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Key Outcomes in FY20

Taxation Complaints

In FY20, we received 2,775 tax complaints, of which 93.7% have been processed and finalised within the same period. The majority of complaints received (68%) were from self-represented individuals. The remaining complaints came from self-represented businesses (20%), individuals represented by another party, for example a tax practitioner, lawyer, family member or friend (9%) and represented businesses (3%). Taxation complaints have increased 29% in the five years since commencing as the Taxation Ombudsman.

The top 5 issues accounted for 67% (2,203) of all tax complaints received. The top 5 issues raised by complainants are shown in Table 1.

Table 1: Top 5 complaint issues in FY20

Top 5 issues raised in complaints in FY20 (by number received)

Payments to the taxpayer

665

Debt collection

656

Lodgement and processing

484

Communications

212

Registration/Taxpayer details

186

Total top 5 complaint issues

2,203

Top 5 complaint issues as a percentage of total complaints issues raised with the IGTO

67%

Opportunities to make systemic improvements to the tax system may be identified during the investigation of complaint cases without the need to conduct a review investigation. Where our complaint investigations generate Agreed Business Improvements (ABI) with the ATO, we monitor these for progress. In FY20 the ATO accepted 8 new ABIs which we proposed. The ATO implemented 27 ABIs in FY20. Further information on ABIs is set out in Performance Measure 1.3 in Part 2 of this annual report.

Complementing the Office’s taxation complaints work are:

  • formal review investigations;
  • written submissions and attendance at public hearings before Parliamentary Committees and Inquiries; and
  • written submissions to inquiries undertaken by, and engagement with, Federal and State government departments and agencies.

Review investigations

The IGTO’s review investigations work can be usefully informed by trends and information emerging from the Taxation Ombudsman function, particularly where the potential for systemic issues are identified. The IGTO launched 3 reviews during the year, each of which was informed by a combination of stakeholder feedback and taxation complaints.

1. An investigation and exploration of undisputed tax debts in Australia. As noted elsewhere, debt collection issues were, prior to the COVID-19 pandemic, the number one taxation complaint issue received by the IGTO. The Review seeks to understand the trends and landscape of outstanding (undisputed) tax debts in Australia. The results can assist to identify and gain greater insight into which segments of the economy are experiencing increasing levels of undisputed debts. This will assist to identify areas of debt collection for further and targeted investigation.

2. Death and Taxes: An investigation into ATO systems and processes for dealing with deceased estates was initiated after stakeholder feedback on the difficulties experienced in engaging with the ATO in this area and as confirmed by over 130 complaints received by the IGTO, in the area of deceased estates. This investigation seeks to identify opportunities to reduce the tax compliance burden and associated costs, red tape and frustration as well as improve or simplify the tax administration arrangements for representatives of a deceased individual.

3. An investigation into the effectiveness of ATO communications of taxpayers’ rights to complain, review and appeal decisions, actions and outcomes made by the ATO. This investigation seeks to confirm how effectively (clearly and completely) the ATO communicates appropriate information to taxpayers and their representatives on these taxpayers’ rights. This review includes a taxpayer and tax practitioner survey. The purpose of the survey is to understand:

  • What information is currently typically provided (or not) to taxpayers and their representatives on their rights to complain, review and appeal decisions made; and
  • What information should be provided, compared to what is provided?

This will help the IGTO to better direct the investigation into the relevant business lines within the ATO and assist to identify improvements to ATO communications. This includes (for example):

  • Whether taxpayers are aware of their formal rights to complain about ATO decisions made;
  • What taxpayer rights should be communicated to taxpayers in relation to decisions made;
  • Whether reasons for ATO decisions made are adequately communicated; and
  • Opportunities to improve communications about taxpayer rights.

Parliamentary committees and other inquiries

The IGTO’s tax expertise, complaints investigation service and review investigation experiences allow us to bring specialist insights and perspectives to Parliamentary Committees and Inquiries. The IGTO’s contribution, engagement and consultations in FY20 are listed below.

These submissions vary in length and topic and are aimed at assisting Parliament and other Federal government agencies in their investigation or inquiry to improve the tax administration system. The impacts and benefits flowing from each of the inquiries will depend on the nature of recommendations made and implemented.

