ATO under scrutiny on tax administration

ATO’s compliance approaches to individual taxpayers

A wide range of issues have been raised with the Inspector-General, including delays, perceptions of ATO auditor aggressiveness and lack of capability, the clarity of ATO communications and the adequacy of available ATO guidance to assist individual taxpayers to comply with their obligations.

The Inspector-General said three main areas areas make up this review:

• delayed refunds arising from the ATO’s income tax refund integrity program. As at COB on October 8, 2012, the ATO had stopped around 69,000 income tax returns suspected of being fraudulent or of containing incorrect claims;
• administration of excess superannuation contributions tax – this is an ongoing and controversial issue; and
• use of third party data in compliance activities.

ATO’s interaction with the Australian Valuation Office

The Inspector-General said concerns relating to the ATO’s interaction with the Australian Valuation Office (AVO) have been raised for some time. Those concerns include whether the AVO is sufficiently independent of the ATO and whether there is a revenue bias in determining its valuations or related advice. In a tax context, valuation issues commonly arise when calculating capital gains from the sale of assets.

Furthermore, Noroozi said unnecessary compliance costs and delays incurred in challenging AVO valuations were thought to be exacerbated by a perceived lack of expertise within the Valuation Office and selective provision of information or briefing by the ATO to the AVO.

Noroozi said he would shortly undertake an analysis of the issues raised to refine the scope and focus of the reviews. Thereafter, he will formally commence each review by issuing specific terms of reference and submission guidelines. SMEs with concerns about any of the above issues should keep an eye on the Inspector-General’s website for details of how and when they can make submissions. The process does work and SMEs should be aware of how to participate.

Terry Hayes is the Editor-in-Chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.