Introduction

1. In July 1999, A New Tax System (Australian Business Number) Act 1999 (the ABN Act) introduced a new single business identifier—the Australian Business Number (ABN)—as part of the (then) Government’s Tax Reform Package that established the Goods and Services Tax (GST).¹ The ABN was to be, among other things, the public registration number for the GST. The legislation also provided for the establishment of the Australian Business Register (ABR), a consolidated database of the information provided by businesses when they register for an ABN; and for the appointment of the Commissioner of Taxation as the Registrar of the ABR. The Australian Taxation Office (ATO) would create and maintain the ABR.

2. While the immediate priority in establishing ABNs was to support the implementation of the GST and tax compliance, the longer-term policy objectives of the ABN Act were to:²:

introduce a new unique business identifier for all Commonwealth purposes to facilitate business being able to meet its regulatory obligations and access information and assistance through the business entry point to government.

To achieve this, the ABR would be available to ‘State, Territory, and local government bodies to facilitate single entry point arrangements for all government dealings.³

3. As at 7 May 2014, the ABR held information relating to 10.8 million ABNs⁴, of which 7.7 million were active. Some of this information is publicly available through the ABNLookup service⁵ (managed by the Department of Industry (Industry) on behalf of the Registrar), while other non-public information can be provided to local, state, territory and Australian government agencies that enter into a partnership agreement with the Registrar. The ABR is managed through the ATO’s information technology (IT) systems, and ABR data is used by the ATO in the administration of the tax and superannuation systems.

4. In recent years, the ATO has received additional funding to improve aspects of the operation of the ABR, particularly the accuracy and currency of the information held on the register.⁶ Concerns about ABR data integrity have featured prominently in ATO management reports, and in the annual reports of the Registrar, undermining the operation of the ABR in providing the ‘single source of truth for whole-of-government business registrations’⁷, including for tax administration purposes.

5. The ABR is one of several initiatives aimed at making it easier for businesses to deal with government, and to reduce the number of government registration and reporting requirements. Two of the other initiatives, AUSkey and the Standard Business Reporting (SBR) program, were included in the Registrar’s responsibilities in 2010:

• AUSkey is an electronic ‘key’ or common authentication system that enables secure access to the ATO’s services, including the Business Portal⁸, and is promoted for use by other government agencies to support secure online service delivery; and
• SBR is an initiative to reduce the business reporting burden, focusing on standardising financial reporting from business to government. Under SBR, Australian businesses are able to use SBR-enabled software to prepare and lodge key government forms, and provide financial information, directly to the agencies participating in the SBR program.

6. Other initiatives with a similar or related purpose to that of the ABR are the:

• Business Names Register, established in May 2012 as part of the national business names registration scheme and administered by the Australian Securities and Investments Commission (ASIC). The Business Names Register replaced eight state and territory registers, allowing businesses to register names with a single national register;
• Australian Business Account, which is administered by Industry and has been available since July 2011 to assist businesses to manage their ongoing transactions with all levels of government; and
• Australian Business Licence and Information Service, also administered by Industry and available since August 2012, is a free online service that provides business licence and information from all levels of government.

Previous audits and reviews

7. The ANAO has conducted two previous audits of the ABR.⁹ Recommendations in both audits were aimed at: achieving the register’s whole-of-government objectives; improving the governance framework for the ABR; and maintaining the integrity of ABR data. The ATO advised that the recommendations from these audits had been fully implemented by March 2009, with additional measures to improve the administration of the ABR implemented since 2010.

8. Notwithstanding the work undertaken by the ATO in recent years, an external review commissioned by the ATO in September 2013 made wide-ranging recommendations for the administration of the whole-of-government programs under the responsibility of the Registrar, including the organisation and governance of these programs; and the corporate and IT services supporting them. The recommendations in the review are aimed at supporting the ABR (in conjunction with AUSkey and the SBR program) to meet the policy intent of the programs.

