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  • Tax Practitioner Stewardship Group key messages 15 November 2019

    Tax Time 2019

    The changes to Single Touch Payroll reporting and the Low and Middle Income Tax Offset have driven increased demand across the ATO contact centres and lodgment channels.

    Between 1 July 2019 and 31 October 2019 the ATO processed:

    • over 11.2 million individual lodgments (all years), an increase of 9% on the same time last year
    • over 11.1 million individual electronic lodgments (all years), an increase of 10%
    • over 132,000 individual paper lodgments (all years), a decrease of 30%
    • over 8.7 million individual refunds (all years), to the value of over $23.9 billion
    • refunds issued on average six business days after lodgment.

    The ATO answered:

    • over 4.5 million calls, an increase of 17%
    • over 560,000 calls from tax practitioners, an increase of 7.2%
    • 92% of calls from tax practitioners within 2 minutes.

    Single Touch Payroll

    There are 517,062 employers reporting year to date salary and wages, pay as you go (PAYG) withholding and superannuation information through Single Touch Payroll (at 27 October 2019). This equates to 63% of all employers.

    As at 27 October 2019, 438,088 or 58% small employers (1 to 19 employees) started Single Touch Payroll reporting. This included 242,511 or 50% of micro employers (1 to 4 employees) and 195,577 or 73% of other small employers (5 to 19 employees).

    At 27 October 2019, 78,974 or 97% of substantial employers (20 or more employees) are reporting.

    The ATO undertook a review in late September 2019 to understand and confirm learnings from Tax Time 2019 and identify changes that are needed to improve the experience for Tax Time 2020.

    From an individual employee perspective, the ATO issued over 4 million notifications to those individuals who had an ATO Online account linked to their myGov account. The notifications informed an individual that all of their Single Touch Payroll income statements were finalised (tax ready). Community reaction to the new terminology used, such as ‘income statement’ and ‘tax ready’, was closely monitored. Improvements were made to the ATO website material and other communications.

    There was a threefold increase in the number of individuals registered for myGov and ATO Online who could potentially gain access to their income statement information. From our population of individuals with income reported through Single Touch Payroll, over one and a half million people obtained a myGov account between July and October 2019. Approximately 3.1 million employers finalised their employee data prior to 1 July 2019.

    Some employers continued to send records both to finalise and amend existing records, potentially causing duplications. There was a process in place to identify and block duplicated data from going to pre-fill however further education to employers will be required in 2020.

    Some small employers found the transition to Single Touch Payroll reporting easy and simple while others found that choosing the right Single Touch Payroll enabled solution more challenging. Micro employers are also taking up solutions from these providers as well as the low or no cost options. The experience and learnings from those employers that have transitioned will help the ATO and tax professionals tailor the approach for those that have not yet commenced reporting or are facing barriers.

    From a tax agent perspective, all tax and BAS agent tiers are helping their small employer clients to transition. Further analysis will be done on those practices that are leading and those that are slower to transition in each of the agent tiers. This information will allow the ATO to offer tailored help and assist strategies.

    Policy update

    The ATO is in the process of reviewing the current class exemptions in place for Single Touch Payroll until 30 June 2020.

    The two class exemptions are:

    • payers with a withholder payment numbers
    • redundancy trusts and portable long service leave boards.

    Additional consultation is underway to further understand the processes that these types of payers undertake to pay their workers and/or members to better customise the payroll reporting experience and ensure that there is no significant burden to them given that they are not atypical ‘employers.’

    The ATO has finalised and published a number of new reporting concessions for micro employers with unique circumstances. These concessions where developed as a result of and in conjunction with industry to ensure that employers in certain industries can have a tailored transition into Single Touch Payroll.

    The new quarterly reporting concessions available to micro employers are for:

    • employers in the agricultural, forestry or fisheries industry
    • employers that are not-for-profit clubs or associations.

    Each of these new quarterly reporting concessions can be applied for and lodged directly by the impacted employer; they are not contingent on the use of a registered agent.

    Superannuation guarantee

    Single Touch Payroll data is now available to over 11 million employees which means their super entitlements are more visible. Individuals can compare their super amounts owed versus what was paid by their employers, alerting the employer or the ATO if they think the amount is incorrect.

    The ATO is using Single Touch Payroll and Member Account Transaction Service (MATS) data to identify employers that are consistently late in paying their employees superannuation guarantee and have commenced a campaign to advise those employers that they need to lodge a superannuation guarantee charge statement.

    Income Tax Performance

    The ATO released the first Individuals tax gap estimate in 2018. As part of the 2019 annual report the updated gap figure of 6.4% or $8.4 billon was published. One of the main drivers of this gap continues to be incorrect claiming of work-related expenses and/or rental property expenses. This is evident in both agent and self-prepared returns.

    Since the release of the tax gap figures and an ATO focus on strategies to help taxpayers and tax agents get things right, the ATO is seeing a decrease in work related expenses claims. This decrease is reflected in both the agent and self-preparer returns. Claims have reduced by approximately $120 over the last 2 years.

