The Australian Taxation Office will make it easier and simpler for small-business owners to access compensation for defective administration, after a review by former Attorney-General’s Department secretary Robert Cornall found the current scheme was ineffective.
Cornall was directed to look at how the ATO applies the Compensation for Detriment caused by Defective Administration Scheme (CDDA), from the perspective of small business, but his report also endorses long-standing general concerns about the “inherent limitations” of the policy as it applies to the whole of the Australian Public Service.
He observes that the cost of administrative stuff-ups is not always easy to quantify; sometimes “significant judgments” must be made. “The guidelines are sufficiently flexible to allow narrow or more generous interpretations of the same circumstances.”
Cornall says an opinion expressed by the Commonwealth Ombudsman’s office 20 years ago is just as relevant today: the CDDA scheme gives the public service so much wiggle room agencies can “exclude any request” they want, depending on how they interpret the guidelines. At the time, the federal government’s consumer advocacy office suggested agencies could pay compensation “more often than they do” if they saw the benefits of a more customer-focused approach.
Most CDDA claims are generated by the Department of Human Services, the Department of Home Affairs, and the ATO, which paid out $409,035 in compensation in 2017-18.
In Cornall’s view, the way the tax office runs the scheme is very important in terms of public perception, despite the relatively small amount of money involved. “Concerns for small business and adverse perceptions of the ATO’s administration of the CDDA Scheme have attracted constant attention.”
The report includes a long succession of previous reviews, inquiries and audits that have “consistently raised concerns about the Scheme and suggested improvements” over 20 years. While focusing on the ATO, Cornall points out there are deficiencies in the scheme as it applies across the whole government.
“The adverse perceptions of the CDDA Scheme identified throughout this Report and its limited use over the last five years indicate the Scheme is not working effectively for taxpayers in their dealings with the ATO. Some of the concerns arise from the inherent limitations of the Scheme. Other concerns involve the ATO’s procedures and implementation discussed in this Report.”
Finance Minister Mathias Cormann mostly agreed to 12 recommendations and said the ATO had 12 months to implement them.
Cormann promises CDDA claims will not be handled by officers who were involved in the relevant tax matters. “The most sensitive or complex matters can now be referred to independent reviewers outside the ATO,” he adds.
“For more serious cases, the investigation of a claim will be separated from the decision-making. These cases will also be escalated to senior levels for decision, with the Tax Commissioner himself deciding the outcomes where an independent reviewer is involved.
“For the most serious matters, there will be an opportunity for a complainant to comment on an investigator’s preliminary views before a final decision is made and an opportunity to request a review of a decision.”
The tax office will also lower the standard of proof required to accept claims of detriment to “plausibility” instead of the balance of probabilities, try to raise awareness of the scheme, update the guidance using “succinct everyday language” and simplify the claims process.
The government decided not to follow Cornall’s advice that the ATO place the CDDA function in its Law Design and Practice Group to ensure claims are independently managed.
Instead the government agreed with the ATO’s argument that the lawyers working in the office of its general counsel should handle the compensation claims, as they have “the greatest separation from original decision-makers and the most sensitivity to small business circumstances”.