Senator PATRICK: That's about the level of detail I wanted, anyway. I don't like you leaving the table; I like you being around. You're like one of these little lights that you turn on for your kids at night to keep everyone calm.
Mr Hirschhorn : I'll take that as a compliment, Senator.
Senator PATRICK: I apologise if it affects your career adversely that I said something nice about you.
Mr Jordan : It certainly will!
Mr Hirschhorn : It has been lovely, Commissioner!
- Senate Estimates 2 June 2021
Review investigations updateWe provided our preliminary draft report of the Investigation and Exploration of Undisputed Tax Debts in Australia to the ATO for comment in early April (in accordance with statutory requirements) and have received their comments to that draft. We have provided a Final Draft Report to the ATO for its consideration and response to our recommendations. We aim to publish the report, together with the ATO response, by 30 June 2021. |
ATO doesn’t have to explain decisions – but things could change
Taxpayers and businesses could be guaranteed an explanation of the reasons behind decisions taken by the Australian Taxation Office related to their tax bills – potentially a significant shift in the balance of rights in Australia’s self-assessment system.
Karen Payne’s review is expected to be completed by August. Brook Mitchell
The independent Inspector-General of Taxation and Tax Ombudsman Karen Payne is leading a review into the effectiveness of Tax Office communications related to complaints, reviews and appeals. She is considering whether the rules should make it compulsory for the reasons behind decisions to be given.
There is no common law requirement for the ATO or the Commissioner of Taxation to explain how and why they reach administrative decisions – a potential weakness in the understanding and effective operation of tax rules.
Ms Payne said that although the ATO did explain some decisions to taxpayers, a common standard could reduce costly and time-consuming court litigation and bring Australia into line with OECD guidance.
It could also drive consistency, correct application of the rules and improve compliance.
“At common law, there are no rights,” Ms Payne said. “When you go to various statutes, there are some rights to get reasons. You don’t have to commence litigation but most of those don’t apply in the tax space.
“The legislative framework is not supportive of taxpayers getting reasons, but that doesn’t mean the Tax Office can’t just volunteer and explain to taxpayers.”
You should always give people sufficient reasons for them to understand why you’ve made a decision.
— Karen Payne, independent Inspector-General of Taxation and Tax Ombudsman
The early release of superannuation savings, work-related deductions and tax debts are among the areas where reasons for ATO decisions could help taxpayers.
“My personal view, as an administrator, is you should always give people sufficient reasons for them to understand why you’ve made a decision or the action you’re taking, so they can choose whether or not they want to dispute that action or decision or not,” Ms Payne said.
“If you don’t give people reasons, or say you can only get them if you raise an issue through the courts or a tribunal, then they run off and lodge an application and it’s only at that stage with cost and expense and trouble that they get an explanation.
“It clogs up the system as well.”
The review is expected to be released in August, and samples of ATO communications are being reviewed as part of the process.
The Tax Institute’s senior advocate Robyn Jacobson said increased transparency for taxpayers would be a good outcome.
“Introducing a requirement to disclose that reasoning would ensure a consistent approach and promote a more equitable tax system, where everyone feels they’ve been given a ‘fair go’ by the ATO,” she said.
Ms Jacobson said taxpayers receiving reasons for ATO decisions would feel they had been dealt with rightfully and equitably, and the change would also improve a common understanding of the application of tax law.
“That sense of fairness is very important in creating a system people are willing to work with, and that works for people. It also provides a sound basis on which matters can be escalated, where the taxpayer understands the legal basis on which the ATO’s decision has been made. This is crucial for efficiently progressing and resolving tax disputes,” she said.
“A fair, equitable and transparent tax system is in everyone’s best interest. It removes some of the uncertainty in applying the tax law, and promotes trust between taxpayers, the tax profession and the ATO.”
Under this modernised system, businesses will be able to register a business and maintain the details of those registrations in one location.
Chris Jordan: New system to track dodgy directors: ATO
Mr Jordan : Yes, just brief ones, if I could, because I want to update you on a pretty major program of work that is set to reduce the regulatory burden on Australian businesses. Over the last 12 months, as you're very well aware, the ATO's support for the Australian community has been highly visible through our delivery of the economic stimulus programs such as JobKeeper, the cash flow boost and early release of super.
One of the many ways we will continue to support the reduction of red tape is by streamlining how businesses interact with government. Today, for the first time, I appear before the committee not only as the Commissioner of Taxation but also as the Registrar of the Australian Business Registry Services, or ABRS. The primary aim of ABRS is to make it easier for businesses to meet their registration obligations, saving them time and effort. We are modernising the various business registers, and we'll bring together ASIC's 31 registers and join those with the Australian Business Register, the one that holds all of the ABNs, into a single modern system. Under this modernised system, businesses will be able to register themselves and maintain the details of these registrations in one location. The ATO is working alongside our colleagues in ASIC, the Treasury and other departments to progressively roll out these improvements.
One of the first functions in this program of work, to be delivered later this year, is the director identification numbers or director IDs. This new identifier will introduce a requirement for directors to prove their identity. Those numbers will stay with directors for life, even if they stop working as directors, change their names or move interstate or overseas. Director IDs will be a significant part of our ongoing fight against illegal phoenix activity. This is really no small measure when you consider that the direct impact of illegal phoenix activity is estimated to be up to $5 billion each year. So we want to make it easier for businesses to comply with their obligations, but we want to make it difficult for those who seek to rort the system. The ABRS is a great way to help us do just that.
...
Review investigations update
We
provided our preliminary draft report of the Investigation and
Exploration of Undisputed Tax Debts in Australia to the ATO for
comment in early April (in accordance with statutory requirements) and have
received their comments to that draft. We have provided a Final Draft Report to
the ATO for its consideration and response to our recommendations. We aim to
publish the report, together with the ATO response, by 30 June 2021.
In addition to developing and publishing our article on the statutory rights
for taxpayers to receive reasons for decisions from the Commissioner of
Taxation, we have also progressed with drafting our initial draft of the report
into the effectiveness
of ATO communications of taxpayers' rights to complain, review and appeal.
We are aiming to provide the ATO with a preliminary draft report for its
initial comments in July and will aim to finalise and publish the report before
the end of the 2021 calendar year.
Senator ROBERTS: On a number of occasions, the ATO has been asked if it can provide a break-up of small business tax debt into principal, interest and penalty. The ATO's consistent reply is that this break-up cannot be supplied. Is that still the case?
Ms Smith : In the near future we will be able to provide more detail around the construct of the debts. We, last year, changed our cooperating system across to a system called ASFP. Part of the benefit of that was that it gives us these flexibilities to be able to report. For our collection activities, that's not information that is as critical to us as other information, so it hasn't been a priority to be able to produce this immediately, but we are working on that. Vivek Chaudhary, who is our head of debt, might be able to give us a bit more information. He's appearing by video from lockdown.
Mr Chaudhary : I am able to share with you that, for the month ending April 2021, the primary tax made up 81.7 per cent of all small business tax debt. A further 15.6 per cent is made up primarily of general interest but also shortfall interest. A small proportion—two per cent plus some decimal points—consists of penalties