    Some of the strategies in place to help people get their expense claims right have included:

    • improving advice, guidance and media. During Tax Time 2019, 1.5 million taxpayers received tailored communications to assist with their tax affairs along with educational material for 20,000 clients of tax agents. The ATO has produced 10 new occupation guides with complimentary posters to help clients get it right.
    • continuing to influence community attitudes through the media where people do the wrong thing.
    • piloting new initiatives. In June 2019 the ATO contacted agents of high risk clients to request substantiation and ask questions relating to nexus of their work related expense claims before lodgement of the clients returns. If the pilot is effective, the results will help with the development of a digital substantiation solution to help clients understand the deductibility of their claims.

    The ATO has implemented granular data for tax agents to align with the information provided in self-prepared returns in myTax. Providing granular data will help to:

    • reduce ATO contact due the additional information provided about claims made at the label
    • refine risk models and provide more tailored assistance
    • identify, monitor and take action against the few agents who intentionally do the wrong to create a level playing field in the tax profession.

    ATO and Tax Practitioners Board joint compliance activities

    In June 2019 the ATO consulted with tax agents in relation to the Intermediaries Assurance Strategy. There have been several key changes to the strategy based on feedback from tax professionals, including:

    • a shift in language from ‘Intermediaries of’ to ‘Behaviours of’ to reflect that the ATO is principally concerned with the behaviours that are observed
    • a shift from ‘Intermediaries of choice’ to ‘Behaviours of best practice’
    • a defined vision – High integrity agents encourage, enable and ensure their clients do the right thing.

    The ATO and Tax Practitioners Board (TPB) have adopted the Intermediaries Assurance Strategy as a joint approach to managing agent risk. The ATO is now in the process of developing a whole-of-ATO risk model to inform our view of agent behaviour and tailored treatment strategies.

    The agent risk model draws on all available data and intelligence sources to determine a preliminary risk view and categorisation of behaviours. Categorisation is at a point in time, relative, and will be used as a starting point only to inform further discussions and exploration with agents.

    Preliminary output from the model has been shared with Tax Practitioner Stewardship Group members however, the output requires further validation.

    In the higher risk categories of the model, the ATO and the TPB are seeing a range of behaviours that are undermining the integrity of the tax and super system. To address these behaviours, the level of information sharing and joint compliance work between the ATO and TPB has increased, and there are now 160 of the highest risk agents under joint management.

    In addition, the ATO and TPB have drafted an integrated plan which outlines the common outcome to work together to strengthen the integrity of the tax profession and the tax and super systems, relevant roles of each organisation and the joint priorities to be pursued. One of the key joint priorities was noted by Ian Klug in his speech at The Tax Institute Convention in Tasmania, being that the TPB and ATO plan to use the Intermediaries Assurance Strategy and agent risk model to develop joint strategies to address the 2,000 highest risk tax agents.

    Australian Business Register

    Announced in the Budget 2019-20, the government will strengthen the Australian business number (ABN) system to disrupt black economy behaviour by requiring ABN holders:

    • from 1 July 2021, with an income tax return obligation, to lodge their income tax return.
    • from 1 July 2022, to confirm the accuracy of their details on the Australian Business Register (ABR) annually.

    Tax practitioners play a pivotal role in their clients’ business lives and are in an ideal position to support the productivity, growth and prosperity of those businesses. The ATO will work with practitioners to ensure ABN holders meet their existing obligations and improve ABR integrity.

    From July 2021 ABN holders with an income tax return lodgement obligation will be required to meet that obligation as a condition of holding an ABN. The lodgment condition would not apply to ABN holders that do not have an obligation to lodge an income tax return, for example, income tax exempt organisations. Tax Practitioner Stewardship Group members discussed misunderstandings in the practitioner and business community about not needing to lodge and income tax return if income is below the tax free threshold – there is a requirement for ABN holders to report all business income or loss, even if it is below the tax free threshold. Ensuring there is clarity for everyone on what their lodgment obligations are is key.

    The annual review of details will not cover all ABN information, but is expected to cover business location, the type of activity and who and how to contact the business. Not all ABN holders need to interact with the ATO, such as income tax exempt charities, so members discussed options for how practitioners and the business can review their details. This included looking at how other businesses might interact with other government agencies and if that process can be used to review or update details. Members considered whether it makes more sense to include the review of information as part of the tax return or via a separate form. There were pros and cons for each.

    There will be public consultation starting early 2020 and practitioners are encouraged to be involved and have their say.

    Agent Experience

    There are four initiatives that cumulatively impact the profession, causing confusion and some angst amongst tax professionals.

    These are (in order of impact):

    • access to deceased client information in Online services for agents,
    • Tax and BAS Agent Portal closure,
    • Activity Statement Financial Processing systems upgrade, occurring over the Christmas shutdown
    • AUSkey transition to myGovID.

    Online services for agents replaced the Tax and BAS Agent Portals from 29 November 2019. The ATO contacted and offered support to each of the (approximately) 1800 agents who hadn’t logged-on to Online services for agents before the replacement.

    Tax agents were previously unable to access information about their deceased clients through Online services for agents. Prior to the Tax and BAS Agent Portal decommissioning, agents who are the legal personal representative of the estate received access to deceased estates information through Online services for agents. The ATO are seeking to use the Commissioner’s Remedial Powers to allow agents appointed by a legal professional representative to also access this information. This is expected to be available in May 2020.

      Last modified: 15 Jan 2020QC 61121