Show download pdf controls
  • Why tax can't 'just happen' without you

    Commissioner Chris Jordan, AO
    Address to Xerocon Sydney
    8 September 2022
    International Convention Centre Sydney
    (Check against delivery)

    Introduction

    Thank you for having me – this is my first time at Xerocon.

    I’m really pleased to have the opportunity to speak with you all today, because a long time before I was Commissioner, I too worked in the tax profession.

    I have a first-hand understanding of the importance of your role.

    I also have a first-hand understanding of how difficult the ATO can make your jobs when process gets in the way. When I started my own consultancy firm in 2012, I was sent what felt like endless paper brochures.

    They all had pictures of happy faces smiling at me, and I thought, nobody is happy doing tax! I kept getting sent more every quarter, and I kept putting them in the bin, and I thought, ‘what an untargeted waste of effort!’. So, when I got this job I thought, ‘I’m going to change that’.

    The ATO of 2022 has, I’m pleased to say, come a very long way since then. We’ve been undergoing a major digital transformation, which I’ve been invited to speak to you about today, as well as giving you some insights into what the future of the Australian tax system will look like.

    Put simply, it’s a future where tax ‘just happens’.

    But we know that nothing will ever ‘just happen’ without you.

    In our future plans, nobody gets left behind. In fact, we’d really like you to be in the driver’s seat alongside us.

    Last week our Executive group endorsed a new digital strategy which has a vision for the ATO to be fully digitalised by 2030.

    This is hot off the press, and we are still some time away from sharing the full strategy externally. But I want to share some of it with you today, because I hope it will be reassuring for you to get a glimpse behind the curtains and see the critical role you all play in our future plans.

    The strategy is framed by four pillars and underpinned by five principles. One of the four pillars is collaboration with our partners, and I really want to emphasise that point today.

    In the midst of the chaos of the pandemic, we worked with you to deliver over $164 billion in stimulus to Australians when they needed it most.

    And it will be by working together that we’ll continue to support Australians into the future.

    Everyone here today has a critical role to play in that future.

    Because you are our partners in the tax system.

    The principles guiding us forward

    Today, I’m going to talk to you in more detail about the five principles of the digital strategy. I want to touch on some of the successes they have helped us deliver, and how they guide our future plans.

    Principle 1: Leverage natural systems

    The first principle is ‘Leverage natural systems’.

    We know the key to an effective tax system is a high level of willing participation, where most taxpayers are honest and try to do the right thing. And we know the key to enabling this is embedding what we can into natural systems.

    When we say natural systems, we mean we want businesses and their representatives to be able to interact with us through the software or tools they are already using to run their business and manage their finances.

    Now I know many people (including some in this room!) would argue they’re anything but natural.

    But when we build reporting and payment mechanisms into the systems people already use, we are making it easier and simpler for them to comply.

    The OECD’s Forum on Tax Administration brings together the Commissioners of over 50 tax administrations from across the globe, to share information and experience, and identify international best practice.

    The OECD’s Tax Administration 3.0 is our vision for 2030, where seamless, integrated, and automated systems allow data to flow from the systems taxpayers already use, to ours, without any extra effort or intervention from them.

    To put this in perspective, let me explain the three iterations of tax administration.

    Tax 1.0 is where tax reporting occurs sometime after the taxable event, and payment happens even later again. This affects certainty and is burdensome for businesses and tax agents.

    Tax 2.0 is where reporting happens in real-time, but payment is still received later.

    Single Touch Payroll is a prime example of Tax 2.0. STP works within existing payroll software systems, so reporting to us happens as part of an employers’ usual payroll process – sharing data about salaries and wages, pay-as-you-go withholdings, and superannuation directly to the ATO in real-time.

    Once STP is enabled, employers don’t need to take additional steps to report to us. This reduces duplication and record-keeping requirements. It also means employees have visibility that their employer is meeting their obligations, and so do we.

    Tax 3.0 is our “North Star” - where reporting, payment and real-time compliance checks coincide with the taxable event. The closer we get to real-time, event-based reporting and payment, there is more certainty and less burden for everyone.

