packaging providers to design and administer their salary-sacrifice arrangements with employees.
This year we continued our active compliance focus, reviewing the FBT obligations of around 2,500 employers as part of their employer obligations. We conducted another 480 specific FBT reviews and audits and found that many employers had failed to identify and correctly deal with car benefits provided to employees. And a number of employers had failed to deal correctly with expense payments and minor benefits issues. In order to clarify matters for employers, we provide guidance and online support. For example, in 2007, we clarified the application of the minor benefits exemption that had been increased to $300 in that year. To assist employers to comply with the FBT law, we completed 325 requests for private binding rulings on fringe benefits tax matters.
In 2007–08, no breaches of the Fringe Benefits Tax Assessment Act 1986 resulted in prosecution action, nor did we identify any breaches of the Fringe Benefits Tax (Application to the Commonwealth) Act 1986.
Goods and services tax (GST)
In 2007–08, estimated net GST cash collections were $42.4 billion (including net GST collected by the Australian Customs Service of $2.95 billion)1. This is 1.3% above the original budget estimate of $41.8 billion. As at 30 June 2008, GST collections represented 15.7% of total tax collections.
At 30 June 2008, there were about 2.6 million taxpayers registered for GST.
In 2007–08, we employed a comprehensive compliance approach to improve taxpayers’ compliance through the use of targeted strategies across all markets.
In 2007–08, more than 72,000 small business operators received practical support, with the majority of assistance provided to taxpayers in the micro market. Practical assistance was also provided through investment in building the capability of business activity statement (BAS) service providers and emphasising the importance of business-like record-keeping practices.
In the small to medium enterprises market, we conducted more than 30,000 reviews to address key GST risks, including property dealings and serious evasion. Our engagement with the large and government markets has resulted in important voluntary disclosures, reinforcing our compliance approach.
We maintained our focus on GST refunds to ensure refund claims were correct. This has been achieved through a series of checks, before and after issue, including the monitoring of unusual or high-value refund claims, to detect incorrect or fraudulent refund claims.
We identified issues relating to the integrity of business systems used to process GST transactions. These risks mainly stem from a lack of attention or sufficient investment in systems and processes. This leads to poor governance of accounting system changes and of business or staff restructures. This often leads to errors in capturing and reporting GST information.
We concentrated our efforts on taxpayers who attempt to obtain financial benefits through significant and deliberate non-compliance with their GST obligations. In particular, we have greatly improved our intelligence capabilities to counter unacceptable behaviour by tax agents and operators of ‘phoenix’ schemes.
The property sector has been a significant area of focus for GST. Key compliance risks within this sector included incorrect reporting of property transactions, incorrect application of the margin scheme, and GST-adjustment events arising from a change in the extent of creditable purpose.
Overall we continue to meet our outcomes as agreed with the states and territories for the administration of GST under the Intergovernmental Agreement on the Reform of Commonwealth–State Financial Relations and we signed a new GST administration performance agreement in March 2008. In 2007–08 we exceeded our ‘audit yield’ commitment as set out in the performance agreement. We also established a new forum with state and territory revenue offices to strengthen information sharing and compliance outcomes.
In 2007–08, there were two major judicial decisions with potential GST revenue impacts for the states and territories. The High Court's decision in the Reliance Carpets case confirmed our view that a deposit forfeited in circumstances like those in the case is taxable, as intended by the law.
We are now processing refunds for taxpayers as a result of the Federal Court's decision in the KAP Motors Pty Ltd case on motor vehicle holdbacks. The Federal Court held that the restriction on paying refunds does not apply if GST is paid on a transaction that is later determined not to be a supply for GST purposes. The GST revenue impact of this decision is estimated at $520 million. Legislation currently before Parliament will, if passed, change the law prospectively to counter the future impact of this decision.
1. Excludes GST non-GIC penalities.
Luxury car tax
In 2007–08, we collected $452 million in luxury car tax and raised $2.829 million in luxury car tax liabilities as a result of our compliance activities.
A luxury car is a car with a GST-inclusive value exceeding the luxury car tax threshold. The luxury car tax threshold was $57,123 for 2007–08. An adjustment for indexation has increased it to $57,180 for 2008–09.
The tax was introduced on 1 July 2000 at the rate of 25% to replace the 45% wholesale sales tax on luxury cars. The tax is additional to any GST payable and is generally paid when a car is sold or imported at the retail level.
A Bill to increase the luxury car tax from 25% to 33% was introduced to Parliament in May 2008. Amendments to the Bill were introduced and passed in September 2008 relating to fuel efficient vehicles, pre-budget contracts and refunds for primary producers and certain tourist operators. Regulations will specify the types of vehicles that will qualify for the (up to) $3,000 refund to primary producers and tourist operators.
On 23 June 2008, we suggested two practical compliance approaches for motor vehicle dealers pending passage of the law. Dealers could choose to report in the first business activity statement (BAS) after the law changed or request the ATO amend the BAS for the period in which the luxury car tax accrued. We have liaised closely with the industry and are confident that car dealers understand their obligations under the new law.
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 recovering petroleum in offshore areas under Commonwealth jurisdiction covered by the Petroleum (Submerged Lands) Act 1967.
New taxpayers were registered for petroleum resource rent tax during 2007–08, bringing the total number of registered taxpayers to 53.
In 2007–08, net collections of petroleum resource rent tax were $1.7 billion (cash basis), an increase of 11.7% from last year. The increase was mostly due to the result of higher commodity prices and the effect of legislative changes on 2006–07 net collections. Potential higher net collections were negatively affected by increased production costs coupled with the increasing value of the Australian dollar against the United States dollar. Declining field production and disruptions due to adverse weather conditions also contributed to lower-than-anticipated net collections.
We continued to address several material risks, including claims for indirect expenditure, transfer pricing, taxing points, hedging losses and classification of expenditure. Some of these risks are being litigated. The favourable Federal Court decision in Woodside Energy Ltd v Commissioner of Taxation ruled on the treatment of hedging gains and losses. The taxpayer has appealed to the Full Federal Court.
During 2007–08, we provided petroleum resource rent tax advice to taxpayers, including issuing three private binding rulings on projects moving to production. We also participated in industry forums. And we issued two draft public rulings to provide guidance on the application of the petroleum resource rent tax law.
We advised other government departments on petroleum resource rent tax issues and administrative impacts of new legislative measures. From 1 July 2008, legislative changes to the tax will reduce compliance costs for taxpayers and remove inconsistencies.
Wine tax
We administer A New Tax System (Wine Equalisation Tax) Act 1999, which creates a liability for assessable dealings in wine and allows for a rebate to eligible producers.
In 2007–08, we continued to work with the wine industry on issues identified through our risk assessments and compliance activities. We also worked with Inland Revenue of New Zealand to successfully implement the extension of the wine producer rebate claims to New Zealand vignerons.
We report total collections for wine equalisation tax in Table 2.2.2.
We collected $3.9 million in tax as a result of active compliance checks relating to wine equalisation tax, and one administrative sanction resulted in penalties of $228,233.
There were no criminal prosecutions under the Act during the year.
Use of assumed identities
From 1 July 2007 to 30 June 2008 we did not issue any new authorisations for tax officers to use assumed identities. There were five ongoing authorisations for our field intelligence officers in place. These are now mainly used in countering refund fraud. As required by the Crimes Act 1914, appropriate records of the authorisations and revocations of assumed identities were audited regularly. No fraud or other unlawful activity relating to the use of assumed identities was identified.
Snapshot: Annual compliance arrangements
Following our forward compliance arrangement initiative in 2006, the ATO continued to work with the Corporate Tax Association to respond to an expressed desire from large corporations for ‘no surprises’ in their end of year tax position. In May 2008 we launched our annual compliance arrangement initiative, which goes a long way down this path.
An annual compliance arrangement is entirely voluntary and is built around two concepts:
- the company must have sound tax risk-management processes and meet the key corporate governance guidelines set out in the 2006 Large business and tax compliance booklet
- a genuine commitment to full and true disclosure – broadly, this requires disclosure of all major or unusual transactions (eg transactions with significant cross-jurisdictional issues).
To the extent of disclosure, we will agree not to audit low-risk matters and clearly identify higher-risk issues. Where issues remain open, we encourage the company to resolve them using our priority-rulings process. In this way the company obtains a level of certainty for low-risk matters and an avenue for resolving high-risk matters.
Annual compliance arrangements are a practical means of moving from an adversarial relationship to a more constructive one, underpinned by collaboration, trust and openness. While annual compliance arrangements will initially be available only to the top 50 companies by turnover, we expect that our experience with this group will provide lessons that could apply more broadly.
2.6 Output 4 - Compliance assurance and support for transfers and regulation of superannuation funds
Output 4 reflects the ATO processes required to assure and support compliance and to inform and assist the community in relation to the transfers and superannuation obligations we administer. Transfers are administered expenses incurred by the ATO, including distribution of superannuation guarantee entitlements, superannuation co-contributions, and personal and business benefits and subsidies.
In line with our assurance role under Output 3, we work to ensure that taxpayers receive their entitlements and comply with their obligations.
This output involves:
- providing compliance assurance and support in relation to transfers
- regulating self-managed superannuation funds
- ensuring superannuation funds regulated by the Australian Prudential Regulation Authority meet their reporting obligations.
Highlights
Self-managed superannuation funds now number around 390,000 and manage an estimated $358 billion in assets – about one-quarter of the value of all assets managed by superannuation funds.
To assist new trustees to understand their obligations, we developed a start-up information kit that is mailed to the home address of all new trustees. We also introduced a new declaration for trustees on 1 July 2007. It requires the trustee to acknowledge that they understand their obligations and responsibilities. These initiatives were complemented by a new self-managed superannuation fund newsletter and regular updates of other information products, including web-based guidance.
We continued our collaborative approach in the design of new products. For example, we involved key stakeholders in extensive user testing through our simulation centre to develop the new self-managed superannuation fund annual return. This brings self-managed superannuation fund reporting requirements for income tax, regulation and member contributions into a streamlined single return. We developed a new auditor contravention report for use from 1 July 2008. This form includes minimum reporting criteria and guidance on when an auditor should report a contravention. Key data in both the annual return and auditor contravention report can be cross-checked and matched for much better analysis as part of our compliance activities.
We have also involved external working groups of self-managed superannuation fund auditors and administrators in the co-design of an electronic tool to assist auditors in decision making and in providing more consistent reports of contraventions. This free tool should be available to all auditors as a download or on CD later in the calendar year.
During 2007–08 we conducted more than 11,000 self-managed superannuation funds compliance audits and reviews, completed more than 18,000 lodgment cases and issued more than 139,000 lodgment compliance letters. This included contact with 3,000 new trustees to assess their understanding of their obligations.
A key component of our self-managed superannuation fund compliance program is following up contravention reports lodged by approved auditors. While some 50% of breaches were reported to us as already rectified, of the balance we found that 60% had still not been rectified by the time we made contact with the fund. In a small percentage of cases the breach was so significant that we took further compliance action against the fund.
Loans made by funds continue to be a major cause of concern. Prohibited loans were also the single highest contravention reported by fund auditors and accounted for 30% of the audit cases. We reviewed more than 500 funds where their returns indicated that more than 80% of assets had been loaned to others. In one fund, an audit revealed that 98% of its total assets had been ‘loaned’ to a member. It was subsequently revealed that the loan was used by the fund member for a business venture and that it could not be repaid.
The ATO considers prosecution of trustees where breaches are significant and deliberate. Trustees of one self-managed superannuation fund were fined $30,000 and $32,000 in costs for selling a property belonging to the fund and using the $150,000 in proceeds to pay a private debt.
Significant factors influencing performance against Output 4
Several factors influenced our performance in 2007–08. Our delivery of active compliance activities around choice of superannuation fund, superannuation guarantee obligations, and self-managed superannuation funds, particularly in the first half of the year, was adversely affected by delays in recruiting sufficient new staff in a very tight labour market.
It also became clear during the year that our workloads related to the transition to Better Super had been significantly underestimated – particularly in relation to the level of quotation of member tax file numbers and in reviewing cases where voluntary contributions exceeded the transitional cap of $1 million. This meant that a greater level of ongoing liaison and design with affected stakeholders has been required.
Output 4 performance
TABLE 2.6.1: Output 4 – Compliance assurance and support for transfers and regulation of superannuation funds, 2007–08
Quality and quantity measures
Measure |
Performance |
Information products |
Publications
See table 2.5.1 for more details on Outputs 3 and 4. |
General superannuation media events/campaigns
See table 2.5.1 for more details on activities relating to both Outputs 3 and 4. | |
Information products |
Consultative forums Consultative forums and other key stakeholder initiatives included the fuel schemes advisory forum and the superannuation consultative committee and related sub-committees. The superannuation consultative committee is the peak committee where we meet with representatives of the superannuation industry, tax practitioners, financial planners and employers. |
Evaluation of selected ATO products from a taxpayer perspective, before and after delivery |
We developed a campaign called ‘a plan to simplify and streamline superannuation’ to raise community understanding of the changes and benefits. The evaluation showed that claimed awareness of the superannuation changes increased from 61% to 79% over the campaign. Awareness remained steady throughout the second burst of advertising and was highest among people aged 50 or over. More than eight in 10 respondents said they had seen the campaign, with television the most recalled of the advertising media. |
Interpretation products |
Binding advice We provided:
We issued 14 public rulings under Output 4 (in relation to superannuation and fuel tax) in 2007–08 compared to eight in 2006–07. Requests for private rulings and administratively binding advice have declined. This has been particularly evident for excise, where fuel tax credit claimants have become more familiar with the scheme following implementation and are not seeking the same level of assistance. |
The information in tables 2.5.2 and 2.5.3 covers Outputs 3 and 4.
Interpretation products |
Guidance products We provided:
|
The commentary in table 2.5.1 covers Outputs 3 and 4.
In 2007–08 we issued an increasing number of ATO interpretative decisions on excise transfers and superannuation to provide guidance to our officers on new legislative changes.
Percentage of technical advice passing quality assurance – trend over time |
See table 2.2.12. |
Interpretation products |
Objections, disputes and reviews We completed 2,682 objections, disputes and reviews. Of these, 66 related to excise and 2,616 related to superannuation. Finalisations of objections, disputes and reviews have increased. In particular, increased superannuation guarantee compliance activity has resulted in a greater number of objections decided. |
Performance to service standards |
81.8% of specified interpretation products met relevant service standards. This represents 12,508 products out of 15,293. The percentage of interpretation products meeting service standards has decreased by 5.6 percentage points in 2007–08. See table 2.2.11. |
Perceptions of professionalism in related areas against benchmarks |
See table 2.2.9. |
Output 4 active compliance results
As part of our overall active compliance program, we undertake a range of activities to provide assurance on transfers under the excise and superannuation laws and to support regulation of self-managed superannuation funds. We report our superannuation results in regards to compliance activities on superannuation surcharge as part of Output 4 in the Portfolio Budget Statements. As in previous years, we include results from active compliance activities in regards to income tax returns of superannuation funds under income tax reporting in Output 3.
Tables 2.6.2 to 2.6.5 show our active compliance results for Output 4 by revenue product, market segment and channel for 2007–08.
TABLE 2.6.2: Active compliance results, by revenue product, 2007–08
TABLE 2.6.3: Excise transfers active compliance results, by market segment, 2007–08
TABLE 2.6.4: Superannuation active compliance results, by market segment, 2007–08
TABLE 2.6.5: Active compliance results, by channel, 2007–08
TABLE 2.6.6: Type and number of case products completed in the field channel, 2007–08
Output 4 compliance challenges
We materially achieved our commitments to government under the Output 4 compliance challenges for liabilities and cash. We achieved our coverage commitment in relation to self-managed superannuation funds, lost members register and superannuation guarantee complaints.
TABLE 2.6.7: Output 4 – Compliance challenges, 2007–08
Issue |
Activity |
Employee complaints about the superannuation guarantee |
Additional funding increased our capacity to follow up employee complaints about employers who fail to pay the superannuation guarantee. |
Self-managed superannuation funds |
The additional funding increased our existing audit coverage from 1,000 cases to 3,600 cases. |
Surcharge exceptions and please quote TFN |
Additional funding allowed us to:
|
Lost members register |
We used additional funding to write to people on the lost members register to reunite them with their superannuation contributions. |
Serious non-compliance
There were seven serious evasion or fraud activities in relation to Output 4:
- 7 investigations completed
- 5 briefs of evidence provided to the Commonwealth Director of Public Prosecutions.
Prosecutions
TABLE 2.6.1: Output 4 – Compliance assurance and support for transfers and regulation of superannuation funds, 2007–08 continued
Quality and quantity measures | |
Measure |
Performance |
Active compliance products |
Prosecutions We successfully prosecuted 154 cases from a total of 197 taken to court. The 154 successful prosecutions related to non-lodgment and failure-to-comply tax offences and a serious non-compliance matter. This included 148 successful prosecutions from 185 cases handled in-house, and 6 successful prosecutions from 12 cases referred to the CDPP. |
Output 4 reporting on specific legislation
Excise
Fuel tax credits
In 2008 we worked with tax professionals, bookkeepers, industry representatives and other intermediaries to prepare their clients and members for expansion of entitlement to fuel tax credits from 1 July 2008. During 2007–08, we made fuel tax credits totalling $4.6 billion to 172,538 claimants. Special transitional arrangements, known as early payments, enabled 3,695 of the eligible businesses to access fuel tax credits in advance of their activity statement lodgment cycle. The total amount paid via these special transitional arrangements in 2007–08 was $493 million.
During 2007–08, 421 penalties totalling $1,045,391 were imposed on fuel tax credit claimants.
Energy grants (credits) scheme
Eligibility for diesel fuel under this scheme ceased on 30 June 2006 as a result of the introduction of fuel tax credits, although we accepted claims for outstanding entitlements until 30 June 2007. The energy grants credits scheme will continue for eligible alternative fuels until 1 July 2010. However, the amount of the grant will reduce to zero in five equal annual steps, starting on 1 July 2006 and ending on 30 June 2010. We issued no determinations under section 9 of the Energy Grants (Credits) Scheme Act 2003 during 2007–08.
During 2007–08 we paid energy grants credits scheme payments totalling $5.6 million to 166 claimants using eligible alternative fuels.
Product stewardship for oil program
The product stewardship for oil program came into effect on 1 January 2001. The program supports and encourages sustainable environment management where a benefit can be received for recycling used oil. The ATO administers the program for the Department of Environment, Water, Heritage and the Arts. In 2007–08, we received 695 claims from 82 taxpayers under the program and made payments of $36 million.
The program is funded by the collection of a levy applied to all petroleum-based oils produced or imported into Australia (currently at a rate of $0.05449 per litre, ie $54.49 per 1,000 litres). The total amount of levy collected in 2007–08 was $20.8 million.
Energy grants (cleaner fuels) scheme
The government introduced measures in 2003 to encourage the supply of cleaner fuels to reduce the impact of vehicle emissions on the environment. As part of the measures, from 1 January 2007 a grant of 1 cent a litre became payable for the production of ultra low sulphur diesel containing 10mg/kg or less of sulphur that meets the Australian Diesel Standard. The grant is payable until 31 December 2008. From 1 January 2008, eligibility for a grant for the production of premium ultra low sulphur petrol ceased.
During 2007–08 payments totalling $116 million were made to 38 claimants.
Snapshot: Fuel tax credits
From 1 July 2006 fuel tax credits allowed businesses in certain industries or engaged in certain activities to reduce their business fuel costs by claiming back some or all of the fuel tax paid in the price of fuel.
Eligibility for fuel tax credits was expanded from 1 July 2008, allowing many businesses to claim a fuel tax credit for the first time and giving many existing claimants an additional entitlement. The ATO partnered with a diverse range of intermediaries, including the retail industry, other federal and state government agencies and the insurance industry to distribute hundreds of thousands of fuel tax credit brochures at point of sale or with their direct mailouts. We emailed 79,300 businesses telling them about the expansion and received a positive response.
To make it easier to register for fuel tax credits, businesses can use the interactive voice recognition system available 24 hours a day, seven days a week. All they need is their Australian business number (ABN) and the business tax file number. New businesses can register when they apply for their ABN and register for GST on the Australian Business Register.
To check their entitlement businesses can use the electronic fuel tax credit eligibility tool on our website. Once registered, each business gets a fuel tax credit guide. They can claim on their next business activity statement and use the fuel tax credit calculator.
Superannuation co-contribution
The Superannuation (Government Co-contribution for Low Income Earners) Act 2003 was originally limited to employees. The Better Super measures have extended superannuation co-contribution benefits to self-employed individuals from 1 July 2007.
The superannuation co-contribution matches eligible personal contributions with a co-contribution of up to $1.50 for every $1 contributed. The maximum payment is $1,500 and is available to individuals whose total income is less than $28,980. The amount tapers off for those with total income up to a maximum of $58,980. These thresholds applied for the 2007–08 year and are indexed annually to average wage rises.
For 2007–08, 1.4 million individuals were entitled to $1.2 billion of superannuation co-contribution entitlements.
Superannuation guarantee
The Superannuation Guarantee (Administration) Act 1992 requires employers to contribute 9% of their employees’ ordinary time earnings to a complying superannuation fund. Ordinary time earnings comprise remuneration earned in an employee’s normal working hours.
In 2004 legislation was passed adopting ordinary time earnings as defined in the Act as the earnings base for superannuation guarantee purposes. The change became mandatory on 1 July 2008. The notional earnings base has been simplified to ensure all employees are treated consistently for superannuation guarantee purposes.
Amendments made by the Corporations Amendment (Insolvency) Act 2007 mean that from 31 December 2007 unpaid superannuation contributions and superannuation guarantee charge rank equally with employee entitlements, such as unpaid wages and annual leave, when winding up a business. We will monitor the effect of these changes on superannuation collections.
To ensure that they meet their obligations, we check employer records. And we investigate employee complaints, referrals and insolvencies in relation to choice of fund and superannuation guarantee contributions. This year we looked at more than 20,000 complaints and raised $381 million in superannuation entitlements for around 210,000 employees.
From 24 June 2008 late payments made at any time by an employer to a superannuation fund can be offset against the employer’s superannuation
guarantee charge liability. This change removes the risk of employers paying superannuation contributions once to a fund and again as a superannuation guarantee charge statement. Late contributions are not deductible.
Various tools on our website assist employers to meet their superannuation guarantee obligations, in particular the employee/contractor decision tool, superannuation guarantee contributions calculator, and the superannuation guarantee eligibility decision tool.
Another web-based calculator will help employees prepare and submit a query about whether adequate superannuation has been paid by their employer.
