• Individual taxation

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    The proportion of resident individuals registered for a tax file number

    Purpose

    To observe the trend in registration for a tax file number (TFN) by individuals over time by comparing the ATO population to an estimate for the population devised by the ABS.

    Results

    Chart 1: ATO Individual tax file number registration population as a proportion of the ABS Estimated Resident Population

    Chart 1

    Table 1: ATO individual tax file number registration as a proportion of the ABS Estimated Resident Population

     

    2004 - 05

    2005 - 06

    2006 - 07

    2007 - 08

    2008 - 09

    2009 - 10

    Proportion of ABS Population

    N/A

    113%

    110%

    102%

    104%

    103%

    N/A - Tax Registration data is unavailable for this year.

    * The ABS has revised the population for these years. This indicator used the original published data. The impact of the revision reduces the rate by less than 1%.

    Overall this indicator suggests that the ATO has a high level of engagement with the community to ensure that individual taxpayers are registered for a TFN. Strategies such as our Schools Education Program and work with migrant communities seem to be working.

    While there are obviously concerns about the indicator measuring at over 100%, this is primarily due to the different definitions of resident for the ABS and ATO purposes. We think that these definitions and their impact on the populations are consistent over the years examined, so the movement in the trend will still provide a good indication of participation levels.

    The ATO TFN population is larger than the comparable ABS population, principally due to the fact that the tax law definition of 'resident' is broader than the ABS' definition of 'resident'. TFN data includes temporary residents while the ABS data does not and the time spent in Australia to be considered a resident by the ATO is shorter than time the ABS requires.

    Of course, there may also be taxpayers registered in the system who should not be registered. The ATO has undertaken a series of projects to remove individuals that no longer require a TFN and those deemed to be no longer active from the ATO registration data hence the significant drops in 2007-08. This cleansing of the data is the main reason for there being no 2004-05 data, as the ATO is unable to recreate the active population as at 30 June 2005.

    It should be noted that we would expect a high level of registration in Australia, where a TFN is commonly used to streamline interaction with the ATO and Government, like Pay as you go withholding for employees, bank accounts and access to some government benefits.

    Reliability

    This indicator is deemed to have a low-medium level of reliability. This is not because of data quality per se, but because we do not fully understand the differences between the ABS and ATO data.

    Methodology

    This indicator is the proportion of resident individuals registered for a TFN. The Tax File Number is a unique identifier the ATO issues to individuals and entities to help administer tax and other Australian Government systems. Registration enables interaction in the tax, income assistance, support payments, banking and super systems. Taxpayers can apply for a TFN as a stand alone application or in conjunction with an application for an Australian Business Number.

    The ATO actively registered population is derived from the ATO client register and starts with all taxpayers registered by 30 June of each financial year (i.e. for 2009-10 it is all individuals registered by 30 June 2010). From this we exclude individuals who have been indentified by the ATO as being a non-resident for tax purposes and individuals who have been deemed to be no longer active for tax purposes, such as taxpayers who have permanently left Australia and have had no further interaction with the Australia tax system for a significant period. Non-resident individuals are identified through information provided by individuals, their tax agent or by data matching undertaken with the Department of Immigration and Citizenship.

    The estimated resident population data is taken from Table 9 of the ABS publication 3201.0: Population by Age and Sex - Australian States Territories and 3412.0 - Migration, Australia for the particular year. That is the 2005-06 data comes from the 2006 version, not the 2010 version. For the purposes of this indicator we have used the original published series rather than any revisions. The revisions made by the ABS reduce the rate by less than 1%.

    As the full population is not required to be registered for a TFN, we only compare the populations for the ages 15-74, to simulate the population that would most likely be required to register for a TFN.

    Qualifications

    The ATO's TFN population is influenced by the currency of the data, such as departures from Australia for temporary visa holders and delays with identifying inactive taxpayers.

    The ABS population is subject to revision.

    The proportion of individuals lodging an income tax return on time

    Purpose

    To observe the trend in on time lodgments of tax returns by individuals over time.

    Results

    Chart 2: Proportion of individuals lodging an income tax return on time

    Chart 2

    Table 2: Proportion of individuals lodging an income tax return form on time

     

    2003 - 04

    2004 - 05

    2005 - 06

    2006 - 07

    2007 - 08

    2008 - 09

    On time lodgment

    91%

    91%

    91%

    92%

    88%

    95%*

    * 2008-09 data is sourced from the new processing system.

    The indicator measures the number of returns lodged on time as a proportion of the total number of returns lodged within 12 months of the relevant income year (i.e for the 2008-09 income year it is all returns lodged up to 30 June 2010), and shows an upward trend.

    The decline in 2007-08 can be attributed to the Tax Bonus for Working Australians, which led to the lodgment of many tax returns that would normally be lodged outside the 12 months period used in the indicator. The result of this lodgment profile change was a significant increase in the base, returns lodged within twelve months, however as most of these returns were still lodged late, a smaller increase in the returns lodged on time, resulting in an overall drop in the on time lodgment in 2007-08. Netherless the longitudinal trend has been stable around the mid 90% point.

    The increase in 2008-09 may be the result of the change in processing systems; as such it is not possible to yet attribute the increase to improved levels of participation.

    Reliability

    This indicator is deemed to have a medium level of reliability. It is measured consistently over time but there is a small time delay between the period covered by the data and when it becomes available for use.

