What tax software and apps are right for your practice?
Has remote working made you crave more efficient, browser-based tax tools? It’s time to check out what’s on offer.
- The market for browser-based tax tools is heating up with software and apps from MYOB, Xero, Taxlab, Thomson Reuters and independents.
- Many accounting firms still process tax returns with server-based tax software, so may be missing the advantages of browser-based tools.
- Some practices use tax software from multiple providers such as MYOB, Reckon and HandiSoft.
Client accounting software used by businesses to track and reconcile transactions has leapt ahead in functionality and sophistication in recent years. But tools for accountants – a much smaller market – haven’t received the same amount of attention. And this is particularly true in the critical area of tax applications.
Many accounting firms still process tax returns with server-based tax software. Sage HandiSoft, MYOB and Reckon have a long history supplying comprehensive tax packages, and there has been little innovation to challenge them – that is, until New Zealand-born company Xero came along and offered a bare-bones, online tax program for free as part of its partner program in 2015.
How Xero Tax radically changed the process
In 2019, Xero claimed in a blog post that more than 5000 firms in Australia and New Zealand had filed more than 6 million returns using Xero Tax. (Some firms use tax software from multiple providers such as MYOB, Reckon and HandiSoft as well.)
Price was not the only attraction. Because Xero Tax was built in a browser it could include electronic signatures for faster signing, multi-user review for easier collaboration, and hotlinks to account transactions in the client file.
A crucial difference was that Xero Tax automatically synced updates from the Xero client accounting file. This created a much more efficient process, particularly for trust and company forms, says Megan Smith, a director and head of the Business Services and Taxation division at Prosperity, a firm with more than 130 staff in Sydney, Newcastle and Brisbane.
“Beyond year one, where the mapping of data happens, the efficiency is in the auto pre-fill of all the financial information through to the tax form,” says Smith.
“It [removes] the risk of human keying error, or when the financial statements change and you don’t have to trust that someone remembers to go and update the relevant pieces.”
The ability to pre-fill the tax form has had a broader impact on the type of work performed by accounting graduates. When Smith joined the firm 24 years ago as a trainee fresh out of school, she learned how to prepare tax returns by typing in the numbers for each field. Instead of spending time reviewing work for manual errors, graduates at Prosperity provide clients with an analytical view of their tax return.
“For us to attract and retain good people, they want to do more interesting work. They don’t want to be keying data off a spreadsheet into a tax form,” says Smith.
“For us to attract and retain good people, they want to do more interesting work. They don’t want to be keying data off a spreadsheet into a tax form.”
When Xero doesn’t cover everything
Despite the hype, Xero Tax wasn’t and still isn’t a complete replacement for HandiSoft, MYOB and Reckon APS. It lacks some of the more esoteric work papers and forms that occasionally crop up.
“Xero’s tax product covers 80% of working papers needed for small business, which frustrates some firms accustomed to fuller coverage,” says Alan FitzGerald of Practice Connections Advisory, a software consultancy for accounting firms.
“A firm will need to balance up whether the needs of the many outweigh the needs of the few,” he says. “That 20% of clients (who need uncommon features) might return you 80% of your revenue, so the firm may need to do a lot of work external to the form to complete it.”
Xero wasn’t the first to release online tax in Australia. That award goes to Andrew Noble, a Western Australian accountant who launched LodgeiT in 2011, four years before Xero Tax.
Noble has built LodgeiT into a more fully featured, cloud-based solution for tax than Xero’s. LodgeiT was one of the early integrations with Xero, and it is also the only official tax package that integrates with Intuit QuickBooks.
Xero preaches an open platform for third-party software, even for competing tax applications. However, in October 2020, Xero said it had paused new connections and additional practice clients for LodgeiT pending “a review” of its integration with Xero. (There is no change to existing Xero and LodgeiT connections.)
Taxlab is a strong challenger in New Zealand
Another formidable challenger is New Zealand’s Taxlab. Founded by Big Four accountants, Taxlab signed up more than 150 companies [as at 2020] including banks and telcos and New Zealand’s six biggest accounting firms.
Taxlab’s proposition is unique; it competes against Thomson Reuters ONESOURCE and CCH Integrator at the top end and can scale all the way down to general and special purpose financial statements for small businesses.
Kate Moir CA, tax manager at Todd Family Office in Wellington, files 500 returns a year for mainly wealthy individuals and entities. The practice has its own in-house general ledger system to handle investments as well as accounting.
In practices such as Todd Family Office, where the client base has the same general ledger, the mapping process can automatically complete 80-90% of each return. After Moir implemented Taxlab as the first preparer of the tax return, she no longer needed a full-time employee to assist.
“I’ve found it amazing. It has saved me about two hours from start to finish per process. It’s a massive efficiency,” she says.
“I’ve found it amazing. It has saved me about two hours from start to finish per process. It’s a massive efficiency.”
“Now I’m freed up an extra 1000 hours a year to add value. That is absolutely job changing. I can stop and think how better to structure, what recommendations we can do, how to be more tax efficient. The tax compliance work becomes secondary.”