In 2007–08, we implemented new arrangements to provide employees with more information about their unpaid superannuation. Previously, secrecy provisions prohibited us from providing information about an investigation into unpaid superannuation. We now provide regular updates to employees who have lodged a complaint. There has been an increase of about 55% in cases requiring investigation. The investigation process is explained on our website at Quicklinks.
Information about choice of superannuation fund is available through publications, our website and the superannuation enquiries line on 13 10 20.
For the first two years we helped employers understand and adapt to their choice-of-fund obligations. During this period we did not generally penalise an employer who demonstrated a genuine attempt to comply. In 2007–08, 330 superannuation guarantee assessments included a penalty for not complying with choice-of-fund obligations. These penalties went to the superannuation accounts of the employees entitled to the superannuation guarantee.
Table 2.6.8 shows superannuation guarantee compliance results from 2004–05 to 2007–08.
TABLE 2.6.8: Superannuation guarantee compliance results, 2004–05 to 2007–08
Self-managed superannuation funds
Our supervisory role for self-managed superannuation funds flows from the Superannuation Industry (Supervision) Act 1993 and associated regulations. With a few exceptions, a superannuation fund is a self-managed superannuation fund if:
- it has four or fewer members
- no member of the fund is an employee of another member of the fund, unless they are related
- each member of the fund is a trustee or director of the corporate trustee
- no trustee of the fund receives any remuneration for their services as a trustee.
Participants in the system include trustees, auditors and tax agents. Trustee details are registered in the system when the entity registers and elects to be regulated by the ATO as a self-managed superannuation fund. Tax agents or accountants may be involved in preparing income tax and regulatory returns and may also perform the role of an approved auditor. Approved auditors have an obligation, based on their professional judgment, to report certain regulatory breaches to the ATO through auditor contravention reports.
There are about 390,000 self-managed superannuation funds and the number is growing at the rate of about 2,600 a month. Almost 750,000 Australians are now members of a self-managed superannuation fund. This year our compliance officers conducted more than 11,000 reviews or audits of these funds. They focused on new registrants, follow ups of auditor contravention reports, and issues such as loans to members and transactions involving in-house assets.
There were 33,264 self-managed superannuation fund registrations for the period 1 July 2007 to 30 June 2008, compared to 46,051 registrations for the same period last year, a decrease of 27.7%.
A number of key measures relating to self-managed superannuation funds were announced as part of the Better Super changes. The measures were intended to improve the operation and regulation of funds and ensure trustees comply with their legislative obligations. We have continued to work closely with industry and other government agencies to implement the changes.
The Australian National Audit Office audited our administration of self-managed superannuation funds and they tabled the second of two reports in Parliament on 1 November 2007. We accepted all six recommendations. The report supported our overall compliance direction in administering these funds.
Supervisory levy
The Superannuation (Self-managed Superannuation Funds) Taxation Act 1987 specifies that trustees of self-managed superannuation funds pay an annual supervisory levy to the ATO when they lodge their return. This levy becomes part of consolidated revenue and recovers the broad costs of regulating self-managed superannuation funds. On 1 July 2007 this levy increased from $45 to $150 a year.
In 2007–08, we collected $18.5 million in levy payments. We incurred total costs of $69 million in administering self-managed superannuation funds, with 9% of this amount spent on operational activities and 91% spent on compliance activities.
Lost members register
The Superannuation (Unclaimed Money and Lost Members) Act 1999 requires superannuation funds to report to the ATO twice a year on the details of member accounts that meet the definition of lost member. The information is retained in a register of accounts called the lost members register. Money in a lost member’s account remains with the superannuation fund and is invested according to their rules.
We use three tools to help reunite individuals with their lost superannuation:
- ‘SuperSeeker’ allows individuals to access the lost members register online or through a self-help phone service 24 hours a day, 7 days a week
- ‘SuperMatch’ is a bulk-matching facility that provides tax and superannuation professionals with electronic access to the lost members register
- the superannuation enquiry line provides information and assists individuals with enquiries about the lost members register.
To help individuals find their lost superannuation, in 2007–08 we sent 2.2 million letters to members (covering 3.2 million accounts) and reviewed 291,600 accounts by phone with members. As a result we removed accounts worth $1.36 billion from the register.
The lost members register continues to grow, from $11.9 billion on 30 June 2007 to $12.9 billion on 30 June 2008, an increase of 8.4%. The total number of lost member accounts has increased by 315,325 or 5.2%, from 6.1 million accounts on 30 June 2007 to 6.4 million accounts at 30 June 2008. The growth in the total value of the register is due to a number of factors, including larger account balances reported by funds, improvements in lodgment compliance and more accurate reporting.
We completed 54 audits of large and small to medium funds to check the accuracy of their reporting of lost members. One audit of a large administrator covering nine funds found systemic deficiencies in their reporting software. This resulted in the accounts of 631 members, with an associated value of $98 million, being removed from the lost members register.
Departing Australia superannuation payments
Temporary residents who depart Australia can choose to be paid their accumulated superannuation benefits, subject to the appropriate tax being withheld. We administer departing Australia superannuation payments in line with the provisions of the Superannuation Industry (Supervision) Regulations 1994.
Temporary residents can apply directly to their superannuation provider for departing Australia superannuation payments – or to the ATO if they have a superannuation holding account special account. They can also apply online from anywhere in the world, 24 hours a day, seven days a week. The website is linked to Department of Immigration and Citizenship systems, meaning applicants can establish their immigration status immediately and free of charge.
We conduct marketing and education activities informing temporary residents they can recoup their superannuation benefits. We deliver this message mainly through the outgoing passenger card completed on departing Australia.
Superannuation holding accounts special account
The superannuation holding accounts special account, established under the Small Superannuation Accounts Act 1995, was closed to employer superannuation deposits on 30 June 2006. However, the special account still contains individual accounts where a holder has not yet transferred their money to a superannuation fund or retirement savings account. Also, as a last resort, we may deposit unclaimed superannuation guarantee charge amounts and unclaimed superannuation co-contribution amounts to the special account when we cannot identify a superannuation account for an individual.
The special account does not operate as a superannuation fund, and payment of interest is subject to certain conditions – interest is payable on the first $1,200 of each account balance after we recover a fair approximation of the costs we incurred. As in previous years, costs and carried-forward losses exceeded interest payable, so interest was not payable on special accounts during 2007–08.
To encourage individual special account holders to transfer their account to a complying superannuation fund or retirement savings account, in 2007–08 we:
- issued around 60,600 statements to special account holders about their account balances
- worked with superannuation funds to facilitate transfers of superannuation holding accounts special account balances
- promoted our ‘SuperMatch’ and ‘SuperSeeker’ products that allow funds, retirement savings account providers and individuals to locate superannuation monies held in the special account.
We continued to transfer inactive special accounts to consolidated revenue and record them on the lost members register. An inactive account is one where there has been no activity for 10 consecutive financial years. Transferred monies can still be claimed if proof of identity is established.
Table 2.6.9 shows changes to the special account from 2004–05 to 2007–08.
TABLE 2.6.9: Changes in the special account, 2004–05 to 2007–08
Unclaimed superannuation monies
The Superannuation (Unclaimed Money and Lost Members) Act 1999 requires superannuation funds to report and pay unclaimed superannuation to the ATO twice a year. Before 1 July 2007, the ATO administered unclaimed superannuation payments from Australian Government superannuation funds. However, from 1 July 2007, private sector superannuation funds must also report and pay unclaimed superannuation to the ATO, rather than to the relevant state and territory authorities. State and territory government superannuation schemes may be required to report and pay unclaimed superannuation to the ATO, subject to relevant state and territory law. The unclaimed superannuation amount is held as administered revenue, pending payment to claimants.
Individuals can contact the ATO to search for lost and unclaimed superannuation monies. On 30 June 2008 the ATO held $7.1 million in unclaimed superannuation monies, in relation to 5,900 unclaimed superannuation accounts.
Bilateral social security agreements
Australia has bilateral social security agreements with a number of countries to address the issue of double superannuation coverage. The ATO issues certificates of coverage to Australian employees when their employer sends them to work in a country that has an agreement with Australia. The certificate exempts employers from providing superannuation (or equivalent) in the country to which their employee is seconded, as long as the employer continues to pay the equivalent of superannuation guarantee support in the employee’s home country.
Australia signed administrative arrangements for the implementation of social security agreements with four other countries during the year. On two occasions the Commissioner delegated his power to sign administrative arrangements to officers from the Department of Foreign Affairs and Trade; on another occasion he delegated his power to an officer from the Department of Families, Housing, Community Services and Indigenous Affairs.
We issued 774 certificates of coverage in 2007–08 for employees seconded to work overseas. Other countries have reported they issued 815 certificates in 2007–08 to employees coming to work in Australia.
Reasonable benefit limits
The intent of the reasonable benefit limit system was to limit the amount of superannuation and similar benefits that could be concessionally taxed. The limits were abolished from 1 July 2007 as part of Better Super.
The ATO continued to process reported benefits as employers and funds finalised their reporting obligations. In 2007–08, we processed about 566,378 benefits, with 26,008 of these benefits exceeding the reasonable benefit limit for 18,801 taxpayers.
Superannuation contributions and termination payments surcharge
Surcharge arrangements operated under the provisions of the Superannuation Contributions Tax (Assessment and Collection) Act 1997, the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 and the Termination Payments Tax (Assessment and Collection) Act 1997 and associated Acts. Amendments enacted in 2005 abolished the superannuation surcharge, making it no longer payable on contributions made after 30 June 2005 or on certain employer termination payments received after that date.
During the year there was a downturn in the total number of surcharge assessments processed on contributions made before 1 July 2005. This was expected as the number of fund members with surcharge liabilities will diminish over time. However, funds will continue to report through member contribution statements and we will need to maintain our capability to administer the law for pre-30 June 2005 contributions.
In order to do this we will have to maintain debt accounts for members of constitutionally protected superannuation funds and continue to provide members with annual account statements and interest applied for that year. Our commitment will continue well into the future as the final surcharge liability for these fund members is not determined or payable until a fund lodges a member-exit statement. We then issue a notice of final liability to the member.
Unfunded defined benefit funds are responsible for maintaining debt accounts for members. They will need to continue to notify members annually of any outstanding surcharge debt, including interest applied for that year. Superannuation funds withhold the final debt account balance from a member’s exit payment and remit it to the ATO.
Snapshot: Better Super
The majority of the changes related to Better Super came into effect on 1 July 2007. Throughout 2007–2008 the ATO focused on putting in place the administrative processes for the new regime and on engaging with key stakeholders to ensure they were familiar with the new arrangements.
We delivered a large-scale communication campaign that included a range of fact sheets, guides and other education material, as well as online calculators to assist compliance with specific aspects of the superannuation reforms. New calculators included an employment termination payment calculator for employers and other calculators to assist superannuation funds, particularly with their obligations during the transitional period. We finalised responses to some 600 requests for guidance (from straightforward to complex) from key stakeholders, including superannuation funds, fund administrators, and software developers.
A major effort was required to improve the level of quotation of member tax file numbers (TFNs) for superannuation accounts. This included data matching member contribution details provided by funds, and an associated mailout to people identified as having an account without a TFN. The result is that almost 94% of active superannuation accounts now have a correct TFN, compared with about 77% two years ago.
2.7 Output 5 - Services to government and agencies
Output 5 covers the range of services we provide to the Treasurer, Assistant Treasurer, Minister for Superannuation and Corporate Law, Treasury, Parliament, Australian Government agencies, external scrutineers and state and territory governments.
We work collaboratively with other agencies to deliver whole-of-government initiatives and to contribute to the outcomes of those agencies. For example, the intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations also outlines commitments we have to the states and territories in relation to GST. To achieve these outcomes we provide information and use memorandums of understanding and a range of cross-agency support services.
This output also covers:
- our complaints-handling procedures
- services provided by the Australian Valuation Office (AVO), which operates on a full cost-recovery basis
- the role of Registrar of the Australian Business Register.
Highlights
We focus on improving services to the community through our close working relationships with other agencies. This includes:
- sharing information, for example with Centrelink, Medicare, the Child Support Agency and the Australian Bureau of Statistics
- working with other agencies, for example in Project Wickenby
- enhancing data matching and information sharing with state and federal government agencies.
We supported a number of whole-of-government initiatives, including the key role we played in relation to the standard business reporting initiative.
We continued to maintain good working relationships with Treasury, Ministers’ offices and external scrutineers, including the Australian National Audit Office, Ombudsman and Inspector-General of Taxation.
Supporting whole-of-government activities continued to be a priority for the ATO in 2007–08. We contribute to the whole-of-government agenda with regard to taxation, superannuation and the Australian Business Register (ABR).
Key achievements in 2007–08 include:
- helping to develop a ‘taxonomy’ for standard business reporting, working with software developers to automatically pre-fill regulatory forms; and working to establish a usable and secure way to do business with participating agencies
- participating in the Australian Government Online Service Point to help to offer easier access to more integrated services, in line with the eGovernment Strategy
- taking part in a number of whole-of-government working parties and reviews, including Sir Peter Gershon’s review of ICT services across the Australian Government.
Significant factors influencing performance against Output 5
This year we implemented new corporate procedures for the development and management of memorandums of understanding with other agencies. This will contribute to better governance of the services that agencies provide to one another. And further to the April 2008 PricewaterhouseCoopers review of our information security practices, we are placing more emphasis on information security.
We experienced a reduced volume of parliamentary work during the period of the federal election and proroguing of Parliament.
After the election, the Joint Committee of Public Accounts and Audit asked the Commissioner to continue his twice-yearly appearances before it.
Relationships with scrutineers continued to be sound. The ATO continued to provide a considerable amount of information to assist the Inspector-General of Taxation, the Ombudsman and the Australian National Audit Office. We continued our emphasis on a timely implementation of their recommendations.
Output 5 performance
TABLE 2.7.1: Output 5 – Services to government and agencies, 2007–08
Quality and quantity measures | |
Measure |
Performance |
Required volume of services delivered for cross-agency support |
We have 134 memorandums of understanding in place with other federal, state, territory and local government agencies. Eighty of these concern the provision of information from the Australian Business Register. |
Number of Centrelink valuations completed |
The Australian Valuation Office (AVO) undertook about 74,000 valuations for Centrelink in 2007–08. The AVO continued to keep pace with Centrelink’s increased demand for valuation services, to specifications agreed to under our service contract. |
AVO level of net operating profit – ongoing performance against budget |
The AVO’s net operating profit for 2007–08 was $4.497m against a budgeted net operating profit of $1.679m. The increase in net operating profit is a result of Centrelink’s increased demand and productivity improvements. |
Cross-agency support
Memorandums of understanding renewed in 2007–08 include those with the:
- Australian Customs Service, for cooperation in administration of GST, luxury car tax, wine equalisation tax and excise legislation applicable to the import and export of goods
- Australian Crime Commission, to establish a framework for cooperation and joint activities in respect of the statutory functions of each party
- Department of Immigration and Citizenship, for exchange of data to monitor the compliance of sponsors (employers) with sponsorship obligations
- Child Support Agency, to establish common provisions for future subsidiary agreements between the two agencies.
Required volume of services delivered for ministerial and parliamentary services |
We provided:
|
Ministerial and parliamentary services
We received 998 pieces of ministerial correspondence. The most significant subjects were superannuation and debt-related issues.
We continued to perform well in providing timely responses to ministerial correspondence, achieving an increased turnaround of 99% to ministerial offices by the due date.
Client satisfaction – number and per cent of work completed for Centrelink within agreed timeframes |
The AVO met agreed client-satisfaction benchmarks for Centrelink. We negotiated some variations to the standard benchmarks due to significant peaks in demand early in 2007–08. |
Cross-agency support delivered to agreed standard and timelines |
We delivered cross-agency support according to the terms and standards agreed through our memorandums of understanding with government agencies. In 2007–08, we enhanced our corporate framework and policies for the development and management of memorandums of understanding. |
Ministerial and parliamentary services delivered to agreed standard and timelines |
Regular informal contact with Ministers’ offices indicates that they are generally satisfied with our day-to-day services. Informal feedback from the Ministers’ offices indicates that the quality of information we provide has generally been satisfactory. |
Output 5 other
Australian Valuation Office
The Australian Valuation Office (AVO) is our only commercial business line. We position it as the government’s preferred valuer. And we maintain customer support by providing the highest standard in customer and valuation services.
We have a transformation program to develop contemporary valuation products and policy advice and to improve our business processes. We are maximising the use of advanced mapping and related information systems, including scoping for a valuation knowledge management system. We invest in the professional and personal development of our employees by delivering quality training and professional development programs.
The AVO is in the process of aligning its operations with the broader ATO governance framework to enhance assurance and integrity arrangements.
Support for other agencies
Tax Agents’ Boards
The registration of tax agents is administered through six state boards that are independent of each other and of the Commissioner. However, we strongly support the boards by providing administrative assistance and specialist staff to ensure they are adequately resourced to carry out their important role.
We have provided additional staff in recent years to increase our level of support. We have also worked with the boards to introduce national approaches to registration and complaints processes.
We have referred some 149 agents to the various boards, resulting in:
- 13 cancellations of registration
- 3 suspensions.
With representatives from the boards and with Treasury we are developing administrative options to support the proposed new national Tax Practitioners Board provided for in the draft Tax Agent Services Bill.
External agencies
We work closely with other government agencies to improve services to the community, entering into memorandums of understanding and providing data where appropriate. In some instances we take a leadership role, while in others we support the work of other agencies.
This year the ATO:
- assisted the Child Support Agency by contacting 125,095 clients to obtain lodgment of 94,839 tax returns. This resulted in the collection of $19.7 million in outstanding child support
- worked with Centrelink and the Family Assistance Office to administer the 30% child care tax rebate
- jointly administered the Research and Development Tax Concession Program, Pooled Development Funds Program, and Venture Capital Limited Partnerships Program with AusIndustry
- worked with the Department of Families, Housing, Community Services and Indigenous Affairs to administer the family tax benefit. Claims for benefit in
2007–08 are the last to be made through the tax system. Future claims will be made through the Family Assistance Office - worked with the Department of Health and Ageing to administer the private health insurance rebate
- transferred data to the Australian Bureau of Statistics under a formal governance framework established by a memorandum of understanding and responded to requests within agreed timeframes
- administered the ‘product stewardship for oil program’ on behalf of the Department of Environment, Water, Heritage and the Arts
- assisted the Department of Immigration and Citizenship to manage the temporary skilled migration visa category program (457 visas). The role of the ATO is to verify that participating employers referred to the ATO are fully compliant with their employment-related tax obligations
- administered superannuation payments to temporary residents departing Australia. Our website is linked to Department of Immigration and Citizenship systems, meaning that applicants can establish their immigration status immediately, free of charge, 24 hours a day, seven days a week.
Providing information to law enforcement agencies
Under Section 3E of the Taxation Administration Act 1953 the Commissioner may disclose information acquired under the provisions of a tax law to an authorised law enforcement agency officer, or to an authorised royal commission officer. However, the Commissioner must be satisfied that the information is relevant to establishing whether a serious offence has been or is being committed, or to the making, or proposed making, of a proceeds-of-crime order.
Information provided under the legislation can be used for investigative purposes, but not as evidence in a court for non-tax prosecutions (except in relation to proceeds-of-crime order proceedings).
During 2007–08 we received 917 requests, up from 868 received during 2006–07. We processed 984 requests and disclosed in 938 requests. These cases involved the affairs of individual and corporate entities. We carried over 110 requests from last year. We had a total of 48 requests on hand at 30 June 2008.
Requesting agencies withdrew 12 requests. And we rejected, or assessed as not being a 3E request, another 34. We initiated five disclosures to agencies.
We received no request from, nor did we make any disclosures to, any royal commission in the period.
Table 2.7.2 shows the general categories of offence for 2007–08, while table 2.7.3 shows requests from agencies and ATO initiated disclosures.
TABLE 2.7.2: General categories of offence, 2007–08(a)
TABLE 2.7.3: Requesting agencies and ATO-initiated disclosures, 2007–08
Providing information to prescribed taskforces
Project Wickenby
In 2006–07, the Tax Laws Amendment (2007 Measures No. 1) Bill 2007 inserted section 3G into the Taxation Administration Act 1953. Section 3G allows the disclosure of taxpayer information to Project Wickenby taskforce officers where the information is relevant to the taskforce’s purpose. Table 2.7.4 indicates both the number of requests to disclose documents under section 3G received and the number of occasions we disclosed documents under that section in 2007–08.
TABLE 2.7.4: Project Wickenby requests and disclosures, 2007–08
Other prescribed taskforces
In 2006–07, the Taxation Administration Act 1953 was amended to insert section 3H. This section permits the disclosure of taxpayer information to officers in other taskforces that may be established to protect the public finances of Australia. The Governor-General may, by regulation under section 18 of the Taxation Administration Act 1953, prescribe a prescribed taskforce. However, no such taskforces were prescribed during 2007–08.
Australian Security Intelligence Organisation access to tax information
Section 3EA of the Taxation Administration Act 1953 authorises the release of taxpayer information to the Australian Security Intelligence Organisation (ASIO). These powers are available only where the information provided is directly relevant to ASIO functions under subsection 17(1) of the Australian Security Intelligence Organisation Act 1979.
ASIO did not request any tax information under section 3EA of the Taxation Administration Act 1953 during 2007–08.
External scrutiny
Commonwealth Ombudsman
The Ombudsman Act 1976 allows the Commonwealth Ombudsman to investigate taxpayer complaints, conduct ‘own motion’ investigations and report on any complaints received.
Investigations for taxpayers
In 2007–08 the Commonwealth Ombudsman referred 146 investigations to the ATO, compared to 154 investigations last year.
The lower number of referrals for investigation is attributable mainly to an assisted-transfer process where complainants are directed to approach the ATO before the Ombudsman investigates.
In 2007–08 the Commonwealth Ombudsman made a finding of administrative deficiency in six cases compared to eight last year.
Own motion investigations and other reviews
The Ombudsman’s Office revised their program of project work in 2007–08. Three projects were underway at the end of the year:
- administration of superannuation guarantee
- an investigation into ATO practices and procedures for re-raising written-off tax debts
- a cross-agency investigation into administration of the Compensation for Detriment from Defective Administration Scheme.
In 2008 the Commonwealth Ombudsman expects to finalise his review of the administration aspects of the superannuation guarantee.
The reports are summarised in appendix 5 and include:
- a case study on research and development syndicates (released by Minister, 16 August 2007)
- potential revenue bias in private binding rulings involving large complex matters (released by Minister, 25 February 2008)
- implementation of agreed recommendations included in previous Inspector-General reports (released by Minister, 5 March 2008)
- review of the ATO’s administration of GST audits for large taxpayers (released by Minister, 11 June 2008).
