Tax practitioner action plan

Speech by Commissioner of Taxation Michael D'Ascenzo
to the CPA Sydney Professional Accountants Group annual dinner
2 February 2012.

Introduction

If one is committed to keeping Australia as a leader in tax administration, it makes sense to listen to tax practitioners and to act on good advice.

Today is just part of what we continually need to do to give Australia an even bigger comparative advantage in tax and superannuation administration. We need to both commit to a genuine and constructive dialogue as to how we can improve things; how we can make things simpler and easier; how we can reduce compliance costs; and how we can make Australia more efficient.

The ATO and tax agents have had a symbiotic relationship, at least since the unification of the income tax laws in 1942. It is a model that has worked well for Australia, even though there are sometimes criticisms of the heavy dependence of Australian taxpayers on tax agents.

With modern technology there is today less of a need for the ATO to stagger lodgment dates, so the traditional win-win situation of the 1940s has less relevance now. The fact that we have maintained a special lodgment program for tax agents speaks loudly about the ATO's support for tax agents. We take the view that tax agents play an important role in helping their clients comply with their legal and civic responsibilities in relation to tax and superannuation. In addition tax agents still oil the mechanisms that make the ATO's administrative processes run smoothly, reducing compliance costs for taxpayers and generally helping to make Australian businesses more accountable and efficient. Importantly they help ensure that taxpayers' rights are protected. In doing this they help the ATO live our corporate values and the commitments we make in the Taxpayers' Charter.

This is why it is important that we continue to support you.

That said I need to acknowledge that not every thing in the relationship has always worked as well as we all would have liked. Neither of us can rest on our laurels.

Tonight I want to talk to you about how the ATO is refocusing our attention on how we can work with you to identify, and resolve, the big and the small irritants in our relationship. Those things that make it harder for you to do your job and make it harder for us to ensure willing and proper participation in the tax and super systems.

The tax practitioner action plan

Our commitment is expressed in our recent development of a 'Tax Practitioner Action Plan'. Today I am formally launching our plan and commitments for the future (see attachment).

The Action Plan was a direct outcome of the feedback we have been receiving from tax practitioners that has highlighted for us that we have some work to do to further increase our positive engagement with the profession.

The Action Plan was conceived late last year and maps our path forward until 2015. It provides the foundations for how we will work with you, and acknowledges past difficulties, while focussing on a positive future.

The principle which underpins the Plan is this - 'Tax practitioners support and influence Australians to value their tax and superannuation systems as community assets, where willing and proper participation is recognised as good citizenship.

The Action Plan sets the direction the detail, the what, the how and the when we would like to work out in collaboration with tax practitioners and your professional bodies.

We have already begun that consultation, with the first iteration of our approach being endorsed by the National Tax Liaison Group (NTLG) in December 2011 and shortly we will be taking it to the ATO Tax Practitioner Forum (ATPF).

There are three elements to our Plan:

• identify areas where we can improve the support we give you and work with you to design and implement the improvements,
• increase the effectiveness of our consultation with the profession - to make sure we are listening to you and acting on your feedback or where we don't, explaining why we can't or why we think it's not a good idea, and
• increase engagement with the profession around our compliance program.

Improve the support we give you

The ATO commits a lot of resources to make it easy for taxpayers to comply with their obligations - a fair bit of that is the systems and support we provide to tax practitioners.

Continuing to improve the support we provide practitioners and in turn, improving your ability to support your client's compliance, is an ongoing goal for us. One that we are seeking to achieve through our Action Plan.

As I stated earlier our Action Plan was shaped by the feedback we receive from the profession, and particularly by the research we commission each year to establish what issues are important to the tax profession. We have made the results of this research and consultation public, and for those of you seeking more detail it is available on our website¹.

From the research we heard the following:

In terms of the ATO's support for tax practitioners you told us our team members are polite and ready to assist. Fast key codes are helpful, but many agents do not use them or have to be transferred for assistance.

You have told us you want better targeted information, guidance on ATO positions, speedy resolution of issues and access to experts.

You have told us you liked the increased availability of ATO Law but you are still finding challenges in locating information on our website.

You said the tax agent portal makes your life easier, but you are looking for improved reliability and functionality on the portal.

And you have confirmed lodgment of obligations is still a critical activity for both of us.

This feedback provides the ATO with several opportunities for improvement in service delivery.

Resolution of queries at first point of contact is an obvious challenge; we understand the frustration of calling and then being passed from one person to another without any seeming progress. We have already identified one improvement we can make here.

