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Chapter 6 – The ATO’s approach to external fraud

6.1 The first part of this report considers how the ATO prevents, detects and responds to internal fraud and other integrity-related issues. This chapter turns to how the ATO manages the risk of external fraud, that is, taxpayers and other external parties seeking to exploit the tax and superannuation system to commit fraud against the Commonwealth.

6.2 External fraud arises where taxpayers or their representatives dishonestly obtain a benefit from the ATO or cause a loss by deception.603 It is a broad term that may include small scale actions, the accumulation of which could result in a significant loss of revenue. However, the egregiousness of the actions is a major factor in how the ATO decides to treat the fraud. For example, knowingly claiming a $5 gift donation as a deduction on an income tax return without having made the donation is a fraudulent act, but may be addressed through the ATO’s power to amend assessments and apply administrative penalties. However, the design of a complex phoenix arrangement with the intention of defrauding the Commonwealth and others of tens of millions of dollars or more without detection may require the application of criminal sanctions, such as prison sentences, as a form of punishment and deterrent to others.

6.3 The IGT has previously examined the ATO’s compliance approaches in applying administrative penalties.604 In this review, therefore, the focus is to examine the ATO’s approach to external fraud which involves criminal sanctions, namely ‘tax crimes’ or, where it involves other parties being defrauded, ‘financial crimes’.

6.4 The ATO has a specific framework, the ATO’s Tax Crime Framework, which outlines how its work in dealing with tax crime and external fraud fits within the Commonwealth Fraud Control Framework and the Commonwealth Risk Management Policy.605 The responsibility of addressing tax and financial crime lies with the PGH business line and the approach is captured in its ‘Tax Crime Strategic Intent 2015–18’.606 Within PGH there are different areas such as the Serious Financial Crime, Offshore Tax Evasion, Phoenix, and Refund Fraud units.607

Prevention

Stakeholder concerns

6.5 In submissions to this review and during interviews, stakeholders have suggested that success in addressing external fraud should be measured on whether the behaviour has been stopped rather than by the number of prosecutions and convictions. Accordingly, stakeholders are of the view that the ATO’s main focus should be on preventing the fraudulent behaviour, with prosecution being considered as only one of a range of treatment options.

6.6 In addition, a number of former ATO officers have suggested that the ATO could do more to encourage its officers to identify weaknesses in the tax systems which are being exploited or could potentially be exploited. Where ATO officers proactively identify such weaknesses, the ATO should act promptly to address them.

6.7 Stakeholders have also raised concerns that the ATO has not made the most of publishing its successful investigations and prosecution action to deter others from engaging in such activities by demonstrating the severity of consequences. They note that there has been a significant reduction in ATO publications regarding fraud and tax crime. The ATO’s former publications, such as the Annual Compliance Program and Targeting Tax Crime, were important tools that had assisted tax advisers to encourage their clients to adopt compliant behaviour. These former publications heightened public awareness about the ATO’s approaches, which contributed to community perceptions that the ATO considered tax fraud as a priority and made visible the ATO’s position on tax crime and fraud.

Relevant materials

ATO strategy to prevent tax crime

6.8 As described in Chapter 2, the Tax Crime Risk is part of the ATO’s enterprise risk of Major Tax Integrity Threats. The Tax Crime Risk encompasses the risks associated with GST evasion, phoenix activities and refund fraud (the ‘tax crime risk areas’).608

6.9 The ATO’s approach to addressing tax crime and external fraud is outlined in its ‘Tax Crime Strategic Intent 2015–18’ which states that ‘tax crime prevention is an integral part of ATO business’.609

6.10 The ATO aims to reduce the risk of tax crime by making the ‘tax and super systems secure and unattractive targets for crime’. It further states:

This means that we must focus our efforts on:

  • systemic solutions that remove the opportunity for people to commit crime and avoid detection
  • ‘whole-of-crime’ treatment approaches that provide long-term changes in participation by removing the opportunity to repeat an offence
  • taking firm action against people who are not doing the right thing and removing the profit from participating in tax crime.610

6.11 The ATO’s strategy outlines the five key principles that work together to achieve this aim. These principles are:

Secure systems and processes – Tax crime prevention measures are designed into the corporate, intermediary and trusted third party systems and processes we rely on.

Robust law and administration – Our legal and administrative framework has a focus on eliminating opportunities for tax crime.

Meaningful engagement – Innovative and contemporary engagement solutions are used, considering both content, channel and audience characteristics.

Intelligence-led detection – Our data and information sharing framework supports timely detection.

Sustainable compliance – Compliance strategies focus on achieving sustainable improvement in voluntary compliance.611

6.12 As part of the first principle of ‘secure systems and processes’, the ATO aims to incorporate ‘effective authorisation controls’ that ‘work to prevent identity crime’, ‘tax crime minimisation concepts into system and process design,’ and ‘effective system security and controls as part of system design’.612

6.13 The second principle of ‘robust law and administration’ refers to the prioritisation of reforms which ‘remove key vulnerabilities’ and the consideration of ‘alternate reporting systems to reduce fraud’ as well as ‘effective sanctions that work to deter future participation’.613

6.14 The principle of ‘meaningful engagement’ is where the ATO has a number of aims for its communication/engagement strategy, including ‘consistent tax messages tailored’ to its audiences, a ‘simple channel for engagements/referrals’, ‘coherent and coordinated internal and external tax communications’ as well as engaging ‘key intermediaries’ to ‘harness their active involvement in tax crime approaches’.614

6.15 The fourth principle of ‘intelligence-led detection’, by maximising data sharing and matching opportunities between internal and external treatment partners, seeks to meet compliance needs and prioritise a ‘real time domestic and international data sharing capability’.615

6.16 The final principle of ‘sustainable compliance’ is where the ATO seeks to remove ‘the profit from tax crime activity’ through ‘effective recovery of tax liabilities and fraudulent profits’, ‘applying meaningful and targeted sanctions and consequences for participation in tax crime’ and using a ‘whole-of-crime’ approach to ‘influence the environment so that the offence is harder to commit in the future’.616

6.17 In addition to the ATO’s strategic intent, the ATO conducts Enterprise Tax Crime Risk Reviews that seek to evaluate the effectiveness of its risk controls and treatments and examine changes in the tax crime environment which may impact the risk ratings. The reports of these reviews contain some important information. For example, in the latest review, conducted in 2016, reference is made to the ‘Phoenix Risk Model’ which ‘provides a demographic and risk-based profile of the overall potential and confirmed phoenix population’ as well as characteristics of industries and business structures which may increase the risk of phoenix behaviour.617

6.18 The Enterprise Tax Crime Risk Reviews also outline environmental factors that influence and facilitate ‘tax crime behaviours’ such as the participation of ‘opportunistic individuals,’ ‘sophisticated individuals,’ organised crime and professional facilitators, intermediaries and advisers who may ‘wittingly or unwittingly be used to facilitate financial crime’.618

6.19 The five principles in the Tax Crime Strategic Intent mentioned above are referred to as ‘risk controls’ in the Enterprise Tax Crime Risk Reviews. In particular, the reviews outline aspects of the ATO’s work in contributing to the principles. For example, in discussing the principle of ‘robust law and administration’, the ATO states that ‘law reform activities undertaken by the ATO are focused on the introduction of legislation that better reflect modern business and enhances information sharing. This approach provides a platform for the ATO to be proactive and note any emerging risk areas, as well as innovative reforms occurring around the world’. The legislative reforms which the latest review notes as ‘being pursued by the ATO’ include reforms to ‘address fraudulent phoenix activity such as expanding the director penalty regime to cover GST and extending the promoter penalty regime’.619

6.20 The PGH business line develops a ‘treatment strategy’ for each of the tax crime risk areas. This strategy provides a high level view of the key focus for that year, communication activities that will be undertaken, the effectiveness measures for the strategies as well as options for law simplification and reducing compliance cost. For example, the Phoenix risk and treatment strategy, states that PGH will ‘continue to lead the building of the Phoenix Taskforce brand, its key messages and initiatives, including systemic law reform’ and that under ‘law simplification and reducing compliance cost,’ it will be ‘integrally involved in all aspects of the implementation of Transparency of Tax Debt’ and contribute to a Phoenix Taskforce/whole-of-government law reform submission.620

ATO officer insights

6.21 All ATO officers are, under CEI 2014/05/09, responsible for preventing, detecting and referring suspected tax crime committed by parties external to the ATO. The CEI outlines a number of responsibilities for officers, including referring suspected tax crime matters after consultation with their manager to the PGH business line and ‘providing information into corporate processes designed to better understand Tax Crime behaviour, such as for reports and risk assessments’. In relation to the prevention of tax crime specifically, the CEI instructs officers to ensure that they consider tax crime prevention when developing or changing major tax or superannuation policy and to refer through their team and risk processes examples where the ATO’s systems or processes ‘enable tax crime’ as ‘fixing these locally can reduce tax crime opportunities’.621

6.22 In addition to the above, the ATO also seeks to utilise the knowledge and insight of its officers by encouraging them to contribute ideas for innovations and improvement through a number of different channels. One such channel is the ATO ‘Innovations SharePoint page’, where ATO officers can submit their ideas, report concerns or issues regarding ATO systems, search for existing ideas and potentially collaborate with others to further develop existing ideas. When an ATO officer makes a suggestion on the ATO Innovations page, they will receive a confirmation with a reference number to allow them to track the progress of their submission. A member of the ATO Innovations Team will generally contact the ATO officer within 10 business days to discuss their idea and provide them with progress updates, or alternative channels to more effectively advance their suggestion, particularly where the idea relates to a specific ATO site or business unit.622

6.23 The PGH business line has also developed its own initiatives, under the oversight of the ATO Innovations team, to obtain staff insight and ideas to improve the way in which the business line undertakes its work of addressing fraud and tax crime. A key example of this is the ‘Strategic Outcomes Initiative’ which was commenced by the TEC area within PGH in October 2016. While suggestions raised by this initiative cover the entire spectrum of prevention, detection and response, the primary objective of the initiative is to gather ideas for ‘shifting the behaviour of the 5%’ who ‘deliberately attack the tax and super systems or actively resist doing the right thing’ by identifying gaps in ‘law, policy, administrative and IT systems’.623 Accordingly, a large portion of the ideas raised were geared towards prevention, such as the suggestion for the ATO to publicise its ‘successful and noteworthy prosecution outcomes’ to ‘demonstrate the ATO’s approach to such matters’ and ‘assist with greater education in the community about obligations and possible repercussions for certain behaviours’.624

