Australian taxation office
the ombudsman has been investigating complaints about the Australian taxation office (Ato) since 1977, when the ombudsman’s office commenced operation. the ombudsman was given the title of taxation ombudsman in 1995 to give a special focus to the office’s handling of complaints about the Ato. this was a result of recommendations of the Joint Committee of public Accounts, which recognised the unequal position of taxpayers and the Ato.
As the only external complaint–handling agency to which taxpayers can bring complaints about the Ato, the taxation ombudsman is uniquely placed to draw on our regular contact with taxpayers to assist in improving taxation administration.
ComplaintS oVerView
In 2008–09 we received 1,422 approaches and complaints about the Ato, an increase of 17%
from the 1,219 received in 2007–08. While this is the highest number of complaints about the
Ato in three years, it is in line with the average number of complaints over the past five years, as Figure 6.2 shows.
the Ato itself also received an increased number of complaints in 2008–09. these increases probably stem from the impact of some significant events during the year, including the tax bonus payment and changes to some Ato systems as part of its Change program. We will closely monitor Change program releases during 2009–10 for possible problems.
During the year we finalised 1,400 approaches and complaints, of which 321 (23%) were investigated. While this is more than double the percentage of cases investigated last year, this increase is largely due to a change in categorisation of tax complaint investigations.
Most of the complaints we investigate have already been through the Ato’s complaint–
handling system. As a first stage of
investigation we seek information about the outcome of the Ato complaint handling.
Figure 6.2 AustRAliAn tAxAtion offiCe AppRoACh And ComplAint tRends, 2004–05 to 2008–09
Number
2004-05 2005-06 2006-07 2007-08 2008-09
Year 200
400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
0
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previously we did not record this stage as an investigation, but from this year on it will be included as an investigation in our reports.
We achieved one or more remedies in 49% of the cases we investigated. the most common remedies were better explanations (28% of all remedies), apologies (21%), financial remedies (9%) and actions being expedited (7%).
We transferred approximately 14% of the complaints directly to Ato Complaints under the assisted transfer process introduced in 2007. this is a significant decrease from the 25% complaint transfer rate in 2007–08. We have not analysed fully why there has been a drop in the rate of transfers. We consider that the assisted transfer process is a valuable service to assist people to pursue their complaints through the most appropriate mechanism.
moSt FreqUent ComplaintS
the complaints we received covered a broad range of Ato activities and products. the most frequent complaints related to the lodgement and processing of forms (31%), debt collection (15%), superannuation (11%), Ato complaint handling (8%) and taxpayer information (6%).
While these have been the most frequent complaint topics in previous years, the most significant change is an increase in the number and proportion of lodgement and processing complaints.
lodgement and processing
Almost a third of the complaints we received during the year were about lodgement and processing issues, most commonly related to income tax assessments and refunds. Many of the complaints were related to delays in receiving a refund or confusion about the basis for assessment. there was also an increase in lodgement and processing activity in the Ato, following the announcement of the Australian Government’s tax bonus payment, which included as an eligibility requirement that a taxpayer had lodged their 2007–08 income tax assessment.
the case study Processing error resolved is an example of how we were able to assist a complainant to resolve an Ato processing error that resulted in a debt wrongly being raised against him.
Debt collection
Complaints about debt collection increased from 12% of complaints in 2007–08 to 15% in 2008–09. this followed an earlier increase in 2006–07. the most frequent issues were payment arrangements, debt waiver or write off, actions of debt collection agencies and garnishee and bankruptcy action. In most cases the appropriate outcome from these complaints was to provide the taxpayer with a better explanation about the debt situation and their options for resolving it.
Mr A complained to us about an outstanding pay as you go (pAYG) instalment debt. Mr A had been contacted by one of the Ato’s outsourced debt collection agencies about payment of the debt. According to Mr A he did not have a pAYG instalment debt because his primary income since 2000 had been Centrelink benefits.
As a result of our investigation, the Ato identified that it had failed to properly remove Mr A from the pAYG instalment system after he had advised it that he would not be lodging income tax returns because he did not receive sufficient income. Mr A was actually entitled to a refund of more than $3,000.
the Ato apologised to Mr A and paid the refund to his bank account.
Processing error resolved
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In some cases, such as Unfair garnishee decision, we highlighted problems with Ato administration of debt collection, leading to fairer decision making.
Superannuation
In 2008–09 close to 12% of the complaints we investigated were about superannuation. the number of such complaints has decreased over the past three years.
one area of increase was in complaints related to superannuation co–contribution. this increase was related to problems with the Ato’s implementation of one of its Change program releases in February–March 2009 that affected superannuation co–contribution payments. the Ato advised that payments to around 200,000 people were delayed as a result. In June 2009 the Ato implemented a
‘workaround’ that allowed it to expedite payments to people eligible to receive these payments who experienced hardship as a result of the delay (usually people who are relying on their superannuation in retirement or because of adverse personal
circumstances). the Ato advised that it is
working with superannuation funds to clear the backlog of payments and interest will be paid for the period of delay. We expect to continue receiving complaints about this issue until the Ato fixes the problem completely.
there was a decrease in complaints from employees about unpaid superannuation (32%
of superannuation complaints compared to 47% in 2007–08: a decrease from 52 to 32 complaints). We attribute this decrease to two factors. one is the improved processes the Ato put in place to better manage investigations and recover established superannuation debts, as a result of additional funding provided in the 2007–08 Budget. the other factor is that, following legislative changes to secrecy restrictions, the Ato can now provide more information to employees about progress in investigating unpaid superannuation guarantee. even though the number of these complaints has decreased, we consider that there is value in further scrutiny of this area of Ato administration and we will cooperate with the Inspector–General of taxation’s review of the administration of the superannuation guarantee charge in 2009–10, discussed later.
