Tax ombudsman launches probe into how ATO handles identity theft
The taxation ombudsman has started an investigation into identity theft and compromised tax accounts after repeated reports of fraudulent activity and concerns about how the ATO is handling them.
The Inspector-General of Taxation and Taxation Ombudsman said it is currently working through about 140 dispute investigations with the ATO over identity theft and was now calling upon tax practitioners to relate their experiences of the issue.
Ombudsman Karen Payne said the problem was not new but “we keep hearing about it and my concern is it’s not fully fixed or fully resolved”.
“At conferences, practitioners in particular will come up to me at the end of my presentation and say, ‘Hey, Karen, I'm alarmed at this.’
“We're still seeing instances where people's identity is being used to achieve outcomes that are unauthorised in the tax system and to achieve refunds and payments that they're not entitled to.”
“So what we wanted to do through this investigation is basically give people an opportunity to come and tell us their stories. What happened? Did you report it? Was the ATO and tax system effective?”
The IGTO said discussions with complainants and tax practitioners already confirmed there was increased identity and fraud activity in connection with income tax, BAS and GST returns.
Ms Payne said in one case, a tax agent had identified that a client was no longer on their listing. When they followed up, the client’s ATO account revealed amendments for prior years resulting in large refunds along with a current return that had yet to be prepared or authorised by the client.
“Tax agents are concerned about that. We're concerned about that. And we're trying to understand by getting better examples of what's taking place. What is not working effectively that allows that sort of thing to happen?”
The investigation would focus on the Tax Office systems and how the ATO responded to unauthorised access.
“Part of the problem is having got information that allows you to get into the tax system, into somebody's personal tax accounts, how effective are the fraud prevention and detection issues?
“If somebody gets your personal details, how easy is it to then commit this financial fraud without you understanding or being notified or authorising some of these changes?”
Another example also involved unauthorised access to someone’s tax accounts that changed their bank account details so that refunds could be routed to the fraudster.
Ms Payne said that type of activity for a general banking client would typically involve notification to the customer and a programmed delay in payment.
She said the ATO was “equally alarmed” about the problem and the IGTO expected it to collaborate on the investigation.
The IGTO was asking tax agents to call out instances involving unauthorised refunds, changed bank details, suspicious activity or contact purportedly from the ATO seeking personal information.
It involved answering four questions:
- What happened for the fraud to take place?
- Was the fraud or suspected fraud reported to the ATO?
- Was the ATO and tax system response effective?
– and if so, why?
– and if not, what should have been done?
- Were the ATO contact arrangements after the compromise of tax identity and fraud appropriate and sufficient?
– and if so, why?
– and if not, what should have been done?
Ms Payne said many of the complaints related to how the ATO handled the aftermath of an identity theft.
“We get lots of complaints on that issue in particular. So when somebody has had their identity compromised the tax office will put processes and procedures in place to now deal with you on a go-forward basis which are quite cumbersome.
“It's for people's own good, if you like, but we also want to hear about how people are experiencing that and whether or not there are other things they think should be happening.”
“Sometimes the response is basically to shut down all activity on your account,” she said with the ATO then requiring additional information every time the taxpayer interacted with their account.
The question template can be accessed on the IGTO website and completed responses forwarded to IDFraudreview@igt.gov.au, or to a tax professional body for those who do not wish to be identified.
Alternatively, an email to IGTO with contact details will receive a callback on a recorded line. The survey is open until 15 February and the IGTO expects to report its findings next June.
The ATO has a Client Identity Support Centre on 1800 467 033 for people who suspect their tax file number has been compromised.