We have had a busy year at the IGTO, lodging eleven submissions (including supplementary submissions) — four to the Senate Economics Legislation Committee (SELC), four to the Standing Committee on Tax and Revenue, two to the Treasury and one to the Australian Information Commissioner. These submissions are available on our website and are noted below:

House of Representatives Standing Committee on Tax and Revenue

  • Inquiry into the Commissioner of Taxation Annual Report 2018–19 (including one supplementary submission);
  • Inquiry into the Development of an Australian Corporate Bond Market; and
  • Inquiry into the Tax Treatment of Employee Share Schemes.

Senate Economics Legislation Committee

  • Inquiry into the Performance of the Inspector-General of Taxation (including two supplementary submissions); and
  • Disclosure of Business Tax Debts.

The Treasury

  • Review of the Tax Practitioners Board; and
  • Minor and Technical Legislative Amendments.

Australian Information Commissioner

  • Disclosure of Public Servants’ Names and Contact Details

Senate Economics Legislation Committee Inquiry into the Performance of the Inspector-General of Taxation

On 1 August 2019 the SELC commenced an Inquiry into the Performance of the Inspector-General of Taxation. The terms of reference for the review included:

  • whether the accountability framework the Inspector-General operates within needs to be amended or strengthened;
  • how the Inspector-General conducts its investigations into the Australian Taxation Office;
  • what safeguards exist to ensure the independence of the Inspector-General;
  • the complaints management policies and practices of the Inspector-General;
  • the protections afforded to whistleblowers who disclose information to the Inspector-General; and
  • any related issues.

The community’s perception of the fairness of the tax administration system has an important influence on voluntary compliance by taxpayers and tax practitioners alike — which ultimately determines tax revenues raised, the timeliness of lodgements and the efficient resolution of disputes. The IGTO legislative framework, protections and process of investigation is equally an important influence in establishing trust in the fairness of the tax administration system — since IGTO investigates and provides assurance about the integrity, fairness and effectiveness of the system itself and the actions and decisions made by those administering that system.

On 17 June 2020, the SELC tabled its report — the Performance of the Inspector-General of Taxation (the SELC Report) in Parliament. The SELC made sixteen (16) recommendations — a summary of these recommendations can be found in Appendix 1 — all of which were matters for the Government’s consideration. I welcome the SELC’s report and recommendations and look forward to the response from Government in due course.

Progress on immediate priorities

In the FY19 IGTO Annual Report I identified 3 immediate priorities. These were to:

  1. better understand our resource capability, capacity and constraints in fulfilling community and stakeholder expectations and improving the tax administration system;
  2. improve community awareness of our services and explore opportunities for more seamless connections with other agencies and bodies who assist taxpayers manage their tax affairs; and
  3. develop a principled framework for articulating the community’s expectations for improved tax administration — to assist in identifying, communicating and understanding the tax administration issues that my office can prioritise and to address and recommend improvements that can be made.

One year on, I would add a fourth priority to this list:

  1. to improve the effectiveness and efficiency of resolving taxation complaints generally, for the community.

Capability, capacity and constraints

The SELC in its report dated 17 June 2020 made several recommendations in relation to the IGTO’s capability, capacity and constraints for the Government to consider.

Distinguishing features and capability

While the IGTO, like other ombudsman services, is vested with strong statutory information gathering powers, we also have direct access to ATO systems. This is a distinguishing feature of our office and our ability to provide independent assurance. The manner and sufficiency of our access to ATO and TPB records and information, including through systems access, is important in the independent investigation and delivery of our tax complaint investigation services.

This need was acknowledged by Recommendation 3 of the SELC Report.

Recommendation 3 — The SELC recommends the Australian Government review the IGTO's current access to the ATO and TPB’s systems, data, and records and considers improving access, where necessary, to further enable it to perform its legislative functions.

We also have the ability to receive and manage Tax File Numbers (TFN) during the course of our complaint investigations, which significantly aids in quickly identifying correct and accurate taxpayer records and assists in reducing the time necessary to resolve tax complaints.

Capacity

We employ professional tax specialists (solicitors, accountants, taxation experts) to investigate the tax disputes raised with our office. Our team possesses not only the applicable tax technical skills and experience, but people skills — listening with respect and empathy. This is a special skillset and it allows our officers to engage and build trust with different types of complainants, from tax professionals to those more vulnerable and at risk of not meeting their obligations. Sometimes complainants are upset, frustrated, angry or simply fatigued by the time they discover or approach our office — which means our team needs to be both approachable and resilient.