9. Other reviews commissioned in 2013–14 included: a Gateway Review¹⁰ commissioned by the (then) Department of Finance and Deregulation on the development and implementation of the national business names registration scheme; and a review by Industry of the Australian Business Account. These reviews drew attention to shortcomings in the development and implementation of these initiatives, and concluded that the aims of the initiatives, to streamline services to business and reduce reporting and registration requirements, including through linkages with the ABR, had not been met.

Audit objective, criteria and scope

10. The objective of the audit was to assess the effectiveness of the administration of the ABR. To form a conclusion against this objective, the ANAO adopted the following high level criteria:

• appropriate and effective governance and administrative arrangements were in place to support the ABR in achieving its objectives, both within the ATO and across other agencies that administer, or had a key role in business registrations that interact with, the ABR—particularly Industry and ASIC;
• strategies were developed to encourage broader use of the ABN and ABR in support of whole-of-government initiatives, including to improve business-to-government dealings; and
• systems and processes were developed to effectively manage data and provide assurance of the integrity of the information held on the ABR, including that ABNs were only issued to eligible businesses.

11. The ANAO designated the ATO, ASIC and Industry as the agencies subject to this audit, and sought input from the Department of the Treasury (the Treasury) and the Department of the Prime Minister and Cabinet, in relation to the Government’s deregulation agenda.¹¹

Overall conclusion

12. An ABN was intended to be a unique business identifier, used to support the implementation of the GST, and more broadly to make it easier for businesses to deal with all levels of government. In establishing the ABR, the whole-of-government objectives were: to allow business to comply with regulatory requirements; to have a single entry point or as few entry points as possible, for business to gain information and assistance from all government agencies; and to allow business to notify a change of details to one government agency that would be shared across other agencies. The ATO created and is responsible for maintaining the ABR, and the Commissioner of Taxation is the Registrar of the ABR, although with a separate and distinct role. While the operation of the ABR is dependent on the ATO’s administrative and information technology systems, meeting whole-of-government objectives requires coordination with other key agencies, particularly ASIC and Industry, with oversight by the Treasury. In 2012–13, the ATO reported expenditure of $105 million on the ABR, accounting for approximately three per cent of the ATO’s total expenditure of $3.4 billion.¹²

13. Since its inception in July 2000, a number of reviews, including an ANAO audit in 2007–08¹³, identified scope for the ABR to better meet its whole-of-government objectives. This largely required: an increased focus on the broader objectives of the ABR, beyond the ATO’s use of ABR data for tax administration purposes; improved visibility of the ABR within the ATO’s administrative systems and structures; and better delineation of the roles and responsibilities of the Commissioner and of the Registrar. In response, initiatives implemented by the ATO from 2008–09 included the establishment of an ABR Advisory Board in 2009, and the creation of the new Business Reporting and Registration business line in 2010, to administer the ABR with other whole-of-government programs under the responsibility of the Registrar.¹⁴

14. The use and applications of ABNs and ABR data, for the purposes of administering the GST and broader tax and administrative systems, are well established. However, despite the implementation of the above mentioned initiatives commencing from 2008–09, there has been limited progress in achieving whole-of-government objectives for the ABR. There also continues to be acknowledged problems with the integrity of ABR data, particularly regarding the number of entities on the register and incomplete and inaccurate entity information on the ABR. These shortcomings undermine the operation of the ABR as providing the ‘single source of truth for whole-of-government business registrations’. Accordingly, some 14 years after establishing the ABR, little real progress has been made by the ATO, in conjunction with ASIC, Industry and the Treasury, in achieving the goal of making it easier for business to deal with government through reducing business reporting and registration requirements and entry points to government.

15. Rather than being the unique identifier for business to meet regulatory obligations, and to reduce business registration requirements and entry points to government as intended when introduced in 1999, a number of initiatives with similar purposes have subsequently been established.¹⁵ As potential efficiencies provided by these schemes have not been achieved, businesses are required to provide the same information to different agencies, or different parts of the same agency.