Ms B complained that it was unfair of the Ato to garnishee her entire bank account balance for a partnership debt of $60,000. She had only found out about the debt two weeks earlier as previous correspondence had been sent to her former business partner. Ms B had advised the Ato that she could not afford to pay. She agreed to contact the Ato after seeking professional advice about her options, but did not do so by the agreed date. Without attempting to contact Ms B again, the Ato issued a garnishee notice for 30% of the debt, resulting in the total balance of her bank account being sent to the Ato. While the garnishee notice was not legally incorrect, we expressed concern to the Ato that it had not acted consistently with its policy to take into account the likely implications of garnishee action on a debtor’s ability to provide for a family or maintain the viability of a business.
the Ato agreed that it should have made further enquiries about the balance of Ms B’s account to enable it to make an informed decision about the appropriate action to take. the Ato also advised that it would explore a possible modification to its garnishee practices, to ensure that only a specified and reasonable percentage of the contents of a bank account would be removed under a garnishee.
As part of our process to follow up on recommendations arising from complaints, we will check with the Ato about the implementation of any changes to their garnishee practices and procedures.
Unfair garnishee decision
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the case study Compassionate response is an example of how the Ato responded effectively and compassionately to our approach on behalf of a complainant who was seeking the release of superannuation funds held by the Ato.
taxpayer information
taxpayers rely on the Ato to accurately record and manage their personal information. If a mistake is made, it is important that the Ato acts appropriately to address this, taking into account how the mistake occurred. the case study Incorrect assumption resolved shows how we were able to assist a complainant to have a mistake in processing their personal information corrected.
In 2008–09 we received a number of complaints related to taxpayer information security and compromise. they highlighted two areas of concern. the first is the Ato’s approach to resolving a suspected duplication (either two taxpayers using the same tax file number (tFn) or two tFns thought to relate to the same taxpayer). the case study Error in resolving suspected TFN duplication (p. 56) is an example of this type of complaint. the second area of concern is the effectiveness of the Ato’s systems and processes for deterring tFn fraud and assisting taxpayers whose identities have been stolen or misused. Cases involving tFn compromise and suspected fraud are complex and involve judgement and sensitivity to resolve.
Ms C had been diagnosed with terminal cancer with less than six months to live. She had superannuation funds in the Superannuation Holding Accounts special account (administered by the Ato) and she wanted this money paid directly to her so that she could take a holiday with her son before she became too ill to do so. Ms C complained to us that the Ato had advised that it could take three months for her to be able to access her funds. While the Ato normally undertakes to process payments within 21 days of receiving the necessary information, a scheduled upgrade to the superannuation system would interrupt these types of payments for the next few months.
When Ms C complained to us, we asked the Ato to look at the matter urgently. the Ato responded within three days and advised that, because of Ms C’s exceptional circumstances, she should complete a withdrawal form and send it to Ato Complaints so that they could issue a manual cheque. this would take two weeks but it was still much sooner than would have occurred if the funds were transferred to her superannuation fund. the Ato Complaints manager took charge of the process to ensure that Ms C received the funds as quickly as possible.
Compassionate response
Ms D was a serving Army officer. Her tax agent recorded her title as Captain D when lodging her tax returns. Based on this information, Ato staff made the assumption that Ms D was in fact a male and updated its records to reflect this, without contacting her for clarification.
Ms D made repeated requests to the Ato to correct her record, but it did not do so. At one stage Ato staff asked Ms D if she had had a sex change operation, and subsequently told her that she would have to provide her birth certificate to prove she was female.
As a result of our investigation, the Ato updated its databases without requiring further evidence from Ms D and sent a letter of apology to her.
Incorrect assumption resolved
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reViewinG tax aDminiStration
In addition to resolving individual complaints, we use information from complaints to identify potential systemic problems in tax
administration. through our external project work, including own motion investigations and less formal reviews, we review the effectiveness of specific areas of tax administration and consider areas for improvement.
During the year we worked on three own motion investigations:
the Ato’s processes and practices for
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re–raising debt
the operation by several agencies of the
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Compensation for Detriment caused by Defective Administration (CDDA) scheme (more detail is provided in the Centrelink section of this chapter)
the Ato’s use of its unannounced access
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powers.
We also finalised an informal review of aspects of the superannuation guarantee.