In instances where our office is unable to assist due to jurisdictional constraints, our intention is to explain and refer taxpayers to the most suitable agency or organisation which can assist. In this respect, our staff also receive training to assist with the identification of signs which may suggest a particular taxpayer may need extra support. During the year we also introduced specialist human resource capability through the engagement of an HR Director. This role also assists in developing the resilience of the IGTO team.

Constraints

An ongoing challenge for the office has been our resource management. The IGTO has a statutory obligation to investigate taxation complaints with limited discretion to decline to investigate. Taxation complaints have increased by 29% since the Taxation Ombudsman function commenced in 2015 and have been increasing year on year. Taxation complaints are also difficult to predict with certainty and more complex complaints, require an investment of significant senior management time to resolve. The IGTO experiences a peak in taxation complaints during the period July to mid-November which coincides with ‘tax time’. This also coincides with a peak in corporate compliance requirements — including budgeting, annual reporting, financial statement preparation, auditing and corporate planning.

This limits the capacity for the IGTO as an agency to engage in meaningful review investigations, or at least constrains the available resources we have to commit to such investigations.

This constraint was acknowledged by Recommendation 1 of the SELC Report.

Recommendation 1 — The SELC recommends the Australian Government assess whether the IGTO is adequately resourced, both now and into the foreseeable future, to effectively discharge its dual role as the Inspector-General of Taxation and the Taxation Ombudsman.

Demand for our complaints investigation service has increased year-on-year since we commenced our Taxation Ombudsman complaint investigation service. Across all complaint categories, there has been a 6.6% increase per annum and an overall increase of 29% across the 5 year period. When looking at categories 3–5 (i.e., those that require the IGTO to commence a complaint investigation), there has been a 6% increase across 5 years — this has largely been driven by increases in category 3 and 4 cases. More information about the various complaints categories is included in Appendix 3.

An overview for the past 5 years illustrates that, while there are peaks and troughs month-on-month, complaints are generally increasing — see Figures 2 and 3. Figures 2 and 3 reflect data as at 30 June 2020.

Figure 2: Overall trend in complaints received by the IGTO — FY16 to FY20 A figure of the overall trend in complaints received by the IGTO — FY16 to FY20
Figure 3: Total complaints received each month in FY19 and FY20 A figure of the total complaints received each month in FY19 and FY20

As shown in Figure 3, prior to the COVID-19 restrictions commencing, complaints received by the IGTO were approximately 14% higher than the same period in FY19. This is, in part, due to the ATO debt collection areas refocusing resources away from tax debt collection towards that of COVID-19 support measures delivered through the tax system. Debt collection and debt issues have historically been the number one complaint issue raised with our office, accounting for approximately 25% of taxation complaints.

Complaints about ATO debt collection, reduced by approximately 50% during the COVID-19 period. It is anticipated that when the ATO resumes debt compliance and recovery work, there will be a corresponding increase in complaints.

Another challenge for the IGTO is the limited protections available under the Inspector-General of Taxation Act 2003 (IGT Act) for tax officials who disclose information to us. We have no power to investigate taxation complaints made under the Public Interest Disclosure Act 2013 (PID Act). That is, ‘whistleblower’ style complaints made by tax officers (as public servants). The Commonwealth Ombudsman has the power to investigate such complaints and appropriate whistleblower protections are provided by Part 2, Division 1 of the PID Act in these circumstances. The IGT Act does not provide the same level of protections for Tax Officials as the protections available under the PID Act. The IGT Act also does not provide protection equivalent to other whistleblower regimes for taxpayer and public disclosers. To encourage voluntary disclosures (including from ATO and TPB officers) to our office, additional protections including protection against, and compensation for reprisal action would need to be introduced to the IGT Act. Ideally, these protections should be consistent with protections available under other whistleblower regimes, including the PID Act.

This constraint was acknowledged by Recommendations 6 and 7 of the SELC Report.

Recommendation 6 — The SELC recommends the Australian Government consider strengthening protections available to individuals who disclose information to the IGTO, regardless of whether the disclosure is in relation to a complaint investigation or systemic review.

Recommendation 7 — The SELC also recommends the rights of tax officials who are interviewed during investigations undertaken by the IGTO be clarified, and that protections afforded to them be strengthened. This includes providing officials the legal right to choose whether or not they have other persons present when providing information.