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  • Program 1.1 Australian Taxation Office

    Purpose

    The ATO purpose is to contribute to the economic and social wellbeing of Australians by fostering willing participation in the tax and superannuation systems. We achieve this through the delivery of our goals:

    • making it easier for people to participate
    • providing contemporary and tailored services
    • maintaining purposeful and respectful relationships
    • being a professional and productive organisation.

    We have nine strategic objectives to guide us in working towards this purpose. They were developed to provide areas of focus for our efforts across the ATO – from our work meeting our obligations to government and improvements for clients, to our enabling functions of workforce, operations and financial management.

    The ATO corporate plan 2017–18 lists performance measures for each of these objectives so we can assess their success. It also lists one or more significant pieces of work, identified as the strategic initiatives that would be undertaken in the year to deliver the objective.

    The following sections outline the results of the performance measures and progress on reaching our objectives.

    Performance overview

    The ATO performance results for 2017–18 indicate a year of solid performance in achieving our purpose, with some specific areas for improvement. The ATO has 23 measures for Program 1.1 to demonstrate how well we are achieving our purpose. These are set out in the Australian Taxation Office Budget Statements in the Treasury Portfolio Budget Statement (PBS), and in the ATO corporate plan 2017–18. Fifteen of these measures had a 2017–18 performance target, with the target fully achieved for nine and substantially achieved for the remaining six. In 2018–19 we will be looking at what we need to do differently to fully meet our own and the community’s expectations.

    The intention of the annual performance statement is to report on the performance criteria included in the PBS and corporate plan to accurately reflect the performance of the ATO in achieving its purpose.

    In considering our overall assessment of fostering willing participation we have regard to:

    • the complexity of the tax and superannuation environment and how our activities influence the behaviour of clients in meeting their obligations
    • the interrelated nature of performance criteria, which means that results should be viewed as a suite of indicators, rather than in isolation
    • the use of estimates for some criteria.

    In addition, it is important to note the trends over time in results, both in absolute terms and relative to the performance target for the relevant year. We assess our performance targets annually to determine where existing results are expected to be maintained and where future performance is expected to be stronger. Some of our performance targets are under development, due to a lack of relevant external comparators to benchmark ourselves against and the time it can take to baseline results to understand what future improved performance we should be aiming for.

    We will continue to monitor and assess performance as we build on the outcomes we have achieved to date.

    Strategic objective - G1 Government

    The government and the public have trust and confidence in the integrity of the ATO

    Performance results

    By measuring community perceptions, we will understand the level of community trust and confidence in the ATO. By measuring revenue-based performance criteria, we can assess trends in our prevention-before-correction activities, as well as changes in the extent of system assurance.

    The following symbols are used in table 2.1:

    Target achieved

    Target achieved

    Target substantially achieved

    Target substantially achieved

    Target not achieved

    Target not achieved

    Result not available

    Result not available

    TABLE 2.1 G1 results

    Performance criterion

    Source

    Results

    Target

    2015–16(a

    2016–17

    2017–18

    2017–18

    Satisfaction – Community satisfaction with ATO performance(b

    PBS 190
    Corp plan 3, 22

    74%

    75%Target achieved

    71%Target substantially achieved

    75%

    Superannuation – Adjusted employer superannuation contributions as a proportion of adjusted salary and wages

    PBS 190
    Corp plan 3, 22

    10.0%

    10.0%Target achieved

    10.0%Target achieved

    Trend target 10% (statutory superannuation guarantee rate is 9.5%)

    Registration – Proportion of companies registered in the system

    PBS 190
    Corp plan 3, 22

    68.0%

    66.6%Target achieved

    66.2%Target achieved

    The ATO aims to ensure that all entities required to participate in the tax and superannuation system are registered on the ATO client register

    Registration – Proportion of individuals registered in the system

    PBS 190
    Corp plan 3, 22

    127.0%

    101.2%(c)Target achieved

    105.8%Target achieved

    The ATO aims to ensure that all entities required to participate in the tax and superannuation system are registered on the ATO client register

    Lodgment – Proportion of activity statements lodged on time

    PBS 190
    Corp plan 3, 22

    78.1%

    77.0%Target substantially achieved

    77.6%Target substantially achieved

    78.1% activity statements

    Lodgment – Proportion of income tax returns lodged on time

    PBS 190
    Corp plan 3, 22

    82.3%
    (2014–15 returns)

    82.6%Target substantially achieved (2015–16 returns)

    83.0%Target achieved
    (2016–17 returns)

    82.5% income tax returns

    Payment – Proportion of liabilities paid on time by value

    PBS 190
    Corp plan 3, 22

    89.5%

    88.2%Target achieved

    89.5%Target achieved

    Overall 88%

    Debt – Ratio of collectable debt to net tax collections

    PBS 190
    Corp plan 3, 22

    5.3%

    5.6%Target substantially achieved

    5.7%Target substantially achieved

    Below 5.5%

    Audit yield – Cash collected from direct compliance activities

    PBS 190
    Corp plan 3, 22

    $9.6 billion

    $10.2 billion
    Target achieved

    $11.8 billion Target achieved

    $5.96 billion (projected)

    Total revenue effects – Tax revenue from all compliance activities

    PBS 190
    Corp plan 3, 22

    Result not available

    $15 billion

    $16 billion

    See note(d

    Tax assured – Proportion of the tax base where the ATO has justified trust that it is accurate

    PBS 190
    Corp plan 3, 22

    Result not available

    Results not available

    Refer to tax assured in Part 2

    See note(e

    NOTES
    (a) There were no targets set in 2015–16.

    (b) Results presented for 2016–17 reflect a methodology change from previous years. The 2015–16 result reflects survey outcomes for the 2015 calendar year, the 2016–17 result reflects survey outcomes for the 2016–17 financial year.

    (c) Previously, the ATO calculated the measure using active individual TFN registrations for all age groups, compared to the ABS resident population aged 15 to 64. The updated methodology from 2016–17 only includes TFN registrations for individuals aged 15 to 64, to better align to the ABS population used as the comparator.

    (d) The target was under development in 2017–18. In 2018–19, the target is $15 billion.
    (
    e) This target is still under development, due to a lack of relevant external comparators to benchmark ourselves against and the time it can take to baseline results.

    Results analysis

    Of the nine performance measures for strategic objective G1, we fully met four targets, substantially met three, and have two with targets under development.

    Satisfaction – Community satisfaction with ATO performance

    Community satisfaction with ATO performance for 2017–18 was 71%. This is four percentage points below the 2016–17 result and the target of 75%.

    This result was driven by users of our online systems – 66% of clients who use our online services were satisfied with ATO performance.

    We are currently undertaking considerable work on a new tax agent portal and will continue to work hard to improve the online experience for tax professionals, business users and individuals.

    Superannuation – Adjusted employer superannuation contributions as a proportion of adjusted salary and wages

    In 2017–18, total employer superannuation guarantee contributions were 10% of total salary and wages, a result that met the trend target and was stable with the previous two years.

    The trend indicates that some employers are continuing to pay more than the minimum 9.5% superannuation guarantee rate. Through our monitoring of other indicators, such as complaints or notifications received from employees, we also know that some employers are not paying enough. This year, we finalised and published estimates for the superannuation guarantee gap, which will be our primary measure of superannuation guarantee compliance in the future. The ATO follows up on all potential matters of non-compliance.

    Registration – Proportion of companies and individuals registered in the system

    The results support the view that those who should be registered are registered. We continue to undertake research to better inform the baseline we use to determine what the level of individual and company registrations should be.

    Companies

    The results compare the number of companies registered by the ATO to the number of companies registered by the Australian Securities and Investments Commission (ASIC).

    Not all companies that are registered with ASIC have taxation and reporting requirements; this is due to the nature of their corporate structure or the fact that they may not be operational yet. Therefore, the proportion is always expected to be well below 100%. This measure remains fairly stable, with no significant change in the last 12 months. This is expected, as the ATO ASIC Registered Company client population continues to trend in line with Active Company Registrations data direct from the ASIC website.

    Individuals

    The trends in registration of individuals are closely aligned to population growth. The proportion is always expected to remain above 100% because the ATO’s definition of ‘resident’ captures a greater number of people than the ABS estimated resident population. This is particularly true for individuals who have recently migrated to Australia or are short-term visitors, such as seasonal workers.

    Lodgment – Proportion of activity statements and income tax returns lodged on time

    Activity statements

    On-time lodgment performance for 2017–18 activity statements finished the year at 77.6%. This is a 0.6 percentage point improvement from the 2016–17 end-of-year result and 0.5 percentage points below the target of 78.1%.

    End-of-year results for on-time lodgment of monthly and annual activity statements performed well against the total target. Quarterly activity statement performance, while improving slightly, continues to erode overall achievements against the 78.1% target.

    A range of tailored lodgment compliance strategies were implemented during the year, including a greater focus on sole traders in small business. Lodgment outcomes across the population will continue to be analysed to identify additional influencing factors and to expand measures that improve performance.

    Income tax returns

    On-time lodgment performance for 2016–17 income tax returns finished the year at 83.0%. This is an improvement of 0.4 percentage points, compared to the 2016–17 end-of-year results for 2015–16 income tax returns.

    This result is 0.5 percentage points above the end-of-year target of 82.5%.

    The trend of increased on-time lodgment of income tax returns is a result of end-to-end strategies, such as tax time messages and stronger enforcement, to encourage a change in client lodgment behaviour.

    Payment – Proportion of liabilities paid on time by value

    After a reduction in payment on time by value performance in 2016–17, 2017–18 results have returned to historic levels, increasing by 1.3 percentage points and achieving the target. The main driver for the increase in performance is companies increasing from 81.9% in 2016–17 to 85.8% in 2017–18.

    We make it as easy as possible for taxpayers to pay their tax on time using a wide range of tools, payment channels and self-serve payment options.

    Debt – Ratio of collectable debt to net tax collections

    The 5.7 % ratio of collectable debt to net tax collections exceeds the target and is a 0.1 percentage point year-on-year increase, driven upward by a range of factors including a year-on-year increase in audit-raised liabilities.

    We know that taxpayers, particularly small businesses, sometimes have cash flow issues and can’t pay their tax on time. To assist, we offer payment plans tailored to individual circumstances.

    For the minority of taxpayers that don’t engage to address their debts we take timely firmer action (for example, garnishee or director penalty) to prevent them gaining an unfair financial advantage, As a last resort we may take stronger action using legal recovery, exercising the same rights available to any other creditor. If a debt remains unresolved we may initiate insolvency. An independent external review of our insolvency decisions completed in June 2018 concluded that our collection practices do not prematurely lead to viable taxpayers being made insolvent.

    Audit yield – Cash collected from direct compliance activities

    In 2017–18, audit yield of $11.8 billion represents an increase of $1.6 billion on the previous year and met the performance target. Audit yield measures the additional direct cash collections of tax revenue arising from an audit or similar downstream compliance activity. This result reflects 2017–18 cash collections in relation to liabilities raised both in the current financial year as well as previous years.

    Total revenue effects – Tax revenue from all compliance activities

    In 2017–18, total revenue effects was $16.0 billion. This amount comprises an audit yield of $11.8 billion and an estimated wider revenue effects of $4.2 billion. There is not yet a performance target to assess this result.

    Methods for estimating wider revenue effects are reviewed and updated each year with the latest information. New and improved techniques have been implemented to broaden the coverage of our preventative and corrective taxpayer engagements while maintaining robust and defensible estimates. Overall, our wider revenue effects estimate has fallen from $4.8 billion in 2016–17 due to refinements to our statistical methodology and lower case-by-case estimates this year. The impact of these factors were partially offset by the introduction of new methods and the incorporation of new work types into our estimate.

    For both wider revenue effects and audit yield, a change in company tax paid is treated as a revenue effect. In reality, company tax receipts can create an entitlement to franking credits for resident shareholders that could offset a portion of these effects in future periods.

    For more information, refer to total revenue effects in Part 2 of this report.

    Tax assured – Proportion of the tax base where the ATO has justified trust that it is accurate

    Tax assured is an estimate of the proportion of tax reported that we are highly confident is correct. This is the first time we have published our estimate for the tax assured measure. As the measure was previously under development, there is not yet a performance target with which to assess this result.

    We estimate that 45.5% of total tax reported in 2015–16 to be assured. To varying degrees, we risk assess all taxpayers however this measure is based on our highest standard of confidence referred to as justified trust. Tax assured is a lag measure based on accrual accounting principles. In most cases, we can only assure tax reported by taxpayers once they have lodged and we have completed our data-matching and taxpayer engagements. Due to this lag effect, our first estimate is based on the 2015–16 financial year.

    By establishing a baseline for this measure for 2015–16, we will be able to track movements in the proportion of tax reported that we consider assured. Over time, changes in this measure will help us assess the effectiveness of our engagement strategies and system controls. Tax assured will be best viewed as a trend as we publish future-year estimates. The measure should also be considered in conjunction with our broader suite of measures, including tax gaps, audit yield and wider revenue effects.

    For further information, refer to tax assured in Part 2 of this report.

    Reaching our objective

    In our 2017–18 corporate plan, we identified initiatives to provide assurance that we are meeting our commitments to government, collecting the right revenue and exercising sound judgment.

    Taskforces

    The ATO has received funding for taskforces to focus on specific threats to the tax and superannuation systems – such as tax avoidance, serious crime, phoenix activity and the cash economy. We aim to provide assurance that the ATO is collecting the right amount of tax.

    In 2017–18, our total taskforce activity raised more than $2.8 billion in tax liabilities. In particular, the work of the Tax Avoidance Taskforce raised liabilities of:

    • over $1.3 billion from multinationals and public groups
    • over $1.1 billion from wealthy individuals and associated groups, including trusts and aggressive tax planning.

    At the end of June 2018, 44 taxpayers have changed, or are in the process of changing, their Australian-sourced sales back onshore as a result of the multinational anti-avoidance law (MAAL). The ATO anticipates an additional $7 billion in sales revenue will be returned to the Australian tax base each year as a result of the MAAL.

    The Serious Financial Crime Taskforce raised over $207 million in liabilities this year and collected over $79 million in cash. One criminal matter was successfully prosecuted, resulting in a custodial sentence of 10 years and three months. The increased capability of the Serious Financial Crime Taskforce enables it to respond to new and emerging risks, including transnational crime impacting on the Australian tax and superannuation systems.

    The Phoenix Taskforce raised over $199 million in liabilities this year and collected over $168 million in cash. The ATO had three successful prosecutions from ATO-related matters. Criminal convictions were recorded in all three cases, with custodial sentences ranging from two to three and a half years.

    Following release of the Black Economy Taskforce report in May 2018, ten measures were announced in the 2018 Federal Budget to address the taskforce’s key recommendations. The new measures and our guidance are expected to significantly influence voluntary compliance.

    The ATO also investigated 182 people for defrauding the Commonwealth. Following these investigations, 23 people were prosecuted and 21 sentencing outcomes were achieved, ranging from three months to eight years imprisonment. Almost 1,900 individuals and companies were prosecuted for failing to lodge, failing to respond to notices, or making false or misleading statements.

    Commitment to government

    To meet our commitments to government, including collecting the right tax at the right time, we are investing effort to maximise voluntary compliance – getting it right upfront and preventing non-compliance.

    For the first time, this year we measured the portion of the tax base where we have high confidence that the amount paid is correct. We call this ‘tax assured’. Estimated tax assured results for the 2015–16 financial year suggest that 45.5% of the revenue base has been assured. This shows that we have confidence over a large portion of the tax base across all markets. For more details on revenue collection see the revenue performance section.

    We also have a commitment to implement new measures and programs that deliver government priorities. We successfully implemented a world-first model for the collection of GST on low value imported goods and the new major bank levy for authorised deposit-taking institutions which we jointly administer with APRA.

    To address concerns around the cash economy, we communicated with over 40,000 small businesses nationally about the potential risks presented when operating as cash-only or mainly-in-cash transactions, and how to find out more about electronic payment options.

    We continued to enforce Australia’s foreign investment rules and improve compliance by foreign investors. As part of this, we screened almost 11,000 residential foreign investment applications and collected over $113 million in fees, identified almost 600 breaches and issued penalties of over $3 million.

    Through our Serious and Organised Crime Program, we target our civil and prosecution responses to those who engage in high-risk organised crime. In 2017–18, we raised over $180 million in liabilities and collected over $21 million in cash through this program.

    We want to ensure that we deal with tax professionals who display or encourage poor compliance behaviours. We moved quickly to identify egregious tax practitioner behaviour and took steps to shield the community. This included 12 tax practitioners having ATO system access withdrawn during 2017–18.

    Superannuation reforms

    Along with protecting revenue, the ATO is charged with protecting people’s superannuation. We work with the superannuation industry to provide information to allow individuals to make informed decisions about their retirement.

    This year we undertook significant work to implement the government’s superannuation reforms. This included developing ways for funds to report information to the ATO, which allows us to assist individuals to not breach their obligations around excess contributions.

    We also reunited people with their lost or unclaimed superannuation, made improvements to the super guarantee charge statement and implemented the event-based reporting framework for self-managed super funds (SMSFs). Our work on new measures included the housing affordability measures (Downsizer Super Contributions and First Home Super Saver Scheme), and changes to the eligibility requirements for personal superannuation contribution deductions.

    The ATO continued to support youth, migrants, temporary residents and Aboriginal and Torres Strait Islander peoples to better understand the tax and superannuation systems. We also improved the client experience this year for temporary residents and super funds by making changes to the Departing Australia Superannuation Payment online system. The improvements allow self-service and access to third-party visa information as part of the Working Holiday Maker measure.

    We made superannuation balance details available via ATO online, allowing individuals to make better decisions relating to their superannuation caps, and eligibility for super co-contributions and spouse contributions tax offset. Two new services were introduced during the year – the Member Account Attribute Service and the Member Account Transaction Service. These require super funds to report their member contributions and transactions when they occur from 1 July 2018. We are working closely with funds to ensure a smooth implementation by 1 April 2019.

    Assurance

    To give the community confidence that the ATO is exercising sound judgment, we seek assurance from a range of channels.

    Under our Independent Assurance of Settlements program, we have engaged four former Federal Court judges and refer the largest and most significant decisions on disputes to them for review. During the year, they reviewed 12 settlements and found that 11 provided a fair and reasonable outcome for the Australian community. Their feedback has provided insight into improving how the ATO undertakes settlements.

    In the one settlement where the assurer could not conclude that the settlement was fair and reasonable, the assurer noted the settlement as ‘a difficult case’, involving unique circumstances. In this settlement, the ATO does not foresee any negative impact on the future compliance of either the taxpayer or the broader community. This is an important topic in light of the ATO’s strong focus on willing participation by taxpayers in Australia’s taxation system and the need to address future compliance rather than just looking at previous non-compliance.

    For more details on settlement cases, see Appendix 1.

    Our largest clients have access to our Independent Review program. Since the introduction of the program in July 2013, there have been 64 reviews conducted for groups with a turnover greater than $250 million. This year we conducted 16 reviews, the most in any year of the program. Only one case has proceeded to litigation in five years of the program. This program has driven improvements in the quality of statement of audit positions for the large market and in clients’ understanding of our audit positions.

    All matters in which the general anti-avoidance rules (GAAR) may apply are considered in accordance with our published practices and, in most cases, referred to the GAAR panel before a final decision is made. The panel members (external business and legal experts and senior ATO officers) provide independent advice on the basis of the facts of the matter to an ATO decision-maker. Of the 35 matters considered in 2017–18, preliminary advice was provided on 15 matters and final advice was provided to ATO decision-makers on a further 20 matters.

    More information about the results of external scrutineers reviews is provided at external scrutiny in Part 4 of this report.

    Commissioner’s remedial power

    Recognising that the law sometimes does not operate the way it was intended, the Commissioner’s remedial power was introduced in 2016–17 to give the Commissioner of Taxation limited powers to modify the operation of tax law in circumstances where entities will benefit, or at least be no worse off, as a result of the modification.

    The Commissioner is supported in this work by the Commissioner’s Remedial Power Advisory Panel, which consists of representatives from the ATO, Treasury and the private sector. Since its introduction in February 2017, the panel has considered 30 possible candidates, with 3 accepted as suitable. While one of these was addressed through the development of a legislative amendment, modifications were made to the operation of:

    • the foreign resident capital gains withholding (FRCGW) regime to reduce compliance costs where property transactions straddle two income years – in October 2017
    • the small business restructure rollover rules to ensure that the transfer of depreciating assets will have no direct income tax consequences – in May 2018.

    A register showing modifications is available on our website at ato.gov.au/CRP and will be expanded over time to improve transparency in the Commissioners remedial power process.

    Strategic objective – G2 Government

    Our influence and insight enable well-designed tax and superannuation law, policy and administration

    Performance results

    Our ability to influence well-designed tax and superannuation policy is dependent on the trust that government and Treasury have in the quality of our insights and advice.