Communication as one of the strategies to prevent tax crime

6.24 Part of the ATO’s strategy to prevent tax crime is through communication, which falls under the ‘meaningful engagement’ principle. The ATO has advised that its communication approach focuses on:

Prevention – making sure people know how to make the right choices;

Non-compliance – showing community we are not afraid to take firm action on those who don’t comply; [and]

Victim support – helping innocent victims get the support they need.625

6.25 The ATO also has an Enterprise Tax Crime Communication View which outlines the process by which the PGH business line collates the necessary information to ‘give the community evidence that shows the ATO to be both aware and capable of dealing with these perpetrators [of tax crime].’ It also sets out key events which provide communication opportunities, such as court proceedings, execution of warrants, Parliamentary Committees and speaking opportunities. Part of this communication process involves the collation of materials from each of the tax crime risk areas.626

6.26 Within each risk area, there are specific communication strategies. For example, in the 2016–17 Phoenix communications strategy, it outlines the key outcomes of the strategy which includes highlighting the whole-of-government work of the Phoenix Taskforce and educating and informing the community on how to identify and report suspected phoenix activity as well as the range of target audiences and the different mediums through which the messages will be communicated, such as Facebook advertising, videos627 and newsletter articles.628

6.27 The ATO conducts evaluations of its communication strategies. At the conclusion of 30 June 2017, the ATO conducted an evaluation of its communication strategy for phoenix activities. As part of the evaluation, the access rate to the different channels were measured such as the number of times the ATO videos on ‘Protect yourself from illegal phoenix activity’ was viewed, the number of times the ATO’s Phoenix and the Phoenix Taskforce webpages were viewed as well as the level of digital amplification via tweets and retweets. The ATO considered that there may have been a correlation between peak periods of communication activity and referrals made by community members about alleged tax evasion and fraud (tax evasion referrals, or ‘TERs’) to the Tax Evasion Referral Centre (TERC) hotline and that their peak advertising period commenced in April and ran until early June. The latter can be matched with the increasing TERs of 30 in April, 44 in May and 80 in June. The calls in late June may be the result of significant media coverage surrounding Operation Elbrus.629 However, the evaluation did not provide details on the topics raised by the calls made to the TERC hotline and whether they related to phoenix activities or similar activities. The use of the TERC will be discussed later in this chapter.

6.28 The ATO also publishes information on risks that it believes warrant attention as part of its tax crime communication strategy. Historically, the ATO’s areas of compliance focus were published in the Annual Compliance Program which was superseded by Compliance in Focus. The latter outlined the ATO’s focus for the different taxpayer groups, their risk areas as well as case studies and links to relevant taxpayer alerts about certain arrangements. It also contains a snapshot of preliminary results from the previous year (prior to being published in the Annual Report).630

6.29 In particular, in the first Compliance in Focus publication, the ATO stated that its four areas of focus in 2013–14 were data and information matching capability, tax crime, misuse of trusts and profit shifting.In addition, the ATO stated that it:

…will update the online version of the publication throughout the year to report on its progress and identify any emerging risks, including explaining what we are doing about them.631

6.30 In March 2015, it was announced that a new publication, ‘Building Confidence’ would replace Compliance in Focus. It stated that:

In short, Building Confidence defines the outcomes we are trying to achieve – confidence in the ATO and the tax and super systems.

This online publication is about being transparent in our approach to fostering willing participation and dealing with non-compliance. It outlines how we are designing for the majority of the people who are trying to do the right thing while taking a determined and firmer stand with those who are not. It explains how we are achieving fairness – striking the balance between encouragement and enforcement based on risk, transparency and behaviour.632

6.31 The Building Confidence webpage outlines the ATO’s expectation of the different groups of taxpayers as well as the areas that attract the ATO’s attention. These areas can range from individuals who claim deductions for which they are not entitled to small businesses that do not meet their responsibilities as an employer. The webpage also contains results from the prior year’s compliance activities as well as case studies ranging from research and development incentives to phoenix activities.633

6.32 The ATO also publishes its areas of focus in relation to tax crime on its ‘The fight against tax crime’ webpage, which states that the ATO focuses ‘on key areas that present a high risk to the community and revenue, including international, trust and phoenix tax evasion and fraudulent behaviour, refund fraud, identity crime and organised crime’.634 The webpage contains further links to some of these risks and how the ATO broadly manages these risks.635

6.33 The above publications and the periods of their operation are summarised in the table below.

Table 6.1: ATO publications on its compliance focus

ATO public communications Years in operation
Compliance Program (paper) 2002–03 to 2012–13
Compliance in Focus (paper and online) July 2013 – March 2015
Building Confidence (online) March 2015 to present

Source: ATO636

6.34 Furthermore, the ATO publishes the outcomes of its activities and provides transparency on the actions it takes against those who deliberately avoid their tax. For example, ‘The fight against tax crime’ webpage contains results of ‘serious tax crime joint investigations’ which include the outcomes of joint investigations from July to December 2017. It also has a table which provides a summary of the offence, the result (prison sentence, arrest or fine imposed) and the names of those convicted.637 An extract of the table is below.

Table 6.2: Serious tax crime joint investigations, from July to December 2017

Result of investigations Details State
27 months jail – non-parole period 15 months Anthony ROCK from Newcastle NSW lodged four income tax returns via his tax agent. The agent queried the excessive amounts of PAYGW. Refunds totalling $555,924.80 for the four years were stopped prior to payment. New South Wales
Arrest A 56-year-old man from northern NSW was arrested when he surrendered himself to police. He was charged with attempted tax fraud to the value of $10,229,360, but had failed to attend court resulting in the issue of a bench warrant. New South Wales
3 years jail – no parole Phillip LEACH was found guilty on 12 charges of lodging BAS across three entities claiming GST credits that were found to be false. He was sentenced to three years imprisonment without parole. A reparation order of $134,011.99 has been made by the courts. Queensland

Source: ATO

6.35 In addition to the outcomes of joint investigations, the ATO also publishes results of prosecutions for tax crime from the 2011–12 to 2016–17 financial years on its webpage as well as results from Project Wickenby which concluded on 30 June 2015.638 It also publishes results of some of its actions in addressing tax crime in media releases639 and its Annual Reports.640

6.36 As public communications may be delivered to the taxpayer via an intermediary, these intermediaries also play an important role in the ATO’s communication strategy. This was recognised by the ATO in its Phoenix Strategic Communication overview, where it stated that intermediaries, such as ‘tax agents, accountants, financial planner/advisors, legal practitioners and advisors to high wealth individuals’ are secondary audiences to its messaging as well as key influencers in the communication strategy. For example, with respect to Phoenix activities, one of the strategies was ‘increased engagement with key industries and intermediaries with a focus on educating them about the warning signs of illegal phoenix activity’.641

IGT observations

6.37 Perpetrators of fraud seek to conceal their unethical conduct from the authorities, for example by not registering or reporting tax obligations or otherwise giving the impression that their activities are legitimate, or a combination of both. For example, perpetrators may use nominee trustees in tax secrecy havens to hide beneficial ownership of trusts or false identities for accounts held with financial institutions.

6.38 Perpetrators of fraud actively seek weaknesses, which are little known or are not being addressed, the exploitation of which may be highly profitable. As fraud may be difficult to detect and often requires a significant amount of resources to investigate and address, effective preventative measures are paramount. Minimising weaknesses in the tax system or administrative arrangements is one such measure.

6.39 As mentioned earlier, the ATO currently has a number of measures to address potential weaknesses in the system. However, there have been occasions in the recent past where such weaknesses could have been addressed more promptly. For example, as illustrated in Appendix D of this report, in dealing with alleged fraud by some in the precious metal industry, the ATO should have addressed the weaknesses being exploited through earlier identification of the risks. Once the risk was identified, such weaknesses were ultimately addressed. However, a prompt whole of ATO approach was required to prevent the propagation of the alleged fraud at the same time as pursuing the perpetrators.

6.40 The IGT is of the view that the ATO should create an environment where its officers routinely consider whether risks encountered in their case work indicate a potential weakness in the system, ensure such weaknesses are promptly investigated and the necessary resources, from the requisite areas, are devoted to addressing them.

6.41 ATO officers could be required to identify the typology of any potential fraud by reference to weaknesses in the system when actioning cases, estimate the potential impact of the weakness on the system and refer it to the relevant area for consideration and action. This requirement could be facilitated through an update of the existing CEI 2014/05/09 on Tax Crime and External Fraud by expanding the consideration of tax crime prevention to all case work and not only for changes to tax and superannuation policy and systems. The focus should be to identify potential weaknesses in the system rather than attempting to quantify the scope of the fraud before raising the weakness for consideration. This would allow the weakness in the system to be treated as a greater priority without needing to wait for the risk to manifest or propagate.

6.42 The proposed change to CEI 2014/05/09, may be underpinned by amending the ATO Corporate Plan to include targets for its prevention work as part of the existing performance targets. The ATO could also report on its performance against these targets in the Annual Performance Statement in its Annual Report. Such reporting would also reinforce with officers, as well as the community, the ATO’s commitment to combatting external fraud. It would also shape the way business lines plan and undertake their operational activities.

6.43 Another way to reduce the opportunity for fraud is to recalibrate perceptions of the risk and reward associated with non-compliance or fraud. One option is communicating the risks to the community and the actions being taken to address those risks. In a general sense, the ATO has taken steps in this direction through its Annual Compliance Program, Compliance in Focus and more recently its Building Confidence online publication.

6.44 With respect to specific fraud risks, the ATO, for example, publishes information about the activities which it considers to be refund fraud and the actions it is taking both internally and with other agencies to detect it.642 Such actions send a clear message that there is a greater risk of detection.643 It also reassures the community that the ATO is addressing fraudulent activities, builds their confidence in the system and improves voluntary compliance.644

6.45 The ATO has published the outcomes of the criminal investigations and prosecutions which may include, subject to confidentiality constraints, the perpetrators’ names and actions. As discussed earlier, there are benefits to widely sharing such information as it can provide a more effective deterrent. However, the majority of serious tax crime joint investigations listed on the ATO webpage have not received the desired level of media coverage to adequately inform the public that the ATO does prosecute perpetrators of tax fraud.645 Accordingly, the ATO may need to employ a more effective media strategy.

6.46 It would also be beneficial for the ATO to publicly report on its work with other agencies to disrupt broader criminal activities that have a tax element as it represents the broader scope of work that the ATO conducts in tackling fraud. For example, it may be possible in some situations for the ATO to work with other agencies to treat a tax crime risk through alternative means, which might not involve criminal prosecution. An example of the adoption of such alternative treatments has been provided in Appendix E in relation to illicit tobacco. Further discussion of the ATO’s collaboration with other government agencies and its use of non-criminal treatments will occur in Chapter 7.

