We focus on prevention before correction
It is universally recognised that getting the right amount of tax paid in the first place is the most efficient way to operate a tax system from all perspectives, including the cost to the taxpayer.
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.
In a market as large as individuals, one of the most effective ways to reach taxpayers is often through an intermediary. We leverage our compliance approaches—from help and education through to reviews and audits—through tax agents and employers, tailoring them to address similar needs and compliance behaviours.
The shift to digital interactions is also helping us reach greater numbers of taxpayers, more economically and speedily.
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Providing advice and guidance
To make it easier for individuals to understand how the law applies to them, we provide easy-to-understand guidance material and tools on our website. Examples include work-related expenses videos, occupation-specific guidance on allowable deductions and tax offset calculators, and Alex, the ATO website’s virtual assistant. We also provide public and private rulings for particular topics and circumstances.
We use mainstream and social media to remind individuals of the need to lodge and correctly report their tax information to us using myTax or a registered tax agent. We also issue email prompts throughout the year to alert taxpayers to issues, remind them of tax-related events that may require reporting and provide information to help them get their tax right.
Working with the tax profession
Tax professionals have a critical role in the tax and superannuation systems. To support them, we provide agents with access to information we hold about their clients’ tax affairs in a secure way, and electronic tools and services such as the practitioner lodgment service to make it easier for them to lodge information with us. We also provide tax agents with work-related expense ‘risk pictures’ that are customised to their client base, to help them understand our view and where they can take steps to reduce risk.
We recognise and support agents who have good practice management, lodge electronically and consistently lodge on time. We help these agents to smooth the cyclical peaks in their client workload through a program that accommodates lodgment over a 12-month period.
The administration of the tax and superannuation systems will change in the coming years as we and the tax profession continue to modernise. We have established a working group to better understand the future role of the tax profession in the system. We are looking at opportunities to collaborate more effectively to achieve better outcomes.
As most of the income received from individuals not in business is from salary or wages, employers also play an important role in the system.
We provide guidance on our website and tools to help employers determine the employment status of their workers and meet their PAYG withholding and super guarantee payment obligations. We also work with employers and industry representatives to design tailored guidance material such as fact sheets to help employees understand their obligations.
Single Touch Payroll has also been introduced. This change has modernised how we interact with employers and will mean they can all easily report PAYG withholding and superannuation information to us directly from their payroll solution at the same time they pay their employees.
For employees, Single Touch Payroll will allow timely visibility of tax withholding amounts and payments including salary and wages, allowances, deductions and super.
For individuals who choose to self-prepare their tax return using myTax, we pre-fill as much data as we can to minimise errors. We also provide a web chat service to help taxpayers complete their returns. We use pre-lodgment prompts such as myTax nudge messages and advisory letters to encourage people to accurately report information in their returns and lodge on time.
People can use the myDeductions function on the ATO app to keep records during the year and upload these to their myTax return or send them to their tax agent. We also provide guidance material on allowable deductions for specific industries and occupations to better reflect today’s employment market.
We help individuals manage their tax debts by sending SMS payment reminders, letters or phoning them.
For Tax Time 2019, we are:
- using third-party data from share registries and other financial services providers to remind people to correctly calculate and report capital gains and losses on the sale of shares and units
- expanding our push assessment offering to an additional 20,000 individuals, focusing on those with franking credit refunds.
Supporting those who need more help
We offer contact centre and face-to-face services including the Tax Help program where ATO volunteers help low income taxpayers prepare and lodge their return online.
We also hold tax time pop-up shops in community and shopping centres to help taxpayers with general enquiries and the transition to digital services. Additionally, we provide services through Services Australia as a myGov member agency to assist people to understand and meet their tax obligations.
We know that people sometimes make mistakes. So if we find an inadvertent error in particular tax returns, we won’t apply a penalty. Instead, we will show the person where they went wrong and how to get it right next time.
To support tax agents, we visit practices and host professional events to provide tailored help and support including updates about law changes and issues that require attention.
We help the community understand their superannuation entitlements through our superannuation education and communication initiatives.
We have information and examples on our website to help the community understand recent changes to the income threshold for super contributions (change to Division 293 income threshold).
We help reunite people with their lost or unclaimed super through marketing campaigns, including on social media. We publish lost super by postcodes, providing super funds with updated contact details for their lost members and encouraging individuals to access ATO services via myGov.
From 1 July 2018 to 30 June 2019, 540,412 million accounts worth $4.4 billion have been consolidated or transferred by individuals (including some in business) using our ATO online services (accessed via myGov).
Detecting and dealing with non-compliance
We use data-matching evidence to identify taxpayers with a requirement to lodge and systematically check all tax returns. Sophisticated analytical models can identify individuals who are making errors or displaying higher-risk behaviour and may need increased assistance or attention from us to get things right.