At 30 June 2008 the following Inspector-General reviews were in progress:
- fourth report on the ATO’s ability to identify and deal with major complex issues within reasonable timeframes
- review of the underlying causes and management of objections to our decisions
- review into the ATO’s administration of public binding advice
- review of aspects of our settlement of active compliance activities
- review of non-lodgment of income tax returns.
Australian National Audit Office
The ANAO conducts financial, performance and business support process audits on the ATO.
During 2007–08 the ANAO tabled eight performance audit reports specific to the ATO. This included two follow-up audits. In addition, the ATO was involved in one cross-agency audit and had limited involvement in a performance audit involving the Department of Treasury. The audits, which are summarised in appendix 5 of this annual report, were:
- Audit Report No.12: ‘Performance audit: Administration of high-risk income tax refunds in the individuals and micro enterprises market segments’
- Audit Report No. 13: ‘Performance audit: The Australian Taxation Office’s approach to managing self-managed superannuation funds compliance risk’
- Audit Report No. 15: ‘Performance audit: Administration of Australian Business Number Registrations follow-up audit’
- Audit Report No. 30: ‘Performance audit: The Australian Taxation Office’s use of data matching and analytics in tax administration’
- Audit Report No. 31: ‘Performance audit: Management of recruitment in the Australian Public Service – cross agency’
- Audit Report No. 32: ‘Performance audit: The preparation of tax expenditures statement – Department of Treasury, with limited Tax Office involvement’
- Audit Report No. 36: ‘Performance audit: The Australian Taxation Office’s strategies to address tax haven compliance risks’
- Audit Report No. 40: ‘Performance audit: The Australian Taxation Office’s Taxpayers’ Charter follow-up audit’.
At 30 June 2008 the following ANAO audits relating to the ATO were in progress:
- Business continuity management in the ATO
- ATO’s assessment of benefits realisation relating to the change program.
Privacy Commissioner
In 2007–08 the Office of the Privacy Commissioner assisted us to determine the best way to conduct certain activities and publicised protocols for our data matching activities in compliance with the Use of data matching in Commonwealth administration guidelines (February 1998). The Privacy Commissioner confirmed that it was in the public interest to depart from one requirement of the guidelines in relation to the Owner Builders data matching project this year. This departure only related to a longer period for retaining data than provided for under the guidelines.
The Privacy Commissioner notified us of five formal investigations into our actions during the year, with each of these investigations remaining open at 30 June 2008. We were found to have acted consistently with our privacy obligations in the only investigation completed by the Office of the Privacy Commissioner during 2007–08. This formal investigation began in an earlier year.
There are five other formal investigations by the Privacy Commissioner that began in earlier years which remain open at 30 June 2008. We have responded to all requests for information made by the Privacy Commissioner on these matters and await formal notification of the outcome.
Snapshot: Information security
We engaged PricewaterhouseCoopers to conduct an independent review into our information security practices to ensure our procedures are rigorous, up-to-date and reflect changes in work practices as technology evolves.
Overall, PricewaterhouseCoopers found that we are highly conscious of our security obligations. In particular, we were found to have a clear corporate position on information security, sound governance structures, well-defined security classifications and effective education and awareness programs for staff. In addition, PricewaterhouseCoopers identified a number of key strengths in our information security monitoring, including physical checks of work stations and a gateway that monitors sensitive information being sent outside the office.
We will work to implement priority recommendations arising from the review, building on our strong foundation of keeping taxpayer information secure.
Parliamentary committees
Demand for ATO input to parliamentary committee processes remains high.
In addition to our regular appearances at Senate Estimates hearings (following which we responded to 13 questions on notice), we were invited to participate in a range of committee inquiries. These included an appearance in July 2007 before the Joint Committee on the Australian Crime Commission inquiry into the future impact of serious and organised crime on Australian society; and in August 2007 before the Senate Economics inquiry into Private Equity Investment.
We gave evidence and provided submissions to the Joint Committee of Public Accounts and Audit (JCPAA) biannual hearings with the Commissioner of Taxation in September 2007 and April 2008.
For the September 2007 hearing we provided a submission covering some of our compliance program priorities and updated the committee on our performance in 2006–07. In April 2008 we reported on our performance and emerging priorities for 2008–09 and our draft 2008–09 corporate plan.
On 26 June 2008 the JCPAA reported on its ‘Inquiry into a range of taxation issues within Australia’, which began in December 2005. The committee made 18 recommendations for the ATO, Treasury, government and Parliament. Of the 18 recommendations the ATO is preparing a response to the 11 administrative recommendations.
Judicial and other decisions
Litigation
Taxpayers have a range of administrative and legal options available to them where they do not agree with the ATO view on the application of the law to their circumstances.
Sometimes a taxpayer’s challenge to our position provides law clarification, helping the ATO and the community to better understand the law.
In substantive non-debt tax law litigation court decisions, we were successful in 57% of cases this year, while 30% of cases were decided wholly in favour of the taxpayer. The remaining 13% were decided partly in favour of each party.
TABLE 2.7.5: Outcomes of cases resolved by court decisions, 2007–08
In the Administrative Appeals Tribunal and the Small Taxation Claims Tribunal, our decisions were affirmed in 46% of cases, while 25% of cases were decided wholly in favour of the taxpayer and 29% decided partly in favour of each party.
TABLE 2.7.6: Outcome of cases resolved by tribunal decisions, 2007–08
In 2007–08 the Commissioner obtained special leave to appeal to the High Court in four cases. Two cases were decided by the High Court during the year – Reliance Carpet; and Raftland (see appendix 5). In addition, the taxpayer obtained special leave in two cases.
We are also involved in debt-recovery litigation and, like other government departments, may respond to or initiate litigation in a range of commercial or other civil litigation matters.
Table 2.7.7 shows the outcomes of court and tribunal cases that did not proceed to hearing.
TABLE 2.7.7: Outcomes of court and tribunal cases that did not proceed to hearing, 2007–08
Test case litigation program
Under the test case litigation program, we provide financial assistance to taxpayers involved in litigation that we regard as being important to the administration of tax and superannuation systems or that will help clarify the law.
For more information, visit Quicklinks.
While the ATO makes the ultimate decision on test case applications, there is an advisory test case litigation panel which considers applications according to the program’s criteria. It recommends to the chair of the panel whether or not funding is appropriate.
The test case litigation panel consists of members of the accounting and legal professions, as well as senior tax officers. During the year, the external representatives on the panel included a tax barrister, a tax lawyer, a tax accountant and a former judge of the New South Wales Court of Appeal.
This year the panel considered 31 applications, of which:
- 13 were approved for funding (these cases are summarised in appendix 5)
- 17 were declined funding
- 1 was deferred.
The chair accepted the panel’s majority or unanimous recommendations in all cases this year.
There were 23 cases being funded by the test case litigation program at 30 June 2008. Total expenditure for the program this year was $3.2 million.
There were varying reasons why we declined particular applications. Most were cases that would not resolve uncertainty in the law – because it was likely that they would be determined on their facts, having regard to existing legal principles. We declined cases involving alleged tax avoidance, where it could not be said that the public interest would have been better served from funding the case.
Test case decisions
This year 17 cases funded through our test case program received a court decision and three cases received a decision in the Administrative Appeals Tribunal. Appendix 5 contains an outline of the cases.
Significant cases
The Commissioner was a party to a number of significant cases this year, not all of which received funding under the test case program. The most significant court and tribunal decisions are summarised in appendix 5.
Significant developments
On 4 April 2008 the Chief Justice of the Federal Court issued the ‘Notice to Practitioners and Litigants (Taxation) – Tax List Directions’. It is known as the new Federal Court taxation directions and sets out revised arrangements for managing tax litigation in the court.
In response, the ATO has taken a number of initiatives to improve the efficient conduct of our litigation and to ensure our practices enable us to comply with the changed court procedures.
2.8 Australian Business Register
The Australian Business Register (ABR) is an extensive database of business identity information on all Australian business number (ABN) registered entities.
The Commissioner of Taxation is also the Registrar of the ABR. The two roles have separate and distinct responsibilities, with the ultimate goal of the ABR being to make it easier for businesses to deal with all levels of government.
In maintaining the ABR, the Registrar is responsible for:
- registering new ABN applications
- maintaining register integrity by ensuring that records are current and accurate
- providing the community with access to publicly available ABN information to assist in verifying core business identity and taxation registration information, for example, whether an entity is registered for GST
- providing eligible government agencies with access to details of registered ABN holders.
In 2007–08 we continued to support whole-of-government strategies to reduce red tape and make improvements to help business by:
- ensuring ABR data is a reliable and trusted source of information
- providing services that make it easier for business to interact with government
- making it easier for the community to access public business information
- enhancing our delivery of information to government agencies.
Providing a trusted source of information
We continued our data integrity program to build the ABR’s reputation as a trusted source of information, cancelling 177,321 ABNs.
Our ABN post-registration reviews involved contacting a sample of 785 newly-registered businesses to confirm their entitlement to an ABN.
To obtain a measure of the register’s accuracy we conducted our annual survey of ABN holders in March 2008, with positive results. In addition, data quality assurance processes continue to meet quality levels. The Australian Bureau of Statistics helps us measure the quality of this data.
Making it easier for business to interact with government
We assisted business to interact online with government, continuing to review the strategic vision and technical design of the register and looking at ways to position the ABR to meet the future needs of government and the community.
Our work with other agencies aims to reduce red tape and improve services to business. In cross-agency projects we worked with the Department of Innovation, Industry, Science and Research and other agencies to progress the integration of ABN and state business name registration processes. This work is ongoing and will report back to the Council of Australian Governments throughout 2008–09.
We worked with Treasury and the Australian Prudential Regulation Authority to position the ABN as the unique business identifier for government.
Making it easier for the community to access public business information
Anyone can access the online ABR database to confirm information, such as the ABN and GST status of a business.
The ABR has two websites providing information and support to the community: ‘ABN Lookup’ (maintained by the Department of Innovation, Industry, Science and Research for the Registrar); and www.abr.gov.au
We continued to provide updated ABR information via the ‘ABN Lookup’ website and made online improvements to www.abr.gov.au and ABR-related systems, improving navigation and data quality.
In 2007–08 monthly searches of ‘ABN Lookup’ peaked at 11,134,386. There were on average 6,819,356 searches a month to verify details of other businesses, up 9% from the previous year. This shows increased reliance on the data in the ABR.
In July 2007 we launched the online ‘Superfund Lookup’ tool with the Department of Innovation, Industry, Science and Research and the Australian Prudential Regulation Authority. It provides the community with up-to-date information on superannuation funds and has improved search capabilities. It replaces the Register of Complying Super Funds.
We introduced our online ‘ABN eligibility’ tool in January 2008 to allow people to check if they are entitled to an ABN before applying. It can be accessed through both ABR and ATO websites and has been accessed 16,883 times a month on average since its introduction.
Better service to government
Although there has been strong take-up of the ABN by the business community, greater adoption of the ABN and the ABR by government agencies will better progress the whole-of-government intent of the register. The Australian National Audit Office supported this view in their 2007–08 report and recommended ways to progress the ABR as the government’s business register. Our directions are consistent with these recommendations.
The ABR has established partnerships with 79 government agencies and provides them with information according to the law. The ATO is the biggest user of the ABR and ABN. Appendix 13 shows the list of ABR partner agencies as at 30 June 2008. A new quarterly newsletter updates interested agencies on ABR developments, and can be accessed on ABR Help.
This year the ABR piloted online ABR data downloads with the New South Wales Office of State Revenue. This service allows agencies to obtain updates to ABN records online and more frequently and could replace the need for agencies to seek information from their clients. We are looking to expand this service to other agencies.
Australian Business Register performance
TABLE 2.8.1: Australian Business Register performance, 2007–08
Quality and quantity measures | |
Measure |
Performance |
Number of registrations processed |
The Registrar of the ABR issued 597,444 ABNs. The Registrar also facilitated registration transactions on behalf of the Commissioner of Taxation, resulting in:
These registrations are a subset of those included in Table 2.4.1. |
Australian Business Register
ABN registrations decreased 6% compared to 2006–07. Reducing the number of ineligible registrants was a key focus in 2007–08. In January 2008 we introduced a web-based ABN entitlement tool that provides businesses with greater certainty of their entitlement to an ABN.
Number of records maintained |
The Registrar of the ABR processed 4,275,095 updates to the ABR. |
Records maintained
The number of active ABNs on the Australian Business Register increased 5% in 2007–08. The total population is 6,087,516 in 2007–08, compared to 5,775,749 last year. The growth of the active ABN population has slowed compared to the 7% increase in 2006–07.
We cancelled 177,321 ABNs from the register for those individuals, companies and superannuation funds that are no longer eligible to hold an ABN. This reduces the potential for misrepresentation and/or misquotation of ABNs within the community. This workload is on top of the 91,719 cancellations initiated by businesses.
Part 3 – Management and accountability
3.1 Our management arrangements
Our management arrangements include the ATO Executive, sub-plan executives, business and service lines, and various corporate committees and forums.
Under the umbrella of our strategic statement and corporate plan, our business and service lines are currently grouped under six sub-plans.
During 2007–08 the ATO Executive was broadened to better cover people, finance and technology issues.
Bill Gibson was appointed acting Second Commissioner, Easier Cheaper More Personalised, and Information, Communications and Technology Sub-plans in November 2007, after Greg Farr moved to the Department of Defence.
Raelene Vivian was appointed Chief Operating Officer in February 2008, replacing Margaret Crawford, who moved to the Victorian Department of Housing.
Greg Burgoyne was appointed Chief Finance Office in January 2008, and David Diment was appointed First Assistant Commissioner, ATO People, in April 2008, and both joined the executive after Anne Ellison retired in December 2007.
Figure 3.1.1 shows our organisational structure at 30 June 2008.
FIGURE 3.1.1: Our organisational structure at 30 June 2008
FIGURE 3.1.2: Our planning and governance arrangements
Senior management committees
Some of our committees, including the Audit Committee, focus on assuring that our processes and practices conform to legal requirements and expected behaviour and values. Other committees and forums, such as the Plenary Governance Forum, Corporate Design Forum, Whole-of-Government and Security Committees, address issues central to our planning, performance and accountability. Committees such as Public Rulings Panels (which include external experts), Policy Implementation Forum, Priority Technical Issues Committee, and the joint Treasury-ATO Tax Policy Coordination Committee ensure we have a coordinated cross-agency approach to the development and implementation of taxation policy and interpretative advice.
FIGURE 3.1.3: ATO key committees, at 30 June 2008
Role of the ATO Executive
The ATO Executive is responsible for high-level management of the organisation and considers:
- budgeting and planning
- performance and conformity
- corporate policies
- key strategic and business issues.
The monthly Executive meetings are chaired by the Commissioner, who is accountable to government and the Parliament.
TABLE 3.1.1: ATO Executive members and meeting attendance, 2007–08
ATO Executive members |
Meetings eligible to attend |
Meetings attended |
Commissioner (Chair) |
11 |
10 |
Second Commissioner, Compliance |
11 |
11 |
Second Commissioner, Law |
11 |
8 |
Second Commissioner, Easier, Cheaper and More Personalised program |
11 |
10 |
Chief Operating Officer |
11 |
11 |
Chief Finance Officer |
5 |
5 |
First Assistant Commissioner, ATO People |
11 |
9 |
Change Program Steering Committee
Chaired by the Commissioner, the Change Program Steering Committee (CPSC) includes the Second Commissioners, Chief Finance Officer, Chief Operating Officer and First Assistant Commissioner ATO People. The committee sets the direction, outcomes and priorities for our ambitious, transformational change program and for the commitments outlined in our Making it easier to comply publication.
TABLE 3.1.2: Change Program Steering Committee members and meeting attendance, 2007–08
Change Program Steering Committee members |
Meetings eligible to attend |
Meetings attended |
Commissioner (Chair) |
14 |
12 |
Second Commissioner, Compliance |
14 |
13 |
Second Commissioner, Law |
14 |
12 |
Second Commissioner, Easier, Cheaper and More Personalised program |
14 |
13 |
Chief Operating Officer |
14 |
13 |
First Assistant Commissioner, ATO People |
14 |
7 |
The ATO’s change program integration partner, Accenture, and our independent assurer, CapGemini, also attended most meetings.
Audit Committee
The Audit Committee oversees the internal governance and assurance policies used to monitor and evaluate our internal controls. The committee also ensures that recommendations of external scrutineers are implemented, including those of the Australian National Audit Office (ANAO), Inspector-General of Taxation and Commonwealth Ombudsman.
The committee is chaired by the Second Commissioner, Law. It includes two external representatives who bring high-level public sector experience and relevant financial expertise, along with independent advice, and our independent integrity adviser. The ANAO attends meetings to report on their activities and provide technical advice.
TABLE 3.1.3: Audit Committee members and meeting attendance, 2007–08
Audit Committee members |
Meetings eligible to attend |
Meetings attended |
Second Commissioner, Law (Chair) |
7 |
7 |
FAC, ATO Business Solutions |
7 |
7 |
Integrity Adviser, Robin Creyke |
7 |
6 |
Independent member, Wayne Lonergan |
7 |
6 |
Independent member, Peter Kennedy |
7 |
7 |
3.2 Our approach to corporate governance
We take corporate governance seriously. We base our approach on the Australian Public Service values and code of conduct and alignment with our strategic direction and Taxpayers’ Charter.
We benchmarked our strategic planning capability in association with the National Institute of Governance and the results were both positive and informative. They identified communication of our strategic direction to our staff, to support business delivery, as one of our key strengths. We have nevertheless enhanced our capabilities in a number of areas – for example, we now provide more opportunities for conversations with our staff and others about our strategy. This has enabled better management of our portfolio of work and spurred more potential innovative thinking. It has also given us a greater understanding of current environments, better positioning us to be able to respond quickly to future challenges and opportunities.
This year we continued to strengthen assurance processes by improving the rigour of our certificates of assurance. At the same time we adopted a principles-based approach to streamlining corporate policies. We further integrated risk and corporate planning to support our long-term focus.
A culture of integrity
Our integrity framework sets out the behaviours, values and ethics underpinning the policy processes and procedures for our work. In 2007–08 we were awarded the SAI Global Australian Business Excellence Award for Governance recognising our integrity framework.
Robust monitoring and assurance processes assist us to ensure our integrity and identify and address instances where requirements are not being met. In 2007–08 our values and integrity were supported and reinforced by an independent Integrity Adviser and an Integrity Advisory Committee with external members.
We also have fraud prevention and control plans.
Integrity assurance
In 2007, for the third year in a row, the ATO was recognised as leading the Australian Public Service in the prevention of fraud and corruption. We won the Corruption Prevention Network Award, Commonwealth Public Sector category, in recognition of the tools and techniques we use to detect and prevent corruption.
Preventative measures and awareness
We continued to deliver our fraud prevention and ethics program in 2007–08 using the interactive DVD Make the right choice. This presentation comprises a series of professionally acted scenarios covering a range of ethical dilemmas, including conflicts of interest, service procurement, protection of corporate assets and misuse of power.
We deliver Make the right choice to all new employees through our corporate induction program, and encourage all of our staff to participate in a modified version of the program. We supplement this message with:
- a mandatory online e-learning package covering information technology security, information security, fraud awareness, ethics and privacy
- online documents outlining fraud and corruption-control activities and related corporate management practice statements for all employees
- a new fraud awareness communication strategy designed to heighten fraud awareness and highlight our values, to be delivered through articles in our weekly electronic magazine News Extra.
Fraud and corruption control plan
We have adopted a ‘rolling plan’ approach to producing our fraud and corruption control plan under the Commonwealth fraud control guidelines. This enables us to combine a number of plans (or chapters) that collectively address our fraud risks. The 2006–07 two-year planning cycle, which included a number of control tests and analysis reviews, was completed in December 2007. The fraud and corruption control two-year planning cycle for 2008–09 is underway.
CERTIFICATE OF FRAUD MEASURES I certify that on 1 January 2008 the Australian Taxation Office (ATO) started the 2008–09 two-year cycle of fraud risk assessments and fraud and corruption control plan preparation. This cycle and the ATO fraud and corruption control plan will be finalised by 31 December 2009. I also certify that the ATO has in place appropriate fraud detection, prevention, investigation, reporting and data collection procedures and processes that meet the specific needs of the agency and comply with the Commonwealth fraud control guidelines.
Michael D’Ascenzo |
Outcomes of investigations
We investigate or take action on all allegations of fraud and/or serious misconduct made against our employees. We work with other law enforcement agencies where appropriate. In 2007–08 we finalised 238 allegations and substantiated 45 of them. We refer substantiated matters for misconduct action and/or criminal prosecutions.
During 2007–08 three ATO employees and/or former employees were prosecuted and convicted for various offences, including fraud and unauthorised access to taxpayer records.
At 30 June 2008 four matters were with the Commonwealth Director of Public Prosecutions (CDPP) or before the courts. These matters include one case of fraud against the tax system. The person will be sentenced later in 2008.
We have a large workforce and a comprehensive plan and processes to control fraud and corruption. The low number of substantiated matters therefore reflects the strong integrity and ethics of our culture.
In 1999–00, together with the Australian Federal Police, we investigated misuse of our private binding rulings. This led to a former senior tax officer being charged with a number of offences. In December 2007 a jury found the former senior officer guilty. On 20 June 2008 he was sentenced to three years and two months in jail for these offences.
Figure 3.2.1 describes the internal fraud and corruption detection and prevention framework operating in the ATO.
FIGURE 3.2.1: Internal fraud and corruption detection and prevention framework in the ATO
Security
During 2007–08 we continued to implement appropriate security policies and procedures and monitored our compliance with the Australian Government Protective Security Manual.
We monitor compliance with security standards through a national program of security reviews, which cover physical, information, contractor, working at home and close of business security. Our assurance activities are to ensure adherence to government standards for protection of information and resources.
Every employee must complete a security, fraud and privacy e-learning program as part of their induction, followed by a more advanced program of security essentials. Programs are mandatory and compliance is monitored.
This year we finalised a review of our security risk management program. The program is designed to identify, assess and treat corporate security risks.
We also had PricewaterhouseCoopers review our information security.
Our financial performance
Our financial management
ATO finances are managed in accordance with the Financial Management and Accountability Act 1997, relevant policy statements from the Department of Finance and Deregulation and the relevant tax legislation. Achieving a high degree of integrity in our financial affairs is a major organisational focus. We seek to do this through an effective policy framework, risk-based control structures and a strong culture of accountability.
All entities in the general government sector report annually to their portfolio minister on their financial management and financial sustainability. Preparation of the ATO certificate of compliance is facilitated by assurances gathered under our financial assurance framework. The framework provides information on the design and operation of key controls in place to ensure financial integrity.