Recommendation 6.1

The IGT recommends that the ATO improve the prevention of external fraud by:

  1. requiring its officers to routinely consider whether risks encountered in their case work indicate a potential weakness in the system, ensure such risks are promptly prioritised and investigated as well as publicly reporting the outcomes where appropriate; and
  2. improving its media strategy to increase the reporting of its tax crime investigations, prosecutions and recoveries of proceeds of crime.

ATO RESPONSE

  1. Agree

    As set out in the report, our existing Tax Crime and External Fraud Chief Executive Instruction (CEI) outlines the responsibility of staff to actively assist in preventing, detecting and reporting tax crime by referring suspected tax crime matters to the Private Groups & High Wealth Individuals (PGH) business line. We will consider how this policy might be enhanced to address the issue highlighted in this recommendation. The ATO already has initiatives in place to routinely keep ATO staff informed of the matters they identify and report. The ATO will seek to identify ways to publicise the outcomes where action is taken in these circumstances, which will include a consideration of the best channel through which this might occur.

  2. Agree

    The ATO has a well-established integrated approach to communicating about tax crime matters, and specifically on the results of prosecutions and investigations. We continually review our communications approaches in order to ensure they remain current and contemporary.

Detection

6.47 Whilst perpetrators of small scale fraud may gamble on the ATO not selecting their claims for review, more sophisticated or larger scale fraud often relies on advice from professional advisers who have an in-depth knowledge and understanding of the ATO’s thresholds and detection measures. Although these professionals may not knowingly facilitate tax crime, their specialist skills and expertise are often used by individuals and organised crime groups to gain unique industry insights, develop complex arrangements and establish strategies to conceal the proceeds of crime.

6.48 Perpetrators of fraud may further disguise the nature of their activities by using methods, such as dealing in cash, which are difficult to trace. While financial institutions are required to identify and report suspicious transactions or those which exceed a certain threshold to comply with anti-money laundering rules, smaller transactions which occur outside the banking system will often be invisible. These fundamental characteristics of cash currently make it a reliable and preferred means for criminals to facilitate illicit activities. There is also the potential for cash to be replaced by emerging cryptocurrencies particularly as they are currently unregulated.

6.49 Rapid advances in technology and the rise of digital transactions may also assist in the creation of complex arrangements, falsification of records and concealment of identities, resulting in an expansion of the tax crime landscape. There has been a corresponding increase in the volume of information which the ATO and its law enforcement partners must access to gain adequate visibility. For example, technological improvements now allow financial transactions to occur instantly646 which significantly speeds up the rate that the proceeds of tax fraud and crime can be moved offshore. Historically, the ATO would become aware of Australian taxpayers’ involvement in transnational tax crimes through leaks of information, such as the Panama paper, or through leads in audits, such as the initial cases in Project Wickenby. In relation to the latter, it took many years before sufficient information was obtained to mount a prosecution.647

6.50 The ATO also faces difficulties in identifying the perpetrators of tax crime (the risk population)648 in a constantly changing environment that provides new opportunities to exploit weaknesses in the tax system and its administration.649 Accordingly, the ATO’s fraud detection measures need to be agile, efficient and effective to ensure that the ATO is able to respond promptly and effectively. Such responses require regular evaluation to keep pace with the changing environment.650

6.51 The ATO receives information and intelligence from a variety of internal and external sources which contribute to the development of its fraud detection measures and strategies. The ATO’s approach to fraud detection can be broken up into two main streams. The first stream is referrals, which can broadly be categorised as referrals from the broader community, referrals from its own staff and referrals from other government agencies. The second stream of the ATO’s fraud detection mechanism is based on its intelligence, risk models and data analysis.651

Referrals from the community

6.52 As discussed in Chapter 5, the Australian Government is committed to promoting transparency, empowering citizens and fighting corruption as part of its membership to the Open Government Partnership. The Government’s National Action Plan has identified transparency and accountability in business as an important area for improvement, with the key objective being to ensure that there are appropriate protections in place for people who report fraud, corruption and misconduct within the corporate sector as well as tax evasion or avoidance.652

6.53 The Government aims to achieve this objective ‘by improving whistleblower protections for people who disclose information about tax misconduct to the Australian Taxation Office’ and through reforms to whistleblower protections in both the corporate and public sectors.653 This included an announcement in the 2016–17 Federal Budget by the Government to introduce whistleblower protections for those who disclose tax misconduct information to the ATO.654

6.54 The Black Economy Taskforce’s Interim report also observed that:

various government agencies have whistleblower programs or reporting services in place where members of the public can report information on suspected fraud, tax evasion and other misconduct or breaches of relevant legislation. These have been effective to a degree, but should be better targeted, relaunched and rebranded to become more user friendly…If done well, this can play a role in changing wider social norms and behaviours.655

6.55 Members of the broader community can report alleged instances of tax fraud, or make TERs, to the ATO’s TERC. It is expected that other coordinated Government initiatives, for example, the proposed Phoenix hotline656 and the proposed Black Economy hotline657 may impact the manner in which the ATO deals with TERs.

Stakeholder concerns

6.56 Stakeholders have expressed concern that the ATO does not demonstrate that it appropriately considers and investigates TERs made to its TERC by the community — a valuable resource for detecting fraudulent activity. The perceived lack of ATO action was said to discourage members of the community to make such reports.

6.57 The IGT has also received a number of complaints from taxpayers who were dissatisfied with the ATO’s response to their TERs. They had sought independent assurance from the IGT that the ATO had appropriately considered their referral. In investigating many of these complaints, the IGT has been able to provide the required assurance that the ATO has considered the referral and had taken appropriate action. However, in a number of other cases, such assurance could not be provided. In one case, the ATO had internally allocated the TER to a team which had been disbanded due to an internal restructure and the referral had not been reallocated. In addition, the ATO had difficulty in confirming the processes for referrals which were sent to particular business lines. Accordingly, the IGT commenced an own initiative investigation658 to map the ATO’s TERC process and to identify opportunities for improvement. The findings of this own initiative investigation have been incorporated into this review and discussed below.

Relevant materials

6.58 Taxpayers and members of the broader community can report alleged instances of tax evasion and external fraud to the ATO by lodging a TER with the TERC by telephone, by facsimile, through the tax evasion reporting form available on the ATO website and in writing by post.659 Such information may also be lodged through a variety of other channels such as by reporting660:

6.59 All TERs received by the ATO are recorded and documented under an activity on its work management system, Siebel.661 For example, when a community member provides information to the ATO via its online tax evasion report form, the form is initially managed through its Community Information Storage Communications and Observations (CISCO) system, ATO officers convert that information to a separate document which is attached to Siebel.662 The ATO has indicated that it aims to incorporate the ability to automate the process of converting data on its CISCO form into a Siebel activity as part of an upgrade to the online tax evasion report form.663

6.60 ATO officers, who receive TERs by telephone, have scripting available to guide them in obtaining the relevant information. This scripting consists of 85 questions although not all of them are required to be asked as the answers will determine the further questions to be asked. ATO officers are also expected to use their judgement to tailor the questions based on the relevance to the specific TER being made. Under the ATO’s current processes, TERs received by telephone are handled by specially trained officers, however, the ATO is seeking to ensure that all of its contact centre officers are appropriately trained to receive such calls in the future. The ATO has emphasised that it does not impose any time constraints nor does it assess calls based on the duration of the call.664

6.61 All those who lodge a TER with the ATO using the online tax evasion reporting form or by telephone are provided with a reference number. These numbers differ depending on the channel through which they were lodged. For example, the reference number provided to taxpayers who lodged TERs by telephone can be searched on Siebel, however, reference numbers provided for online lodgments can only be searched through the CISCO system. The ATO expects to address this issue in the upgrade of its online tax evasion reporting form to ensure that a uniform approach is adopted.665

6.62 In the 2016–17 financial year, the ATO received 46,389 TERs of which 8,997 were by phone, 5,285 by mail and 32,107 online as outlined in the table below.666 The information in the table also demonstrates that since the 2013–14 financial year, the proportion of referrals lodged by web and e-mail has increased, accounting for over 65 per cent of total referrals for both the 2015–16 and 2016–17 financial years.

Table 6.3: The number of referrals from community by year and interaction

Interaction 2013-14 2014-15 2015-16 2016-17
Phone 12,460 10,706 9,347 8,997
Mail & Other 6,028 5,531 5,479 5,285
Web & E-mail 19,482 25,342 30,184 32,107
TOTAL 37,970 41,579 45,010 46,389

Source: ATO

6.63 It should be noted that 90 per cent of all TERs were lodged anonymously.667

6.64 The TERC is staffed by nine FTE officers who dedicate 13 hours per week to processing the TERs received. Upon receipt of a TER, the information provided is reviewed and the identity of the taxpayer, who is the subject of the allegation, is confirmed based on details such as name, address, date of birth, TFN, Australian Business Number or any other unique identifying information. In cases where there are insufficient details to identify the taxpayer, no further action is taken other than the records being stored on Siebel. Such records may be directed to the relevant business line in the future if additional information is subsequently provided which allows the ATO to take action.668

6.65 There may also be instances in which ATO officers identify that a TER has previously been made with the same information less than three months ago. These are treated as duplicates and are still recorded on Siebel but no further action taken. However, if new information is provided, the allegation would be treated as a new TER regardless of when the previous one was received.669

6.66 In reviewing a TER, ATO officers are required to determine whether the allegation indicates fraud or tax evasion. They must also review the lodgment history of the subject of the TER and confirm whether it is up-to-date. If it is confirmed that a taxpayer has outstanding lodgments, the TER is allocated to the Tax Practitioner and Lodgement Strategy team to pursue lodgment of any outstanding returns. If it is determined that the TER does not contain any allegation of tax evasion, it is finalised without any further action.670

6.67 In circumstances where it is identified that the TER contains sufficient information to indicate potential tax evasion or fraud, ATO officers are required to identify the issues, assess the level of priority and determine the relevant business line to which it can be referred for further action. This process is undertaken using the ‘stakeholder reference tool’ which is a matrix developed by the TERC in collaboration with the ATO’s business lines. It contains 50 of the most common tax evasion behaviours reported to the ATO. The tool allows ATO officers to choose two of these tax evasion behaviours and the business lines to which the TERs may be referred.671

6.68 In some cases, ATO officers may also be required to record the TER on the ATO Intelligence Discover database672 which allows ATO staff to capture, store, retrieve, escalate and analyse information for intelligence purposes (this is discussed in more detail in the next section regarding referrals by ATO officers).

