The Tax Office will stay in Geelong despite previously flagging it wanted to close its office in the Victorian city.
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After consulting with staff about plans to end its operations in Geelong, the Australian Taxation Office on Monday confirmed it would look for a building there to lease office space.
A departure from the city, which has become a hub of federal and state public services in Victoria, would have affected 121 staff and may have involved voluntary redundancies.
The ATO said in a written statement it decided to remain in Geelong, where it's reportedly been for 50 years, after consulting staff and agency leaders about the closure plans.
"During consultation it was made clear that all stakeholders, in particular our staff and leaders, would like to pursue options which could ensure the site remains vibrant and viable," the statement said.
The ATO would look for a new lease in Geelong and hoped to finalise its search by the end of 2020.
"The ATO is committed to maintaining a strong presence in regional Australia as we understand that being a part of the community is essential for continued public trust and confidence in the tax and super system," the organisation's statement said.
The agency did not answer questions including whether there would be job cuts, the reasons for its decision to stay in Geelong, and how it would fill empty office space if it kept its current office site.
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The Community and Public Sector Union welcomed the media reports on Monday morning that the ATO would save its Geelong office.
CPSU deputy national secretary Beth Vincent-Pietsch said it would welcome the ATO making the decision to keep jobs and services in Geelong, which would be crucial to the regional post-COVID recovery.
"The members deserve this win. They left no stone unturned to keep their jobs and protect regional economies," she said.
"Regional Australia desperately needs more jobs and better access to public services and government support. Creating new Australian Public Service jobs in regional towns will deliver major benefits for communities and more job opportunities for APS staff."
The ATO, which is administering the federal government's JobKeeper wage subsidy program, flagged in May that it wanted to wind up its Geelong operation because of a long-term decline in staff numbers.
In a notice to employees the agency said about 50 per cent of its workpoints were vacant in the Geelong office, well above the ATO vacancy target of 10 per cent.
The organisation proposed to close the site, saying it had been unable to identify sub-leasing opportunities and its lease on the site expired in June 2021.
It told employees they could opt to move to another ATO office, which may involve undertaking different work.
They could also consider being redeployed to another APS agency in Geelong, in which they would have to accept the pay and conditions offered by their new employer.
The ATO said in May that workers would also be entitled to apply for a voluntary redundancy.
In response to that plan, the CPSU warned that shutting down the Geelong branch would rip $9 million out of the local economy.