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Purpose

Program overview

Progress of our nine Strategic Objectives - Strategic objective: G1 Government to Strategic objective: F1 Financial

Performance results - program 1.1

Results analysis - program 1.1

Purpose

The ATO purpose is to contribute to the economic and social wellbeing of Australians by fostering willing participation in the tax and superannuation systems. We achieve this through the delivery of our goals:

• making it easier for people to participate
• providing contemporary and tailored services
• maintaining purposeful and respectful relationships
• being a professional and productive organisation.

Our purpose is underpinned by nine strategic objectives. As shown in the ATO corporate plan, the objectives are grouped into five perspectives – Government, Client, Workforce, Operational and Financial.

Critically, the integrity of the tax and superannuation systems will be maintained by supporting those who choose to do the right thing and dealing with those who do not. Ultimately, client experience and participation will be the true measure of success. The following sections outline the results of our performance measures and progress on reaching our objectives.

Program overview

This overview of ATO program performance aligns with the ATO corporate plan 2018–19, and presents our 2018–19 performance against each of the nine strategic objectives.

For each strategic objective, we outline our key 2018–19 achievements in relation to:

• the strategic initiatives outlined in the corporate plan
• our most significant business activities, such as Tax Time 2018.

A summary of performance results is provided for each strategic objective, with more detail and analysis provided at Performance results, 2016–17 to 2018–19 and under the heading Results analysis - program 1.1.

Strategic objective: G1 Government

Overview

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 performance measures, tools such as tax gap analysis, and sharing information with other agencies in Australia and internationally.

We use our understanding of the tax system to help design improvements to our administration. We will continue to shift to a more preventative and pre-emptive approach, sustainably closing the tax gap.

Of the eight performance measures for strategic objective G1, we fully met four targets, substantially met two, and have two targets under development. We also introduced a confidence measure aligned to our 2024 aspiration of building trust and confidence.

Strategic initiatives summary

We delivered on our government commitments, including through our taskforces on tax avoidance, serious financial crime, illegal phoenix activity and the cash economy. Significant achievements for the ATO’s taskforces include:

• the Tax Avoidance Taskforce raised $1.9 billion in liabilities and $1.1 billion in cash collections (apportioned figures)
• the Serious Financial Crime Taskforce raised $235 million in liabilities and $71 million in cash collections
• the Black Economy program raised $1.1 billion in liabilities
• the Phoenix Taskforce raised $163 million in liabilities and almost $66 million in cash collections.

We contributed to operations as part of the Illicit Tobacco Taskforce, which was established on 1 July 2018, as well as ATO-specific operations, which resulted in the seizure and destruction of illicit tobacco with an estimated excise duty of $42 million.

In July 2018, we released the first estimated individuals tax gap, covering taxpayers who are salary and wage earners and investors, but not in business and not high wealth individuals. We estimate that over 93% of income tax due from individuals is paid, mostly voluntarily, or with little intervention from us. The tax gap is discussed in greater detail under Tax gap estimates in part 3 and on our website at ato.gov.au/taxgap.

Through our justified trust program, we assure the tax compliance of large corporate groups and privately owned and wealthy groups. We engage with the top 1,100 public and multinational businesses and superannuation funds and the top 320 privately owned and wealthy groups, obtaining positive assurance on a significant proportion of these clients. This year, we assured 50% of the $47 billion of income tax payable by public and multinational businesses for the 2016–17 financial year and increased our assurance of the $40 billion payable by these businesses in 2015–16 from 50% to 58%. We also assured $2 billion of income tax payable by privately owned wealthy groups across multiple income years.

To confirm or clarify our interpretation of the tax law, we use strategic litigation for cases with the most precedential value. We had a higher number of applications considered by the Test Case Litigation Panel this year, receiving 26 compared to 14 in 2017–18. During the year, there were 102 tax litigation decisions handed down, and 75 of these fully supported the ATO position. For more information, see Appendix 5: Strategic litigation. For statistics about our public rulings, see Appendix 3: Public advice and dispute management.

We implemented an integrated compliance approach to identify endemic non-compliers – those organisations that are not engaging in identified criminal behaviour but are failing to comply with multiple obligations. To illustrate the complexity of this work, one group we identified as high risk comprises over 40 entities, with assets totalling approximately $70 million.

In 2018–19, we supported the superannuation system by helping Australians connect with their super. ATO Online services were used to consolidate over 537,600 accounts worth $4.4 billion. To improve and streamline APRA-regulated fund reporting and provide greater ‘real time’ visibility of superannuation contributions and other transactions, we implemented the Member Account Attribute Service (MAAS) and Member Account Transaction Service (MATS). To protect retirement savings for members of self-managed super funds (SMSFs), we reviewed and audited SMSF funds, trustees and auditors. This work included:

• cancelling 609 new registrations and withholding 229 funds from Super Fund Lookup, protecting nearly $100 million of individuals’ retirement savings
• responding to serious regulatory contraventions by issuing 26 notices of non-compliance, disqualifying 145 trustees and issuing administrative penalties against the trustees of 146 SMSFs, resulting in net penalties of $3 million
• reviewing 151 SMSF auditors, resulting in 52 referrals to the Australian Securities and Investments Commission (ASIC).

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Strategic objective: G2 Government

Overview

The tax and superannuation systems need to evolve so that they remain sustainable for collecting Australia’s revenue. They need to be easy to comply with and hard not to, transparent in their operations, and provide for a seamless client experience. The ATO is well placed to influence the design of the law to fix system irritants, address loopholes that allow people to avoid their obligations, and make use of new technology.

