Background

In 2002–03, the Australian Taxation Office (ATO) collected revenue of $185 billion.¹ Selfassessment and a broad range of compliance strategies support collection of this revenue. The ATO relies upon risk management approaches and the integrity features built into the tax system to identify, cost effectively, instances where taxpayers fail to comply. The ATO's compliance strategies aim to optimise collections and instil confidence in the community that the taxation system is operating effectively.

The ATO uses financial transaction report (FTR) information provided by the Australian Transaction Reports and Analysis Centre (AUSTRAC) in its administration of the taxation system. FTR data is an important source of financial intelligence for the ATO. This data can be used by the ATO to:

• monitor money movements into and out of Australia;
• profile individuals, industries, occupations and geographical areas;
• identify potential high-risk transactions;
• identify and quantify compliance risks and develop compliance strategies; and
• assist in the selection of compliance cases for further investigation.

Audit approach

The Australian National Audit Office (ANAO) completed a performance audit of the ATO's use of AUSTRAC data in August 2000, titled The Australian Taxation Office's Use of AUSTRAC Data, Audit Report No.7 2000–01. It found that the ATO had used AUSTRAC data to achieve a significant improvement in the collection of taxation revenue. The ANAO considered that the ATO could build on this success by using AUSTRAC data more effectively at both the strategic and operational levels. The audit made six recommendations. The ATO agreed with all recommendations.

The objective of this follow-up performance audit was to assess the ATO's progress in implementing the recommendations of Audit Report No.7 2000–01, The Australian Taxation Office's Use of AUSTRAC Data. Follow-up performance audits are an important ANAO activity. They encourage agencies to act on audit recommendations and they provide feedback and assurance to the Parliament on actions taken by agencies.

Overall conclusion

The ANAO found that the ATO has implemented four of the recommendations and has made significant progress in implementing the other two. The ANAO considers that it is now timely for the ATO to finalise action on the recommendations that relate to its strategic partnership with AUSTRAC and the implementation of a cost effective performance management system. In particular, this would require the ATO to:

• develop a revised Memorandum of Understanding (MoU) between itself and AUSTRAC. This would improve the strategic partnership and governance arrangements between the two agencies; and
• implement a performance measurement framework that supports the effective monitoring and reporting of the ATO's use of AUSTRAC data. The framework would help improve the value and effective use of AUSTRAC data.

The ATO advised the ANAO, in October 2003, that the revised MoU is well advanced and it is planned to be in place by the end of the year. The performance measurement framework will form part of the MoU.

Summary of Agencies' responses

The ATO agreed with the outcomes of the report. With regard to the development of a revised MoU and performance measurement framework, the ATO advised that further progress has been made since the completion of the audit. A draft of the MoU, which includes an updated performance measurement framework, has been completed and is with the executive of both agencies for approval.

The proposed report was provided to AUSTRAC to clarify any matters of fact. AUSTRAC advised that in general it agreed with the report and considers that the relationship between itself and the ATO is now more effective.

Footnotes

1 Australian Taxation Office, Annual Report 2002–03, p. 43. This amount includes collections of $30.7 billion for the Goods and Services Tax and $21.6 billion for Excise and other indirect taxes.