    The following symbols are used in table 2.2:

    Target achieved

    Target achieved

    Target substantially achieved

    Target substantially achieved

    Target not achieved

    Target not achieved

    Result not available

    Result not available

    TABLE 2.2 G2 results

    Performance criterion

    Source

    Results

    Target

    2015–16

    2016–17

    2017–18

    2017–18

    Influence – Government and Treasury perceptions of the ATO and the quality of our advice

    PBS –
    Corp plan 4, 23

    Result not available

    Result not available

    Satisfactory

    See note
    (a)

    NOTE
    (a)This target is still under development, due to a lack of relevant external comparators to benchmark ourselves against and the time it can take to baseline results.

    Results analysis

    Influence – Government and Treasury perceptions of the ATO and the quality of our advice

    The ATO has successfully influenced the design of new policy and law through our advice to Treasury and the Government. The feedback we have received over the year, along with an assessment of the impact of our advice on the settled new policy and law provides the ATO with an understanding of the success of our contribution. The ATO’s advice was generally taken into account by Treasury, and the ATO was largely successful in getting our feedback incorporated into new policy and law design over the year. Of particular note was the impact of our advice on the identification and scoping of 2018–19 Budget revenue measures, the Phoenix package announced in September 2017 and the Tax Expenditure Statement publication.

    Feedback from Treasury highlights areas where there could be improvement, in particular ensuring that the ATO consistently speaks with one voice and there is clarity in respect of our overall position on any given issue. We will focus on these areas in 2018–19 as we continue to improve the ATO’s influence.

    Reaching our objective

    In our 2017–18 corporate plan, we identified initiatives that would contribute towards improving the way tax laws are designed and implemented.

    Treasury partnership

    We continue to see results from our Treasury partnership, where our understanding of the tax and superannuation systems aided in identifying and scoping of revenue measures for the Budget 2018–19. We influenced the design and delivery of measures relating to affordable housing, superannuation guarantee integrity, and the black economy to address tax avoidance, and the Hybrid Mismatch rules, providing guidance on the operation of those rules and the new diverted profits tax. We also provided advice on Budget revenue and administered expenses forecasts.

    Secondments

    Our secondments program, where Treasury and the ATO temporarily engage staff from the other agency, has been a huge boost to the success of our working relationship, substantially improving our shared understanding in developing policy and law. Staff participating in the program return from a secondment with stronger networks and new skills and experience.

    Approximately 110 officers from both agencies have participated in the program since January 2014. This financial year, 36 ATO staff were seconded to Treasury and 13 staff from Treasury were seconded to the ATO.

    Tax gap analysis

    Our analysis of the tax gap plays a key role in improving the design and administration of the tax and superannuation systems. Our tax gap research program helps us understand the system in operation and provides evidence and insights to inform our strategy development, administrative design and input to policy development.

    In 2017–18, we released tax gaps for superannuation guarantee, large corporate groups’ income tax, and tobacco duty. These gaps have informed our employer compliance strategies and the Corporate Tax Avoidance Taskforce, and supported the increased investment in dealing with illicit tobacco and the change to the taxing point for tobacco.

    This year, insights from our tax gap analysis supported increased government funding to bolster our efforts to address the individuals not-in-business income tax gap.

    Even prior to releasing the gap estimate for individuals not in business, our early insights meant we could be proactive in increasing our help and education activities. In the lead up to Tax Time 2018, we shared our observations about over-claiming of work-related expenses and rental deductions, and provided advice on how to avoid errors.

    We are continuing to work through our research program and will publish new tax gaps when we have credible, reliable and meaningful estimates.

    The tax gap is discussed in greater detail in tax gap estimates in Part 2 of this report and on our website at ato.gov.au/taxgap.

    Policy research

    The ATO provides access to high quality tax data to enable policy evaluation and research. We produce detailed micro tax data for the Treasury and Parliamentary Budget Office and work with these organisations on policy costings and analysis.

    We also:

    • publish annual aggregate taxation statistics
    • respond to ad hoc data requests
    • release cross-sectional ‘confidentialised’ individual micro tax data and a new longitudinal file of income tax and superannuation data for external researchers.

    International collaboration

    Our influence is also seen in our international collaboration. Along with Treasury, we engage regularly with the Organisation for Economic Co-operation and Development (OECD) and other tax regulators to share intelligence and work on areas of common concern. We assisted the European Commission to shape the design of their measures for taxing low-value imported goods based on our experience to date.

    This year was the first time that entities deemed to be significant global entities had to prepare and lodge country-by-country reports. Over 3,300 international taxpayers have lodged statements containing details of international related-party dealings, a description of their global operations and a breakdown of revenues, profits, and taxes paid by jurisdiction. We have begun to exchange these reports with more than 50 tax administrations.

    More information about country-by-country reporting is available on our website at ato.gov.au/CbC.

    In our continuing role leading the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC), we are working with other tax authorities to analyse shared data and identify key players in the international arena. The ATO is leading the coordination of the international collaborative response to the Paradise Papers leak, and we are investigating taxpayers with a connection to Australia to better understand their connection to the entities and tax havens featured in the data leak.

    Participation in the system

    We recognise that the vast majority of Australian taxpayers want to do the right thing when it comes to meeting their tax and superannuation obligations.

    The four key indicators we use in assessing the level of participation in the tax and superannuation systems are based on the Measures of tax compliance outcomes: a practical guide issued by the Organisation for Economic Co-operation and Development (OECD) in 2014. The OECD recommended a focus on measuring and improving registration for tax purposes, filing tax returns on time, correctly reporting liabilities, and paying on time.

    The ATO considers these to be indicators of willing participation in the tax and superannuation systems. To support willing participation, we constantly improve our approaches, systems and processes to make it easy for taxpayers to get things right. We are also determined to have strong mechanisms to deter those who do not willingly comply.

    Registration for tax purposes

    Entities need to register for a tax file number (TFN) as a unique identifier for the Australian tax and superannuation systems. Businesses may also need to register for an Australian business number (ABN) to make it easier to interact with other businesses and government, and may need to register for GST in some circumstances. The ATO is working with other government agencies to streamline registration processes for new businesses.

    At the end of June 2018, there were 21.4 million active TFNs registered to individuals, which included around 754,000 new registrations for the year. Of these, 97% were held by people considered to be Australian residents for tax purposes. (The ‘individuals’ group excludes those who are in business – for example, sole traders.)

    There are a further 4.3 million TFNs registered to business entities, along with 7.7 million active ABNs and 2.7 million GST registrations.

    The OECD identifies registration compliance as the most difficult of the four indicators to assess. The proportion of companies and individuals registered in the system is one of our key performance measures; it is based on a comparison of entities registered with us, with the population registered with ASIC (for companies) and calculated by the ABS (for individuals). This is discussed further in performance results in Part 2 of this report.

    Lodging on time

    We continue to introduce new ways to help taxpayers lodge on time – such as sending reminders to those who have been late in lodging in the past, and reducing the burden of completing returns by making the forms simpler and faster to complete.

    We monitor not only whether people lodge, but also whether they lodge on time and – for those who lodge late – how late they are. Figure 2.1 shows the timeliness of lodgments for each of our client groups.

    The timeliness of lodgment of activity statements and income tax returns is an ATO performance measure. This is discussed further in performance results in Part 2 of this report.

     FIGURE 2.1 Lodgment on time, by client group, 2017–18

    Alternative text version is available for this table from the link below.

    Data for figure 2.1 is available as an alternative to this graph.

    Correctly reporting liabilities

    It is not enough for people to submit a return – the information in it needs to be accurate. We are redesigning our systems to make it easier for people to get their returns right, and harder for them to make errors or report incorrectly. For example, the ‘simpler BAS’ form not only reduces the burden of reporting, but reduces the likelihood of errors.

    We are also using data to improve the accuracy of returns. Increased availability of third-party data for pre-filling online returns has significantly improved the accuracy of income reporting for individuals and small businesses. Letting taxpayers know if their entries differ significantly from taxpayers in similar circumstances encourages them to check their information before lodging.

    Our pre-lodgment advice services and taxpayer engagement programs for privately owned and wealthy groups are designed to resolve potential disputes and errors before lodgment. They also support complete and accurate information when returns are subsequently lodged. By working in advance with large taxpayers to agree on tax treatment, we create certainty, for both them and us, about their tax position now and in the future. (See Justified trust for more details.)

    Once returns are submitted, we use data and analytics to check the accuracy of what taxpayers are telling us. Our compliance program focuses on higher risk taxpayers and transactions, and we conduct reviews and audits to confirm information reported to us. Our use of automation to review individuals’ income tax returns is helping us to detect errors, over-claiming and omissions, before a return is issued. We also use third-party data, tax return data and business analytics to identify if intervention may be required.

    We also use estimates of tax gap, tax assured, audit yield and wider revenue effects to understand the health of the system and evaluate the impact we have on willing participation. For example, the estimated tax gap for individuals (not in business) is 6%, or $8.8 billion. Analysis of the tax gap showed most individuals report the right amount of income, although we have concerns about non-reporting of cash wages, and many, including those who use tax agents, are making errors when claiming deductions. See tax gap estimates for more detail.

    Paying on time

    The final element of participation is paying the correct amount on time. It is universally recognised that getting the right amount of tax paid in the first place is the most efficient operation of a tax system from all perspectives, including cost to the taxpayer, administration and the community. This is why promoting willing participation is the most effective and efficient strategy.

    Recognising that there will always be liabilities, we have continued our focus on making it as easy as possible for taxpayers to pay their tax on time. In 2017–18, 89.5% of tax liabilities were paid on time, an increase of 1.3 percentage points from last year.

    Figure 2.2 shows the timeliness of payments for each of our client groups.

    FIGURE 2.2 Payment of liabilities on time, by client group, 2017–18

    Alternative text version is available for this table from the link below.

    Data for figure 2.2 is available as an alternative to this graph.

    Payment on time improved for all client groups in 2017–18 except for the individuals group, which was down by three percentage points from last year.

    The payment of liabilities is an ATO performance measure. This is discussed further in performance results in Part 2 of this report.

    End of Participation in the system feature 

    Strategic objective – C1 Client

    We provide clients with a consistent, tailored and transparent experience

    Performance results

    A consistent, tailored and transparent experience makes it easier for clients to access the services and support they need. By measuring the following performance we will understand how our service affects taxpayers in managing their tax affairs.

