8 July 2014

Inspector-General of Taxation report into the Australian Taxation Office’s administration of penalties

Today we release the Inspector-General of Taxation's Review into the Australian Taxation Offices administration of penalties.

The review examines the effectiveness of the Australian Taxation Office's penalties regime to taxpayer compliance.

The objective of the Australian Taxation Office's penalties regime is to foster voluntary compliance. The Inspector-General of Taxation found that this objective may be hindered by:

  • categories of taxpayer behaviours being too broad;
  • the inability to receive interest on money paid for unsustained penalties; and
  • the broad application of false or misleading statement penalties where no tax shortfall occurs.

To improve the penalties regime, the Inspector-General of Taxation made ten recommendations.

The Australian Taxation Office agrees with nine recommendations in whole, in part or in principle.

The remaining recommendation is relevant for Government. This recommendation, suggests that we consider whether:

  • the current penalties regime could benefit from more categories to treat taxpayers according to their behaviour;
  • penalties are appropriately aligned to factors that influence taxpayer behaviours; and
  • taxpayers should be compensated for the time-value of money paid on unsustained penalties.

Given interaction between the penalties regime and the broader system of taxation administration, the Government will consider these issues once the Tax White Paper process has been finalised.

The Inspector-General's report, including the Australian Taxation Office's response, is available at www.igt.gov.au.