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Review into the Australian Taxation Office’s use of benchmarking to target the cash economy

A report to the Assistant Treasurer

July 2012

Table of Contents


Telephone: (02) 8239 2111
Facsimile: (02) 8239 2100

Australian Government - Inspector-General of Taxation crest

Level 19, 50 Bridge Street
Sydney NSW 2000
GPO Box 551
Sydney NSW 2001

16 July 2012

The Hon. David Bradbury MP
Assistant Treasurer and Minister Assisting for Deregulation
Parliament House
Canberra ACT 2600

Dear Minister

Review into the ATO’s use of benchmarking to target the cash economy

I am pleased to present my report of the review into the Australian Taxation Office’s (ATO’s) use of benchmarking to target the cash economy. It arose from concerns raised by small businesses, tax practitioners and their representative bodies during consultations on my work program.

Stakeholders generally supported benchmarks as a risk identification tool. However, concerns were raised with how they were developed and used in ATO compliance activities. Several recommendations seek to address this by improving ATO transparency and data integrity.

Some of the other recommendations are aimed at improving the ATO’s risk identification and audit processes to exclude compliant taxpayers from audits thereby minimising unnecessary compliance costs.

I have also identified opportunities to improve ATO audit staff and taxpayer understanding of the evidentiary requirements to support taxpayer reported income and ATO penalty decisions. Recommendations in this regard seek to improve communication and the available guidance.

Opportunities to better support taxpayers and tax practitioners to improve small business record keeping were also identified, including consultations with the Federal small business commissioner, once appointed.

Overall, I have made eleven recommendations to the ATO – with nine agreed in full and two in part. The ATO has not agreed to publish geographic comparisons of benchmarks and, hence, some transparency concerns remain.

I offer my thanks to tax practitioner representative bodies, small business taxpayers and their tax agents for taking the time to prepare submissions and discuss issues with myself and my staff. I also thank ATO and Australian Bureau of Statistics officers for their professional cooperation and assistance.

Yours faithfully

SIGNED

Ali Noroozi
Inspector-General of Taxation


© Commonwealth of Australia 2012

ISBN 978-0-642-74835-5

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