In an e-mailed statement outlining the move this morning, ATO second commissioner Greg Farr said there was no current need to go offshore as the organisation had "sufficient capability to deliver on our current plans".
"The third stage of the Change Program involves the introduction of the integrated core processing system which replaces our back end processing systems," said Farr. "We are some way down the development track already, working on a model of parallel design and development. So far we are on track and on budget."
The ATO's Change Program is designed to streamline the costs and processes associated with tax compliance. It includes the replacement of both front-end systems and back-end processing systems.
However, the ATO has left the offshoring option on the table for future work, noting there was currently a huge demand for IT services in Australia.
"So, if at some time in the future we need to ramp up our capability and we were not able to develop or acquire that capability in Australia, we may be prepared to consider a future proposal to offshore development work under our current contract," said Farr.
The second commissioner noted it had taken some time to finalise the decision due to the need to consider wider implications.
"It was not just a question of considering the requirements of the current Change Program," he said.
"There was a need to look at the broader change agenda for the Tax Office and to consider any impacts that may have emerged from Federal Budget announcements."
The ATO discussed the matter with other government stakeholders.
"There were discussions with the Department of Finance and Administration, the Australian Government Information Management Office and relevant ministers in relation to the risks and benefits associated with the proposal received from Accenture," said Farr.
"They noted that the decision to accept the proposal was one for the Tax Office to make."
ZDNet Australia's Iain Ferguson contributed to this story.