Inspector-General of Taxation investigates ATO refund delays

The Inspector-General of Taxation yesterday announced a review of the Australian Taxation Office‘s delayed income tax refunds.

Ali Noroozi will review the ATO’s income tax refund integrity program, including considering the efficiency and transparency of the program.

The Inspector-General will particularly look at whether the actions taken by the ATO are appropriate given the impact on taxpayers and tax practitioners on the one hand and the risk to government revenue on the other.

“Despite improvements made by the ATO, concerns persist relating to delayed refunds, communications surrounding them and whether the burden imposed on taxpayers and tax practitioners is proportionate to the potential risk being mitigated by the program,” Noroozi said in a statement.

The Inspector-General will also look at the ATO’s administration of superannuation excess contributions tax, which he said is a “complex area” where taxpayers believe they’re being unduly penalised due to minor errors or matters outside their control.

Finally, his review will look at the ATO’s use of data matching and will consider the data integrity, analysis and communication relating to data matching, as well as the ATO’s engagement with taxpayers in resolving disputes arising from data ‘mismatches’.

“Stakeholders support data matching where the outcomes assist taxpayers to comply with their obligations, for example, the income tax return pre-filling initiative,” Noroozi said.

“However, concerns have been raised with the accuracy, reliability and currency of third party data and ATO processes that address mismatches with taxpayer-provided information.”

Each review will examine the specific concerns and identify improvement opportunities for the system.

Nooroozi said he was focusing on the three areas which caused taxpayers the most concern.

“My aim for each review is to improve the administration of the tax system by striking a better balance between minimising any adverse impact on taxpayers and the ATO getting its job done,” he said.

Yasser El-Ansary, general manager of leadership and quality at the Institute of Chartered Accountants, told SmartCompany the Inspector-General’s reviews will have an important bearing on the way the ATO engages with small business as well as individuals in the future.

“There is some concern amongst taxpayers that the ATO’s processes sometimes appear to work against the best interest of taxpayers and, on some occasions, this is without there being any apparent reason why,” El-Ansary says.

He says the reviews present an opportunity for the Inspector-General to try to identify options and improvements so taxpayers have the best experience they can interacting with the tax office and so the ATO does not unnecessarily distract the focus of businesses away from running their organisation.

“Delayed refunds is a key reform as there has been concern for a long period of time that the ATO’s processes are holding refunds up with no apparent reason and, clearly, if you are running a small business, cashflow is king,” El-Ansary says.

“Any ATO process which has the effect of delaying or slowing refunds back is clearly going to be a cause for concern for many small businesses.”

Submissions to the Inspector-General are strictly confidential and are due by December 18, 2012.