    The following symbols are used in table 2.3:

    Target achieved

    Target achieved

    Target substantially achieved

    Target substantially achieved

    Target not achieved

    Target not achieved

    Results not available

    Result not available

    TABLE 2.3 C1 results

    Performance criterion

    Source

    Results

    Target

    2015–16(a

    2016–17

    2017–18

    2017–18

    Compliance cost – Adjusted median cost to individual taxpayers of managing their tax affairs

    PBS 190
    Corp plan 5, 23

    3.6% reduction
    (2014–15 returns)

    1.0% Target achievedreduction (2015–16 returns)

    Unchanged(b) (2016–17 returns)Target achieved

    Remain steady

    Ease – People surveyed agree the ATO makes it easy to access services and information(c

    PBS 190
    Corp plan 5, 23

    78%

    75%Target achieved

    72%Target substantially achieved

    75%

    Successful delivery – Design of the ‘Future state tax and superannuation systems’ initiative

    PBS 190
    Corp plan 5, 23

    Results not achieved

    Results not achieved

    Achieved

    See note(d)

    Notes
    (a) There were no targets set in 2015–16.
    (
    b) The unchanged result for 2017–18 reflects a less than 0.1% change in the adjusted median.
    (c) The 2015–16 result reflects survey outcomes for part of the 2015–16 financial year, whereas the 2016–17 result reflects survey outcomes for the full 2016–17 financial year. The full 2015–16 financial year result is now available for this measure is 75%.
    (
    d) The target was under development in 2017–18. However, all relevant activities have been completed and this performance criterion ceased as at 30 June 2018.

    Results analysis

    Of the three performance measures for strategic objective C1, we fully met one target, substantially met one, and successfully delivered against the remaining measure with a target under development. As an increasing proportion of our interactions with clients occur online, we are particularly focused on better understanding, measuring and assessing online experiences so we can implement strategies to improve performance of our online systems. This issue is also discussed under strategic objective C3 – we provide clients with reliable service.

    Compliance cost – Adjusted median cost to individual taxpayers of managing their tax affairs

    This measure shows any change in the cost to individual taxpayers of managing their tax affairs.

    The adjusted median cost of managing tax affairs for 2016–17 income tax returns was unchanged compared to the previous year. Taxpayers who do not report an amount on this label are not captured in this calculation; however, over recent years a declining trend has emerged in the ratio of taxpayers claiming cost of managing tax affairs to the total individual taxpayer lodging population.

    The cost of managing tax affairs includes the costs of preparing and lodging tax returns and activity statements, fees paid to tax advisers, and the costs of tax reference material. While the impact of external market forces can influence these costs, our strategies for making it easier to comply, by providing better guidance and advice and contemporary and digital services, also influence this trend.

    Ease – People surveyed agree the ATO makes it easy to access services and information

    Of those surveyed in 2017–18, 72% agreed that the ATO makes it easy to access services and information, three percentage points below both the 2016–17 level and the target of 75%.

    This result was driven by a decrease in favourable perceptions of our online systems, from 82% in 2016–17 to 72% in 2017–18. While this represents a 10% decline, it is consistent with the 2017–18 result for offline interactions (also 72%).

    As discussed in the analysis of community satisfaction we continue to work on a range of aspects of the online experience for tax professionals, business users and individuals. Community satisfaction is discussed in more detail in strategic objective G1.

    Successful delivery – Design of the ‘Future state tax and superannuation systems’ initiative

    The two deliverables required to provide evidence of progress of the ‘Future state tax and superannuation systems’ strategic initiative were achieved by 30 June 2018.

    Articulation of the future state

    The 2024 seven-year plan has been developed, including an outline of the focus areas for achieving the desired future state. The future state aligns with the vision and purpose of the ATO, and was developed through extensive research, analysis and review of internal and external environmental factors. The two aspirations of the future state are:

    • building trust and confidence in the ATO and the tax and superannuation systems
    • creating a future that is streamlined, integrated and data-driven.

    Whole-of-organisation roadmap to reach the future state

    A supporting roadmap is being developed, with the objectives of the 2024 plan aligning with the nine strategic objectives in the ATO corporate plan 2018–19.

    Reaching our objective

    In our 2017–18 corporate plan, we identified initiatives that would improve our clients’ experience, and support more willing participation in the tax and superannuation systems.

    Future of the tax and superannuation systems

    Mapping our plans for the ‘future state’ of the tax and superannuation systems was a key piece of work this year. We undertook extensive work to develop a series of strategic objectives that will guide us through to 2024. These objectives will inform the direction of our corporate plans, now and into the future, and will build on the progress of our reinvention and commitment to improving the experience of our clients and staff.

    ‘Every interaction matters’ is at the centre of our plans to ensure our systems, processes and services are streamlined, integrated and data-driven. We are planning for the long term, to identify and implement what we need to be working on to ensure the tax and superannuation systems are well designed and provide a tailored experience, and build trust and confidence in the ATO.

    Service and channel management strategy

    Our service and channel management strategy is focused on improving client interactions and supplements our long-term planning. It guides the way our services and interactions are delivered to provide clients with a well-designed, tailored, fair and transparent experience.

    While the strategy has a long-term focus, a number of improvements for key client interactions were delivered prior to Tax Time 2018, including:

    • significant online improvements to provide tax practitioners with increased visibility of their clients’ accounts and status and the ability to access payment plans
    • piloting a new process to support clients to go digital when receiving their first activity statement, after registering a new role over the phone
    • expanding the client population who are eligible for a ‘push’ income tax assessment in Tax Time 2018, making it easier for clients with basic and stable affairs
    • reducing the volume of statements of accounts issued by paper.

    A key component of the strategy is the ATO service model, which has been designed around the key theme ‘every interaction matters’. Work on the model will continue in 2018–19, with a focus on improving our clients’ experience of the various channels they use to interact with us. The strategy will see us direct our investment and effort into preferred channels, so that the client experience in those preferred channels is optimised.

    Individuals – risks

    Along with looking to the future, we have considered what support we need to provide now. We have developed mitigation strategies to deal with existing and emerging individuals’ risks – that is, risks to the timely and correct lodgment of individuals’ tax returns and payment of any tax debts.

    We take a proactive approach and help individuals to get things right from the start. We know this delivers a better client experience. However, a fair and balanced system requires both preventative and corrective action, in the right measure.

    Making more use of the information available to us, we are working to pre-fill more of individuals’ tax returns, sooner. We extended our data sources, obtained data more quickly following the end of the income year, and expanded the range of information available via our pre-filling services.

    To support individuals to correctly report income in their tax return, we use automated programs that identify and correct errors once a return is lodged checked against the third-party data we receive. This means returns are processed more quickly, reducing refund delays and the need to contact a taxpayer about the error. It also avoids potential debt issues at a later stage.

    We continue to develop services for tax agents and self-preparers, including guidance and education on specific areas of concern (including work-related expenses) and providing assistance to correct errors we have identified. The ATO’s occupation guides and fact sheets on work-related expenses have been well received by tax agents and industry groups.

    With the expansion of our work-related expenses program this year, we interacted with over one million taxpayers in relation to their claims. We used real-time analytics to send ‘nudge’ messages to approximately 230,000 taxpayers (or nearly 7% of myTax users) while they were preparing their return in myTax, asking them to review specific items. As a result, lodgers made adjustments estimated to have saved almost $24 million in government revenue. We also provided risk messaging in the pre-fill report of over 700,000 clients of tax agents, and interacted with over 140,000 taxpayers via letter or audit where their work-related expense claims were higher than expected when compared to their peers, resulting in over $43 million in liabilities.

    Balancing community conversations

    We have been researching how to balance ‘community conversations’ – addressing those perceptions that negatively affect willingness to participate in the tax and superannuation systems.

    In 2017–18, a key focus of the initiative was to understand current community beliefs, attitudes and norms about tax and super, and improve education to new entrants such as youth and migrants. We expanded our existing work with schools by developing resources for primary school teachers to support them teaching tax and super. We are working towards tax and super being embedded into the school curriculum. For students who might be starting in the workforce, we included targeted messages in our communications activities aimed at youth, supplementing messages focused on the cash and hidden economy, and our tax time communications.

    Fostering a greater understanding of, and appreciation for, the tax and superannuation systems is something we will continue to develop. Community perceptions have been benchmarked and we will track results through regular surveys. We also commissioned research to better understand existing beliefs, attitudes and norms in the community, and motivational drivers of engagement.

    Justified trust

    Recognising that taxpayers need tailored support, we have justified trust programs to assure the income and indirect tax compliance of large corporate groups.

    We use tailored one-to-one engagements to obtain justified trust over the top 100 public and multinational businesses. Our focus on understanding and assuring clients from a whole-of-tax perspective has positively shifted client behaviour. The desire to improve the ATO’s level of assurance has led several clients to improve how they work with us.

    Additional funding under the Tax Avoidance Taskforce has enabled us to expand this one-to-one engagement beyond the top 100 to other large public and multinational businesses. Under the Top 1,000 tax performance program, we are engaging with the next 1,000 large public and multinational businesses. This involves using streamlined assurance reviews to obtain additional evidence and gain greater assurance over their income and indirect tax affairs.

    We also work with the largest 320 private and wealthy groups using ongoing one-to-one engagements to obtain justified trust. These tailored engagements have positively influenced client behaviour and prevented aggressive tax planning and disputes.

    More information about the Top 320 Program is on our website at ato.gov.au/top320program.

    More information about our justified trust initiative is also available on our website at ato.gov.au/justifiedtrust.

    Single Touch Payroll

    Introducing Single Touch Payroll (STP) in 2017–18 for employers with 20 or more employees was a major milestone in providing clients with a streamlined and improved experience. STP is designed around an employer’s natural business processes. With STP, we can help employees review the super payments their employer has made on their behalf.

    We worked closely with digital service providers to ensure their STP-enabled software products were ready for employers with 20 or more employees to report from 1 July 2018. At the end of June 2018, we had almost 3,900 employers voluntarily reporting to us each pay day. We have invested in information technology infrastructure to ensure our systems and platforms have sufficient capacity to meet forecasted transaction peaks.

    STP awareness among businesses and intermediaries has improved significantly following our targeted media campaigns and industry engagement activities.

    More information about Single Touch Payroll is available at ato.gov.au/STP.

    Public advice and guidance

    The ATO has a number of initiatives designed to assist clients with their tax affairs. We provide public advice and guidance to help taxpayers understand their rights and obligations in a range of situations.

    We are continuously striving to make our advice meaningful, timely and consistent, using data sources to identify emerging issues, and to prioritise and tailor our products. This year, we increased community participation and consultation in the development process and made it easier for the public to provide feedback on our products.

    For more information about our advice and guidance products, and about the timeliness of draft public rulings, see Appendix 1.