Taxlab has spent the past year creating content for the Australian market. It is finalising individual returns and will start on corporate tax in Q1 2021. Mike Roberts, managing director for Australia, says the corporate market will take some time to reach due to the complexity of Australian tax regulations.
MYOB develops its online option
“MYOB is working furiously on an online tax module as part of its MYOB Practice, the online successor to the Accountants Enterprise suite. The product has been under development for four years – the BAS and FBT forms have hundreds of firms using them,” says Caroline Wright, Head of Product – Accountants & Partners MYOB Practice.
A group of early adopters are testing the partnership, company, trust and SMSF forms, which have received ATO approval, she advises.
“The individual tax form is almost complete and should get the ATO’s blessing in early Q1 2021.”
Like Xero Tax, MYOB’s tax module is browser based and offers the same multi-user review and electronic signatures. MYOB’s Practice tax module also auto-fills forms directly from MYOB Essentials, AccountRight and Ledger. However, MYOB opted for a manual refresh of the form rather than the continuous synching used by Xero.
“We made that decision consciously. Our customers said they wanted to have control over when the data is updated,” says Wright.
Most of the development team has been focused on finishing the end-of-year financial compliance for the past 12 to 18 months, Wright says. While the tax module will lack some of the features of Xero Tax on launch, MYOB does intend to bring it to feature parity with its server-based version.
In New Zealand, MYOB has released NZ Tax for tax preparation and lodgement. In late 2020, it added a module that reconciles payments to Inland Revenue and manages tax notices. It plans to adapt that module for the Australian market, though this is not high on the list of priorities for now, Wright says.
MYOB’s plans for MYOB Practice are a little unclear with the news of its pending acquisition of South African competitor, GreatSoft. The sale is undergoing approval by the Australian Competition and Consumer Commission. (A decision is expected on 22 April 2021.)
What does CCH offer?
Wolters Kluwer sells an online tax product, CCH iFirm Tax, for its practice management software CCH iFirm. However, the company decided to integrate CCH iFirm with Xero Tax in a concession to the latter’s popularity.
Now, Wolters Kluwer is focusing on products that exploit the value of its deep tax coverage. CCH iQ Client Match, which integrates with Xero Tax and CCH iFirm, automatically identifies clients to contact about upcoming relevant tax events. It also explains how the tax events will affect them.
This saves a lot of time working out who to call when the government passes new legislation, ATO rulings and announcements or macro-economic events. It effectively creates a call list of affected clients which a firm can turn into billable work.
CCH iQ Client Match provides Wolters Kluwer’s professional analysis of the event, plus templated client letters, calculators and impact statements to make it easy to contact clients.
The product has been in market since 2016 and claims to generate an average $150–$10,000 in advisory fees per event. Users also reported up to 50% boost in efficiencies by using the predictive intelligence tool, according to Wolters Kluwer.
Other competitors in a growing market
The tax space may have taken a while to get going but it is now on a roll. Thomson Reuters, which enjoys a large market share in the corporate sector, is trying its hand at tax for small business as well.
Thomson Reuters has dived into the highly competitive practice software market for small and medium firms with Onvio Practice, time and billing software for small accounting firms, and Onvio Tax.
More accountants are trying their hands at software development. AssetAccountant creates an asset register and applies the rules of instant asset write-off to calculate book value and tax value. This saves accountants the burden of working out first installed versus first use through several years of changes.
ChangeGPS has created a bundle of nine small apps to increase efficiency in tax-focused practices. For example, its TaxPlan Plus helps create tax strategies with pre-written content and colourful advice reports.
As we move through this pandemic-driven recession, governments will most likely introduce more concessions to business that will increase the complexity of our tax system. Fortunately, our software sector is suiting up to meet the challenge.
Nine popular tax software packages
The table below outlines key facts about nine popular tax software packages. The options listed here are by no means exhaustive. A product’s inclusion should not be regarded as an endorsement by Chartered Accountants Australia and New Zealand. Information included in this guide has come from the relevant vendors or associated websites. Prices may be subject to change.
Can you automate normal tax add backs (such as leave, wages payable) so it automatically goes from accounting profit to tax profit in the return?
|Are there schedules for:
– borrowing costs
– blackhole expenditure
– fixed asset depreciation rates
|Can the software integrate with other systems (accounting, database)?|
Allows accountants to manage tax preparation lodgement and compliance for all clients.
|As a Xero partner, there’s no charge for Xero Tax once you reach bronze partner status. Otherwise, subscription prices are: A$71.50 per month for one user; A$108.90 per month for up to three users; A$163.90 per month for unlimited users (incl. GST). Xero Workpapers is included at no extra cost. Additional charges apply for Xero Sign powered by Adobe Sign.||No.||Yes. Xero Tax has a comprehensive list of worksheets and schedules to support the preparation of individual and non-individual tax returns||Yes. Xero Tax integrates with Xero Practice Manager, Xero SME solution and a number of third-party solutions.|
A cloud-based application that allows accountants within both firms and companies to prepare tax returns in Australia and New Zealand (company, partnerships, individuals and trusts) and financial statements. Also has functionality for more complex tax use cases such as consolidations and tax effect accounting.