Currently when tax practitioners ring with a complaint, resolution of that complaint follows a 12 step process and you don't talk directly to the problem resolver. The staff in that area have looked at that and arrived at a shorter process and one where you talk directly to the person who will resolve your issue.

We would prefer the matter not to get to the point of a complaint. In particular, we want to provide you with better and more accessible tools to continue to enable self help where possible or access to people which help you resolve significant matters you are dealing with.

To do that we are looking to combine a number of our existing support services including the professional-to-professional service, access to experts and relationship managers into a single point of contact. This will allow us to offer the most appropriate avenue for resolving each issue as it arises. This should ensure that you get to the right person sooner and your issues are correctly resolved sooner. We will then use this intelligence to improve our processes or to better explain in simple and practical terms the underlying legal or administrative requirements.

We are also aware that some of these services (access to experts, professional to professional) are not widely known about or utilised and so we will be increasing awareness of them and making them more accessible.

In a large organisation we recognise that sometimes intention and execution don't always align. The professional to professional service was designed to give tax agents direct and personalised access to a more senior tax officer and subject matter experts.

It's a great service. We have conducted polling of users and that's what they tell us. But to make use of the service you had to register for it. So we design a product to improve service but then we put hurdles to you using it.

We are going to remove the hurdles so more people know and use the professional to professional service

Under our Action Plan we will be working more closely with you, the tax professionals, to ensure we design the right services that work for you without unnecessary blockers.

Issues like the professional to professional service are relatively simple process fixes, although they may stretch our capacity to provide the right level of service. For other issues a better use of technology will be at the core of future solutions.

The community expects to be able to buy, sell, communicate and transact on-line and in real time. This flows through to how they expect to be able to do business with us. We too would like to operate in this way because we think it can reduce compliance and administrative costs and make Australia more efficient.

As community and commercial practices progressively move to an increased use of electronic transactions, we both must do the same. The world has moved on, and we cannot go back to processes of the past. We both need to take advantage of new technology.

More and more we will be dealing with each other electronically, increasing the use of technology, and making it easier and cheaper for you to provide professional services to your clients.

For example, pre-filling has proved to be a very effective way to harness technology and it use is growing. For 2010 tax returns there was a 13% increase in the number of downloads compared to 2009. So far, for 2011 returns, there has been 7.9 million pre-filling reports downloaded. I recall when we introduced pre-filling there was negative push back from some tax agents, but a positive reception from those that were more progressive.

So far this year tax agents have generated pre-filling reports for over 7,400,000 individual taxpayers. This is up from 6,200,000 at the same time last year. We have made available, to taxpayers and tax practitioners, over 65,000,000 records of income received through pre-filling such as interest, dividends, managed fund distributions, payment summaries and welfare payments.

Increasing the ways in which we can deal with each other electronically will, in turn lead to better and more personalised ways of communicating.

In one area where this is already working extremely well has been the SMS initiative. This is a tool that was created jointly with tax professionals that allows the ATO to send text messages promoting new services or alerting people to due dates, for example tax time is approaching or that a business activity statement is due. It is bringing benefits to both of us.

Where we can't yet move away from old technology we look to how we can work more effectively. For instance we have stopped sending letters to you and your clients at the same time, because you told us that too often the client got the letter first and would ask you what you were doing about it before you were even aware there was an issue.

We now send copies of any letters to you days in advance of writing to your client.

Much of the help and assistance provided to tax agents is now done online. In a recent satisfaction survey 83% of tax agents agreed it is now easier to deal with us online. For the 2009-10 financial year there were 31.4 million logins and 14.5 million transactions via the tax agent portal. We expect these numbers to be well and truly exceeded when the statistics are released for the last financial year.

As we develop our future online systems we will look at continuing to build on the advantages Standard Business Reporting (SBR) can potentially provide to both of us, in particular, substantial reduction in business reporting costs.

As part of this move in the future we will be looking to redevelop some of our flagship systems like ELS into SBR technology. This will result in tax practice management software being able to support not only next generation ELS services, but also make them available to whole of government interactions. We will commence our consultation with software providers this month. We plan to transition to SBR for ELS services from 2015.

Under our online Action Plan we (the ATO and the Tax Profession) will be working closely together to ensure that the introduction of the new platform allows us to optimise your ability to manage your client's affairs easily and efficiently.

We would also want to ensure that we implement these changes in ways which are the least disruptive to your business. Again we would hope to do this by working together with the profession to design an appropriate transition plan.

