Document Index Portfolio Budget Statements Australian Taxation Office

Section 2: Outcomes and Outputs Information

• Outcomes and Output Groups
• Outcome 1
• Measures in the 1999-2000 Budget
  • Australian Business Number -- Expense
    • Budget Measure Purpose
  • Pay-As-You-Go and New Withholding Arrangements -- Expense
    • Budget Measure Purpose
  • Fringe Benefits Tax Reform -- Expense
    • Budget Measure Purpose
  • Binding Oral Advice by the Australian Taxation Office -- Expense
    • Budget Measure Purpose
  • Business Taxation Reform -- Expense
    • Budget Measure Purpose
  • Business Taxation Reform -- Capital
    • Budget Measure Purpose
  • Savings Bonus for Older Australians -- Expense
    • Budget Measure Purpose
  • Equity Injection for A New Tax System Initiatives -- Capital
    • Budget Measure Purpose
  • Tax Reform and Australian Taxation Office Efficiencies -- Expense
    • Budget Measure Purpose
• Resources for Outcome 1
• Contribution of Outputs to Outcome 1
• Performance Information for Outcome 1
  • Competitive Tendering and Contracting

OUTCOMES AND OUTPUT GROUPS

The map on the following page shows the relationship between Government outcomes and the contributing outputs for the Australian Taxation Office. Financial detail for Outcome 1 by output appears in Table 2.2 while non-financial information for Outcome 1 appears in Table 2.3.

OUTCOME 1

There is a single Government outcome relating to the ATO which is `effectively managed and shaped systems that support and fund services for Australians and give effect to social and economic policy through the tax system'.

In this context, `effectively managed and shaped' means the degree to which the ATO manages and shapes:

• compliance;
• costs of compliance; and
• community confidence;

within the taxation, excise and superannuation systems while doing so as an efficient and adaptive organisation.

Table 2.1 shows the relationship between the programme structure for 1998-99 and the new outcome structure for the 1999-2000 Budget for Outcome 1.

Table 2.1: Relationship between Programme and Outcome Structure for Outcome 1

MEASURES IN THE 1999-2000 BUDGET

Australian Business Number -- Expense

Budget Measure Purpose

Funding has been provided to the ATO to meet the administrative costs associated with the introduction of the Australian Business Number (ABN).

The ABN is a key element of the Government's A New Tax System (ANTS) framework. The introduction of the ABN will allow businesses to have a single business identifier for all Commonwealth purposes. This will be more efficient for business and will also provide an important opportunity to improve compliance. The system will also be available to State, Territory and local government bodies to facilitate single entry point arrangements for all government dealings. As such, it will increase levels of service to the business community and reduce compliance costs for business in a whole of government environment.

The introduction of the ABN is integral to a number of ATO specific ANTS measures including GST registration and withholding trigger mechanism.

Pay-As-You-Go and New Withholding Arrangements -- Expense

Budget Measure Purpose

Funding has been provided to the ATO to meet the administrative costs associated with the introduction of the Pay-As-You-Go (PAYG) and new withholding arrangements.

As part of A New Tax System the Government will rationalise the current withholding tax arrangements into a single PAYG scheme. This will replace five existing payments and reporting systems (Pay As You Earn, Prescribed Payment System, Reportable Payment System and provisional tax and company instalments) with a single new comprehensive system, avoiding confusion, potential overlaps and gaps. The reforms will also involve changes to remittance dates.

PAYG will apply a common set of rules to all instalment and withholding events under the taxation law. Similarly, existing income reporting arrangements will be streamlined through the introduction of a simple transaction reporting system. The measure also seeks to ease the administrative costs for small business in complying with tax obligations by introducing one return (or single statement) and one payment, each quarter, for large numbers of taxpayers.

The new PAYG arrangements are designed to achieve several aims:

• more closely align income tax payments with current trading conditions or income flows for all entities;
• provide a single payment system for business (and investor) income tax;
• create a flexible system so that taxpayer obligations will be transparent and easily managed, paying income tax and collecting other taxes will become simpler and compliance costs will be reduced; and
• replace PAYE and PPS arrangements with a single withholding system giving businesses certainty about which payments are subject to withholding.

Fringe Benefits Tax Reform -- Expense

Budget Measure Purpose

Funding has been provided to the ATO to meet the administrative costs associated with the introduction of fringe benefits tax (FBT) reforms.

The four elements of the Government's announced FBT reforms are designed to make the tax system fairer for all Australians:

• improving income tests for surcharges and government benefits by requiring employers, from the 1999-2000 FBT year of income, to identify on group certificates the grossed-up taxable value of an employee's fringe benefits where the taxable value of the benefits exceeds $1,000;
• stopping overuse of the concessional FBT treatment of public benevolent institutions and certain other not for profit organisations. This will be done by limiting, for each employee, the value of fringe benefits eligible for concessional treatment to $17,000 of grossed up taxable value per employee of such organisations. Any amount above this limit will be subject to the normal FBT treatment;
• extending FBT to the benefits in excess of $1,000 a year provided by companies to their shareholders or by trustees to trust beneficiaries, where the benefits are not taxed currently; and
• extending the FBT exemption for remote area housing provided by mining industry employers to their employees. This provides the mining industry with the same treatment that applies currently to primary producers.

The first of these elements took effect from 1 April 1999. The last three elements will take effect from the 2000-01 FBT year.

