Tax administration transformation: Reinventing the ATO
Geoff Leeper, Second Commissioner, People, Systems and Services
Address to the National Tax Practitioner Conference
Sydney, Wednesday, 18 June 2014
(Delivered by First Assistant Commissioner Steve Hamilton on behalf of Second Commissioner Geoff Leeper; check against delivery)
Good morning and welcome to the second day of this National Tax Practitioner Conference.
On behalf of the Commissioners of the Australian Taxation Office, I applaud the collaborative approach to considering the future of tax administration that is represented here today.
You heard yesterday about the major drivers of change in the next decade and about what tax professionals are experiencing. The ATO is affected by, and responding to, the same driving forces as everyone else. A key point you heard yesterday is that the forces are playing out regardless of what the ATO does – we are seeing them and responding to them.
You will hear later this morning about one way in which we are responding – we would like tax practitioners to immediately start to focus on the opportunities offered by having software enabled with Standard Business Reporting (computers talking to computers).
It can be seen defensively as a threat, or more usefully as an opportunity.
Critically, you also heard what the clients, what Australian businesses, need. If they can’t get what they need from us, they will get it from somewhere else.
The scenarios Michael presented yesterday vividly portray the dangers of irrelevance and lack of community support. Of course, they also pictured the significant opportunities available. I assure you that we feel the challenges and opportunities as much as anyone.
I am so pleased to see so many of you here from both the tax practitioner and software provider worlds. As is clear from our discussions yesterday and from what you are seeing day-to-day, the world is changing at a rapid pace. It is hard to keep up with technology, and to leverage and maximise the advances. This is why it is so important that we change the way we work with each other and bring together seemingly quite different industries, to embark on this modernisation of our tax administration system.
Before I go any further, I would like to highlight the cooperation and collaboration of the Steering Committee, led by Michael Monaghan, to put this conference together. I want to thank those who have given their time to co-design this conference. This call to arms for the tax profession, led by the tax associations, is an unprecedented step in our journey together and marks a new type of collaboration between the profession, the software industry and the ATO.
Today I will focus on:
- the technological changes the ATO is making to support the taxation and superannuation systems
- the need to evolve with the rapid change in technology
- the relationship between the ATO and the tax profession into the future.
The scenarios that were outlined yesterday demonstrate that while the future is uncertain, we can look at the possibilities before us and shape ourselves towards a preferred future state.
For the ATO, we want to be in a world where the tax administration service offering is digital by default. That is, we offer enhanced online services, data is easily shared between businesses, intermediaries and government, and the term ‘red tape’ is something which is used when you’re fixing your car or you’ve called an electrician.
We are all aware of the rising costs of compliance and ‘red tape’ associated with interacting with government, including the reporting aspect to agencies such as the ATO. These compliance costs can significantly impact the time and resources of business. We recognise that time is money – which could be better invested in running and growing businesses for the future. These compliance costs also affect the efficiency of the economy, restricting innovation and dampening productivity.
Just as tax administration is evolving, so is business – this evolution is being driven largely by our digitalised society and new technology. In a survey soon to be released by the SME Association of Australia, globalisation, offshore manufacturing, competitiveness of business through technology and the growth of online and e-commerce, are identified as the major trends impacting on the Australian market place in the next five years. This concurs with what we heard from you in relation to your clients’ needs when we conducted the Systemic drivers of change research.
Acknowledging the broader trends, the ATO is deliberately taking a long-term perspective, lifting our gaze beyond the next 12 to 18 months, to ask a simple question – 'What should the tax and superannuation experience be like in 2020?'
The ATO is committed to change in the technology arena to simplify client interactions and allow you the space to focus on providing greater support and taxation advice to clients. We believe we are demonstrating our early commitment to this through:
- the release of our first app to access services such as tracking your refund, the tax withheld calculator and basic tax information. We have expanded this to include small business information, and superannuation information will be added soon.
- the launch of the interactive online Small Business Assist tool to give access to tools to help small businesses meet their obligations.
- the online business viability assessment tool to help businesses manage their cash flow and debts.
But, as we all know, the tax administration system is much bigger than the ATO. There are a range of players, not least of which is the tax profession.
Based on what you’ve told us, we know that there are increasing demands on your time from your clients. They are seeking advice that is cross-jurisdictional as they endeavour to grow their businesses internationally, using new technologies to lower boundaries.
How do you have time to provide this advice when you are shackled by the amount of reporting that is currently required of you as a practitioner?
As a practitioner, you already operate largely online in your businesses. The Electronic Lodgement System and the portal are significant parts of your lives.
We are committed to providing a better service for you that is integrated with business software. We recognise the fundamental importance of the Portal service experience to your business and seek to improve the electronic services available by taking advantage of new and emerging technology.
The new technology we are jumping on board with, branded ‘SBR’, that is, Standard Business Reporting, is essentially a technology that allows computers to talk to each other. It will reduce the need for manual entry of numbers or, as you would be aware of, the transfer of figures from a form to an online format.
The SBR software technology can read the financial data in a business accounting system; pre-fill forms with the required information, while allowing the business or their adviser to check for accuracy; and then make the required data available to the ATO through a safe, secure online channel.