We don't expect you to wait until 2015 for any improvements to the tax agent portal, even though extensive changes to our superannuation systems to support the Government's Stronger Super measures will absorb a lot of our IT capabilities and limit our capacity for other major IT changes. In the interim we are looking for shorter term solutions to deal with your immediate and most pressing concerns.

An example of where we could build improvements is in assisting practitioners to view and save copies of their clients' notices of assessment via the tax agent portal. Tax practitioners have told us that this would assist you in communicating in a timely and efficient manner with your clients. We are also looking at ways to improve your access to relevant and accurate income tax lodgment information, such as prior year returns and lodgment status.

Our long term objective is to have a fully integrated online service for tax practitioners. One where our online tools are more accessible, relevant and contemporary. We will work closely with you to co-design these solutions.

I mentioned better management of lodgments was one of the things we wanted to achieve through improvements to the portal.

While most practitioners do a good job of getting lodgments in on time overall compliance is slipping consistently. We have identified that there are around 1,600 agents who struggle to manage their lodgment program. These 1,600 are responsible for around half of the outstanding lodgments by clients of tax agents.

We appreciate that circumstances can raise problems for tax agents, and we will continue to take our empathetic approach where this is the case.

We are working with the profession through one of our consultative forums, the Lodgment Working Group to develop a lodgment program that produces a more level playing field between those agents who manage their practices well and meet their lodgment deadlines and those who don't.

We have been working through options with the Lodgment Working Group over the course of 2011 and are holding a co-design workshop on 21 and 22 February 2012 to further develop these options. At the same time we are working with the professional bodies to promote better practices.

We know that agents need better tools to effectively manage their client lists and their lodgment performance.

We also know that some agents do this much better than others.

We are beginning to work with those "better" agents to understand what they do differently. We will use that understanding to develop jointly with professional bodies better practice guides for agents who are struggling to manage their workloads.

Engagement

We want to continue to grow our understanding of all aspects of how your business works so that we can support you better.

We currently have an extensive and deliberate program to seek out the opinions and practices of the tax profession.

The ATO currently engages with nearly 400 professional association representatives and tax practitioners via around 30 working groups and consultative forums. We talk to another 3,000 agents every 12 months through our research arm which conducts regular surveys to gauge agent views.

Our challenge, expressed in our Action Plan is to make sure that we are reaching the right people, that we are making the most of our consultations and that we are acting on what we are hearing.

We have come a long way over the last decade in hearing and responding to your concerns. For example we have introduced:

• our 'Listening to the Community' initiative,
• a premium phone service and telephone fast key codes,
• the Tax Agent Portal,
• the relationship manager program,
• we created Regional Tax Practitioners Working Groups in 2006,
• increased BAS service provider support in 2007, and
• in 2008 established the 'Professional to Professional Program'.

Each of these initiatives were a result of increased collaboration and co-design with the tax profession, as has been our annual lodgment programs.

Our Action Plan is acknowledgment that, again we need to respond to your feedback and further lift our game.

We want to build on the lessons of the past.

Engagement with the profession around Tax Time 2011 was a positive experience. We conducted intensive collaborative work with the ATPF and professional associations in the lead up to, and during, Tax Time 2011, and had a concerted focus on improving communication and engagement.

We worked together to get out joint messages and alerts on issues as they arose.

And we developed and published tips on common errors in client returns that would result in processing delays.

All of this was a tremendous advance in our ability to work productively together. We want to continue this and extend collaboration into other areas.

We are working with the profession on continuing to improve our detection and management of fraudulent and over claimed refunds. In 2008-09 and 2009-10 we looked at around 65,000 of 23,000,000 income tax refunds, and of the 65,000, four out of five needed reducing or cancelling. We remain concerned that we continue in 2010-11 to reduce or cancel around four out five refunds reviewed. Nevertheless, we will work with our consultative forums to improve both our detection models and our communications to reduce the impact on the refunds we currently delay without adjustment.

Other issues we have identified through our consultations and which we will progress through our Action Plan are:

• we have decreased call waiting times for tax agents by increasing the number of staff and increasing their skills and capability through training and better system support, particularly during Tax Time where we were able to reduce the average wait times for agents by 25% (they decreased from 40 seconds the previous tax time to 31 seconds),
• continuing to work closely with our consultative forums to raise the awareness of our differentiated and balanced approach to the collection of tax and superannuation debt,
• working with tax practitioners to understand how agents use the portal and the areas where we can improve its usability,
• looking at whether we can provide more assistance in the updating of your client lists,
• looking at practical ways to manage any unplanned or planned outages of ATO systems - for example piloting SMS alerts to tax practitioners, and
• improving the suite of self help tools available to tax practitioners on our website.

