The Australian Taxation Office has been highly successful in assisting taxpayers to meet their compliance obligations, in particular through the use of technology.
The “Australian Taxation Office” is considered as the main revenue collecting organization for the government. The ATO plays a leading role in administrating the tax system of Australia and its main role is to manage effectively and shape the procedure as well as system that helps the taxpayers in fulfilling their tax requirements (Murphy, 2019). The tax administration of ATO is completely reliant on “Information and Communication Technology System”. The ICT systems needed for each single step of tax administration. This ranges from registration of taxpayer, through issuing of an assessment and if it is necessary, carryout the compliance investigations.
Essentially, the taxation system in Australia is mainly dependent on users engaging with ATO as the keen partakers. Australia being a comparatively small nation is very much interested in digitalisation and data. The “ATO digitisation” is presently driving the future of tax administration and the Australian government has taken a “whole-of-government” approach towards “data and digitisation”.
The ATO’s tax system pre-dates the capability to gather data based on any given magnitude. Its supporting factor was the tax return, a custom set of data, which the ATO requires every single Australian to provide every single year on manual basis (Barkoczy, 2016). The accurateness relating to data set is wholly dependent on the Australian’s trustworthiness, backed by huge amount of fines and threat of audit. This has already been spoken by ATO and uses time comprehensive data validation exercise.
Although, it was tough to certify the data provided for those returns against the other sets of data, despite the data was given on single basis, since authentication of data was entirely in taxpayer’s possessions (Sadiq, 2019). The next phase of “tax administration” that was developed was the substantiation of “third-party data” and this became available to ATO at large extent. This simply empowered ATO to complete matching of data and detecting irregularities which needs additional enquiry with the help of its audit programs.
The stage currently ATO is now in along with several other top revenue authorities all through the world are at present in, is pressing for the third-party data of taxpayers so that time can be saved and reduce the risk relating to unintentional errors which needs to be hunted down at later stages. The ATO is currently looking to improve the future of its tax management by moving towards the system of data verification, instead of bringing the data within the system. The data level that is assessed is simply based on six characteristics (Anderson et al., 2016). Namely, data identify, timeliness of data, visibility of data, standardisation, reliability of data, visibility of data and data usefulness. All of this is simply directed towards making the data correct or completion of “data set” or making tax return easy for Australians.
The ATO is at a stage where it pre-fills 90% of the boxes for an average individual on individual tax return to report about the income which is not changed by taxpayers. This actually helps the Australian citizens to save huge time while completing their tax obligations, irrespective of whether or not they finish the tax return by themselves or through a tax agent (Kenny & Devos, 2018). The pre-fill boxes not only include all the items of income but it also includes other items such as details about health insurance. The items that remain are deductions or it is much more related to difficult matters such as rental properties and capital gains. Nevertheless, partial data can still provide assistance with those type of details.
Response During Pandemic
The ATO, as an example gets huge number of data regarding numerous cryptocurrency exchanges and it usually has information about taxpayers that have made investment in cryptocurrency and those that trades (Kenny & Devos, 2018). Although, ATO does not has higher quality data to compute the exact amount of capital gains, but it has sufficient info to make taxpayers aware that ATO have information regarding their cryptocurrency trades. The ATO can remind the taxpayers to include those capital gains in their income tax return.
Another prime example of technological advancement made by ATO is about deductions claimed b taxpayers. The ATO has good insight about the type of deductions the taxpayers have incurred in a particular occupations or locations. The ATO has named it as “nearest neighbour data”. The ATO has moved from making use of this data as an element of risk tool to ascertain who must be held under audit. Through its technological advancement, the ATO actively prompts or nudges the taxpayers in real-time at the time of finishing their tax return (Morgan & Castelyn, 2018). The ATO lets the taxpayers know regarding their out of normal tax claims and also provides them with an opportunity to take into account more deeply, before final confirmation is made regarding the validity of claim.
To provide the aforementioned strategy a sense of scale, the ATO has issued 350,000 prompts with the help of its technological advancement to assist the taxpayers to check their figures in “myTax” when ATO’s system has noted that the amounts which was entered were different significantly to those or others in identical situations.
