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.
Apply a risk-based proportionate approach to compliance obligations, engagement and regulatory enforcement actions.
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.
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.
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.
Performance either improved or met target for one of the three metrics for this KPI, one declined, and one is 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. The total revenue effects for 2020–21 from all our interventions totalled $11.5 billion, of which penalties and interest made up $1.8 billion.
Tax gap analysis
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.
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 that target those taxpayers who intentionally avoid their obligations. For 2018–19, we estimate the overall net tax gap to be 7.3%, or $33.5 billion, meaning the ATO received more than 92% of tax revenue it expected to collect, the bulk of which was collected voluntarily. This result is in line with our expectations. We are also publishing the four-year trend as part of our ongoing commitment to provide greater transparency into the operation of the tax and superannuation systems. The net tax gap is trending downwards over this four-year period, even with the slight increase in the latest year.
This year’s tax gap program focuses on the 2018–19 year, so the impact of COVID-19 will be more evident next year, although there were indirect consequences this year. For example, the small business income tax gap estimate is based on a random enquiry program. The estimate is a preliminary one prepared from a smaller sample size due to the impacts of COVID-19 on our audit program leading to lower confidence. As such, it will be updated in 2021–22 when it will be calculated from a larger sample size.
Ensuring the integrity of the tax and superannuation systems
We continued to focus our compliance efforts on individuals and entities that present a risk to Australia’s tax and superannuation systems by intentionally doing the wrong thing. Our taskforces address tax avoidance and enable us to focus on areas of significant risk. Achievements for this year include:
- The Tax Avoidance Taskforce exceeded its 2020–21 outcomes for planned liability and cash collections, raising $3.03 billion in tax liabilities and almost $1.3 billion in cash collections (apportioned figures).
- The Serious Financial Crime Taskforce raised approximately $121 million in liabilities and $145 million in cash collections. The taskforce also launched a public ‘Identikit’ to inform the community of the impacts of serious financial crime and educate them about the types of criminals they should be aware of.
- The Black Economy program2 raised $766.6 million in liabilities and an estimated $598.0 million in cash collections.
- The Phoenix Taskforce raised $157.2 million in liabilities and $68.5 million in cash collections.
- The Superannuation Guarantee Taskforce raised $49.4 million in liabilities.
In administering the COVID-19 stimulus measures, our focus was on processing eligibility as quickly as possible, while still protecting the integrity of the tax and superannuation systems against the small number who attempt to gain benefits they are not entitled to. The economic stimulus legislation was designed with integrity in mind – for example, eligibility for the stimulus measures relies predominantly on information already registered in our systems.
Along with additional layers of protection designed specifically for the stimulus measures, we also deployed all our existing sophisticated integrity and risk models. Additionally, we worked across government to investigate instances of fraud against the stimulus measures and bring offenders to account.
We worked with clients across all markets to ensure the integrity of the tax system, including large public and multinational companies, privately owned and wealthy groups, small businesses, individuals, tax practitioners, and superannuation funds. For example, we:
- extended our program of work with the ‘Top 1,000’ companies to increase assurance that they are reporting the right amount of income tax and GST and to identify areas of risk for further action, engaging with over 150 clients through the combined assurance reviews with a total business income of more than $120 billion
- continued and extended our work with the ‘Top 500’ and ‘Next 5,000’ largest and wealthiest private groups to increase assurance that they are reporting the right amount of income tax and GST, and taking further action where we identified areas of risk
- pursued litigation cases in the courts and the AAT that are significant to the integrity of the tax system, including cases involving promoter penalties, freezing orders, and engagement in artificial schemes and egregious conduct to avoid the payment of tax
- continued our small business assurance programs and enhanced our analytics and validation checks, allowing more real-time messages for those using our online services to lodge activity statements, prompting them to self-correct and prevent inadvertent errors prior to lodgment
- expanded the data available in our pre-fill service to include reminders to taxpayers who earn foreign income, and increased reminders to those who invest in cryptocurrency
- delivered the Superannuation Guarantee Amnesty project, which ran from 24 May 2018 to 7 September 2020, providing employers with a one-off chance to catch up on unpaid superannuation.