We also have delegation structures that support the operation of both the Financial Management and Accountability Act and tax legislation.
The scale and complexity of our financial reporting are reflected in our requirement to prepare financial statements that give a true and fair representation of the financial position and performance of the ATO – both as a department (financial statements) and also as administrator of the tax and superannuation revenue, expenses, assets and liabilities administered on behalf of government (administered schedules).
As a result of the importance we place on our financial management, our 2007–08 financial statements continue to be unqualified.
The following commentary relates to the financial management of the ATO and how we use our operating expenditure and capital budgets. Information on how we performed in administering the tax and superannuation revenue, expenses, assets and liabilities administered on behalf of government can be found in part 2 of this report.
The ATO began 2007–08 with an operating budget of $2,849.6 million. Over 2007–08 our operating budget increased by $31.3 million as a result of additional government funding, but was reduced by $12.7 million as a result of a one-off pro rata efficiency dividend which was applied to all agencies; and by $7.67 million as a result of some changes made to the scope of a marketing campaign associated with changes to fuel tax.
Of the additional funding we received in 2007–08:
- $10.0 million was agreed as part of the Mid Year Fiscal Outlook (MYEFO) to implement arrangements for the payment of temporary residents’ superannuation to the Australian Government.
- $11.4 million was agreed at Additional Estimates to implement the cross-agency Standard Business Reporting measure which will reduce the reporting burden on business in a coordinated and consistent manner.
- An additional $4.1 million was also received at Additional Estimates for Review of Self Assessment (RoSA) and $3.2 million for marketing and education activities associated with implementation of the Better Super measure.
- A further $2.6 million was received as part of the 2008–09 budget to commence implementation of the First Home Savers Accounts measure.
- We also received $13.3 million of additional revenue from other sources
over 2007–08.
As a result of financial pressures that we experienced during 2007–08 we sought and gained approval from the Minister for Finance and Deregulation to operate at a loss of up to $60 million.
Two key factors influenced our final 2007–08 operating loss. Labour costs were higher than budgeted, mainly as a result of the staffing levels we maintained over 2007–08 to manage higher overall workloads across the office and the financial impacts of our ongoing change agenda.
Our final full-year operating expenditure budget for 2007–08 was $2,873.9 million and our operating expenditure for 2007–08 totalled $3,000.8 million. The final operating loss was $127.0 million (before income tax) which represents a 4.4% overspend against our operating budget.
The other factor was a number of asset-related adjustments associated with our change program. Given intervening events and a rescheduling of delivery dates we reviewed the treatment of financial costs associated with the program which had been based on the original plan. We have made adjustments in our financial statements in accordance with accounting standards to include a reduction in the carrying value of assets on our balance sheet as well as the reclassification of some asset-related expenditure. However this accounting adjustment did not impact on our cash position.
How we spend our operating budget
We operate through six sub-plans:
- Compliance
- Easier, Cheaper and More Personalised
- Information Technology
- Law
- Operations, and
- People and Place.
Figure 3.2.2 shows how we allocated expenses between these sub-plans in 2007–08 compared to 2006–07.
FIGURE 3.2.2: Our expenses, by sub-plan, 2006–07 to 2007–08, by percentage
In 2007–08 employee and related costs made up around 63% of our total expenditure. The significant proportion of our expenditure related to employee costs, reflecting our position as a large, people and technology based organisation.
Figure 3.2.3 shows a breakdown of the broad activities undertaken by our employees in 2007–08.
FIGURE 3.2.3: Breakdown of work done by our average actual full-time equivalent employees, 2006–07 to 2007–08, by percentage
Other major categories of expenditure in 2007–08 were technology costs, accounting for over 9% of expenditure; and property costs, which represented over 8% of our expenditure.
A further 4% of total expenditure was largely driven by taxpayer demand; this included items such as printing and postage ($40.2 million), bank fees and collection charges ($17.3 million) and legal expenses ($59.6 million). Depreciation expenses ($82.2 million) excluding the depreciation associated with our finance leases ($18.8 million) accounted for 2.8% of total expenditure, and payments for services provided by the Australian Customs Service relating to GST administration on behalf of the ATO ($51.6 million) represented another 1.8% of our expenditure.
Figure 3.2.4 shows our operating expenses for 2007–08 compared to 2006–07.
FIGURE 3.2.4: Our operating expenses, 2006–07 to 2007–08, by percentage
Our capital budget
The ATO began 2007–08 with a capital budget of $191.9 million. During 2007–08 we received additional capital funding of $9.3 million at Additional Estimates. This additional capital funding was provided to assist in developing the Standard Business Reporting measure.
We spent $214.4 million against our final capital budget of $201.2 million, which was an overspend of 6.6% against the total capital budget. The overspend was primarily associated with additional software licences purchased during the year.
Of the total capital expenditure in 2007–08, $55 million was related to building improvements and $26.7 million was related to software purchases. The balance of our capital expenditure in 2007–08 related to internally developed software, and was mainly associated with the development of system assets to support our change program.
Our budget to administer GST
We continue to meet our outcomes as agreed with the states and territories for the administration of GST under the Intergovernmental Agreement on the Reform of Commonwealth–State Financial Relations.
This year our expenditure for administering GST was $631.6 million. This result was $1.4 million or 0.2% under the $633.0 million budget agreed with the states and territories, allowing for variations in our work program for the year. This is an interim result and is still subject to a special purpose audit by the Australian National Audit Office (ANAO).
During 2007–08 the ANAO delivered the results of the annual special purpose audit of GST costs and the systems for controlling GST costs for 2006–07. The unqualified audit report confirmed that our expenditure fairly represented our costs for GST activities for 2006–07. In addition, the ANAO made several recommendations which we have implemented or updated in relation to GST costing procedures, cost reconciliation and cost-driver methodology.
After consultation with the states and territories, we signed a new GST administration performance agreement in March 2008. The agreement, which is reviewed every three years, reflects some changes to the performance measures and definitions of information provided to the states and territories.
We work with the states and territories to meet our performance outcomes, which include a set return on investment target for active compliance activities each year. In 2007–08, we exceeded our active compliance return on investment target. In achieving this we focused on key risks across all our market segments, ranging from small to large businesses. This year, we worked to ensure our compliance strategies brought to account non-compliant businesses, and also encouraged voluntary compliance within the broader taxpaying community.
In our reporting to the states and territories, we have begun to focus on the non-revenue benefits of GST activities that support voluntary compliance. Such activities include the Small Business Assistance Program, which gives small business practical assistance on a range of revenue products including GST. To help taxpayers meet their obligations we have invested in building the capability of business activity statement (BAS) service providers in 2007–08. We also continued to emphasise the importance of correct record keeping practices through our record keeping reviews.
We established a new forum with state and territory revenue offices to strengthen our information sharing and compliance outcomes.
In 2007–08 there were two major judicial decisions with potential GST revenue impacts for the states and territories. The High Court's decision in relation to Reliance Carpets confirmed our view that a deposit forfeited in circumstances like Reliance Carpets is taxable. As a result there will be no reduction in GST revenue from this decision.
Refunds for taxpayers began to be processed by the Tax Office during the year as a result of the Federal Court's decision on motor vehicle holdbacks in 2007–08. The Federal Court of Australia in KAP Motors Pty Ltd v Commissioner of Taxation [2008] FCA 159 held that the restriction on paying refunds does not apply if GST is paid on a transaction that is later determined not to be a supply for GST purposes. The GST revenue impact of this decision is estimated at $520 million.
FIGURE 3.2.5: GST as a proportion of our total expenses, 2006–07 to 2007–08, by percentage
Cost of collection
The cost of collection measures the cost of collecting every $100 of cash. This calculation measures ATO costs incurred against the cash collections, net of refunds paid. The calculation excludes all costs and receipts that do not relate to collecting Australian Government tax revenue. Superannuation and excise costs related to transfers of monies are also excluded.
Figure 3.2.6 shows the cost to collect $100. In 2007–08 costs increased marginally from $0.83 to $0.84 for every $100 of cash collected, excluding GST administration costs and collections.
FIGURE 3.2.6: Cost to collect $100, 1997–98 to 2007–08
Procurement
All complex procurement is managed by qualified procurement officers with at least a Certificate IV in Government and Procurement, to ensure that we follow the principles and policies of the Commonwealth procurement guidelines.
Documentation, including request for tender and contract templates, contains a clause requiring contractors to give an assurance about their tax obligations. Additional clauses are also available to seek higher levels of assurance where there is greater risk to our reputation.
We use electronic tendering through the government’s AusTender system.
The ATO established major national contracts for services such as debt collection, health, electrical goods (office machine), forms ordering, warehousing and distribution services, Standard Business Reporting authentication, salary packaging (for vehicle novated leases), employee assistance program, human resource specialists and tax technical, legal, mailroom, travel management and airline services. We conducted an open tender for supply of an electronic self-managed superannuation fund auditor tool (e.SAT) and engaged a supplier. A tender for supply of e-tax software will be released early in 2008–09.
We follow quality assurance processes to ensure that payments to our suppliers, especially small to medium enterprises, are processed promptly in accordance with the agreed terms of trade. This year we consistently met the government’s target to pay at least 90% of businesses within the terms of trade.
We met our reporting obligations, including listing contracts of $100,000 or more on our website, in accordance with the Senate Order on Departmental and Agency Contracts. Our annual procurement plan was published on AusTender by 1 July 2007 and updated in February 2008.
No contracts or deeds of standing offer were exempted from publication on AusTender. All contracts we entered into contained provisions allowing the Auditor-General access to information held by contractors relating to contract performance.
Appendixes 10 and 11 of this annual report contain details of our consultancy services with a value of $10,000 or more; and advertising, direct mail, media placement and market research.
Information on expenditure on contracts and consultancies is also available on the AusTender website at www.tenders.gov.au
The ATO also began a three-year sourcing program to market-test information and communication technology services. See Part 3.4 of this report for procurement details.
Asset management
Our asset accounting function is centrally controlled, while the day-to-day management of assets is decentralised to regional locations. Assets with an acquisition cost over the specified amounts in the Chief Executive’s Instruction are recognised in our financial statements. On the other hand, portable items with values below the asset recognition threshold are registered for physical control purposes but not recognised in the financial statements.
Asset recognition thresholds, frequency of revaluations, depreciation and amortisation, estimation of useful lives, and impairment of assets are discussed in detail in note 2.22 to our financial statements.
The bulk of our information technology equipment is leased and managed by Electronic Data Systems (EDS).
3.3 Managing our people
Our workforce is located in 64 sites across the country. At 30 June 2008 we employed 23,303 ongoing and non-ongoing employees under the Public Service Act 1999. This number excludes employees on leave without pay and those who started working with the ATO in the last week of June 2008.
Appendix 6 contains a series of tables showing the size, location and make-up of our workforce. This includes a breakdown of employees by gender and classification, their area of the organisation and where in Australia they work.
An analysis of our workforce demographics for 2007–08 shows that compared to last year:
- the gender profile remained very similar, with women representing about 54% of our workforce
- the age profile remained steady, with about 64% of employees being 40 or older.
In 2007–08, we processed:
- 3,478 employee commencements; 3,784 promotions; and 3,963 transfers at level
- 594,017 salary payments
- 2,172 security clearances.
We helped our people in relation to more than 170,000 telephone and email enquiries about conditions of service.
Employee turnover continued to be low and decreased slightly this year. We had a 6.0% separation rate for ongoing employees (1,321 people), compared with 6.7% last year. People leaving the ATO included:
- 730 resignations
- 237 age retirements
- 64 redundancies
- 8 dismissals.
Workforce planning
In 2007–08 we held our first integrated workforce planning across the ATO. We developed our workforce planning tools with internal and external stakeholders. The tools have been showcased globally by the Corporate Leadership Council (CLC), an international human resource research organisation.
Our workforce plan seeks to mitigate succession risks. Under the plan we have introduced talent management, policies on staff retention and secondment, and coaching and mentoring programs. We also established an internal community-of-practice to trial our management of knowledge for high-risk technical capabilities.
Our leading-edge framework and tools for managing succession is available to all Australian Government agencies through the Australian Public Service Commission best practice website. In addition, our work has been recognised as global best practice in the August 2007 CLC report Identifying and responding to strategic talent needs.
Workforce development
This year we delivered a number of initiatives to build workforce sustainability. We now have a capability framework that is common to employees at all levels. It was also used for expanding the national Australian Public Service capability framework. Our integrated skilling curriculum project is drawing together our programs and products into a corporate curriculum for job readiness across the ATO. We developed a strategy to build on our values-based culture. As part of this, we surveyed staff in three of our business lines to measure their levels of engagement. With leaders and staff in these business lines we developed plans to enhance these levels.
The local site leadership initiative has been expanded to 16 sites, with models developed for greater Senior Executive Service (SES) involvement in Melbourne, Albury and Canberra.
We have trained more than 14,000 of our people in Siebel Case to improve our case management and workflow capabilities. This was the largest Siebel training rollout in the world and ten times larger than the norm for Australia.
Continuing professional development
We are proud to have supported:
- around 900 employees who received, across eight different initiatives, full funding for their tertiary studies
- around 1,000 employees who received paid leave to study
- around 2,500 employees who attended development programs leading to qualifications or professional accreditation
- 10,250 employees who registered for tax technical update seminars
- more than 1,000 of our leaders who attended our innovative new teleconference series, Leaders talking to leaders
- 340 employees who attended our Lunchtime Legends series, where our senior staff share knowledge with their colleagues.
Leadership capability
We established a leadership and management framework to address the skills that we think are required for people seen as emerging or accomplished leaders. For example, we piloted a new manager survival skills program, an emergent leader program, and an expert leader program. The latter can be accredited for a Diploma in Government and may be delivered across the Australian Public Service by the Australian Public Service Commission.
More than 140 of our SES Band 1 officers have attended an experiential learning program, with more than 90% of participants reporting increased confidence in strategic decision making.
Workplace agreements
Collective agreements
The ATO (General Employees) Agreement 2006 and the ATO (Executive Level 2) Agreement 2006 have been in place since 1 July 2006 and have a nominal expiry date of 30 June 2009. The Australian Valuation Office Collective Agreement 2006 came into effect on 15 December 2006 and also has a nominal expiry date of 30 June 2009.
The executive level 2 (EL2) agreement for 2006–09 is an employee collective agreement that reflects the leadership requirements of EL2 employees; the general employee agreement for 2006–09 is a union collective agreement.
Table 3.3.1 shows the number of employees covered by collective agreements in place at 30 June 2008.
TABLE 3.3.1: Collective agreements, at 30 June 2008
ATO collective agreements |
Number |
EL2 employees |
1,607 |
General employees (APS1 to EL1) |
21,170 |
AVO employees |
127 |
TOTAL |
22,904 |
Australian workplace agreements
From 13 February 2008 Australian Public Service agencies no longer offered new Australian workplace agreements. At 30 June 2008 we had 1,357 employees under Australian workplace agreements; the majority of these were for non-ongoing employees.
TABLE 3.3.2: Australian workplace agreements, at 30 June 2008
Employee level |
Number |
Senior executive service |
215 |
EL2 employees |
42 |
General employees (APS1 to EL1) |
1,100 |
TOTAL |
1,357 |
NOTE: Includes the Australian Valuation Office.
Individual workplace arrangements
Employment conditions for the majority of employees are provided by the collective agreements. Where there is a business need to attract or retain certain skills, a determination under section 24 of the Public Service Act 1999 is used to provide supplementary employment conditions.
SES employees not covered under an Australian workplace agreement have their employment conditions covered under the Australian Public Service Award, with a determination under section 24 of the Public Service Act 1999 providing supplementary conditions.
At 30 June 2008 we had 33 employees under an individual workplace arrangement provided by a determination under section 24 of the Public Service Act 1999.
TABLE 3.3.3: Individual workplace arrangements at 30 June 2008
Employee level |
Number |
Senior executive service |
31 |
EL2 employees |
0 |
General employees (APS1 to EL1) |
2 |
TOTAL |
33 |
NOTE: Includes the Australian Valuation Office.
Productivity gains
Pay rises for employees covered by collective agreements are contingent upon achieving productivity improvement-based corporate outcomes. Based on our achievements in 2006–07 the ATO made two pay rises during 2007–08. There was a 2.5% pay rise on 1 July 2007 and a further increase of 2% from 1 January 2008. The pay rises were made under clause 7.2 of the general employees agreement and clause 34.2 of the EL2 agreement.
Performance systems
An online survey of participation in the performance system conducted in April 2008 indicated that 96% of employees have a performance and development agreement and/or a team plan. Around 88% of employees also reported that they had had a mid-year performance review discussion.
Multi-source feedback is used to provide feedback to managers and leaders on their development needs and is linked to the capabilities identified in the Australian Public Service Commission's integrated leadership system. Around 64% of our senior executives and 77% of EL2 employees participated in multi-source feedback in 2007–08.
Remuneration
Our remuneration policy outlines the intent and direction of remuneration and related matters across the organisation and operates within the government policy parameters applying to the public sector.
Senior executive remuneration
The Remuneration Tribunal sets remuneration and conditions for the Commissioner, while the Commissioner determines the remuneration for Second Commissioners within a framework set down by the tribunal. The Commissioner also sets remuneration and conditions for our senior executives through sub-plan remuneration committees. Remuneration for senior executives is determined with reference to the annual Australian Public Service remuneration survey conducted by the Department of Education, Employment and Workplace Relations.
In 2007–08 the standard salaries for senior executives were $124,410 to $147,070 for band 1, and $158,970 to $182,560 for band 2.
Note 13 to our financial statements gives the number of executives whose total remuneration falls within each $14,999 band (starting at $130,000) and the aggregate remuneration paid to all executives.
Other employee remuneration
The remuneration arrangements for the majority of non-senior executive ongoing employees are covered by our collective agreements. Base rates of pay are set within the current agreements, with provision for salary advancement subject to satisfactory performance.
Salary advancement for EL2 employees is also subject to meeting criteria for growth, experience and contribution. Our remuneration committees review EL2 base pay to ensure that it is consistent, equitable and fair across the ATO.
Table 3.3.4 shows the salary ranges for the different ATO employee classifications at 30 June 2008.
TABLE 3.3.4: Salary ranges for different ATO employee classifications, at 30 June 2008
Classification |
Salary range | |
$ |
$ | |
Cadets while undertaking study |
12,479 |
20,329 |
Cadets while undertaking practical training in the workplace |
22,058 |
40,628 |
Graduate administrative assistant |
47,384 |
48,615 |
APS1 |
22,058 |
40,628 |
APS2 |
41,602 |
46,135 |
APS3 |
47,384 |
51,141 |
APS4 |
52,812 |
57,342 |
APS5 |
58,905 |
62,461 |
APS6 |
63,619 |
73,082 |
EL1 |
81,559 |
88,070 |
Information technology officer grade 1 |
51,141 |
58,905 |
Public affairs officer grade 1 |
54,491 |
62,461 |
Public affairs officer grade 2 |
66,269 |
75,306 |
Public affairs officer grade 3 |
85,794 |
99,238 |
EL2 |
92,188 |
109,852 |
Table 3.3.5 shows the salary ranges for the different AVO employee classifications at 30 June 2008.
TABLE 3.3.5: Salary ranges for different AVO employee classifications, at 30 June 2008
Classification |
Salary range | |
$ |
$ | |
APS1 |
20,920 |
38,475 |
APS2 |
39,382 |
43,262 |
APS3 |
44,797 |
48,279 |
APS4 |
49,838 |
54,062 |
APS5 |
55,251 |
58,838 |
APS6 |
59,918 |
68,743 |
EL1 |
76,796 |
82,957 |
EL2 |
89,951 |
110,524 |
Valuers |
55,521 |
82,957 |
Valuers in Training |
11,924 |
52,727 |
Performance pay
Senior executives and EL2 employees are eligible to be considered for annual performance pay.
The first 5% of performance pay forms part of the total salary that a senior executive or EL2 is entitled to receive if they perform their job effectively and if the organisation meets corporate outcomes.
Senior executive performance pay is calculated at 5%, 10% or 15% of base salary, recognising fully effective, superior or exceptional performance respectively over the appraisal period to 30 June.
EL2 performance pay is calculated on a five-point scale ranging from 5% to 15%, depending on performance.
Recommendations for performance pay are assured by the ATO remuneration committees and all payments are subject to approval by the Commissioner.
During 2007–08:
- 301 senior executives out of a possible 302 received performance pay for 2006–07
- 1,694 EL2 employees out of a possible 1,721 received performance pay
for 2006–07.
The total amount of performance pay for senior executives was $3,594,307. This comprised $817,741 for Senior Executive Service band 2 employees, $2,776,566 for SES band 1 employees. Performance pay for EL2 employees totalled $11,554,068.
The range of performance pay was $2,337 to $41,318 for senior executives, and $358 to $20,532 for EL2 employees.
Table 3.3.6 shows the number of senior executives and EL2 employees who received performance pay this year.
TABLE 3.3.6: Performance payments for 2006–07 paid in 2007–08, by classification
Non-salary benefits
We provide the following non-salary benefits to our employees:
- senior executives – a motor vehicle allowance, which may be used to provide a privately plated motor vehicle for private and official use, parking at work, and airline lounge membership (if eight or more return trips are planned for the year)
- EL2 employees – payment of a taxable annual allowance of $850 to enable them to purchase items or services that maintain or increase their professionalism, and airline lounge membership (if eight or more return trips are planned for the year)
- general employees – airline lounge membership for employees who undertake 12 or more return trips in a year
- all ongoing employees – access to salary packaging of cars and utility vehicles, motor cycles, car parking, superannuation (self only), exempt child care, airline lounge membership and professional association membership fees. Salary packaging arrangements for portable computers, personal digital assistants and portable printers are under review following announced changes to the FBT exemption of certain work-related items in the 2008–09 Federal Budget.
Rewards and recognition
In 2007–08 we continued to enhance our employee reward and recognition scheme. Additions to the scheme this year included local or manager initiated recognition, designed to create an environment where our people work to the best of their abilities.
The Commissioner’s Awards presented in 2007–08 were:
- Sue Edwards, for excellence in innovation
- Nigel Aitchison, for excellence in leadership
- Nada Gardiner, for excellence in client service
- Sheree Clancy and Gus Falkenhagen, for technical excellence.
The Commissioner’s postgraduate scholarship provides full-time paid leave and reimbursement of associated costs to employees doing postgraduate study. This year the Commissioner’s scholarship was awarded to Elea Gudgeon, a PhD candidate researching a framework for implementing the ATO compliance model for tax agents.
