The Australian Taxation Office (ATO) should set up a dedicated compensation scheme for practitioners who suffer a financial disadvantage as a result of outages or system failures.
Releasing the findings from a long-awaited review into the future of the taxation profession yesterday afternoon, the Inspector General of Taxation (IGTO) recommended a suite of improvements to the ATO’s digital performance.
Nine recommendations were made, focusing on improving the “tested at times” relationship between tax practitioners and the ATO.
Tax practitioners were up in arms last year over a series of outages in ATO systems which prevented access to online lodgement services, including the tax agent portal.
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There have not been any major outages so far this year, but nevertheless, the IGTO found the tax office should “align its service standards for the performance of its systems with commercial providers” through the introduction of a compo scheme.
“The ATO and Tax Practitioners Board (TPB) along with tax practitioners and professionals collectively
need to have strong working relationships to realise this future,” acting inspector general of taxation Andrew McLoughlin said in a statement.
The IGTO also advised the tax office to “bolster the stability” of its systems, update its timeframe for the migration of the tax agent portal functions to the new ATO online system, and expand access to the current beta-testing site, particularly for smaller tax agents.
The recommendations have been welcomed by practitioners.
Tony Greco, general manager of technical policy and public affairs for the Institute of Public Accountants, said compensation for tax agents was needed given the lack of an alternative to using ATO platforms.
“We haven’t had many outages in the last 12 months, and since the major ones, things have improved … but the ATO don’t quite realise the reputational damage it has done and the costs,” Greco tells SmartCompany.
“If things go off the rails there should be a compensation mechanism … we’re forced to use their systems.”
Paul Drum, head of policy at CPA, says compensation for affected tax agents is a positive step.
“It’s positive that the report has highlighted some of the risks surrounding some of the recent ATO technology failures and the need for affected parties to have better access to compensation,” he tells SmartCompany.
Responding to the report the ATO did not specifically address the compensation scheme but said it welcomed the report.
“The Inspector-General has quite rightly focused on digital services and their increasingly important role,” the ATO said in a statement.
“We are well advanced on a number of areas noted in the report, including our new online services for agents accessed through MyGov, provision of Application Programming Interfaces (APIs) to digital service providers, and the extensive program to increase stability across our systems.”
Tax agents could play a bigger role in ABN verification
More broadly, the IGTO report was designed to assess the relationship between practitioners and the ATO, examining the evolving role for tax agents as technology becomes a bigger part of the industry.
There have been predictions that tax practitioners may become largely redundant over the next decade or so as the ATO evolves its processing and outreach systems, and taxpayers, including small business, increase their use of one-stop-shop accounting platforms.
The IGTO found, at least in the short-to-medium term, tax practitioners still have an important role to play in administering Australia’s taxation system, and could even play an expanded role in helping the ATO do its job.
One area singled out was Australian Business Number (ABN) verification. The IGTO said it is feasible tax agents could take pressure off the ATO by helping to administer this aspect of the tax system.
Drum welcomed the idea, saying Australia’s ABN system was due for a tidy up. “ABNs are a problem, there’s too many out there,” he says.
“It needs to be cleaned up.”
Back in 2017, a scandal involving tradies using Bunnings’ ABN details to rip off taxpayers was uncovered, sparking calls for system reform.
Greco said tax practitioners were in a position to better advise those applying for ABNs on whether one is required, and could ensure better verification in accordance with existing law.
“At the moment it’s too easy, any Tom, Dick or Harry can get on and whammo, out pops an ABN,” he says.
The government announced measures in the 2019-20 budget earlier this week to crack down on dodgy ABNs, including increasing the compliance burden on those who hold them.
Workplace expense overhaul?
An overhaul of Australia’s workplace-related expense regime could pave the way for making lodging tax returns “obsolete” in the coming years, the tax watchdog says.
Echoing views expressed by others in recent years, the IGTO said streamlining the work-expense system with a system of standard deductions could eliminate the need for income tax returns.
“As increasing amounts of reliable data are made available to the ATO, the purpose of a tax return as a means through which the ATO seeks to understand the taxpayer’s position will be diminished,” the IGTO said in its report.
“Effectively, the lodgment of tax returns would become obsolete.”
Previous work into the possibility of a standard deduction system in 2015 suggested taxpayers could be given the option of “ticking a box” to claim a set of standard deductions, valued, perhaps, at $500.
The ATO already uses pre-fill data to simplify the tax return process, data which is also made available to tax practitioners, although the current complexity Australia’s taxation laws has been identified as a barrier to full automation.
Internationally, many taxpayers in the UK, New Zealand and Singapore aren’t required to lodge income tax returns.
Legislation which would have introduced some standard deductions in Australia was drafted in 2011, but was not subsequently introduced into parliament.
The IGTO wants the government to revisit the idea, although it conceded there are some barriers to reforming the system.
“There is currently little support for any major change such as introducing standard deductions because of the impact on government revenue,” IGTO said.
ATO data suggests a standard deduction of $500 would cost taxpayers $2.294 billion a year, increasing to $4.58 billion if the deduction was increased to $1,000.
Savings would involve compliance-cost savings for taxpayers and administration costs for the ATO.
Drum thinks the idea is nothing more than a “pipe dream” and would actually shaft workers.
“Workers would absolutely lose out … if you’re a company you can claim deductions, but if you’re a wage slave you’re going to have a cap,” he says.
“They say to ameliorate the burden they’ll give everyone a deduction in personal income tax rates … we don’t trust future governments to keep that symmetry.”