Where our analysis indicates patterns of errors or irregularities for:
- an individual’s tax return – we bring them to the attention of the individual or their tax agent, and work with them to amend the assessment
- a cluster of individuals employed by the same employer or in the same industry – we work with employers and industry associations to understand why this is occurring and address any misconceptions about how the rules apply to individuals in these circumstances.
We will continue to focus our corrective compliance efforts on the highest risks to the integrity of the system including individuals who:
- are not lodging tax returns including those with the financial capacity to meet their child support payment obligations
- display higher risk behaviours when reporting information in their tax return such as under-reporting income and overclaiming deductions
- are not paying their tax debts.
We also maintain a focus on higher risk tax agents who display unacceptable behaviours such as:
- exaggerating or falsifying deduction claims to retain or increase their market share
- committing fraud against the Australian Government or their clients, intentional and sustained misreporting, and taking positions contrary to established law.
We have strategies in place to identify and closely monitor these agents. Our interventions include education, additional reporting and reviews and audits of their client base. Where we see evidence of a breach of the Tax Agent Services Act 2009, we refer the agent to the Tax Practitioner’s Board. We also follow up on information provided by the community and other practitioners to protect the community, the profession and the integrity of the tax system.
In addition, we pay close attention to employers to ensure they report the correct amounts of PAYG withholding tax. We take action where we see employers avoiding their tax and super responsibilities by improperly treating workers as contractors. This behaviour undermines the tax and superannuation systems, can adversely affect workers that are employees by law and creates unfair competition for honest employers.
Individuals who disagree with a decision we have made about their tax affairs have the right to have the decision reviewed. While taxpayers have a right to object to amended assessments made by us, less than 5% of individuals (including those in business) with amended assessments do so. Of these, the majority are resolved as a result of facilitation. We aim to approach disputes in a fair, efficient and respectful way and recognise that resolving disputes early and as quickly as possible, lowers costs for both taxpayers and us.
We encourage individuals to use our free in-house facilitation service to resolve disputes. We also offer a Dispute Assist service for vulnerable unrepresented individuals such as elderly taxpayers and those dealing with family illness, domestic violence or mental health issues.
Where individuals object to an amended assessment from us, we seek to resolve the objection as quickly as possible. Depending on the nature of the objection and the taxpayer’s circumstances, we may agree to a settlement or proceed with litigation.
Protecting the integrity of the system
While we focus our efforts on preventing non-compliance, as administrators it is also our role to protect the integrity of the Australian tax system and ensure everyone pays the right amount.
We take firm action against people who intentionally falsify information on their tax returns including penalties or prosecutions in serious cases. In conjunction with partner agencies, we target people who profit from criminal activity and work to protect taxpayers from fraudulent activities.
Refund fraud occurs when people make false claims in tax returns to obtain a refund. We use analytical models to assess tax forms, and share data and intelligence with our partner agencies to detect and prevent fraud. In 2018–19, we stopped over 20,200 income tax returns and denied $82.5 million in attempted fraudulent refund claims.
We identify, monitor and respond to TFNs that have been (or appear to be) compromised by fraudulent activities. Confirmed cases of compromised TFNs have decreased from 6,697 individuals (including some in business) in 2014–15, to 4,444 in 2018–19. TFNs being monitored as potentially compromised have increased significantly from 4,391 (including some in business) in 2014–15, to 38,562 in 2018–19. This rise is due to significant increases in digital and online interactions, and subsequently higher instances of identity theft and cybercrime. We encourage taxpayers and agents to safeguard their personal information and apply extra security measures to protect affected taxpayers. These may include enrolling a voiceprint or applying a password to ensure taxpayers can continue to interact safely with the tax system.
We provide information on our website to help people identify and report scams. We issue messages warning the community about specific scams as they emerge and encourage all taxpayers to protect their personal information. Where a person’s identity has been stolen, we provide support services, so they can continue to engage in the tax and superannuation systems.
Aggressive tax planning schemes seek to allow participants to inappropriately obtain concessions or other tax benefits. We issue communications and offer education programs to discourage individuals from participating in these schemes.
Criminal prosecutions play an important role in helping us to maintain the integrity of the Australian tax system and ensure people meet their tax obligations. They are only used in the most serious cases.
Generally, we instigate prosecution action to pursue tax administration offences in response to repeated non-compliant behaviour over a sustained period of time. This may include continually ignoring ATO requests to lodge a tax return or disregarding our advice and deliberately lodging returns with false or inflated claims.
In 2018–19 we investigated or prosecuted around 950 individuals (including some in business), including over 900 non-lodgers. These resulted in a mix of sanctions including community service orders, fines, and in some cases, gaol terms.
The ATO takes a proactive approach to help individuals get their tax right from the start. However, a fair and balanced system requires both preventative and corrective action in the right measure.