Anti-corruption body wastes time with a triviality
But do not get excited – it is pretty low-level stuff: a senior public servant (their name has been concealed) inappropriately placed her sister's fiance into a job. This is pretty ordinary work, and not an especially spectacular start for Australia's premier anti-corruption body. It is the kind of matter commonly dealt with by the Australian Public Service Commission, not an anti-corruption body. It really looks well beneath the role of the NACC.
There is real work to be done, but the NACC is distracted by dealing with comparative trivialities.
The first two years of the NACC have been a real disappointment. There is negative feel to it, as though the NACC's leadership team are unwilling to flex their muscles. Even the decision to conceal the names of those involved in this incident is puzzling – they did wrong, so why not expose them? The NACC emphasised that it regarded the matter as serious and pointed out that the principal miscreant was in a senior position. The evidence collected showed the breach was deliberate and flagrant. It was a misuse of public power, a misallocation of public money, and it meant that a person who deserved to get the job missed out. Yet the NACC seems to be more concerned to protect the wrongdoers than to expose the wrongdoing.
This is a dispiriting position to be adopted by the agency charged with overseeing transparency and accountability in the public sector. The public is denied transparency; those breaking the rules escape accountability.
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We should not be surprised. Everything we have seen so far from the NACC suggests it is not up to the task of tackling serious corruption.
The NACC's decision not even to open an investigation into the six persons referred to it by the Robo-debt royal commission was an early sign that something was not right. That decision, which was an awful error, needed to be corrected by Gail Furness SC, the statutory inspector of the NACC. Ms Furness' report exposed that the NACC commissioner himself was unable to manage a basic conflict of interest – yet he is the person to whom public officials should turn to get guidance on their conflicts of interest.
That misjudgment by the NACC commissioner led to a finding of 'officer misconduct' on his part – so, ironically, the first finding of misconduct about the NACC was a finding against the NACC.
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ABC News
29-07-2025
- ABC News
The tax office traded people for programs and is still grappling with the consequences
A decade ago the Australian Tax Office (ATO) management faced a tough choice. Confronting government demands to cut costs, they made a simple trade-off: people for programs. The ATO would slash staff numbers and instead rely on automated systems and slick computer algorithms to process returns and pick up tax fraud. The cost of that decision is only now being revealed, in half a dozen scathing reports by the auditor-general, the inspector-general of taxation, the Australian Public Service Commission (APSC) and others which provide a sweeping account of how the ATO is failing. The ATO has long been one of the most opaque agencies in the government. Its critics accuse it of a lack of accountability, and using taxpayer secrecy as an invisibility cloak to prevent scrutiny of its shortcomings. The external reports by the auditor general and others provide glimpses behind that cloak that can be used to build a picture of the ATO's troubled inner workings. That picture shows a tax system teetering on the edge, and an agency culture that ignores red flags. The saga began back in 2013, when prime minister Tony Abbott's incoming government was demanding an efficiency dividend. By this it meant the government should pay less money to run the ATO, even as the amounts raised by the office were soaring. Under Commissioner Chris Jordan, the ATO's response was to cut staff and throw resources into new technology that could do the work to process returns, to run the checks and detect fraud. Jordan, who stepped down from the ATO last year, spoke of modernising how the office works "as part of the digital revolution to make 'tax just happen'." Which is to say, tax collection without human intervention. The ATO isn't alone in this dilemma. Adapting to new technology is a universal challenge that tax agencies around the world are struggling with. But the ATO's trade-off has had serious consequences. Between 2013 and 2019, the ATO shed close to 6000 people — almost a quarter of its staff. Some of the hardest hit were those sections that detect fraud and chase up debt. The cuts were already beginning when Jordan became commissioner in January 2013, the first outsider in the top job in the agency's history. From 2011 to 2019, the indirect tax division, which collects GST and Customs excise, lost half its staff — more than 1000 tax officers gone. At the same time Jordan was bringing in more outsiders — partners from his old firm KPMG and top tier law firms, who typically would parachute in as deputy legal counsel and speedily be appointed deputy commissioners or higher. By 2021 the top four executives at the ATO all came from outside, though the incoming commissioner, Ron Heferen, has reversed that. In the new look ATO, law degrees were a minimal requirement for advancement, preferably with a history of working outside the office. Tax officers with training as police officers and experienced investigators ranked low on the totem pole. Most of the