1 Lack of access to all data
Limitations in quality assurance
The integrity of ABR data is an ongoing challenge for the ATO. The ATO has developed an extensive suite of policies and procedures that provide the framework within which the quality assurance activities are to take place. The ANAO found that the ATO's approach to its quality assurance activities is comprehensive. However, there are some limitations in implementing ABR-related quality assurance activities that affect their overall effectiveness. These relate to the relevant ATO quality management staff not having access to all ABR data to allow the selection of representative samples for some quality activities, and the absence of quality assurance activities for registrations processed automatically by the ABR system.
2 Some business rules switched off
Data integrity affected
Data integrity has been adversely affected by past operational decisions to switch off some business rules, and from data quality deficiencies relating to the migration of ABN data from other ATO systems. The imperative to issue 2.9 million ABNs to businesses before A New Tax System commenced on 1 July 2000 meant that some business rules were switched off. Also the ATO found some of the business rules contradicted others and had to be overridden. The ATO advised that the business rule changes were documented as part of the process of changing the system and that the records affected were self-correcting, or subsequently have been, or are being, dealt with through the ATO's ongoing data integrity activities.
3 Limited verification of data provided by applicants
Ineligible entities registered
The basic requirement for eligibility to an ABN is that the applicant is actually undertaking a business in Australia. Section 10(b) of the Act requires the Registrar to be satisfied that applicants are entitled to an ABN before issuing one. However, the ANAO found that the ATO undertakes limited up-front checking of information provided by applicants to determine eligibility. Instead the ATO has opted for a 'self-assessment' approach, placing the onus on applicants to determine their eligibility for an ABN. The ATO undertakes certain computerised checks, before an ABN is issued, to ascertain whether information provided by applicants meets ATO's requirements and meets various ABR business rules. The ATO also undertakes post registration integrity checks both on a random and risk-related basis.
The ANAO has reservations regarding the ATO's approach of limited up front checking because of the reliance on 'self-assessment'. ATO analysis of ABR data has identified registrants that appear to be employees rather than businesses (employees are not entitled to ABNs). Also the ATO has identified, as part of its own quality assurance and data analysis initiatives, changing patterns in registrations, with less (supposed) new businesses wanting to register for GST and Pay-As-You-Go (PAYG). Registration for GST and PAYG are strong indicators that the entity actually is undertaking a business enterprise. In addition, our own testing of the ABR database identified apparently ineligible registrants.
Background
A New Tax System (Australian Business Number) Act 1999 (the Act) enacted, in July 1999, the recommendation in the Bell Report for a unique business identifier. The Australian Business Number (ABN), a unique 11-digit number, became the new identifier for business and a key element of the Government's framework for a new tax system. The legislation also established the Australian Business Register (ABR) as the register of all ABNs. The ABR is the central collection, storage and verification system for basic business information, supplied by businesses with an ABN. Some of this information is available to the public.
The ABR is also a whole-of-government initiative, primarily developed to make it easier for business clients to transact business with Commonwealth Government agencies. Eventually it is hoped that the ABR will be able to deliver similar efficiencies to State and Local governments. Once the services to be offered by the ABR are readily available, businesses will be able to update their details as needed and, although the Australian Taxation Office (ATO) will maintain these records, they will be made available to other government agencies. Therefore, other agencies will have the benefit of gaining access to up-to-date information on all Australian businesses. This approach of 'Tell Once Use Many' was one of the key themes for the design of the ABR.
Objectives
The objective of the audit was to assess the administrative effectiveness of the ABN registration process and the ATO's implementation and management of the ABR. In addressing the audit objective we considered whether the:
- implementation of the ABR was managed efficiently and effectively by the ATO;
- ATO has implemented governance arrangements for the effective ongoing administration of the ABR;
- ABN registration systems and procedures will efficiently and effectively deal with all applications for ABNs;
- ATO has implemented systems and procedures to ensure the integrity of ABR data; and
- ATO is making progress towards achieving the whole-of-government outcome for the ABR