Glitches in the Australian Tax Office’s (ATO) new multi-million-dollar computer system have resulted in lengthy delays processing about 1 million tax assessments.

Since the system was introduced in January, thousands of taxpayers have waited weeks longer than normal for a refund, with some waiting more than four months.

Many taxpayers were told their refunds had been sent when in fact they had not.

The ABC has been given an internal ATO document that confirms hundreds of people have been calling the office about the protracted delays.

Some of the callers say they are at risk of being made homeless and some have cancelled surgery because they have been relying on refunds.

The ATO has updated its website at regular intervals, claiming the problems were being addressed and the backlog was rapidly diminishing.

But head of tax and superannuation for Taxpayers Australia, Roger Timms, says it is premature to say the ATO is on top of the problem.

“We receive a lot of feedback into our offices that would indicate there are a lot of aggrieved taxpayers and tax agents out there who would think that the problem is far from being solved,” he said.

“Now the Tax Office in one of their publications indicated that they were conscious of hardship issues and they said we’ve assisted – I think the figure was 1,000 or so people with hardship issues. Now if they’d assisted 1,000, the question is how many others are out there who haven’t been assisted?”

An internal ATO document issued on April 7 confirms that complaints to the Tax Office remain high, with 346 calls made over a three-day period.

It says tax agents and taxpayers are reporting cash flow problems due to the delays in issuing refunds.

The document contains the stories of two people desperately waiting on refunds to pay their mortgage and medical bills.

“I have been waiting for my return, I guess like everyone else, since January,” one statement from a taxpayer reads.

“I am now literally on hardship. I don’t have any money. I needed to borrow money to eat over the Easter weekend and by the end of this week I will be homeless.”

Another says: “I have organised surgeons, hospitals and needed to cancel because of you guys. How long is this going to take to fix? Are you going to give me another 14 days?

“They told me it would be done by the 30th and that was yesterday. My daughter has an illness which needs to be fixed.”

The leaked document says 71 per cent of tax agents who phoned the ATO had expressed confusion, frustration and anger.

It goes on to say their tolerance level has decreased and they remain sceptical about ATO advice and that the scepticism might have long-term consequences for the Tax Office.

One agent says they have had 150 fewer refund payments put into their trust account over a three-month period this year compared with the same time last year.

Inquiry calls

With the end of the financial year looming Mr Timms wants an inquiry into what went wrong.

“Part of the problem is that the Tax Office through this period of implementation have fairly consistently said that things are on track,” he said.

“Now I think this has caused considerable frustration with tax agents who have clients who would say ‘well, things aren’t on track’ and each time we get an on-track message from the Tax Office, it sort of is followed up a week or so later by one that indicates, ‘well, look there are some on-going problems, but we won’t go into too much detail but we’re on top of it’.

“And that sort of pattern of behaviour, if you like, has been repeated pretty much throughout March, and so agents really feel that they’re not getting a true reflection of the position inside the Tax Office.”

Independent Senator Nick Xenophon agrees. He says the tax document contradicts statements the office has previously given publicly.

“This document puts lie to what the Tax Office has said to the Australian public over the past few months about this system,” he said.

“This requires nothing short of an independent investigation by the Inspector General of Taxation and by the Commonwealth Auditor General, because we need to get to the bottom of this.

“The danger is that unless this is sorted out by tax time, it will turn into absolute chaos when it comes to millions of returns being processed.”

Senator Xenophon says the situation is nothing short of a debacle.

“When you consider that taxpayers are becoming desperate, they’re under mortgage stress because their returns aren’t being processed, when one person had to cancel a child’s surgery because they didn’t get their refund cheque, then you know there is something seriously wrong with this new IT system,” he said.

At the time of PM going to air, the ATO still had not responded to the claims.