ATO Archives - The Latest on Accounting Tech for SMEs

The Top Three Priorities on The ATO’s Roadmap

March 10, 2015 by Sholto Macpherson

Accountants have heard a lot from the Australian Taxation Office about its big-picture goals to digitise its processes and overhaul the way it collects tax.

The scale of this enormous exercise has clearly worried a lot of accountants – but what are the immediate projects and what will their effects be?

The date in everyone’s dairies should be June 30 2016. It should mark the launch of the ATO’s three flagship projects, two of which are already underway and one has only just started.

ELS to SBR

The most important is the transition from the electronic lodgment service (ELS) to the standard business reporting (SBR) framework. While this migration will affect every accountant, bookkeeper and business owner who submits information electronically to the ATO, it will occur largely invisibly.

The project is largely in the hands of the ATO, which is upgrading its databases and data collection software to SBR, and the accounting software companies, which must upgrade their tax, practice management and business accounting software.

Come July 2016 – after the software companies have pushed out upgrades to all users – tax and BAS agents shouldn’t notice any difference in the way they lodge returns electronically. The ATO is in effect just changing the plumbing.

The next couple of years will be a different story, however. The SBR framework will give the ATO and software companies the ability to re-use information automatically, between forms and between government agencies, which should reduce the amount of paperwork and time taken to meet compliance.

New portals

The ATO plans to upgrade its temperamental portals for tax and BAS agents. The ATO is pursuing several options including building the portals into the MyGov and ATO Online websites.

Software companies have already started building basic functions of the existing portals into their practice management software.

Xero has plans to replicate all the functions of the ATO’s tax agent portal within its practice management software. This would include updating the list of clients, changing addresses and receiving notices of assessments.

“All the admin tasks I pay someone to do in three systems I can get them to do in one system.

All that should happen within your practice management software. At the moment it’s very disjointed,” Anthony Migliardi, product owner of tax at Xero, says. Reckon and MYOB have said they are also building features from the portals into their practice management software.

The existing ATO portals will probably continue in their existing form past July 2016 until all features have been replicated by other services.

Single Touch Payroll

This project was announced in December by the federal minister for small business Bruce Bilson, who committed the ATO to launching by July 2016.

The exact definition of Single-Touch Payroll is still under discussion. The most basic implementation will require businesses to report how much superannuation and income tax they owe every time they make payroll.

The most aggressive version will require businesses to not just report but pay their superannuation and income tax with every payroll.

If the ATO decides to tie super and income tax payments to payroll it will effectively bring forward payments to the ATO, with a corresponding impact on cashflow. It is unlikely that the ATO or the federal government will have the stomach to introduce this politically unpopular step.

Again, the software companies are in the firing line here with updates to their business accounting programs required.

These are exciting times to be an accountant and a bookkeeper; slightly nerve-wracking if you work for an accounting software company or in the ATO’s IT department! A huge amount of development is going on behind the scenes, the impact of which won’t be felt until second half of 2016.

To find out what else is on the ATO’s technology roadmap and the likely impact of these changes on the accounting profession, check out the latest Macpherson Report: An Analysis of the ATO’s Technology Roadmap.

The Death of Compliance: A Valid Threat or Scaremongering?

March 5, 2015 by Paul

By now most tax accountants will have heard about ATO second commissioner Geoff Leeper’s comments at the ATSA conference last year. You would have heard “$500 million of compliance fees will be lost” due to the ATO’s move to standard business reporting, the digital format that will replace the electronic lodgment service (ELS).

For anyone on an email list of so-called business and marketing ‘experts’ you have had this shoved down your throat with the aim of scaring you into thinking you will lose all of your compliance revenue within four years.

Like Henny Penny (Chicken Little for my American friends) running around screaming “the sky is falling”, these “experts” want you to believe that all the work you have done to earn revenue in the last 20 to 40 years is gone and buying their book or attending their seminar is your only salvation.

I believe these experts are using the threat of the ATO to boost their sales. While I agree that SBR will introduce efficiencies, I don’t think they will reduce revenue for most firms. In fact, I believe SBR will increase profitability, ensuring there will be many years of lucrative work from tax compliance. Here’s why.

From the day I started 5ways I have explored ways of streamlining processes for our clients and ourselves using technology.

5Ways Group is a 100 percent cloud accounting firm and we create efficiency by reducing time spent on admin or data entry. Technology plays a huge part in that efficiency. Can I say here that for a lot of the systems I use, the ideas and suggestions have come from firms many times bigger and better than us.