The one measure for this objective achieved a rating of good. Although the target was still under development in 2018–19, a target has been set for 2019–20.

Strategic initiatives summary

We contribute to the shaping of the tax and superannuation systems, assessing where the law has not been working as intended, using insights and developing ideas to improve the systems. We endeavour to influence proposed policy and legislation and share our analytical expertise by:

• providing data and costings advice on policy proposals
• working closely with Treasury on ATO-generated new policy proposals, as well as those led by Treasury, including revenue proposals sought by Treasury for the Budget and the Mid-Year Economic and Fiscal Outlook
• collaborating with Treasury on the design of new legislation, and providing input into explanatory materials and joint quality assurance of draft laws.

Our relationship with Treasury is a significant component in successfully influencing new legislation (see performance measure: Influence – Government and Treasury perceptions of the ATO and the quality of our advice).

We provide tax and superannuation systems insights and responses and inform policy development and research. Along with our annual publication of aggregated taxation statistics, in 2018–19, we:

• worked with the Board of Taxation on a survey on compliance costs associated with fringe benefits tax
• provided access to our database of ‘confidentialised’ longitudinal data on individual income tax returns to researchers in 19 Australian universities, and expanded the database
• contributed to a whole-of-government public data strategy overseen by the Department of Prime Minister and Cabinet
• provided research and data to inform the Council of Financial Regulators final report into risk and leverage in the superannuation system, in addition to providing information and calculations to support the Productivity Commission’s review into the efficiency and competitiveness of the superannuation system
• assisted with the Australian Bureau of Statistics (ABS) Multi-Agency Data Integration Project, the Department of Social Security’s research into the National Disability Insurance Scheme (NDIS) workforce, and the work of the Department of Jobs and Small Business following closure of the Australian automotive manufacturing industry, including their assessment of retraining programs.

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Strategic objective: C1 Client

Overview

We are improving the experience our clients have by designing a tax and superannuation system that is seamless and easy to use. This includes the experience for those of our clients who may disagree with our decisions and seek some form of formal review. We are taking advantage of the growing opportunities offered by the expanding digital world to provide people with the information they need, when they need it and in their preferred format.

We delivered a successful Tax Time 2018, with over 10 million individual income tax returns lodged, resulting in almost 8 million refunds.

Of the two performance measures for strategic objective C1, we fully met one target and substantially met the other. We continued to expand the scope of our digital services to progress our journey to 2024.

Strategic initiatives summary

We streamlined processes through Single Touch Payroll (STP) and worked with software developers to expand STP to employers with fewer than 20 employees, ensuring there will be a good range of low-cost reporting software in the market – including low-cost or no-cost products for employers with fewer than four employees.

As at 30 June 2019, we had 58,600 substantial employers (80% of the target population) reporting tax and superannuation information through STP, and another 108,000 employers with fewer than 20 employees voluntarily reporting before the legislative start date for this group. More information about STP is available at ato.gov.au/STP.

By delivering a range of digital channel experience options, we help meet client expectations of a ‘24x7’ service and reduce our reliance on paper to contact clients. By identifying what people need to know, we can make it available through self-service channels such as our website. This year we:

• digitised the Australian business number (ABN) confirmation letter, replacing over 800,000 letters a year
• provided more self-help tools for tax professionals and coached callers on how to use the tools
• stopped sending paper activity statements for monthly self-preparers and quarterly agent lodgers.

Our support for small businesses included:

• assistance to farmers and drought-affected businesses in New South Wales, Victoria and South Australia through the federal government’s Drought Community Outreach program
• the Reach Out Indigenous Business Support program pilot, with workshops held in Ipswich, Darwin and on Palm Island, reaching up to 450 Indigenous business owners
• over 2,300 workshops and webinars on a range of topics
• over 1.6 million emails distributed as part of our New to business essentials service
• letters, emails and SMS to over 143,000 new clients in high-risk industries to provide information on the taxable payments reporting system
• our Small Business Newsroom service, with 19% more subscribers this year.

For more information about our small business workshops, see lets-talk.ato.gov.au/sbworkshops.

We produced proactive advice and guidance on a range of issues, including the expansion of the taxable payments reporting system, changes to the small business tax rates, and the tax treatment for compensation paid to individuals following the Royal Commission into banking misconduct. We continued our communication and education programs, delivering new training modules for small businesses to address specific tax avoidance behaviours identified by our Black Economy Taskforce, along with our regular workshops and webinars. Our Indigenous helpline received a record 25,000 calls for specialised tax and superannuation assistance this year.

Several dispute resolution initiatives were implemented during the year, including:

• an Independent Review for Small Business program pilot, designed to give small businesses an opportunity to have their audit with us reviewed before any assessments or amended assessments are issued
• our Dispute Assist service, offering help to unrepresented individuals and small businesses with significant or exceptional personal circumstances
• new National Tax Clinics operated by 10 universities for taxpayers who may not be able to afford professional advice or representation but are looking for independent guidance
• a new Small Business Taxation Division of the Administrative Appeals Tribunal (AAT), developed in conjunction with the Treasury, the AAT, the Inspector-General of Taxation and Taxation Ombudsman (IGTO) and the Australian Small Business and Family Enterprise Ombudsman.

We resolved over 26,000 objections, which represents less than 0.1% of over 37 million returns lodged. There were 441 applications for review or appeal to the AAT or other courts in 2018–19, with 102 decisions made either in relation to these applications or applications made in earlier years. The significant gap between the number of applications and actual decisions reflects the fact that most matters are resolved through alternative dispute resolution. For more information on the numbers of disputes, see Dispute management in Appendix 3.