    Principle 2: Imagine the possible

    Our second principle is to ‘Imagine the possible’, and this is about adopting a transformation mindset.

    We know that a greater use of data and digital not only empowers us, it empowers our clients. But we need to do more than just turn a paper form into a fillable PDF. If you digitise rubbish, it’s still rubbish!

    We need to completely reimagine and transform the process.

    eInvoicing is the perfect example. eInvoicing is a new way to send and receive electronic invoices directly in software, via a secure network. With eInvoicing, suppliers no longer need to print, post or email paper-based or PDF invoices and buyers don't need to manually enter or scan invoices into their software.

    The ATO is the Australian Peppol Authority – we have the responsibility of developing and administering the Peppol framework in Australia.

    Peppol is the international eInvoicing framework that is now used in 40 countries across the world. It enables faster payments, cuts the administrative burden, and reduces the risk of errors and fraud.

    I should point out, the ATO does not receive a copy of the eInvoice, and we are not able to view the contents of any eInvoices being transmitted between businesses.

    Looking ahead, we’ll reimagine other systems, too. Picture a future, for example, where businesses no longer need to do monthly or quarterly GST reporting. If digital systems can bring together point-of-sale, banking and eInvoicing data at the time of purchase or sale, can their systems report the GST paid or collected to the ATO in real-time too?

    And if we have this real-time GST system, as well as real-time payroll events coming out of STP software, and real-time PAYGI coming out of accounting software, perhaps we can imagine a BAS-free future. We’re dreaming big, but this is the essence of Tax Admin 3.0.

    Principle 3: Sustainable digitalisation and benefits

    Our third principle is ‘Sustainable digitalisation and benefits’.

    What this means is, wherever possible we re-use existing systems and capabilities. And we design new systems with re-use in mind.

    JobKeeper is an excellent example of this in action. Together with the Fiscal group in Treasury, we designed the JobKeeper payments around the systems we had already built for STP. This facilitated fast and efficient delivery, and importantly, ensured integrity.

    When an employer applied for JobKeeper and said they had 8 employees, we knew whether that was true or not based on their regular payroll reporting.

    It also meant we could move quickly. We built the system and started making payments within 6 weeks, and 97% of payments were made within 4 business days from application.

    Sustainable digitalisation is also about taking a whole-of-system approach to solving problems and delivering benefits.

    During the JobKeeper rollout, we shared de-identified STP data with the Australian Bureau of Statistics and important stimulus information with Treasury, enabling them to see almost in real-time how the economy was tracking and shape government response accordingly.

    We shared the same data with state governments to help the administration of their own pandemic payments.

    Now we share STP data with Services Australia and Department of Employment and Workplace Relations to help them deliver welfare payments and improve services for their customers.

    Designing sustainably doesn’t just improve efficiency, it achieves better outcomes for the community.

    Principle 4: Integrity by design

    Our fourth principle is ‘Integrity by design’.

    We are operating in an increasingly digital environment. We have to consider how we safeguard our systems from ever-evolving cyberthreats and fraud attempts.

    We defend against more than 2.5 million attempted cyber intrusions each month, and in peak months like tax time, this rises to over 3.5 million. Protecting our data and digital systems is a massive undertaking and a responsibility we take very seriously. We are entrusted with protecting the community’s personal information and this trust underpins the whole tax system.

    We have begun a fundamental shift towards embedding fraud prevention measures into systems as part of the initial design process. This is why our efforts to modernise Australia’s Business Registry Services began with DirectorID.

    DirectorID is the unique identifier that company directors apply for once and keep forever. It prevents the use of false and fraudulent director identities and has real-world economic impacts like stamping out illegal phoenix activity.

    You will see and hear more about DirectorID as we approach 30 November. By this date, all existing directors need to have applied for their DirectorID.

    If any of your clients are directors, please encourage them to get online to get their myGovID and apply for their DirectorID. It is something they need to do personally, because an important part of this process is confirming their identity. I understand a lot of Directors aren’t used to doing things themselves, but you must get them to do this.

