What the future for Tax Professionals Looks Like

The Australian Taxation Office (ATO) has a bold strategy involving a connected environment with software companies, encryption of data in the cloud computing environment to clients data at source. This strategy leaves some tax professionals feeling vulnerable. My impression however is that there is both threat and opportunity within the changing way in which we do our work.

In a connected environment, the ATO will have access to everything. The very deliberate push is to link up multi agencies to increase the integrity of tax collection and data matching. With "E Invoicing" some of the current data risks with email traffic may be enabled in a secure, encrypted invoicing and data collection environment. The technology itself is a bit beyond this writer, however my understanding is that government are developing the process to mitigate against the usual nasties of ransomware, encryption and intercepted communication by criminals.

It is very likely that tax advisors will be remote, digital, instant and automated. Within this environment, the ATO will be able to apply big data analytics. For any skeptics, the reality is that they already do, it is merely that the analytics will become more instantaneous and more accurate through a combination of AI machine learning and the nearest neighbor concept. The nearest neighbor concept is about elite data matching of similar businesses in a similar geography with similar characteristics reporting different margins, different label answers as a proportion of revenue, different revenue for a head count and various other ways of cutting up the same data to come up with material misstatement wherever it may occur.

The tax advisor will need to lead their clients ahead of the ATO computer. Where the advisor of 20 years ago spent most of their time on data entry and business process, the advisor of tomorrow will be seeking to automate all that can be automated in the data entry process, then turning their mind to providing quality control and oversight to that automation that the right widgets are in the right box and that the reporting and lodging to the ATO is accurate. Inaccuracy will be punished, be that through the tax practitioners board, the ATO itself or in the audit process that is receiving more and more funds with every budget.

In preparation for this new reality that may be closer than you think, attention turns to software providers to enable the source data to be uploaded into the computer file at source, then coded (only once) on the way to the BAS and income tax return lodgement. One wonders where accountability will lie in the eyes of the ATO when an incorrect lodgement occurs. The usual process is a period of education followed by a more punitive and recovery approach. Questions to contemplate include "who" is responsible for the lodgement and does the advisor and software provider share some of the risk? Who is responsible for the source document proof and can the software convey this proof on an extraction basis seamlessly? How will the process work from end to end to enable processing, certainty, understanding of responsibility and lodgement on a recurring basis? What happens when a client moves software provider or from advisor to advisor in relation to data recovery of previous quarters/years source data?

It seems logical that every advisor will be required to be accredited in every skill performed and that every accreditation will be subject to continuing professional education requirements and that the professional indemnity claims will increasingly demand evidence of both before honouring a claim. I think we will see every increasing specialization of individuals that design systems, connect and maintain systems, automate the moving parts within the system then communicate in real time on the results. Engagements themselves will have to be understood by all stakeholders to the engagement that may draw a wider net than previously was the case,

We already know that Auskey technology is being replaced and that MyGov whilst unpopular will be ramped up. MyGov ID will be a digital identity with 100 point checks like banks have which will connect individuals to ATO online services and their software solutions in all their forms. Relationship Authorization Management will become a thing with ABN reviews occurring every 12 months. That is a big movement from once every 20 years or so which has been the case to date!

The tax ecosphere is on the move. It has been coming for a while. Those that are nimble will merely roll with the changes and keep the outward experience fairly calm. Many clients (if done well) may not really know all that is going on under the surface, secure in the knowledge that their advisor "has it covered". Other clients will want to ride every step of the journey. Change of any nature is hard for the human condition so some angst will occur. Having said that, change is constant with the species that fails to adapt becoming extinct.

Have you asked your advisor what they are doing to be ready? If not, it might be a useful conversation to have about how your system can be improved, automated, bank rules set, data entry time cut in half or more to give you a picture of performance in real time, all the time. Whilst there is a compliance sting in the tail, the direction is far from all bad. Who would have thought it would be the ATO to finally drive what consultants and advisors have dreamt of for at least a decade.