The Indigenous undergraduate scholarship provides full-time paid leave and reimbursement of associated costs to employees studying an undergraduate degree. This year the scholarship was awarded to Megan Morris, who is studying a Diploma of Business.
Internal communication
Our e-magazine, News Extra, is read by 98% of our employees, according to our annual readership survey. News Extra promotes the organisation’s culture and values, highlights how these values can be incorporated into the way we work, and informs managers and employees about our corporate programs, objectives and priorities. The letters to the editor in News Extra is one way our employees can have their say.
We also use bulk emails, SMS and priority messages to communicate with employees, particularly if there is an urgent need to provide them with information. Senior executives are increasingly using video downloads to personalise messages to employees, given our geographically dispersed locations.
SES/EL2 dialogue days are held three times a year and are an important mechanism for communicating corporate messages, engaging our leaders in discussions about key issues and obtaining feedback on matters that affect the organisation. They are an opportunity for the ATO Executive to engage in two-way conversations with senior executives and EL2s, who can then engage in two-way discussions with their teams.
Employment equity and diversity
As part of our workplace diversity program we introduced a new e-learning program on managing diversity in 2008. The program is available through our emergent leaders program. It complements the valuing diversity e-learning module that all new starters must complete within six weeks of joining the ATO. A total of 4,970 employees completed the valuing diversity program this year.
To engage our employees in diversity issues and highlight the important role diversity plays in helping us achieve our business outcomes, this year we:
- regularly promoted diversity through News Extra, including profiles of employees from diverse backgrounds, detailing their contribution to the ATO
- celebrated Harmony Day, NAIDOC Week and International Day of Disability in most sites
- held a diversity census to learn more about the workplace environment and our progress in this area.
We seek to develop a culture that discourages discrimination and harassment. Guided by the results of our diversity census, we have focused our attention on bullying and harassment and how to assist our managers to handle these occurrences in the workplace. In addition, we undertook a stocktake of intranet and other educational material relating to discrimination and harassment and available to our employees. We did this to ensure that it was relevant and helpful.
Access for people with disability
Our workplace diversity program includes a disability action plan, which outlines strategies to improve our performance in complying with our obligations under the Disability Discrimination Act 1992. We also provided pathways to employment for students with disability, through school-to-work sponsorship programs and by offering paid work experience for university students. For more information see appendix 8.
Indigenous employment and development
While we have a low percentage of Indigenous employees, the percentage has risen slightly from 0.48% to 0.5% over the past year. This goes against the trend of declining Indigenous employment in the wider Australian Public Service.
We implemented a number of employment and retention measures this year, including establishing a network of Indigenous liaison contact officers, providing career development and training opportunities and continuing our school-to-work sponsorship program and offering traineeships and cadetships.
In December 2007 we launched our reconciliation action plan, which commits the ATO to a range of measures in employment and retention, cultural awareness and assistance to Indigenous Australians.
Snapshot: Action on reconciliation
To mark the 40th anniversary of the 1967 referendum that removed clauses discriminatory to Indigenous Australians from the Constitution, all Australian Public Service agency heads were asked to develop a reconciliation action plan.
We developed the ATO reconciliation action plan, launched in December 2007, through consultations with indigenous employees and senior executives and the wider ATO community. Reconciliation Australia has endorsed the plan and commended its clear and worthy milestones. Achievements to date include:
- sponsoring an extra five Indigenous high school students under our Queensland school-to-work program – we now sponsor 21 students
- employing cadets, entry-level trainees and graduates through our Indigenous employment pathway programs
- acknowledging traditional custodians at significant ATO events
- establishing a national network of Indigenous liaison contact officers and paying them an allowance as formal recognition of their strong community links
- conducting career development workshops attended by Indigenous officers
- increasing numbers of Indigenous staff, up from 0.48% to 0.5% at April 2008
- appointing an Indigenous custodian to ensure that our focus is both internally and externally collaborative – the custodian’s role is to ensure that we take a whole-of-ATO view when dealing with indigenous matters
- delivering a cross-agency workshop focusing on sustainability and indigenous corporations
- providing cultural awareness training
- developing a cultural awareness team-discussion kit to support the integration of new cadets and high school students in the workplace.
ATOconcern
An important facility we provide, one which is rare in the Australian Public Service, is called ATOconcern. This is an area within the ATO that provides an independent, confidential and impartial service where staff may raise employment-related issues or concerns. It is also an important channel for public interest disclosures.
Around 55% of approaches to ATOconcern this year were by email. Employees can also contact ATOconcern by phone, by fax or in person. By 30 June 2008 there had been 917 approaches to ATOconcern for the year, compared to 892 in 2006–07.
The main reasons for employee contact with ATOconcern this year were employment conditions and environment, recruitment and selection, workplace conflicts, and discrimination and harassment. Other approaches related to public interest disclosure, allegations of fraud or misconduct, skilling, occupational health and safety, payroll and information technology.
Harassment contact officers
We have a network of more than 136 trained harassment contact officers. This year we also implemented a national refresher training program for all new and existing harassment contact officers to ensure they are adequately trained.
There were 182 approaches to harassment contact officers in 2007–08, which was lower than last year’s 282. Around 32% of all approaches concerned alleged bullying compared to 33% in 2006–07. In November 2007, we formed a working group from across the office to review and respond to the complaints and ensure that our internal procedures are working effectively.
Occupational health and safety
We maintained our commitment to the comprehensive safety and health program 2005–10, which is a practical guide to promote a safe work environment.
We are the first agency to implement new health and safety management arrangements that allow greater and more direct involvement in occupational health and safety matters by our employees. The health and safety management arrangements replace the Occupational Health and Safety Agreement 2004, introducing a model focusing on consultation, new responsibilities for site leaders and health and safety coordinators in main sites.
In 2007–08, there was a decrease of 40% in the number of compensable injuries compared with 2006–07.
We acknowledge that this has been partly influenced by changes to the Safety Rehabilitation and Compensation Act 1988. Our estimate is that the legislative changes account for only around 15% of the decrease in the number of compensable injuries.
Analysis of our compensation claim data suggests that our early intervention activity is leading to a lower cost of claim. On average, claims where there was early intervention showed that costs were about $12,000 less than those where no early intervention activity occurred.
The average cost of a claim has increased slightly. However, the rate of increase of 1.04% is less than that of salary and wages, which is 4.5%.
Comcare has advised that our premium for 2008–09 is $31.2 million (including GST), a decrease of about $6 million.
Appendix 9 of this report contains our occupational health and safety report.
Snapshot: Offices for the future
This year the ATO moved into new purpose-built, greener premises in Sydney and Canberra. Around 20% of all ATO staff will work in these new buildings.
Working with our contractors, both projects were completed on time and to budget and with little impact on day-to-day business operations.
We expect that the new premises will offer advantages to our staff and business well into the future. The buildings feature the latest in environmental management in construction, materials and infrastructure. This will save running costs, reduce our impact on the environment and provide optimum work space for our people.
Internal audit program
We significantly strengthened our internal audit program in 2007–08 to ensure high quality, robust, independent reviews, and consulting services that improve operations and governance processes across the ATO.
In February 2007, we appointed a specialist chief internal auditor, charged with improving all aspects of internal audit products and functions. All core documents, procedures and governance arrangements in internal audit have been strengthened, providing the foundations for robust, contemporary practice.
Between 1 December 2007 and 30 June 2008 we finished all 37 audits and reviews in our updated, risk-based internal audit program – comprising broad coverage across all areas of the ATO – as well as 21 audits commissioned in previous years. We implemented 189 audit recommendations to improve operations and controls.
To monitor internal performance we introduced the balanced scorecard approach. This significantly improved audit delivery times, bringing the average closer to industry best practice. We also invested in staff capability and increasing overall numbers.
In May 2008 a follow-up, external, quality-assessment review by the Institute of Internal Auditors – Australia confirmed strong conformance with professional auditing standards and that our current internal audit activities represent better practice.
3.4 Managing information technology
We have a fundamental reliance on information technology to deliver our operational outcomes. We are engaged electronically with the Australian public, and our systems implement a complex set of connections from homes, businesses and offices across the country, through network connections, to our midrange and mainframe data centres. We need to maintain this complex environment to deliver our registration, processing and accounting services.
Our challenges include meeting community expectations for convenience, reliability and accessibility; protecting our systems against an increasing range of security threats; detecting and fixing outages and problems quickly; and engaging a range of partner and supplier organisations to deliver our services efficiently and effectively.
We have an ambitious information technology strategy, which includes aspects of our ongoing change agenda. It supports our current processing systems, government policy and cyclic changes and, at the same time, prepares us for the next wave of technology change. We continue to work with the Australian Government and state and territory agencies to deliver whole-of-government services.
Delivering information technology solutions to meet community needs
To deliver innovative and secure electronic services to the community:
- We improved the functionality and usability of e-tax, reaching a record 1.9 million online lodgments for the 2006–07 tax return – accounting for 86% of the total returns lodged by individuals (and not through tax agents).
- We implemented a client contact overflow capability that allowed us to deliver some telephone services to the community through trained contractors. This was particularly important during the peak tax-time period from July to October 2007.
- We worked with the Australian High Tech Crime Centre and AusCert to shut down email ‘phishing’ scams and a website purporting to be ours. We made the public aware of the scam to ensure the ploy did not succeed.
- We enhanced the Tax Agent Portal to improve access to our systems and information – including pre-filling – making tax processes easier and more certain for tax agents and their clients.
Enhancing ATO information technology and communication capabilities
Two major initiatives gave our people the essential business tools to do their work:
- We began an upgrade of laptop computers. Improvements included the addition of wireless connectivity, increasing staff ability to collaborate when working remotely. This is increasing the frequency of communication in geographically dispersed teams while reducing travel costs. It is also improving our ability to work securely with sensitive information.
- We increased secure internet access from 9,000 desktops in July 2007 to 27,000 in May 2008. This gives staff an additional research tool and reduces administrative costs for matters that can now be managed through the internet.
We introduced a number of infrastructure improvements:
- We enhanced our monitoring facilities so that we can detect and resolve operational issues more rapidly and improve the reliability of our systems.
- To reduce power consumption in our midrange data centre we introduced ‘virtualisation’ to reduce the number of physical servers.
- To improve the security of our systems we actively tested for and corrected vulnerabilities to a range of threats from hackers and malware.
Information technology strategies for the future
Over the next two to three years our existing technology services contracts are being refreshed. We intend to prepare ourselves to respond to future needs through an innovative solution that focuses on effectively and efficiently delivering business outcomes.
We have advanced our sourcing approach with assistance from the Boston Consulting Group. The strategy includes a multi-sourced solution comprising three services bundles: managed network services, end-user computing services, and centralised computing services.
Each bundle has a high business priority and must be delivered to sustain and transform our information and communications technology needs and activities, including the broader needs and expectations of the taxpaying community.
Building and developing an information technology workforce
We took a number of steps to build and retain an information technology workforce capability in the ATO:
- We implemented the first phase of our information and communications technology recruitment and resource management (pipeline) strategy. Its aim is to streamline and simplify recruitment, selection and resource-allocation processes.
- We initiated a skills and knowledge transfer process with Accenture in the support function of our change program. We also developed and implemented a transition process to prepare our staff for emerging roles.
- We continue to invest in our information and communications technology graduate and apprenticeship programs. These programs have been adopted by the Australian Government Information Management Office as a framework for whole-of-government.
- We access overseas markets to broaden our recruitment base. We conducted retention surveys to analyse the expectations and engagement of our information and communications technology workforce.
- We built on our leadership and management expertise through ongoing coaching, leadership and management training tailored to our information and communications technology and change program staff.
FIGURE 3.4.1: Information Technology sub-plan activities, 2007–08
Snapshot: Sourcing the best in ICT
The ATO is replacing its existing technology services contracts with EDS, Telstra, NEC, Telstra Business Services and Electroboard. We spend about $275 million a year on the existing contracts that will expire in 2009 and 2010.
Each new contract will not only seek to deliver existing services but be flexible enough to enable us to take advantage of new developments in technology that will improve services to taxpayers or improve our efficiency and effectiveness.
Procurement is divided into three bundles: managed network services, end-user computing services, and centralised computing services. The performance-based contracts focus on our business outcomes. A new operating model and multi-vendor governance framework will need to be established.
The procurement process has three stages:
- an expression of interest, followed by evaluation for short-listed respondents
- short-listed respondents invited to pre-request for tender workshops with ATO business and IT representatives
- the request for tender issued to short-listed respondents; followed by evaluation to select one or two vendors for negotiations; then contract finalisation with the successful tenderer.
Procurement for the first bundle, managed network services, is underway. It covers all telecommunications services and call centre infrastructure. The expression of interest was issued in January 2008 and four vendors short-listed in March 2008 – CSC, Dimension Data, Optus, and Telstra. Workshops were held in March-April 2008 and vendors spent three days working with our experts. A probity advisor attended all workshops to ensure fair and equitable processes. The request for tender will be issued in mid-2008 and a contract signed early in 2009. We spend about $58 million a year for managed network services.
The expression of interest closed on 26 May 2008 for the second bundle, covering all desktop and help desk services. We spend about $43 million a year for end-user computing services. The expression of interest for the third bundle, covering mainframe and midrange services, will be released in mid-2008. We spend about $174 million a year for centralised computing services.
These contracts are likely to last from four to 10 years, depending upon execution of extension options and will be worth between $1.5 billion and $2.5 billion.
Part 4 – Appendixes
Appendix 1 – Legislative reporting requirements
Table 4.1.1 lists legislative provisions administered by the Commissioner that include a reporting requirement. This report addresses those requirements. The report also addresses several reporting requirements in laws that are not administered by the Commissioner. These other reporting requirements are listed in table 4.1.2
TABLE 4.1.1: Reporting requirements in laws administered by the Commissioner
Legislation |
Main page reference(a) | |
Section 29 |
A New Tax System (Australian Business Number) Act 1999 |
99, 105, |
Section 10 |
Commonwealth Places Windfall Tax (Collection) Act 1998 |
147, |
Section 9 |
Energy Grants (Credits) Scheme Act 2003 |
79, |
Section 12 |
Franchise Fees Windfall Tax (Collection) Act 1997 |
147 |
Section 8 |
Fringe Benefits Tax (Application to the Commonwealth) Act 1986 |
66 |
Section 4 |
Fringe Benefits Tax Assessment Act 1986 |
15, 38, 40–44, 66 |
Section 14 |
Income Tax Assessment Act 1936(b) |
16–18, 29, 31, 37, 40–65, 99 |
International Tax Agreements Act 1953 |
60–61 | |
Trust Recoupment Tax Assessment Act 1985 |
147 | |
Section 16 |
Petroleum Resource Rent Tax Assessment Act 1987 |
15–18, 42, 68–69 |
Section 93 |
Small Superannuation Accounts Act 1995 |
85 |
Section 54 |
Superannuation (Government Co-contribution for Low Income Earners) Act 2003 |
19–21, 42–43, 81, 85 |
Section 41 |
Superannuation (Unclaimed Money and Lost Members) Act 1999 |
78, 84–86 |
Section 31 |
Superannuation Contributions Tax (Assessment and Collection) Act 1997 |
87 |
Section 27 |
Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 |
87 |
Section 44 |
Superannuation Guarantee (Administration) Act 1992 |
16, 19–21, 44, 75–76, 78, 81–86, 98 |
Section 7 |
Taxation (Interest on Overpayments and Early Payments) Act 1983 |
47 |
Section 3B |
Taxation Administration Act 1953(c) |
8–34, 41–47, 52–69, 74–80, 89–91, 98–102, 109–126, 131 |
Exchange control |
147 | |
Information disclosure |
94–97 | |
Section 352-5 |
Taxation Administration Act 1953(d), in relation to: |
|
Fuel tax law |
19–21, 42, 73, 75, 79–80 | |
GST law |
15–17, 42, 57, 66–67, 91, 98, 106–107, 122–125 | |
Luxury car tax law |
68, 91 | |
Wine tax law |
69, 91 | |
Section 22 |
Termination Payments Tax (Assessment and Collection) Act 1997 |
87 |
(a) The page references indicate where in this report we address each requirement. Page references are not exhaustive, and other discussions of ATO activities and outcomes throughout the report are also relevant to a number of the requirements.
(b) Both the International Tax Agreements Act and the Trust Recoupment Tax Assessment Act incorporate the reporting requirement contained in section 14 of the Income Tax Assessment Act. We referenced the main pages that include reports on these two Acts separately from the main pages addressing the report required by the Income Tax Assessment Act.
(c) Section 3B requires a report on the working of the Taxation Administration Act including information about exchange control and information disclosures. We have separately identified the pages where these two topics are discussed.
(d) Section 352-5 requires a report on each of the four indirect tax laws. We have identified the main pages where we report on these laws.
TABLE 4.1.2: Other reporting requirements(a)
Legislation |
Main page reference(b) | |
Section 311A |
Commonwealth Electoral Act 1918 |
196–197 |
Section 15XUA |
Crimes Act 1914 (Assumed identities) |
69 |
Section 516A |
Environment Protection and Biodiversity Conservation Act 1999 |
176–179 |
Section 57 |
Financial Management and Accountability Act 1997 |
209–332 |
Section 8 |
Freedom of Information Act 1982 |
150–154 |
Paragraph 11 |
Legal Services Directions 2005 |
148 |
Section 74 |
Occupational Health and Safety Act 1991 |
184–187 |
(a) Limited to reporting requirements under law. As a matter of Commonwealth policy, other information is also required in this report. For example, the Commonwealth Fraud Control Guidelines require information about our fraud prevention and control procedures to be included in this report. That information appears on pages 116.
(b) The page references indicate where in this report we address each requirement. Page references are not exhaustive, and other discussions of ATO activities and outcomes throughout the report are relevant to a number of the requirements.
A number of Acts include a legal requirement for the Commissioner to report information relating to the particular Act. In some cases, no activity occurred under an Act during the year. However, in order to fulfil the Commissioner’s reporting obligations, the following information about particular Acts is provided:
Commonwealth Places Windfall Tax (Collection) Act 1998
The Commonwealth Places Windfall Tax (Collection) Act 1998 applies a 100% windfall tax on applications for refunds of tax paid sought on the basis of constitutional invalidity. There was no activity to report under this Act during 2007–08.
Franchise Fees Windfall Tax (Collection) Act 1997
The Franchise Fees Windfall Tax (Collection) Act 1997 relates only to revenue collected as business franchise fees by the states and territories before August 1997. There was no activity to report under this Act during 2007–08.
Taxation Administration Act 1953, Part IV – Exchange control
Section 3B in the Taxation Administration Act 1953 requires the Commissioner to report on any breaches or evasions of Part IV in that Act. Part IV contains the rules applying to issuing tax clearance certificates. Since 1 July 1990, these rules have had little practical effect. The rules have largely been replaced by transaction reporting requirements in laws overseen by the Australian Transaction Reports and Analysis Centre, which provides financial transaction information to the ATO and other agencies. There were no breaches or evasions of Part IV or breaches of section 14C(2) undertakings to report during 2007–08.
Trust Recoupment Tax Assessment Act 1985
The Trust Recoupment Tax Assessment Act 1985 provides for the recovery of income tax sought to be avoided under new generation trust stripping schemes. There was no activity to report under this Act during 2007–08.
Appendix 2 – Legal services expenditure
Table 4.2.1 is a statement of legal services expenditure by the ATO for 2007–08, published in compliance with paragraph 11.1(ba) of the Legal Services Directions 2005.
TABLE 4.2.1: ATO legal services expenditure, 2007–08(a)
No. |
$ | |
TOTAL EXTERNAL LEGAL SERVICES EXPENDITURE(b) |
59,646,454 | |
External expenditure on solicitors |
25,162,972 | |
External expenditure on counsel |
16,579,722 | |
Number of male counsel briefed |
144 |
|
Value of briefs to male counsel |
11,423,349 | |
Number of female counsel briefed |
65 |
|
Value of briefs to female counsel |
5,156,373 | |
Other disbursements on external legal services |
15,521,059 | |
External expenditure on compensation |
2,382,701 | |
TOTAL INTERNAL LEGAL SERVICES EXPENDITURE(c) |
25,929,223 | |
Salaries(d) |
18,615,284 | |
Overheads (includes administrative support and accommodation costs) |
7,313,939 | |
TOTAL |
85,575,677 |
(a) All dollar amounts exclude GST.
(b) Excludes summons fees in connection with debt recovery and prosecutions. Includes expenditure on solicitors, counsel and other costs attributable to the ATO’s test case program.
(c) The ATO’s Legal Services Branch manages tax litigation (under Part IVC of the Taxation Administration Act 1953), debt litigation, general law and freedom of information. The total internal legal services expenditure consists of the cost of labour and expenses associated with our Legal Services Branch. The Tax Counsel Network performs core business of the ATO through the provision of interpretive advice on the more complex areas of tax law. In addition there are business lines within the ATO where employees perform functions of a legal nature (for example preparation of writs, statutory demands and bankruptcy notices). The cost associated with the legal component of the work of these areas is not included.
(d) Includes labour on-cost, superannuation and other staff costs.
Appendix 3 – Laws conferring powers on the Commissioner
In 2007–08, the Commissioner of Taxation had responsibilities under a wide range of laws. The main tax and superannuation laws that confer powers or functions on the Commissioner are listed in Table 4.3.1.
TABLE 4.3.1: Laws conferring powers on the Commissioner
Income Tax Assessment Act 1936 |
Income Tax Assessment Act 1997 |
International Tax Agreements Act 1953 |
Taxation Administration Act 1953 |
A New Tax System (Australian Business Number) Act 1999 |
A New Tax System (Bonuses for Older Australians) Act 1999 |
A New Tax System (Goods and Services Tax) Act 1999 |
A New Tax System (Goods and Services Tax Transition) Act 1999 |
A New Tax System (Luxury Car Tax) Act 1999 |
A New Tax System (Wine Equalisation Tax) Act 1999 |
Commonwealth Places Windfall Tax (Collection) Act 1998 |
Energy Grants (Cleaner Fuels) Scheme Act 2004 |
Energy Grants (Credits) Scheme Act 2003 |
Excise Act 1901 |
Excise Tariff Act 1921 |
Franchise Fees Windfall Tax (Collection) Act 1997 |
Fringe Benefits Tax (Application to the Commonwealth) Act 1986 |
Fringe Benefits Tax Assessment Act 1986 |
Fuel Tax Act 2006 |
Higher Education Funding Act 1988 |
Higher Education Support Act 2003 |
Petroleum Resource Rent Tax Assessment Act 1987 |
Product Grants and Benefits Administration Act 2000 |
Product Stewardship (Oil) Act 2000 |
Small Superannuation Accounts Act 1995 |
Superannuation Contributions Tax (Assessment and Collection) Act 1997 |
Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 |
Superannuation (Government Co-contribution for Low Income Earners) Act 2003 |
Superannuation Guarantee (Administration) Act 1992 |
Superannuation Industry (Supervision) Act 1993 |
Superannuation (Self Managed Superannuation Funds) Taxation Act 1987 |
Superannuation (Unclaimed Money and Lost Members) Act 1999 |
Taxation (Interest on Overpayments and Early Payments) Act 1983 |
Termination Payments Tax (Assessment and Collection) Act 1997 |
Trust Recoupment Tax Assessment Act 1985 |
Appendix 4 – Freedom of information
Functions and decision-making powers of the Commissioner
The ATO is part of the Treasury portfolio, but the Commissioner of Taxation is a statutory office holder, reflecting his independence and the complexity and scale of his responsibilities. Our main function is to administer legislation dealing with taxation, including excise (but excluding customs duty) and aspects of superannuation. We also work with appropriate departments on policy matters relating to tax, superannuation and other Acts we administer.
