A botched raid based on a hunch has prompted the Australian Tax Office to rethink its policies.

The review comes after an investigation into a raid which saw nine suit-clad bureaucrats daringly board the HMAS Cerberus, searching for nine hours and finding absolutely nothing.

The raid was ordered by the ATO’s Fraud Prevention and Internal Investigations branch (FP&II), whose senior officers believed that a former colleague had sent hate mail to a senior tax official.

Their old workmate, Mr Gary Setter, has since joined the navy and consistently denies any wrongdoing. He is reportedly considering legal action, while an investigation by the Privacy Commissioner has already kicked off.

“The requisite ethical behaviour has not been met, and significant taxpayer funds were wasted on what could only be viewed as a personal vendetta against a member of the public by a senior public servant,” Mr Setter said in a statement after the events.

“Again, I state that the actions of the persons involved in this matter are tantamount to criminal acts. To date, I have never been shown any evidence to justify these actions instigated and undertaken by the ATO. How public servants can get away with this and be defended by their taxpayer-funded employer has me baffled.”

The Fraud unit has been the subject of probes into its range and possible overreach, after allegations the group had ‘gone rogue’.

The ruling of an Ombudsmen’s inquiry into the unit found it should at least have told the police what it was doing.

“While the ATO maintains that it had the necessary authority to conduct the investigation in this case, it has accepted that a referral to the AFP would have been appropriate to allow the AFP the opportunity to assess the matter,” the Ombudsman's delegate Dorota Siarkiewicz wrote.

“The ATO has also agreed to seek independent assessment of whether any officer involved in this matter has breached the Australian Public Service Code of Conduct.”