Pursued beyond the grave: Damning report slams ATO misconduct

A damning independent report into the Australian Taxation Office has found evidence of maladministration, including targeting a taxpayer for five years after she had died.

ATO Commissioner Rob Heferen ordered the investigation after reporting by A Current Affair and this masthead into the treatment of businessman Jae Jang last July.

The 144-page report, prepared by Tax Ombudsman Ruth Owen, has left seasoned tax professionals stunned, and it raised concerns that misconduct was spread across the ATO.

Bruce Collins, who spent 35 years working for the tax office, including as an assistant commissioner, said the report made “the most strongly worded comments about ATO misconduct” he had ever seen.

“Of all the ones I’ve read and been involved with, on both sides of the fence, this is probably the most significantly critical of the ATO in relation to issues of maladministration,” said Collins, who is now a tax lawyer representing Jang.

The ombudsman’s findings uncovered evidence of “maladministration” by the ATO, a pattern of bias and prejudicial conduct, unreasonable use of discretionary powers, and actions contrary to procedural fairness across a number of teams within the tax office and “not limited to just one or two individual officers”.

One element of misconduct – involving two ATO investigators disclosing confidential taxpayer information to third parties – was found to constitute “serious maladministration”.

One of those breaches involved investigator Anthony Rains, who disclosed information to New Zealand government agencies.

The ombudsman found his contact was speculative and unreasonable, creating a “perception of bias” and “inappropriate targeting” beyond the ATO’s jurisdiction, by recommending the New Zealand tax office conduct an audit of Jang’s businesses.

Collins described these disclosures as “a very serious area of misconduct” that should warrant further investigation.

An ATO spokesperson declined to answer questions as to what action had been taken.

“The ATO welcomes the ombudsman’s thorough review, and the finding that there were no instances of unlawful conduct or misfeasance,” the spokesperson said.

These comments conflict with the ombudsman’s report, which specifically stated it had “not assessed whether these disclosures breached the tax secrecy provisions, as this is outside our terms of reference”.

Jang, a 58-year-old businessman with no criminal history, was arrested and thrown in jail over tax fraud charges before eventually being exonerated during a 10-year battle with the ATO.

His sister Deannah was also targeted, and he blames the ATO’s pursuit for her death by suicide in 2017.

The ombudsman found garnishee notices issued against Deannah Jang were “unwarranted and unreasonable” and gave the impression of “guilt by association”.

“The ATO’s debt recovery actions against Ms Jang were inappropriate and lacked consideration for the potential impact on her,” the ombudsman said.

“There is, however, no evidence of any direct link between the ATO’s actions and her decision to take her own life.”

The ombudsman found Deannah Jang was pursued for five more years after her death, with ever-increasing penalty notices causing “unnecessary distress to her family” in what was “a serious failure of process and governance within the ATO”.

The ombudsman’s report has now sparked four additional lines of inquiry to assess how widespread the misconduct is within the tax office.

Two of those are “independent systemic investigations” by the tax ombudsman regarding impartiality, as well as internal record-keeping, which was lacking in Jae Jang’s case.

“If they don’t keep the records, then that evidence trail isn’t there for the ATO to properly manage their staff, or for taxpayers to properly challenge ATO actions,” Collins said.

An ATO spokesperson declined to answer 18 detailed questions about the most concerning findings, instead issuing a statement.

“The ombudsman considered allegations raised by the taxpayer and found the majority of these, including the most serious allegations, to be unsubstantiated,” the spokesperson said.

“Notwithstanding this, we acknowledge that there are some areas where improvements are to be made, and we have already begun making process improvements.”

Rains, who was referenced in the report, remains employed by the ATO but no longer works as an investigator. The ombudsman’s report was the second authority to find misconduct in relation to his work at the tax office.

In a separate case last October, a Queensland Supreme Court judge found 11 instances of misconduct, including Rains deliberately altering evidence, preparing a false witness statement, and lying in a briefing note to the Queensland Bar.

That case is now under appeal.

Assistant Treasurer Daniel Mulino said in a statement that the government expects the tax office to “deal with Australian taxpayers honestly, transparently, and fairly”.

He said he was waiting for the final report from the ombudsman’s follow-up investigations before commenting further.

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