ATO Top 500 Family Company Trust Programme - The ...
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ATO Top 500 Family Company Trust Programme 3 August 2021
John Dahlsen
INTRODUCTION
The ATO is by far the Government’s principal resource for collecting revenue. It is not
surprising that Treasury and the Treasurer take a close interest in the ATO and like the ATO
place a ring of steel around ATO operations. Unless you can convince Treasury and the
Treasurer, the ATO will rely upon the tax legislation which gives the ATO incredible powers.
The ATOs Top 500 Family Company Trust Programme will be of great benefit to the ATO. The
ATO are planning to extend the next 5,000 Companies and then to the Emerging Companies.
The ATO are saying “give us a great deal of information so work with us and we will decide
whether you can be a trusted tax payer or partner and be left alone for three years and only
report material change in the interim.”.
It is questionable whether it is worthwhile tax payers co-operating; is it a fair exchange of
value? Is it a fair compact? Is it not an overarching exercise of power with insufficient benefit
to the tax payer?
In a report recently re-issued, the ATO has disclosed the status of the Top 500 engagements
52 justified trusts
21 engaged and progress towards justified trust
187 engaged but not sufficient evidence to support justified trust
27 engaged but not yet committed to attain justified trust
6 unwilling
11 not engaged
The ATO may now have more information on the above.
In the interview ATO officers are polite, fair, respectful and listen. But that does not distract
from the comments on policy that follow.
Through the upgraded ATO relationship officer the ATO are genuinely trying to get co-operation
and to promote the various services they can provide to make life easier. The Commissioner of
Taxation, in his Annual Report to the Treasurer for the 2019-20 year (The ATO Report), provides
staff via the Enterprise Client Profile Data Base (ECPDB), with a wide range of facts and insights
on clients (pages 11 and 29). This Single Client Account Process System (SCAPS) would be very
useful for staff (ATO Report, page 31).
The ATO communication toolbar (ATO Report, page 27), enables staff to handle client issues
across multiple challenges.
The huge data base the ATO is creating (probably by far the largest in Australia) is the way to
develop tools to access this otherwise it would be sterile but you need the ECPDB and great
analytic capability combined with automation and artificial intelligence to use a data base
and so make the ATO extremely powerful.
1Unlike in the past this will definitely help in communicating with the ATO. The relationship
Authorisation Manager is a great initiative (ATO Report, page 32). Naturally the ATO wants to
have a corresponding tax payer staff member responsible for tax. The hope is that this will
increase communications between the ATO and tax payers.
Of the 328, or 65% engaged, some may want reassess their position given the time and cost
involved.
THE TRUSTED TAX PAYER JOURNEY
This journey to get doubtful privileges, commences with omnibus questions (over 200) only
some of which are irrelevant to taxing you. The ATO want to understand all the connections,
relationship, the sector and your economics and where you are heading (basically your
strategy) and fundamentally the ecosystem within which you operate.
o For some companies this will be extraordinarily complex, difficult, time consuming and not
adding any value to your business. The larger companies will have plenty of documentation,
the smaller ones not because they cannot afford it or don’t believe it has any value.
o It will however help the ATO establish your sensitive tax areas and provide the ATO with
huge information relevant to other tax payers and understand the interconnection within
and between ecosystems.
ISSUES WITH GIVING INFORMATION
My difficulty with that is that if you are providing information not relevant to your taxing but
will help the ATO with others then you should be paid providing collecting and providing that
information. The ATO should not use their draconian powers to get information which is not
relevant to your tax without paying for it. Why should you help the ATO with their cross-
referencing? Is this Tax Act excess?
The massive data you provide (in our case over 1,000 pages), is merely the beginning of the
journey. It is like peeling an onion and the initial enquiries just remove the peel. And then
follows a series of interviews to target areas based on your information seeking more and
more information. This information will be very valuable for the massive data base the ATO
is building enabling the consolidation of a lot of information (ATO Report, page 29). Your
responses will lead to further questions which will be endless, cascading down to direct
contact and interview the staff because in ATO language they want the direct evidence from
staff to establish trust. It is for this reason that so many of these trust programmes are
works in progress, because the ATOs inexhaustible and often costly demand for more and
more information.
