An inquiry ran by the government has recommended a number of significant changes to the Australian taxation system and the conduct of the tax office, including a suggestion tax agents and taxpayers be compensated for ATO outages and downtime.
The government’s Standing Committee on Tax and Revenue released its report last week analysing taxpayers’ engagement with the tax system, looking at how the Australian taxation system can be improved and refined to make it easier for businesses and individuals.
The committee released 13 recommendations — the first of which advised the government to fully review Australia’s taxation system before 2022 in order to further simplify the tax system and reduce the “quantum” of tax law while continuing to improve comprehension of the tax systems for taxpayers “without expertise in taxation law”.
As part of this taxation system review, the committee suggested the ATO create a tax platform which encourages and facilitates other service providers to serve Australian taxpayers, saying it was concerned the ATO is “seeking to provide services to end users to the exclusion of other providers”.
“The Committee therefore believes it is timely for the government to revisit consideration of Australia’s broader tax regime and what reforms are required to place the Australian tax system in the best possible position, not only for domestic taxpayers but for all Australian residents,” the report says.
Many of the recommendations suggest the ATO should increase its use of tools such as behavioural insights techniques to better serve Australian taxpayers, along with creating a regulatory philosophy to codify the principles it uses to engage with taxpayers.
These recommendations come in the wake of a scathing Four Corners report earlier this year, which accused the ATO of “bullying” Australian small businesses.
Compensation for ATO outages
However, one of the most interesting recommendations is the suggestion from the committee for the ATO to introduce a service-level agreement with end users, especially tax agents, for service guarantees in the event the tax portal experiences an outage or is otherwise disrupted.
This recommendation includes the suggestion there should be a “consideration of payments to end users for poor delivery outcomes”, effectively recommending the ATO compensate taxpayers for outages and other disruptions.
“This is proposed in recognition that the ATO is a monopoly provider that is not subject to contestability in its service delivery,” the report said.
The ATO experienced an unprecedented series of service outages in late-2016 and early-2017, which ran for a number of days and left multiple accountants and business owners high and dry, with none able to access the tax office’s online taxation portal.
Further expanding on this in the report, the committee asked the tax office about its current level of cyber resilience, to which the ATO confirmed its cyber security capabilities were one of its highest priorities.
However, the committee was not convinced, citing a number of “concerns in the community” about the ongoing resilience of the system, saying it would remain a challenge for the ATO “well into the future”.
It also called on the ATO to respond to numerous complaints from businesses and taxpayers who expressed distress over the outages, and businesses who experienced “lengthy downtimes” due to outages and maintenance.
Speaking to SmartCompany, director at Allied Accountants David McKellar said while compensation from the ATO “would be nice”, it’s hard to quantify due to taxpayers not paying the ATO for its services in the first place.
“I don’t think compensation or payment is the answer. Instead, we need more consistency in how the ATO deals with these things, especially for tax agents,” he says.
Instead, McKellar calls for greater certainty from the tax office when it comes to giving clients deferrals when the tax system goes awry, including more freedom to get extensions for lodgements. However, when it comes to the concept of a service-level agreement, the tax agent is on board.
“I think a service level agreement would definitely assist, and while they do have a service standard now of 28 days, once they breach that service standard there’s nothing you can do, you’re at the mercy of waiting for them to do whatever,” he says.
“Getting a clear service standard in place would also make it clear on things like escalation procedures, and new business and tax agent portals.”
Work-related deductions should have “standard” deduction
The inquiry also recommends a “standard deduction” be introduced to Australia’s work-related deduction scheme, along with an overall simplification of the tax return system, including an eventual move towards ‘push returns’ for users with uncomplicated tax returns. Effectively, this would mean near-automatic tax returns for many Australian taxpayers.
“The ability of a taxpayer to choose a standard deduction, or to substantiate every claim above the determined threshold, will streamline tax return lodgement and reduce compliance costs for many taxpayers,” the report reads.
“It will also have the effect of tightening the nexus between income earned and substantiated claims as there will be fewer of these in the system.”
McKellar welcomes the suggestion for a standard work-related deductions system, saying its been something recommended many times in the past. He thinks it would come in at about a $500 threshold and would go a long way to simplifying both the tax return system and the ATO’s internal system.
“For a lot of taxpayers, it takes away the need to retain documents and comply with substantiation tools. It would make it a lot simpler for individuals with simple tax affairs, and what it’s effectively doing is raising the tax-free threshold by an amount.”
SmartCompany contacted the ATO but did not receive a response prior to publication.