We sought independent assurance and advice from experts on the application of complex legal matters, and referred our most significant decisions on disputes for review. During 2018–19:

• the General Anti-Avoidance Rules (GAAR) Panel assessed 28 matters, including share buy-back transactions, with the GAAR provisions held to apply in 10 matters
• the Public Advice and Guidance Panel considered 7 matters, including employee travel expenses, work-related expenses for truck drivers, and GST relating to financial services
• under the Independent Assurance of Settlements program, 16 reviews were finalised, with our actions considered to be fair and reasonable in 13 cases.

For more details on settlement cases, see Settlements in Appendix 3.

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Strategic objective: C2 Client

Overview

Our goal is to make it as easy as possible for clients to meet their tax and superannuation obligations and to interact with our systems when they need to do so. It is also important to maintain a strong relationship with our international counterparts so effective action can be taken when people attempt to use jurisdictional borders to block our effective administration.

By working closely with and learning from tax practitioners, digital service providers and overseas jurisdictions, not only is our role as an advocate for change made easier, we can build better tools that support our clients, whether they deal with us directly or through a third party. By enabling access to ATO systems via application programming interfaces (APIs), we can work with partners to provide a more streamlined ecosystem.

The ‘working together’ measure for this objective achieved a result of 64/100. Although the target was still under development in 2018–19, a target has been set for 2019–20.

Strategic initiatives summary

Through our international collaboration with other tax administrators, information is shared to influence tax reform and identify global trends and best practices. This year, our involvement with the Organisation for Economic Co-operation and Development (OECD) included co-hosting the fifth meeting of the Global Forum on Value Added Tax and GST and presenting at the Forum on Tax Administration in Chile. Our work on issues raised by the Panama and Paradise papers was recognised by the Chair of the OECD’s Forum on Taxation Administration.

We completed our first international exchange under the new Common Reporting Standard, receiving over 1.5 million financial accounts to review from over 60 tax jurisdictions – including those that have been associated with tax havens and bank secrecy.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting came into effect this year, enabling jurisdictions to swiftly modify their tax treaties to better address multinational tax avoidance and more effectively resolve tax disputes. Together with New Zealand Inland Revenue, we published a joint administrative approach, to provide certainty for eligible taxpayers and allow us to prioritise our resources on matters with material revenue consequences or a higher risk of tax avoidance.

We delivered significant changes to our tax and BAS agent services in 2018–19. Our practitioner lodgment service (PLS) became the sole channel for tax agents to electronically lodge current year income tax returns, with approximately 6.8 million returns successfully lodged during Tax Time 2018. For agents using the service, more of their clients had their refunds processed within five days compared to previous years.

Since March 2019, all tax and BAS agents have been able to access Online services for agents. This system replaces our tax and BAS agent portals, with a modern, customisable interface that addresses portal irritants and provides access to new functionality. It delivers more real-time client information, such as individuals’ superannuation and income tax return history, and includes the ability to create payment plans and search for clients by name. More information is available at ato.gov.au/onlineservicesforagents.

We partnered with 530 digital service providers (DSPs) consuming 269 web services. An online service was introduced to streamline interactions with DSPs, providing a secure environment to access support. We reviewed all DSPs against the ATO’s Operational Framework, with all DSPs – representing 676 digital products – meeting the requirements. Extending on the framework and at the request of industry, ATO worked in collaboration with the Australian Business Software Industry Association to develop common cyber security standards for add-on marketplaces.

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Strategic objective: W1 Workforce

Overview

The ATO works to provide support and strategies to help us transform our culture and workforce so we can deliver now and into the future. This includes ensuring we have the right balance of capability to deliver the best client and staff experiences and drive a positive cultural change, with a focus on integrity, to foster a collaborative and contemporary way of working.

We met the performance target for each of the three measures for strategic objective W1, with two measures improving since last year and the other remaining at its highest level. This demonstrates continued improvement in the engagement of our staff and the diversity of our workforce.

Strategic initiatives summary

We developed our Workforce Strategy 2024 to describe our future workforce and outline the high‑level initiatives required to achieve it. Given the dynamic environment the ATO operates in, and our dependencies on external influences, the strategy will be updated as our view of the future evolves. A new future-focused capability framework was implemented, outlining the core sets of skills, knowledge, attributes and behaviours we need to successfully deliver our administration of the tax and superannuation systems. Our training programs are being aligned to the new framework to support staff in their pursuit of ongoing learning and development.

Recognising the importance of a positive culture for the achievement of our strategic and organisational goals, we have committed to supporting our people in demonstrating the cultural traits. We communicate regularly with our staff about what our culture means for them, the community and why it is critical to achieving our organisational outcomes. We assessed our progress at making cultural change through consultation, perception surveys and independent feedback, finding that our staff and the community have seen real and positive cultural change.

Our Integrity Adviser, Dr Simon Longstaff, worked with our Chief Risk Officer, the ATO Executive Committee and staff across the ATO, to help us extend our view of integrity so that we overtly consider our ‘integrity position’ in what we do and say, and make good decisions guided by ethics. We updated various processes for SES officers and staff to declare interests and other circumstances that could influence (or be seen to influence) their actions at work. This is fundamental to embedding transparency and integrity as part of our culture and providing confidence that we remain vigilant about managing perceived and real risks. A highlight this year was our Security, Integrity and Fraud Awareness week, with external speakers, panel discussions, webinars, and training sessions.

