The Australian Taxation Office was criticised by the Commonwealth Ombudsman for its handling of cases where a person's tax identity was compromised by data matching or administrative errors.
The Ombudsman said today that actions taken by the ATO in eight cases involving tax file number compromise were "unreasonable" with cases lasting months to years.
"Our investigations suggest a systemic failure by the ATO to properly recognise and respond to the issues faced by taxpayers who, through no fault of their own, have their [tax file numbers] compromised or incorrectly linked - by the ATO - to another person's," the Ombudsman said in a new report [pdf].
"[Tax file number] integrity and ATO data and systems quality are areas of high importance to the tax system."
The ATO conceded that the experiences of "some taxpayers [had] been less than satisfactory" but said the eight cases outlined by the Ombudsman were isolated and not typical of taxpayer experiences.
The tax agency agreed to the five recommendations made by the report and cited last year's establishment of the Client Identity Support Centre as a step to create a "single capability for the management and resolution of identity crime" and tax file number compromises.
Some of the cases involved identity fraud, where a person's tax number was compromised by an unknown third party that used it to lodge tax returns.
Others were caused by data-matching errors where the ATO incorrectly "culled" a person's tax file number in the mistaken belief they were issued two.
But the numbers were for different people with the same name and, in one case, also with the same date of birth.
It took seven months to resolve the latter case, in part because the ATO sent an "objection" letter from the taxpayer whose number was canned to a "decommissioned email address", causing a four-month delay.
Delays in resolving another case were attributed to the ATO's $725 million swap out of its tax-processing systems earlier this year.
"[The resolution] timeframe was affected by delays in processing resulting from the ATO change program roll out of a new system for income tax account processing," the report said.
"However, an adequate explanation was not provided about why the matter was not resolved before the change program roll out, or why the ATO processes account transfers in a way that can generate debt letters before the processing is resolved."
At least one taxpayer said that their experience caused them to lose faith in the taxation system.