16. More also needs to be done to strengthen the operation of the ABR. Prior to 2012–13 the ATO had not developed a formal ABR compliance strategy, and had undertaken only limited assurance activity to assess if ABN holders were compliant with the requirements for registering or maintaining their ABN status. The ATO has subsequently used specific funding provided by the 2012 and 2013 Commonwealth Budgets to improve the accuracy and completeness of ABR data, in order to increase confidence in the ABN as a trusted identifier of Australian businesses. However, the ATO does not expect the benefits of these measures to improve the integrity of ABR data to be fully achieved until 2014–15. There is also scope to strengthen the planning, reporting and resource allocation supporting the ABR to enable appropriate differentiation from the ATO’s administration of the tax and superannuation systems, and to provide the Registrar with sufficient knowledge of the strategies, operations and outcomes of the ABR.

17. Against this background, the Deputy Registrar commissioned a review of the operations and governance of the Business Reporting and Registration business line in September 2013, which found significant shortcomings in the administration of the ABR and other whole-of-government programs administered by the business line.¹⁶ While implementation of the recommendations of this review has the potential to improve the administration of these programs, the Government’s deregulation agenda may provide a platform for broader review of the entry points to government and the efficient and effective delivery of business services.¹⁷ In any event, effective implementation of measures to make it easier for business to deal with government requires: a clear focus on the objectives for the ABR and initiatives with a similar purpose; greater alignment between the ATO, ASIC, Industry as well as the Treasury portfolio department on implementation strategies; and more open communication between these key agencies. Without a cohesive approach and a strong focus on the business user, it is likely that limited progress will continue to be made in achieving the whole-of-government objectives of the ABR, and related services.

18. The ANAO has made one recommendation aimed at better integrating the ABR and similar or related initiatives to make it easier for business to deal with government.

Key findings by chapter

Management Arrangements (Chapter 2)

19. Commencing in 2007–08, the ATO has implemented several measures to restructure the administration of the ABR, in response to feedback from internal and external stakeholders that the operations of the ABR were not sufficiently distinct from the core role of the ATO. Such differentiation would facilitate appropriate focus on the whole-of-government objectives of the register.

20. Notwithstanding these changes, essential corporate functions, including business and strategic planning, were not further developed. Performance monitoring and reporting for the ABR also reflected ATO management activities rather than achievements against the broader whole-of-government objectives to make it easier for business to deal with government, and to reduce reporting and registration requirements. The ATO advised that new ABR performance indicators are being developed to support a new strategic statement for the ABR that will be included in the ATO’s 2014–15 Portfolio Budget Statements.

21. Reporting on the ABR is included in management reports prepared for the ATO Executive. However, these reports provide only high level and limited information on the operations of the ABR. There are no separate ABR reports prepared for the Commissioner, in his role as Registrar. The limited extent of management reporting raises concerns that the Commissioner, in his role as Registrar, is not being kept adequately informed of the operations of the ABR. While the ATO advised that the Registrar is engaged with the ABR in other ways, including through the ABR Advisory Board, reporting mechanisms for the ABR to the Registrar could be strengthened.

22. The revised administrative arrangements, implemented over several years, have not achieved the aim of supporting the broader whole-of-government objectives of the ABR. Some three years after the Business Reporting and Registration business line was established, an external review of its operating and governance arrangements, conducted in September 2013, made wide-ranging recommendations for change. As at May 2014, there was no evidence that the Registrar or ATO Executive had considered the findings of the review or endorsed any of its recommendations, beyond the work being undertaken for the new ABR strategic statement and the ATO’s 2014–15 Portfolio Budget Statements.

IT Systems Supporting the ABR (Chapter 3)

23. The development and maintenance of the ABR in the ATO’s systems was designed to support the implementation of the GST and ATO data matching and compliance activities. ABR data is currently contained in, and flows between, five ATO systems that are used for different purposes and by different users, including to support the administration of the Business Names Register administered by ASIC, and to populate the ABNLookup service, administered by Industry. The ABR data held on these systems is updated at different times, including to reflect new or cancelled ABNs or changes to the information of the entity associated with an ABN.

