The Tax Office has told staff it is cutting jobs within weeks of receiving a funding boost for its compliance work.
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Tax officials on Thursday learnt the agency would begin a rapid round of voluntary redundancies to be finished by June.
The announcement coincided with an escalation in election campaigning as Prime Minister Scott Morrison revealed the federal poll would be held on May 18.
Between 140 and 170 jobs will leave the Australian Taxation Office's client engagement group - in charge of compliance - as bosses reportedly try to reduce a workforce over the Coalition government's average staffing level cap.
The cuts will come after budget papers on April 2 revealed the Coalition would plough money into the Tax Office's compliance work, and a day after ATO officials appeared at a Senate estimates hearing in Canberra for questioning.
ATO second commissioner Jeremy Hirschhorn told staff it identified areas where cuts were needed, and that the agency would accept expressions of interest and offer voluntary redundancies to client engagement group public servants.
"The specific number we will offer will depend on the level of interest, affordability, locations and capability, balanced against our need to continue to deliver business outcomes.
"Employees who do not express interest in a VR will continue in their current role, in their current location," Mr Hirschhorn said.
Australian Services Union official representing ATO staff, Jeff Lapidos, blasted the cuts as a "ghastly decision".
The redundancies would cost $15 million despite ATO claims that pay-outs would reach $12.5 million, he said.
"It seems to us that the ATO has better things to do with its money than hand out tax free redundancies equal to a year's salary to mates and those it considers dead wood," Mr Lapidos said.
The union is waiting to receive a list of the areas targeted and the number of staff in each.
Community and Public Sector Union deputy national president Brooke Muscat-Bentley said the ATO job cuts would cast a shadow on workers and hurt morale.
"It's a bitter irony that these jobs are being cut from the client engagement group just a matter of days after the budget announcement of extra jobs for this unit to do its important work tackling tax avoidance," she said.
"The sad reality is that the balance of jobs added versus jobs cut will leave the Tax Office with significantly fewer workers than it had this time a year ago.
"The Tax Office says it's being forced to sack workers because of the Coalition's arbitrary ASL cap, meaning the work of ATO staff being made redundant will soon be handed over to the private sector through contract and labour hire arrangements."
Labor MP and shadow assistant treasurer Andrew Leigh said the cuts would follow other job losses at the ATO since 2013.
"Staff cuts put pressure on those who remain, and hampers the ability of the Tax Office to ensure multinationals and the top end of town pay their fair share," he said.
An ATO spokeswoman said the announcement had been planned for a couple of weeks and it was coincidental that the election was called on the same morning.
"This is one element of a range of actions we are taking to ensure we have the right capability mix to deliver today and into the future, predominantly achieved through redeployment and retraining," she said.
Liberal senator and assistant minister for treasury and finance Zed Seselja said the cuts were part of a business-as-usual reshaping of the ATO workforce, and would apply nationally.
Budget papers showed the Tax Office's ranks in 2019-20 would swell by nearly 700 jobs, although the agency's staffing would still be lower compared to last year's forecast for 2018-19.