Independent Senator Nick Xenophon has called for an inquiry into an Australian Taxation Office (ATO) computer glitch delaying the processing of refunds.
The income tax component of the ATO's $879 million Change Program was turned on in January, but problems with it have led to long delays processing about one million tax assessments.
An internal ATO document obtained by the ABC indicated hundreds of people had been calling the agency about the serious impact the delays were having on their lives.
One man said he had to borrow money to eat and was about to become homeless, while a woman said she had to cancel her daughter's surgery because she hadn't received her tax refund yet.
Senator Xenophon said the situation was a debacle.
"When you consider that taxpayers are becoming desperate ... then you know there is something seriously wrong with this new IT system," he told ABC Radio on Wednesday.
"This requires nothing short of an independent investigation because we need to get to the bottom of this.
"The danger is that unless this is sorted out by tax time, it will turn into absolute chaos when it comes to millions of returns being processed."
ATO chief operating officer Raelene Vivian couldn't say how many tax returns had been held up as a result of the computer problems, but there had been 1440 hardship cases.
"Where people genuinely have those ... our staff have been falling over backwards to make sure that we get that money to those people," she said.
Vivian said only about 2 per cent of the total number of returns the ATO processes annually had been affected, and that the problems should be sorted out by May. The taxation office has been releasing updates detailing how it is progressing with removing the back-up of returns.
Taxpayers Australia spokesperson Roger Timms said the ATO certainly wasn't on top of the problem at the moment.
"We receive a lot of feedback into our office that would indicate there are a lot of aggrieved taxpayers tax agents out there who would think the problem is far from being solved," he said.
Shadow Assistant Treasurer Sussan Ley also weighed in on the problem.
"Late last month the ATO assured me that the problems they'd been experiencing processing returns as a result of a changeover to the new computer system were all but resolved," she said in a statement. "However, there is still a steady stream of complaints from constituents and their accountants who have been waiting for assessments and refunds since as early as December last year."
Some people had received an assessment notice but no pay, while others haven't received a notice at all.
"It is clear from the calls that I am being advised of that the ATO still has not cleared the backlog. I want to know how many returns are still outstanding and exactly when taxpayers can expect to receive their returns."
The Change Program has involved replacing systems from the mid 1970's with a new integrated core processing system. IT services firm Accenture is the ATO's major partner for the Change Program work, although Capgemini also works with the agency from an assurance perspective. Fringe benefits tax and superannuation components were tackled before moving the major income tax component segment into the new systems.
It had already seen budget slippage and delays up to this point. The budget started out at $445 million over six years in 2004. The program was scheduled to be completed in June 2008. However, the program is still being bedded down and the tax office has said that in the worst-case scenario it could cost $879 million.