Is the Commissioner's speech a turning point for the profession?
Rob Heferen's recent speech at the Tax Institute suggests a positive shift in the way the ATO views the tax profession.
On 12 September, Rob Heferen, Commissioner of Taxation, delivered an address to the Tax Institute’s Tax Summit 2024. There were two statements in Mr Heferen’s address that I found encouraging from the point of view of a tax agent. These were:
‘Focussing on the tax profession is one of our core priorities. We want to strengthen our partnership with you [tax agents] to support the integrity and continuous improvement of the tax and super system.’
Also…
‘…I am (sic) a greatly interested in the influential reach you [tax agents] have with the more than 19 million taxpayers, clients and partners in Australia.’
If these statements are genuine and are followed through by the recently appointed Commissioner, tax agents will breathe a collective sigh of relief and have an expectation for a better working relationship with the ATO. Time will tell whether these are nice words in a speech or whether their import and impact will put ‘rubber on the road’ for tax agents.
I want to be expectant that the Commissioner’s stated intent will be followed through, because the last, say, 15 years of experience by tax agents has been one of feeling unappreciated, unrepresented and being seen as ‘the problem’. This is not a sweeping generalisation. I know it to be a fact from extensive experience with tax professionals.
In, say, the last 15 years the pressures on the public accounting profession, tax agents and BAS agents has grown at a very significant rate. Tax and BAS agents are now, arguably, the most regulated profession in Australia. The tax and super laws, rulings, cases, pronouncements etc increase in complexity at an unabated pace.
On top of this, the expectations of the tax profession have grown enormously. We are told on a constant basis that we must act ethically and with integrity with the implied assumption that the probity of the Australian tax system rests entirely on our shoulders.
There is scant acceptance or appreciation of the daily battles of the tax profession with the ATO systems, confusing rulings, PCGs and Government announcements. This aspect of the Australian tax system costs Australian taxpayers many millions of dollars through inefficiencies, delays, the need to take advice from a range of sources and so on. Tax practitioners are supposed to ‘just cope’ and make sure they don’t make any mistakes because there are penalties, lawsuits and the Tax Practitioners Board at the ready to bring punishment.
Tax profession focus
I am very heartened by the Commissioner’s ‘great interest’ in the influence of tax professionals over 19 million people. I would like to think that this is a turning point in the way the ATO views the tax profession. If the Commissioner is genuine in this ‘great interest’ it could unlock some very effective solutions to problems the ATO faces.
I have long stated that one of the key methods of improving the administration and working of the Australian system is to recognise the pivotal role that tax and BAS agents occupy and ensure they are provided with every available facility to operate the tax system efficiently.
What is not clear from the Commissioner’s speech is what he means by ‘influence’. He refers to Kardashian and the Beatles, but that doesn’t help me understand what he means by the term.
If ‘influence’ means the ability of the accountants to ‘read the riot act’ to clients about complying with their tax obligations, this won’t work. Accountants and other tax professionals already do that. They already constantly remind clients of their tax obligations.
However, if Mr Heferen means, for example, the influence of accountants in relation to their client’s businesses, such that they are run with proper planning (particularly cash flow planning), that is different. If the ATO (and Government) were to help accountants have more time to do that effectively and gave them assistance to engage with helping clients, this could have a dramatic impact on the efficiency of the tax system and the ability of the ATO to collect the eye-watering debt that it is now owed to it.
Mr Heferen says in his speech that the amount owed to the ATO is largely made up of amounts that have been withheld from employees’ wages, collected GST and employee entitlements. An accountant immediately recognises this as poor cash flow planning. Who are the best people to help with that problem – accountants!
If the Commissioner is genuine in being interested with the influence that tax professionals have with their clients, it seems to me that there is a solution to the debt problem staring us in the face. Help accountants to help their clients with good cash flow planning. The ATO can play an important role in this endeavour.
Elevate tax and BAS agents
I am a tax agent, and all of my customers are tax agents, so this statement may seem self-serving, but I genuinely believe that one of the critical ways to improve the operation of the Australian tax system is for the ATO to elevate the status of tax and BAS agents within its culture and operations.
Tax and BAS agents are the individuals who have chosen to spend their lives immersed in the complexities of the tax system and to make a living from it. They have the one-to-one connection with the taxpayers. Taxpayers who use the services of tax and BAS agents trust them. For the most part, these taxpayers will do whatever their tax professionals advise.
It is my proposition that the ATO should appoint a Deputy Commissioner or Second Commissioner whose sole responsibility it is to ensure that tax and BAS agents are getting all of the help they need to work in the tax system. This includes the very best of IT systems. It means that OSfA (often called the portal) is almost never down. It means rapid answers to questions by people in the ATO who know what they are talking about. It means responses to private rulings requests that are not taking many months, and even years to appear.
I also believe that the current information system the ATO has for obtaining the views of tax and BAS agents is not working. I don’t think I could find a tax or BAS agent that would disagree with me.
The ATO needs to have weekly, ongoing, focus group meetings with tax and BAS agents in practice. Such meetings need to be facilitated by people in the ATO, and externally, that really understand what happens in the day-to-day life of a tax professional. The feedback from these groups should be fed directly to the Deputy or Second Commissioner in charge of tax agents and immediate action should be taken to correct systemic problems.
No item of new technology or systems should ever be released by the ATO without extensive, thorough testing and it being signed off as workable by a panel of tax practitioners and the responsible Deputy or Second Commissioner.
Integrity
Mr Heferen referred in his speech to standards of integrity. While acknowledging the ATO must hold itself to a high standard, as is typical, the speech quickly turned to what is always portrayed as the real problem – tax agents.
Tax agents are sick and tired of hearing that they must uphold the integrity of the tax system. The vast majority of tax professionals are very committed to the integrity of the tax system and have always been so. To suggest otherwise is deeply insulting to the tax profession. In recent times, the egregious few, of a particular large accounting firm has caused a raft of unnecessary laws to be foisted on the whole profession. The sins of a tiny minority have been visited upon the massive majority – to the annoyance of tax professionals and to the cost of the Australian community.
Discussions about integrity of the tax system are always from the perspective of how tax professionals must ensure they behave themselves without any regard to the actions of the ATO that bring frequent challenges. Many examples of these challenges come to mind.
- Why has it taken the ATO 24 years to finally release some guidance on personal services income and Part IVA?
- Why did the ATO change its mind about whether unpaid present entitlements were loans for Division 7A purposes without testing this view in the courts?
- Why does the ATO produce practical compliance guidelines that do nothing more than say what the ATO does and doesn’t like without any technical support for its position?
- Why did the ATO introduce a client-agent linking system that had so many flaws?
- Why has the ATO virtually dropped its services standards in relation to replying to private rulings?
If we are to talk of ‘integrity’ it is a two-edged sword. Tax professionals would warmly welcome recognition of this.
Conclusion
I am very pleased to hear the Commissioner say, ‘Focussing on the tax profession is one of our core priorities.’ I truly hope that this statement is followed through with clear action steps that will elevate the status and recognise the essential role of tax professionals in the Australian tax system. If this can be achieved, the road is truly open for the ATO to solve many of the problems that is has – not the least of which is the collection of tax that is lawfully owed to it.
John Jeffreys produces tax information for tax professionals and is a director of John Jeffreys Tax Pty Ltd.