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  • KPI 3 performance summary

    Actions undertaken by regulators are proportionate to the regulatory risk being managed

    The following table shows the measures of good regulatory performance and the related metrics. The results of the metrics and analysis are outlined in the Appendix.

    Measure

    Description

    Metric(s)

    3.1

    Apply a risk-based proportionate approach to compliance obligations, engagement and regulatory enforcement actions.

    15

    3.2

    Regularly reassess preferred approach to regulatory risk. Amend strategies, activities and enforcement actions to reflect changing priorities that result from new and evolving regulatory threats, without diminishing regulatory certainty or impact.

    A1, A3, S3

    3.3

    Recognise the compliance record of taxpayers, including using earned autonomy where this is appropriate. Consider all available and relevant data on compliance, including evidence of relevant external verification.

    Note: There are no specific metrics for measure 3.3, as per the ATO Regulator Performance Framework.

    Self-assessment rating: Good

    This assessment is based on the results of the metrics relating to each measure and how our actions were proportionate to the regulatory risk being managed.

    Summary of metric results

    Performance either improved or met target for one of the four metrics for this KPI with one remaining relatively stable and two based on activities.

    Our operational efficiency continues to improve, as evidenced by the decline of our administrative costs relative to the community we serve and the tax revenue we collect. This result highlights the positive outcomes arising from our risk-based proportionate approach to compliance obligations, engagement and regulatory enforcement actions.

    Activity-based examples

    While our emphasis is on helping people willingly comply with their tax obligations, we take action to protect the integrity of the Australian taxation system and ensure everyone pays the right amount of tax. We have been transforming the way we assess risks and the strategies we use to address them.

    We use the risk-differentiation framework to help us assess tax risk and determine the intensity of our response in a coherent, consistent and considered way. It complements the compliance model, which suggests an appropriate choice of remedy. Our risk-differentiation framework and compliance model are openly available on ato.gov.au.

    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.

    We also progressed research and analysis for the gaps related to large and small superannuation funds, and income tax for individuals not in business. These three gaps have since been released in the first few months of 2018–19. 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 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.

    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.

    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 in 2018–19 and beyond.

    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.

    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.

    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.

    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.

    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 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.

    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.

      Last modified: 08 Feb 2019QC 57845