The Australian tax system
The ATO has a vital role in collecting tax and ensuring that unpaid and under-reported tax is effectively and efficiently pursued so that government can deliver services for the Australian community. Addressing risks in the tax system maintains community confidence, which in turn supports voluntary participation and compliance. In delivering on our responsibilities, a core focus for the ATO is to collect the right amount of tax in the most efficient way for government and the taxpayer.
Our tax gap estimates program tells us how well the tax system is operating, the overall level of compliance across the tax system and what drives taxpayer behaviours. This allows us to tailor our interactions with taxpayers to make it easier to comply, both now and into the future.
The insights gained from tax gap analysis guide us in determining or confirming priority risks and developing strategies (including administrative design, help and education, and audit), which aim to reduce the tax gap, improve voluntary compliance, and minimise deterioration in tax system performance. The tax gap program also influences areas for investment by government through specific new policy proposals.
Of course, more traditional metrics for revenue authorities, such as audit liabilities and yield, and total revenue effects, remain important. However, a focus solely on these measures can lead to a short term tactical focus. Supplementing these measures with tax gap estimates allows and encourages a longer term strategic approach.
Addressing the gap
As outlined in the ATO corporate plan 2025–26, we are committed to improving the overall performance of Australia's tax system. Our vision is an Australia where every taxpayer meets their obligations because complying is easy, help is tailored, and deliberate non-compliance has consequences.
We support taxpayers to get their affairs correct at lodgment through reminders, real-time prompts or nudges and improved guidance. We design the system around verifiable data, and leverage taxpayers’ natural systems to save them time and minimise inadvertent errors. Importantly, this ensures maintainable voluntary compliance and will sustainably improve tax performance.
We continue to focus our compliance efforts on individuals and entities that present a risk by intentionally doing the wrong thing. While addressing non-compliance through audits and other correction activities will always be an important part of our compliance approach, our real success lies in ensuring taxpayers get things right from the start.
Where issues do arise, we know it’s better (for taxpayers and for the ATO) to identify and resolve these early. We are also focused on increasing activities aimed at correcting issues as early as possible with minimal taxpayer impact.
We undertake a range of activities each year aimed at improving levels of correct assessment in the systems and programs we administer. Our compliance activities are funded through a combination of base funding and current or new policy programs, including the: