Tax Ombudsman releases review on ATO bias risk

The most recent review into ATO controls for bias examined whether ATO’s current processes, guidance and training prevented bias or prejudice from influencing its decisions, particularly where they can significantly affect a person’s livelihood.

Tax Ombudsman Ruth Owen said while the ATO has improved how it makes decisions about taxpayers in recent years, the review indicated that there is more to be done, particularly in terms of explicitly recognising bias as a risk and strengthening controls so they are embedded in the ATO’s everyday processes.

Owen said she'd heard concerns from taxpayers and tax professionals that once a taxpayer is labelled as “bad” it is difficult for them to remove that label, and this could ultimately undermine public confidence in the ATO’s impartiality.

The review also found some of the ATO’s processes were not designed to counter bias, meaning staff were not explicitly prompted to consider the risk of bias in their decision-making and to retain an open mind in considering the facts.

“Guarding against bias is not a set-and-forget exercise; it requires ongoing vigilance, regular review, and a willingness to continually challenge assumptions as circumstances, data, and risks evolve,'' Owen said.

Owen said she was also concerned about the ATO breaking its own rules or processes because they believe they are acting in the public interest.

"The community expects the ATO to act impartially, lawfully, objectively and without bias or prejudice, regardless of a taxpayer’s past behaviour or history. The ATO’s decisions must always be based on evidence, applied fairly and regularly checked against the risk of bias.”

Owen warned that bias and prejudice can affect tax administration in many ways.

"Officers may pursue a pre-determined outcome, give too much weight to past conduct, or fail to consider current evidence with fresh eyes," she said.

“While bias exists in all organisations, the risk is heightened in teams regularly dealing with noncompliance or suspected wrongdoing,”Owen said.

The review made two main recommendations, which the ATO has agreed to.

One of the recommendations from the review was for the ATO to assure the community that its "controls against bias and prejudice in its compliance and enforcement actions are decision-making are working effectively".

The other recommendation was for the ATO to develop and implement a plan to address the identified gaps in bias controls.

"This includes strengthening explicit bias checks, training, assurance guidance, data and monitoring, and language used in disclosures," the review stated.

Owen said that strong bias controls were not about second-guessing ATO officers but about "protecting people from avoidable harm, supporting good decision-making and maintaining public confidence in the tax system".

The Tax Ombudsman also said she will be monitoring the ATO’s progress in responding to her recommendations.