The dreaded annual tax return, scourge of every Australian worker, soon could be consigned to the wastepaper basket of history.
Prime Minister Tony Abbott raised the possibility recently when he launched his “Cutting Red Tape” website.
Asked if returns were part of the red tape he was looking to target, Mr Abbott said: “At this stage, no, but watch this space.”
The tax office itself has given a far stronger indication that the days of filling out tedious returns are numbered – at least for those with uncomplicated tax affairs.
We’ve identified this as a possible service initiative and we’re working towards it
In a speech given last year in Canberra, Neil Olesen, now the Second Commissioner for Compliance at the ATO, said the tax office was working on ‘push’ returns that would be sent to taxpayers for them to approve.
Around 4.5 million taxpayers could be “liberated” from filling out tax returns, he added.
“We’ve identified this as a possible service initiative and we’re working towards it,” an ATO spokesperson told The New Daily.
The proposal has the tacit approval of the Institute of Chartered Accountants (ICA).
Michael Croker, ICA head of tax policy, said it was “a positive move”.
Compared with many other developed nations, Australia is lagging in this regard.
Denmark and Norway compile the returns of “nearly three quarters” of their citizens, Mr Olesen said in his speech.
Paul Brassil, a partner at big four accounting firm PricewaterhouseCoopers, said most people in the UK don’t have to lodge tax returns either.
“There are quite a few places around the world that don’t require tax returns – Papua New Guinea for example,” he said.
“If they can manage it, why can’t we?”
If the tax office does go down this well-trodden path, and use its trove of data to speed up and simplify lodgment, will it be to the benefit of the average taxpayer? And what will become of the tax professionals who lodge our returns?
Red tape reduction or revenue raiser?
Damian Sutherland, head of the business advisory division at accounting and financial planning firm Bell Partners, said doing away with returns could improve the Government’s revenue flow around tax time.
Having greater control over the timing of tax refunds would be “a slight advantage”, he said.
But the idea did not constitute a money grab on the part of the government, he added.
“I don’t see any hidden agenda, or anything of that nature,” he said.
It could save you time, money and jail sentences …
Despite the likelihood the move will cost them work, accountants seem to support a change to automatic returns.
“The government should be able to work it out for you and save you the bother of having to go and see an accountant or a tax return preparer and probably save you $100 or $200 in costs,” Mr Sutherland said.
“In that sense, it’s a benefit and a winner.”
Mr Bassil describes the current system as “just a paper war creating a whole lot of cost”.
“There is a vast number – millions of tax payers – that are going through a paper-shuffling, red tape exercise and not adding any value to the economy,” he said.
It would also remove the possibility of getting caught out for failing to lodge for many Australians, Mr Brassil added.
“It’s very easy to fall behind, for one reason or another. It can amount to a criminal offence for people to fall behind. Why put people in that position?”
“As an accountant and a tax practitioner, I’m in favour of the concept. I think they should be trying to make it somewhat easier for people with tax,” Mr Sutherland said.
…but also lead to big blunders
The exact mechanics of this tax system overall are still murky, although Mr Olesen hinted the tax office is considering a system similar to what is common across Scandinavia and the US, where returns are compiled and then sent out to taxpayers for final approval.
Advances in computer technology now allow the ATO to get all the necessary information on wages, interest and dividends from tax file numbers, according to Mr Sutherland.
“The ATO has the information, they’re going to tell you what it is, and that’s the end of the story,” he said.
“You’re relying totally on the ATO, and if you don’t really bother to go look at it, and they just give you a refund or an assessment and tell you it’s this, you may not even pick up on [the errors].”
Cutting the red tape might not be so easy
Those with complicated tax affairs, or the desire to claim every possible deduction, would still need to check over the automatic return, or pay an accountant to review it.
Australia’s complex tax law means that modernisation will not be straightforward and the ATO and tax professionals will have many issues to consider in the digital age
“The minute there’s any sort of complexity to your return, the ATO aren’t going to be in a position to work that out, and you are going to need to lodge a return,” Mr Sutherland said.
In addition, Australia’s complex tax laws mean modernisation will not be straightforward and the ATO and tax professionals will have many issues to consider in the digital age.