As the data used in reporting is more consistent and integrated with natural business processes, it can also improve compliance outcomes.
We are in the process of enabling, from July this year, the ability to update client information via SBR through your software. Address and financial institution elements will be added by December. While we are implementing the ATO component, you will have access only when software providers update their systems.
We will also be enabling the transmission of individual tax return data via SBR from January 2015.
We will consult and co-design with the Tax Practitioner community about the future of further highly valued services to ensure that our business directions reflect the needs of this group.
The ATO is committed to improving the electronic services available in business software by making available for software developers a fully SBR-enabled suite of forms and services by July 2015 and removing ELS by Tax Time 2016.
I won’t say too much about this, for fear of stealing Chris Thorne’s thunder as he tells you more about this technology and how it will be used. However I will say that intermediaries, such as yourselves, will benefit from SBR with a reduction in the time spent on gathering, analysing and assembling data for your clients. It also reduces potential input errors from manual entry, as much of the information will come directly and automatically from the intermediaries’ business systems and government records.
Just as the ATO is changing to meet the evolving environment, so will you. The technological transformation for the ATO will obviously have a range of consequences for you and your business models. These will range from minor and gradual changes to keep pace with the latest technology, to having to revolutionise the way you operate. But it can be done.
The Port Adelaide Football Club and Australia Post are excellent examples, which you heard about yesterday, of how adapting your business model won’t just ensure that you remain relevant in the changing environment, but that you are also able to reap the benefits of being at the forefront of the shift.
The ATO is not sheltered or isolated, and needs to change our business model and keep up with technology to ensure we can strive to be:
'a leading taxation and superannuation administration known for our contemporary service, expertise and integrity.'
Our goal is that in the future, a taxpayer’s experience with the tax and superannuation systems will be streamlined and tailored based on our knowledge of their tax and superannuation affairs. That is, we will reward transparency and willingness to participate in the tax and super systems with less effort required to comply and greater certainty about the status of tax and super affairs. ‘Light touch’.
For those willing to do the right thing, we will make it easy to comply, but make it harder for those who have decided not to comply.
In addition to the Standard Business Reporting initiative, which aims to reduce the red tape associated with business reporting, some of the other technological changes we are considering include:
Flexible and contemporary services
This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
End of attention
Each year at tax time we were asked why don't we offer e-tax for the Apple Mac. Well, last year we did, and over 320,000 people used it to lodge their tax return.
And, as I just mentioned, we now also have the mobile app for Apple, Android and Windows devices. We are listening carefully to the feedback we are getting about the app and using it to inform future updates. This is certainly something we must do to become an organisation known for its contemporary service offering.
Working across government
We are working with the Department of Human Services to bring together government services for Australian citizens. We recently became part of myGov (my.gov.au).
MyGov provides a single entry point for key government services, including Medicare, the Personally Controlled e-Health Record and other Human Services-related business, and now the ATO. Over time, other Commonwealth and State agencies are expected to join myGov.
Registered myGov users will have access to services such as 'Tell Us Once' for change of address, and will be able to update tax and bank account details, see their current superannuation accounts, and even consolidate these into a single account.
From March 2015, the ATO will begin using the myGov digital inbox to send electronic communications to our customers. Over time, this means that citizens will get all their Government communications in a single convenient location accessible anywhere anytime. The ATO’s use of the myGov inbox will improve the customer experience, significantly reduce paper, postage and handling costs for the ATO and contribute to reducing our carbon footprint.
Reducing (or even eliminating) the administrative burden for individuals with simple tax affairs
For compliant individual taxpayers with simpler tax affairs, we are looking at generating a 'push' tax return. This year, we will be trialling this with myTax, a streamlined online return available on tablets, smart phones and all computers. We’re expecting at least 1.4 million current e-tax users to move to myTax, accessing it through myGov.
The new myTax return has some key differences to the current e-tax service as it:
- has substantially fewer screens to complete;
- is fully online rather than requiring a software download and installation;
- is a more contemporary design and experience;
- has automatic pre-filling of the return, and
- will be available on mobile devices such as tablets and smart phones.
We are looking to build on the existing pre-filling process by using the information we currently receive about a taxpayer's affairs and pre-empting the lodgement with a pre-prepared return.
Our Scandinavian counterparts from Denmark and Norway send nearly three quarters of tax returns to the taxpayer, and in Norway since 2008 there is silent acceptance – if you do not respond, the tax return is treated as final and binding.
Tailoring the individual tax return to specific circumstances
This means only completing labels which relate to the taxpayer’s specific circumstances and freeing up your time to concentrate on the more complex taxation advice, e.g. e-tax Seniors Tax offset.
Using so-called natural systems
Payroll data is just one example of where using SBR-enabled software can radically reduce the compliance burden for business, without compromising the quality and accuracy of information that legislation requires to be supplied to State and Commonwealth governments. It also allows you as the advisor to have more opportunity to provide valuable advice, because the machines will do the mechanical things.
