Watchdog to review claims Australian tax office misused power to garnish wages

Tax

Inspector general says he wants to restore public confidence after claims of misuse and overreach

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The inspector general describes the claims of misuse of powers by the ATO as being of ‘serious concern’.
Photograph: The Age/Fairfax via Getty

The Australian Taxation Office’s use of extraordinary powers to garnish wages will be scrutinised by the federal watchdog following allegations of misuse and overreach.

The inspector general of taxation, Ali Noroozi, announced he would review the use of the powers in an attempt to “restore public confidence” in the tax office.

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Noroozi’s probe follows an investigation by Fairfax and the ABC’s Four Corners program, which showed how the heavy-handed use of the powers was causing significant financial hardship to taxpayers and small businesses.

The inspector general described the allegations as being of “serious concern”.

“The allegations about the ATO’s inappropriate use of garnishee notices is of serious concern and, if not addressed, can affect community confidence in the administration of the tax system,” Noroozi said in a statement.

“As the taxation ombudsman, I have a duty to independently investigate these allegations to restore public confidence.”

Last month the financial services minister, Kelly O’Dwyer, said she was “deeply concerned” about allegations raised in the ABC’s Four Corners program.

She had ordered an investigation by Treasury, and expected the inspector general and the small business ombudsman to cooperate.

“The minister has requested a thorough investigation of all allegations raised and the government will be responding once it has had an opportunity to consider that in detail,” a spokesman said at the time.

The inspector general investigated debt collection practices at the ATO in 2015. It found the ATO should have regard to taxpayers’ circumstances when recovering debt, and take proportionate action, Noroozi said.

He said debt-related issues continued to account for 20% of all complaints to his office. Problems with garnishee notices were among “the top three issues raised”.

“Cash flow is the lifeblood of small businesses and, if inappropriately disrupted, can have an unjustified and devastating effect on them,” he said. “My investigation will examine the accuracy of the allegations made, along with themes emerging from complaints to my office, with the aim of finding improvements where necessary and restoring confidence in the system.”

An ATO spokeswoman said it would cooperate fully with the investigation.

“We note the IGT has announced an investigation into the ATO’s use of garnishee notices and, as always, are committed to cooperating fully throughout the process,” she said.

The shadow assistant treasurer, Andrew Leigh, said the government should update the public on the status of the Treasury investigation.

“Genuine concerns have been raised and Labor will continue to ensure that a thorough investigation has been conducted,” Leigh said. “Labor also seeks clarification on whether the investigation addressed legitimate concerns that tax office staff have been left struggling as a result of staffing cuts by the Coalition.”

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