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Strategic objective: W2 Workforce

Overview

We are committed to giving our staff contemporary tools that make it easier to help our clients and collaborate with each other. In 2018–19, we identified a number of system irritants that – while minor in themselves – added up to serious barriers across our organisation. We worked together to learn from our shared experiences and identify new ways to integrate solutions across the organisation.

In the ATO corporate plan 2018–19 we introduced a new measure for this objective, with a result of 63% this year. Although the target was under development in 2018–19, a target has been set for 2019–20.

Strategic initiatives summary

To improve the staff experience, our highest priority for 2018–19 was to refresh our desktop and laptop hardware which has significantly improved the time it takes to log in, as well as overall speed and performance. The upgrade also ‘opens the door’ to new and better software, including contemporary collaboration tools. All laptops and 62% of our desktops have been replaced with newer models and any remaining aged desktop computers will be replaced by the end of 2019. This is a significant step in assisting the ATO in becoming streamlined, integrated and data-driven. This year, one of the biggest staff irritants of having to manage mailbox capacity was resolved by increasing staff mailbox size.

Not all innovations require such a large financial investment. Our staff are encouraged to find ways to work smarter and support each other in their day-to-day work. One example is our PowerPit tool, which was designed and built by staff using existing technology. PowerPit enables experienced staff to share their expertise with new front-line officers, using an immersive training environment. This gives trainees fundamental hands-on practice as part of their training – before they take calls from clients. It complements other training they undertake, enabling them to focus on providing the right information and ultimately improve the caller’s experience.

We continue to look for opportunities to build on and connect with other initiatives to drive improved staff and client outcomes by maximising the value from data and analytics, including our enterprise client profile. We listen to our people about the tools that will best support them, through focus groups, surveys and census results – recognising that our staff are at the heart of the ATO and their experience and engagement is critical to delivering the right client experience.

To provide staff with a view of the improvements being made, we have taken a coordinated and holistic approach to informing them of initiatives that affect them. In 2018–19, we launched an online ‘Improving Our Staff Experience’ hub, making it easy for staff to see the full set of experience improvements the organisation has made and plans to make in the future. Complementing the hub, we delivered a Staff Experience Showcase spotlighting the ‘now, soon and later’ improvements and helping staff envision how they can work smarter and more efficiently, both now and into the future, using the new ATO tools, technology and workspaces.

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Strategic objective: O1 Operational

Overview

Our transition towards being a streamlined, integrated and data-driven organisation relies on having the right data available for our staff and clients, the tools to manage and derive insights, and the capabilities to understand and use the data in innovative ways. We are embracing new technologies, work patterns and data-learning programs to ensure our staff have the data, insights and skills they need to work smarter and improve interactions with clients. Our use of automation, artificial intelligence and sophisticated analytical techniques will continue to help us better understand our clients and provide the tailored and timely services they expect.

This objective had one measure, which achieved a result of 87.9%. While the target was still under development in 2018–19, a target has been set for 2019–20.

Strategic initiatives summary

Implementation of initiatives, such as Single Touch Payroll and the progress of the automatic exchange of information with other countries, means that much more data is coming into the ATO. We are focused on continuing to enhance our data acquisition and quality program and have the infrastructure and tools available to manage and use data we collect in an ethical and transparent way. More sophisticated tools have been implemented to ensure the quality of our data and better transform it into usable and repeatable processes that can be streamlined into automated processes. Faster and more precise insights enable improved compliance outcomes through greater personalisation and more targeted and effective interactions. The mapping of third-party datasets is a key element of our work and provides staff with more relevant information to improve decision making. For example, in 2018–19 we obtained data to better understand how ride-sharing and short-term accommodation providers may impact on the tax system.

Our enterprise client profile system is designed to provide our staff with access to client facts and insights. The system visualises consistent and timely information insights in a contemporary way that can be tailored to specific work requirements. The use of enterprise client profile has created efficiencies in providing a complete view of relevant information to support staff in their interactions with clients. For example, staff visiting around 10,000 small businesses as part of our work on the Black Economy Taskforce, were able to access a real-time profile of client facts, history and insights for use prior to and during visits.

We are progressing new and innovative ways of using automation and artificial intelligence to streamline business processes, automate repetitive tasks and improve decision making. Machine learning and robotic process automation (RPA) technologies provide opportunities to increase our understanding of client behaviours and create efficiencies for more repetitive tasks. This year, we designed and tested the suitability of RPA software and trialled the extension of machine learning to categorise taxpayer deduction claims and identify risks at a more detailed level. RPA effectively uses technology that follows a pre-programmed set of actions to automatically undertake repetitive, manual and high-volume tasks.

Using sophisticated analysis techniques, we are able to compare returns prepared by tax agents with a similar client base. To identify areas of concern or risky behaviour we apply a nearest neighbour approach to compare claims. This allows us to identify areas where agents would benefit from more information and support, and cases where intervention is necessary. This year, we developed a model to give us a holistic view of multiple risks in the tax agent profession, and systematically identify or predict changing behaviour in a timely way.

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Strategic objective: O2 Operational

Overview

Meeting community expectations that our systems will be secure and available when required and on a variety of platforms is an ongoing challenge. Our focus has been on making it easier for our clients to interact with us, as well as updating the systems we use to manage the tax and superannuation systems.

This objective had two measures, with our security policy report requirements met and our key digital systems availability achieving 99.5%. Although targets were still under development in 2018–19, a target has been set for the measure that was retained for 2019–20.

