As we all deal electronically with the tax authorities there’s going to be more – not less – need for accountants. And it could mean new revenue streams for accountants and bookkeepers, if the digitisation of the Australian Tax Office (ATO) matches experiences in the UK.
Tony O’Reilly, tax director at KPMG, told Acuity magazine that when HM Revenue and Customs moved to a digital platform in the UK it actually created new revenue streams. The Big Four firm now helps companies transmit information directly to HMRC. KPMG’s UK practice has created a new business based on tagging financial statements.
The need for accountants is only growing in Australia. Australian tax law is not getting any simpler, and small businesses who lodge returns and activity statements directly with the ATO are facing an increasing compliance burden. Some of this, according to suggestions from the ATO, could see greater compliance responsibilities shifted to the accountancy and bookkeeping sector.
This will mean accountants who meet certain requirements and qualifications will be entrusted by the ATO to review clients’ records vigorously and ensure they’ve claimed deductions appropriately. Accountants already play an important role with the ATO today as something of a compliance gatekeeper. Along with a responsibility to ensure their clients don’t pay a dollar more than they need to in tax, accountants have a legal obligation to comply with the appropriate tax legislation.
Under Tax Practitioners Board requirements, accountants should not lodge a tax return where (for want of a better term) they should have known better. What used to be an ‘all care, no responsibility’ position is now one where accountants can face prosecution if they don’t take reasonable steps to prepare the return in accordance with the legislation, and ensure to some degree that the claims made are supported.
The ATO has also pushed for data transfer mechanisms that would require accountants to cross-check client data entry before it is submitted. In a digital world, then, it becomes even more vital for accountants to be involved at the beginning of the tax process, and not the end, to ensure clean and accurate tax returns.
It may seem that digital systems, which appear simple to use and reduce manual data processing work, automatically create perfect business data. In reality, capital versus income, GST versus non-GST, deductible versus non-deductible aren’t coded perfectly by a system, no matter how beautiful it is.
An Evolving Role
In a digital tax economy, the accuracy and efficiency of data the ATO is receiving from small businesses might be worse than ever if it’s not entered into systems correctly. Human errors are easy to make – it could be as simple as inputting a figure in the wrong box with the wrong code, for example – and could trigger unwanted attention from the ATO as a result.
Under other tax regimes (like in the UK), accountants traditionally get involved in the tax return process a lot earlier. They make sure systems are set up right and they are engaged to review their clients’ accounts more frequently.
If that happens in Australia, an increasingly digital tax landscape will softly shift accountants from form-filling and lodging services into the role of advisors, joining small businesses at the outset of the process, rather than at the end.
Technology makes it increasingly easy for small businesses to deal directly with the ATO, and accountants of the future will be called upon for compliance advice. Their expertise will simply be applied at a different point along the timeline.
Then there is the expansion of digital tax tools such as myTax. ATO Second Commissioner Andrew Mills assured accountants in a 2015 speech that: ‘All this does not mean we are shutting out tax agents and intermediaries. That’s not our intention at all. You are very much a part of the picture.”
Interestingly, when the ATO released e-Tax, the number of returns lodged through tax agents in Australia increased from 71% to 74% – debunking the theory that technology will replace accountants. Rather, the trend shows that technology enhances the relationship between accountants and tax payers.
Benefits for all
Clients frequently tell surveys they want their accountants to be more involved. Unfortunately, many clients aren’t willing to pay extra for it. In fact many small businesses wonder why, when technology allows them to deal with the ATO directly, they even pay as much as they do for tax services today.
The ATO has an opportunity here to help. If they do change how businesses’ tax submissions are lodged, it would help to ensure small businesses see their accountants in a different light. Accountants should welcome (or at least not be scared of) more direct client-ATO relations. The ATO’s role of playing the bad cop shouldn’t be underrated, and neither should steps that improve the efficiency of accounting firms by removing manual and non-chargeable ATO liaison tasks.
Accountants might actually begin to be able to charge more, not less, as they are in more frequent contact with their clients throughout the course of the year. Their clients will begin to understand and see how their accountant is adding more value on a regular basis, not only for tax advice but with the business advice they provide.
It’s up to the ATO to facilitate these changes and if they do it right, everybody can win.