24. Modifications to the IT systems supporting the ABR, being progressively implemented from February 2014 (with full transition taking approximately 12 months), will allow Business Reporting and Registration business line staff to source ABR data from a new system that is updated on a daily basis, providing better quality information that can be sent to ABR partner agencies and used to support ABR operations. However, a one-off reconciliation undertaken as part of the implementation of the new arrangements, showed thousands of discrepancies between two of the ATO’s systems holding ABR data. These discrepancies were not subsequently corrected. The ATO is considering the option of conducting regular reconciliations to identify discrepancies in versions of ABR data held on its various systems. However, this would only be of value if, unlike the initial reconciliation, the results were acted upon. The ATO has advised that a major systems release scheduled for December 2014 will change aspects of the management of ABR data in the ATO systems.

25. The ABR IT solution is fragmented and its complexity has created problems for the whole-of-government function of the ABR. No internal service level agreements or standards support the IT arrangements for the ABR, or the availability of services or currency of data for ABR stakeholders. ASIC has reported some 1200 hours of (mainly planned) outages of the ATO’s systems between March and December 2013, impacting on the issuing of new registered business names. There has also been limited planning for the management and hosting of the ABNLookup service in the longer term, although the ATO advised in April 2014 that different options were being considered.

26. Requests for changes or improvements to the functions of the register are considered in the allocation of funds and resources to meet the ATO’s objectives and IT requirements. However, as there is already a significant backlog of IT projects relating to the ATO’s revenue collection and other responsibilities¹⁸, and in light of potential budget reductions, internal funding bids for further system changes to the ABR may face difficulty in gaining priority and approval in the near term.

Data Integrity (Chapter 4)

27. Funding allocated to the ATO in the 2012 and 2013 Commonwealth budgets is supporting the development of a framework for measuring and assuring the integrity of the data held on the register, including a risk and intelligence capability in the Business Reporting and Registration business line, and strengthening controls over the processing of ABN applications. These measures are expected to mitigate the severe risks currently associated with the ABR, that: entities do not meet the ABN entitlement criteria; and entity information held on the ABR is incomplete or inaccurate.

28. Prior to 2012, the ATO had no structured processes for measuring or managing the integrity of ABR data. It has relied on annual surveys of ABN holders that provided limited insight as to the accuracy and currency of the ABN information held on the register. The results of the 18 surveys undertaken to date have been similar over the years, although the Registrar’s annual reports have noted significant shortcomings in the survey methodology, including a low response rate amongst the ABN holders contacted. A new approach and methodology have been designed for the 2014–15 annual survey of ABN holders.

29. Improvements in the quality of ABR data may encourage greater uptake of ABR services by partner agencies. The Registrar has processes in place to manage the non-public information provided to them.¹⁹ The current process nominates an ‘entrusted person’ (under the ABN Act) to take responsibility for the management and use of ABR data within the agency. While there is no legislative requirement for the Registrar to monitor the use of ABR data by entrusted persons, there is potential for loss of community confidence in the ABR and the Registrar should the protected information be compromised or inappropriately disclosed. The ATO’s arrangements for access to and use of non-public data are designed to limit the administrative and compliance burden on partner agencies and ATO staff, and rely on the internal controls of partner agencies. To strengthen the assurance, commencing in 2014 the ATO intends to conduct a compliance review of 15 randomly selected partner agencies each year, based on a pilot study of six agencies (two from each tier of government) conducted the previous year.

30. Since inception of the ABR to February 2014, the ATO has suppressed an ABN holder’s information on approximately 1170 occasions (often to protect the location of the individual). In 2012, for unknown reasons, the ATO ceased advising partner agencies when these suppressions occurred. While new data provided to partner agencies will not include suppressed information, this information may already be in agencies’ databases, obtained from earlier ABR data extracts. There would be merit in the ATO reviewing the administration of ABNs where information has been suppressed, to provide confidence that any risk associated with ABR partner agencies not being notified has been appropriately managed.

Whole-of-Government Initiatives (Chapter 5)

31. As previously noted, the ABN was intended to be a unique business identifier used to support the implementation of the GST, and more broadly to make it easier for businesses to deal with government. The ABR has not been developed as the sole business entry point to government, nor is there evidence that it has reduced the number of entry points, either directly through linkages with other government agencies; or indirectly by facilitating agencies’ use of ABR data. Additionally, uncertainty about the level of integrity of ABR data undermines the use of ABNs as trusted identifiers of Australian businesses, although work underway through new policy funding aims to improve the quality of ABR data.