Strategic initiatives summary

With rapid growth in online activity there is greater opportunity for fraudsters to steal and sell personal data. The ATO will continue to invest in securing taxpayer information through robust identity, authentication and authorisation platforms. In June 2019, the myGovID app was released to enable people to securely establish and manage their digital identity with us and across government. We delivered Relationship Authorisation Manager (RAM), a new way for people to establish relationships and manage who is authorised to act on their behalf. Authorised representatives of businesses are now able to securely prove their identity using myGovID, link their ABN, manage their authorised contacts, and use the myGovID app to authenticate and access the ATO Business Portal. Tax agents operating on behalf of their clients will soon be able to use myGovID and RAM to access the new ATO Online service for agents.

We increased our cyber security capabilities in controls for compliance and protection against security threats, continuing maturity in detection and response functions, preparation for major initiatives that build our visibility of vulnerabilities and gaps in the environment, and increasing our security certification programs.

Modernisation of our infrastructure for improved ATO systems resilience included relocating critical applications to a more resilient storage system, and providing dedicated infrastructure for Online services for agents and ATO Online capability to improve performance and stability for Tax Time 2019. We upgraded the tools we use to interact with our clients over the phone, including improved voiceprint matching, which has reduced average call times for clients. To help our staff provide better services to clients and work together from different sites, we updated desktop and laptop computers and expanded security and functionality of online training and meeting rooms.

We improved the functionality of our systems, making significant progress in resolving an ongoing issue that means some clients with different taxes have more than one account with us, by creating a single client account. We will need to migrate close to 17 million activity statement accounts to our primary accounting system. The move will bring the processing of 95% of taxpayer financials into one system, resulting in fewer delays in issuing refunds and most account transfers happening without the need for a manual request. Our single case management system and analytics-driven approach to managing outstanding payments across all account types ensures more tailored treatments and interventions in the collection of debt.

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Strategic objective: F1 Financial

Overview

We have established a range of initiatives to deliver better productivity and outcomes, improve data quality, and drive consistent and streamlined systems and processes for staff. This ensures we can meet client expectations in a cost effective way, reduce operating costs and get better value.

Of the two performance measures for strategic objective F1, we fully met both targets.

Strategic initiatives summary

Working smarter to be more efficient is one of the benefits from many of our objectives, from extending our use of data to developing our staff. In addition to automating processes where we can, we have made business improvements through work redesign. Simplifying how we work has resulted in faster processing speeds and fewer escalations and transfers. Our Debt staff now manage both debt and outstanding lodgments for clients, rather than only dealing with existing debt.

We recognised the nexus between delivering small changes and achieving operational excellence and efficiency. We will be looking at how we manage the implementation of small changes across the ATO in 2019–20.

In 2018–19, we initiated a program to transform our outbound communications to ‘digital first’. We reduced the paper correspondence we send by replacing it with email, SMS, the myGov Inbox and the tax and BAS agent portals, or by sending it less often. We estimate that we will save $2 million each year by sending clients their general interest charge (GIC) statement of account quarterly instead of monthly.

We continued to develop our strategic procurement capability in line with changes to government procurement, including the Modern Slavery Act 2018, Government Procurement (Judicial Review) Act 2018, and the updated Black Economy Procurement Connected Policy. Working with our outsource providers, we focused on building collaborative partnerships that create more value for the ATO and our providers. With so many active contracts to support our successful operation, we are also conscious of our responsibility to see that our procurement ensures supply chain integrity and delivers social outcomes.

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Performance results overview

The ATO performance results for 2018–19 show a year of solid performance in achieving our purpose, with some specific areas for improvement. The ATO has 21 measures for Program 1.1 to demonstrate how well we are achieving our purpose. These are set out in the Australian Taxation Office Budget Statements in the Treasury Portfolio Budget Statement (PBS), and in the ATO corporate plan 2018–19.

Thirteen of these measures had a 2018–19 performance target, with the target fully achieved for ten and substantially achieved for the remaining three. In 2019–20, we will be looking at what we need to do differently to fully meet our own and the community’s expectations and to build trust and confidence in our administration of the tax and superannuation systems.

The intention of the annual performance statement is to report on the performance criteria included in the PBS and corporate plan to accurately reflect the performance of the ATO in achieving its purpose. In considering our overall assessment of fostering willing participation we have regard to:

• the complexity of the tax and superannuation environment and how our activities influence the behaviour of clients in meeting their obligations
• the interrelated nature of performance criteria, which means that results should be viewed as a suite of indicators, rather than in isolation
• the use of estimates for some criteria.

In addition, it is important to note the trends over time in results, both in absolute terms and relative to the performance target for the relevant year. We assess our performance targets annually to determine where existing results are expected to be maintained and where future performance is expected to be stronger. Some of our performance targets were under development, due to a lack of relevant external comparators to benchmark ourselves against and the time it can take to baseline results to understand what future improved performance we should be aiming for. We will continue to monitor and assess performance as we build on the outcomes we have achieved to date.

Performance results - program 1.1

Our performance criteria are set out on pages 185–189 of the Australian Taxation Office Budget Statements (in the Treasury PBS), and pages 5–13 and 22–23 of the ATO corporate plan 2018–19.

A Target achieved S Target substantially achieved N Target not achieved X Result not available

NOTES

(a) The target was under development in 2018–19. The target for 2019–20 is 65/100.