    Pre-emptive advice

    The ATO aims to provide pre-emptive advice to inform people about issues before they emerge. We continue to publish law companion rulings with specific and early guidance on significant new law, which this year included measures relating to housing affordability and GST on low value imported goods. The ATO uses Taxpayer Alerts to share our concerns with the community and to indicate at an early stage when we think an arrangement may not comply with the law.

    To make our advice easier to understand, we have adopted new formats for our publications – such as our series of infographic posters on work-related expenses for specific occupations, in preparation for tax time. A survey of clients and tax professionals found the majority agreed that our guidance made it easy for them to understand their tax obligations, with two out of three clients agreeing they were able to find the guidance they needed.

    We are using data sources to identify emerging issues and to prioritise and tailor our products. For example, intelligence, patterns and trends from our work with public and multinational clients are being captured and used to develop guidance products for this group.

    We continue to engage with clients at an early stage, especially in relation to complex arrangements. This ensures we can influence client behaviour in a timely way, often before a transaction or arrangement has occurred. Our early engagement strategy was extended to all of our client segments in 2017–18.

    Dispute resolution

    Due to the complexity of tax and superannuation law, it is inevitable that some areas of disagreement will arise. Where a taxpayer disagrees with an ATO decision, they have the right to have that decision reviewed. At these times, the ATO provides a dispute resolution service to ensure consistent application of the law and fair outcomes for the community. Our approach is to engage with clients as early as possible, dealing with matters before they reach the courts.

    Since 2015–16, all disputes are managed and resolved by officers who are independent from the original primary decision-making area, and who report to a separate Second Commissioner. We aim for a fair and efficient resolution, minimising the time and costs involved. Approximately two-thirds of objections are resolved within three weeks of being raised with us.

    To get better outcomes for taxpayers and the Australian community, we provide assistance in some cases where taxpayers involved in an objection or dispute process may be disadvantaged by exceptional personal circumstances. Our Dispute Assist program aims to help these unrepresented taxpayers navigate the dispute process, and is also looking at ways to connect taxpayers with independent experts from charities and law firms providing pro-bono services.

    The Commissioner is focused on litigating the right cases, such as where fraud or evasion has occurred, or when it is essential to clarify the law to provide certainty to the community. Our test case litigation program can provide funding to taxpayers in these situations.

    We continued to improve upon our use of alternate dispute resolution techniques, such as our in-house facilitation service and settlements as a means of pragmatically resolving disputes. In 2017–18, we received almost 250 referrals for in-house facilitation (a 99% increase over 2016–17). Each facilitation that resolves a dispute will save taxpayers and the ATO time, costs and prevent the stress that comes with protracted dispute. Importantly, it helps to provide certainty for taxpayers for future years, contributing to willing participation in the tax system.

    See Appendix 1 for more information about:

    • the number of returns that resulted in a dispute and subsequently progressed to litigation over the past three years
    • the stage at which settlements have occurred, and disputes by client group.

     Strategic objective – C2 Client

    We empower and include our partners

    Performance results

    Empowering and including our partners requires that we work together, leveraging each other’s work as appropriate, to achieve better outcomes.

    The following symbols are used in table 2.4:

    Target achieved

    Target achieved

    Target substantially achieved

    Target substantially achieved

    Target not achieved

    Target not achieved

    Result not available

    Result not available

    TABLE 2.4 C2 results

    Performance criterion

    Source

    Results

    Target

    2015–16

    2016–17

    2017–18

    2017–18

    Empowerment – Partner perceptions of how the ATO empowers and includes them

    PBS –
    Corp plan 6, 23

    Result not available

    Result not available

    61%

    See note(a)

    NOTE
    (a) This target is still under development, due to a lack of relevant external comparators to benchmark ourselves against and the time it can take to baseline results.

    Results analysis

    Empowerment – Partner perceptions of how the ATO empowers and includes them

    For 2017–18, the overall result for partner perceptions of how the ATO empowers and includes them was 61%. As this measure was previously under development, there is no performance target against which to assess this result this year.

    Survey questions, focusing on how the ATO works effectively with our partners and intermediaries, were asked of tax professionals from November 2017 and superannuation funds from December 2017. Views across these partner and intermediary groups indicate that tax professionals’ perceptions of how the ATO empowers and includes them were more positive than those of superannuation funds.

    We are working to expand the scope of these survey questions to other intermediary groups.

    Reaching our objective

    In our 2017–18 corporate plan, we identified initiatives to improve the services our partners can provide, and strengthen our relationships with organisations that help us deliver tax and superannuation systems and administration.

    Tax agent services

    We recognise that the quality of service tax agents receive from us also affects the experience of their clients. Improvements to the systems that tax and BAS agents use to access our services were a major initiative in empowering these partners.

    The ATO’s Tax Agent Portal is a secure website, where registered agents and their authorised staff can access a range of tools, services and information about their clients’ record. Work on migrating agents to the ATO online platform has started and will continue through 2018–19, which will further enhance our service offering to agents.

    We met our commitment to ensure that all tax return types are available through the practitioner lodgment service (PLS) by Tax Time 2018. Electronic lodgment has transitioned to a new, interactive, Standard Business Reporting (SBR) platform, delivering a wider range of interactive services to tax and BAS agents through their practice management software.

    We have been co-designing a new system, Online services for agents, to provide tax and BAS agents with access to services currently available through our portals. With the help of the agent community, we are confident the product will meet the needs and expectations of end users and empower them to assist their clients. To supplement this product, we are working to assist digital service providers to integrate the same Online services for agents functionality into the practice management software they develop for tax and BAS agents.

    Working with and through others

    By working with and through others, we can deliver more for our clients. Our Cash Flow Coaching Kit, which we co-designed and tested with registered tax practitioners and their small business clients, is one example. In 2017, the kit was awarded an Australian Good Design Award in the Public Sector category for ‘smart, practical application of design thinking to a widespread, real-life need’ and our approach was recognised as best practice in our work on the Future of the Tax Profession. We are continuing our collaborative approach on a digital version.

    Consultation

    Another key to better consultation and working with our partners is giving them a voice and an advocate within our agency.

    In 2017–18, our consultation focus was on making it easier for individuals and industry bodies to contribute to the development of the tax and superannuation systems, raising matters of their own or responding to matters we are seeking views on.

    Our new Partners Experience Committee was established following the model we used to guide ATO-wide improvements for our various client segments. The committee is charged with setting the ATO’s partnering vision and developing the strategies and plans for optimising outcomes from the interactions we have with our partners.

    We established the Intermediary Relationship Centre to provide intermediaries with a central point of entry to the ATO, commencing from 1 July 2018.

    A new Professional Services Reference Group, made up of key influencers in the tax and BAS agent communities, will focus on understanding issues affecting agents and developing practical solutions to those issues.

    Each of our ATO stewardship groups has diverse representation across the Australian community, ensuring we have access to the views and inputs of as many stakeholders as possible. These groups are responsible for the stewardship of their respective market or product segment. Throughout 2017–18, we identified some opportunities to improve the efficiency and effectiveness of our stewardship groups and we continue to collaborate with key stakeholders to optimise the contribution these groups make to the tax and superannuation systems.

    We have revamped and refreshed the consultation content on ato.gov.au/consultation to make it easier to find information relevant to a particular segment of the community.

    Strategic objective – C3 Client

    We provide clients with reliable service

    Performance results

    An increasing proportion of our interactions with clients occur online. By measuring the proportion of inbound online transactions for key services we are able to understand the preferred ways of interacting with us and the level of demand for digital services. Measuring availability of our digital systems ensures we understand the reliability of services that support clients digitally.

    The following symbols are used in table 2.5:

    Target achieved

    Target achieved

    Target substantially achieved

    Target substantially achieved

    Target not achieved

    Target not achieved0

    Result not available

    Result not available

    TABLE 2.5 C3 results

    Performance criterion

    Source

    Results

    Target

    2015–16

    2016–17

    2017–18

    2017–18

    Digital – Proportion of inbound transactions received digitally for key services

    PBS 190
    Corp plan 7, 23

    Result not available

    88%Target achieved

    88%Target substantially achieved

    90%

    • income tax returns
     

    PBS 190
    Corp plan 7, 23

     

    96%

    97%

     

    • activity statements
     

    PBS 190
    Corp plan 7, 23

     

    78%

    82%

     

    • tax file number registration
     

    PBS 190
    Corp plan 7, 23

     

    92%

    96%

     

    • payment arrangements
     

    PBS 190
    Corp plan 7, 23

     

    24%

     

    • ABN registrations
     

    PBS 190
    Corp plan 7, 23

     

    100%

     

    • role registrations
     

    PBS 190
    Corp plan 7, 23

     

    73%

     

    Availability – Digital systems and services availability

    PBS –
    Corp plan 7, 23

    Result not available

    Result not available

    99.4%

    See note(a)

    NOTE
    (a) This target is still under development, due to a lack of relevant external comparators to benchmark ourselves against and the time it can take to baseline results.

    Results analysis

    Our capacity to measure and assess our digital systems and services continues to mature and expand in its scope. In 2017–18 we introduced a new performance measure and expanded the scope of another. Where 2017–18 results can be compared to those from 2016–17, we have seen consistent improvements in our digital performance.

    Digital – Proportion of inbound transactions received digitally for key services

    The scope of the measurement methodology was broadened in 2017–18 to include ABN applications, payment arrangements and role registrations. Additionally, the performance target was increased from 85% to 90%. The ATO achieved a result of 88%, representing a 1 percentage point increase compared to the same services in the prior year. Applying the 2017–18 counting rules to 2016–17 would deliver a prior-year result of 87%.

    The digital take-up rates for each of the six services increased throughout 2017–18. However, the inclusion of payment arrangements drove the overall below-target result. In 2017–18, payment arrangements achieved a digital take-up rate of 24%, reflecting the limitations of the current online service offering (which is not available online for all users, or for all circumstances). Clients entering into a payment arrangement via digital channels must satisfy very specific criteria. Those with complex tax affairs are deliberately directed to person-to-person interactions with ATO staff to ensure tailored treatment. The expansion of the digital payment arrangement service offering to tax agents and BAS agents is expected to increase digital take-up during 2018–19.

    A number of key factors are attributed to the increase in the digital take-up rate for component services in 2017–18:

    • Income tax returns – the ATO continues to promote its flagship digital lodgment service, myTax, which was expanded for Tax Time 2016 making it available to all individual taxpayers. A 14% increase in myTax lodgments was supported by the availability of web chat services throughout Tax Time 2017.
    • Activity statements – 2017–18 saw an increase in proactive participation by clients in the ATO’s activity statement digital lodgment channels. Digital lodgments are increasing faster than paper is reducing, reflecting the migration of some existing clients from paper to digital and the ‘onboarding’ new clients into digital channels. Transition strategies include email, SMS, and social media campaigns to promote our online services.
    • TFN registrations – There has been a 40% reduction in paper TFN applications compared to the previous year. The ATO has supported this by continuing to restrict the availability of paper application forms and promoting online application channels via ato.go.au, in our school programs and on atoTV.