Some may well have regretted going down this path and my concern is the next the 5,000
and Enabling Companies will not know what they are in for.
The smaller the companies the greater the burden on their resources and the need to
engage expert and expensive help to satisfy the ATO demands. Some advisers like the big
accounting firms providing data will insist on auditing the information to avoid risk to
themselves.
2This will be another significant area for the larger accounting firms’ advisory services. Not
only would it be a good revenue earner but it will in some cases help the firm to better
understand clients with a possibility of generating more advisory work which may have
benefits to the client, beyond simply assisting the ATO. This movement to and from the ATO
is very healthy and brings the ATO and professional firms closer in generally administrating
the tax act and the culture within the ATO on the one hand, and the professional firms
desire to serve its clients and the practical barriers that arise from the administration of tax.
Indecently, Tax Officers are not over-paid, which probably explains the movement of Tax
Officers into professional firms (ATO Report, page 101).
NOT TO CO-OPERATE
What are the problems in not co-operating with the ATO?
The ATO has, unlike any other organisation, incredible power. In effect you have to prove your
innocence whether you are charged with a sin or not. The ATO does first not have to prove
your guilt or sin. You simply go, unless bailed, to jail and you have to find your way out, and at
the same time pay up front for your sins and loose the money whilst you are proving your
innocence.
It is important that tax payer modifies this massive imbalance of power and it is enshrined in
legislation, not as articulated in a different form by the ATO and its Taxpayer Clients and where
it is capable of change and the ATOs interpretation .and importantly no consequences or
remedies. The ATOs Tax Payer Charter (ATO Communications and Reporting, Page 20-63) is a
comprehensive, well worded document. It is very appealing but the only redress you have is
the limited rights in going to the Ombudsman. This is insufficient to protect your rights and as
with the US there should be added to the Tax Payers Charter a whole raft of avenues for
reaching out, remedies and consequences to the tax officials that do not comply. After all, we
as employees, have to face consequences for not complying with corporate policies.
It is not just the legal power the ATO has but the huge imbalance of infinite resources, massive
information, superior and specialised knowledge, and so it is easy to crush the tax payer. The
tax payers have developed a huge fear of the ATO. Many compromise because they do not
have the resources or will to resist irrespective of the likely outcome of the case. After all the
appeal processes is daunting, very slow and costly.
Few are sufficiently free to criticise the ATO. By way of example the Intermediaries
Engagement Arrangements and the tax practices enable the ATO to analysis the risk of
practitioners’ tax client base. Their business processes would worry taxation practitioners
speaking out.
Practitioners are recruited to the tax practitioners board and to the various boards of review
and appeal processes.
Barristers are similarly available for these jobs and rarely get involved in tax administration
issues but simply in the legal issues (ATO Report, page 23).
3WHAT DOES TRUSTED STATUS MEAN
The trusted status is in effect a defacto investigation of your affairs, but cleverly the ATO seek
your cooperation to get the same information for questionable benefits. There is little
difference between the trusted investigation and the formal investigations carried out in the
usual course of business. If your affairs are in reasonable order (remembering there is a
materiality advantage because none of us are perfect), that little is of value with a trusted
investigation is opposed to a formal investigation. The later may be more aggressive,
demanding and manned by officers with great investigative experience and skills.
There are other issues, the ATO are very keen to understand your processes governance your
controls and the people involved in managing the tax sensitive areas of your business.
The ATO has a preconceived idea as to what they regard as appropriate. It is very close to
telling you how to manage your business. But instead of telling you the precise detail they
continue to peel the onion to get into all these issues like a set of interrogatories or a QCs cross-
examination.
What the ATO wants to do is to lumber you with a process they believe is appropriate and a
staff person to whom they can relate, question, probe and pin independently of the people to
whom that person reports. Such a staff person may give the information in a different way to
their superiors.
What the ATO could be more sensitive to in the current age of digitalisation block chain and
robotics we are all trying disparately to remove all these processers, people and simplify our
business and our business model taking out costs and getting greater efficiency and
productivity.
You can see from the ATO Report (page 22), the ATO for its own benefit is digitising, but how
much of this is available for tax payers is not known. Maybe the 2020-21 will be more
informative on this subject of enhancing the digital ecosystem.