The systems we use take efficiency and time saved far beyond what the ATO could even dream of and, by the rationale of those business ‘experts’, my firm should be broke. It’s not; profitability has increased by 200% and the time we spend on each file has halved. Accounting has never been more profitable and accountants have never been more relevant to their clients.

A funny thing happens after you find efficiency. You realise that compliance work has a value that isn’t tied to the number of hours you spend on it. You realise that you can still charge the same fee but spend half the hours working on it. This is because the time you are now spending on the job carries a much higher value to the client. Anyone familiar with the phase, “What do we bill them? Oh, just take last year’s bill and add 5 percent” will understand.

I want to address the views of these scaremongers using examples taken from their marketing material.

What they say: Compliance revenue is dead!

What I say:

Compliance revenue isn’t going anywhere, no matter how many books these ‘experts’ write.
The complexity of our taxation system alone will keep us busy for decades to come. When the ATO pre-populates a couple of forms it will eliminate some of the low-level, manual admin and heavy data entry by collecting it at source. This should be embraced. E-tax has been with us for many years now and I haven’t seen a great deal of lost compliance revenue from the firms I have worked for. While ‘I’ returns will get more streamlined I think the threat is a storm in a teacup.
100 percent of my revenue comes from what people would call compliance and the efficiency has not dropped revenue $1 and has seen net profit more than double.

What they say: The ATO will act as the accountant for your clients and do you out of a job!

What I say:

The ATO’s SBR isn’t revolutionary for us non-tech geeks. The majority of us won’t know if we are using ELS or SBR. It’s the platform by which people (mainly tax agents) lodge information with the ATO.
The task of implementing most of the SBR functionality has been given to software providers who monetise the accountant channel. What do you do to a channel you earn revenue from? You keep them happy. The toys will be in the accountants’ hands.
The main areas of automation so far from SBR (TFN declarations and PAYG stationery) reduce the time it takes for accountants to help clients. Most of this eliminated work doesn’t contribute a great deal to the revenue of a firm but it definitely chews up time.

We should also ask ourselves how many business taxpayers actually trust the ATO to take their raw data. The stuff before the accountant has checked that it’s correct and that the tax has been minimised. In my experience it is NONE.

This is an unbelievable time for the accounting industry. We have an ATO tax commissioner with real business experience driving an agenda of change. A team of dedicated second commissioners are driving change by embracing technology and innovation. With our industry’s support, they will drive this change (and its $500 million of time savings) straight to the profitability of accounting firms.

As for our scaremongering friends:

I can accept discussion about industry trends.

I understand the need to educate an industry in decline.

I will even take hyperbolic sales copy.

What I won’t take is people using unfounded fear to sell a book or a seminar.

To read more of Paul’s take on the ATO’s planned changes, and for an impartial(!) look at the ATO’s technology roadmap, check out the latest Macpherson Report.

ATO Gives Few Details on 1.4M Automated Tax Returns for FY14

May 2, 2014 by Aimy Chen

The Australian Taxation Office and Treasurer Joe Hockey recently announced an automated tax refund plan for taxpayers with straightforward deductions from July 1. Under the plan, as many as 1.4 million taxpayers would receive a pre-filled tax return from the government and receive their tax refunds automatically.

However, the ATO was unable to give BoxFreeIT details as to which taxpayers would qualify for the plan or the maximum number of deductions it could process.

The ATO also gave no indication of how taxpayers can find out whether they are eligible for the plan.

“We’ve identified this as a possible service initiative and we’re working towards it,” said an ATO spokesperson. Industry insiders expected another announcement within the next month or two clarifying the details of the plan.

Over 4.5 million taxpayers were expected to be included in the trial of automated tax returns between 2015 and 2016. The E-tax software would be eventually replaced by a web portal via myGov.au to deal with tax related issues.

While some tax agents would lose low-margin business from taxpayers with simple returns, most accountants realised there was more future in offering targeted advice to taxpayers with complex affairs, said Michael Croker, head of tax policy from the Institute of Chartered Accountants Australia in the Financial Review.

Under the automated tax return plan, wage and salary earners received a ‘thank you’ receipt from the ATO, which showed how their tax dollars were spent on welfare, health, education and defence.

Taxpayers spent on average $371 each in outsourcing tax refund preparations, according to the latest Tax Statistics released. The ‘tick and flick’ scheme was the Treasury’s plan to reduce red tape but it would be difficult for individuals with work-related deductions. Individuals claimed more than $19 billion in work expenses last year.