32. To date, the success of the ABR has been measured through quantitative indicators, including those that reflect the number of ABR partner agencies, the number of times ABR data is provided to those agencies, and the volume of searches undertaken on the ABNLookup service. While these indicators have trended up in recent years, they largely reflect ABR management and administrative activities, with little or no reference as to how the ABR is meeting its objectives as a whole-of-government service to the business community.

33. Similarly, potential benefits associated with the national Business Names Register have not been fully achieved. In particular, the joint application process for an ABN and a business name still requires work; and improved transparency of business ownership through the use of registered business names has been delayed until 2018. Further, while businesses can now access comprehensive licensing information through the Australian Business Licence and Information Service website, the benefits to businesses that could be delivered through an Australian Business Account (ABA) have not been realised. These benefits include the potential to engage with all levels of government through a single entry point for business. However, take up of the ABA has been low, with an evaluation of the initiative finding that a significant contributing factor was the failure to integrate the ABA with the ABR and Business Names Register.

34. In early 2014, the government’s deregulation agenda prompted renewed discussion on many aspects of governments’ engagement with, and services to, the business community. A discussion paper released on 30 April 2014, The Small Business and Family Enterprise Ombudsman, provides details of ‘the Government’s vision of establishing a single entry point for small businesses, providing an easy way to find out about services and programs’. Public commentary has also included the Australian Securities and Investments Commission Chairman’s view that there may be merit in selling ASIC’s registry functions to a commercial entity. Most recently, the Commission of Audit recommended that ASIC’s registry functions transfer to the ATO, which already has registry responsibilities, to streamline business reporting requirements. Achieving greater whole-of-government coordination of services to business requires the ATO, ASIC, Industry and the Treasury to work collaboratively, in consultation with the Prime Minister and Cabinet department through the deregulation agenda, to review existing entry points to government, with a focus on the experience of businesses using the services provided.

Summary of agencies’ responses

35. The following summary comments to the audit report were provided by the ATO, ASIC, and Industry. The agencies’ full responses are included at Appendix 1.

Australian Taxation Office

The ATO welcomes this review and the recommendation made.

Since the development of the Business Reporting and Registration business line in 2010, the whole of government initiatives (Australian Business Register, Standard Business Reporting and AUSkey) that come under the umbrella of the Australian Business Register (ABR) program have continued to evolve.

As noted in the report, the two Federal Budget initiatives, Towards a Better Business Future and Reducing Business Costs, are helping to improve the integrity of the information held on the ABR, as well as making it easier for business to register for an Australian Business Number (ABN) and meet their reporting obligations to government.

The 2014 vision for the ABR program is to “Contribute to improving the wellbeing of the Australian people through enhanced business productivity by:

1. Reducing the administrative cost to business of complying with government regulation,

2. Influencing government policy and implementation, through advocating the use of services, technologies and processes to minimise the administrative impact on business, and

3. Encouraging the adoption of new practices by businesses to reduce operating costs.

The ATO recognises that the report identifies some opportunities for improvements to the ABR. We will explore these opportunities to identify where further changes can be made to the ABR in the future.

Australian Securities and Investments Commission

ASIC welcomed the opportunity to contribute to the ANAO performance audit on the administration of the Australian Business Register and strongly agrees with its recommendation.

Whilst acknowledging more can be done to reduce entry points to government and streamline registration and reporting requirements for business, the national Business Names Register has reduced the entry points to government by consolidating eight State and Territory registers into a single national online register.

Importantly, it has delivered cost savings to business. On its second anniversary on 28 May 2014, the national Business Names Register has saved business $76.8 million in reduced fees to register or renew a business name.

Department of Industry

The Department of Industry acknowledges the contribution the ANAO audit report makes to support and improve whole-of-government interactions with business.

