What's emerging? Principles guiding the ATO's digital strategy and what it means for employer obligations
21 September 2022
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On 8 September 2022, the Commissioner of Taxation, Chris Jordan AO, announced that the Australian Taxation Office (ATO)’s Executive Group had endorsed a new digital strategy, which sets out the 2030 vision for enhanced digital administration of tax compliance, through integrated, real-time reporting.
The ATO’s digital strategy is aligned to the Organisation for Economic Co-operation and Development (OECD)’s “Tax Administration 3.0: The Digital Transformation of Tax Administration” discussion document, which was published in 2020. That document includes a digital maturity model that outlines recommended steps to achieve digitisation for tax administration.
Although the ATO’s documented digital strategy might not be released to the public for some time, it is expected that the strategy will be underpinned by the following five key principles - broadly, these principles are based on integrating tax administration into taxpayer’s existent systems, focused on real-time compliance coinciding with the relevant taxable event:
Principle 1: Leverage natural systems
Building tax administration (such as assessment and reporting mechanisms) into the systems, software and tools currently used by taxpayers, with the aim of facilitating integrated/seamless compliance.
Principle 2: Imagine the possible
With the adoption of a transformation mindset, the digitisation to be developed is aimed at cutting the administration burden by utilising a single data source and reducing risk of errors and fraud. Ideally, digitisation developed ensures synchronicity with taxable events in real-time, all facilitated through one source.
Principle 3: Sustainable digitalisation and benefits
Where possible, the ATO will seek to re-use systems and capabilities, and keep dual-purpose in mind when new systems are designed. This means taking a whole-of-system approach, including sharing data with other government agencies to enable administration of separate regimes/services which rely on the same/similar inputs.
Principle 4: Integrity by design
In an increasingly digital environment, the ATO will seek to embed fraud prevention and cyberthreat measures into its systems as part of the design process. This is important given the sensitive nature of the data being transmitted.
Principle 5: Design for the user
The ATO will work together with tax professionals and digital service providers to ensure its revamped systems are “designed for the user”, and allows for ease of use. In this regard, the ATO has flagged consultations and feedback programs as being key in implementing its strategy
Looking forward - where to from here?
The evolution to a more digitised tax administration system is a welcome development. Based on the ATO’s digital strategy, in time, we should see taxpayers’ focus shift from core tax compliance reporting and associated processes (generally in environments outside of native systems), to the need for good governance measures which support seamless tax compliance from existing business infrastructure.
While the 2030 digital strategy and principles may initially appear to be largely hypothetical, we have already witnessed the first steps in this space. The real-time reporting of payroll data to the ATO under Single Touch Payroll - Phase 2 (STP2) is a key example.
With respect to the five principles noted above, STP2 leverages natural systems (reporting directly from native payroll systems), acts as a real-time compliance mechanism (e.g. each STP2 label has a particular tax, superannuation and social security profile to enable compliance monitoring), has been built with sustainable benefits in mind (e.g. data shared with Services Australia to deliver social security programs), has inbuilt integrity designs (e.g. at an employee-level, data can be accessed in real-time using a personal myGovID), and is focused on the user (e.g. detailed employer guides constantly enhanced with details and examples based on feedback).
With the ATO’s commitment to enhanced digitisation of tax administration, it would be prudent for taxpayers to consider any current tax processes that necessitate significant out-of-system intervention to enable compliance and keep this front of mind in relation to any future enhancement / upgrade projects. As the ATO moves towards integration into native systems, taxpayers will be encouraged to invest in their internal environment to enable seamless (and real-time) flow into tax compliance - for example, in a Fringe Benefits Tax context, where expense management systems and general ledger data cannot be relied upon to enable reporting due to the absence of accurate or tailored configuration, investment in this regard will align to the ATO’s 2030 digital strategy.
Watch this space.
If you have any questions about these developments and how they could impact you, please get in touch with your PwC specialist.
