Date posted: 1/12/2016 4 min read

Does the ATO’s digitalisation mean the death of compliance?

Many experts say the ATO’s move to a digital platform will mean accountant’s compliance work will dry up. But is that true?

In brief

  • The ATOs move to the digital Standard Business Reporting platform ensures work from tax compliance
  • Automating processes reduces time spent on low revenue tasks such as administration and data entry
  • Few taxpayers trust the ATO, they’ll require an accountant to check the tax has been minimised

By Paul Meissner FCA.

By now most tax accountants will have heard about ATO second commissioner Geoff Leeper’s comments at the ATSA conference last year. You would have heard “$500m of compliance fees will be lost” due to the Australian Tax Office’s (ATO) move to Standard Business Reporting (SBR), the digital format that will replace the electronic lodgment service (ELS).

For anyone on an email list of so-called business and marketing “experts”, you have had this shoved down your throat with the aim of scaring you into thinking you will lose all of your compliance revenue within four years.

Like Henny Penny running around screaming “the sky is falling”, these experts want you to believe that all the work you have done to earn revenue in the past 20 to 40 years is gone and buying their book or attending their seminar is your only salvation.

I believe these experts are using the threat of the ATO to boost their sales. While I agree that SBR will introduce efficiencies, I don’t think they will reduce revenue for most firms. In fact, I believe SBR will increase profitability, ensuring there will be many years of lucrative work from tax compliance. Here’s why.

From the day I started my firm, 5ways, I have explored ways of streamlining processes for our clients and ourselves using technology.

5Ways Group is a 100 per cent cloud accounting firm and we create efficiency by reducing time spent on administration and data entry. Technology plays a huge part in that efficiency. For a lot of the systems I use, the ideas and suggestions have come from firms many times bigger and better than us.

The systems we use take efficiency and time saved far beyond what the ATO could even dream of and, by the rationale of those business experts, my firm should be broke. It’s not. Profitability has increased by 200 per cent and the time we spend on each file has halved. Accounting has never been more profitable and accountants have never been more relevant to their clients.

A funny thing happens after you find efficiency. You realise that compliance work has a value that isn’t tied to the number of hours you spend on it. You realise that you can still charge the same fee but spend half the hours working on it. This is because the time you are now spending on the job carries a much higher value to the client. Anyone familiar with this answer to the question about what to bill clients — just take last year’s bill and add 5 per cent — will understand.

Myth: Compliance revenue is dead

Compliance revenue isn’t going anywhere, no matter how many books experts write.

Also, the complexity of our taxation system alone will keep us busy for decades to come. When the ATO pre-populates a couple of forms it will eliminate some of the low-level, manual admin and heavy data entry by collecting it at source. This should be embraced. E-tax has been with us for many years now and I haven’t seen a great deal of lost compliance revenue from the firms I have worked for. While “I” returns will get more streamlined I think the threat is a storm in a teacup.

Further, 100 per cent of my revenue comes from what people would call compliance and the efficiency has not dropped revenue and has seen net profit more than double.

A funny thing happens after you find efficiency. You realise that compliance work has a value that isn’t tied to the number of hours you spend on it. You realise that you can still charge the same fee but spend half the hours working on it.

Myth: The ATO will do you out of a job

The ATO’s SBR isn’t revolutionary for us non-tech geeks. The majority of us won’t know if we are using ELS or SBR. It’s the platform by which people (mainly tax agents) lodge information with the ATO.

In addition, the task of implementing most of the SBR functionality has been given to software providers who monetise the accountant channel. What do you do to a channel you earn revenue from? You keep them happy. The toys will be in the accountants’ hands.

The main areas of automation so far from SBR (TFN declarations and PAYG stationery) reduce the time it takes for accountants to help clients. Most of this eliminated work doesn’t contribute a great deal to the revenue of a firm but it definitely chews up time.

We should also ask ourselves how many business taxpayers actually trust the ATO to take their raw data. The stuff before the accountant has checked that it’s correct and that the tax has been minimised. In my experience it is none.

This is an unbelievable time for the accounting industry. We have an ATO tax commissioner with real business experience driving an agenda of change. A team of dedicated second commissioners are driving change by embracing technology and innovation. With our industry’s support, they will drive this change (and its A$500m of time savings) straight to the profitability of accounting firms.

As for our scaremongering friends, I can accept discussion about industry trends. I understand the need to educate an industry in decline. I will even take hyperbolic sales copy. What I won’t take is people using unfounded fear to sell a book or a seminar.

This article was first published in the December 2015 issue of Acuity magazine.