(b) The target was under development in 2018–19. The target for 2019–20 is ‘increase the proportion of the tax base where the ATO has justified trust to a level as high as practicable given the nature and complexity of the law and resources available’.

(c) The target was under development in 2018–19. The target for 2019–20 is a ‘good’ rating.

(d) The unchanged result for 2017–18 reflects a less than 0.1% change in the adjusted median.

(e) The unchanged result for 2018–19 reflects a 0.2% increase in the adjusted median.

(f) The methodology was refined in 2018–19 and results are not comparable to the result for ‘Empowerment – partner perceptions of how the ATO empowers and includes them’ published in the 2017–18 annual report.

(g) The target was under development in 2018–19. The target for 2019–20 is ‘equal to or better than the 2018–19 result’.

(h) The target was under development in 2018–19. The target for 2019–20 is ‘equal to or better than the average result for large agencies’.

(i) The target was under development in 2018–19. The target for 2019–20 is 85%.

(j) The target was under development in 2018–19. This measure has been retired for 2019–20.

(k) The target was under development in 2018–19. The target for 2019–20 is 99.5% (excluding planned outages).

(l) The description of the measure changed this year to ‘inclusive of GST’ and ‘exclusive of GST’.

Results analysis - program 1.1

Confidence – community confidence in the ATO

For 2018–19, the overall result for community confidence in the ATO was 65/100. As this measure was previously under development, there is no performance target against which to assess this result this year.

The methodology for this measure comprises survey questions to measure confidence in the ATO across two different audiences – clients who’ve had a recent interaction with the ATO, and the general community – and allow comparisons between these groups. In 2018–19, general community confidence in the ATO was slightly higher at 65/100, with recent clients’ confidence at 64/100.

In 2018–19, we developed two aspirations for the ATO’s journey to 2024 – to build trust and confidence in the tax and superannuation systems and to create a streamlined, integrated and data-driven future. This measure will be integral in tracking our progress in building trust and confidence.

Registration – Proportion of companies and individuals registered in the system

Companies

This measure compares the number of companies who are obligated to obtain Australian Securities and Investments Commission (ASIC) registration between ASIC and ATO.

The proportion has remained fairly stable, with no significant change in the last 12 months. This is expected, as the ATO–ASIC Registered Company client population continues to trend in line with Active Company Registrations data direct from the ASIC website.

The proportion is always expected to be well below 100%, as the ASIC register includes companies that have no taxation obligations or other ATO reporting obligations.

Individuals

This measure compares active Individual clients (aged 15–64) in the ATO Client Register, to the ABS Estimated Resident population within the same age group.

The trends in registration of individuals are closely aligned to population growth.

The proportion remains fairly stable, with no significant change in the last 12 months. The proportion is always expected to remain above 100% for the following reasons:

• The ATO’s definition of a ‘resident’ captures a greater number of people than the ABS estimated ‘resident’ population, because the duration of time spent in Australia to be considered a resident by the ATO is shorter than that required for the ABS definition.
• The ATO currently has difficulties identifying and deactivating tax file numbers for expatriates, resulting in unused TFNs within the system. This is due to the ATO not currently receiving information relating to expatriates exiting the country.

Lodgment – Proportion of activity statements and income tax returns lodged on time

Activity statements

On-time lodgment performance for 2018–19 activity statements finished the year at 76.9%. This is 0.7 percentage points below the 2017–18 end-of-year result and 1.1 percentage points below the end-of-year target of 78%.

Most client experiences showed an improvement in on-time lodgment; however small business – representing 73% of the overall lodgment population – decreased. A change in on-time lodgment behaviour for small business therefore has a significant impact to the on-time lodgment performance across the overall population.

During 2018–19, the small business population increased by 4.1%; however there was only a 2.6% increase in the number of on-time lodgments. There is a continued focus on tailoring our lodgment strategies to obtain overdue lodgments and influencing future on-time lodgment behaviour, particularly for small businesses.

Income tax returns

On-time lodgment performance for 2017–18 income tax returns finished the year at 83.5%. This is an improvement of 0.5 percentage points, compared to the 2017–18 end-of-year results for 2016–17 income tax returns.

This result is 0.5 percentage points above the end-of-year target of 83%.

The trend of increased on-time lodgment of income tax returns is a result of ongoing end-to-end strategies including tax time messages and tailored client engagement to encourage a change in lodgment behaviour.

Payment – Proportion of liabilities paid on time by value

In 2018–19 the proportion of liabilities paid on time by value was 89.9%, which is 0.4 percentage points higher than last year. This result achieves the target of above 88%.

The main drivers of this increase in performance were improvements in individual and company income tax returns and pay as you go instalments. GST also contributed to this improvement.

We make it as easy as possible for taxpayers to pay their tax on time using a wide range of tools, payment channels and self-serve payment options. For example:

• clients can use the ATO app to identify their due dates and these can then be loaded into their phone calendar so that they receive a reminder prior to each due date
• clients can manage their cash flow by pre-paying part or all of their income tax and activity statement liabilities
• we issue SMS payment reminders before the due date to clients that are unlikely to pay on time or at all.

Correct reporting – Tax gap as a proportion of revenue

Tax gaps are an estimate of the difference between the amount the ATO collects and what we would have collected if every taxpayer was fully compliant with tax law.

For more information, refer to Tax gap estimates in part 3.

Debt – Ratio of collectable debt to net tax collections

At 30 June 2019 the ratio of collectable debt to net tax collections was 5.7%, which is the same as last year. This result is above the target of below 5.5%.

