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In media release No 2011/068, issued 5 May 2011, the Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, announced the release of the Inspector-General of Taxation's (IGOT) report entitled "Review into the Australian Taxation Office's Change Program".

The IGOT made 9 recommendations in his report. Eight recommendations are of an administrative nature and the responsibility of the ATO. The ATO agreed with 5 recommendations, agreed in part with 2 recommendations and does not agree with one recommendation. 

The remaining recommendation was directed at the Government and relates to the use of standards for large information and communication technology projects. The Government will consider how the elements of this recommendation interact with its existing policies and standards before taking it further.

In his report, the IGOT found, at para 50:

"In relation to the income tax release, it was clear that in January 2010 the income tax release was not in an ideal state in terms of the number of existing defects or defects likely to arise in production. At the time, there were 229 known 'Severity 2' defects. The ATO was also aware that an unknown number of unidentified defects would likely arise in production, as the rate of new defects emerging to the date of deployment of the income tax release was substantial."

The ATO gave a number of reasons why it went "live" notwithstanding these defects. The IGOT concluded at para 4.60 that "the ATO had little choice but to go live when it did." The IGOT then commented, at para 4.61:

"Having made the go live decision, the approach to problems, defects and wider system difficulties, including how these were to be communicated to the community, required careful consideration and timely remediation by the ATO.

However, the IGOT went on to find that the ATO did not communicate the significant risk of potential impacts on taxpayers, businesses and tax practitioners adequately. For example, he said at para 4.68 as follows:

"Further, when problems were encountered after deployment, the ATO did not adequately communicate (until 25 August 2010) those problems in a manner, or on a timely basis, which would have materially assisted relevant taxpayers to minimise the adverse impact on them."

And at para 4.75:

"Tax practitioners wanted advance and specific warning of potential adverse impacts and made in a manner which would allow them to take action to mitigate them. This was made clear to the ATO at a meeting between the ATO and tax professional bodies on 22 April 2010. The ATO responded to this by issuing on 28 May 2010 a list of issues it was working on or had recently resolved.90 However, until 25 August 2010, the ATO did not do this with sufficient specificity. Without detailed knowledge of the likely risks, one can form the impression that the ATO perceived the delays to be insubstantial, small in number or that the majority of delayed returns were due to compliance risk checks."

And at para 4.76:

"Generally where the ATO did seek to warn parties, the word 'delay' proved too simple and subtle in communication. If there is a problem, it needs to be communicated transparently and specifically rather than just the consequence of the problem, being a delay. Such an approach did not allow people to assess their own position and risk effectively."

The ATO has agreed with the IGOT's Recommendation 2 on better communication with respect to potential adverse effects of significant software releases or large Information and Communication Technology implementations.

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