The recent review of ATO dealings with small and medium enterprises uncovered a lack of resourcing and poor technical ability within the department, leading to the loss of 58 per cent of SME assessment disputes.

Inspector General of Taxation Ali Noroozi said mid-range businesses were sometimes treated unfairly or subjected to unnecessary compliance costs and delays caused by the lack of corporate knowledge within the government department.

''It needs to improve their technical capability,'' he said.

''The ATO has already acknowledged that they need to improve things for the years ahead, they have already started the body of work and we will be working with them.''

The report made 41 recommendations to the ATO - including to improve the technical ability and understanding of commercial and business issues of ATO staff through training courses; better matching of complex case work to staff training levels and experience, and improvements to recruitment processes across the organisation.

Noroozi said an education process would also be put in place for the owners of SMEs.

''What we have agreed to with the Tax Office is that they will provide the booklet to all SMEs all the way down to $2 million in turnover,'' he said. ''It spells out what the Tax Office should do and almost like a bill of rights for taxpayers it is a means for all SMEs to hold the Tax Office to account.''

Noroozi said it was important for all parties to be patient while the changes were made.

''The implementation of these recommendations, together with the program of work already commenced by the ATO, should result in significant improvements in this area of tax administration,'' he said. ''However, these improvements may not become apparent immediately as staff capability, for example, may take some time to develop.''