The Acting Inspector-General of Taxation and Taxation Ombudsman (IGTO), Mr Andrew McLoughlin, has welcomed the Government release of the IGTO report into The Future of the Tax Profession. The review examined the challenges and opportunities presented by new and emerging digital technologies, along with the accompanying social, policy and regulatory impacts on the administration of the tax system and the tax profession.

‘The Australian Taxation Office (ATO), Tax Practitioners Board (TPB) along with tax practitioners and professionals collectively need to have strong working relationships to realise this future’, noted Mr McLoughlin.

The IGTO made nine recommendations comprising 28 elements: 19 elements relating to the Australian Taxation Office, six to the Tax Practitioners Board and three for Government.

Recognising that the report may be of assistance to stakeholders wishing to engage in the current review of the Tax Practitioners Board, Assistant Treasurer Stuart Robert requested publishing the report before standard timeframes.


Recommendation 4.1

The IGT recommends that:

  1. the ATO:
    1. in collaboration with its staff and the unions, develop a roadmap outlining its current position, desired future state and how it intends to make the transition from one to the other, including redeployment and upskilling options for staff and support them through the transition;
    2. in consultation with recognised professional associations, offer assistance to tax practitioners who may wish to develop their own roadmaps to transition from the current to future states; and
    3. engage with the professional associations, tertiary institutions or other education providers to co-design training programs and courses to upskill ATO staff for the roles of the future; and
  2. the TPB:
    1. implement a framework to periodically review its workforce capability needs to meet future regulatory and compliance challenges; and
    2. in consultation with recognised professional associations, offer assistance to tax practitioners by, for example, providing advice on whether their future plans meet the ongoing obligations of the Tax Agent Services Act 2009.

Recommendation 4.2

The IGT recommends that the ATO:

  1. conduct a cost-benefit analysis on the design and production of its own software solutions as compared to outsourcing the work to the private sector;
  2. in collaboration with the relevant professional bodies, implement a communication strategy to inform tax practitioners of its research and adoption of new technologies that may impact on them and their business;
  3. expand its beta testing program to reach as wide a spectrum of tax practitioners as possible, particularly those operating small businesses or who are remotely located;
  4. assess the number of taxpayers who will continue to require access to traditional methods of communication, and use that research to develop a plan for meeting the needs of those taxpayers in the future;
  5. determine the effectiveness of automated decision making tools to minimise the risk of under compliance or over compliance and ensure they are periodically tested to produce accurate outcomes;
  6. consider whether it can devolve some of its functions to tax practitioners with appropriate safeguards;
  7. align its service standards for the performance of its systems with those of commercial providers, including a dedicated scheme for compensation where outages or system failures result in loss for the users;
  8. engage with the tax practitioner community to develop an action plan to bolster the stability of systems which enable them to assist the community to comply with their tax obligations, including an updated timeframe for the migration of the Tax Agent Portal functionality to ATO Online; and
  9. ensure that any future messaging regarding concerns it may have with the tax profession is appropriately considered and accompanied by robust and properly tested data.

Recommendation 5.1

The IGT recommends that the ATO review its current framework for monitoring and identifying new or emerging technologies or innovations to ensure that it is able to take prompt action to address any tax implications.

Recommendation 5.2

The IGT recommends the:

  1. Government consider reform of the work-related expense deduction regime, having regard to prior reviews in this area, including the possibility of introducing standard deductions with a view to eliminating the need for most individuals to lodge income tax returns; and
  2. ATO engage with:
    1. third party data providers to maximise access to reliable information whilst minimising costs and disruption to their business and systems; and
    2. the CSIRO’s Data61 group on the latter’s work on machine-readability of tax laws.

Recommendation 5.3

The IGT recommends that the Government, in seeking to improve the administration of the tax system as well as public service delivery more broadly, consider whether the Digital Transformation Agency, or a similar agency, should adopt a more comprehensive role in driving the whole-of-government digital transformation.

Recommendation 5.4

The IGT recommends that the ATO:

  1. review its current internal arrangements for identifying and responding to cyber security risks to ensure efficiency, effectiveness and, in particular, that responsible areas within the ATO are clear on their remit, communicate and share intelligence appropriately and deliver a unified and coordinated response in addressing the risks;
  2. assist tax professionals, particularly those operating in small practices, to develop and maintain their own cyber security risk management and response plans; and
  3. broadly communicate and inform the public about the measures it has implemented to mitigate risks of cyberattacks and data breaches.

Recommendation 6.1

The IGT recommends that the TPB, in consultation with recognised professional associations, undertake research to determine if its policies and procedures appropriately cater for all tax professionals within its jurisdiction, including tax (financial) advisers.

Recommendation 6.2

The IGT recommends that the TPB:

  1. periodically review the suitability of the educational requirements of the Tax Agent Services Regulations 2009 and its own related guidance with input from practitioners, professional associations, tertiary institutions and the ATO and act upon any findings including requesting the Government to consider legislative change where necessary; and
  2. consider whether the TASA regime provides sufficient flexibility to manage the range of professionals who may offer tax services and present its findings to the Government.

Recommendation 6.3

The IGT recommends that:

  1. the Government consider increasing the range of sanctions that the TPB may impose on non-compliant tax professionals, including empowering the TPB to release information to the professional associations, in appropriate cases, to enable the latter to undertake disciplinary action against their members;
  2. the TPB undertake research to determine the extent to which tax services may be offered in the gig economy by people who are not appropriately registered and engage with other agencies, such as the ATO, the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission to consider options to protect taxpayers from such service providers; and
  3. the ATO broaden the membership of its Tax Profession Future State Working Group to include new entrants into the tax profession such as digital service providers, tax (financial) advisers and their representative bodies as well as publish more comprehensive information about the work of the Group.

ATO response

Of the 19 recommendations related to its work, the ATO agreed with four of the elements and noted that seven have either already been implemented or they are existing programmes of work. Finally, the ATO disagreed with eight of the recommended elements.

TPB response

The Tax Practitioners Board is an independent statutory body, separate from the ATO, created under the Tax Agent Services Act 2009.

The Board welcomed the review, given TPB’s regulatory functions in the registration and regulation of entities providing tax agent services in Australia. The Board’s response highlighted the report as a good consolidation of known issues that are affecting the tax profession, as well as a useful reflection of retrospective and current matters as context for the forward-looking review.

The Tax Practitioners Board agreed with the six recommendation elements relating to its work.

Government response

The Government acknowledged the three recommendation elements made for its consideration.

(Source: IGT press release | Recommendations | Read the report)

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