Brave new world for tax practitioners

As elements of tax compliance becomes more automated, it is imperative that practitioners consider how they can add value.

The ATO’s push towards full digitisation is a potential plus for tax agents and clients.

By Christopher Neische

In the wake of serious outages the Australian Taxation Office (ATO) is upgrading its IT and working with software developers to move tax agents from the electronic lodgment system (ELS) to the new practitioner lodgment service (PLS) by the end of March next year.

ATO assistant commissioner Colin Walker says the tax office is digitising all its processes, though admits it is currently “nowhere near a totally digital operation”.

“We have significant amounts of our operations still in paper form,” Walker says. 

“It is a continuing progress towards a world that is moving into an environment where we will interact digitally in most cases.”

The vast majority of Australia’s 28,500 active tax agents currently file using the ATO’s ELS or PLS, with less than 2000 still using paper.

However, the ATO is in the process of phasing out the two decade-old ELS and replacing it with the PLS, which has wider capabilities and establishes the platform to deliver more services through agents’ SBR-enabled practice management software.

PLS and ELS: key differences

The ELS is essentially just a lodgment channel; it does not process forms in real time or permit two-way communication between the ATO and practitioners.

In contrast, the new PLS enables an agent to in real-time or near real-time lodge and correct errors that under ELS would delay processing.  

Developers of tax practice software are able to incorporate the PLS into their systems and many of the things agents currently access through ATO portals will eventually be delivered in their software. 

“It means that in the future you will be working in one piece of software,” Walker says. 

“You will be able to access to support the preparation of tax returns as you’re doing them, rather than having to go into two systems.”

For example, if a practitioner is doing an income tax return for a client, instead of having to go to the ATO portal to determine dividends, the information will be accessible via practice software. 

When interacting with the ATO, Walker says PLS will become a “one-stop shop”.

Some 29 per cent of tax practitioners are already using PLS, although the ATO is in the process of progressively “turning off” which return types can be lodged via ELS, with the system planning to be shut at the end of March 2018.  

Currently, the only form not available through ELS is the fringe benefits tax (FBT) return.

Key benefits hidden in the cloud

According to Peter Docherty, general manager of public practice at CPA Australia, practitioners can make best use of PLS by taking advantage of the security and functionality of cloud computing, if they are not already doing so.

Docherty says cloud-based practice software allows practitioners to present data more clearly and to improve the financial literacy of clients, adding that many accountants only use about half the functionality of their systems. 

“The functionality that makes a difference – to actually present the data with the push of a button, in a graphical form, looking at past performance against current year performance – is rarely used,” he says.

“That provides a real opportunity to add value for clients – to make sure they understand what the financial report or tax return means for their business and how they can look at the future and make changes to improve financial performance.”

As elements of tax compliance becomes more automated, it is imperative that practitioners consider how they can add value, Docherty insists.

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Tax is never going to go away in Australia. It’s the quality of the tax advice and tax planning that [practitioners] provide, rather than just a tax return.”

ATO’s Walker also sees an ongoing need for high-calibre practitioners.

“To my mind, there will always be a role for the tax professional because, essentially, they are the people that are putting together and validating the material that supports the lodging of tax returns and other information with the ATO,” he says. 

“They are experts in their field of tax and add an enormous amount of value to their business and individual clients. Their expertise not only helps clients comply with at times complex legislation, they provide business-related advice and many other forms of assistance. 

“However, their world is changing and success in the future will rely on their ability to change to meet the needs of their clients.”

IT reliability a top priority

Another priority for the ATO is upgrading its IT systems after a significant outage in December 2016, when its Hewlett-Packard Enterprise data storage system failed and its main website, tax agent portal and business portal went down. A similar incident occurred in February this year.

Much of the equipment was replaced over Easter, Walker says. 

“We’re continuing to enhance and strengthen our systems to ensure reliability so that agents can have confidence, but that’s not to say we’re not going to have minor blips at different times.”

The ATO is also collaboratively designing with agents new portals to allow better access to client information, in combination with an improved and more stable online interface. However, it remains a work-in-progress as the ATO also delivers on other commitments.

One area it is not pursuing is the UK’s recent doing away with income tax returns for PAYG earners.

According to Walker, that is a “policy question” for government and given Australia’s income tax system is based strongly around deductions, would require fundamental changes to the law.

Read next: How will the cloud disrupt practice management software?

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