    Methodology

    This indicator is the proportion of individuals who lodge their income tax return on time. Failure to lodge an income tax return on time may result in a penalty being imposed. The statutory due date for individuals lodging a return is generally 31 October, however individuals may lodge after this date and still be regarded as lodging on time, if their return is prepared by a tax agent or an extension has been arranged with the ATO.

    The indicator was derived by determining the number of individual income tax returns lodged on time compared to those lodged late. Only lodgments within 12 months of the end of the relevant financial year are included, to enable the indicator to be produced in a relatively timely fashion.

    Qualifications

    Only individuals that lodged an income tax return within 12 months of the end of each income year were included in the population.

    For most individuals the lodgment date was used to assess the timeliness although in some cases when a lodgment date was unavailable the processing date was used. There were not a significant number of these instances.

    The correct reporting of income

    Purpose

    To observe the growth in salary and wage reported in income tax returns as compared to the growth in an ABS measure of individuals salary and wage income.

    Results

    Chart 3: Growth in salary and wages reported on income tax returns compared to growth in compensation of employees - wages and salaries estimated by the ABS. Index basis (2000-01 - base year).

    Chart 3

    Growth in wages and salaries estimated by the ABS tracks favourably with the salary and wages reported to the ATO. While the variation in the last few years requires further investigation, the very close correlation between ATO and ABS data suggests high levels of compliance in relation to salary and wage income.

    The PAYG Withholding arrangements applicable to salary and wage income contribute to high levels of compliance. The variations since 2005-06 have prompted more focus by the ATO on employer obligations.

    Reliability

    This indicator is deemed to have a low level of reliability.

    Data quality is good but definitional differences which are still being investigated limit its usefulness as a direct measure of reporting.

    Methodology

    The growth for each data source is shown as an index, using 2000-01 as the base year. The salary and wage data is extracted from ATO data captured from the lodgment of returns. As returns are continually lodged we have restricted the population to returns lodged within twelve months of the end of the reporting period, hence this measure can be impacted by changes in lodgment patterns, such as the change associated with the Tax Bonus.

    Wages and Salaries data is obtained from the Australian System of National Accounts data produced by the ABS and is based on surveys of employees.

    An index for each series was calculated using 2000-01 as the base year (that is, 2000-01 = 100). The trend for both series is then compared.

    Qualifications

    Wages and salaries data from the ABS is based on surveys of employees and so should provide a reasonable external source however:

    • the base salary and wage data from the ATO is incomplete, due to late lodgment of tax returns
    • for comparison purposes we have limited salary and wage data from income tax returns to a 12 month lodgment period.

    The proportion of individual income tax liabilities paid on time

    Purpose

    To observe the trend in on time payment of tax liabilities.

    Results

    Chart 4: Proportion of liabilities paid on time by value and number

    Chart 4

    Table 3: Proportion of liabilities paid on time by value and number

     

    2004 - 05

    2005 - 06

    2006 - 07

    2007 - 08

    2008 - 09

    On time by value

    66%

    69%

    69%

    73%

    68%

    On time by number

    61%

    67%

    70%

    71%

    67%

    The trend shows the value and number of individuals' tax liabilities that are paid on time has increased over the period examined until 2008-09 where a small decline is evident. The decline reflects wider economic conditions, the impact of the economic slowdown on tax collections and the ATO policy on increased deferrals for viable businesses. Since 2004-05 the proportion of payments made on time has remained steady in both number and value. While this may indicate only minimal improvement for the ATO, it should be noted that while the number of transactions has not changed significantly over time, there has been a 60% increase in the amount of liabilities requiring collection.

    Reliability

    This indicator is deemed to have a medium level of reliability. The trends are directly attributable to participation levels and there is minimal bias in the data or methodology.

    Methodology

    This indicator is the proportion of individual tax liabilities paid on time. Individuals have an obligation to pay tax according to their income. Australia operates a tax system which incorporates withholding and instalment arrangements, so most taxpayers have credits withheld during the year. This helps ensure that at the end of the income year they have enough tax withheld to meet their tax liability. However when insufficient credits are withheld the ATO will raise a debt on assessment liability. Liabilities may also be raised as a result of the lodgment of an amended return or as a result of compliance activity.

    This indicator was derived by determining the number and value of liabilities raised and due for payment by the end of the financial year (30 June 2010 for the 2009-10 financial year) by individuals. The due date for payment depends on whether an individual has used a tax agent; an individual has 21 days after receiving notice of assessment to make payment.

    A liability was considered to be paid if the balance outstanding was zero once payments, credit amendments, amounts written off and any other transferred credits/refunds had been taken into account. The payments received from individuals may cover more than one liability but are recorded on ATO systems as one payment. The payments or credits are allocated to each liability transaction held on the taxpayer account.

    A liability was considered to be paid on time if the balance outstanding was zero within seven days of either the due date or the date the liability was raised, whichever was the later.

    Qualifications

    Only transactions which result in a liability that was payable by 30 June were included in the population. Also included are transactions involving liabilities which are being disputed or involved in insolvency action.

    As the measure was determined at a transaction level rather than the individual taxpayer level, the indicator using number of transactions may be distorted to some extent.

    In measuring this indicator, the timeliness of the lodgment which created the liability is ignored.

      Last modified: 25 Feb 2011QC 24195