The links between a high ranking tax official and a $165 million payroll fraud case struck at the "heart and values" of the agency, its boss says.
Ten people have been charged including Adam and Laura Cranston, the children of Australian Taxation Office deputy commissioner Michael Cranston.
Mr Cranstan is due in court next month to answer charges of allegedly abusing his position.
ATO Commissioner Chris Jordan said his office was aware the community must have full trust in its integrity, objectivity and expertise.
"We cannot do our job effectively without this," he told a Senate committee hearing in Canberra on Tuesday.
The allegation against the deputy commissioner Cranston had detracted from the success of Operation Elbrus - involving the ATO, Australian Federal Police and Australian Criminal Intelligence Commission - in investigating Plutus Payroll.
"All three agencies separately and independently identified and investigated the syndicate, and then worked to together to culminate in the actions earlier this month," Mr Jordan said.
The commissioner also confirmed the AFP told him on January 11 of the personal relationship between the principals of the alleged fraud and Michael Cranston.
"Commissioner (Andrew) Colvin was clear to me that Michael Cranston was not suspected, and is still not suspected, of being involved in the syndicate and its activities of defrauding the commonwealth," he said.
"Let me assure you, evidence to date shows that at no time did Michael Cranston directly access taxpayer data systems or access the audit cases under this investigation."
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