Letters sent by the Australian Taxation Office (ATO) are sometimes unclear, lacking in empathy, and likely to cause distress, according to a new watchdog report calling for improved communication.
The Tax Ombudsman on Thursday released the findings from its review of the ATO’s mail strategy, providing a stern assessment of letters meant to encourage taxpayers to do the right thing.
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“The ATO’s drafting of letters appears to focus on what the ATO wants to say, not what the taxpayer needs to know,” the report found.
They assume a level of knowledge, including a proficiency in English, and a familiarity with tax terminology that is not reflective of the average Australian.
In a statement, Tax Ombudsman Ruth Owen framed the issue in even simpler language.
“I think we’ve all received a letter from the ATO at some point and wondered what on earth it was about,” she said.
“The ATO has a responsibility to engage with taxpayers in ways that make it easy to understand their obligations and any actions they need to take.”
The report comes two years after controversial ATO letters about ‘on hold’ debts sparked comparisons to the Robodebt saga — and arrives in the midst of a tightening approach to taxpayer compliance.
The Tax Ombudsman shared four recommendations for reform, all of which have been accepted by the ATO.
Focus on compliance comes into question
The ATO sends 144 million letters to taxpayers each year, and despite its continuous digitisation, paper mail is still fundamental to its communication with taxpayers.
The Tax Ombudsman assessed six types of letters sent to individual and small business taxpayers, covering matters as diverse as mismatched income reports to taxpayers disqualified as self-managed super fund trustees.
It found the ATO’s efforts to improve clarity and directness in those letters can “sometimes seem threatening and imply guilt or assign blame to the reader”.
Phrases like “you must act” or “you didn’t report correctly” appear to “reflect the ATO’s focus on driving compliance rather than making it easy for people to comply”.
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The review of sample letters found the ATO “could reframe its language to be more empathetic,” instead of using language that “can come across as threatening or implying guilt”.
The tax office has a framework to ensure its letters are clear and useful, but the report found its existing processes have “mixed” results.
Internal teams specialising in tax and legislation, and teams with expert communication skills, are both used to draft letters.
However, these camps are “not always used together effectively to produce letters which are both easy to read and technically correct”.
The report also questioned the ATO’s user-testing approach, noting that it seeks feedback from tax professionals, not everyday taxpayers who find themselves on the sharp end of those letters.
“The ATO can tell what a taxpayer did, but not why they did it, whether they understood the message, or whether the letter helped,” the report said.
“This makes it harder for the ATO to know which letters worked well, and which may need to be refreshed or retired.”
Noting the large proportion of Australians who use English as a second language, and those who may have a disability, the Tax Ombudsman said letters must be written in a ways “that allow everyone to interact with the tax system, whatever their origin, background, education or circumstances”.
On a technical level, the report also notes a lack of consistency in where letters are sent — to a taxpayer or their tax agent — creating further confusion.
ATO accepts calls to rethink letter strategy
The report lays out four recommendations, calling on the ATO to review its letter design framework and ensure both tax and communications experts are consulted during the drafting process.
Letters should be drafted to include support options for those from linguistically and culturally diverse backgrounds, and those with a disability, it added.
A new user-testing framework should be created, and the ATO should evaluate how best to seek feedback from recipients about letter comprehension and clarity.
Additionally, the ATO should promote the correct use of address preferences among taxpayers while reviewing how those preferences are applied in practice.
Responding to the report and its recommendations, ATO second commissioner David Allen said, “we recognise there is always room to improve clarity”.
The ATO accepted all recommendations and agreed “they will help us move to the next level of
managing our communications,” he continued.
Beyond letters alone, the tax office has developed online resources for small business taxpayers, in the hopes of building tax knowledge among the SME community.
