The Tax Office's 25,000 workers across Australia were informed by email to expect redundancies as efficiency dividends by the previous Labor government and mandated by the Coalition began to bite.

The move paves the way for what is potentially the largest mass redundancy so far in the wave of job losses hitting the public service.

Writing before a planned late-night appearance at a Senate estimates committee, Commissioner of Taxation Chris Jordan told his staff that a low departure rate from the ATO recently meant that “realistically” voluntary redundancies were likely.

The move comes despite the government's announcement on Tuesday that it was walking away from its election commitment to cut 12,000 jobs from the public service through natural attrition. Apart from efficiency dividends, Mr Jordan blamed policy, including the scrapping of the mining tax and the axing of the Australian Charities and Not-for-profits Commission for the cuts.

The commissioner also cited “new policy funding from previous budgets coming to an end, the potential impact of the announced reduction of (Australian Public Service) jobs, slowing attrition rates and interim recruitment arrangements” as factors hitting the Tax Office's bottom line.

“We anticipate we will need to reduce our staff numbers as part of our contribution to the overall APS staffing reduction,” staff were told.

“Our best estimate is that we will have to reduce our workforce by up to 900 staff by the end of this financial year.

“We are giving thought as to how this reduction can be achieved, but realistically we consider some voluntary redundancies will be needed, particularly given the current low natural attrition rate.”

The Tax Office employs 25,093 people across Australia, according to the latest figures, with about 3100 of them based in the capital.

Wednesday's bulletin contained no hint of where the axe would fall.

In the past financial year 223 tax bureaucrats have taken voluntary redundancies and the resignation rate has slumped by 19 per cent to 383 employees leaving voluntarily in 2012-13.

A large-scale redundancy program at the ATO might prove expensive with more than half of its permanent workers boasting 10 years or more of service.

Mr Jordan said he hoped to have more news on the staff cuts and redundancies next month.

Public sector unions reacted with dismay on Wednesday evening, with Australian Services Union official Jeff Lapidos saying the cuts would be ultimately counter-productive.

“Redundancy programs are not cost-effective,” Mr Lapidos said.

“The ATO will recruit graduates from universities while it pays highly skilled staff to leave.”

CPSU national secretary Nadine Flood said the move was a “huge blow” to Tax Office workers.

“The ATO cannot afford to lose talented and experienced staff,” Ms Flood said.

“The provision of decent health, education, infrastructure and other public services depends on having an effective Tax Office, collecting revenue and ensuring big business pays its fair share.

“ATO staff are already stretched after previous cuts.

“These latest cuts will cause delays for taxpayers and small business who rely heavily on ATO for advice.”