Responsibility for administering a range of tax and superannuation legislation is vested by Parliament in the Commissioner of Taxation. With some exceptions (that is, the power of general administration, the power of delegation, and furnishing an annual report for presentation to the Parliament) the Commissioner’s powers and functions under the tax laws 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 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 2008, the organisation employed 23,303 people. The National Office is in Canberra. There are 21 branch and regional offices (with public access) located throughout Australia. Our employees are housed in 70 buildings nationwide.
Part 3 includes an organisational chart.
Legislation administered by the Commissioner of Taxation
The main areas of legislation we administered in 2007–08 are covered in appendix 3.
Arrangements for participation
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.
We have more than 50 formal consultative bodies. For example, the National Tax Liaison Group is the peak consultative forum between professional bodies and the ATO and is chaired by the Commissioner. It has nine sub-committees dealing with specific issues or focus areas. We also have a range of consultative committees based on industry or market segments. The committees are listed on our website at Quick links. External experts are also involved on technical decision-making forums, such as our Public Rulings Panel, and on other panels, such as the Test Case Litigation Panel.
Categories of documents
We hold the following categories of documents:
- internal administration documents, including:
- agendas and minutes of meetings of senior tax officers (for example, reports on conferences and departmental committee meetings)
- reports relating to research and projects undertaken within the ATO
- documents relating to human resource and facilities management
- ministerial, interdepartmental and general correspondence papers
- financial reports, expenditure estimates and expenditure reports
- case files, including:
- 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 individuals and companies concerning the recovery of tax
- documents relating to tax law, including:
- documents received from international organisations or overseas tax authorities
- copies of instruments of delegation given to, or by, the Commissioner of Taxation
- requests for legal advice and copies of notes of advice provided
- copies of legislation, drafting instructions and draft legislation
- parliamentary papers, including:
- briefing papers prepared for, and submissions to, the Treasurer, Assistant Treasurer, and Minister for Superannuation and Corporate Law
- answers to parliamentary questions
- other departmental files, including:
- freedom of information request files and papers relevant to considering those requests
- 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, personnel, appeals, freedom of information)
- training materials
- tax rulings and determinations
- speeches by senior personnel, media releases, staff circulars and press clippings.
Some documents are generally available, while others are available under the Freedom of Information Act 1982 (FOI Act).
Documents available for inspection or purchase
The following documents are available for inspection or purchase by the public, or a section of the public, in line with arrangements we have made:
- income tax returns and associated papers lodged by all classes of taxpayers. (Taxpayers may only obtain copies of their own returns.)
- income tax ready reckoner, which helps individuals work out the tax they owe on their income for the relevant income year
- Commissioner of Taxation annual report, which is tabled in Parliament. The latest edition is on our website at www.ato.gov.au/annualreport
- Taxation statistics, which presents a range of tax statistics and has an accompanying CD-ROM. The set is 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.
Documents available free of charge
Each year we produce numerous documents that can be requested from any of our offices free of charge (office locations and contact details). These documents include:
- tax, superannuation and other relevant rulings and determinations (with exempt material excluded)
- law administration practice statements, which guide our employees in applying the laws administered by the Commissioner
- brochures and booklets for taxpayers on tax topics and people’s rights and obligations under the tax system
- tax return forms, schedules, and instructions to taxpayers on use of the forms
- tax tables for PAYG withholding
- forms relating to the laws administered by the Commissioner.
Many documents are also on our website at www.ato.gov.au
TaxPack makes reference to about 50 publications that can be ordered, free of charge, by phoning our publications distribution service on 1300 720 092.
Access to information
Procedures
Applicants may discuss the nature and scope of an intended request or seek advice on freedom of information matters. Whenever possible, a freedom of information 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, access may be refused. Alternatively, access may be granted to a document that exempt material has been deleted from, where practical.
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 all our sites where applicants can inspect documents they have accessed under the FOI Act.
If applicants cannot come to one of our offices, we can post documents to them. Information about access for people with disabilities is available by contacting a freedom of information officer at one of our branch offices.
State Freedom of information contacts
National Office |
South Australia/Northern Territory |
The Manager |
The Manager |
New South Wales/ |
Victoria/Tasmania |
The Manager |
The Manager |
Queensland |
Western Australia |
The Manager |
The Manager |
Callers outside capital cities may phone 13 28 69 and ask for the Freedom of Information Unit.
Freedom of information requests
At the beginning of the financial year we had 115 requests for documents under the FOI Act. During the year we received an additional 1,000 requests.
A total of 951 cases were determined. Applicants withdrew another 44 requests before a decision on access was made, and one case was transferred to another agency.
Full access was allowed in 342 cases, while part access was allowed in 536 cases. Access was refused in 73 cases and three of these matters were appealed to the Administrative Appeals Tribunal.
At the end of the year, 119 cases remained on hand.
Appendix 5 – External scrutiny
Test case litigation program
Table 4.5.1 lists the cases we funded or agreed to fund in 2007–08 and describes in broad terms the legal principles that each case will examine in whole or in part.
TABLE 4.5.1: Test case litigation, 2007–08
Case |
Issue |
Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation Funding agreed with the applicant |
This appeal was funded and a decision received. See summary in table 4.5.2. |
Brady King Pty Ltd v Commissioner of Taxation Funding agreed with the applicant |
This appeal was funded and a decision received. See summary in table 4.5.2. |
Ostwald Bros Civil Pty Ltd as trustee for Ostwald Family Trust Funding agreed with the applicant |
This appeal was funded and a decision received. See summary in table 4.5.2. |
Ya’el Frisch v Commissioner of Taxation Funding agreed with the applicant |
This appeal was funded and a decision received. See summary in table 4.5.2. |
ATO reference 07/6665 Funding agreed with the applicant |
Whether a student taxpayer is entitled to claim self-education expenses as a deduction under section 8-1 of the Income Tax Assessment Act 1997 against income in the form of youth allowance payments. |
ATO reference 07/11626 Funding agreed with the applicant |
Whether the purchase of a residential property as a development site is a creditable acquisition or an acquisition of an input taxed supply of residential premises to be used predominately for residential accommodation within the meaning of section 40-65(1) of the A New Tax System (Goods and Services Tax) Act 1999. |
ATO reference 07/16111 Funding agreed with the applicant |
Whether a community bank satisfies the exemption from liability to income tax contained in section 50-10 of the Income Tax Assessment Act 1997 which applies to a society, association or club established for community service purposes. |
ATO reference 07/16115 Funding agreed with the applicant |
Whether the partitioning and in-specie distribution for no consideration of real property between the partners of a partnership creates a taxable supply for GST purposes in circumstances where the partnership bought, developed and partitioned several blocks of property, and whether the margin scheme can apply pursuant to Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 to the distribution. |
ATO reference 08/2143 Funding agreed with the applicant |
Whether the taxpayer’s supplies of residential units to third party purchasers, by way of assignments of long-term leases granted by a local council to the taxpayer, are to be characterised as supplies of ‘new residential premises’ for the purposes of section 40-75 of the A New Tax System (Goods and Services Tax) Act 1999. The taxpayer constructed the units on the council’s land before the grant of the long-term leases by the council to the taxpayer. |
ATO reference 08/2513 Funding agreed with the applicant |
Whether beverages, with an alcohol content reduced to less than 0.5%, should be regarded as non-alcoholic and consisting of juices of fruits pursuant to Schedule 2 to the A New Tax System (Goods and Services Tax) Act 1999. |
ATO reference 08/3122 Funding agreed with the applicant |
Whether under section 703-50 of the Income Tax Assessment Act 1997 and section 388-55 of the Taxation Administration Act 1953 the Commissioner has the power to extend the time for a taxpayer to lodge a notice to consolidate that takes effect in relation to a prior income year after the taxpayer has lodged its income tax return for that prior year. |
ATO reference 08/3920 Funding for the Full Federal Court appeal was initially offered to the applicant on the basis that the proceeding continued, however funding was later withdrawn as the parties filed consent orders and agreed on the form of the costs orders that the Full Court ought to have made. |
Whether benefits provided by an employer are provided ‘in respect of the employment of the employee’ within the meaning of the definition of ‘fringe benefit’ in section 136(1) and section 148(1) of the Fringe Benefits Tax Assessment Act 1986 in circumstances where the cost of providing the benefits is debited to the employee’s shareholder loan account. The Full Federal Court found in favour of the taxpayer. The Commissioner did not seek special leave. |
ATO reference 08/4828 Funding agreed with the applicant |
The interpretation and application of the definition of ‘exempt non-resident foreign termination payment’ in section 27A of the Income Tax Assessment Act 1936. Specifically, the requirement that a payment made in consequence of termination relate solely to a period of employment during which the applicant is not a resident of Australia. |
ATO reference 08/6144 Funding agreed with the applicant |
This case involves a consideration of present entitlement in the context of trust distributions. In particular, the meaning of ‘share’ in section 97 of the Income Tax Assessment Act 1936 and what constitutes ‘income of the trust estate’ for the purposes of section 97. |
Test case decision
Table 4.5.2 lists cases funded as a test case by the test case litigation program in 2007–08 that received a court or tribunal decision. The table briefly describes the law clarification obtained and the current status of decisions.
TABLE 4.5.2: Test case decisions, 2007–08
Case |
Issue |
Anthony Mark Malouf v Commissioner of Taxation |
Whether for the purposes of claiming a deduction under section 8-1 of the Income Tax Assessment Act 1997 for expenditure incurred in the year of income that a contract for the sale and development of a retirement village was entered into, the investors in the retirement village incurred only the deposit paid upfront, or, as well, the balance of the purchase price which was not payable until the retirement village was completed and a certificate of completion issued. The Federal Court found that the obligation to pay the balance of the purchase price was incurred in the year that the contract for sale was entered into, and the expenditure was consequently deductible in, and referable to, that year. The Commissioner has appealed the decision to the Full Federal Court. A date is not yet set for a hearing. |
Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation |
This case considered the Commissioner’s remission discretion under section 298-20 of Schedule 1 to the Taxation Administration Act 1953 and whether, in the exercise of the discretion to remit, it is relevant to take into account a general consideration of whether or not it can be said that the Commissioner has suffered any harm, or whether the exercise of the discretion is limited to considerations that are specific or peculiar to the taxpayer’s conduct. The Full Federal Court agreed unanimously with the primary judge that the mere fact that no harm has been done is not of itself a matter that can be taken into account in the exercise of the remission discretion. |
Brady King Pty Ltd v Commissioner of Taxation |
Whether a taxpayer who had entered into but not completed a contract for the acquisition of an office block at 1 July 2000 (which it subsequently converted to strata titled home units) ‘held’ or had ‘acquired’ the relevant interest in the stratum units at that date in accordance with section 75-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 and, if so, whether the taxpayer’s valuation complied with the relevant legislative determination. The Full Federal Court held that because the contract was the genesis or source of the taxpayer’s interest in the stratum units it supplied, the relevant interest was acquired at the time the contract was entered into which was before 1 July 2000. The Full Court remitted the matter to the trial judge for the determination of the margin in accordance with law, which will require consideration of the valuation. |
Commissioner of Taxation v Shane Day |
This case involved the issue of the extent to which abuse of process and issue estoppel apply in revenue matters and whether legal expenses incurred by a taxpayer in defending or otherwise in relation to disciplinary or other action by the taxpayer’s employer, as a result of conduct otherwise than in the performance of the taxpayer’s duties, are deductible pursuant to section 8-1 of the Income Tax Assessment Act 1997. The Full Federal Court considered that there was no issue estoppel in the circumstances. The Full Court also held that the legal expenses incurred in respect of two of the three sets of disciplinary charges were deductible. The High Court granted the Commissioner special leave to appeal. |
Commissioner of Taxation v Donald St Clair Starr and Gary Kevin Hopkins |
Whether, for the purposes of section 226L of the Income Tax Assessment Act 1936, ‘purpose’ referred to in the definition of ‘tax avoidance scheme’ in section 224(2) of the Income Tax Assessment Act 1936 should be construed using a subjective or objective test. The Full Federal Court held that the relevant purpose in section 224(2) was a reference to the actual purpose of the taxpayers in ‘entering into’ or ‘carrying out’ the relevant scheme. |
Commissioner of Taxation v Ostwald Bros Civil Pty Ltd as Trustee for Ostwald Bros Family Trust |
Whether the taxpayer was entitled to an off-road credit pursuant to section 53 of the Energy Grants (Credits) Scheme Act 2003 (‘Energy Grants Act’) for diesel fuel it purchased for use in carrying out earthworks for the construction of a rail line to carry minerals from a mine site to a port and earthworks for the construction of a maintenance road alongside the rail line. Entitlement to the credit depended on whether the earthworks constituted ‘activities undertaken in the preparation of a site to enable mining for minerals to commence’ for the purposes of the Energy Grants Act. In finding that the taxpayer was not entitled to the off-road credit, the Full Federal Court allowed the Commissioner’s appeal against the decision of the Administrative Appeals Tribunal. |
Commissioner of Taxation v Word Investments Ltd |
Whether a body can have charitable purposes when it conducts profitable commercial activities. The Full Federal Court decided that where an organisation raises funds exclusively for a charitable purpose, the fact that it does so through a commercial enterprise does not preclude it from being a charity. The High Court granted the Commissioner special leave to appeal. |
Deputy Commissioner of Taxation v George Dow Taylor Dick |
Whether section 1318 of the Corporations Act 2001 can operate to relieve a director from liability for a penalty arising under Division 9 of Part VI of the Income Tax Assessment Act 1936. Section 1318 empowers the Court to make orders relieving a person from liability with respect to actual or prospective claims made in civil proceedings in respect of ‘negligence, default, breach of trust or breach of duty’. The NSW Court of Appeal allowed the Commissioner’s appeal, holding that section 1318 cannot operate to relieve a director from director penalty liabilities imposed under Division 9 of Part VI of the Income Tax Assessment Act 1936. The High Court refused the taxpayer’s application for special leave. |
Gary Falson v Commissioner of Taxation |
This case concerned the deductibility of a non-employer-sponsored superannuation contribution under section 82AAT(1) of the Income Tax Assessment Act 1936. The case involved the interpretation of ‘eligible person’ within the meaning of section 82AAS(2) of the Income Tax Assessment Act 1936 as modified by the operation of section 82AAS(3). The AAT accepted the Commissioner’s arguments that it is the object or purpose of section 82AAS(3) that all assessable income received or attributable to particular eligible employment is included when calculating the 10% rule, even though it may not all have been subject to superannuation support. |
Gregory Ronald Alfred Clark v Commissioner of Taxation |
In this case, the Full Federal Court held that the taxpayer, who was a magistrate in South Australia, was a ‘judge of a court of a State’ within the meaning of section 7 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 with the consequence that the superannuation contributions made in respect of the taxpayer were not subject to the superannuation surcharge. |
IRG Technical Services Pty Ltd v Deputy Commissioner of Taxation; Kenneth Daniel Owen as Trustee for Owen Family Trust v Deputy Commissioner of Taxation |
These cases examined whether the personal services income of a private company of an engineer and a family trust of another engineer, both of whom contracted with a labour hire firm, satisfied the results test in section 87-18 of the Income Tax Assessment Act 1997. In dismissing the taxpayers’ applications, the Federal Court concluded that not all of the conditions of section 87-18 were satisfied. |
Mark Riddell v Federal Commissioner of Taxation; David Raymond Spriggs v Federal Commissioner of Taxation |
Whether fees paid to player agents by a professional AFL player and a professional NRL player for negotiating employment contracts with new clubs are deductible under section 8-1 of the Income Tax Assessment Act 1997. The Federal Court held that the fees were deductible. The Commissioner appealed this decision to the Full Federal Court. That appeal was heard in May 2008 and the Court reserved its decision. |
Neutral Bay Pty Ltd v Deputy Commissioner of Taxation; MA Howard Racing Pty Ltd v Deputy Commissioner of Taxation; Broadbeach Properties Pty Ltd v Deputy Commissioner of Taxation |
In this matter the Queensland Court of Appeal held that in proceedings under section 459H of the Corporations Act 2001 to set aside a statutory demand neither section 177 of the Income Tax Assessment Act 1936 nor section 105-100 of Sch 1 to the Tax Administration Act 1953 provides that production of a notice of assessment is conclusive (or even prima facie) evidence that the liability to tax is not disputed. The High Court granted the Commissioner special leave. The High Court appeal was heard in June 2008 and the Court reserved its decision. |
Ralph Clarke v Commissioner of Taxation |
The Full Federal Court held that the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 and the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 were constitutionally valid, and that the taxpayer, a former South Australian Member of Parliament, was liable for superannuation contributions surcharge. |
Reliance Carpet Co v Commissioner of Taxation |
Whether a deposit held as security for the performance of a purchaser’s obligations under a contract for sale of land is consideration for a supply, within the meaning of section 9-10 of the A New Tax (Goods and Services Tax) Act 1999, where the deposit is forfeited for failure to perform the obligations. Special leave was granted to the Commissioner to appeal the Full Federal Court decision to the High Court. The High Court allowed the Commissioner’s appeal and found that a vendor of land makes a supply to a purchaser when a contract for sale is entered into, and that the deposit paid by the purchaser was consideration for that supply. |
Terry Hamilton v Commissioner of Taxation |
Whether the taxpayer was entitled to a rebate of tax under section 159M(1) of the Income Tax Assessment Act 1936 in relation to his superannuation pension and whether the taxpayer was entitled to an Undeducted Purchase Price (UPP) deductible amount under section 27H(2) of the Income Tax Assessment Act 1936. The Administrative Appeals Tribunal found that the taxpayer was not entitled to a rebate of tax or an UPP deductible amount as he had already benefited from equivalent taxation concessions when he received the lump sum. |
Victorian Women Lawyers’ Association Inc v Commissioner of Taxation |
The Federal Court held that the taxpayer, an incorporated not for profit association, was a charitable institution, being an organisation whose purposes are beneficial to the community according to the established definition of a ‘charitable organisation’ and therefore exempt from liability to income tax under section 23(e) of the Income Tax Assessment Act 1936 and sections 50-1, 50-5 and 50-10 of the Income Tax Assessment Act 1997. |
Ya’el Frisch v Commissioner of Taxation |
The case addressed deductibility under section 8-1 of the Income Tax Assessment Act 1997 of expenditure incurred by a taxpayer with a disability in employing a person to assist the taxpayer in relation to that disability while they carry out their employment duties. The Administrative Appeals Tribunal found the expenditure to be deductible. |
Other significant cases
Table 4.5.3 lists other significant cases decided by the courts and AAT in 2007–08 and describes the main issues of each case.
