High stakes: The future of the tax profession

Thursday, 2 October 2014 by Mark Chapman
We live and work in an age of increasing digitalisation.  While the landscape for many professions has been changing dramatically for a number of years, imminent developments in the use of “big-data” solutions championed by the Tax Office mean that the taxation profession is about to reach a tipping point.

Tax practitioners in Australia may have been incrementally adopting new technologies in their professional lives to better service their clients, and to meet Tax Office requirements, however all this is about to be given a turbo-charged kick-along.

Taxpayers Australia was invited on Wednesday 24 September 2014 to attend a special purpose working group with the Tax Office. This working group has been tasked with providing the Tax Office with guidance in relation to its strategic plans to redefine and revolutionise the Tax Office’s relationship with tax practitioners.

Some of the insights gained from this meeting were sobering — especially so given the realisation that the changes being discussed are planned to be implemented by July 2016. The changes spelled out by the Tax Office are indeed pervasive, as we discuss below, but also represent an opportunity for practitioners to become an even more valuable part of their clients’ lives and businesses.

Taxpayers Australia recognises that practitioners will need to develop new skills and become ever more adaptable to take advantage of the new landscape, and this heightened need for new skills forms a critical input for our own strategic review of new products and services for members. We recognise that it is not only practitioners that will need to adapt and evolve to stay relevant — indeed, to survive — but also the Tax Office, training providers, and also ordinary taxpayers.

Major changes to be implemented by July 2016
The current online portal and Electronic Lodgement Service will be moved on to Standard Business Reporting (SBR) software. The Tax Office will use this new generation of software to effectively become a wholesaler of software to commercial software providers (think MYOB and Xero). This is important because it means these commercial providers will be able to connect practitioners directly to prefill data and Tax Office forms, thus integrating this information into their software.

This critical step from the Tax Office represents a massive structural shift in relation to the functionality of commercial software. Small business clients on these software platforms will be connected in real time to share registries, banks and the Tax Office. The packages, once set up appropriately, will automate much of the work tax practitioners have traditionally performed. The new software will also allow automation of simpler individual tax returns, which will conceivably lead to many individuals not having to lodge a tax return at all. Given the level of paper lodgements having dropped to very low levels, the pace of change will become increasingly rapid.

Major changes out to 2020
Once SBR adoption is complete and software providers have fully implemented the changes up to 2016, the Tax Office is planning to release a standardised chart of accounts. This will mean that company, trust and other entity tax returns will be automated — and is essentially the missing link in fully automating the preparation of these types of returns. Bank and share registry information, and information from various other databases, will be used to record transactions automatically in the Tax Office-designed chart of accounts. All of this data will then be prefilled into the entity’s tax return automatically.

Commercial software providers have also indicated that dual signature functionality is on the way. Gone are the days when practitioners will need to print a copy of returns and organise their signing with the client. Instead, once a practitioner completes a return and digitally signs it, it will be sent to the client electronically, which they will also digitally approve. This will then be recorded in a practitioner’s practice management software and will then simultaneously lodge the return, thereby fully integrating and digitalising this part of a tax practitioner’s practice.

The majority of individual tax returns will be automated at this point, with the majority of these taxpayers having little or no physical interaction with the Tax Office.

What does this mean for practitioners?
Tax practitioners will no longer perform the tasks of preparing accounts and tax returns, and in the near future they may see many clients move away from their practice as automation becomes more pervasive. However, the imminent revolution as mapped out by the Tax Office means the integrity of information and security will become increasingly critical for practitioners. The need to carefully review information and make sure it is accurate will become even more critical. The ability of the Tax Office to data match and automatically audit taxpayers will force practitioners to adopt a risk-based approach to a client’s affairs. This will mean the level of skill in interpreting how tax laws apply to a client will be central to a practitioner’s service offering to clients in mitigating the risks they will now face.

The practitioner of the future will need to be more like a Chief Financial Officer for their clients. They will have access to information in real time, giving a practitioner the ability to be a key partner to their client’s business and take on a critical decision support role. Marketplace demands will also see practitioners shift their focus to become more tax-technical professionals, necessarily focusing more on tax planning and validation of information — and they will need the skills that go with this territory.

We are here to help you with the transition
With all of the above in mind, Taxpayers Australia plans to adopt a strategic approach to all the Tax Office proposals, with a view to evolve our products and services to efficiently assist tax practitioners, and indeed taxpayers in general, in navigating this transition successfully. The tax profession landscape will be starkly different after the transition, but we are committed to assisting our members to negotiate this uncertain period to emerge with an even stronger professional standing in the taxpaying community.

Taxpayers Australia began, almost 100 years ago, as an independent voice to educate and inform taxpayers in relation to taxation and superannuation. To remain relevant today, we see it as our duty to be the bridge between the current tax profession and this new and different landscape that has been thrust on to our horizon. We reaffirm our commitment to our members and to the principle that greater knowledge about the content of tax and super laws is fundamental to being able to engage effectively with the Tax Office, and to better serve your clients and their changing requirements.

We will be in touch throughout this period to keep you up to date with the latest developments, and the implications these changes will have on you, your clients and your practice.

In addition, we’ll be bringing you new products and services to help you with the transition. In the meantime we would like to remind members that they have access to dedicated helpline calls to speak to a tax specialist regarding issues with tax and superannuation, and high quality publications with strategies to deal with technical difficulties in these areas. We are also in the process of moving many of our offerings to a digital platform to give you instant access to fully up-to-date technical information.  In the near future, we will also be re-configuring our online presence for a more intuitive experience.

It is also intended to present more information for general taxpayers, both individuals and small businesses, laying out basic and more general tax and super information for the consumer audience. A more informed and educated clientele can go a long way to smoothing out their interactions with a tax professional, and make the tax practitioner’s working day hopefully a little less filled with having to explain basic tax issues to a necessarily curious client base.

We also would like you to know that we are currently undertaking a major review of the Tax Summary to progressively update it throughout this period and make it even more relevant as a technical guide written in plain English to make it easily accessible.

We request all members give us a call or email regarding our involvement with the Tax Office working group so that we can represent the views of our members and make sure the Tax Office takes these valid viewpoints on board when implementing these changes.