The technological advancement made in the field of data by ATO is not simply about tax returns and assisting people to get their tax and superannuation obligations correct. The response of ATO towards Covid-19 also focussed on the significance of having higher-quality systems and data sets for greater than one single purpose. They can be very handy when needed.
Inside the span of few weeks, the ATO was able to set up the system from grounds and the new tax system was able to help one million job keeper recipients by lending support to around 3.8 million peoples and around 800,000 small businesses were able to get cash flow boost (Taylor et al., 2017). The new system also helped in facilitating access to superannuation accounts for more than 3 million Australians. All this support was achieved by Australian community through ATO’s higher degree of program reliability and the work was very much devoted in the direction of core group of individuals.
Most importantly, while fine-tuning the policy initiatives, the Department of Prime Minister, Treasury and Cabinet closely worked with ATO to obtain better understanding of data holdings and digital systems that it has set up and frame the policy around them (Robin, 2021). The policy of ATO was designed around the data sets to make sure that it is not possible for business to get access unless it is pre-existing, actual business with true employees and with track record with engaging with tax system. This also implies that it is very easy to relate the measure with ATO’s data and analytics of risk instruments.
While other noteworthy aspect of technological advancement was to digitise the taxpayers experience and making it easy for them to make claims. The ATO designed cash flow boost to make sure that there are no new claim requirements. A business is simply needed to lodge the normal activity statement and the ATO’s systems would automatically produce cash flow boost credit.
Increasing the holdings of data and capabilities has only become possible due to increase in ATO’s technological advancement. However, after getting over the technological constraints, there certain ethical and legal aspects which should also be considered. On a critical note, the ATO is given responsibility of extensive-data collection powers. These powers simply help in addressing the asymmetry in information amid taxpayers and ATO (Digital transformation, 2022). These powers help in protecting the taxpayers from any misuse of information, which is used by other parts of governments except when there is any specific exemption or it is made publicly.
Moving further than the lawful framework of ethics, the ATO has created a set of data-based ethical principles which is aimed making interactions with taxpayers easy and make sure that its data activities lends support to integrity of Australia’s tax and super systems. The main principle of ATO is to preserve privacy, legality and security of data. The ATO emphasizes on upholding stewardship regarding the use of data when it is shared with others.
On a conclusive note, the ATO has made technological advancement by having a strong security framework to make sure that confidentiality as well as reliability of digital service is maintained. The ATO constantly adapts and enhances its technology so that it can address the rising cyber threats. Following digitisation, the ATO has experienced substantial rise in the total number of digital transactions processed every year.
The ATO is continuously developing digital solutions to make it easy for tax professionals for managing their client’s affairs with the help of their own system to great extent. This involves real-time based analytics and nudges to assist them in saving taxpayers from committing any errors.
Anderson, C., Dickfos, J., & Brown, C. (2016). The Australian Taxation Office-what role does it play in anti-phoenix activity?. Insolvency Law Journal, 24(2), 127-140.
Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.
Digital transformation - Australia as a world leader. (2022). Retrieved 13 April 2022, from https://www.ato.gov.au/Media-centre/Speeches/Other/Digital-transformation---Australia-as-a-world-leader/
Kenny, P., & Devos, K. (2018). Australian Small Business Taxation. LexisNexis.
Morgan, A., & Castelyn, D. (2018). Taxation education in secondary schools. J. Australasian Tax Tchrs. Ass'n, 13, 307.
Murphy, K. (2019). Procedural justice and the Australian Taxation Office: A study of scheme investors. Centre for Tax System Integrity (CTSI), Research School of Social Sciences, The Australian National University.
Robin, H. (2021). Australia Taxation Law 2021. OXFORD University Press.
Sadiq, K. (2019). Australian Taxation Law Cases 2019. Thomson Reuters.
Taylor, J., Walpole, M., Burton, M., Ciro, T., & Murray, I. (2017). Understanding Taxation Law 2018. LexisNexis Butterworths.
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