The department is well positioned to deliver on the government’s deregulation agenda. Work is underway on the implementation of a Single Business Service delivery model to simplify the way businesses access government information and services. The new initiative, to commence from 1 July 2014, will focus on excellence in program design, delivery and above all, customer service. It will showcase the department’s capacity to provide a Single Business Service delivery mechanism for government.

The department supports the delivery of the Australian Business Register (ABR) by hosting the ABNLookup and SuperfundLookup services, which can be accessed directly on the web, or through links provided in the business.gov.au website.

The Department is responsible for the administration of other initiatives including the ‘Australian Business Account’, ‘Australian Business and Licence Information Service’ and also VANguard.

VANguard is a whole of government program that delivers cost-effective and reliable authentication services to secure business to government (B2G) and government to government (G2G) online transactions. VANguard provides a simple way for government agencies to use the AUSkey as a credential for their own online channels. VANguard authenticates every VANguard transaction to government including those for the ATO. Over 40 million AUSkey authentication transactions were processed by VANguard in the 2013/14 financial year on behalf of over 40 agencies.

The department is committed to continue to work with other agencies and stakeholders to reform and streamline business interactions with government.

Recommendation

Footnotes

[1]A New Tax System (Goods and Services Tax) Act 1999.

[2]A New Tax System (Goods and Services Tax) Act 1999 Explanatory Memorandum, p. 2.

[3]A New Tax System (Australian Business Number) Bill 1998 Explanatory Memorandum.

[4] The total includes the details of active, inactive and cancelled ABNs. Inactive ABNs are maintained on the register as they may be re-activated by the entity, and data in relation to cancelled ABNs provides useful statistical information.

[5] The ABNLookup is a web-based service that holds information relating to ABN holders. The service may be used by the public for a variety of purposes, for example: allowing businesses and consumers to verify the identity of entities they deal with, including their GST status; and for charities and non-profit organisations, their government endorsed status.

[6] Additional funding was provided through the: Towards a Better Business Future program that provides $68.5 million over four years, 2012–13 to 2015–16, to improve the operation of the ABR and the quality and currency of its data; and Reducing Business Costs program that provides $80.2 million over four years, 2013–14 to 2016–17, to strengthen upfront checks for issuing an ABN and for related purposes.

[7] Australian Government, Report of the Registrar 2012–13, p. 17.

[8] The ATO Business Portal is a secure website providing businesses with access to ATO online services.

[9] ANAO, Audit Report No. 53, 2002–03, Administration of Australian Business Number Registrations.

ANAO, Audit Report No. 15, 2007–08, Administration of Australian Business Number Registrations Follow-up Audit.

[10] Gateway reviews involve short, intensive reviews at critical points in the project’s lifecycle by a team of reviewers not associated with the project. This provides an arm's length assessment of the project against its specified objectives, and an early identification of areas requiring corrective action.

[11] In January 2014, the Australian Government implemented a deregulation agenda with a net red-tape reduction target of at least $1 billion per annum, divided among portfolios.

[12] Australian Government, Report of the Australian Business Registrar 2012–13.

[13] ANAO, Audit Report No. 15, 2007–08, Administration of Australian Business Number Registrations Follow-up Audit.

[14] Expansion of the Registrar’s responsibilities include Standard Business Reporting and AUSkey.

[15] The Business Names Register has been administered by ASIC since May 2012, and the Australian Business Account and the Australian Business Licence and Information Service administered by Industry since May 2011 and July 2013 respectively.

[16] The review made six wide-ranging recommendations for change relating to four key themes: strategic; organisation and governance; processes and enablers; and people and services.

[17] Public discussion following the implementation of the government’s deregulation agenda in January 2014 has included potential changes to ASIC’s registry functions. Further, a recent discussion paper details ‘the Government’s vision of establishing a single entry point for small businesses, providing an easy way to find out about services and programs’. Minister for Small Business, media release, Government looks to make life easier for small business, 30 April 2014.

[18] Australian Public Service Commission, ATO Capability Review, May 2013, p. 9.

[19] The ABN Act specifies the information held on the ABR that the Registrar can make publicly available, and that which can only be released to government agencies that enter into a partnership arrangement for access to additional information that is not publicly available.