We discontinued an own motion investigation into the complaint–handling practices of state tax agents’ boards. We decided that this would no longer be pertinent because these boards will be replaced by a national tax practitioners Board under new legislation reforming the regulation of tax agent services.
In January 2009 we made a submission to the inquiry by the Senate Standing Committee on economics into the tax Agent Services Bill 2008. our submission was based on observations from the complaints we receive about tax agents and the various state–based tax agents’ boards.
If implemented effectively, the reforms are likely to provide a more centralised and structured approach to the regulation of tax practitioners, and should facilitate increased professional accountability and service delivery standards to the benefit of taxpayers, tax professionals and tax administration generally. We look forward to working with the new national tax practitioners Board.
re–raising written–off tax debts
this investigation was initiated in response to complaints we received about the operation of Ato policies to re–raise debts which had been written off many years earlier, sometimes where taxpayers were unaware that they still had a collectable debt. the trigger for a debt being re–raised was a taxpayer receiving an income tax assessment of over $500 credit. In some cases taxpayers were asked to pay the general interest charge (GIC) applied back to the write–off date. In other cases the GIC was remitted automatically.
the investigation report Australian Taxation Office: Re–raising written–off tax debts
Mr e complained that he had not received tax refunds for the past two years and he could not submit a tax return because he did not have a valid tFn.
When Mr e lodged his income tax return, he discovered that the Ato had processed another person’s tax records with his tFn. the Ato had incorrectly decided that he and another taxpayer with similar identifying information were the same person, and merged information together under Mr e’s tFn. Mr e’s tax return was processed as an amendment, adding the income from the two lodgements together. our investigation highlighted a lack of action to correct the error or to consider how it could have happened and whether there were appropriate safeguards against it recurring.
As a result of our investigation, the Ato apologised to Mr e, and expedited action to provide a new tFn and his tax refunds. the Ato also reviewed its tFn compromised procedures to ensure that investigating officers are prompted to make adequate enquiries to properly identify if there are two taxpayers with similar details.
Error in resolving suspected TFN duplication
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(report no. 4/2009), published in March 2009, identified a number of areas where the Ato could improve its administration of debt re–raise decisions, including:
improving communication with taxpayers
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more comprehensive recording of reasons
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for decisions
ensuring that the criteria used for deciding to
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re–raise debts are clearly related to whether it is economic to pursue the debt and efficient, effective and ethical to do so monitoring the impact of the Ato’s bulk
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write–off process to ensure it is operating appropriately.
the Ato agreed or partially agreed to all the recommendations in the report. It implemented revised criteria for re–raising debts, with a view to promoting a more consistent approach to the re–raise of debt and avoiding the impact on low income earners that resulted from the previous approach.
Unannounced access powers of the ato
Many government agencies administer legislation that authorises staff to access premises or information—often described as coercive powers. the Ato administers several pieces of legislation that contain such provisions. one of the best known and most commonly used is s 263 of the Income Tax Assessment Act 1936 that empowers the tax Commissioner or his delegate to enter premises, private or business, for the purpose of
administering the tax legislation.
the Ato regularly uses these powers to gain access to premises to examine and copy documents. the Ato has in place internal checks and balances, but the use of these powers receives only intermittent scrutiny by external government bodies.
During 2008–09 we commenced an investigation into the Ato’s unannounced access powers. the aim of the investigation is to foster good public administration by providing independent oversight of the use of coercive powers and to identify areas for improvement.
the report from this investigation will be
informal review of superannuation guarantee charge
During the year we finalised an informal review of Ato administration of the superannuation guarantee charge (SGC).
We revised the scope of this review after the Ato implemented changes to SGC administration and received additional funding to address a backlog in unpaid superannuation cases. our revised review looked at the two main employee complaint issues we had received about the SGC:
Ato delay in collecting unpaid
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superannuation from employers
lack of information provided by the Ato to
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employees about the collection of their unpaid superannuation.
the Commissioner of taxation agreed in principle with our recommendations that the Ato:
continue reviewing the processes and
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resources used to increase the timeliness of follow–up and finalisation of
investigation of employee notifications about employers’ failure to pay their superannuation entitlements and collection of established superannuation debts
review its business processes to ensure
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that employees receive advice when no further action is being taken by the Ato to collect unpaid superannuation (pending full implementation of the Change program)
ensure its new systems are able to
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provide management and client information for the entire process from investigation of unpaid superannuation claims to payment of money collected from employers, and in particular the collection of unpaid superannuation guarantee.
We are continuing to monitor the Ato’s administration of SGC and we receive updates about progress with business and systems improvements. In the coming year, we will work closely with the Inspector–
General of taxation in his review of the Ato’s
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the review will consider the Ato’s:
risk assessment strategies for the SGC and
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Ato implementation of strategies to improve compliance by employers (such as education, employer assistance, audit and enforcement) communication strategies the Ato could
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adopt with employees who have raised concerns about their employer’s compliance, the timeliness of actioning employee notifications and the level of information provided by the Ato to employees about the collection of unpaid superannuation guarantee
timeliness in collecting unpaid
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superannuation guarantee from employers.