ANAO urged to undertake audit into ATO tax debt reporting

CA ANZ has highlighted a number of audit areas it believes the Australian National Audit Office (ANAO) should investigate, following the release of ANAO's draft work program.

The professional body welcomed a number of the proposed audit areas in the draft work program, but has also called for an audit into the ATO's reporting of taxpayer debts.

"With the amount of outstanding tax debt exceeding $100 billion and 1 percent of taxpayers owing over 20 percent of the collectable tax debts, there is great public interest in obtaining a deep understanding of the composition of this tax debt and ATO debt collection procedures," CA ANZ Australian leader, tax, superannuation and financial services Susan Franks said.

"In addition to the proposed audit work program, it is recommended that the ANAO undertake a review of ATO debt reporting."

CA ANZ noted in its submission that while the ANAO has previously undertaken various audits covering the management of taxpayer debts, it wants the ANAO to consider an audit on the reporting of taxpayer debts.

Back in 2021, the Inspector-General of Taxation and the Taxation Ombudsman (IGTO) released a report exploring undisputed tax debts in Australia. The report made a number of recommendations to improve the reporting of debt by the Tax Office.

CA ANZ said the report considered in detail the substantial benefits that would arise for many stakeholders and the public administration of these debts from such improved reporting.

The IGTO report noted that while the ATO holds significant amounts of data, it only publishes a very small amount each year.

"Such reporting is framed at a high level and does not provide the level of granularity and insight needed to support policy considerations and community engagement and understanding," the IGTO report said.

"Accordingly, the IGTO considers that more detailed and frequent reporting of the ATO’s debt holdings and debt recovery efforts is warranted.”

The report recommended that the ATO enhance its reporting in relation to its debt book and debt recovery activities and develop metrics to measure debt collection performance.

It called for changes that would require the ATO to report all taxpayer debts, in aggregate, to parliament, that exceed a benchmark dollar value and that are outstanding for more than 100 days.

It also recommended improving segmentation and reporting of collectable debt by industry divisions and occupation codes to enable enhanced comparative analysis.

CA ANZ said it agreed with the IGTO that there would be a marked improvement in the administration of tax debts if the reporting of these debts was improved, both in frequency and in breadth and depth.

"Therefore, we would encourage the ANAO to add to its Draft Work Plan a review of ATO debt reporting, especially considering the benefits identified by the IGTO to public administration from such reporting," the accounting body said.

Among the performance audits proposed in the draft work program, CA ANZ said it greatly supported the proposed audit into developing and delivering digital identity reforms.

The professional body said the progress of the digital identity system implementation and its functionality was a critical area for its members ahead of the rollout of the expanded anti-money laundering and counter-terrorism financing (AML/CTF) regime. It is also important for client-to-agent linking.

"In July 2026, many of the 80,000 new reporting entities under AML/CTF regime will be CA ANZ members in public practice. These members will be required to identify and verify new clients and existing clients seeking designated services," the accounting body said.

"Stage 2 of the Digital Identity System, which is intended to provide Australians with a voluntary, secure, convenient and inclusive way of verifying their identity online and to remove the unnecessary collection of data, is expected to be a key tool in enabling our members to meet their statutory obligations under the AML/CTF regime."

CA ANZ said it would like to see this performance audit review the progress of stage 2 delivery of the Digital Identity System to ensure it is on track to enable private sector entities to participate by December 2026.

Under the client-to-agent linking system, CA ANZ said taxpayers must verify their identity to access the ATO’s online services so they can link themselves digitally to their tax agent to allow the agent to represent them in interactions with the Tax Office.

Currently, identification of a taxpayer is a six-step process.

"Taxpayers are required to have a smart phone, the ability to download apps, a personal email account and a passport/driver's license," the professional body said.

"Many Australians do not have all these items and can only complete the CAL process through multiple phone calls to the ATO. The administrative burden of CAL to both taxpayers and our members is substantial."

CA ANZ said a performance audit in this area could consider the use, or lack of use, of the digital identity reforms in relation to the ATO’s implementation of CAL.