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. |
10, 11 |
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. |
11, A11 |
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. |
11 |
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 two of the three metrics for this KPI with one 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 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 July 2018, we released the first estimated individuals tax gap, covering taxpayers who are salary and wage earners and investors, but not in business and not high wealth individuals. We estimate that over 93% of income tax we collect from individuals is paid voluntarily, or with little intervention from us.
We also progressed research and analysis for the income tax gaps related to small business and large corporate groups. Our estimate of the large market income tax gap, released in December 2018, was 4.4% of tax payable, confirming high levels of compliance with income tax obligations. The small business income tax gap has also since been released in early 2019–20.
The tax gap is discussed in greater detail on page 50 of the Commissioner of Taxation Annual Report 2018–19 and on our website at ato.gov.au/taxgap.
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 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 2018–19, significant achievements for the ATO’s taskforces included:
- the Tax Avoidance Taskforce raised $1.9 billion in liabilities and $1.1 billion in cash collections (apportioned figures)
- the Serious Financial Crime Taskforce raised $235 million in liabilities and $71 million in cash collections
- the Black Economy program raised $1.1 billion in liabilities
- the Phoenix Taskforce raised $163 million in liabilities and almost $66 million in cash collections.
The total revenue effects for 2018–19 from all of our interventions totalled $15.3 billion, of which penalties and interest made up $2.2 billion.
We assure the tax compliance of large corporate groups and privately owned and wealthy groups through our justified trust program to give the community confidence that large businesses are reporting and paying the right amount of tax. We engage with each of the top 1,100 public and multinational businesses and superannuation funds and the top 320 privately owned and wealthy groups, obtaining positive assurance on a significant proportion of these clients. This year, we assured 50% of the $47 billion of income tax payable by public and multinational businesses for the 2016–17 financial year and increased our assurance of the $40 billion payable by these businesses in 2015–16 from 50% to 58%. We also assured $2 billion of income tax payable by privately owned wealthy groups across multiple income years.
We implemented an integrated compliance approach to identify endemic non-compliers – those organisations that are not engaging in identified criminal behaviour but are failing to comply with multiple obligations. To illustrate the complexity of this work, one group we identified as high risk comprises over 40 entities, with assets totalling approximately $70 million.
The intent of our SMSF compliance program is to provide assurance that SMSFs are meeting their obligations and that SMSF auditors undertake quality audits. We undertake a number of strategies to provide assurance of our key risk areas such as ‘New Registrant Integrity’ and Top 100 SMSF Auditor strategy which are major components of our SMSF work program. These auditors cover 30% of the SMSF population. We made over 50 referrals to ASIC leading to exits from the sector or stringent conditions applied by ASIC to the auditor.
Through our international collaboration with other tax administrators, information is shared to influence tax reform and identify global trends and best practices. Our leadership of the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC), as well as our participation in the Joint Chiefs of International Tax Enforcement Alliance (also known as the J5), continue to deliver insights into how to effectively manage joint initiatives and projects across international tax jurisdictions. This has improved engagement on key issues, such as the Panama and Paradise papers.