|Price on application.||
Yes. Taxlab has
|Yes. Taxlab can connect to third-party systems such as AssetAccountant enabling automation from registers to return and deferred tax proofs.
||Yes. Taxlab can integrate with other cloud systems via a set of APIs (includes practice management, accounting ledgers, CRMs and tax authorities).
|Reckon APS Tax
A comprehensive tax preparation and management tool that tax agents can use for all of their clients’ income tax needs. There are distinct tax products for the Australian and New Zealand markets.
|No upfront cost, monthly subscription per user.
||No. Some timing differences from a prior year (such as trade debtors not returned as income in the previous year for taxpayers operating on a cash basis) are automatically reversed the following year.
||There is a separate worksheet for borrowing expenses and the deduction can be allocated to one or more relevant locations within the tax return.
Blackhole expenditure and fixed asset depreciation rates are all handled by the Assets sub-system. The Assets sub-system is used to calculate the decline in value, capital gains and losses, and capital works deductions of assets.
|Reckon APS Tax can import figures from the Reckon APS XPA Professional
Accounting system (XPA). XPA can import accounting data from various sources, which can then be manipulated by the accountant, before being reported upon and imported into Reckon APS Tax.
|Intuit QuickBooks Tax
QuickBooks Tax, powered by LodgeiT, enables accountants to prepare and lodge business activity statements, individual, company, partnership, and
SMSF returns from any client accounting software.
|QuickBooks Tax plans allow unlimited users and start from A$550 pa and increase depending on the number of returns which are lodged to the ATO.
||QuickBooks Tax allows accountants to automate tax add backs through superannuation payable.
||Yes. These include borrowing costs, fixed asset/depreciation, hire purchase and blackhole expenditure schedules.
||Yes. Integrates with QuickBooks Online and MYOB. Can also import client accounting data from any other system via an Excel plugin.
|Sage HandiTax Online
A tax management solution for accountants with tax lodgement and preparation, accounting and productivity tools for firms of all sizes, all hosted in a secure cloud environment.
|A$1860 annual subscription.
||No.||Fixed asset depreciation.
||Integrates with Accounts Production solution.|
The end-to-end workflow allows practices to create and lodge/file a tax return with the Australian Taxation Office (ATO) and Inland Revenue (in NZ).
|Price on application. Price varies depending on what the customer needs.||Aus: Yes.
NZ: This is in the roadmap as more modules are added to MYOB Practice.
|Aus: Yes. Work paper is available for borrowing costs. There is no separate work paper for blackhole expenditure. Depreciation is available in the online assets module.
NZ: No. Borrowing costs and depreciation schedule currently available on Client accounting AE/AO.
|Aus: Tax integrates with MYOB Essentials and AccountRight Live.
Provides modularised accounting software solutions for Australian tax agents and accounting practices. Products include Software Assistant, a full accounting solution enabling tax preparation and lodgements and an integrated ledger module as a desktop-based application. Thomson Reuters also developed Onvio, a cloud-based tax and practice solution.
|Software is subscription based, renewed annually.
||Thomson Reuter's products pre-populate individual tax returns from Australian Taxation Office prefill data. In addition, Software Assist Ledger Assistant module integrates and pre-populates data into Tax Assistant module.
||The product is designed to comply with Australian regulations and Thomson Reuter’s tax products include a fixed asset depreciation schedule which integrates into the various sections of the income tax form. There is no requirement for borrowing and blackhole schedules in Australia.
||Ledger Assistant integrates into a third- party for bank feeds and an SMS provider to allow practices to remind their clients they have a meeting (or similar).
A cloud-based global tax platform that significantly reduces the complexity of tax compliance and reporting across multiple entities and jurisdictions, increasing control, reducing risk, and freeing the tax function to focus on greater things.
|Annual subscription. There may be additional upfront and ongoing costs depending on the particular client solution.
||Yes. CCH Integrator can fully automate all common tax adjustments.
||Yes. CCH Integrator has schedules and workpapers available for adjustments such as blackhole expenditure. You can also design your own secure cloud-based workpapers, so CCH Integrator directly aligns with their internal processes.
||Yes. CCH Integrator can
automate TB data load from ERP systems, is integrated with revenue authorities and is building out its API capability to integrate with workflow, CRM, DMS and BI tools.
A cloud-based platform that provides an integrated software suite designed specifically for accountants. The CCH iFirm suite helps accounting firms run and grow their practice through deeply integrated modules, increasing automation and productivity. The solutions include: Cloud Tax (for ATO and Inland Revenue lodgements), Practice Manager, Intranet, Portal, Document Manager, Billing, Resource & Capacity Planning, CRM, Workflow Automation and Reporting.
|Tailored pricing based on specific business requirements.
||Aus: Currently on the CCH iFirm roadmap for Australia. NZ: Yes, provides over 60 cloud-based workpapers templates.
||Yes. Integrated schedules are available to support fixed asset depreciation, borrowing costs and blackhole expenditure.
||Yes. Integrates with Xero and imports client accounting data from other various sources.
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