GovReports Releases iTax Portal From Beta

January 13, 2014 by Sholto Macpherson

iTax Portal aims for two-minute tax return lodgments
Faster lodging helps compliance with ATO lodgment program
$1,000 discount until 31st January 2014

GovReports’ iTax Portal has finished beta testing and was available to registered tax agents to speed up lodgment of individual tax returns. Impact Management Group which developed the portal claimed it would use pre-filled information from the Australian Tax Office to reduce lodgment time to two minutes.

Agents could enter, queue and lodge returns in the Electronic Lodgment Service compliant portal. Agents already using GovReports could push client data directly to the iTax Portal, which was automatically updated with the latest tax rules.

Faster lodgment would help tax agents comply with the ATO’s recently updated lodgment program, said Tiana Tran, Impact’s managing director. The program gave concessional due dates to tax agents who lodged 85 percent of clients’ current year returns by the lodgment due date and lodged all annual income tax and fringe benefits tax returns electronically.

While the ATO was expected to release its pre-fill function for tax returns in March, “accountants are shopping around now for solutions in preparation for tax season,” Tran said.

“Agents can use their traditional low season to become familiar with the portal and be ready to reap the benefits when the 2013-14 tax season starts,” Tran added.

Impact would waive the $1,000 initial set-up fee for registered tax agents that subscribed before 31 January 2014. Tax agents would still pay an annual fee of $75 for the 2014 financial year and lodgment fees of $2-$3 per return depending on volume. Lodgment fees were payable once the returns had been lodged with the ATO.

The set-up fee included a customised log-in landing page, customisable standard business and client web page, banner ads promoting the service for the tax agent’s business website, and the ability to import or roll over client and tax information from the previous year.

Tax agents could lodge 2012 and 2013 individual tax returns with the customisable iTax Portal from 4 April. Agents could lodge 2014 returns from 1 July.

Booming SBR Usage to Pass 3.2 million with SuperStream Expansion: ATO

December 18, 2013 by Sholto Macpherson

Business use of Standard Business Reporting had exploded this financial year with the introduction of SuperStream Tax File Number Integrity Checks (SuperTICK), the Australian Taxation Office has said.

SBR lodgements had risen from 150,000 lodgements using SBR in the 2012-2013 financial year to over 750,000 transactions by the end of September, most of which were SuperTICK checks.

“We estimate that 3.2 million such checks will be undertaken by the end of this financial year,” Geoff Leeper, second commissioner for the ATO’s people, systems and services group, told an accounting conference in New Zealand last month. Leeper also said the ATO intended to automate 1.4 million individual tax returns in 2014 and would eventually “liberate” 4.5 million taxpayers from completing tax returns.

Accountants and bookkeepers could benefit from SBR as it would reduce the time spent gathering, analysing and assembling data for clients. SBR would reduce potential input errors from manual entry, as much as the information will come accountants’ business’ systems and government records.

A Price Waterhouse Coopers’ tax integration project using SBR had found savings of $1.8 million a year in its private clients practice, which prepared nearly 5,000 tax returns. A Deloitte Digital pilot demonstrated similar benefits with an 82 percent saving in time for the preparation of financial statements from SBR.

SuperTICK checks offered potential savings of $40-$50 per transaction by replacing manual processes to verify member details for rollover purposes, according to the Association of Superannuation Funds of Australia.

The federal initiative to provide standardised electronic reporting was entering a “substantial period of expansion”. While the initial implementation of Standard Business Reporting (SBR) was focused on financial and payroll reporting, the ATO would introduce SBR standards for SuperStream transactions in 2013-15 and the ATO’s Electronic Lodgement Service from 2015-16, Leeper said.

The SBR program comprised three elements: an online gateway, which enabled reports to pass securely between business and government in both directions; a taxonomy, which supported a single reporting language; and the secure log-on mechanism, AUSkey.

The program aimed to reduce the amount of time and money business spend on reporting in several ways. SBR could read financial data in a business accounting system, pre-fill forms with required information and let businesses deliver forms to government agencies through a secure online channel.

“As the data used in reporting via SBR is more consistent and integrated with natural business processes, it can also improve compliance outcomes,” Leeper said.

SBR could help larger businesses with complex corporate structures or many reporting entities to improve internal reporting. “Businesses can realise internal efficiencies because SBR uses an international accountants’ reporting language which offers tagging of data at its source and uses a consistent definition of terms,” Leeper said.

The full text of the speech was available on the ATO’s website.