Companies do not like bureaucracy over-processing, unnecessary and costly controls and
adding to huge compliance costs they are incurring through regulation right throughout their
business. The smaller companies take the view we know where the sensitive tax issue and we
don’t need processes the ATO is suggesting. ATO officials are not paying for this process and do
not need a one-size-fits all process, it does not matter to them how much it costs or what are
the costs of all the other activities requiring regularly compliance. For instance, why should tax
be any different to OH&S and the health of their workers. You are taxing my hard-earned
earnings through my business I am making huge payments to government so please recognise
me as a client delivering benefits to government and other tax payers. See my Philosophy
attached.
Can there be a rebalance in the massive imbalance in the exchange of information?
o Why will not the ATO give you your Risk Rating broken up into various components?
o Why not articulate in each component the reasons for the rating?
o What needs to be done to improve the rating?
o Why not justify how the improvements will increase the tax payable?
o Why not give me my ranking within my category of the 140 categories you have created?
4o In your category (without the possibility of identifying any player and breaching privacy
issues), can you tell me
• my relative size tax payable amount percentage of revenue
• the sensitive tax areas in my category
• where category performance can be improved
• what are the various forms of technology being used in the various aspects of my
business relevant to tax?
The ATO road forward is to use technology in the growing technology market of software,
which can be readily plugged in to the new platforms. We are all tackling this differently. The
bigger companies can do it faster and the smaller companies to do it step by step. When
complete, it will be much easier for the ATO to access and get the information electronically.
TRUSTED STATUS – ONGOING OBLIGATIONS
In the meantime, as a trusted party you have to inform the ATO during the three-year period of
any material changes. For most of us material changes are happening almost daily. It is a
journey and with the new concept of Blockchain and Digitisation, we are going through a
profound business revolution where people are struggling to understand all the ramifications.
Some foresee this as a great business revolution than the internet.
So, we have to go through these archaic processes to satisfy the ATO about legacy systems and
processes that the ATO believes, by its questions, to be important but what the long term may
be of little value.
What is driving this is the huge technology and software development taking place and the
difficulty of tax payers is to know what is the best technology or system to use.
How much is the ATO approving software which is both fix (ZERO) and not fixed in mode and
cannot be altered, except to improve. Coupled with this is the huge data bases that individual
companies are creating as part of digitisation making it easy to extract information from these
data bases which have been compiled by one only and not duplicated pieces of information.
The ATO is probably unwilling to do this but there must be some way which the market, by
osmosis, to know what is suitable. Would it be possible for consultants to review this data
within the ATO and publish a report? It would be valuable for software developers (ATO
Report, page 22). It is accepted that the ATO has many interactions with software developers
but what we are interest in is outcomes and what technology is available and suitable to the
ATO to remove a huge amount of cost and gain great efficiency and reliability.
The other opportunity is where technology and software are being development which may be
of indirect benefit to the ATO and they work with the appropriate suppliers to help.
5ATO DATA BASE
The big data that the ATO is collecting has massive implication for tax in the years ahead. The
ability to cross reference and use this vast data they are now receiving to check others is
profound. Out of the 140 individual industry sectors identified by the ATO, it will be possible to
develop a huge data base on each sector providing massive information cross-checking, bench
marking and much like a jigsaw puzzle, filling in all the pieces to completion. In addition to this,
the ATO will be able to engage data analysists to make great use of this information.
This information apart from enabling the ATO to focus on the sensitive tax issues, will provide
huge information of great value to other agencies and the public. It is the broad-based
information that the ATO are seeking in this questionnaire which will make this a rich data
source.
With the ATOs own digitising initiatives, the benefits could be profound and with the
connection to individual company data bases, tax collection will be improved dramatically.
It must be remembered that one of the outcomes of digitisation is an incredible data base of
information which can be sourced very effectively and can support the ever growing and
sophisticated software that is hitting the market place. Because digitisation makes it easier if
you have the right ERP system to plug in different software means that there is greater
opportunity for the software providers to update and improve their software. It will become a
very competitive and value adding space for companies.
