Smarter digital forms could spell the end for personal tax returns.
Perth-based accounting practice Noble and Associates said it was one of the first companies to have built a cloud-based program for lodging tax and other forms to the federal government’s next-generation data gateway.
The program, called LodgeIT, allowed accountants and bookkeepers using the Xero cloud accounting program to lodge all 22 versions of the Business Activity Statement form, a company tax form (C Return), payroll tax forms for all state governments and a number of ASIC (Australian Securities and Investment Commission) forms for larger companies.
LodgeIT was a fully automated system that could pull information out of accounting software and government agencies to populate a form and reconcile the collected data with the source. LodgeIT then checked the form for errors with the government’s electronic data gateway before submitting it.
“We are really looking at a revolution here,” Andrew Noble, director of Noble and Associates, said during a demonstration of the program at a user conference for Xero in Melbourne last month.
The program would be available in beta within two months after the government had released digital tax forms for trusts, partnerships and superannuation funds, Noble said in a phone interview. Noble and Associates planned to sell LodgeIT in the first quarter of 2012.
LodgeIT was written in the next-generation language for electronic documents used by government called XBRL (eXtensible Business Reporting Language). The Federal Government’s Standard Business Reporting initiative (SBR), a joint venture between the Treasury and the Australian Taxation Office (ATO), was writing standardised forms in XBRL that could be automatically received over the internet and distributed to relevant government agencies.
XBRL forms have already been adopted by banks and regulators in the US, Europe, China, India and other countries to reduce the time businesses spent responding to tax and other government obligations.
The XBRL programming language allowed government agencies to “pre-fill” forms with data that they had collected from other sources. The ultimate goal would be to drastically reduce the number of forms requested by government, even as far as abolishing the personal tax return, Noble said.
Read on for the potential of XBRL – and its limitations
“You already get your group certificate, interest and dividends prefilled. Now there’s not a whole lot more because the government already knows the information. I think they see the death of the I Return (the personal tax form).
“If you’ve got deductions less than $500 they will say don’t bother lodging your return, so that will cut out an absolute swathe of personal lodgers,” Noble said.
Noble said that established accounting software players such as Handisoft, Reckon and MYOB were too invested in the older Electronic Commerce Interface standard used to submit data to the ATO.
“It’s not like you can provision your developers to move from desktop (and ECI) to XBRL systems, they’re like two different animals. You have to completely retool and reskill your team,” Noble said.
There were notable differences between the two technologies, Noble said. An ECI program couldn’t be used in the cloud, and XBRL had a much greater application beyond tax. The SBR government initiative had written XBRL definitions for tax, schooling, the economy and the environment, which meant many different agencies could compile forms for electronic lodging.
“XBRL is amazingly sophisticated and it’s the next-generation business language,” Noble said.
One other company had built a cloud-based, XBRL form-lodgement service in Australia, Noble said. Intuit had included XBRL technology in its Quickbooks desktop accounting software which let you lodge BAS statements from a PC.
XBLR programs such as LodgeIT would not replace ECI services entirely until the SBR government initiative had released all essential forms for taxation and business registration, Noble said.
SBR had released ASIC forms including the annual return of a foreign company, notification of half yearly profits, a copy of financial statements and reports. However, it hadn’t released forms for activities common among SMEs such as changing directors or adding shares.
“Why they don’t have the forms in there for what we lodge on an every day basis, God knows,” Noble said.
While the personal tax return may one day disappear, the SBR has not released an XBLR form for that either. Noble said that accounting practices would not be able to replace their ECI-based systems with an XBLR alternative until a personal tax form and more ASIC forms had been released.