Federal Government launches ATO system upgrade review

Inspector General of Taxation to evaluate the performance of the ATO's income tax IT system upgrade and broader Change Program

The Federal Government has launched a review of the ATO's Change Program

The Federal Government has launched a review of the ATO's Change Program

The Federal Government has called on the Inspector-General of Taxation to review the Australian Tax Office's (ATO) income tax IT system upgrade in the wake of public complaints over processing delays.

In a statement, assistant treasurer, Senator Nick Sherry, said he wanted the review of the Change Program - the ATO's name for its wide-ranging IT reform program which aims to migrate the agency away from more than 180 legacy and paper-based systems to a single, integrated core IT system - to cover off all bases.

This includes the impact the Change Program has had on taxpayers and their representatives, if internal effects have been felt, and whether resources have been allocated appropriately.

"I have asked the Inspector-General to consider engaging relevant technical expertise to assist him with the review and to consult broadly with the community and other relevant stakeholders," Shery said in a statement.

"I've required that these consultations include discussions with the key private sector project providers and all third party assurance assessors involved in the project.

"An appropriate timeline for the completion of the review will be decided in conjunction with the Inspector General and will be made public by the Inspector General in due course."

Just a few days ago the ATO defended itself on the state of stockpiled tax returns arguing its upgraded systems are working well and millions of tax returns have not been delayed.

In a statement issued by Second Commissioner, David Butler, the ATO said of the 11 million returns it process each year, it was estimated that the ATO had just 100,000 on hand over 30 days old.

The ATO also said 140,000 delayed cheques were currently being printed and would be with taxpayers by the end of next week.

“The new system is working well,” the statement reads. “We have already sent just over 1.1 million notices of assessment to individuals, of which 684,000 were refunds since we recommenced processing in mid-February.”

The ATO also claimed that some tax returns had been delayed due to a tax debt owing, an obligation due to the Child Support Agency and/or Centrelink or errors in a return.

Butler added that ATO staff were putting in an “extraordinary effort” to minimise the impacts of any delays on the community.

That change in tack was stark contrast to a statement issued in late March which apologised for delays in sending out 2008-09 income tax return notices of assessment as a result of an upgrade to its IT systems.

In January that ATO announced it would go ahead with the upgrade of its IT systems and followed up with reports of smooth sailing one week into the upgrade.

The upgrade had previously been described by Butler as the biggest in the agency's history. It decommissioned the National Taxpayer System (NTS), which had been in use since the early 1970s.

In its place, a new income tax processing system is supposed to extend the ATO's "integrated core processing (ICP) system to income tax and higher education loan accounts (HELA)".

At the time the upgrade was about to start, senior industry analyst and former ATO employee, Kevin Noonan, told <i>Computerworld</i> the ATO had to "bite the bullet and proceed".

"The old income tax system, NTS, dates back to days when the computers they had didn't even do decimal arithmetic," Noonan said. "They have been converted a number of times and, under maintenance, continue to be modernised, but the underlying structure and processes date back to those early days.

"There is a high probability that there are processes in those systems that are not well understood. The tax office is right in taking a very cautious approach because this is an enormous change for them. In order to set themselves up for change in the future it is just not practical to have a system that has unknown pieces in it and a legacy that goes back so far."

Since its inception the Change Program has been hit by delays and budget blowouts, forcing the agency to publicly acknowledge it was under “extraordinary pressure”.

The ATO's annual report, submitted in October last year, revealed the Change Program is high risk and mostly responsible for the office’s budget overspend last financial year.

The program commenced in December 2004 at an estimated cost of $350-450 million and was set to be completed by the end of 2007. The budget, however, has blown out to double the original figure, hitting close to $750 million.

In October last year the ATO also accepted the recommendations from the Australian National Audit Office (ANAO) after the latter conducted a performance audit of the Change Program.

The Change Program problems have also led many observers to question the performance of key ATO partner, global consultancy firm Accenture.

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