Our current research and understanding of your feedback is that there is scope to better align our services, systems and policies to match your needs.

The heart of strong support for tax practitioners has to be open and ongoing engagement and a spirit of constructive collaboration and co-design.

When we asked about what you thought of the ATO's consultation and engagement with you, you told us the following:

You believe we could have more effective consultation programs, and that we could and needed to better understand your organisational models.

Individual practitioners - not just always a peak group - wanted the opportunity to provide input and receive feedback directly. They wanted us to ask ourselves if the many consultative committees and consultation arrangements truly represented the broader practitioner base.

We want to bring the practical experience of agents into the discussions about how we can improve tax and super administration.

Another challenge for us is the feedback that many of you believe the value of tax practitioners is not fully recognised by the ATO.

Let me say right now that we recognise and appreciate the critical role tax agents play in ensuring the willing and proper participation of citizens and business in the tax and superannuation systems. The fact that we set up our Tax Practitioner and Lodgment Strategy Division (TPALS), headed by a dedicated Deputy Commissioner, is tangible recognition of the importance we place on our relationship with you.

And we do want to understand your world better so that we can deliver the services and support you need to help your clients.

Nevertheless the pace of change is quickening and we need to have a very good handle on your systems, processes and practices.

The ATO will continue to invest in genuine consultative arrangements, and work to maximise the opportunities afforded by our many consultative forums. We will also expand the regular face-to-face senior executive meetings with peak bodies, industry associations, and large and high volume practices. TPALS will continue to give individual agents and their professional bodies a focal point for dialogue, and for the co-design of solutions.

Compliance effectiveness

The final part of our Action Plan is about our compliance effectiveness.

Feedback from tax practitioners about our annual Compliance Program was that lack of knowledge of the ATO's intent raised misunderstandings or concerns about some of our program. For example our debt collection approaches, small business benchmarks and refund integrity processes were not well known by some agents.

Last year we went out and spoke to a lot of our consultative forums about how we use benchmarking in compliance and took their feedback into consideration in developing our 2011-12 plans. Consequently we reduced the number of benchmark related audits and increased the level of record keeping support because the feedback pointed to a failure to keep records as a key driver of the underreporting of income.

We also wrote directly to the tax agents where we identified a number of clients outside benchmarks to provide the agent with an opportunity to assure themselves that income was being correctly reported.

The ATO will continue to improve opportunities for consultation and co-design in the development of compliance strategies. We will consult with the NTLG before the release of the 2012-13 Compliance Program and will share with you the effectiveness of elements of our Compliance Program. I think that it is important you know what we are doing and why we are doing it, and I will always welcome your feedback.

For example, we will explain our compliance outcomes with our consultative forums and with your professional associations. We are seeking their support in positively influencing behaviour. Tax Time support and warning messages are obvious opportunities, as is your intelligence of sharp practices or emerging areas of risk.

Additionally we will develop differentiated approaches to recognise the extent to which practitioners support compliance, and to promote a more level playing field.

And finally, we will continue to focus our research and consultation on better understanding your relationships with your clients and the influence that has on compliance behaviour.

What we are currently seeing on the ground is that agent influence is not evenly distributed. Most do a much better job of ensuring that their clients are compliant than some others.

There are around 21,000 agents lodging around 11.5 million 2010 financial year income tax returns. As I said, most do a pretty good job but a small minority of tax agents are associated with a significant level of non compliance by clients. For example:

• 1,600 tax agents represent half the taxpayers who use agents and have outstanding returns
• 1,900 tax agents represent 50% of the taxpayers who are significantly outside the small business benchmarks, and
• 1,600 agents (with more than 100 clients) were identified as having an unusually high level of claims for work related expenses.
• Many of these agents fall within two or three of these categories.

We want to understand how we can better support tax agents generally so that you can positively influence the behaviours of your clients.

Conclusion

Managing the future together presents a joint challenge, but one I believe we are both ready for, and one where we will work together to achieve.

Together, we promote a level playing field. Together we need to make the processes of complying with Australian's tax and superannuation systems as efficient as we can because this in turn reduces compliance costs for taxpayers and helps make Australia more efficient.

Thank you for your support.

Footnotes

¹ http://www.ato.gov.au/taxprofessionals/pathway.aspx?sid=42&pc=001/005/045