ATO involvement in government tax clinic trial raises questions about its integrity

Questions are being asked about the integrity of the government’s tax clinic trial after it was revealed last week the program will be administered by the Australian Taxation Office (ATO).

Announced late last year, the federal government is spending $1 million setting up 10 tax clinics across the country to help unrepresented small businesses and individuals get free tax advice.

Each clinic will receive $100,000 in government funding under the 12-month trial, which has been billed as a way to help taxpayers who otherwise fall through the cracks with ATO disputes.

Operated by universities, the clinics will be modelled after an initial trial at Curtin University in Western Australia, which has already helped over 180 taxpayers resolve tax issues.

However, it has emerged that the ATO itself will be responsible for administering the national trial and will pay out grant funds to universities under its sponsorship grant program.

Responding to questions about the nature of the ATO’s role in the trial, a tax office spokesperson confirmed it will be responsible for evaluating the trial program and preparing monthly reports to the government on its progress.

“Over the trial period the ATO will be responsible for paying grant funds, recording and reporting on grant activities to Government, and coordinating the evaluation of the National Tax Clinic trial,” the spokesperson said.

The tax office says it won’t be “heavily involved in day-to-day operations” but will assist with setting up the clinics themselves and will provide “liaison points” to assist with difficult cases by allocating “dispute assist guides”.

In a speech delivered to the Australasian Tax Teachers Association at Curtin University last week, ATO second commissioner Andrew Mills said the tax office was already working with 10 short-listed universities to get a trial off the ground by March.

“We see our role in this process as facilitators, helping to get things up and running and putting in place the necessary support points to make a national trial a practical reality,” he said.

Cause for concern

But Tony Greco, general manager of technical policy at the Institute of Public Accountants, says a perceived conflict of interest regarding the ATO’s role in the program is a cause for concern.

“It can be viewed as essentially following their script as opposed to an external facilitator who might have been a better option,” he tells SmartCompany.

“If it’s very procedural, and it’s black and white, then sure they can probably adequately assist, but if it’s something beyond that are you getting the best result for those coming forward?”

Small businesses represent a significant portion of ATO business, accounting for about a third ($12 billion) of outstanding tax debt at the end of the 2017-18 financial year.

However, tax disputes have also come under the microscope in the last 18 months after media reports revealed allegations of unfair treatment by the ATO.

Those revelations prompted an overhaul of dispute resolution processes, including a previously announced support desk within the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) office.

There were 173 small-business disputes that resulted in settlements in the 2017-18 financial year, delivering $30.7 million in tax reductions.

Responding to questions about the trial, Assistant Treasurer Stuart Robert repeated part of the ATO’s response word-for-word, reiterating it won’t be heavily involved in day-to-day operations.

Robert added the ATO has prepared grant guidelines in accordance with Commonwealth rules.

“The guideline sets a very high-level set of criteria regarding establishment and assessment to ensure the funds are used to create a Tax Clinic,” Robert said in a statement.

“Beyond these criteria, the ATO has no influence on how the Universities establish or conduct each tax clinic.”

“I don’t think it’s the best design”

Under Labor’s clinic plan, which involves $150,000 in annual ongoing funding for each of 10 tax clinics, the ATO would play a much less direct role.

Shadow Assistant Treasurer Andrew Leigh tells SmartCompany a Labor government would liaise directly with universities to set up clinics, ensuring the ATO isn’t responsible for handing out grants.

“I don’t think it’s the best design,” Leigh says.

“They’re invariably going to be brought into conflict with the ATO.”

Leigh says Labor doesn’t “tear up contracts” but will evaluate how much on the program has been locked in by the Coalition if it wins the next election.

“Any organisation told by government they can have a one-off grant knows they’re in a very different position from receiving sustained, ongoing funding.”

Managing perceptions

Council of Small Businesses of Australia (COSBOA) chief executive Peter Strong has been supportive of tax clinics as a concept but says perceptions about the ATO’s involvement need to be managed.

“I believe the ATO is quite capable of doing this but it is the perception that has to be managed,” he tells SmartCompany.

“ASBFEO should either be doing this or heavily involved.”

Ombudsman Kate Carnell, who has also been supportive of the trial, says she would be concerned if the ATO was directing the way the trial was working.

“The ATO is a source of expertise in the tax space if that’s all they are used for that’s good, but if they actually started to become involved in starting to direct the trial and how it works, we would have a significant problem,” Carnell tells SmartCompany.

Carnell says her office was not asked to facilitate the trial but would have done so.

Step in the right direction

Carnell is broadly supportive of tax clinics, however, saying they are a good opportunity to provide small businesses with free advice and upskill accounting students in how SMEs operate.

Others SmartCompany spoke to said it was appropriate for the ATO to administer the clinic trial.

“It makes sense that the ATO administer the trial,” David McKellar of Allied Business Accountants tells SmartCompany.

“They will be best positioned to provide resources and points of contact within the ATO to the clinics to enable them to operate efficiently.”

Chartered Accountants ANZ’s Australian tax leader Michael Croker said his organisation is supportive of the clinics, but that a different funding mechanism should be considered.

“We look forward to having our members participate in the tax clinics and will be monitoring the progress of the clinics,” he tells SmartCompany.

“Should the clinics be successful, consideration should be given to providing funding through a mechanism other than the ATO to ensure that there is a perception of independence.”

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