I am not aware of the nature of the discussions taking place within the ATO, on the extent to
which technology companies can be assisted to include the needs of the Tax Department.
But would not a high level, economic study be undertaken to consider the role of tax and
technology and where to objectives of the Tax Department and the technology companies can
be aligned.
o What would be the value of a considerable improvement in the use of technology?
o Would such a study best be taken out of the exclusive realm of the ATO and put in the hands
of a panel of tax technology and tax payers representative who would have a government
grant to engage consulting help.
o Is this not important to government who are trying to remove over regulation and
compliance costs?
o Is it not likely that a successful study and alignment with technology could take huge
amounts of cost out of the system with greater efficiency and productivity? The cost of such
a study would pale into insignificance with the potential value add.
It would be important for this to be a government lead project where the interests of the ATO
are rebalanced with the interests of technology companies and the tax payers. The outcome
could be a significant reduction in paperwork, people involvement and greater efficiency and at
lower cost.
A critical part of this assignment would be to understand where technology is heading with
digitisation and block chain because here in lies a massive change both for the ATO and tax
payers. In other words, the study should be very forward looking and out of it could be a plan
to move to the future removing a lot legacy systems, habits and attitudes. Would it not be
worthwhile through one of the newspaper groups to hold a tax summit organised
6independently by the government where papers are presented on these issues with public
debate and conversation following. This would be very healthy.
UNIDENTIFIED TAX
The above might have relevance to the huge sway of tax payers who are not paying their fair
share of tax through under disclosure and the failure of their accounting advisors to deal with
the situation. It is very hard to accept the ATOs view of unpaid tax. The ATO acknowledges it
uses independent experts but without seeing that information it is difficulty to form a view on
uncollected tax. It looks like building of shifting sands. The figures make the ATO look good.
OTHER JURISDICTIONS
To what extent does the ATO learn from other tax administrations around the world. What kind of
exchanges take place, and how does Australia’s ATO administration stand up? Does the OECD do
any comparative work? Are there any international bodies that the ATO relate to in terms of
administration and performance?
ATO PERFORMANCE
There is a lack of independence about the report on ATO performance.
Why not have a website where tax payers in respect to the various components of tax air their
frustrations about the tax and the way they were treated by the Tax Department.
This could be done anonymously and the tax payer only giving their name to the Tax
Department if they so desire.
You could establish a website where tax payers could complain and articulate their dealings
with the ATO. In developing such a website it would be important to have the following:
• The tax category for the issue, eg is it personal tax, GST, etc.
• The electorate of the complainant
• The complainant type; are they are farmer, stockbroker, etc; it would not be difficult to
design such a website and promote it for use with the ATO being required to inform tax
payers of this service in all of their communications.
The AATO would not like this but maybe there are sufficient agitated parliamentary back
benchers who might push this into ATO policy before the next election.
• The ATO, like all other government agencies, makes an annual report to the Treasurer and
then for parliament. Presumably the Senate can call for the Commissioner of Tax to be
interviewed. But what about an annual Tax Summit being set up where the ATOs annual
report is the subject of public debate with a number of experts being able to present to
one of the forums that the newspaper groups are very good a running. There would be an
obligation of the practitioners Board to report and engage.
Is it worthwhile revamping the role of the objectives etc. of the Treasurer or the Finance
Minister, or some other dedicated Minister in respect to the ATO? It is an extraordinarily
important agency but it is very difficult for the public to engage and certainly all complaint and
objections are heavily processed and controlled by the ATO.
7The ATO measures its own performance against the Charter (ATO Report, page 181). This can
be much better explained, this report lacks proportionality and insights as to the weight of and
the significance of the issues. Without this information this report is fairly meaningless.
This would show more light than anything else on the Tax Department.
There is also a huge amount of economic data that could be captured of relevance to the wider
community and such a study should establish what information should be gathered and how it
could be made available subject to the laws of privacy.
The ATO is creating a massive data base of information and this subject to privacy should be
available for public use.
What will drive the Treasurer and Treasury is that they will not want to lose control of the
debate and performance of the Tax Department. This has been a hallmark of the past, is the
Treasurer prepared to open up these issues for public discourse? Unquestionably the tax group
with Treasury and the Tax Department will fight this till the end. The Tax Department wants to
continue to be protected by statute that gives them a great deal of untrammelled power with
little counterbalancing power of, for instance, a Bill of Rights instead of an unenforceable Tax
Payer Charter.