6.69 Once the ATO officer has recorded the relevant information about the TER in the Siebel activity, the latter is closed to ensure that the information received in the TER cannot be changed or altered.

6.70 At the end of each month, the TERC compiles a spreadsheet for each business line within the ATO. They contain details for all Siebel activities relating to finalised TERs and are sent to the relevant business line representative for their consideration.673 They include the taxpayer details, information about how the TER was received, the date the Siebel activity was closed and background data about the taxpayer such as the market segment to which they belong, whether they had a tax agent and their overall lodgment status.674

6.71 Table 6.4 below outlines the percentage of TERs allocated to each of the ATO’s business lines for the last three financial years. The table demonstrates that almost a quarter of all TERs received by the ATO were allocated to the Individuals business line. The Cash and Hidden Economy (CHE) stream of the SB business line also received a significant proportion of referrals, averaging 19 per cent of all referrals over the past three years. In addition, the ATO’s Lodgment and Employer Obligations (EO) business lines were allocated 16 per cent and 14 per cent respectively over the same period. A smaller proportion of the TERs were allocated to the Superannuation and PGH business lines, five per cent and three per cent of total referrals respectively.

Table 6.4: Receipt of community referrals by business areas

Financial year 2014–15 2015–16 2016–17 Total for last 3 financial years
Business Area Total referrals % Total referrals % Total referrals % TOTAL % of total
Individuals 11,289 23% 13,043 24% 14,099 24% 38,431 24%
CHE 10,616 22% 10,187 19% 10,377 18% 31,180 19%
SB (non-CHE) 8,217 17% 8,773 16% 9,483 16% 26,473 16%
Lodgment 6,717 14% 8,610 16% 10,700 18% 26,027 16%
EO 7,081 14% 7,582 14% 7,457 13% 22,120 14%
Superannuation 2,431 5% 2,974 5% 3,138 5% 8,543 5%
PGH 1,629 3% 1,346 2% 1,180 2% 4,155 3%
Other 1,038 2% 1,728 3% 2,004 3% 4,770 3%
TOTAL 49,018 100% 54,243 100% 58,438 100% 161,699 100%

Source: ATO
Note 1: The table above combines two ATO tables provided by the ATO to the IGT.675
Note 2: ‘Other’ includes referrals to PGI, ITX, Debt and other business lines within the ATO.

6.72 A breakdown of the types of tax evasion reported in the TERs for the 2016–17 financial year is provided in the table below. The table highlights that underreporting of income (41 per cent) and non-lodgment (19 per cent) account for the majority of the referrals. In addition, 15 per cent relate to cash-related payments with the remaining five per cent being related to non-payment of Superannuation Guarantee (SG).

Table 6.5: Type of tax evasion behaviour identified by community referrals

Tax evasion behaviour identified No. of referrals % of total
Under-reported / unreported income 24,605 41%
Non lodgment – income tax return or BAS 11,090 19%
Employers paying staff in cash 5,602 9%
Businesses demanding cash payment 3,647 6%
SG not paid 2,985 5%
Other 11,788 20%
TOTAL 59,717 100%

Source: ATO

6.73 Upon receipt of the monthly report from the TERC, each business line representative considers the information in the report in accordance with the relevant business line process. The processes between the business lines may vary due to the different risk assessment approaches that each business line may have adopted.676 Initially, the precise nature of these processes was not clear to the IGT. However, as the ATO further developed these processes, it was able to provide the following representations about the processes used by the six business lines that receive the majority of TERs.

Cash and Hidden Economy stream

6.74 The Risk & Strategy unit within the CHE stream receives TERs from the TERC through its regular reports as well as referrals which may have been transferred to CHE from other business areas. Figure 6.1 below provides an overview of the CHE stream process for receiving and reviewing TERs.

Figure 6.1: Cash and Hidden Economy stream’s process for community referrals

Source: ATO

6.75 The above Figure shows that the CHE stream reviews TERs in accordance with the following three methods:

6.76 In their reviews of TERs, Risk and Strategy officers place emphasis on those which have been marked as high risk and may be relevant to any current or future CHE compliance projects. TERs which provide reliable information are sent to the relevant areas within the CHE stream or other areas in the ATO for action. TERs which do not provide such information are input into a database and no further action is taken unless the CHE Model selects the case for action.678

6.77 The CHE Model is a risk rating tool which analyses a range of taxpayer data to provide a risk score for each taxpayer. This risk score is added together with any score that the TERC may have attributed to the TER when it considered the prioritisation of the referral, as mentioned earlier. The combined score provides the CHE stream with an overall TERC-rated risk which is used when the CHE stream runs its risk models to select BAU cases. The BAU cases that are generated from the CHE Model take into consideration all of the information available to the CHE stream. As the TERC risk rating is one of many types of information input into the CHE Model to generate cases, it is difficult to identify whether the cases generated by the CHE Model were solely based on a TER as they would generally contain project codes relating to other risks.679 The CHE stream explained that it is currently considering undertaking compliance activity against taxpayers who have been subject to multiple TERs.680

6.78 The CHE stream provides reports on TERs and outcomes of cases which were created as a result of TERC referrals.681 However, the outcomes are focused on the high risk referrals and TERC-related projects being conducted by the CHE stream.682

Individuals business line

6.79 Upon receiving the monthly report from the TERC, the Individuals business line identifies taxpayers for which treatment action is already being undertaken through its normal risk models. For example, six per cent of the TERs received by the Individuals business line over the July to September 2016 period included cases which had previously been identified by the business line through its usual detection processes and had become the subject of compliance action.683

6.80 It should be noted that 10 per cent of TERs received by the Individuals business line did not have sufficient information to identify the subject taxpayer. In addition, 95 per cent of the referrals were made anonymously.684

6.81 The remainder of the TERs received by the Individuals business line are assessed using its risk models in conjunction with other available information for the particular taxpayer including the identification of keywords, scams, specific agents or frauds. The use of the risk models generally results in a reduction of approximately 64 per cent of the referrals for further review.685 Officers’ decisions are documented and inputted into a database for future intelligence purposes.

6.82 The Individuals business line stated that 51 per cent of the referrals it had received from the TERC, for the 2016–17 financial year, involved the non-payment of child support obligations and claimed that the relevant taxpayers had underreported their income or not lodged their income tax return. As a result of the TERs, the Individuals business line conducted a campaign which involved issuing letters to taxpayers who had a TER about non-lodgment raised against them. The letters to the taxpayers informed them that they had outstanding lodgments and that according to information available to the ATO, they were required to lodge them.686

6.83 The Individuals business line noted that it was in the process of determining whether it would be appropriate to place a TERC indicator on taxpayers’ files to assist in its case selection process. The TERC indicator would form part of an overall risk rating for the taxpayer and assist in determining whether compliance action is required. It expects to review the TERC indicator to assess the likelihood of the risk occurring in the future and update taxpayers’ risk profiles for the previous two years. It is also assessing the value of reporting revenue raised from compliance actions taken as a result of the TERs and also provides feedback to the TERC.687

Superannuation business line

6.84 The majority of TERs received by the Superannuation business line provide information regarding the non-payment of SG by employers. Accordingly, the initial review of these referrals focusses on determining whether sufficient identification information has been provided to commence an investigation of the employer through the Employee Notification (EN) process as the ATO has committed to investigate all ENs it receives.688

6.85 TERs which allege unpaid SG but do not adequately identify the employee, are assessed against the business line’s risk models to determine whether further compliance activity against the employer would be appropriate.689

6.86 The Superannuation business line has advised that only 700 of the 3,138 TERs received from the TERC for the 2016–17 financial year had contained sufficient information to be considered for further investigation. The remainder were, therefore, assessed in accordance with its risk filters.690

6.87 It also noted that 70 per cent of the allegations regarding unpaid SG are lodged via the online TER form and 15 per cent over the phone with contact centre scripting guiding staff to obtain sufficient information for lodging an EN. The online TER form does not inform users, that if their concerns relate to unpaid SG, relevant information is available on the ATO’s website. Furthermore, it does not direct users to the online EN form in appropriate cases.691

Small Business (SB) business line

6.88 TERs which are received by the SB business line are reviewed by an ATO officer in the SB Integrity team who determines whether there is sufficient basis for the TER to warrant further investigation. As part of this process, the ATO officer identifies the behaviour exhibited in the TER and the merits of the allegation. However, they must also consider any potential biases by the person making the TER. Once the TER has been assessed, the officer’s decision is documented in Siebel. The SB Integrity team notes that due to the volume of referrals it receives, some of these decisions have limited detail, particularly those where no further action is taken.692

6.89 Of the TERs received by the SB business line in 2016–17, only 81 were considered suitable for further compliance action and only 40 per cent of these cases resulted in an audit outcome. Due to the small proportion of actionable cases, the SB business line is evaluating how it assesses TERs and whether it would be more practical to adopt a risk-based approach in considering them.693

Employer Obligations business area

6.90 The EO business area explained that the majority of TERs it had received in the 2016–17 financial year (approximately 73 per cent) involved employees receiving their wages in cash. The remaining TERs included concerns with employers not remitting PAYG tax to the ATO (8.3 per cent), the non-issuance of payment summaries (12.5 per cent) and the disputed status of the worker (6.9 per cent). The EO business area’s current risk models aim to identify such concerns as part of its own processes. However, it is unclear whether these processes had already identified the concerns raised in the TERs.694

6.91 The EO business area has advised that it does not review each TER on a case-by-case basis, however, it does use the information reported in the TERs in developing future strategies for the business line.695

PGH business line

6.92 TERs are sent to five different areas in the PGH business line. These are the Tax Crime, Phoenix, ATP, Fringe Benefits Tax (FBT) and National Case Selection (the BAU team) areas.696 In addition, PGH has a dedicated e-mail inbox for internal referrals made by ATO officers and other business lines within the ATO.

6.93 The Tax Crime area reviews TERs on a case-by-case basis to determine whether there are sufficient grounds for further investigation. The Tax Crime area provides confirmation to the TERC that it had received the TERs sent, however, it is unclear whether this communication includes details regarding the decision made as a result of that referral.697

6.94 The Tax Crime area received 140 TERs in the 2016–17 financial year. Of these, 129 were transferred to other areas of the ATO for their action and one was transferred to the TPB. No action was or could have been taken on the remainder. Table 6.6 below sets out the outcome of those referrals.