TABLE 4.5.3: Significant cases, 2007–08
Case |
Issue |
A Taxpayer v Commissioner of Taxation |
Whether a lump sum payment was an ‘exempt non-resident foreign termination payment’ within the meaning of section 27A of the Income Tax Assessment Act 1936. The AAT affirmed the Commissioner’s view that the lump sum payment related to periods of foreign and Australian service such that it would not satisfy the definition of exempt non-resident foreign termination payment, and that a dissection of the lump sum payment was not permitted under that definition. The taxpayer has appealed to the Federal Court. |
Bluebottle UK Limited v Deputy Commissioner of Taxation |
Whether a notice under section 255 of the Income Tax Assessment Act 1936 can be defeated by the assignment of the right to receive dividends to another non-resident entity that has no tax debts in Australia. The High Court found that despite the assignments the Australian company remained contractually liable to pay the dividends to its shareholders, not to the shareholders’ assignees and was obliged pursuant to section 255 to retain from the dividends sufficient funds to pay the tax due under each assessment. |
Colby Corporation Pty Ltd v Commissioner of Taxation |
Whether a contractor is entitled to an off-road credit under the Energy Grants (Credits) Scheme Act 2003 for diesel fuel supplied to it by the other contracting party on the basis that it was purchased from that party. The Full Federal Court found that the taxpayer had not ‘purchased’ or acquired a proprietary interest in the fuel, notwithstanding that the taxpayer gave valuable consideration under the contract for the supply of the fuel. The taxpayer has sought special leave to appeal to the High Court. |
Commissioner of Taxation v Gino Lenzo |
The Full Federal Court found that the taxpayer obtained a tax benefit from the project for the purposes of paragraph 177C(1)(b) of the Income Tax Assessment Act 1936 because, absent the entire scheme, including the promoter loan, there was no evidence that moneys would have been invested and deductions would have been allowable. The trial judge was wrong to consider the relevant counterfactual to be the taxpayer investing in part of the scheme, but using arm’s length financing. The Full Court also found that the actual scheme was applicable only on the basis of obtaining tax benefits for the taxpayer. The taxpayer has sought special leave to appeal to the High Court. |
Commissioner of Taxation v R & D Holdings Pty Limited |
In this case where a mortgagee had entered into possession of a rental property, the Full Federal Court found that the same business test was not satisfied because the mortgagor was no longer carrying on its rental business. The Court also held that interest accrued but not paid after the business had ceased and which, as a matter of commercial certainty, would never be paid, was nevertheless deductible. Each party applied to the High Court for special leave to appeal the decision. Special leave was refused by the High Court on 14 December 2007. |
ConnectEast Management Ltd as Trustee for the ConnectEast Investment Trust 2 v Commissioner of Taxation |
The taxpayer argued that section 272-127 of Sch 2F to the Income Tax Assessment Act 1936 applied in their case with the consequence that the taxpayer could access an alternative test in determining whether their carry forward losses could be recouped against income of a later year. The Federal Court held that the terms of the section were not satisfied in relation to the taxpayer. |
Davina Bamford, Philip Bamford and P & D Bamford Enterprises Pty Ltd in its capacity as the Trustee of the Bamford Trust v Commissioner of Taxation |
Whether beneficiaries were presently entitled to a ‘share’ of the income of a trust estate under section 97 of the Income Tax Assessment Act 1936 and whether the terms of a trust deed can determine what constitutes ‘income’ of the trust estate for the purposes of section 97. The AAT found that the decision in Zeta Force Pty Ltd v Commissioner of Taxation (1998) 84 FCR 70 was binding on the Tribunal, such that the proportionate view of ‘share’ in section 97 applied to all beneficiaries presently entitled to trust income, regardless of whether they received awards expressed as specific amounts or as proportions of trust income. The AAT also found that the terms of a trust deed cannot determine that ‘income’ of the trust estate is anything other than income according to ordinary concepts. The taxpayers have appealed to the Federal Court. |
Deputy Commissioner of Taxation v Meredith |
The NSW Court of Appeal found that, in the case of a person who is presently a director, the Commissioner ‘gives’ a director penalty notice within the meaning of section 222AOF of the Income Tax Assessment Act 1936 from the time when the notice is posted and not when the notice would have been delivered in the normal course of the post. |
Dixon Consulting Pty Limited v Commissioner of Taxation |
Whether the taxpayer had exclusive use of the business premises for the purposes of the business premises test under Division 87 of the Income Tax Assessment Act 1997 and whether the business premises was physically separate from any premises used by the taxpayer’s employees or the family of the taxpayer’s employees for private purposes. At first instance, the Tribunal set aside the Commissioner’s objection decision. The Commissioner appealed to the Federal Court, which allowed the appeal and referred the matter back to the Tribunal. The Tribunal found that the company did not meet the business premises test because it did not have exclusive use of the business premises and the business premises were not physically separate from any premises used by the taxpayer and his family for private purposes. |
Elisabeth Murdoch v Commissioner of Taxation |
Under various trusts, the taxpayer was income beneficiary for life and her son corpus beneficiary. The taxpayer released the trustees and the trust assets from claims of breach of fiduciary duty, on the trustees’ undertaking to pay her $85 million from monies raised by a reduction of share capital on the shares which constituted the trust estate. The Full Federal Court held that the amount should be characterised by the claim given up. It was noted that the making of the claim ‘as life tenant’ merely explained the taxpayer’s standing to claim for breach of fiduciary duty and did not serve to ‘characterise … the character of the claim’ made. Accordingly, the amount paid in satisfaction of that claim was not income. |
Envestra Limited v Commissioner of Taxation |
Whether a deferred tax liability recognised and measured in accordance with AASB 1020 (AAS 3) Income Taxes (the 1999 standard) is a liability of a joining entity at the joining time under section 705-70 of the Income Tax Assessment Act 1997, where the 1999 standard was not adopted for financial reporting purposes in the period within which the joining time occurred. The Federal Court held that in the absence of an election under section 334(5) of the Corporations Act 2001 to apply the 1999 standard for financial reporting purposes in respect of the period within which the joining time occurred, the 1999 standard could not be applied for the purposes of recognising and measuring the liabilities of the joining entity at the joining time. |
Food Supplier v Commissioner of Taxation |
The AAT held that a promotional, non-food product labelled ‘free’ and packaged with a GST-free food product was supplied for consideration. The supply of the packaged goods was partly taxable and partly GST-free. The apportionment calculation made by the Commissioner to determine the value of the non-food product was held to be reasonable. |
Futuris Corporation Ltd v Commissioner of Taxation |
Whether the taxpayer can challenge an amended assessment (issued to give effect to a Part IVA determination) by way of judicial review under section 39B of the Judiciary Act 1903, where the Commissioner’s ascertainment of the taxpayer’s taxable income may have been incorrect at law. The amended assessment claimed to be invalid is the subject of a separate Part IVC appeal in the Federal Court. As at 30 June 2008 the case had been heard by the High Court and the decision reserved. |
Hastie Group Limited, Hastie Holdings Pty Limited, Austral Refrigeration Holdings Pty Limited and Austral Refrigeration Pty Limited v Commissioner of Taxation |
The case concerned the provisions that quarantine franking credits generated during a period when a company was effectively owned by non-residents. The question was whether, in certain circumstances, those credits could be freed after transfer to the head company of a consolidated group. In affirming the Commissioner’s view that the credits remained quarantined, the Federal Court preferred to have regard to the overall legislative scheme rather than rely on a ‘purely textual analysis of the relevant provisions’. |
KAP Motors Pty Ltd and ACN 087 069 065 Pty Ltd (formerly GAP Motors (NT) Pty Ltd) v Commissioner of Taxation |
Whether section 105-65 of Schedule 1 to the Taxation Administration Act 1953 operates to preclude the entitlement of the taxpayers to a refund of GST paid by them after 1 July 2000 to the Commissioner in respect of holdback payments received by them. The Federal Court found that in circumstances where the Commissioner has conceded that there has been no supply involved in or in connection with the making of the holdback payments, section 105-65 does not operate to preclude the taxpayers from recovering any GST overpaid to the Commissioner by reason of a mistake on the part of the taxpayers. |
McCutcheon v Commissioner of Taxation |
Whether Part IVA of the Income Tax Assessment Act 1936 applied to include the net income of a trust in the assessable income of the taxpayers as trust beneficiaries where the income of the trust has been distributed through a series of trusts to a loss trust and reimbursed from the loss trust to an associate of the taxpayers. The Federal Court agreed with the Commissioner that the arrangement was a scheme to which Part IVA applied. Absent the scheme, it was reasonable to expect that the taxpayers would have been assessed on the net income of the trust as beneficiaries presently entitled to the trust income. |
Metlife Insurance Ltd v Commissioner of Taxation |
In this case, the Federal Court determined as a separate and preliminary question whether the Commissioner’s amended assessment was out of time under section 170 of the Income Tax Assessment Act 1936. The Court found that pursuant to section 170(10AA) of the 1936 Act, the Commissioner could amend an assessment at any time to give effect to the CGT timing provision (s 104-10(3) of the Income Tax Assessment Act 1997) whether the event giving rise to the amendment occurred before or after the making of the assessment sought to be amended. The taxpayer has appealed to the Full Federal Court. |
Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation |
Whether distributions of income by the taxpayer to the loss were a sham, or otherwise ineffective in equity, such that the apparent appointment of the trustee of loss trust as a beneficiary of the interposed trust was to be disregarded. If this was correct then the operation of Division 6 of Part III of the Income Tax Assessment Act 1936, including the trust stripping provisions, would produce a tax liability in the hands of the taxpayer. In dismissing the taxpayer’s appeal, the High Court agreed with the finding of the first instance judge, Kiefel J, that the distributions from the interposed trust to the loss trust were a sham, and that the appointment of the loss trust as a beneficiary of the interposed trust was likewise part of a facade. |
St George Bank Limited v Commissioner of Taxation |
The case concerned the raising of Tier 1 capital by an arrangement involving the issue of debentures to offshore investors by an offshore entity and the sum raised being lent onshore to the taxpayer. The Federal Court held that the interest on the debenture was not deductible as the character of the expenditure was capital in nature. The taxpayer has appealed to the Full Federal Court |
Star City Pty Limited v Commissioner of Taxation |
In this case, the taxpayer successfully bid for a casino licence from the NSW Government. In order to obtain the licence, the taxpayer made a one-off payment of $256 million for the licence, and paid $120 million in prepaid rent for the casino site for first 12 years of the lease. Non-indexed rent of $250,000 was payable annually for the last 87 years. The Federal Court held that the payment was on revenue account as the advantage sought by making the payment was the quiet enjoyment of the casino premises from which the casino business was conducted. The payment did not secure an enduring benefit. The Court also held that Part IVA did not apply as there was no scheme for the purposes of Part IVA but rather ‘a series of disjointed or unconnected steps’. There was also no ‘tax benefit’ because the taxpayer had no reasonable alternative given the State Government set the terms. The Commissioner appealed the Federal Court decision to the Full Federal Court. The Full Federal Court has heard the appeal and the decision is reserved. |
Sydney Refractive Surgery Centre Pty Ltd v Commissioner of Taxation |
The Federal Court held that damages awarded to the taxpayer in defamation proceedings in the Supreme Court of NSW did not constitute income according to ordinary concepts for the purposes of section 6-5 of the Income Tax Assessment Act 1997 because the award was in respect of injury to the taxpayer’s trading reputation brought about by defamatory publications, notwithstanding that the damages had been calculated in terms of lost profits. The Commissioner has appealed to the Full Federal Court. |
Spassked Pty Limited v Commissioner of Taxation; IEL Finance Limited v Commissioner of Taxation; Queensland Trading & Holding Company Limited v Commissioner of Taxation |
This dispute relates to the taxpayers’ appeal to the Full Federal Court against a decision of the Federal Court that the taxpayers’ applications be struck out on the grounds of abuse of process and issue estoppel. The Full Federal Court held that there was no abuse of process or issue estoppel. The proceedings are currently before the Federal Court to consider the substantive issue. |
TACT v Commissioner of Taxation |
The AAT held, relying on the decision of the Full Federal Court in Commissioner of Taxation v Word Investments Ltd [2007] FCAFC 171 (which is on appeal to the High Court), that the taxpayer was a trust for public charitable purposes, and was therefore entitled to be endorsed as an income tax exempt entity under section 50-105 of the Income Tax Assessment Act 1997. The Commissioner has appealed to the Federal Court. |
Tasman Group Services Pty Ltd v Commissioner of Taxation |
Whether amounts advanced by a foreign parent company to its Australian subsidiary (the taxpayer) were commercial debts and whether they were forgiven for the purposes of the commercial debt forgiveness provisions in Division 245 of Schedule 2C of the Income Tax Assessment Act 1936. The Federal Court found that they were, with the consequence that the amount of forgiven debt is applied to reduce the taxpayer’s entitlement to accumulated losses and other deductible amounts. However the Court also found that each debt was used by the foreign parent in carrying on a business through a permanent establishment in Australia. This has the consequence that the forgiven debt is valued without regard to the solvency assumption that generally applies and the notional value of the debt decreases (and hence so does the amount by which the taxpayer’s entitlement to accumulated losses and other deductible amounts is reduced). The Commissioner has appealed this finding to the Full Federal Court and the taxpayer has cross-appealed on all the other issues. |
Trail Bros Steel & Plastics Pty Ltd v Commissioner of Taxation |
Whether Part IVA of the Income Tax Assessment Act 1936 applied to payments by the taxpayer to an employee welfare fund. The AAT concluded it was not possible to identify a Part IVA tax benefit as, absent the scheme involving the payments to the employee welfare fund, some other form of deductible payments would have been made by the taxpayer. The Commissioner has appealed to the Federal Court. |
Vincenzo Princi, Domenic Princi, Mate Tolich and Kevin Dorn v Commissioner of Taxation |
Whether there were questions of law in the claim that the case was distinguishable from the decision in Sleight and whether the AAT had the power to make Part IVA determinations. The Federal Court found that the issues raised by the taxpayers about Sleight were merely factual issues that did not raise questions of law. The Court also found that Part IVA was in issue before the AAT because the taxpayers objected to the application of Part IVA and that ground was properly considered by the Commissioner in making the objection decisions, which were then appealed to the AAT. In addition, the AAT had power to make Part IVA determinations and the Commissioner could give effect to those determinations by virtue of the former subsection 170(7). |
Woodside Energy Ltd v Commissioner of Taxation |
The Federal Court found that in determining taxable profit for the purposes of Resource Rent Tax, hedging losses should not be taken into account, either as expenses in relation to sale (reducing assessable receipts), or as deductible expenditure, as losses did not fall within section 24 of the Petroleum Resource Rent Tax Assessment Act 1987 as expenses related to sales of marketable petroleum commodities or within section 38 as general project expenditure. The taxpayer appealed to the Full Federal Court. |
W.R. Carpenter Holdings Pty Limited v Commissioner of Taxation; W.R. Carpenter Australia Pty Limited v Commissioner of Taxation |
Whether the Commissioner is required to provide particulars in respect of the making of determinations under Division 13 of the Income Tax Assessment Act 1936. As at 30 June 2008 the case had been heard by the High Court and the decision reserved. |
Commonwealth Ombudsman
During 2007–08, the Commonwealth Ombudsman did not complete any external research projects or ‘own motion’ investigations that related to the ATO.
Inspector-General of Taxation
The Assistant Treasurer released four reports by the Inspector-General of Taxation during 2007–08. While the complete reports can be found on the Inspector-General of Taxation website, table 4.5.4 contains summaries.
TABLE 4.5.4: Inspector-General of Taxation reports, 2007–08
Report |
Summary |
Review of Tax Office management of complex issues – case study on research and development syndicates |
This is the final of three cases studies relating to the Inspector-General’s review of our ability to identify and deal with complex issues in reasonable timeframes. There were ten conclusions and one recommendation. The ATO did not agree with or accept a number of the conclusions, but we did accept the conclusion that our communication with affected taxpayers was not always effective and could have been better. We also did not accept the basis of the recommendation that we acted unfairly towards some R&D taxpayers, but we decided to review some cases which were settled prior to our general settlement offer. |
Review of the potential revenue bias in private binding rulings involving large complex matters |
The review looked at whether there was a pro-revenue bias evident in private binding rulings issued by the Commissioner and generally considered practices relating to private binding rulings. We welcomed the Inspector-General’s conclusion that there was no evidence of actual revenue bias in private binding rulings. We agreed that there are perceptions of bias, and therefore generally agreed with the Inspector-General’s recommendations, which were directed towards addressing these perceptions. |
Follow-up review into the Tax Office’s implementation of agreed recommendations included in the six reports prepared by the Inspector-General of Taxation between August 2003 and June 2006 |
The Inspector-General examined the status of recommendations agreed to by the ATO as a result of the first six reviews undertaken by the Inspector-General between August 2003 and June 2006. The Inspector-General found that from 65 recommendations agreed to, the vast majority (62) were found to have been either fully implemented or significant progress had been made towards implementation. No new recommendations were made in this report. |
Review of the Tax Office’s administration of GST audits for large taxpayers |
The review looked at the ATO administration of GST audits when dealing with taxpayers from the large business sector. The Inspector-General made 14 recommendations to the ATO and one recommendation to government. The ATO agreed to 12 of the 14 recommendations. We are establishing a project to implement the recommendations and to consider other matters raised in the report to see if they can inform further improvements to our practices. |
Australian National Audit Office
During 2007–08, the Australian National Audit Office (ANAO) tabled eight performance audits specific to the ATO, one involving the Department of Treasury in consultation with the ATO and one cross-agency audit involving the ATO. Following is our synopsis of the ANAO’s objectives, conclusions and recommendations for each audit, and our responses. The complete audit reports are available on the ANAO website.
TABLE 4.5.5: ANAO audit reports, 2007–08
Audit report |
Summary |
ANAO Audit Report No. 12: Administration of High Risk Income Tax Refunds in the Individuals and Micro Enterprises Market Segments |
This audit assessed our administration of high risk income tax refunds in the individuals and micro enterprises market segments. It examined three key areas:
The ANAO concluded that the ATO seeks to balance client service against the need to maintain refund integrity and protect government revenue. The conclusion reflects the considerable effort and investment that the ATO has made to ensure that appropriate resources, procedures, skilling and governance frameworks are in place to effectively administer high risk income tax refunds. The ATO accepted the five recommendations made by the ANAO and has made progress towards implementation. |
ANAO Audit Report No. 13: The Australian Taxation Office’s Approach Managing Self-Managed Superannuation Funds Compliance Risk |
This is the second of two audits concerning the ATO’s administration of self-managed superannuation funds, pursuant to the provisions of the Superannuation Industry (Supervision) Act 1993. The first audit report, tabled in June 2007, examined the efficiency and effectiveness of our approach to regulating and registering self-managed superannuation funds. This audit examined the effectiveness of our approach to managing the compliance risks of self-managed superannuation funds. Specifically the ANAO examined the processes we use to:
The ATO accepted the six recommendations made by the ANAO and has made progress towards implementation. |
ANAO Audit Report No. 15: Administration of Australian Business Number Registrations Follow-up Audit |
This follow-up audit assessed our progress in implementing the recommendations of Audit Report No.59 2002–03, Administration of Australian Business Number Registrations, having regard to any changed circumstances, or new administrative issues, affecting the implementation of those recommendations. The ANAO found that overall the ATO has substantially implemented the recommendations of the previous audit. As the ABR has been operating in a business as usual environment for about four years, the governance framework of the ABR was also reviewed to extract any lessons learnt that may be useful in developing other whole-of-government initiatives. The ATO accepted the four recommendations made by the ANAO and has made progress towards implementation. |
ANAO Audit Report No. 30: The ATO’s use of Data Matching and Analytics in Tax Administration |
This audit evaluated our corporate management of data matching, focusing on its strategic intent and the achievement of intended outcomes, including cost effectiveness, increased compliance, and improved services provided to taxpayers. For the purpose of this audit, the ANAO understood ‘data matching’ to mean ‘bringing together data from different sources and comparing it’, which includes finding relationships and patterns in large volumes of data. Developments in technology are allowing the ATO to move to increasingly sophisticated approaches in the use of data. The ATO will continue to explore opportunities for the increased use of data to improve the operation of the tax system. The ANAO supports the ATO’s shift to using data matching to support a range of service initiatives. These include the expanded pre-filling initiative and extended use of third party information (for example, real property data) to assist taxpayers in correctly preparing income tax returns, rather than using this data exclusively to support post issue compliance checks. The ATO accepted the six recommendations made by the ANAO and has made progress towards implementation. |
ANAO Audit Report No. 31: Management of Recruitment in the Australian Public Service – cross-agency |
This cross-agency audit assessed whether APS agencies had sound approaches to recruitment to assist in providing the workforce capability to deliver government programs effectively. Sound approaches to recruitment involve:
The report made five recommendations, based on findings from fieldwork at the selected agencies and broader audit analysis, which are likely to be relevant to all APS agencies. The ATO has agreed overall to the recommendations and has developed an action plan to implement these improvements. |
ANAO Audit Report No. 32: The preparation of the Tax Expenditures Statement |
This audit of the Department of Treasury assessed the completeness and reliability of the estimates reported in Tax Expenditures Statement 2006. The audit examined the development and publication of the detailed statement of actual tax expenditures. The ATO had limited involvement in the audit. The ANAO made six recommendations directed at Treasury. The ATO supported Treasury’s response to the recommendations and will support Treasury where appropriate in implementation. |
ANAO Audit Report No. 36: The Australian Taxation Office’s Strategies to Address Tax Haven Compliance Risks |
This audit assessed the ATO’s strategies to address tax haven compliance risks. Particular emphasis was given to our:
The audit did not examine cases related to the promoters of tax haven related schemes, nor the criminal use of tax havens. The ATO accepted the three recommendations made by the ANAO, which aimed at improving our ability to measure the effectiveness of ATO strategies to address tax haven compliance risks. The recommendations relate to strategic risk management, assessing the extent of the risk and measuring the effectiveness of our compliance strategies. |
ANAO Audit Report No 40: The Australian Taxation Office’s Taxpayers’ Charter follow-up audit |
This follow-up audit assessed the ATO’s implementation of the nine recommendations of Audit Report No.19 2004–05 Taxpayers’ Charter, having regard to any changed circumstances affecting implementation of the recommendations. This involved an examination of our:
The audit also considered trends in the development of charters by revenue agencies of other countries. As with the previous audit, this audit did not examine our strategies for monitoring taxpayer conformance with obligations stated in the charter. These strategies are included in the Compliance Program. The ANAO found that the ATO has progressed well in implementing the recommendations made in the first audit, implementing all recommendations in full or part. We accepted with some qualifications the four recommendations made by the ANAO to improve management of our responsibilities under the charter. |
Appendix 6 – Workforce demographics
TABLE 4.6.1: Employees, at 30 June 2008
Full-time |
Part-time |
||||
Classification |
Female |
Male |
Female |
Male |
Total |
Senior executive service 2 |
11 |
25 |
1 |
37 | |
Senior executive service 1 |
66 |
169 |
4 |
3 |
242 |
Executive level 2 |
678 |
1,220 |
69 |
17 |
1,984 |
Executive level 1 |
1,681 |
2,370 |
264 |
42 |
4,357 |
Valuer broadband |
10 |
31 |
2 |
1 |
44 |
APS6 and equivalent |
1,997 |
2,149 |
345 |
49 |
4,540 |
APS5 and equivalent |
1,149 |
1,140 |
208 |
21 |
2,518 |
APS4 and equivalent |
1,598 |
1,196 |
324 |
41 |
3,159 |
APS3 and equivalent |
2,371 |
1,488 |
540 |
88 |
4,487 |
APS2 and equivalent |
495 |
250 |
326 |
100 |
1,171 |
APS1 and equivalent |
29 |
52 |
275 |
36 |
392 |
Graduates |
147 |
98 |
245 | ||
Cadets |
61 |
66 |
127 | ||
TOTAL |
10,293 |
10,254 |
2,357 |
399 |
23,303 |
NOTE: Includes paid ongoing and non-ongoing employees at 26 June 2008, last pay day of 2007–08. Excludes statutory officers and externals.
TABLE 4.6.2: Employees, at 30 June 2007
Full-time |
Part-time |
||||
Classification |
Female |
Male |
Female |
Male |
Total |
Senior executive service 2 |
10 |
22 |
32 | ||
Senior executive service 1 |
67 |
165 |
8 |
3 |
243 |
Executive level 2 |
595 |
1,150 |
48 |
11 |
1,804 |
Executive level 1 |
1,425 |
2,228 |
223 |
39 |
3,915 |
Valuer broadband |
10 |
33 |
2 |
1 |
46 |
APS6 and equivalent |
1,915 |
2,062 |
298 |
45 |
4,320 |
APS5 and equivalent |
1,066 |
1,095 |
229 |
33 |
2,423 |
APS4 and equivalent |
1,557 |
1,274 |
323 |
38 |
3,192 |
APS3 and equivalent |
2,163 |
1,378 |
486 |
91 |
4,118 |
APS2 and equivalent |
855 |
427 |
238 |
48 |
1,568 |
APS1 and equivalent |
21 |
49 |
306 |
41 |
417 |
Graduates |
83 |
95 |
178 | ||
Cadets |
43 |
43 |
86 | ||
TOTAL |
9,810 |
10,021 |
2,161 |
350 |
22,342 |
NOTE: Includes paid ongoing and non-ongoing employees at 28 June 2007, last pay day of 2006–07. Excludes statutory officers and externals.