What should not be misunderstood from my suggestions is that it is likely that more tax will be
collected and the collection costs as a percentage of tax will drop as happens in the US.
But will the Treasurer have the courage? Maybe it’s up to the members of parliaments who
from time to time receive many complaints about the Tax Department. Is there any sin or
anything fundamentally wrong with what I am suggesting? Albeit something bold and forward
looking.
FEAR OF RETRIBUTION
Few want to be involved for perceived fear of retribution in respect to their own affairs and of
related entities. Professional firms have an on-going relationship with the ATOs so called
independent Tax Practioners Board. Tax is often a huge and very profitable part of their
practice. For the firms to criticise or comment it is a risk for how the firm will be treated in
respect to their extensive clients. Tax Barristers like being paid for their work and time and
often have ambition to become judges, or join boards of review, etc, so who is left? We need
whistle blowers, but they are not protected. We need people who are prepared to speak out
and join the conversation in the interest of our economy.
In seeking change in practices in the ATO it is almost impossible, it is the most protected, self-
contained, insulated, internalised silo that exists. There is no countervailing force and there is
little accountability of a meaningful nature. It is extraordinarily difficult to influence or shape it
no matter how good your ideas are.
The ATO is protected by Treasury. Treasury has a small team of tax people that advise the
Treasurer on tax issues. But these people are fundamentally out of the Tax Department.
8ATO MANAGEMENT
We lack an amount of information on how the ATO is managed. We do get information on tax
collections, tax appeals, objections, etc and we have a labyrinth of arrangements and a library
of information about how the ATO works. But there are some fundamentals missing.
o How effective is the time used by Tax Officers on the various tasks they carry out.?
o What time do Tax Offices spend on various activities and how effective are they? Do Tax
staff complete time sheets and is this allocated and analysed?
o Is there enough information on staff turn-over where staff go and the reason for their
departure and a debriefing about their experience at the ATO?
o It would be very interesting to see a schedule of the various causes run by the ATO for staff,
both internally and externally, and the strategy in ensuring the staff continue to be trained.
There is a whole raft of information that can be made available from the ATO to form a view
about its productivity, efficiency and fairness. We will not get this from the Commissioner’s
Annual Report or the Ombudsman.
o An independent survey run on all tax payers could generate a massive information that
could be very important to improving the management, efficiency and productivity of the
Tax Department. This could be quite different to the ATO surveys in composition. No doubt
the Tax Department and the Treasurer’s trusted in-house advisory group would resist this
very strongly, arguing that it is outside the Tax Act but the public and the professionals
would love it.
How can we debate some of the bigger issues when the prospects of Treasury taking notice is
zero? For instance, why not separate or adopt the US system and pay protected whistle
blowers a percentage of tax recovered from confidential disclosures to the ATO? This has been
extremely successful in the US where tax collection has gone up and tax administration costs
have dropped dramatically as a percentage of tax. It is extremely difficult in Australia to get
discussions like this going.
FINALLY
9TAX PHILOSOPHY 22 July 2021
By John Dahlsen
The ATO is the conduit or transfer mechanism by which money or value is transferred from those
who create value and work to those who require welfare most of which is justified but some is
not.
The more you inhibit the generators of cash and value the less you can pay those seeking welfare.
It is an economic reality that were the balance between payers and receivers gets out of balance
an economy will decline and everyone will be much worse off. To head down this direction is to
move back to an Agrarian way of life. It does depend upon your lens.
In the Agrarian days it was on the surplus of food that was available for the rest of the tribe. If you
share with the tribe this is a form of socialism but if you gain benefit from more individual
production then you can by exchange share more and give to the Trust. Then came the exchange
of trade movement where Adam Smith justified capitalism on the basis of mutual self-interest but
not selfishness.