Single touch reporting
By embedding reporting into standard business processes, this can remove separate reporting obligations that exist solely to provide the ATO with information. For example, software could automatically provide all the information we need at the time of payroll, such as gross and net income, tax withheld and super guarantee – thereby removing the separate monthly, quarterly and annual reporting obligations.
Using analytics more effectively
The ATO holds and receives enormous amounts of data each year. We currently hold over 22 terabytes of data in our data warehouse. This is growing at over 20 per cent a year, and we receive over 600 million transactions of data each year from third parties. Our challenge is to organise all this data in such a way that analytics programs can find the key bits of information that will help us target our activities and programs in the most efficient way.
We are already using analytics to automate some high volume processes, to make automatic corrections in data supplied to us by taxpayers, and to mine large amounts of textual information to find the nuggets of value from a compliance and business management point of view.
We have an opportunity to improve our use of analytics to predict lodgement patterns for taxpayers, their propensity and capacity to pay in debt cases, and objections from audit cases. There is much more to do here, but analytics will play a key role in supporting our intended move to more real-time, online taxpayer interaction with the ATO.
The ATO is focused on making it easier for taxpayers and businesses to interact with the ATO. But as you heard yesterday, a new global market is emerging where a range of people and businesses are going to need to get greater support and advice on how best to structure their affairs.
The tax system is much bigger than just the ATO and the Treasury – there are a number of different players who make it work – the tax profession, financial advisors, software providers, small businesses, individuals etc. We all need to work together if we are to achieve a tax system that is fair, has integrity, collects the right amount of revenue, and works to support the productivity and competitiveness of our nation.
That brings me to the third topic I want to speak about today and that is the future of the ATO's relationship with you the tax profession. As I said at the beginning of this speech, I appreciate that so many of you could come and participate in this conference. Even better is the collaboration between the tax profession and the ATO in putting this conference together. Working well with others and understanding different perspectives are critical to fulfilling an effective stewardship role and ensuring that both the tax and super systems and administration are fit for purpose for Australia now and into the future.
We are committed to working cooperatively to find solutions to broad challenges faced by the international system as a result of globalisation and the increasingly digitalised economy. We want to completely transform the way we work with you and take a collaborative approach with technology partners, software developers and tax practitioners to achieve this outcome.
We could continue to improve our existing services, but with the dominance of the internet, social media, cloud computing and broadband, we need to get ahead of the technology wave in order to meet our clients’ needs. We are also open to advice on the role emerging technologies can play. With that said, the ATO needs to balance this with our commitment to whole-of-government approaches, including myGov for individuals and SBR for business transactions, and to ensure consistent outcomes across service channels and technologies.
As you know, last year we implemented new consultative arrangements. A considerable amount of time was invested in the old arrangements, with almost 1,500 external people participating in 230 meetings a year as part of 68 ongoing committees. This has been significantly reduced to eight stewardship committees plus project-like consultation for specific issues. We have taken a very deliberate approach to meet with the right people about the right issues at the right time. As you would agree, this has been a considerable shift in our consultative work, but we need to completely transform the way we work with you.
The National Tax Liaison Group (or NTLG) is our peak consultative group on tax matters. It is a dynamic consultative forum for the tax industry to identify and drive systemic improvements to the tax and superannuation systems. A focus of the NTLG is to facilitate and promote improvements in the ATO service delivery. This is achieved by addressing future challenges and opportunities while implementing strategic initiatives and major improvements.
The NTLG is a dynamic group with representatives from major tax, law and accounting associations who actively represent the community. Through your representative, this is a great opportunity for you to be part of the future of our technological transformation.
We recently consulted with you about how we can reduce the number of invalid objections received, which in turn will enable the ATO to improve the timeliness and client experience for those lodging valid objections. It’s important we continue to make time to talk with you about where we think the tax system is going and the ways in which the ATO is looking to collaborate with you to improve its administration, and the overall system.
The discussion you had yesterday, in relation to the four different-world scenarios, will be put to the NTLG on an ongoing basis and will frame strategic discussion on the world we want to get to. The NTLG meeting tomorrow will be an opportunity to debrief from the conference and shape the way forward.
We are about to embark on a collaborative effort with professional associations to explain the benefits of SBR-enabled software as a successor to the current Electronic Lodgement System. Similarly, we know that the functionality of the portal is your business tool, and we recently indicated to the National Tax Liaison Group that decisions need to be made on the future manifestation of this important service.
In closing, I’ve provided you with a summary of the technological transformations the ATO is working towards implementing. Just as the ATO is looking to the future, I imagine you are thinking about your future in this ever evolving digitalised environment.
We have a strong focus on delivering new products and services to meet our clients’ needs. However, to achieve this technological reform – we cannot do it alone. The ATO must look beyond the development of new products and services and understand the new skills, attitudes and behaviours needed to make this transformation a reality. There is a lot happening within the ATO and we are committed to working together to achieve this reform.
Just as the ATO must adapt to continue to deliver that value-add, ask yourself: how can I adapt or reinvent to keep pace with this evolving world of technology and digitalised society and invest in growing my business for the future? As I said earlier, you will have an opportunity and be provided with some of the tools to step you through some of these questions.