Table 6.6: Number of community referrals actioned by PGH’s Tax Crime area in 2016–17, by outcome

Type of outcome Number
Transfer to other areas in PGH 84
Transfer to CHE 23
Transfer to SB (non-CHE) 14
Transfer to GST 4
Transfer to EO 2
Transfer to Superannuation 1
Transfer to Not-for-profit 1
Transfer to TPB 1
No further action – not a tax matter 3
No further action – general 1
Not able to determine 6
TOTAL 140

Source: ATO

6.95 The Phoenix area of PGH receives TERs through two main methods. The first method is through TERC staff who use the ATO Intelligence Discover database to report a potential phoenix arrangement in a TER. In this case, an e-mail is sent directly to the Phoenix area’s mailbox.

6.96 The second method is through referrals which are sent directly to the Phoenix mailbox by external parties such as liquidators, dissatisfied creditors and employees. In these cases, the information is entered into a TERC Siebel activity and added to the ATO Intelligence Discover database.

6.97 The Phoenix area states that it treats all referrals as intelligence in the first instance and does not always commence an investigation. Upon receipt of the TER, the PGH officer reviews the relevant information and attachments in both ATO’s Risk Assessment Profiling Tool (RAPT) and Siebel. RAPT is used to determine whether the allegation is made in relation to an entity which is already considered to be part of the Phoenix population. After the initial assessment has been completed, the ATO inputs that data into a master reporting sheet which includes demographic details to assist in identifying industry trends and geographic locations.698

6.98 Once the TER has been considered for intelligence purposes, it is reviewed to determine whether a more detailed analysis is required. As part of this analysis, the Phoenix area seeks to determine information about the scope of the allegations, the potential impact and whether there is a reputational risk to the ATO if the matter is not investigated. Cases which are considered to be suitable for further action are placed on a checklist and presented to a case selection panel as a priority.699

6.99 The Phoenix area had received 456 TERs during the 2016–17 financial year of which 22 resulted in the outcomes set out in Table 6.7 below. Fifteen of these 22 TERs were subject to a current audit or were already identified as a risk by the PGH business line and the remaining two had initiated investigations.

Table 6.7: Number of community referrals actioned by PGH’s Phoenix area in 2016–17, by outcome

Outcome Number of TERs
Subject to a current audit – information forwarded to auditor 6
In current Phoenix population 9
No further action due to insufficient risk or no evidence of phoenix activity 4
Referred to another area within the ATO 1
Phoenix case created 2
TOTAL 22

Source: ATO

6.100 The Phoenix team has stated that it is currently unable to determine whether action is taken or liabilities are raised specifically as a result of TERs as their treatment strategies are designed to address the behaviours of groups rather than those of individual entities.700

6.101 The Phoenix area prepares and provides reports about TERs and associated feedback on a quarterly basis to the TERC. Such reporting is one of the Phoenix area’s effectiveness measures that are reported to the PGH Executive annually.701

6.102 The ATP area records all TERs assigned to it in the ATP Risk Management spreadsheet in the ATO Intelligence Discover database. The ATP area also forwards details about the referrals to the Smarter Data business line (responsible for all of the ATO’s risk assessment activities and described in detail in the section below on ‘Risk Models and Data Analysis’). The TERs are reviewed by both ATP and Smarter Data to determine whether they have been appropriately assigned to the ATP area and whether there is sufficient information to take action. Where there is insufficient information, any resulting action may be deferred for six, nine or twelve months.702

6.103 The ATP area has expressed its concerns to the TERC that the majority of the TERs referred to it do not relate to its work. It explained that from 1 July 2016 to 31 March 2017, it received a total of 237 TERs which resulted in two being progressed for further analysis and another being placed on an ATP watch list. The remaining TERs were considered to be low risk or not associated with a risk managed by ATP. The ATP area stated that it is in the process of developing additional guidance, training and fact sheets for the TERC team in addition to the monthly feedback it already provides to them.703

6.104 The FBT team within the PGH business line allocates the TERs it receives from the TERC to its compliance staff to analyse and determine the appropriate response. Once an FBT officer has decided the appropriate action, their decision is required to be documented and recorded on Siebel and the ATO Intelligence Discover database.704 They also provide a response to the TERC’s monthly report and inform the latter of the decisions they have made with respect to each TER.

6.105 The FBT area had received a total of 201 TERs during the 2016–17 financial year. Of these referrals, 71 were escalated as a potential risk for verification which in three cases resulted in an FBT amendment. Nil outcomes were recorded for 51 of the TERs with the remaining 17 cases still in progress.705

6.106 All TERs that are referred to the PGH business line but do not fall in any of the above four areas are sent to the BAU area. Each of these referrals is reviewed to identify those which relate to ongoing cases and those with respect to which compliance activity should be initiated. The resulting action may be referral to a risk manager, other areas of PGH or other business lines, or the case officer of an existing case. Analysis of the TERs include determining an appropriate risk rating based on whether documents have been provided, if the contact details of the person making the TER are available and how many previous TERs have been received from the same person.706

6.107 The BAU area also provides reports to the TERC about the actions it has taken with respect to each TER and whether they have been appropriately classified.707

6.108 For the 2016–17 financial year, the BAU area received 751 TERs. Of these referrals, 494 were considered to be of minimal risk or relevance to the PGH business line with no further action being taken. However, three were placed on the PGH Intelligence watch list. In addition, 235 TERs were referred to other areas within PGH or other business lines. The remaining 22 TERs were considered for further investigation with 20 investigations being commenced as a result.708

IGT observations

6.109 The general public including whistleblowers are a valuable resource to the ATO and can play a vital role in identifying and reporting instances of suspected fraud and tax crime. In this respect, they can supplement the ATO’s resources by acting as a detection mechanism for no additional cost and provide real time insight about the tax environment, emerging trends and the effectiveness of the ATO’s strategies to address tax crime. They may also be useful in ongoing cases and assist the ATO in gathering additional data to enhance its risk models and detection measures.

6.110 As a point of principle, the large number of TERs lodged with the ATO clearly reflects the community’s desire to support the ATO in addressing fraud and tax crime although some TERs indicate that other motives may be at play and may be vexatious. Nevertheless, they all need to be reviewed diligently to ensure that important information is not overlooked. To maintain and develop this valuable source of information, the ATO has to demonstrate to the community that it values all TERs, scrutinises them closely and takes appropriate resulting action.

6.111 It is noted that the majority of TERs relate to small scale matters and may not be treated with the same priority as suspicions of major fraud which attracts the attention of multiple agencies and taskforces. However, if these smaller scale acts of fraudulent behaviour are not addressed, they may propagate, compound or lead to more serious fraudulent activities, adversely impacting the total revenue collected.709

6.112 Based on the reporting provided by the ATO, only a small percentage of TERs contain sufficient information to enable the ATO to take further action. This difficulty is further compounded by the majority of the community members lodging TERs anonymously without providing contact details (approximately 90 per cent). In the IGT’s view, there are a number of steps the ATO could take to improve the quality of information it receives in TERs. These steps include widely publicising the availability of the TER process and specifying the types of information which would be most useful. In doing so, the ATO could specify the information needed to action the most common types of TERs. For example, the Individuals business line could specify the information needed to action a TER regarding the undeclared income of a person who has child support obligations.

6.113 The ATO could also provide greater confidence in the TER process by explaining how ATO officers seek to protect the identity of those who lodge TERs as they conduct their investigations. For people who still wish to lodge a TER anonymously, the ATO could seek to establish a secure two-way information channel by, for example, suggesting they could set up a unique and anonymous e-mail address specifically for this purpose. They could also be assured that the law prohibits the ATO from accessing metadata to identify and track their Internet Protocol (IP) address, unless they are the subject of a criminal investigation. These types of information could be advertised widely as well as at the time TERs are being lodged online or by telephone.

6.114 Once TERs are provided to the ATO, the ATO’s TERC processes for logging and referring them to the relevant business lines are detailed and robust. However, improvements are required to the processes that the business lines use to deal with TERs. These processes were being further developed during this review. The IGT believes that the ATO should ensure these processes are consistent across business lines, are formally documented and are available to all relevant staff.

6.115 Under the ATO’s current approach, each of the ATO’s business lines has different processes for considering TERs for intelligence and compliance purposes. Some of these differences are necessitated by the nature of work across multiple risk areas and taxpayer segments. However, in some business lines the risk rating scores only check to determine whether a TER has been lodged with no consideration given to the quality and reliability of information contained in the TERs. Accordingly, it is difficult to establish the priority which should be given to a TER investigation as compared to, for example, risks identified by the business line itself.

6.116 There may be many TERs that contain insufficient information or identify issues of low risks which may not warrant a detailed investigation or should not take priority over risks identified by other ATO processes. A consistent treatment of TERs across business lines is required which takes a whole of ATO view in determining the priority with which they should be investigated relative to each other as well as risks identified by other means. Relevantly, the ATO is considering developing an Enterprise View of Client Risk which would review the case selection systems across all of the ATO’s business lines.

6.117 Furthermore, currently, the ATO is able to report on the number of TERs received each year, the business lines to which they have been allocated and the number of taxpayers that were the subject of TERs whilst an audit was conducted on their affairs. However, the ATO does not currently capture the extent to which the information provided in the TERs had contributed to its compliance activities, particularly whether they have resulted in the initiation of audits or have improved the outcomes of those audits. The IGT believes capturing such information would be useful in assessing the effectiveness of TERs and identifying further improvement. The publication of such aggregated data as well as information about identified trends and the most reported type of allegations would also enhance community confidence in the ATO’s management of TERs and may increase their useful contribution.

Recommendation 6.2

The IGT recommends the ATO:

  1. better inform the public about making tax evasion referrals including by specifying the type of information required and assuring them of confidentiality;
  2. formalise and document consistent processes, across all business lines, for dealing with tax evasion referrals; and
  3. publically report aggregate data about the outcome of its investigations of tax evasion referrals including the extent to which they give rise to compliance activities, any identified trends and the most common types of referrals.

ATO RESPONSE

  1. Agree
  2. Agree

    The ATO will seek to formalise and document procedures for all business areas that receive and action tax evasion referrals from the Tax Evasion Reporting Centre, ensuring they are centrally recorded. The ATO notes that the detail of some processes may differ between business areas due to the volumes of referrals received and the nature of those referrals.

  3. Agree

Referrals from ATO officers and other agencies

Stakeholder concerns

6.118 Stakeholders, including some former ATO officers, have expressed concerns that when suspected tax frauds are reported within the organisation, the ATO is either slow to act or does not take action at all.

6.119 Stakeholders have also raised concerns about the ATO’s processes for actioning referrals from other government agencies. In the past, they believe that ATO officers have not acted on documents received from other agencies for a significant period of time as they did not know which area of the ATO should be approached.