TABLE 4.6.3: Employees, by line, at 30 June 2007 and 2008
Line |
At 30 June 2007 |
At 30 June 2008 |
Client Account Services |
4,192 |
3,539 |
Goods and Services Tax |
2,591 |
2,518 |
Debt |
2,108 |
2,343 |
Client Contact |
2,068 |
1,901 |
Micro Enterprises and Individuals |
1,496 |
1,874 |
Information and Communications Technology |
1,461 |
1,554 |
Law and Practice |
1,270 | |
Small and Medium Enterprises |
1,063 |
1,178 |
Superannuation |
919 |
1,105 |
Tax Practitioner and Lodgment Strategy |
1,041 |
1,089 |
Large Business and International |
891 |
1,029 |
ATO People |
735 |
598 |
Serious Non-Compliance |
639 |
595 |
Easier, cheaper and more personalised program |
342 |
483 |
ATO Finance |
199 |
410 |
Excise |
279 |
323 |
Compliance Support and Capability |
494 |
287 |
Marketing Communications Line |
270 | |
Governance and Government Relations |
258 | |
Aggressive Tax Planning |
256 | |
Office of the Chief Knowledge Officer |
140 | |
ATO Business Solutions |
108 |
116 |
Office of the Commissioners |
8 |
11 |
Office of the Chief Tax Counsel |
1,046 |
|
ATO Relations |
276 |
|
Policy Management Division |
251 |
|
Australian Valuation Office |
135 |
156 |
TOTAL PAID EMPLOYEES |
22,342 |
23,303 |
NOTE: The figure for Law and Practice includes the Tax Counsel Network.
A number of lines were restructured during 2007–08:
- The Policy Management Division was renamed Governance and Government Relations
- The Office of the Chief Tax Counsel was renamed Law and Practice
- ATO Relations was renamed the Marketing Communications Line
- ATO People and Place was renamed ATO People and the Property branch was moved to ATO Finance
- Aggressive Tax Planning was created from the Aggressive Tax Planning branch of Compliance Support and Capability
- The Office of the Chief Knowledge Officer was created from part of the Easier, cheaper and more personalised program.
TABLE 4.6.4: Employees, by location, at 30 June 2007 and 2008
Region |
At 30 June 2007 |
At 30 June 2008 |
Australian Capital Territory | ||
Canberra |
3,170 |
3,348 |
SUBTOTAL |
3,170 |
3,348 |
New South Wales | ||
Albury |
758 |
742 |
Newcastle |
695 |
719 |
Sydney |
4,447 |
4,548 |
Wollongong |
253 |
256 |
Regional NSW (Grafton, Lismore, Orange, Port Macquarie) |
48 |
68 |
SUBTOTAL |
6,201 |
6,333 |
Queensland | ||
Brisbane |
3,381 |
3,499 |
Cairns |
10 |
10 |
Gold Coast |
74 |
66 |
Townsville |
382 |
389 |
Regional Queensland (Bundaberg, Mackay, Rockhampton, Toowoomba) |
33 |
33 |
SUBTOTAL |
3,880 |
3,997 |
South Australia | ||
Adelaide |
1,837 |
2,084 |
SUBTOTAL |
1,837 |
2,084 |
Northern Territory | ||
Alice Springs |
8 |
8 |
Darwin |
28 |
24 |
SUBTOTAL |
36 |
32 |
Tasmania | ||
Burnie |
74 |
81 |
Hobart |
453 |
521 |
Launceston |
23 |
23 |
SUBTOTAL |
550 |
625 |
Victoria | ||
Geelong |
164 |
163 |
Melbourne |
4,962 |
5,209 |
Regional Victoria (Ballarat, Bendigo, Sale) |
33 |
33 |
SUBTOTAL |
5,159 |
5,405 |
Western Australia | ||
Perth/Western Australian region |
1,509 |
1,479 |
SUBTOTAL |
1,509 |
1,479 |
TOTAL OPERATIVE STAFF |
22,342 |
23,303 |
TABLE 4.6.5: Ongoing employee separations, by line, 2007–08
Line |
Employees |
Client Contact |
212 |
Client Account Services |
169 |
Goods and Services Tax |
136 |
Information and Communications Technology |
124 |
Debt |
112 |
Micro Enterprises and Individuals |
80 |
Large Business and International |
63 |
ATO People |
60 |
Small and Medium Enterprises |
60 |
Law and Practice |
53 |
Superannuation |
45 |
Serious Non-Compliance |
36 |
Tax Practitioner and Lodgment Strategy |
26 |
Governance and Government Relations |
25 |
Excise |
22 |
Easier, cheaper and more personalised program |
21 |
ATO Finance |
19 |
ATO Business Solutions |
16 |
Marketing Communications Line |
15 |
Compliance Support and Capability |
12 |
Aggressive Tax Planning |
0 |
Office of the Chief Knowledge Officer |
0 |
Australian Valuation Office |
15 |
TOTAL OPERATIVE STAFF |
1,321 |
NOTE: The figure for Law and Practice includes the Tax Counsel Network.
A number of lines were restructured during 2007–08:
- The Policy Management Division was renamed Governance and Government Relations
- The Office of the Chief Tax Counsel was renamed Law and Practice
- ATO Relations was renamed the Marketing Communications Line
- ATO People and Place was renamed ATO People and the Property branch was moved to ATO Finance
- Aggressive Tax Planning was created from the Aggressive Tax Planning branch of Compliance Support and Capability
- The Office of the Chief Knowledge Officer was created from part of the Easier, cheaper and more personalised program.
Appendix 7 – Ecological and environmental performance
Ecologically sustainable development
We administer a number of measures that support better environmental outcomes for Australians. Under the Energy Grants Credits Scheme, we pay grants to those who use alternative fuels such as compressed natural gas, liquefied petroleum gas and biodiesel in road transport.
We also pay a grant to either the licensed excise manufacturer or distributor of cleaner fuels under the Energy Grants Cleaner Fuels Scheme. Biodiesel, renewable diesel and ultra-low sulphur diesel are currently eligible for a grant. In 2007–08, businesses received grants covering 50.4 million litres of biodiesel and 9,403.7 billion litres of low sulphur fuels, but no claims were received for grants for renewable diesel.
We collect a levy from importers and manufacturers of new mineral oils and, on behalf of the Department of the Environment, Water, Heritage and the Arts, pay a grant to recyclers of used oil under the Product Stewardship for Oil program. This scheme is intended to encourage environmental and economically sustainable reuse of waste oils. In 2007–08, we paid grants on 527.9 million litres of recycled waste oil.
Fuel tax credits links the payments of grants for users of heavy road vehicles to compliance with emissions criteria and vehicle servicing guidelines set by the Department of Infrastructure, Transport, Regional Development and Local Government. Fuel tax credits also requires taxpayers claiming more than $3 million a year in fuel tax credits to be a member of the Greenhouse Challenge Plus program. For tax periods in 2007–08, 167 taxpayers have claimed more than $3 million in fuel tax credits a year and are members of the Greenhouse Challenge Plus program.
In 2007–08, we set up a small team to focus on the taxation implications of the proposed Carbon Pollution Reduction Scheme. This team is working closely with other government agencies (the Treasury, Department of Climate Change) to ensure that the taxation system supports the desired policy intent of an emissions trading scheme.
We continue to administer a large range of concessions that encourage people to conserve and improve the environment. Deductions are available for expenditure on a wide variety of activities, including:
- gifts to certain environmental organisations
- environmental protection activities, such as cleaning polluted sites
- landcare operations, such as eradicating pests or constructing fences to protect fragile land from degradation
- developing water storage and delivery facilities
- rehabilitating mining, quarrying and petroleum sites
- environmental protection earthworks
- entering perpetual covenants to preserve the environmental value of land.
We also support measures to offset global warming, such as processing deductions for expenditure on forestry managed investment schemes.
Environmental performance
Since 2004, we have had a corporate management practice statement to help manage our operational impact on the environment. Our environmental management plans focus on areas affected by our operational activities, such as energy, procurement, waste management and consumption of goods, and highlight the activities to be implemented and reporting processes.
Our internal certificate of assurance process provides the governance mechanism for reviewing the effectiveness of our efforts to reduce our impact on the environment.
For the second year running our graduate program is conducting a research project on the topic: What can the ATO do as an organisation to contribute to environmental sustainability?
The ATO also conducts an annual Environmental Award where we reward and recognise staff working on active solutions to environmental issues.
Energy
Tenant light and power figures are expected to be below the 2006–07 average of 6,761 megajoules per person. This betters the government’s energy intensity target of 7,500 megajoules per person by 2011–12 five years in advance. However, we need to investigate our central services consumption figure, which in 2006–07 rose to 611 megajoules per square metre, in excess of the 400 megajoules per square metre target for providing services in office buildings.
ACT sites on the whole-of-government energy contract procure 10% approved green energy.
We are ordering smaller vehicles, reducing our fleet size and introducing hybrid cars to reduce our greenhouse gas emissions. In line with the government’s policy on ethanol-blended fuel we have enabled purchase of E10 fuel with fuel cards and encourage fleet users to purchase the fuel where possible.
Water
We are addressing water-saving measures in our lease and refurbishment negotiations. This year a water audit was conducted in one site and we are currently reviewing the recommendations. We have continued with ‘waterless’ car washing.
Green procurement
We consider environmental factors when purchasing goods and services, producing benefits such as reduced energy use by equipment. Our approach also influences the behaviour of contractors and suppliers in relation to packaging and recycling. In 2007–08, our facilities staff involved in procurement attended the Green Procurement 08 training course run by Good Environmental Choice Australia.
Consumption of goods
We have extended the use of recycled paper to ten sites, but in 2007–08, internal paper consumption remained at the 2006–07 average of 10.8 reams per person.
Waste
We have a national secure waste contract for removing and recycling all paper and paper-based products to in-confidence level. Our national general waste contractor operates transfer stations in NSW and Canberra, where our general waste is sorted and recycled. Building management teams have introduced co-mingle recycling programs in some sites, while smaller offices use council kerbside collections.
We recycle toner cartridges nationally via the Close the Loop project, diverting around 2,000 kilograms from landfill. Cardboard is also recycled nationally, and our stationery contract with Corporate Express requires them to collect delivery boxes for reuse.
Property management
In conjunction with our contracted property provider we are encouraging the use of green lease agreements with building owners and seeking 4.5 star ABGR-rated buildings when looking for new tenancies. Examples of this were new national office buildings in Canberra.
Snapshot: Helping conserve Western Australia’s power
In response to the major disruption to Western Australia’s gas supply in June 2008, local tax officers in conjunction with the building owners implemented a range of measures to reduce power consumption. Some measures were implemented at office level, others required individual participation.
Office-wide measures included adjusting the air-conditioning thermostats, taking two lifts out of operation and reducing lift, foyer and other non-essential lighting. Some hot water units and hand dryers were also turned off.
These efforts were in addition to our usual energy management practices of turning off lights in meeting and other rooms when not being used, disconnecting non-essential electrical items and shutting down computers and monitors overnight.
Thanks to staff cooperation and support, the ATO contributed to conserving the state’s energy. And even though things are back to normal, some of the energy saving initiatives will continue.
Appendix 8 – Access for people with disabilities
Disability action plan
In March 2008, we surveyed our progress in implementing our disability action plan. Tables 4.8.1.to 4.8.4 show the outcomes against the four core roles identified in the Commonwealth Disability Strategy: Employer, Provider, Purchaser and Regulators.
Survey results show that we are performing well in relation to a number of the performance indicators, but there is room for improvement (see part 3.3).
TABLE 4.8.1: Disability action plan – our role as regulator
Performance indicator |
Survey results |
|
Sub-plans indicated that there are appropriate arrangements to meet this performance indicator. Information about our regulations is on our website in various publications, including brochures, guides, pamphlets, fact sheets, media material and checklists. For taxpayers with disabilities, we use a range of methods to make information accessible. This includes publications in scaleable HTML format, large print and Braille publications. Information relating to ATO regulations is produced in e-text format on CD and is compatible with screen reader software. In addition, information is provided in either Braille or CD audio format for clients with vision impairment, on request. In consultation with Vision Australia, we continue to refine our website to enhance accessibility. |
TABLE 4.8.2: Disability action plan – our role as purchaser
Performance indicator |
Survey results |
|
Sub-plans reported 100% compliance with this performance indicator. |
|
We did not develop any new purchasing processes with a direct impact on the lives of people with disabilities for this period. |
|
Sub-plans reported 100% compliance with this performance indicator. |
|
There are no publicly-available reports for purchasing contracts. |
|
We have a robust complaints-handling mechanism as prescribed in ATO Procurement Guidelines 2005/23 that is accessible in HTML format. |
TABLE 4.8.3: Disability action plan – our role as provider of services
Performance indicator |
Survey results |
|
Most sub-plans assess the effectiveness of their services using data from web surveys, consultative mechanisms with intermediaries from the disability sector and our complaints process. |
|
We meet this performance indicator by providing alternative avenues for taxpayers to contact us or receive information. Alternatives include TTY phones, accessible shopfronts and client contact areas, and adapted web services for vision impaired people and those who cannot use a mouse. We ensure that people with disabilities have access to information and systems or software that meets their needs. For example, when providing the specifications to external developers for the e-tax program, we ensured e-tax was compatible with adaptive technologies such as screen reader and magnification software. People with disabilities were part of the focus groups and user testing for the new version of e-tax. People with hearing disabilities have access to TTY facilities as part of our enquiry line. |
|
76–99% compliance with this performance indicator. People with disabilities who need to access information which is not accessible can make a request for the information to be produced in alternative formats. This will be actioned by the Special Audience Unit together with the relevant business line. People with disabilities will get this advice when contacting the ATO through call centres correspondence, or directly from the Special Audiences Unit. There is scope for the ATO to market the availability of these different formats more actively to people with disabilities. |
|
Sub-plans reported 100% compliance with this performance indicator. |
|
People with disabilities who wish to make a complaint or lodge a grievance or make ministerial representation can do so via the ATO complaints and grievance mechanism process. Support mechanisms to enable people with disabilities to make a complaint include the National Relay Service for people with a hearing or speech impairment, and information presented in accessible HTML format on our website for people who wish to complain in writing. |
TABLE 4.8.4: Disability action plan – our role as employer
Performance indicator |
Survey results |
|
There are two established networks operating in the ATO. They are the NSW Deaf Tax Officer network and a network of adaptive technology users. Employee Performance and Services provides support to these networks. The ATO is also involved in a collaborative cross-agency working group to determine how a whole-of-government approach might improve support for employees; in particular, people with disabilities and/or special needs using adaptive technology in the APS. |
ATO commitment to providing job opportunities to people with disabilities made clear in all recruitment information. |
Sub-plans report 100% of recruitment information is provided in accessible formats, with 91% of our employees with disabilities who have applied for jobs in the last 12 months reporting that the information is available in accessible formats. Based on annual sampling, 50–75% of sub-plans report that their recruitment information makes it clear that we are committed to providing job opportunities to people with disabilities. This area requires further improvement. |
|
All recruitment contracts with external providers specify the requirement to comply with the Disability Discrimination Act. During the briefings, Clause 11.1 (Compliance with other Laws) of the Deed of Agreement is covered. At the preparation of an Official Order there is also an opportunity to cover the standards of service, which states that the services provided must be consistent with principles and practices of workplace diversity. 50% of employees with disabilities, who indicated their involvement in selection processes over the last 12 months, report reasonable adjustment was not met by the selection committee and/or delegate, even though the employee requested an adjustment to be made. This area requires improvement. On a more positive note, 78% of employees indicated that their manager applies the principle of reasonable adjustment. However, some employees indicated application of reasonable adjustment across the ATO is not consistent, and often depends on the manager’s level of understanding of what is required and the ability of the line to fund these adjustments. There is no prescribed process for portability of the reasonable adjustment within the ATO, so this is an area that requires improvement. |
|
There was no negotiation and certification of ATO agreements during this reporting period. |
Learning and professional development programs include information on disability issues as they relate to the content of the program. |
Sub-plans report that trainers provide the opportunity for people with special needs to disclose at the time of nominating for a training session; however, some employee responses do not support this assertion. All sub-plans report that where programs should include information on disability issues, the information has been included. |
Appendix 9 – Occupational health and safety report
Section 74 of the Occupational Health and Safety Act 1991
The following information details our responses to our legal obligations under section 74 of the Occupational Health and Safety Act 1991 (the OH&S Act).
Section 74(1)(c)
Our Health Safety Management Arrangements were developed by a working group comprising management and unions and signed in October 2007. The Health Safety Management Arrangements replaces the Occupational Health and Safety Agreement 2004. It introduces a new model focusing on consultation and new responsibilities for site leaders, and health and safety representative coordinators in our main sites.
Under the new arrangements we have established a reconstituted National Executive Health, Safety and Wellbeing Committee (NEHSW) that contains equal ratios of employee to management representatives. Employee representatives are both union-nominated and directly elected. The ratio is reflected in our six sub-plan committees. The management representatives on the NEHSW are the chairs of the six sub-plan Health, Safety and Wellbeing committees.
It was also necessary to redesign election processes for health and safety representatives and new consultative approaches with all our employees. The elections for directly elected representatives were completed, as were the required elections for 26 site health and safety coordinators.
Section 74(1)(d)
We maintain our commitment to the comprehensive Safety and Health Program 2005–2010, which is a practical guide to promote a safe work environment and is available for all our employees on our intranet. It provides details of our current OH&S activities and strategies.
As part of our psychological wellbeing program Mind the Mind, we rolled out an education program for leaders called Mind our People. It promotes a supportive work environment, encourages early intervention, builds manager confidence and skills, engages and informs all employees and, in the long term, reduces the costs associated with psychological illness in the workplace.
Tax Safe Map, a detailed health and safety management assessment, has progressed, with action plans and corrective actions being developed and implemented. We have addressed 95% of the critical corrective actions identified and work is underway to implement the remainder.
The Comcare Integration project went live on 17 December 2007. It provides efficient electronic communication for Comcare and the ATO, including electronic submission of documents in relation to workers’ compensation claims.
Participation levels in our Wellbeing program continue to increase. We continue to offer influenza vaccinations for staff; there was a record number of entrants in the 10,000 Steps program in 2007; and we supported our employees to stop smoking through various initiatives.
Section 74(1)(da)
Preventing work-related injury
During 2007–08, we experienced a decrease in the number of injuries reported per 1,000 full-time equivalent employees.
TABLE 4.9.1: Injury rate per 1,000 full-time equivalent employees, by premium year, 2004–05 to 2007–08
Injury rate |
2004–05 |
2005–06 |
2006–07 |
2007–08 |
Number of injuries |
36.66 |
35.10 |
29.12 |
11.69 |
NOTE: The figures in this table vary slightly from last year as measurement has been adjusted from Comcare ‘experience’ year to financial year.
The number of compensable injuries received and accepted by Comcare for 2007–08 again showed a decrease.
TABLE 4.9.2: Compensable injuries received and accepted by Comcare, 2005–06 to 2007–08
Year |
2005–06 |
2006–07 |
2007–08 |
Claims received by Comcare |
860 |
832 |
534 |
Claims accepted by Comcare |
724 |
661 |
305 |
Percentage of claims accepted (%) |
84 |
79 |
57 |
The ATO premium paid to Comcare for 2007–08 was $37.2 million (including GST). Comcare has advised that our premium for 2008–09 is $31.2 million (including GST), a decrease of about $6 million. The rate of injuries per 1,000 staff reduced from 2.52% to 2.04%.
Preventing and managing work-related injury
Table 4.9.3 outlines our performance against the Safety, Rehabilitation and Compensation Commission’s performance indicators. Performance is reported by financial year. Among other things, the table shows that incapacity rates (ie absence due to injury) for all measures continue to improve.
TABLE 4.9.3: Safety, Rehabilitation and Compensation Commission performance indicators, 2004–05 to 2007–08
2004–05 |
2005–06 |
2006–07 |
2007–08 | |
P1.1 | ||||
Incidence of injuries with 5 or more days lost time per 1,000 full-time equivalent employees |
18.60 |
17.65 |
17.79 |
9.25 |
P1.2 | ||||
Incidence of injuries with 30 or more days lost time per 1,000 full-time equivalent employees |
9.42 |
9.47 |
7.99 |
6.13 |
P1.3 | ||||
Incidence of injuries with 60 or more days lost time per 1,000 full-time equivalent employees |
6.52 |
7.21 |
6.13 |
4.17 |
P4 | ||||
Lost time injury (claims) frequency rate |
15.08 |
14.28 |
13.38 |
6.28 |
C1 | ||||
Average time taken (in calendar days from date of injury to claim lodgment with Comcare) |
55 |
64 |
69 |
87 |
R1 | ||||
Percentage of claims with 10 or more days incapacity with a return to work plan (%) |
61 |
72 |
65 |
68 |
R2 | ||||
Quality of return to work (% achieving return to work on case closure) (%) |
90 |
87 |
87 |
84 |
NOTE: The figures in this table vary slightly from last year because they have been updated to reflect the current position for the years shown. The receipt of late claims with updated costs and incapacity periods results in slight variations from year to year.
Section 74(1)(e)
There were 61 notifiable incidents under section 68 of the OH&S Act in 2007–08, as shown in table 4.9.4. This was 14 more than in 2006–07. This was due to our increased efforts to encourage our employees to lodge an incident report in relation to bullying and harassment matters.
TABLE 4.9.4: Notifiable incidents, 2006–07 to 2007–08
Notifiable incident |
2006–07 |
2007–08 |
Death |
0 |
1 |
Serious personal injury |
44 |
49 |
Injury resulting in incapacity of more than 30 days |
0 |
0 |
Dangerous occurrences |
3 |
11 |
TOTAL |
47 |
61 |
Section 74(1)(f)
Under section 41 of the OH&S (CE) Act, there were three investigations carried out by Comcare in 2007–08:
- Investigation Number 3545 – Bullying and Harassment – Comcare found that the ATO had failed to report all incidents of bullying and harassment. Comcare’s recommendation, that the ATO adopt a notification system to ensure compliance, is being implemented.
- Review of investigation 3376 – NT3-NT4 Workpoints (Dandenong) – the review found that all but one of the recommendations from the original investigation had been implemented. Subsequent to the review, the last recommendation was completed.
- Review of investigation 3187 – Air conditioning (Box Hill) – the review found that all recommendations from the original investigation had been implemented.
There were no investigations carried out under section 44, no directions given under section 45, and no prohibition orders under section 46.
There were two provisional improvement notices issued under section 29. Both have been finalised.
Appendix 10 – Consultancy services
Policy
The ATO policy on engaging consultancy services is contained in Corporate Management Practice Statement PS CM 2005/19 Spending of public money – consultancy services. The practice statement provides guidance to tax officers on the policy and procedures to be followed in procuring consultancy services.
The policy is based on the principles stated in the Commonwealth procurement guidelines (January 2005).
The procuremen