new ATO senior management had little or no experience in full scale audits of businesses, so it's not surprising that tax officers say the ATO moved largely to desk audits, a top-down process that doesn't get into the long grass of checking physical details. Reliance on technology extended to reliance on systems like the tax gap, a hypothetical estimate of how much tax the ATO is failing to collect. It's a small percentage number, which the ATO points to as a measure of its effectiveness. What happened with GST offers a stark example of what can happen when all of these things come together badly. Last year the ATO raised $85 billion in GST. That's a net figure that represents more than $2 trillion in underlying transactions. Monitoring this process has to be a mixture of clever algorithms (called risk models) to highlight suspicious transactions, and some form of manual follow up. In March 2018, the then inspector-general of taxation, Ali Noroozi, issued a report warning that checks on GST fraud were inadequate. He cited a 2015 ATO study which showed that its risk models were little better than random selection. Perhaps the most disturbing aspect of this was that the random selection study found that one in four GST payouts needed to be adjusted. The ATO brushes off the criticism. It says it was already aware of the problem and had begun to upgrade its systems. Through to early 2021, the ATO had just 150 staff involved in vetting suspicious GST claims before payment. It would be another year after Noroozi's 2018 warning before it began developing a new suite of monitoring tools "leveraging machine learning, artificial intelligence, and forensic analytics", which were due to be ready from late 2020. But the program ran a year late. Meanwhile an ATO spokesperson says the office had stopped a GST scam involving gold trading, which tax officers believed was the only major fraud threat. Each year, the ATO has a critical measure for external fraud risk. In both 2018 and 2019 it concluded the risk of fraud occurring was "almost certain" and the consequences for that would be "very high". But in May 2021 it revised this assessment, concluding that the fraud risk was "rare" and rated the possible consequences as "medium". Who made this momentous decision that the fraud risk was rare? The auditor-general said the ATO could not find any written record for who was responsible. At the same time, the ATO's calculations of the tax gap for GST was also indicating that the situation was completely under control. The ATO estimated that in 2019 it collected all but 7.6 per cent of the total amount of GST that should have been paid. By 2021, the ATO decided that the tax gap for GST had been slashed to just 2.7 per cent. It was another triumph for the regulator. Just two months after the risk assessment was downgraded and the tax gap was cut, the first signs of a growing wave of GST fraud hit the ATO. This was a different kind of fraud for the ATO. More than half the claimants were on welfare and while it seemed inevitable that they would eventually be caught, they didn't understand or didn't care. And there were tens of thousands of them. By year's end the ATO's systems would be overwhelmed. Both warning measures — the risk rating and the tax gap – had failed spectacularly. And the new software that could have detected the rise of bogus GST claims was 12 months late. Two new risk models to detect suspicious GST claims — one to target incorrect reporting, the other aimed at identity crime — were only plugged in on January 8 2022. It was only then, the auditor-general says, that the scale of the fraud wave became "clearly apparent". "The ATO did not have a procedure to respond to a large-scale external fraud event," such as it faced, the auditor-general's report says. In all, more than $2 billion in fraudulent GST claims were paid out to more than 57,000 people before the ATO got on top of it, in part by sheer numbers. It played whack-a-mole. While the ATO would attribute its success to its artificial intelligence and algorithms, a major part seems to have been throwing people at the problem. By May 2022 the ATO had moved an extra 470 staff to work on GST. The auditor-general says in 2023 total GST staff had been lifted to 2,144 — the highest level it has ever been. The tax gap for GST for 2021 has since been revised from 2.7 per cent to 4.3 per cent, and the gap for 2023 has jumped to 9 per cent. It's one of the biggest tax gaps the ATO faces. The risk rating for external fraud occurring has been upgraded from "rare" to "even chance", and the consequence of it happening from "medium" to "extreme". Remarkably, the auditor-general's report appears to suggest the ATO misled the finance minister when it asked for more funding for this, because it told the minister that this was the first time its fraud risk had been out of tolerance. The report says the figure had been out of tolerance in 2018 and 2019 — it's just that the ATO hadn't done much about it. Even with its new systems, the auditor-general concluded that the ATO's "framework for assessing and managing GST fraud risk is not fit for purpose". The ATO spokesperson told Four Corners that within six weeks of launching Operation Protego in April 2022, "almost all fraud attempts were being stopped". It was a dramatic recovery, which over 15 months blocked further fraud claims of $2.6 billion. But how could the ATO know the threat was over? Fraud experts say the only real way to test if a scam has been licked is to conduct a sample of random audits. The ATO was in