We’re transforming our approach to build trust and confidence in our management of payment and debt. This involves designing processes, systems and approaches that make payment an easy and natural part of activities across all stages of tax and superannuation.

Our preference is to help taxpayers meet their payment obligations on time or address any debts that arise as early as possible, while they are manageable. We only take firmer or stronger action against the minority of taxpayers that don’t engage with us to address their tax debt to prevent them gaining an unfair financial advantage over the majority that pay, ensuring a level playing field for all.

Total revenue effects – Tax revenue from all compliance activities

The total revenue effects measure is an estimate of the additional tax revenue that comes from our client engagement activities. It is the combination of both audit yield and wider revenue effects.

In 2018–19, total revenue effects was $15.3 billion against a performance target of $15 billion. This amount comprises an audit yield of $10.5 billion and estimated wider revenue effects of $4.8 billion.

For more information, refer to Total revenue effects in part 3.

Tax assured — Proportion of the tax base where the ATO has justified trust that tax paid is correct based on income, deductions and tax offsets assured

At 30 June 2019, we estimated that 45.6% of total tax reported for the 2016–17 tax year could be assured. During 2018–19 we also assured an additional 1.9% for the 2015–16 tax year, bringing the total tax assured estimate for that year to 47.4%. The results reflect our growing confidence over a large portion of the tax base.

Around 70% of the tax that we assure is assured through system controls that collect third party data and match it against tax reported by individual taxpayers.

Around 30% of the tax that we assure is assured through direct taxpayer engagement with our larger clients.

For more information, refer to Tax assured in part 3.

Influence – Government and Treasury perceptions of the ATO and the quality of our advice

In 2018–19, the ATO and Treasury undertook a review of our working relationship, which found that the relationship had clearly improved over the past 12 months and identified ways to further improve collaboration between the two agencies. The recommendations of that review are being implemented.

The ATO contributed to the development of tax policy by providing input to Treasury on new tax proposals. The ATO’s experience in tax administration and our insights are valued by Treasury and are a crucial part of developing new law that delivers on the government’s agenda.

The ATO also worked with Treasury on the design of draft legislation and contributed to explanatory materials that accompanied the new law. Quality assurance that the draft law could be interpreted consistently with the policy was also provided by the ATO jointly with Treasury prior to each package of new law being introduced into Parliament.

Our Treasury secondment program is an important initiative designed to build capability in both agencies as well as foster a stronger working relationship between the ATO and the Treasury.

Compliance cost – Adjusted median cost to individual taxpayers of managing their tax affairs

This measure shows any movement in the cost to individual taxpayers of managing their tax affairs.

The adjusted^(a) median cost of managing tax affairs for 2017–18^(b) income tax returns remained broadly steady compared to the previous year (with only a marginal increase of 0.2%) and the performance target is considered to be fully met. Taxpayers who do not report an amount on this label are not captured in this calculation; however, over recent years a declining trend has emerged in the ratio of taxpayers claiming cost of managing tax affairs to the total individual taxpayer lodging population.

The cost of managing tax affairs includes the costs of preparing and lodging tax returns and activity statements, fees paid to tax advisers, and the costs of tax reference material. While the impact of external market forces can influence these, our strategies for making it easier to comply, through the provision of better guidance and advice and contemporary and digital services, also influence this trend.

For 2018–19 financial year reporting, data was extracted from each component and summed together to provide consistent results with previous years.

^{(a) AWOTE – average weekly ordinary time earnings (for full-time adults) is used to adjust these costs.
(b) The 2017–18 income tax return has split the D10 label into three components:
– Interest charged by the ATO
– litigation costs
– other expenses incurred in managing tax affairs.}

Digital – proportion of inbound transactions received digitally for key services

The scope of the measurement methodology was further broadened in 2018–19 to include ABN cancellations, role cancellations, departing Australia superannuation payments (DASP) applications and taxable payment annual report (TPAR) lodgments.

The inclusion of:

• ABN and role cancellations provides an end-to-end view for business registrations and cancellations
• TPAR lodgments enables the establishment of a baseline for this service with additional industries commencing reporting from 1 July 2018
• the DASP superannuation view provides a digital channel usage perspective that may assist in future investment and service design decisions.

The ATO achieved an overall result of 89%, which is one percentage point below the target and represents a one percentage point increase compared with the previous year.

The digital take-up rates of the six original key services increased throughout 2018–19. Analysis of these original services indicates the 90% target would have been achieved if the additional services had not been included. Taking this into consideration, together with the increase in the target over recent years (target for 2016–17 was 85%), the target has been substantially achieved.

Working together – partner perceptions of how the ATO is working with them to administer the tax and superannuation system

For 2018–19, the overall result for partner perceptions of how the ATO is working together with them to administer the tax and superannuation systems was 64/100.

This result captures perceptions from tax professionals, APRA-regulated superannuation entities and digital service providers.

In 2018–19, the methodology for this measure was adjusted to an index and the measure name updated from the 2017–18 measure description of ‘Empowerment – partner perceptions of how the ATO empowers and includes them’.

Culture – Level of employee engagement

The June 2019 APS Census conducted by the Australian Public Service Commission (APSC) shows that our overall engagement of 6.9 out of 10 met the target. The 2019 results for overall engagement remain the same as for 2018, at the equal highest level they have been since we began participating in 2012. These results remain above the average for large and extra large agencies; and above the APS average overall, although the gap between results for ATO and the APS average decreased slightly in 2019.