Relevant materials

ATO staff referrals

6.120 As mentioned earlier, pursuant to CEI 2014/05/09, all instances of suspected external fraud encountered by the ATO’s other business lines must be referred to the PGH business line710 who assess the referral against tax crime priorities to determine whether the matter requires a criminal investigation.711

6.121 To make a referral, officers must complete a Tax Crime Referral Form and send it to their business line gatekeeper who checks the form for completeness, determines whether it aligns with the business line’s risks and priorities as well as evaluates the strength of the evidence.712

6.122 The business line gatekeeper is also required to provide the referral with a priority rating of between level one and four before uploading the details onto RAPT.713 If the referral is considered to be of a low priority, the referral will be actioned through the ‘BAU casework’ process whereby the relevant data on RAPT will be routed to the PGH Director in the region where the alleged offence occurred.714 A decision will then be made on whether a case is to be created for the PGH investigation team in the region after ‘consideration of funding and resourcing requirements, case type and recommendations.’715

6.123 Higher priority referrals, such as cases where the amount of revenue involved is in excess of $1 million and cases where the specified risks are business line priorities, are actioned in accordance with a priority casework process. This involves a two-stage assessment by PGH’s Criminal Law National Assessment Treatment. The first stage considers matters such as available evidence, the ATO’s ability to commence a review, the strategic role of investigations, the risks and charges as well as engaging with the business line to understand matters of complexity. The second stage involves a 90-day review and is primarily concerned with establishing the grounds for issuing warrants. As with the BAU casework process, the end result will be a PGH investigation in the region where the offence was committed. If, due to the higher risk and complexity involved, the cycle times would be greater than 180 days, these cases also require approval by the PGH Case Escalation Forum before they are commenced.716

6.124 If at any stage during the above process, PGH determines that the matter may need to be referred to the AFP for either investigation by the latter or a joint ATO/AFP investigation, the referral will be submitted to PGH’s Tax Crime Forum for approval.717

6.125 In addition to referring tax crime related matters to the PGH business line pursuant to CEI 2014/05/09, ATO officers are also required to comply with the CEI 2014/03/05 on Intelligence Management which states that they are responsible for recording in the ATO Intelligence Discover database any observations which have the potential to impact the ATO’s business outcomes.718

6.126 As mentioned earlier, the ATO Intelligence Discover database is a tool which allows ATO officers to share and analyse information throughout the organisation as well to monitor, detect and address compliance risks. It is most often used for referring concerns about taxpayers to other business units within the ATO.719

6.127 Where an ATO officer identifies a case which involves a potential fraud or tax crime, they are encouraged to understand the key risks and determine whether they should deal with the risks in the current case or refer them onto another area through the ATO Intelligence Discover database. They may also consult with their team leader in this regard.720

6.128 All ATO officers who submit information through the ATO Intelligence Discover database will receive an automated acknowledgement e-mail and a reference number for their records. Once the referral has been received by a business unit, it will be assessed by intelligence analysts against risk rating models, business objectives and availability of resources to determine the level of priority for further action. The ATO has noted that since ‘it is the responsibility of the risk management areas to review and assess the referral for the appropriate treatment, immediate treatment of the referral may not occur.’721

6.129 Since 2011, a non-mandatory self-paced online training package has been made available to all officers to assist them fulfil their obligations of detecting and referring suspected tax crime. 722 However, a 2014 internal ATO review had found that there was significant underreporting and inaccurate reporting by ATO officers of fraudulent behaviour due to a lack of training amongst other things.

6.130 Following the above review, the training package was updated and now includes links to PGH’s ‘guide to a comprehensive referral’ outlining the three key types of information required to improve the likelihood of a referral being considered suitable for investigation.723 This training package was also revamped in September 2017 with video scenarios used to illustrate examples of tax crime behaviour which were developed from real cases. It was released through a communications strategy that included the promotion of the package in ATO newsletters and e-mails to staff. A total of 2,090 ATO officers completed the revamped training package during the period September 2017 to January 2018, including 1,198 call centre staff.724

6.131 In the IGT’s view, the above training package should be mandatory for all staff as it informs officers of the process for referring suspected tax crime. As mentioned earlier, such training should contain practical scenarios which assist officers to detect fraudulent behaviour.

Other agency referrals of suspected tax crime

6.132 Intelligence and referrals from law enforcement and other external agencies are received by the ATO through its ‘Tax Crime Intelligence’ mailbox. In situations where a referral is sent directly to an ATO officer, the ATO’s procedures states that the officer should pass the referral on to the ‘Tax Crime Intelligence’ mailbox and ‘advise the external agency that future referrals should be sent directly to the mailbox.’725

6.133 Information received via the Tax Crime Intelligence mailbox is reviewed, recorded and managed by the Intelligence Register Gatekeeper before it is uploaded on to the ‘Tax Crime Strategy Management External Intelligence Product Register’ (TCSM Intelligence Register). Information on the TCSM Intelligence Register is then reviewed fortnightly by the Tax Crime Referral Panel who may decide that the information received from the external agency warrants action. If so, an internal review will commence to profile the entity.726

6.134 If the profiler determines the entity to be high risk, the entity will be placed in a ‘candidate pool’ maintained in RAPT. There are currently seven candidate pools within the PGH Serious Organised Crime and Serious Financial Crime areas that correspond to each of the following: the National Anti-Gangs (Morpheus) Taskforce, the Criminal Asset Confiscation Taskforce (CACT), the National Criminal Target List, organised network refund fraud, illicit tobacco, serious financial crime and offshore tax evasion.727

6.135 Entities within each of the candidate pools may be selected for an ATO audit. Prior to commencement, audits with a cycle time of 180 days or less will need to be approved by the Tax Crime Referral Panel while audits with a cycle time of greater than 180 days will need to be approved by the PGH Case Escalation Forum.728

IGT observations

6.136 The ATO has a workforce of approximately 20,000729 officers who are responsible for carrying out activities which assist in the administration of the tax system. These officers, particularly those in client facing and compliance roles, are uniquely positioned to provide real time insights. Through audits, investigative work and interaction with taxpayers and their advisers, they are exposed to a variety of arrangements and are well placed to identify suspicious activities, patterns, or behaviours, which may appear to be abnormal for a given risk profile or taxpayer segment. These insights may be used to refine the ATO’s risk models, detection mechanisms and strategies to address external fraud. Accordingly, all ATO officers are required to refer intelligence and instances of suspected fraud to the PGH business line, whilst the latter has the primary responsibility for addressing external fraud.

6.137 The ATO’s processes for referrals to the PGH business line aim to ensure that they are of sufficient quality to be useful for investigation and intelligence purposes. These processes also provide greater transparency and clarity regarding the assessment and prioritisation of the referrals and, as a result, enhance officers’ confidence that their referrals will be appropriately considered. However, the IGT believes that the ATO could provide greater motivation to its officers, through appropriate incentives, to detect and report suspected fraud by reporting, at least internally, details of referrals which led to successful prosecution of the perpetrators.

6.138 Although ATO officers may be proficient in identifying compliance risks, they may be less familiar with the behaviours and events which may indicate fraudulent activities are at play. The ATO does provide information, in its non-mandatory training package, on the general types of behaviours which may indicate the existence of these activities as well as some interactive scenarios based on real cases.730 However, the training package places greater emphasis on the process for referring matters to the PGH business line than identification of the underlying suspicious behaviours.

6.139 In the IGT’s view, the ATO could improve the assistance it provides to non-PGH officers to identify external fraud by providing them with more in-depth training about the range of behaviours and events which may be indicators of fraud being perpetrated. Such detail could be drawn from PGH’s case work and provided in the form of typologies and case studies highlighting the type of behaviours and activities which should lead them to consider a referral to the PGH business line.

6.140 As mentioned above, there may have been instances in the past where former ATO officers had observed that referrals from external agencies, about suspected fraud, were not being appropriately addressed. The ATO’s current processes for receiving and considering referrals from external agencies are the same as those made by ATO officers, which as stated earlier, provide confidence that the referrals will be appropriately considered.

Recommendation 6.3

The IGT recommends that the ATO consider:

  1. reporting ATO officer referrals, about potential fraud, which have led to successful prosecution along with appropriate recognition; and
  2. requiring all its officers to complete more in-depth training about the range of behaviours and events which may be indicators of fraud being perpetrated.

ATO RESPONSE

  1. Agree
  2. Disagree

    The wording of this element of the recommendation suggests that the ‘in-depth training about the range of behaviours and events which may be indicators of fraud being perpetrated’ will need to be managed through a mandatory training process. This requirement does not address the need for the training material to recognise the different roles and exposure to fraud matters faced by staff in order to ensure it is relevant and appropriate, and thereby properly supporting their ability to identify and report possible fraud matters. The ‘Security, privacy and fraud’ training package is a mandatory training requirement for all staff, which includes guidance and direction for staff in respect to their requirement to report matters of suspected external fraud. In support of this, the ‘Introduction to tax crime’ training package is available and promoted to all staff as a supplementary training package, providing greater detail and illustrative examples of external fraud matters.

Risk models and data analysis

Stakeholder concerns

6.141 Stakeholders are of the view that the ATO generally takes a long time to uncover fraudulent schemes and raised concerns regarding the effectiveness of the ATO’s external fraud detection measures.