the process of doing this last year when the auditor-general wrote his report, but the test was running eight months late. The results were due to arrive two years after it declared victory. The $2 billion GST debacle is a reminder how much dependence the ATO has riding on getting its technology right. And that's where a capability rating by the APSC says the ATO's biggest problems lie — in technology and in its senior management. The report released last March notes that the ATO has 130 committees, which are forums for consensus rather than making decisions. Staff saw its tech systems as "outdated, clunky and … affecting productivity". One tax officer said that "we have nine critical systems coming to end of life or out of support, we are having to make trade-offs to keep some on their last legs and invest in others". Another staff member described how they needed to use 14 different computer systems just to process one case. While banks can automatically compile lists of suspicious accounts, a report on identity fraud by the former inspector-general of taxation, Karen Payne, last year described how tax officers once a week manually compile a list of suspect bank accounts used for ID fraud, on a spreadsheet. Other staff members told the APSC they did not believe the ATO had "the skills to manage the complex relations required to collaborate with and influence multinational software companies". Overhanging this is the ATO's failed efforts to oversee a mammoth new business registry for companies, directors and other records which was supposed to cost $500 million. The government took the project away from the ATO in August 2023 after the projected cost blew out past $2.5 billion. In another report the auditor-general raises concerns over how ATO personnel handle perceived conflicts of interest in negotiating for major new software systems. Ballooning costs for tech upgrades mean "this will continue to be a major risk to the organisation into the future", the APSC concluded. The more immediate problem that the ATO is struggling with is the mountain of collectable debt — that's tax that is undisputed and should have been collected by the ATO, but wasn't. It's a cumulative total, which from 2014 to 2016 was almost static, at $19 billion. But from 2017 collectable debt took off. By 2024 it had reached $52.8 billion, and almost three quarters of the increase has come from one area, activity statements, which mainly covers GST and Pay As You Go tax payments. The rise coincides with the ATO's move to make tax payments easier, through the MyGov app and other automation. Perhaps the unkindest cut was another auditor-general report this year, which took on one of the ATO's most revered performance measures, the tax gap. While the ATO's target is to reduce the tax gap, the AG concluded it was "inappropriate" to link its estimates to reported results. For the four chief tax gap measures the audit office "was unable to obtain sufficient appropriate evidence of whether the dollar value of the tax gap reported represents good performance relative to the reported target", it said. In short, we don't really know how the ATO is performing. And it suggests the ATO doesn't know either.

AU Financial Review
29-07-2025
- AU Financial Review
NACC boss Paul Brereton hits back at his critics
National Anti-Corruption Commission boss Paul Brereton has hit back at his critics, saying there was a lot of misunderstanding about the watchdog's role and warning many investigations would take years, not months, to conclude. In a rare public appearance, Brereton told The Australian Financial Review Government Services Summit on Tuesday that only 10 per cent of the 5400 referrals to the NACC since it started in July 2023 met the legal threshold for further review, and only 1 per cent suggested serious or systemic corruption.

ABC News
28-07-2025
- ABC News
Western Sydney Airport official who sought $200k kickback narrowly avoids jail time
The National Anti-Corruption Commission (NACC) has claimed its first scalp with the sentencing of a corrupt Western Sydney Airport official who asked for a $200,000 kickback. Sajish Erasery pleaded guilty to soliciting a corrupt commission after he attempted to invite a bribe from a company vying for a $5 million contract to provide automated parking systems at the soon-to-be completed airport. The anti-corruption watchdog found the former executive procurement manager had initially proposed he could "get the deal over the line" if he received $250,000, which equated to 5 per cent of the contract's value. The NACC said in a statement Erasery later reduced this figure to $200,000 and suggested a scheme to repay the business by inflating invoices. The Australian Federal Police arrested the man in March 2024 after his former employer referred the matter to the commission. He has been sentenced to two years' jail, which will be served in the community and require him to complete 500 hours of community service. The airport is due to be complete in 2026. Erasery is the first person to be sentenced following an investigation initiated by the NACC. Since the watchdog's inception, there have been convictions in nine other cases which were inherited from the former Australian Commission for Law Enforcement Integrity in July 2023. The latest of those cases involved Anne McCann, a former Department of Home Affairs immigration officer, who abused power in public office by approving a visa application for her brother-in-law. Both matters were prosecuted by the Commonwealth Director of Public Prosecutions.