In the collection of taxes from individuals and corporates, the ATO should regard them as clients
and big contributors to our community. This means you must be sensible about the way in which
you collect tax, and equitable in terms of the how you deal with those not paying tax. Clearly, a
huge amount of tax is not being paid by parts of the community and this is where the ATO should
focus its efforts. But is it doing that? We should be all open to innovation. Why heap on tax
payers who are honest in paying their tax with a huge amount of compliance and collection costs
that deliver little value.
You can understand why those that generate tax are bitter with how it is waisted by the public
service and abused by excess and welfare. If you are a recipient of welfare, you can resent those
that are abusing the system and not paying their fair share of tax. It is up to the ATO to deal with
the first proposition and the public service the later. But overall, the driver of production and
economic value which enables welfare to be paid.
My difficulty is that the ATO does not communicate very well with identifying the pockets of
unpaid tax and their success in this area. A paid whistle blowers is a simple solution.
10FINALLY
Is the ATO acting fairly and responsibly and in the interest of its stakeholders, the Australian tax
payer, notwithstanding the provisions of the Tax Act when it is exercising its very strong and
definitive powers.
No, it is not.
It is not about the nature of its power, but how these powers are exercised. ATO legislation is
very light on how powers are exercised. We are entitled to criticise the ATO on how it exercises
its powers, notwithstanding the Act. The ability to criticise and comment on the exercise is a
democratic right. The ATO issues considerable information bulletins on all aspects of tax, and
articulates how to navigate the Tax Act and to where you can complain or appeal. But it is well
accepted that absolute power corrupts and there will always be individuals within the ATO that
will abuse the exercise of their powers. Conversely, there will also be very good, helpful and
well-informed members of the staff.
Further, sometimes the ATO will undertake very specific projects on a successful basis. A great
example of that is the recent Job Keeper programme where ATO officials very quickly contacted
and re-contacted employers that might be having acute staff problems. The ATO was very
quick to get monies into bank accounts to save a situation as rapidly as possible. On the other
hand, and example of abuse by the ATO is its requests for information about tax governance
frameworks in the privately owned and family sector, which is a massive burden the ATO is
placing on taxpayers for information.
It is giving rise to a huge amount of time, cost and for some a worry for taxpayers which, for a
taxpayer, is non-productive but of great value to the ATO. For taxpayers, quite apart from the
cost, it has no intrinsic value or the likelihood of generating value.
The only beneficiaries are the professional firms who now have another major division of work.
With the big four having a market share of 25% of accounting services it is a very valuable
contribution for them.
Given that it is consulting work and unlike say audit work the margins are high as it is a great
opportunity to leverage the staff mix to lower costs. Further, work is lower risk attracting less
insurance.
The same applies for the smaller firms where, for some, it could be a huge source of extra
revenue.
The difficulties about the ATOs omnibus requests is that it is a one size fits all with very little
targeting to help tax payers and their costs. Indeed, for some tax payers the sheer size of the
11questionnaire will frighten them with its complexity. How am I going to find and put all this
information together?
The spectrum of cost for taxpayers is from one end the accounting firm just advising on sector
or client risk of the sensitive issues to the other where an accounting firm physically collects the
information from the records, puts the information into a disciplined form and provide it to the
ATO. The later raises an insurance risk for accounting firms so this will have to reflect on cost.
More importantly, it is the huge follow up questions that take place in respect to the client’s tax
sensitive areas that will require a lot of accounting firm time and cost.
It is not good enough for the ATO to disclose the extra revenue generated by the programme
and the percentage cost to revenue without understanding how much it is costing taxpayers.
Any global estimate of taxpayer cost should be segmented down to those companies where no
extra tax revenue was generated and others where there was extra tax. Further the Tax Office,
with time costing, could further articulate staff productivity. It will be difficult at this stage to
estimate taxpayer costs but some sampling might be helpful. The difficulty, of course, is that
for many taxpayers this is a journey and the total cost is yet to be established. In the
meantime, it would be wrong for the ATO to gloat to the politicians to what a good job it is
doing. We are yet to see a cost benefit analysis.
The ATO should be more open and reliant upon more evidence, even if it is only sample
evidence, to talk about cost benefit and the efficiency of collection. The ATO, by its actions, is
showing extraordinarily insensitivity to taxpayer costs, etc. Remember, we want our taxpayers
to be focusing on generating revenue, profit and value, in a sense they are clients providing
government and all taxpayers with the money to fund welfare and the less well off.