    We’re also strengthening the agent-linking process to reduce the risk of unauthorised access.

    We are piloting a new process where taxpayers have to nominate their agent before the agent can link to them in online services. We will consult with you before this is fully rolled out. An agent can access a significant amount of data about their client’s tax and super affairs, so this is a really important step in our fraud prevention efforts.

    While our systems are some of the most resilient out there, we will always need to continue to innovate. We are only one side of the coin when it comes to protecting the integrity and security of our systems and the data we hold.

    You, our partners, are integral to this and we rely on you to also embed security pragmatically into your systems and processes.

    Principle 5: Design for the user

    And this brings me to our final principle, ‘Design for the user’.

    Once upon a time, the ATO thought it was the centre of the tax universe. We would set a course and everyone would have no choice but to follow our lead.

    But today we know better. We view ourselves as just one part of a very big tax ecosystem, and we know the key to creating optimal digital experiences is co-design.

    We need to work together to design solutions where taxpayers, tax professionals, Digital Service Providers (DSPs) and the ATO all genuinely benefit and can clearly see what’s in it for each of us.

    JobKeeper is an excellent example of successful co-design. We engaged trusted agents and DSPs, like Xero, early to understand the impacts and opportunities.

    In return, agents and DSPs proactively supported the delivery of JobKeeper. Of course, this was an exceptional circumstance, but there were lessons learned in this process that inform our approach going forward.

    We are committed to working with you, consulting with you, and seeking your input early in the design process.

    For example, there is a proposal to transform the Pay As You Go Instalment system so that business software will calculate PAYGI in real time rather than basing it on past business performance.

    While Treasury will be leading the consultation on this transformation, the ATO and our partner DSPs have already had early feasibility discussions.

    We are looking forward to broader consultation with tax professionals and small businesses. No one can deny that a real-time PAYGI system will improve the small business experience, and it’s a great step towards Tax Admin 3.0. For it to work, we need to co-create the solution together.

    When you see the opportunity to be part of consultation, take it! Work with us, work with your professional associations. We have multiple consultation forums and stewardship groups, and we need you to take an active role in participating in them.

    All too often I hear that dealing with the tax office is difficult. ‘The tax system is complex’ – well yes, it is. But give me an example of something that I can actually fix! The more specific you are with your feedback, the more chance we have of actually addressing it.

    Give us feedback on our online self-service systems.

    We undertook a significant amount of co-design when we developed our online services for businesses and agents. We continue to work in collaboration to improve them.

    We are redeveloping our website to make it easier for you to find the information you need, and we’re co-designing this too.

    We get multiple calls from tax agents asking basic questions then complaining when we send them to the website. We’re not a free advice service! If our online services aren’t working for you, tell us what the blockers are – but be specific! – so we can address them.

    There is no benefit to us designing a system that doesn’t work for you.

    You won’t be designed out of the tax system as technology progresses

    I want to assure you that we have no intention of designing tax professionals out of the system as technology progresses.

    We value our partnerships with you, and we want to support you to add value to your clients.

    The role of agents and other intermediaries is changing, with new entrants and new ways of operating. We’ll do everything we can to support the evolution of the role of agents and others in the system.

    But you must understand that if your business model is high-volume, low-margin, simple tax returns, your business will not be viable in 3 to 5 years. You should be looking to diversify to remain viable longer-term.

    The system is changing because the world is changing – and at the ATO our goal is to not just adapt to it, but to embrace the opportunities that come with it.

    And the system needs you to do the same.

    So, focus on where you can add value for your clients.

    Focus on becoming a brilliant and trusted advisor.

    Focus on improving the tax performance of your clients.

    Help them avoid simple mistakes by using all the data we make available.

    Help them avoid over-claiming by asking the right questions and checking things that just don’t seem quite right.

    Help them get on top of their debt.

    When you help them improve their performance, the whole country benefits.

    Conclusion

    The future is a world where ‘tax just happens’.

    But it will never happen without you.

    Thank you.

    Last modified: 08 Sep 2022QC 70341