    Availability – Digital systems and services availability

    Measuring availability of our digital systems ensures that we understand the reliability of services for clients interacting digitally. We have been monitoring the availability of our digital systems and services since November 2017; therefore, the result shown represents the last eight months of 2017–18. As this measure was previously under development, there is not yet a performance target with which to assess this result.

    The methodology for this measure comprises the availability of six externally facing and four internally facing key IT systems. Availability is the comparison between the planned availability with actual availability of a system for users.

    Over the period of measurement, our systems have been highly available to the community. For systems clients and partners used, availability ranged from 99.67% (ATO online) to 98.68% (SBR2) during this period. For staff, availability ranged from 100% (end user devices) to 99.29% (Siebel).

    Overall, systems have been highly available and maintained stability. We are investing in improvements that continue to increase the resilience and availability of ATO digital services, so that critical services are secure, highly available and scaled appropriately for the expected increase in transaction volumes.

    Reaching our objective

    In our 2017–18 corporate plan, we identified initiatives to modernise and improve the ATO’s technology platforms to ensure they are reliable and meet the expectations of the community and our staff.

    Technology platforms

    The emergence of new technologies, including analytical tools, increased digitalisation, and unprecedented data and information flows, are creating fundamental and rapid change across the economy. This offers significant opportunities to enhance tax and superannuation administration, reduce the burden on the community and automate aspects of revenue collection. The ATO is increasingly becoming a ‘digital business’ to harness these new opportunities.

    We are becoming more connected to the digital ecosystem and, with this, comes increasing demand from the community for ATO digital services that are available, reliable and easy to use. We need to support significantly improved systems resilience, stronger ecosystem partnerships and guard against rising cybersecurity threats. Like many established businesses, our digital services have been built upon legacy foundations that need to be modernised and re-architected to meet the growing demand.

    The ATO’s technology strategy will focus on five priorities for the next 3 to 5 years – to:

    • deliver a modern, stable technology environment, providing reliable, secure services to the community and staff
    • redefine the way our applications and platforms deliver the services of the future to improve client and staff experiences
    • leverage data, insights and natural systems to deliver tailored experiences, streamlined and where appropriate, automated services
    • optimise the business of delivering information technology, our costs, risks and service management to strike the right balance between cost and availability of services
    • develop our workforce, skills and culture to optimise the way we deliver technology with and for the ATO.

    This year, a key focus has been on improving the capacity and performance of the Standard Business Reporting (SBR) channel, including introducing a second cloud-based service, providing more resilience and availability and reducing single points of failure. SBR is our key strategic channel that provides services for SuperStream, Single Touch Payroll and tax professionals, and we are expecting a significant increase in the volumes of transactions these new initiatives will create through SBR.

    In parallel with delivering digital identity to expand our digital services channels, we need to keep pace with technology that protects the integrity and security of client data. The availability of application programming interfaces (APIs) has increased the number of third-party digital service providers (DSPs) with access to our data and the array of services they provide on our behalf.

    As at June 2018, over 250 APIs were being offered to 500 digital service providers, allowing us to integrate our services into business or practice management software used by businesses and tax practitioners. APIs perform a range of registration functions, assisting with tax reporting and employer obligations, assisting tax practitioners, and superannuation reporting.

    To maintain integrity across the digital ecosystem, we developed the DSP Operational Framework, which sets out the minimum requirements a DSP needs to meet to use our APIs. Through adherence to the framework, we are able to mitigate risk and increase security across the digital supply chain. It is an evolving governance model, which will be adapted to meet emerging digital risk.

    Our Cyber Security Operations Centre is actively monitoring DSPs certified under the operational framework and their use of our APIs. This capability continues to mature and increase in sophistication.

    Information technology not only provides services for our clients. Those of our staff not working directly with clients will be supporting someone who does and these officers are, in turn, supported by appropriate systems and hardware.

    This year we modernised our internal systems by giving our staff better tools to help them support our clients. For example, ATO Online Staff View allows our staff to see the screens that an individual client is seeing, which helps our staff better understand how our online products look and function for others. By replicating the client's steps in their own Staff View session, it allows them to provide personalised advice when clients need assistance with online self-services.

    We also improved our service monitoring and management practices so we are able to remediate any incidents or issues in the shortest possible time and reduce any inconvenience to the community. The total number of critical and high priority incidents experienced in 2017–18 was 24% lower than the prior year (around 160 critical and high priority incidents compared to almost 210 in 2016–17).

    To improve our commitment to service availability, the ATO is on-track with developing new best practice benchmarks (service standards). We have been consulting with key stakeholders on the service standards for 2018–19.

    Building confidence

    Australians deserve a robust and well-functioning tax and superannuation system, where voluntary compliance ensures everyone pays their fair share of tax. To achieve this, we need to continue to support taxpayers and the community in building confidence in the system, demonstrating a more transparent and positive attitude to tax and superannuation.

    Negative perceptions about tax and super need to be addressed through effective engagement and communication. It is equally important that we make visible our success in tackling tax avoidance and evasion, communicating our continued and unwavering commitment to making Australia’s tax and superannuation systems fairer and more equitable. During the year, we provided more tailored support to our various client groups to facilitate and encourage voluntary compliance, and make the taxpayer experience helpful and ‘light-touch’.

    We are continuing our efforts to ensure fairness, improve the client experience and be transparent in what attracts our attention. More information is available at ato.gov.au/buildingconfidence.

    Individuals

    Individuals (not in business) are supported by the ATO in a range of ways. Our myTax portal is more streamlined, efficient and personalised and pre-fills information provided to us by employers, banks and government agencies, making it easier for taxpayers to complete their tax return. Our information guides have also been streamlined, making them simpler and easier to understand.

    A penalty relief initiative has been implemented so that when taxpayers make an inadvertent error, by failing to take reasonable care in their income tax returns and activity statements, they are not penalised. We also implemented the total superannuation balance initiative, which simplifies and makes more transparent the superannuation interests of our clients.

    Thousands of taxpayers were assisted through our Tax Help program, with the dedicated work of over 760 volunteers in more than 600 centres. To help taxpayers get their tax returns right, we guided them with 170,000 real-time messages – for example, on work-related expenses, and dividend and interest income.

    We are also tackling those people who do not comply with their obligations, giving the community confidence that we are collecting the right tax.

    See ato.gov.au/taxhelpprogram for more about our Tax Help program.

    Small businesses

    We understand the important role small businesses play in the economy and continue to put in place measures to support them. In 2017–18, we delivered concise tax and superannuation updates to over 2.3 million Small Business Newsroom subscribers. Our New to business essentials email service reached over 419,000 new small businesses, setting them up with the right information from the start. And through our ‘cash-only visits’ program, we supported nearly 5,000 businesses in meeting their tax obligations.

    Almost 3,500 requests for private rulings or guidance were actioned during the year, on issues such as small business concessions, non-commercial losses and personal services income. We also provided guidance on ride-sourcing, accommodation sharing, and the sharing economy more generally.

    Other activities designed to help small businesses meet their tax and superannuation obligations included visits to regional communities, webinars, after-hours assistance via web chat or call-backs, and a range of self-help and public information videos.

    We also work to level the playing field for small businesses doing the right thing, by dealing with those who don’t meet their obligations.

    Tax professionals

    Improving the experience for tax professionals was also a strong focus in 2017–18. We successfully transitioned to the practitioner lodgment service (PLS). This was the most significant milestone in the transition to a new, interactive Standard Business Reporting (SBR) platform that enables a wider range of enriched services to be delivered to tax and BAS agents through their practice management software.

    We commenced implementation of the Cash Flow Coaching Kit with tax professionals who work with small businesses. And, we continue to develop our services for tax agents, including guidance and education on specific areas of concern, and assistance to correct large volumes of tax returns where errors have been identified.

    Privately owned and wealthy groups

    We assisted privately owned and wealthy groups by providing tailored services, based on our understanding of their specific risk position, circumstances, choices and behaviours. This assists in meeting compliance obligations and lowering tax risk through good tax governance.

    As we do across the community, we take action over and above providing help and guidance where necessary with a range of approaches. Through focused taskforces alone, this year we raised liabilities for this group of more than $1.1 billion.

    Public and multinational businesses

    In supporting public and multinational businesses, we improved compliance through close collaboration, including through key tax advisory firms. We worked with our larger clients, applying the justified trust methodology to assure they are paying the right amount.

    Our integrated Tax risk management and governance review guide was updated in January 2018 to help our clients develop a whole-of-tax governance framework and evaluate their strategic and operational risks. We continue to publish timely advice and guidance on important tax matters, and provide earlier certainty on complex issues by issuing more private rulings.

    Our taskforce efforts this year raised liabilities of more than $1.3 billion from taxpayers in this group and in doing so provided them certainty about our views on application of the law.

    Not-for-profit organisations

    Our assistance specifically for not-for-profit organisations included providing up-to-date, tailored information on our website, and our not-for-profit news service. We also established a dedicated phone service for not-for-profit organisations.

    Although most not-for-profits do the right thing, we do take action when we encounter instances where not-for-profit entities are misused to obtain a tax benefit, such as providing individuals or related parties with private benefits or not meeting the requirements for income tax exemption.

    Superannuation funds

    The ATO takes compliance with superannuation guarantee very seriously, as it is about workers’ entitlements under the law, and we investigate all employee complaints about their employers failing to pay superannuation guarantee. In August 2017, the government announced funding to establish the Superannuation Guarantee Taskforce – part of the Superannuation Guarantee Integrity Package – which aims to improve the ATO’s visibility and address the key barriers to compliance.

    We are continuing to educate employers about their superannuation guarantee obligations, and using new data models – nearest-neighbour risk models – to identify non-compliant employers and ensure that employees receive their correct entitlements. These data models are proving to have a high strike rate. As at 30 June 2018, we raised approximately $850 million from our super guarantee case work, compared with $481 million for 2016–17.

    A range of measures were introduced for superannuation funds and their members this year:

    • We deployed the Member Account Attribute Service for reporting changes to members account details (or attributes) when they occur, and the Member Account Transaction Service for reporting contributions at the transaction level. We worked closely with funds to ensure a smooth implementation of these services.
    • Following improvements to the super guarantee charge statement, electronic lodgment of the statements increased from 5% to approximately 50% in the second half 2017–18. In addition, employers can now lodge individual employee shortfall information directly via the business portal.
    • We implemented the housing affordability measures, which enable first home buyers to build a deposit using their super and older Australians to invest the proceeds of downsizing towards their super. In addition, more taxpayers can claim a tax deduction for personal superannuation contributions following changes to the eligibility rules.

