This week seemed to be a meeting of a number of issues that led us to consider the future of Australian taxation compliance.
We believe that Odyssey completing some 50,000 jobs annually for some 500 Australian accounting firms gives us the opportunity to have higher level visibility than most firms.
This week started with receiving a garbage set of prior year working papers from an Australian accounting firm, that at best could be described as “Chicken scratchings on a couple of A4 working pages”. Most times we receive something like this, there is usually an accompanying note like: “the last bloke just left and we just found this mess”. I’m not always sure the last bloke left, but the working pages can best be described as a creative document used for the preparation of the tax return.
At the same time, we’ve been talking to some firms that have had the ATO/CPA/CA or any one of a number of bodies visit, and ask for working papers. Gone are the days that you have a month to get ready for an audit, then when the auditor appears you are given a list, then confess the working papers are held offsite, and over the next few weeks feverishly work to back completing the working papers. Like that never happens right?
What’s happening now is that the ATO rock up with a thumb drive, give you a list of a dozen or so returns they want, and they sit in your office while you get them from the cloud. Everything is digital.
There are no excuses anymore to not having digital working papers available immediately if required.
At the same time, if you listen to any of the ATO webinars, there are indications of where the tax system is headed. The ATO is investing in AI and digital, and more work is being done in refining compliance audits. There is money to be made by the ATO in these areas. It will continue
Our 5 key forecasts on the future of Compliance as far as the ATO is concerned:
- The ATO will start to expect, and then require, that Australian tax agents upload their working papers to some ATO accessible cloud area. The ATO can, and will, look at your working papers whenever they feel like it.
- Prior years’ digital working papers will be available to the next Australian tax agent. The new tax agent is going to be able to determine easily when a mistake has been made.
- With increased computer power, the ATO will continue to modify their forms to breakdowns expenses that were traditionally lumped together. These will be subject to rigorous AI testing for out of range expenses.
- The ATO is investing a lot more money into compliance audits. These compliance audits will increasingly be automated. Bots will identify clients with expenses not in the normal range.
- The ATO will have access to the original expense forms, which are already in online bookkeeping software products like Xero. The ATO will be randomly checking expenses.
The key take-aways here are that compliance is not going to get easier. Quality working papers must be prepared.
If you need help with preparing a cracking set of working papers, then drop Odyssey a line and we’ll show you how Outsourcing your compliance work can assist