Relevant materials

6.142 The ATO uses automated tools and models to detect potential fraud or non-compliance before relevant assessments or refunds are issued to taxpayers731 and to select cases for investigation (pre-issue detection processes). Examples of such processes include analytical models and business rules which are designed to recognise characteristics of potential non-compliance or fraudulent activity. There are also watch lists, based on experience from past fraud incidents, which aims to consolidate information about taxpayers who are most at risk.732

6.143 Pre-issue detection processes are often used where large volumes of data are being processed. For example, the SB business line’s pre-issue compliance program employs a variety of automated tools to detect indicators of over-claimed deductions, understated income and identity fraud. It is important to note that these processes, generally, operate in isolation although the ATO is aware of the benefits that would be gained from integrating them to enhance overall effectiveness.733

6.144 The ATO also employs a variety of other detection measures across its business lines to complement its pre-issue detection processes. These detection processes apply after an assessment or refund has been issued (post-issue detection processes). The majority of investigations are based on post-issue detection processes which identify cases based on known attributes and characteristics.734

6.145 Post-issue detection processes rely heavily on the availability of appropriate information from internal sources including taxpayer-provided information (e.g. data in tax returns), ATO intelligence systems as well as external sources. It is critical that such information is reliable to ensure potential external fraud can be accurately detected. The outcomes of these processes are used to conduct investigations and disrupt criminal business models by such means as issuing default assessments and garnishee notices as well as commencing prosecution action.735

6.146 Prior to the introduction of the Smarter Data business line in 2014, each of the ATO’s business lines were responsible for the development of their own risk models, analysis and detection methods. However, until recently, Smarter Data was responsible for assisting the ATO’s business lines to develop and improve their pre-issue and post-issue detection processes.736 In addition, Smarter Data was responsible for all of the ATO’s risk assessment activities, providing a centralised and coordinated approach to risk assessment strategies through a range of intelligence and data analysis services. These services included data collection, reporting, analysis and case selection models as well as consulting with business unit risk managers about risk and intelligence matters. In addition, Smarter Data also collaborated with the ATO’s business lines to develop tailored project plans to undertake risk assessments which used various techniques and tools based on the complexity of the external fraud risks and the number of stakeholders involved.737

6.147 The 2016 Enterprise Tax Crime Risk Review (2016 ETCR Review) is an example of the risk assessment work that was undertaken by the ATO’s Smarter Data business line. The 2016 ETCR Review focused on identifying changes in the external fraud environment and the potential impacts and risks they posed to the ATO as an organisation. It also sought to determine whether risk controls and treatments implemented by the ATO remained appropriate and effective in addressing fraud.738

6.148 It was found that whilst the controls and detection mechanisms in place appeared to be effective, there were a number of opportunities to improve their effectiveness and ability to adapt to the changing environment. These improvements included developing new analytical models to increase the detection rate for identity crime relating to refund fraud, refining and developing better GST refund fraud models to increase their accuracy and reducing the requirement for manual profiling.

6.149 It was also noted that the majority of controls to detect and address external fraud were implemented at an operational level which made it difficult to measure their effectiveness individually and to consolidate them to form an overall view at the enterprise level to determine whether the ATO’s strategic priorities are appropriate in the current fraud environment.739

6.150 Another finding of the 2016 ETCR Review was that the ATO’s move to digital channels had caused difficulties in gathering data and information for compliance and fraud detection activities. In particular, the use of digital products meant that it was no longer able to obtain demographic details through myTax and shared government platforms have also resulted in difficulties in accessing data.740

6.151 The conclusion reached at the completion of the 2016 ETCR Review was that that the ATO’s existing control and detection mechanisms were partially effective and that further mitigation strategies were required to be implemented. These mitigation strategies included conducting reviews of strategic priorities and controls implemented at the operational level every six months to evaluate their ongoing effectiveness and to identify potential new controls to further address fraud risks. It was also recommended that a further tax crime risk assessment be conducted within the next 12 months. 741

IGT observations

6.152 The effectiveness of the ATO’s pre-issue and post-issue detection processes are critical elements of its overall strategy to detect fraud as they review large volumes of data. However, the effectiveness of these processes relies on the ATO’s awareness of the types of fraudulent activities occurring in the current fraud environment. For example, these processes may detect unsophisticated fraudulent activity, such as not declaring income in form of cash, however, they may not detect more sophisticated arrangements which exploit weaknesses in the tax system until the ATO is specifically alerted to such behaviours. Where these fraudulent activities are allowed to flourish undetected and untreated, they may pose a risk that undermines the integrity of the tax system, as was the ATO’s experience in the precious metals industry (more detail is given in Appendix D).742

6.153 As mentioned earlier, the ATO’s risk detection processes are subject to periodic internal review and seek to ensure that they are responsive to emerging risks and the changing environment. The IGT is of the view that in doing so, the ATO should be particularly mindful of new technologies and how they may be employed to enhance their processes. First, new technologies such as biometric data and secure transaction processes, such as blockchain, can be used to strengthen the architecture of the tax administration system and prevent identity fraud.743

6.154 Secondly, the continued application of advanced data analytical techniques on the ATO’s existing data holdings can better identify trends and connections. This analysis can be bolstered by additional data sources from third parties such as other government agencies and financial institutions to help deepen the ATO’s understanding of taxpayer profiles and behaviours. For example, the expansion of the taxable payments reporting system to contractors in the courier and cleaning industry744 is one of the ways to increase the ATO’s data holdings to improve the detection of fraud.745

6.155 Thirdly, the use of automated systems and artificial intelligence can increase the sophistication and speed at which data can be analysed to detect. These issues are explored in more detail in the IGT’s Review into the Future of the Tax Profession.746

6.156 Finally, technological and societal changes may also provide alternative non-traditional sources of data, to help the ATO identify connections to tax crime which were previously hidden from detection. For example, social media data can be used to determine the various parties to a syndicate that are perpetrating fraudulent activities or the controlling minds behind sophisticated arrangements.

6.157 The IGT conducted a broad review into the ATO’s risk assessment tools in 2013.747 Subsequent IGT reviews have considered more specific ATO risk analysis models such as those which relate to income tax refunds748 and the use of data matching749 in the individual taxpayer context. More recently, the IGT has also examined risk tools used in the GST refund verification process.750 As mentioned above, the ATO also plans to conduct further periodic reviews of its risk assessment processes. Accordingly, it is appropriate that further time be allowed for recommendations emerging from these reviews to be implemented and bear fruit before exploring them again.

Staff capability for criminal investigation

Stakeholder concerns

6.158 Certain stakeholders have expressed concerns that the ATO’s external fraud investigation teams do not possess the adequate skills and experience to conduct criminal investigations. They have suggested that this may be remedied by recruiting staff from law enforcement agencies. They have also suggested that secondments to and from these agencies may also form part of the solution.

Relevant materials

6.159 Within the PGH business line, there are a number of teams responsible for ‘criminal law treatments’. These teams include the investigations, prosecutions, complex investigation, criminal law advice and digital forensics teams.751 As at 19 October 2017, the PGH business line had a total of 154 officers in the criminal law treatment area.752 The following table provides a breakdown of the staff numbers in this area by team for the last four financial years.

Table 6.8: Number of staff in PGH’s criminal law treatment area, by team

  Prosecutions Criminal law advice Investigations Complex investigations (a) Executive and support TOTAL
2017–18 (b) 44 5 75 16 13 153
2016–17 44 5 78 12 13 152
2015–16 49 4 86 4 143
2014–15 51 4 100 2 157

(a): Complex investigations commenced part way through 2016–17, to be discussed in Chapter 7.
(b): 2017–18 figures as at 19 October 2017.
Source: ATO

6.160 As illustrated by Table 6.8, the total number of staff conducting investigations declined from 100 staff in the 2014–15 financial year to 86 staff in the following year. However, total numbers rose in 2016–17 to 90 staff, comprising 78 staff in the Investigations team and 12 in the Complex investigations team. The number of staff in prosecution roles has reduced from 51 in the 2014–15 financial year to 44 as at 19 October 2017.

6.161 Of the 112 officers who undertook ‘fraud-related duties’ in PGH’s criminal law treatment area for the 2016–17 financial year, approximately 54 per cent of officers held a Certificate IV in Government (Investigations) and approximately 32 per cent had attained the Diploma of Government (Investigations). The ATO, however, has advised that as at 8 May 2018, all officers conducting investigations hold the relevant Certificate IV/Diploma qualification, are supervised by an officer with such a qualification or are otherwise exempt as they hold an equivalent qualification.753

6.162 The ATO has also reported that over 40 per cent of its officers in the criminal treatment area have ‘fraud related law enforcement’ experience and 21 per cent have attended training in the AFP’s FAC Centre.754 Criminal law treatment staff have also attended specialist training at the AFP’s Management of Serious Crime Program for Commonwealth Agencies755 and training presented by the IRS in 2017 on conducting criminal investigations on international tax evasion.756

6.163 Officers in the criminal law treatment area are also provided with a ‘learning toolkit’ which outlines the specific capabilities relevant to the role. Links are also provided to relevant online training packages on a number of areas such as information gathering, project management and tax technical topics.757

6.164 The ATO aims to improve the capability of officers in its criminal law treatment area so that it may be considered the ‘tax crime investigative arm for the Commonwealth’ in 18 months.758 To achieve this aim, the ATO plans to ensure that there is sufficient learning and development to provide an appropriate mix of core investigation and prosecution knowledge, skills and experience.759 Review of job design is also planned with the aim of providing opportunities for career advancement and succession management.760 To assist in developing such capability, the ATO also plans to improve its interactions with other agencies, for example, in working with the CDPP to improve the efficiency of the ATO’s criminal investigations and prosecutions.761

6.165 Furthermore, the ATO also seeks to further develop staff capability through secondments and specialist training with other agencies. In this respect, the ATO has advised that since 1 November 2013, it has hosted five staff from agencies such as ACIC, ASIC, CDPP and one financial restructuring firm as part of its secondment program. In that time, the ATO has also approved 54 secondments for ATO officers to work in a variety of institutions including eleven to the ACIC, 22 to the AFP, two to AUSTRAC and three to the CDPP.762

IGT observations

6.166 Based on the information above, the officers in the criminal law treatment area of the ATO possess relevant qualification and experience and there are plans to significantly improve the capability of this area. Accordingly, the IGT believes a review of the ATO’s capability to conduct criminal investigation would be best conducted after some time has elapsed from the formal adoption and implementation of these plans.

6.167 The ability to adequately investigate external fraud is also dependent on the ATO’s collaboration with law enforcement agencies. Such collaboration is examined in Chapter 7.


603 Criminal Code Act 1995 s 134.2.

604 IGT, Review into the ATO’s administration of penalties (2014).

605 ATO, ‘Tax Crime Framework’ (Internal ATO document, 28 March 2018).

606 ATO, ‘Tax Crime Strategic Intent 2015–18’ (Internal ATO document, undated).

607 ATO, ‘PGH Enterprise Tax Crime Communication View’ (Internal ATO document, 16 November 2017).

608 ATO, ‘Risk Register, Major tax integrity threats – tax crime’ (Internal ATO document, ATO database, accessed January 2018).

609 Above n 606, p 3.

610 ibid., p 2.

611 ibid., p 3.

612 ibid., p 4.

613 ibid.

614 ibid.

615 ibid., p 5.

616 ibid., p 4.

617 ATO, ‘Tax Crime Risk Review’ (Internal ATO document, 14 May 2016) p 11.

618 ibid., pp 13–20.

619 ibid., pp 21, 23 and 31–32.

620 ATO, ‘Phoenix Risk and Treatment Strategy – planning 2017–18’ (Internal ATO document, 2 March 2017).

621 Above n 89.

622 ATO communication to the IGT, ‘External Fraud Detection Q 1-4’, 15 November 2017ATO, ‘External Fraud Detection Q 1–4’ (Internal ATO document, 15 November 2017) p 1 paras [1] and [4].