Clearly, much cost can be taken out of the process by better targeting. The ATO has done
nowhere enough to make it more palatable for taxpayers. This is a huge regulatory and
compliance cost and contrary to the government’s policy of reducing regulation and
compliance costs. But is the ATO subject to these policies?
Why is the ATO not subject to a productivity analysis but the Productivity Commission that has
done first class work in this territory.
Examples where the ATO could improve:
Why does not the ATO establish a logic tree or a hierarchy of decisions where yes or no
answers can significantly reduce costs. This partly happens with tax returns.
This could be refined and made relevant to size and the 26 sectors where presumably the
ATO already has a view of risk and compliance.
12Accounting Firm initiative
One practitioner, Mr X, of Mutual Trust, has developed an easy-to-follow templates by
searching the ATO and Board of Taxation websites to identify the issues that the ATO might
look for in a Tax Governance Framework. This provides a model which can easily be adopted by
a number of private groups and families. Why have no other firms, and more importantly, the
ATO, made such templates available for all the sectors but especially private business and
families?
Mr X is charging a modest amount for the use of the templates but its use by all taxpayers
would save a massive amount of cost and would also help the ATO more easily structure all the
information received. It will be interesting to make an estimate of this cost saving. The ATO
should be subject to much criticism for not going down this path or facilitation and co-
operating with industry software developers to undertake this. With the next batch of 5,000
taxpayer entities and 180 to 190,000 emerging private companies and family groups this is
absolutely compulsory.
The accounting profession must be very pleased with this extra category of work, but they too
should share some of the criticism.
The account profession should be at the forefront of testing about this, and pushing the ATO to
adopt more efficient processes and sanction the use of appropriate software.
A little bit of competition between software developers and the ATO, there could be great
innovation here.
What is the geniuses for the Trust Taxpayer approach?
I understand from Mr X, that when we moved to self-assessment the ATO was very concerned
about the quantity and quality of information it will have to ensure appropriate tax was being
paid.
The self-assessment system relies upon a high level of voluntary compliance and the ATO has
now taken that to a new level, adopting an OECD concept called Justified Trust. To achieve
Justified Trust, taxpayers have to satisfy the ATO that their tax Governance Framework is
sufficiently robust, albeit that the concepts are imprecise.
And so, they journey of earning Justified Trust has now begun and the ATO exercised its powers
to exchange a demand for huge amount of information for taxpayer peace. What helped the
so-called compact between a defacto investigation or audit and the omnibus request for
information was outside its remit. If not a legal remit, certainly its moral remit.
We are yet to see what the so-call three-year peace deal means. In Aussie terms, is it a fair go?
I suspect not.
The more the compacts are negotiated, the more the accounting professions should have
complained on behalf of tax payers. But that would not be within their own interests.
Given the huge ignorance as to what is going on, taxpayers are being duded. The main redress,
of course, is to complain to the Treasurer. The Treasurer then refers the matter on to his tax
group within Treasury who are all ex ATO staff. (Delete the previous sentence cos it isn’t true?)
The risk is they will see it more from the ATO than from the taxpayer’s position.
13 There needs to be a fundamental reshaping of the arrangements between the ATO and the tax
payer. This should be backed by legislation not by charters or guides. Without legislation
taxpayers lack adequate tools to address the significant imbalance.
There are insufficient people of clout, information and courage within the community to poke
the bear. Shaun Cartoon, partner at law firm Arnold Bloch Leibler, stated “These reviews might
initially feel like you’re getting a big, warm hug from the ATO, who wants to know everything
about your group and how it works,” Mr Cartoon said. “Clients mustn’t be fooled, because that
hug can quickly turn into a tight squeeze.”
But we are coming up to an election and given that it is well known that a number of back
benchers get many complaints over ATO behaviour, they will want change. But the difficulty is,
what change? I can only hope that my papers generate sufficient conversation and consensus
as to what change should be made to redress this fundamental imbalance so that all tax payers,
at all times, on all issues, are treated properly in accordance with our values and cultures not
necessarily the Tax Act with its powers that have been regularly enforced by the courts.
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