Sustained engagement results over the last few years reflect our continued investment in culture and leadership, particularly our efforts to increase opportunities for our people to develop their capability and to better connect our staff and leaders.

Gender equality – Female representation in the SES and EL classification levels

As at 30 June 2019, female representation in the senior executive service (SES) was 44.9%, increasing from 44.2% the previous year, and continuing a positive long-term trend. The percentage of female staff at the executive level (EL) classification increased from 48.6% to 49.1%.

The end-of-year targets for female representation in both the SES and EL classifications are considered to be met, recognising that normal fluctuations in staffing levels make it highly unlikely for these results to be exactly 45% (for SES) and 50% (EL).

Indigenous representation – Proportion of staff who identify as Indigenous

The proportion of our staff identifying as Aboriginal and Torres Strait Islander was 2.5%, increasing from 2.1% the previous year, and meeting the performance target.

This result is due to continued investment in employment strategies to increase Indigenous representation in our workforce, with the objective of removing barriers to both gaining and retaining employment in the ATO for Aboriginal and Torres Strait Islander people.

Staff experience

The June 2019 APS Employee Census conducted by the Australian Public Service Commission (APSC) had 63% of ATO employees agreeing that their workgroup has the tools and resources needed to perform well. This result is significantly higher than the 2019 overall APS, larger operational agencies and the extra-large agencies results for the same question, whilst being a decrease on the 2018 ATO result of 69%. It is possible employee awareness and expectations have increased as tools and resources have not been reduced during the year, and a significant program of upgraded tools is currently being delivered.

In 2018–19, the ATO had a focus on improving the digital experience for staff. The full program is yet to be delivered and we have recognised that the value of individual improvements might not be fully appreciated unless they are viewed as part of a broader program of work. For example, during the year we rolled out a replacement to our instant messenger tool. When we have completed our associated telephony upgrade later this year, we will be able to maximise the full functionality of the instant messenger tool. Since April 2019, we have had a focus on showing staff how individual improvements to tools and technology and other resources are connected as a whole. The impact of improvements to staff’s digital experience including a refresh of our desktop and laptop hardware is likely to be reflected in the 2020 Census.

Tax returns – Proportion of items that are pre-filled

The presented result of 87.9% is a slight increase on last year’s result of 87.5%, indicating the continued quality and timeliness of pre-filling to support clients and tax agents to lodge their tax return and meet their obligations.

The result is solely focused on individuals who are not in business. It reflects the proportion of their total income where our pre-filling exactly matched their final income tax result. This measure uses a dollar-based systems assurance approach, where pre-filling makes it easier for clients to meet their obligations and increases trust and confidence in the accuracy of final tax outcomes.

To allow for appropriate checking of our pre-fill results against the final income tax return, the methodology for this measure applies a time lag and reflects Tax Time 2017 results. This is to allow sufficient time for lodgment program periods for clients and tax agents to be completed and results assured by the ATO.

This measure was first reported in 2017–18, and there is not yet a performance target with which to assess the result. A performance target has been set for 2019–20.

Security policy – Level of compliance with Protective Security Policy Framework mandatory requirements

The purpose of this measure is to report the ATO’s overall level of maturity with the 16 Protective Security Policy Framework (PSPF) requirements following the introduction of the PSPF reforms on 1 October 2018.

The ATO has shown a strengthened security environment to ensure that it can effectively anticipate and manage security risks for stakeholders and the community.

There has been continued investment in developing and implementing a communication strategy to ensure staff understand their security obligations, including improvements made for staff annual refresher training. We have continued to engage with vendors and service providers to ensure that the security priorities of the ATO are aligned and that shared risks are managed while we continue to improve digital services for clients.

The ATO has reported our maturity with the new PSPF to the Attorney-General’s Department. Details on the levels of maturity are not made public for security reasons.

Availability – Key digital systems availability

Measuring availability of our digital systems ensures that we understand the reliability of services for clients interacting digitally. The overall result for 2018–19 was 99.5%, a 0.1 percentage point increase from 2017–18. There is no performance target for 2018–19 with which to assess this result. A target of 99.5% has been set for 2019–20.

The methodology for this measure comprises the availability of six externally facing and four internally facing key IT systems. Availability is the comparison between the planned availability with the actual availability of a system for users.

For externally facing systems used by our clients and partners, the average availability was 99.3% and for internally facing systems used by staff, the average availability was 99.8%.

Budget – ATO manages its operating budget to balance

The ATO commenced 2018–19 with an operating expense budget, excluding depreciation, of $3.4 billion. During the year, the following changes impacted our funding:

• Small Business Package – making it easier for business (increase of $6.0 million)
• Small Business Package – supporting small businesses with tax disputes (increase of $1.0 million)
• VET FEE-HELP debts – additional student protection (increase of $1.6 million)
• Women’s Economic Security Package (decrease of $0.2 million)
• revised start dates for tax measures (decrease of $1.9 million)
• electronic invoicing adoption (decrease of $2.3 million)
• appropriation reclassification from operating budget to departmental capital budget (decrease of $20.0 million).

The ATO’s 2018–19 financial result (including the ACNC) was an operating deficit of $3.3 million, or 0.1% of budget. This result excludes non-cash financial accounting adjustments such as write-off expenses, depreciation, amortisation, finance lease and revaluation adjustments made for our financial statements.

Refer to Part 5 - Financial statements for detailed information.

Cost of collection – Cost to collect $100

The decreased cost to collect $100 (both inclusive and exclusive of GST) met the performance target for 2018–19 and is largely due to the 8% increase in revenue collections in 2018–19.