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 one 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 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. The total revenue effects for 2019–20 from all our interventions totalled $13.7 billion, of which penalties and interest made up $2.4 billion.
Activity-based examples
The ATO aims to provide the community with confidence in our administration of the tax and superannuation systems and that this results in the collection of the right tax at the right time, for the wellbeing of all Australians. To provide that confidence, we need to understand the effectiveness of our approach, which we do by using revenue-based performance measures and tools such as tax gap analysis.
We will continue to shift to a more preventative and pre-emptive approach, sustainably reducing the tax gap. Our prevention and education products and systems improvements are aimed at making it easier for people to understand and meet their commitments. These complement our activities targeting those taxpayers who intentionally avoid their obligations.
Work continued on activities to address the individuals tax gap (for those individuals not in business), including strategies to streamline income tax reporting and enhance our use of data to make it available for pre-filling of income tax returns. This tax gap relates to individual taxpayers who earn an income as salary and wage earners, as investors or both. However, it excludes those in business and high wealth individuals, who are covered in other areas of our tax gap program.
The individuals tax gap was first published in July 2018 and an update for the 2017–18 tax return year shows that our strategies and approaches are starting to take effect, as the gap has declined. However, it is important to note that a small amount of overclaiming across a large population does add up to a significant amount and that this area requires continued focus. The tax gap is discussed in greater detail in Part 3 of the Commissioner of Taxation annual report 2019–20 and on our website at ato.gov.au/taxgap.
To better support individual taxpayers and address the mistakes we see in tax returns, we will continue to explore opportunities to pre-fill income tax returns, with a focus on areas that are driving the individuals tax gap. In 2019–20, we:
- collected data on taxpayers who acquired and disposed of cryptocurrency and, through our pre-fill service, we used this data to remind them of their obligations to report income from these transactions
- collected data from short-term rental platforms and used this to better understand the use of online platforms and whether taxpayers are reporting their income correctly
- continued to explore and pilot potential new data sets to help manage errors that are commonly made for work-related expenses and rental claims
- piloted approaches where selected taxpayers were advised in advance of lodging their returns that they would be required to provide substantiation to support their claims at the time of lodging. The pilot showed improved accuracy of work-related expense claims and reduced stress on taxpayers about expected contact from the ATO following up on their claims.
The ATO received funding for taskforces to focus on specific threats to the tax and superannuation systems – such as tax avoidance, serious financial crime, illegal phoenix activity and the shadow economy. We aim to provide assurance that the ATO is collecting the right amount of tax. In 2019–20, significant achievements for the ATO’s taskforces included:
- The Tax Avoidance Taskforce raised $2.7 billion in tax liabilities and almost $1.6 billion in cash collections (apportioned figures).
- The Serious Financial Crime Taskforce raised $131 million in liabilities and $59 million in cash collections.
- The Shadow Economy program raised $787 million in liabilities and an estimated $696 million in cash collections.
- The Phoenix Taskforce raised $112 million in liabilities and $47 million in cash collections.
- The Superannuation Guarantee Taskforce raised almost $111 million in liabilities.
We assure tax compliance through our justified trust program to give the community confidence that our clients are reporting and paying the right amount of tax.
For businesses, particularly larger businesses, we primarily assure tax by reviewing objective evidence obtained through one-to-one engagements with them.
Under our justified trust program, we undertake specific tax assurance engagements with:
- the top 100 and next 1,000 public and multinational businesses
- the top 500 private groups.
We also assure indirect tax through our ongoing relationships with large excise clients.
We worked with the ‘top 1,000’ public and multinational companies and superannuation funds to ensure they reported the right amount of income tax and, under the shadow economy program, we made over 5,100 business assistance visits in 22 metropolitan, regional and remote locations, predominantly to small businesses. We continued our program to educate future taxpayers, with around 420 presentations reaching an audience of over 28,000 students. We also connected with migrant communities, with over 270 presentations reaching around 10,500 people.
At the other end of the scale, we target serious crimes that present the highest risk to Australia’s tax and superannuation systems. Serious financial crime affecting the ATO-administered measures of the Commonwealth Coronavirus Economic Response Package was recognised as a priority for the Serious Financial Crime Taskforce in May 2020.
Support for tax practitioners extends beyond providing a better way to interact with our systems. Another factor is ensuring those who are doing the right thing are not disadvantaged by those who are not. Our Intermediaries engagement and assurance strategy and tax practitioner model are used to inform our interactions with tax agents and reflect the level of risk we see in their client base, their business practices and their own tax affairs. We also improved the way we work with key partners in the system, such as the Tax Practitioners Board (TPB) and professional associations, giving them visibility of our tax practitioner model.
In response to the introduction of the COVID-19 stimulus measures, we focused on a ‘disrupt and protect’ strategy to identify and deal with tax practitioners exploiting those measures. We developed a rolling assurance approach to refine our view of risk and tailored treatment approaches throughout each phase of the administration of the payments.
To support the Better as Usual program, we improved the way we collate information from objections, facilitation, Dispute Assist and complaints. This allows us to develop actionable insights to improve our client engagement and ultimately reduce the proportion of actions that result in objections and complaints.