ATO's 2025-26 Outsourcing Reduction Target Sparking Criticism Amid Ongoing Reliance on Contractors
The Australian Taxation Office (ATO) aims to reduce outsourced work by just $500,000 in the 2025-26 financial year within its $4.5 billion operating budget. This target, disclosed during a Senate Estimates hearing, has been met with criticism from unions who describe it as woefully inadequate and suspect it might be a typographical error.
Greens finance spokesperson Barbara Pocock said the target does not go far enough to reduce the reliance on contractors. Despite this modest goal, the ATO reported an $80.4 million reduction in external supplier expenditure in the previous financial year and stated it exceeded last year’s target. The agency also indicated it is considering further opportunities to move core work in-house.
However, outsourcing remains a significant part of operations, particularly in call centres. The Tax Ombudsman highlighted extreme staff turnover at outsourced call centres, resulting in a lack of suitably skilled staff available to take calls. One ATO outsource worker has even filed a same-job, same-pay application with the Fair Work Commission.
Other government agencies show mixed progress. Services Australia reduced its external workforce expenditure by $733 million in 2023-24, with a target reduction of around $600,000 next year. Between 2020 and 2025, about 4,500 labour hire and contractor staff were transitioned to the public sector. Meanwhile, the Department of Employment and Workplace Relations (DEWR) did not set specific targets to reduce external contractors; the Community and Public Sector Union (CPSU) noted that 15% of its workforce is engaged through external private contracts, including call centre staff.
Labor’s strategic commissioning framework (2023) directs agencies to move away from outsourcing core public service work. Despite this directive, many agencies are stalling in achieving meaningful reductions in contractor reliance, keeping outsourcing a contentious issue within public sector workforce management.
