Tax

The ATO’s post-mortem on system outages: SMEs to get only an apology after accountants were “put through the wringer”

Emma Koehn /

The Australian Taxation Office has identified 14 key areas in which it can improve its systems, revealing in a post-mortem of its major systems outage last December that there were 77 performance issues related to its storage area network in the lead-up to the hardware failure.

In a report released on Thursday, ATO Commissioner Chris Jordan said the systems knockout was “unexpected” and “unprecedented”. He apologised for any inconvenience caused to hundreds of tax practitioners in the lead-up to Christmas 2016, when weeks-long disruption to services stopped accountants from being able to log client’s data.

However, despite calls from the tax agent community for compensation, the ATO says in its report they have received “only a handful of claims” calling for assistance on this front.

Accounting groups say it’s now clear nobody could have predicted the saga, but the reality is that SMEs have suffered a significant productivity cost that will likely never be addressed.

“Long-suffering practitioners have been put through the wringer”, general manager of technical policy at the Institute of Public Accountants, Tony Greco, tells SmartCompany.

“Unfortunately there’s only so much an apology can do.”

There are no plans for a special compensation scheme for tax practitioners, although the tax office has pointed to the Scheme for Compensation for Detriment caused by Defective Administration. This is a discretionary tool through which individuals can apply for assistance if they have been put at a serious disadvantage due to processes of a Commonwealth entity.

Greco says this is a problematic solution because that government scheme is not suited to the types of problems small business owners have faced over the past six months.

“It’s not suited to these types of claims — productivity losses aren’t really considered under these schemes. Plus, the hurdles are too high and it’s very difficult because the sums involved [in losses from the outage] are too low.”

The outage and warnings

The ATO report confirms the outages were caused by a hardware failure, when one of the tax office’s Storage Area Networks (SAN) located in Sydney was knocked out late on the evening of December 11.

The SAN was operated and maintained by Hewlett Packard Enterprises. After a review of the failure, the ATO says it came about because of a range of factors, including failures associated with “stressed fibre optic cabling”, unsuccessful attempts to “autorecover” data, as well as management and monitoring systems that relied on the same data pathways as other “production” systems that ran ATO services.

The tax office has since secured a confidential settlement with HPE over the failure, but it also says it needs to review 14 key areas of practice, including the “principles informing the ATO’s IT design” and what happens once faults in the system are identified.

The report confirms that between May and December 2016, at least 77 “events” that related to the systems outage were logged into an incident resolution tool, but the ATO says it did not fully understand the consequences.

“We were not made fully aware of the significance of the continuing trend of alerts, nor the broader systems impacts that would result from the failure of the 3PAR SAN,” the ATO reports.

What next?

The tax office says it has now replaced the faulty SAN equipment with new equipment, including disk drives, with a view to decommission the problematic SAN by July.

Meanwhile, a number of plans are being put in place to improve communication with stakeholders and “incident responses” to minimise disruptive events.

The ATO says its number one goal is making sure everything is stable by the time people start filing this year’s tax returns.

Robert Deutsch, senior tax counsel at The Tax Institute, says that while the tax office is taking the right steps to rectify issues, it’s clear this will be a long-term project.

“For the longer term, clearly more work needs to be done in the design and implementation of the overall IT strategy including appropriate recruitment and engagement of contractors. All that is recognised in the report, and The Tax Institute looks forward to seeing further developments,” he tells SmartCompany.

Greco observes that while the ATO focuses on stability of systems in the lead-up to the end of financial year, many of the planned upgrades to the “ancient” portal system that provides business registration and tax agent services have been put on the backburner.

“Priority one, two and three is just maintaining a stable system. All of the system upgrades and moving to better platforms are all on hold,” he says.

This demonstrates the hardware failure will have significant flow-on effects when it comes to ensuring tax agents have modern services available to them in the long run.

“The existing systems aren’t perfect, and we’re having to wait longer for modern ones,” Greco says.

The full ATO systems report can be read here.

SmartCompany contacted the ATO but the tax office declined to provide further comment.

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Emma Koehn

Emma Koehn is a former senior journalist at SmartCompany.

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