Optimising Software Solutions for a Seamless Tax Time 2025
(Links to strategic priority 3 – Improve tax performance for clients of tax practitioners)
Digital service provider’s (DSP) invest millions of dollars annually into developing Australian software to better support tax agents in anticipation of tax time.
The Australian Taxation Office (ATO) facilitated a DSP led item into these developments in software to provide agents with visibility and insight into the changes coming this tax time. These include, but are not limited to:
- Changes to the PLS platform from XBRL to XML for partnership tax returns. Statement of distribution must be submitted through PLS as XML now supports up to 2,000 entities.
- Variations to items in the International Dealings Schedule were described with summarised context for the 126 changes (at the time of the meeting). New label for ‘build to rent capital works deductions at 4%’ will appear in the company tax return.
- Exempting lump sum payments in arrears from the Medicare levy with the removal of the $1,200 threshold and changes to the amount that is reported at the ‘Lump Sum E’ label.
- Labels have been removed for small business energy incentive and small business skills and training boost.
Member comments
Concerns were raised around the reliance that the tax system has on DSPs to understand the complexity of tax law to be able to transfer these into highly technical IT systems.
Members emphasised that providing agents visibility of these system changes ahead of tax time is a great initiative and very insightful.
Digital service delivery for Tax Time 2025
(Links to strategic priority 5 – Recognise, empower and support current and future tax practitioners)
The ATO provided insights into key digital solutions ahead of Tax Time 2025. Agents should expect the following changes in Online services for agents:
- Authorised registered agents will have visibility of secure messages sent to their clients via the App through client in Communication history in Online services for agents.
- Pay as you go (PAYG) and year to date reports for 2021 will not be available after 13 June 2025.
Digital services changes for individual tax returns include:
- Removal of ‘Small Business Boost Skills and Training Amount’ and ‘Small Business Energy Incentive’.
- Prompts to encourage inclusion of valid Australian bank account details for each income tax return lodgment to avoid cheques issuing.
- Medicare levy will be automatically applied to lump sum payments in arrears.
- Removal of ‘your spouse’s tax element of a superannuation lump sum zero tax rate’.
- The ‘Trade Support Loan’ name has been updated to ‘Australian Apprenticeship Support Loan’.
- There are 5 new disaster recovery allowances in the prefill report.
- Low-rate concessional super cap increased to $235,000 for 2025.
- Changes to self-managed super fund labels X1 and X2.
- There are 3 new validation rules
- When a loss is entered at ‘primary production distribution from partnerships’ or ‘non-primary production distribution from partnerships less foreign income’ you must provide information on the business activity that led to the loss.
- When ‘total assessable foreign income from managed fund’ is provided there must be an amount entered at ‘total other foreign income from managed fund’ or ‘total net foreign rent from managed fund’.
- ‘Total assessable foreign income from managed fund’ must be greater or equal to the sum of ‘total other foreign income from managed fund’ and ‘total net foreign rent managed fund’.
- Taxable payments annual reporting reminder letters that paper forms will cease in the 2026 financial year.
These changes will be available on ato.gov.au once finalised. Agents should refer to the website for the most current information on key system updates.
Member comments
Members emphasised the need to communicate these changes and queried the business readiness of the ATO to support agents engage with these changes.
Concerns were raised around implications of auto-processed Single Touch Payroll PAYG withholding prefill labels W1 and W2 overwriting data populated by software based on the last pay date and the potential for timing differences between software data and ATO pre-populated data.
Can the ATO provide indicators to inform agents and their clients when their account has been compromised. The ATO stated that the ATO app will provide a solution but there are limitations around the distribution of information and indicators to compromised account for security reasons.
Individuals agent authorisation solution
(Links to strategic priority 2 – Safeguard the security of the tax and super systems)
The ATO is currently undertaking consultation on an agent authorisation solution suitable for individuals and sole traders.
The project team has been engaging with a diverse group of tax practitioners, professional association representatives and a group of individuals and sole traders to provide input and feedback. Additional industry sectors and groups will be invited to provide their input and feedback as the consultation proceeds.
Next stages of consultation will include testing and discussions addressing support options, communications and the delivery plan.
Member comments
Members questioned how the design of the individual’s agent authorisation solution aims to interact with the ATO app. We indicated that this is being considered as part of the consultation process.
Digital service provider members expressed their willingness to be involved in consultation. The ATO intends to include DSPs as part of the additional industry sectors and groups consultation.
ATO approach to support the TPB branch RAN project
(Links to strategic priority 1 – Protect the high levels of engagement and integrity in the tax, super and registry systems)
The Tax Practitioners Board (TPB) has identified approximately 300 registered agent numbers (RANs) with branches. A significant number of these branches are associated with just 12 firms, who have 1.4 million clients linked.
The TPB decision to close branched registrations is designed to:
- Improve transparency for taxpayers by making it easier to identify the true registered tax practitioner.
- Transition agents to a new framework either through consolidation under the existing parent RAN or using new registrations by the end of 2025.
- Align with government efforts to strengthen the integrity of the tax system and minimise and mitigate minority misconduct by improving regulatory compliance.
- Promote the take up of contemporary practice management systems that better support client management.
Member comments
Members highlighted that as this predominately impacts companies with multiple practices, it raises concerns around privacy when downloading full client list.
Small business future tax administration work program
(Links to strategic priority 6 – Improve Small Business performance and level the playing field)
Blueprinting a future digitalised tax experience is a key focus area in the 2024-25 ATO Corporate Plan.
The ATO is focused on leveraging opportunities provided by the rapid evolution in technology and digital solutions and services to support small businesses meet their tax obligations from the start. Our aim is to explore, design and test options that will support small businesses to:
- make more informed business decisions
- have a greater understanding of their tax obligations
- get their obligations right from the start.
The small business future tax administration project team facilitated a breakout group session with members to seek opportunities around digital tools, services and communications to help businesses get their tax right, and/or to quickly identify and correct mistakes and issues prior to lodgment.
The ATO continues to engage with small businesses, tax and BAS professionals, representative bodies, digital service providers and academia to explore opportunities that could be deployed to improve the small business tax experience.
Member comments
Members raised opportunities to increase data accuracy with advancements in artificial intelligence (AI).
It was highlighted that there are differences between industries that would need to be considered when identifying process improvements. For example, a small business that maintains 2 EFTPOS machines but only reports one is hard to regulate and validate, whereas ride sourcing is much easier to verify and validate.
Environmental scan
(Links to strategic priority 4 – Increase trust and confidence in the tax and super systems)
Michael Wright led the facilitated group discussion on insights, trends, developments and direction that the ATO should be aware of as context for the operation of the tax system, which included:
- agents unable to access full client list
- liaison with the ATO in relation to overdue return notices received
- practice mail topic selection
- refunds on accounts
- not-for profit review - self assessment
- digital improvements
- Australian business number/trusts with no principal authority.
Other business
The group noted the digital improvements framework tabled paper.