    Digitisation of superannuation continued, with the delivery of services that support the transfer of unclaimed superannuation monies to support reuniting super with the member.

    We supported ASIC’s outreach program in the Anangu Pitjantjatjara Yankunytjatjara (APY) Lands in north-west South Australia in a week-long series of community events drawing attention to basic superannuation literacy/education for the remote Indigenous community. This included providing assistance in finding and locating their super, consolidating multiple accounts, early release of super, and options for access once they retire.

    In February 2018, we smoothly transitioned the Small Business Superannuation Clearing House service from the Department of Human Services to become part of ATO online services, with over 186,000 employers or their representatives using the system at that time.

    End of example

     

    Strategic objective – W1 Workforce

    We are a high-performing, responsive and professional workforce

    Performance results

    Highly engaged employees feel empowered and trusted to deliver the best possible client experience. By measuring the level of engagement of our employees, we will better understand the impact of implementing our culture strategy. Diverse workforces hold a key to fostering new ways of thinking, thereby enhancing productivity.

    The following symbols are used in table 2.6:

    Target achieved

    Target achieved

    Target substantially achieved

    Target substantially achieved

    Target not achieved

    Target not achieved

    Result not available

    Result not available

    TABLE 2.6 W1 results

    Performance criterion

    Source

    Results

    Target

    2015–16(a)

    2016–17

    2017–18

    2017–18

    Culture – Level of employee engagement

    PBS 190
    Corp plan 8, 23

    6.5/10

    6.8/10Target achieved

    6.9/10Target achieved

    Greater than or equal to 6.5

    Gender equality – Female representation in the senior executive service (SES) classification level

    PBS 190
    Corp plan 7, 23

    Result not available

    Result not available

    44.2%Target achieved female
    55.8% male

    40% of SES

    Gender equality – Female representation in the executive level (EL) classification level

    PBS 190
    Corp plan 7, 23

    Result not available

    Result not available

    48.6% female
    51.4% maleTarget achieved

    approx. 50%
    of EL staff

    Indigenous representation – Proportion of ATO staff who identify as Indigenous(b)

    PBS 190
    Corp plan 7, 23

    Result not available

    2%

    2.1%Target achieved

    2.1%

    NOTES
    (a) There were no targets set in 2015–16.
    (
    b) The Diversity and inclusion plan 2017–2019 had a target of 2.1% by December 2017 (see the Commissioner of Taxation annual report 2016–17).

    Results analysis

    Our 2017–18 performance against each measure for strategic objective W1 improved, representing continued improvement in the engagement of our staff and the diversity of our workforce.

    Culture – Level of employee engagement

    The June 2018 APS Census run by the Australian Public Service Commission (APSC) shows that our overall engagement of 6.9 out of 10 met the target. The 2018 results for overall engagement are the highest they have been since we began participating in 2012.

    ATO overall engagement results remain above similar sized agencies and the APS average overall.

    Sustained engagement results over the last three years reflect our continued investment in culture and leadership, particularly our efforts to increase opportunities for our people to develop their capability and to better connect our staff and leaders.

    The APSC has introduced a new model of employee engagement for the June 2018 APS Census. While this model will be the preferred APS engagement measure, it does not yet provide longitudinal data. Under this model the ATO employee engagement result was 72%, which is above the result for similar sized agencies and the APS overall.

    Gender equality – Female representation in the SES and EL classification levels

    As at 30 June 2018, female representation in the senior executive service (SES) was 44.2% and executive level (EL) classification was 48.6%. The end-of-year target for female representation in the SES was exceeded, continuing a positive long-term trend. The end-of-year target for females in EL classifications is considered to be met, recognising that small fluctuations in staffing levels make it highly unlikely for this result to be exactly 50%.

    The calculation for this measure is the headcount of ongoing and non-ongoing staff at the substantive SES and EL levels.

    This measure was implemented in accordance with the Australian Government’s Balancing the future: The Australian Public Service gender equality strategy 2016–19. The strategy aims to address the gender imbalance across the APS at all levels, in all agencies.

    Indigenous representation – Proportion of staff who identify as Indigenous

    The proportion of our staff identifying as Aboriginal and Torres Strait Islander in 2017–18 was 2.1%, which met the performance target. This calculation is based on the headcount of ongoing staff who voluntarily disclose their Indigenous heritage.

    The ATO is committed to supporting all current and prospective Aboriginal and Torres Strait Islander employees and to increasing their representation to 2.5% of our workforce in 2018–19, recognising that achieving this measure will be subject to our broader capacity to recruit new staff.

    We are continuing to invest in employment strategies to increase Indigenous representation in our workforce, with the objective of removing barriers to both gaining and retaining employment in the ATO for Aboriginal and Torres Strait Islander people.

    Reaching our objective

    In our 2017–18 corporate plan, we identified initiatives to create enduring change in our culture and workplace, in pace with a rapidly changing environment. We aim to provide contemporary tools and services to the right people at the right time, now and into the future.

    Culture strategy

    Our culture strategy was launched as part of our Reinventing program in 2014 to be more client-focused and better connected across the ATO. The aim was to look for smarter ways to achieve better results for clients. We commissioned a review of the reinvention strategy in late 2017, which found that our culture has shifted positively since 2015 and that the ATO’s cultural traits continue to be valid for our business and relevant to our people. A key quote from an ATO staff member during the review was:

    If something is not right, staff are now saying ‘this is a bad client experience’. Previously it was about ‘internal cycle times’. We now treat it more as a one-stop shop, even when a problem is for another area. We know where to get the answers so we can assist the client rather than ask them to work with different business lines.

    We intend to refresh the culture strategy in 2018–19 to further embed cultural change to support our next wave of transformation, known in the ATO as Towards 2024. We will refocus our attention on further improving the staff experience as a means of ensuring our people are well positioned to support clients into the future.

    Capability framework

    Along with fostering a culture that supports our clients and staff, we understand that we need to ensure our people have the skills they need. We use the ATO capability framework to integrate our people system, particularly in developing our existing highly skilled workforce and attracting skilled new talent. In 2017–18, we chose to focus on leadership and enhancing the professionalisation of our workforce.

    Leadership and management development is available to all staff at all levels in the ATO. Our leadership model has five tiers – leading self, others, managers, the function, and the organisation. We have a suite of leadership and management resources, many of them available online.

    To support the professionalisation of our workforce, the ATO encourages staff to continue their training through on-the-job, work-based, peer/mentor based and experiential learning, along with formal education and training. Our employees are also encouraged to join professional associations to remain current in their particular fields.

    We are committed to building the capability of our staff. In April 2018, we held the inaugural ATO Technical Conference, which involved the presentation of national and local-based continuing professional development events across 21 ATO sites.

    This year, we updated the job profiles and job specific capability statements for the four priority job families (engagement assurance and compliance, analytics risk and intelligence, law, and service delivery). Our work is changing at an increasing rate and our focus in on supporting our staff to use and promote digital services, and to work in innovative ways.

    Workforce plan

    In 2017–18, our workforce planning had a particular focus on our location strategy, which was finalised in August 2017. The strategy sets out how we will determine the appropriate location of ATO functions across our offices into the future. It highlights the increased focus we want to place on providing on-site leadership, flexibility and career development for staff, while balancing effectiveness and efficiency for our business.

    This will enable us to continue to be responsive to the priorities of government and the community, while also providing a better staff experience. Staff can feel more confident that they understand the basis of future decisions about where to locate functions – and that their careers and access to leaders will be key considerations in the decision-making process.

    Strategic objective – O1 Operational

    We are sophisticated and clever in how we use our data

    Performance results

    Making better use of our data allows for early engagement with our clients to help them get things right from the start. It also enables us to identify those who are not doing the right thing. Measuring the proportion of items pre-filled in tax returns will drive changes that make it easier for our clients to do the right thing. It also provides us with increased assurance of the right outcomes.

    The following symbols are used in table 2.7:

    Target achieved

    Target achieved

    Target substantially achieved

    Target substantially achieved

    Target not achieved

    Target not achieved

    Result not available

    Result not available

    TABLE 2.7 O1 results

    Performance criterion

    Source

    Results

    Target

    2015–16

    2016–17

    2017–18

    2017–18

    Tax returns – Proportion of items that are pre-filled

    PBS –
    Corp plan 9, 23

    Result not available

    Result not available

    87.5%

    See note(a)

    NOTE
    (a) This target is still under development, due to a lack of relevant external comparators to benchmark ourselves against and the time it can take to baseline results.

    Results analysis

    Tax returns – Proportion of items that are pre-filled

    The presented result of 87.5% is solely focused on individuals who are not in business. It reflects the proportion of their total income where our pre-filling exactly matched their final income tax return result. This measure uses a dollar-based systems assurance approach, where pre-filling makes it easier for clients to meet their obligations and increases trust and confidence in the accuracy of final tax outcomes.

    To allow for appropriate checking of our pre-fill results against the final income tax return, the methodology for this measure applies a time lag and reflects Tax Time 2016 results. This is to allow sufficient time for lodgment program periods for clients and tax agents to be completed and results assured by the ATO.

    No performance target has been set, as 2017–18 is the first year where this measure has been undertaken. An appropriate target will be set once ongoing trends in results are established and better understood. As our pre-filling strategy matures and reaches into other client segments, we will also look to expand the scope of clients captured by this measure.

    Reaching our objective

    In our 2017–18 corporate plan, we identified initiatives to use more of our data holdings to improve our services and reduce taxpayers’ effort to meet their obligations.

    Getting the most from our data

    The ATO collects information from a wide range of third-party sources, both public and private, and is expanding collection sources, as well as frequency of data sharing. We are working with other agencies to integrate multiple data sets to produce more accurate and useful data than that provided by single data sources. By combining insights from broadly sourced data sets, we can identify relationships, risks and behaviours previously unknown.

    For example, we have used ATO data holdings with:

    • ASIC data – which has increased our understanding and focus on ‘straw’ and ‘shadow’ directors, and high risk companies
    • big structured and unstructured data sets from the Panama and Paradise Papers – enabling us to identify previously unknown relationships, international risks and behaviours, and make great progress in our tax avoidance taskforce work
    • information from external files and internal systems – enabling us to identify offshore tax evasion.

    We use the data and insights we gain from these processes to ensure people and businesses are complying with their registration, reporting, lodgment and payment obligations.