Binding Oral Advice by the Australian Taxation Office -- Expense

Budget Measure Purpose

The Government has decided that oral advice provided by the ATO to taxpayers with simple tax affairs should be binding on the ATO. Funding will be provided to the ATO to meet the additional administrative costs of this measure.

This measure will involve:

• drafting legislation to ensure taxpayers with simple tax affairs can rely on oral advice received from the ATO;
• the introduction of business support tools for staff providing binding oral advice, including the ability to record details of the advice given; and
• formulation and implementation of a communication and education strategy to ensure taxpayers and ATO staff are aware of their obligations. This will include specific publications, brochures and other marketing-related products.

Business Taxation Reform -- Expense

Budget Measure Purpose

Funding has been provided to the ATO to meet the administrative costs of business taxation reform measures.

The Government has initiated a review of the current arrangements for the taxation of business entities by the Review of Business Taxation (RBT), led by Mr John Ralph AO. The committee is due to provide recommendations to the Government by 30 June 1999.

The Review is being conducted consistently with the strategy for business tax reform set out in A New Tax System including the development of a new framework for the taxation of business entities.

The resources identified in this measure are interim estimates until the Government makes its decisions following receipt of the final recommendations of the Review by 30 June 1999.

Business Taxation Reform -- Capital

Budget Measure Purpose

The Government's reform of business taxation will require the establishment of a legislative basis and supporting administrative systems. The equity injection provided for under this measure will enable the ATO to undertake the capital expenditure necessary to develop this capability.

Savings Bonus for Older Australians -- Expense

Budget Measure Purpose

Funding has been provided to the ATO to meet the administrative costs associated with the provision of a savings bonus as part of A New Tax System.

The Government has decided to pay a one off bonus to older Australians to compensate them for the impact of the GST on their savings.

The bonus is to be paid on or after 1 July 2000. A claim for a bonus must be made by 30 June 2001. Three different agencies -- the ATO, the Department of Family and Community Services and the Department of Veterans' Affairs -- will decide on eligibility to a bonus for their respective client groups. ATO clients are those members of the community who have to lodge tax returns for the year ending 30 June 2000. Features of the lump sum payment are as follows:

• a tax free bonus up to $1,000 for those Australian residents aged 60 years or more on 1 July 2000, who have any savings and investment income, and whose total income in 1998-99 or 1999-2000 is less than $30,000;
• an additional untaxed bonus of up to $2,000 for self funded retirees of age pension age; and
• these bonuses are eligible to be paid after 30 June 2000.

Equity Injection for A New Tax System Initiatives -- Capital

Budget Measure Purpose

The Government's various reform initiatives under A New Tax System will require the establishment of a legislative basis and supporting administrative systems. These systems will involve the creation of major infrastructure items (eg systems for new withholding tax arrangements, Australian Business Number register). The equity injection provided for under this measure will enable the ATO to undertake the capital expenditure necessary to develop this capability.

Tax Reform and Australian Taxation Office Efficiencies -- Expense

Budget Measure Purpose

The introduction of the Government's tax reform package will result in administrative savings in the running costs of the ATO. This will be achieved through:

• phasing out the existing Wholesale Sales Tax system; and
• the rationalisation of five existing reporting and withholding systems into a single Pay As You Go system.

In addition, the ATO has recently undertaken several benchmarking and contestability studies in relation to its existing operations. Efficiencies are expected in areas such as auditing, provision of technical advice and data capture and management.

Additional savings expected from the recently announced outsourcing of the ATO Information Technology infrastructure are also included in this measure.

RESOURCES FOR OUTCOME 1

Table 2.2 shows how the 1998-99 appropriation and programming structure relates to total resourcing for Outcome 1.

Table 2.2: Total Resources for Outcome 1

Notes: 1998-99 figures reflect full year impact of changed administrative arrangements effective from 20 October 1998 onwards, ie exclude Child Support Agency and include Excise functions.

Significant increase in ATO costs from 1998-99 to 1999-2000 is due to GST administration costs.

$16 million difference between cash and accrual figures for `Revenue from Other Sources' in 1998-99 relates to cost recovery of services provided to CSA.

The Australian Valuation Office, formerly reported under the Commercial Activities Fund, is included in Output 1.1.4.

1. See Table 2.1 for details.

CONTRIBUTION OF OUTPUTS TO OUTCOME 1

Justification for the choice of the outputs to achieve Outcome 1 is described in Table 2.3 below. The table provides information on the strategies chosen to deliver Outcome 1, and shows the links between the outputs and the outcome.

There are four distinct outputs that contribute to Outcome 1:

• Contribution to policy advice and legislation supports the formulation of effective taxation policy and the reflection of that policy in legislation and includes provision of Ministerial and Parliamentary Services;
  
• Revenue contributes to effective taxation arrangements through managing and shaping taxation systems that collect taxation revenue effectively and efficiently which, in turn, maintains community confidence in the taxation system;
  
• Transfers effect the movement of money to support government redistribution and savings initiatives such as Retirement Income and Family Initiatives; and
  
• Cross Agency Support provides services, such as data matching and the provision of statistical information to other agencies (not involving moneys).

PERFORMANCE INFORMATION FOR OUTCOME 1

Competitive Tendering and Contracting

The ATO has undertaken a Competitive Tendering and Contracting process across a wide range of its activities. As a result, savings anticipated from the outsourcing of the ATO's information technology infrastructure have been factored into the price that Government is paying for ATO outputs. Anticipated savings from the comparison of other ATO functions with external benchmarks are also factored into the output prices. These other functions include data capture and management, provision of technical advice and audit.