623 ATO, ‘TEC Strategic Outcomes Initiative’ (Internal ATO document, undated).

624 ATO, ‘TEC Staff Improvement Ideas Prioritised’ (ATO database, accessed January 2018).

625 ATO, ‘IGOT Information Pack – General Communications’, embedded document entitled ‘Tax Crime Overview for IGT Current Version’ (Internal ATO document, November 2017).

626 Above n 607.

627 See, for example, ATO, ‘The fight against tax crime’ (21 May 2015) <www.ato.gov.au>.

628 ATO, ‘IGOT Information Pack – General Communications’, embedded document entitled ‘A3 Communication Strategy Overview’ (Internal ATO document, November 2017).

629 ATO, ‘IGOT Information Pack – General Communications’, embedded document entitled ‘2016–17 Phoenix Communications Evaluation’ (Internal ATO document, November 2017).

630 ATO, Compliance in Focus 2013–14 (2014) pp 2 and 26 <www.ato.gov.au>.

631 ibid., p 2.

632 ATO, ‘Reinventing the ATO – Commissioner’s speech to the Tax Institute’s 30th National Convention’ (19 March 2015) <www.ato.gov.au>.

633 ATO, ‘Building Confidence – case studies’ (6 September 2017) <www.ato.gov.au>.

634 ATO, ‘The fight against tax crime – Our focus’ (25 July 2017) <www.ato.gov.au>.

635 ATO, ‘The fight against tax crime – Our focus – Illegal phoenix activity’ (16 March 2018) <www.ato.gov.au>.

636 Above n 632; Above n 630; ANAO, The Australian Taxation Office’s Management of Aggressive Tax Planning (29 January 2004) p 53 <www.anao.gov.au>.

637 Above n 627.

638 ATO, ‘The fight against tax crime – News and results – Tax crime prosecution results’ (13 November 2017) <www.ato.gov.au>; ATO, ‘The fight against tax crime – News and results – Project Wickenby has delivered’ (16 November 2017) <www.ato.gov.au>.

639 For example, ATO, ‘Woman sentenced for $960,000 tax fraud’ (Media Release, QC 52103, 15 May 2017) <www.ato.gov.au>; ATO, ‘Man arrested for fraud and identity crime’ (Media Release, QC 53446, 5 October 2017) <www.ato.gov.au>.

640 For example, above n 7, pp 61–62.

641 ATO, ‘2017–18 Phoenix Strategic Communications Overview’ (Internal ATO document, undated).

642 ATO, ‘The fight against tax crime – Refund fraud’ (25 July 2017) <www.ato.gov.au>.

643 Stuart Hamilton, ‘New Dimensions in regulatory compliance – building the bridge to better compliance’ (2012) 10(2) E Journal of Tax research, 483 p 506.

644 Above n 13, p 183.

645 See above n 13, p 178.

646 Reserve Bank of Australia, ‘New Payments Platform’ <www.rba.gov.au>.

647 ANAO, Administration of Project Wickenby (2012) pp 65 and 152.

648 Above n 617, p 13 para [1].

649 ATO, ‘Risk Assessment – Enterprise Tax Crime’ (Internal ATO document, April 2014) p 36 para [7].

650 Above n 617, p 9 para [3].

651 ibid., p 41.

652 Above n 598, p 12.

653 ibid.

654 Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017.

655 The Treasury, The Black Economy Taskforce – Interim Report (March 2017) p 51 para [24] <www.treasury.gov.au>.

656 The Treasury, Combatting Illegal Phoenixing (Consultation Paper) (28 September 2017) p 7 <www.treasury.gov.au>.

657 Above n 13, p 339.

658 Inspector-General of Taxation Act 2003 s 8; For a description of such investigations, see IGT, Annual Report 2016–17 (2017) p 11.

659 ATO, ‘Report a concern’ (3 October 2017) <www.ato.gov.au>.

660 ATO, ‘Avenues available to the community to report instances of suspected external fraudulent activities (excluding the TERC process)’ (Internal ATO document, undated).

661 ATO, ‘TERC end-to-end process for staff dealing with TERC cases’ (ATO intranet, undated).

662 ATO, ‘Journey maps -Final’ (Internal ATO document, May 2017).

663 ATO TERC business area, IGT review team interview, 12 July 2017.

664 ibid.

665 ibid.

666 ATO, ‘Intermediaries and Lodgement – Tax Evasion Reporting Centre (TERC) – Handling Community information in the ATO’ (Internal ATO document, October 2017).

667 ibid.

668 Above n 662.

669 Above n 663.

670 ibid.

671 ibid.

672 ibid.

673 Above n 662.

674 Above n 663.

675 ATO, ‘TERC SES Summary and overview –v3.1 July 2017’ (Internal ATO document, undated); ATO, ‘TERC – Overview of TERC processes v1.0 June 2017’ (Internal ATO document, undated).

676 ATO, ‘ATO Overview of TERC processes v1.0, June 2017’ (Internal ATO document, June 2017).

677 ATO CHE stream, IGT review team interview, 24 July 2017.

678 ibid.

679 ibid.

680 ATO Individuals business line, IGT review team interview, 26 July 2017.

681 ATO, ‘TERC to CE Process’ (Internal ATO document, May 2017) p 5 para [1].

682 Above n 677.

683 Above n 680.

684 ibid.

685 ibid.

686 ibid.

687 ibid.

688 ATO Superannuation business line, IGT review team interview, 26 July 2017.

689 ibid.

690 ibid.

691 ibid.

692 ATO Small Business business line, IGT review team interview, 18 July 2017.

693 ibid.

694 ATO Employer Obligations business area, IGT review team interview, 27 July 2017.

695 ibid.

696 ATO PGH business line, IGT review team interview, 25 July 2017.

697 ibid.

698 ATO, ‘PGH report to the IGT on TERC referrals’ (Internal ATO document, 28 July 2017) p 3.

699 ibid.

700 ibid., p 4.

701 ibid.

702 ibid., p 5.

703 ibid.

704 Above n 698, p 5.

705 ibid.

706 ibid., p 6.

707 Above n 696.

708 Above n 698, p 6.

709 See, for example, concerns expressed regarding work related expenses: Chris Jordan, ‘Keynote address to the Tax Institute 33rd National Convention’ (Speech delivered at the Tax Institute National Convention 2018, Cairns, 15 March 2018).

710 Above n 89.

711 ATO, ‘Referring suspected Tax Crime to PGH BSL Gatekeeper Expectations’ (Internal ATO document, undated).

712 ATO, ‘Introduction to the Tax Crime Business Line Partner Gatekeeper Role’ (Internal ATO document, undated).

713 ibid., p 2.

714 ATO, ‘Criminal Investigations & CACT Referral Process’ (Internal ATO document, undated).

715 ATO, ‘PGH Criminal Law Tax Crime Referral Guidelines’ (Internal ATO document, undated); Above n 714.

716 Above n 714.

717 ibid.

718 ATO ‘Chief Executive Instruction 2014/03/05 Intelligence Management’ (Internal ATO document, 27 March 2014).

719 ATO, ‘ATOintelligence – Intelligence Centre’ (Internal ATO document, 2 August 2017) p 1.

720 ibid.

721 ibid., p 2.

722 ATO, ‘Introduction to tax crime – an enterprise approach’ (Internal ATO training module, undated).

723 ibid., slides 8, 10 and 12.

724 ATO communication to the IGT, 5 March 2018.

725 ATO, ‘Q-A intel register and candidate pools’ (Internal ATO document, undated) p 3.

726 ibid., pp 2-4.

727 ibid., pp 4 and 7.

728 ibid., p 6.

729 Above n 7.

730 ATO, ‘Tax crime: An enterprise approach’ (Internal ATO document, ATO training package, accessed 5 May 2018).

731 IGT, Review into the Australian Taxation Office’s compliance approach to individual taxpayers – income tax refund integrity program (2013) p 4 para [1.19].

732 Above n 649, p 25.

733 ibid.

734 ibid., p 25 para [3].

735 ibid., p 25 para [4] and p 26.

736 From 3 April 2018, the majority of the ATO’s Risk Assessment and Intelligence competency was transferred from the Smarter Data business line to the Client Engagement Group’s Strategy and Performance (CEG S&P) business line: ATO, ‘A new home in Enterprise Analytics’ (Internal ATO document, 3 April 2018).

737 ATO communication to the IGT, 4 August 2017.

738 Above n 617, p 8.

739 ibid., p 42.

740 ibid., p 22.

741 ibid., p 42.

742 See also Boucher, Blatant, artificial and contrived – Tax schemes of the 70s and 80s, ATO (June 2010), for example pp 73–177 and 386–388.

743 Above n 655, p 53; ATO, ‘Voice Authentication’ (6 September 2017) <www.ato.gov.au>; OECD, Shining the light on the shadow economy (2017) p 48.

744 As was recommended in IGT, Review into the ATO’s employer obligations compliance activities (2016) rec 3.4.

745 Australian Government, Budget Paper No. 2 (May 2018) p 22.

746 IGT, Review into the Future of the Tax Profession (2018).

747 IGT, Review into aspects of the Australian Taxation Office’s use of compliance risk assessment tools (2013).

748 Above n 731.

749 IGT, Review into the Australian Taxation Office’s compliance approach to individual taxpayers – use of data matching (2013).

750 Above n 8.

751 ATO, ‘PGH Criminal Law Treatment Capability Planning 2017–18 DRAFT’ (Internal ATO document, 1 March 2017).

752 ATO communication to the IGT, 27 November 2017.

753 ATO communication to the IGT, 8 May 2018.

754 ATO, ‘Response to AIC Commonwealth Fraud Census 2016–17’ (Internal ATO document, 2017).

755 ATO, ‘Copy of e-mail outlining ATO attendance’ (Internal ATO document, 13 February 2017); AFP, ‘Management of Serious Crime Program’ <www.afp.gov.au>.

756 ATO, ‘Copy of IRS’s presentation delivered to ATO staff in November 2017’ (Internal ATO document, November 2017).

757 ATO, ‘Learning Toolkit for Criminal Investigation’ (Internal ATO document, November 2017).

758 Above n 751.

759 ATO, ‘PGH CLT People Capability Plan Project Outline (draft version as at 7 July 2017)’ (Internal ATO document, 7 July 2017).

760 Above n 751.

761 ATO, ‘ATO-CDPP Project Outline – Project Blossom’ (Internal ATO document, 6 March 2017).

762 ATO, ‘PGH Secondments data as at 21 November 2017’ (Internal ATO document, 21 November 2017).