    The effective collection, integration and storage of third-party data also leads to simpler and easier interactions for individuals’ income tax returns. We pre-fill in excess of 80 million transactions for a more streamlined experience and much greater accuracy in reporting. Each year we expand the information sources we use for pre-filling, with information on disposal of shares and units included for Tax Time 2018.

    Along with growing the data we have available, we are also investing in expanding the data literacy of our staff. In June 2018, the ATO launched a program delivering a series of courses to help staff progressively become more comfortable and self-directed in managing, navigating and interpreting the large, complex and sensitive data we hold.

    Enterprise view of client risk

    By matching the data we collect to client records and using it to build our understanding of those clients, we are creating an enterprise view of client risk. This is an integrated whole-of-client, whole-of-system ‘risk profile’. In 2017–18, we completed the integration of our risk models for small business and individual clients.

    When a client’s history is added to their risk profile, the ATO is able to tailor the services clients use and interactions they have with us. In particular, this capability is being used to support the way we deal with clients who have overdue liabilities, providing a tailored experience based on their history with us to balance the needs of the revenue system with the circumstances of the client.

    This is supported by new tools to better use this data, including new indexing, searching and visualisation tools to help our staff deliver a better experience for our clients and get greater value from our information.

    Data infrastructure

    The ATO has invested heavily in technologies that help us collect, store and use data to create benefits for clients and the community on a broad scale and at faster speeds. In order to manage our data, we improved our data infrastructure and the governance around it. We established our data and analytics roadmap outlining key strategies being delivered over four years; this commenced in early 2018. This four-layered program considers technology, data, capability and engaged business.

    We are transitioning to our new Enterprise Data Hub technology to efficiently integrate and store data from third parties with our taxpayer information. This technology is being supplemented with new capabilities to enable us to better manage less-structured information, and enhanced identity-matching capabilities.

    Strategic objective – O2 Operational

    We ensure the integrity and security of our data, to support taxpayer, partner and ATO needs

    Performance results

    Our systems must comply with whole-of-government standards and give the community confidence in the privacy and security of information they share with us. By measuring our compliance with the Protective Security Policy FrameworkExternal Link (PSPF) we understand the level of safeguards and integrity of our systems.

    The following symbols are used in table 2.8:

    Target achieved

    Target achieved

    Substantially achieved

    Target substantially achieved

    Target not achieved

    Target not achieved

    Result not available

    Result not available

    TABLE 2.8 O2 results

    Performance criterion

    Source

    Results

    Target

    2015–16

    2016–17

    2017–18

    2017–18

    Security policy – Level of compliance with Protective Security Policy Framework mandatory requirements

    PBS –
    Corp plan 8, 23

    Result not available

    Result not available

    Compliant

    See note(a

    NOTE
    (a) This target is still under development, due to a lack of relevant external comparators to benchmark ourselves against and the time it can take to baseline results.

    Results analysis

    Security policy – Level of compliance with Protective Security Policy Framework mandatory requirements

    The purpose of this measure is to report the ATO’s overall level of compliance with the 36 mandatory requirements of the PSPF.

    The ATO has shown a strengthened security environment to ensure that it can effectively anticipate and manage security risks for stakeholders and the community.

    There has been significant investment in developing and implementing a communication strategy to ensure staff understand their security obligations. Improvements to staff training and security provisions in contracts strengthened our compliance position.

    The ATO has reported our compliance position with the PSPF to the Attorney-General’s Department. Details on the compliance position are not made public for security reasons.

    Reaching our objective

    In our 2017–18 corporate plan, we identified initiatives to enhance the security of our systems, in terms of client access and resilience to cyberattacks.

    Client identity program

    Traditional ways of delivering ‘siloed’ government services are no longer meeting the needs of the Australian community. Clients expect their dealings with government to be simple, convenient and secure. Currently, there are myriad credentials and processes used by government agencies to verify identity. Security levels vary, with passwords hard to remember and increasingly subject to vulnerabilities. Along with shifting community expectations, there is a need to increase security and assurance around identification, in the face of increasingly sophisticated methods of identity theft and related fraudulent activity.

    Digital identity and the broader digital ecosystem are changing and the ATO is embracing this future. In partnership with the Digital Transformation Agency, we are developing GovPass – a way to manage identity digitally across government. GovPass forms the government’s client identity program, allowing individuals to securely and easily identify themselves, connect with government digital services and authorise people to act on their behalf. Soon, this technology will enable citizens to manage a range of online interactions with government where verification of identity is required.

    During 2017–18, we focused on developing two critical components to GovPass:

    • myGovID for clients to prove their identity via an app on their Smart device
    • the Relationship Authorisation Manager (RAM) for clients to authorise who can transact on behalf of their business.
    • In late 2017, an early release of RAM was launched for the Unique Student Identifier Office of the Department of Education and Training, allowing registered training organisations to transact securely online via their cloud-based software without the need for an AUSkey.

    The current AUSkey business credential solution, which is built on legacy technology and is functionally limited, will end in 2019–20. Together, myGovID and RAM will replace AUSkey and will be available over multiple releases during 2018–19, providing time for clients to make the change.

    More information for software developersExternal Link is available on our website.

    Security

    We recognise that our system security is a matter of great interest to our stakeholders. The ATO is committed to protecting the integrity and security of client data. The ATO reports on information security measures based on the requirements of the PSPF.

    Our capability continues to mature and increase in sophistication. Ongoing work to improve our security to meet emerging threats is on track and will continue in 2018–19. Our program of review and improvement covers people, buildings/assets, information, cybersecurity and appropriate governance arrangements.

    There has been significant investment in developing and implementing a communication strategy to ensure staff understand their security obligations. Strengthened assurance and development of a holistic framework for compliance with PSPF provisions by contracted service providers has occurred, and improvements with the assessment and management of ongoing suitability of staff employed by the ATO has been implemented. Improvements to access management and control measures will be a priority in 2018–19.

    Strategic objective – F1 Financial

    We manage resources with agility in order to improve productivity and realise efficiencies

    One of the ATO’s objectives is to demonstrate that we manage our resources responsibly. This section outlines our results against our performance measures, and progress against this objective.

    For our financial statements (as required by subsection 43(4) of the Public Governance, Performance and Accountability Act 2013), see Part 3 of this report. For details on our financial performance and resource statements (as required by section 17AF(1)(a) and (b) of the Public Governance, Performance and Accountability Rule 2014), see the Financial performance section of this report.

    Performance results

    Measuring our budget and the cost of collection will allow us to actively manage and reduce our operating costs relative to the services we provide to the community. Our focus is on enhancing the client experience while remaining within our budget.

    The following symbols are used in table 2.9:

    Target achieved

    Target achieved

    Target substantially achieved

    Target substantially achieved

    Target not achieved

    Target not achieved

    Result not available

    Result not available

    TABLE 2.9 F1 results

    Performance criterion

    Source

    Results

    Target

    2015–16(a)

    2016–17

    2017–18

    2017–18

    Budget – ATO manages its operating budget to balance

    PBS 192
    Corp plan 11, 23

    0.8% deficit

    0.13% surplusTarget achieved

    1.0% deficitTarget substantially achieved

    +/– 0.6%

    Cost of collection – Cost to collect net $100

    PBS 192
    Corp plan 11, 23

    $0.84

    $0.81Target achieved

    $0.74Target achieved

    Consistent with trend

    NOTE
    (a) There were no targets set in 2015–16.

    Results analysis

    We continue to reduce our operating costs relative to the services we provide to the community by realising efficiencies and improving our productivity.

    Budget – ATO manages its operating budget to balance

    The 2017–18 financial result was an operating deficit of $36.1 million or 1% deficit (excluding ACNC). This result includes $29 million of revenue received at the end of the 2016–17 financial year that allowed the ATO to sustain an operating deficit to support the ATO Systems Improvement Program and key priority projects.

    Cost of collection – Cost to collect net $100

    The decreased cost to collect net $100 met the performance target for 2017–18 and is largely due to the 10.4% increase in collections in 2017–18. The cost to collect gross $100 (excluding GST and its administration costs) decreased from $0.74 in 2016–17 to $0.67 in 2017–18.

    Reaching our objective

    In our 2017–18 corporate plan, we identified initiatives that contribute to greater fiscal management and responsibility for the ATO and the wider Australian Public Service (APS).

    Shared services

    The ATO is committed to the whole-of-government Shared Services Program, which aims to ensure the APS is positioned to respond to the challenges of a rapidly changing environment in tight fiscal circumstances. To ensure effective planning and design of our shared services offering and supporting technology, the ATO is actively engaged with the Department of Finance, other provider agencies and nominated consumer agencies.

    We have been working closely with Finance on the four priority program streams of work (common technology, sensible bundling of services, ‘protected’ shared service offerings, and small-agency solution); and continue to focus on supporting consumer agency readiness for transitioning. Prioritisation of consumer agencies has been agreed, with the ATO commencing the transition first, followed by three other agencies.

    Resource management strategy

    To enhance our financial management capability, we finalised our Resource Management Framework and progressed our resource management strategy, incorporating advice from other agencies and external consultants. The strategy will outline a number of initiatives to help us achieve the objectives set out in the framework and remains a priority for us in 2018–19.

    Strategic planning and budgeting capability

    Work on increasing our strategic planning and budgeting capability this year has enhanced the way we manage our financial resources. We are introducing a project resource estimate tool to replace our former corporate-costing model tools, with a focus on consolidating project information. We are also improving our ability to track the resources used to deliver on new government-funded policies.

    Benefits culture

    In 2017–18, we continued our work to implement a benefits culture – making it ‘business as usual’ to identify benefits arising from investing in new ways of working that can be reinvested into other outcomes for the Australian community.

    Our benefits culture is maturing and promises to provide valuable information as we begin tracking gains from our larger and corporately funded projects. So far, we have secured around $3 million in harvestable benefits (either realised or forecast from future savings) and $1.3 million in realised notional savings from being able to reallocate resources to other priorities. The new approach is being applied in the development of our 2018–19 investment plan.

    Strategic procurement

    We identified opportunities available from strategically focused procurement, using our combined, integrated whole-of-agency approach across a number of supply categories – including recruitment services, business information services and legal services – to deliver business improvements and reductions in costs. By identifying the likely whole-of-agency demand and timing, we can create savings for both our suppliers and the ATO.

    We restructured our procurement business model to reflect a more contemporary category management approach. Reported savings achieved through procurement activities across the full year were $41.4 million in total whole-of-contract savings and $20.6 million in total annualised spend savings.

    The government and the public have trust and confidence in the integrity of the ATO

      Last modified: 26 Oct 2018QC 57101