What The New ATO Processes Mean For You

Finance and Accounting

Recently I spent a few days hanging out with the ATO (Australian Taxation Office).

For me, what came out of the seminar was the overwhelming realisation that the lives of many of our clients are about to change.

Effectively, the ATO is moving to a regime that will allow it to capture more of your data – directly from your accounting system. Standard Business Reporting (SBR) is an initiative that was implemented some 5 years ago, but which will be enforced by the ATO from 2015. It requires firstly tax agents, and then businesses to report to it using only the data on your accounting systems. Essentially what it means is that the data that is on your computer will be uploaded, via our computers, to the ATO systems.

The ramifications of this could be huge.

The ATO is rolling out this strategy with a helpful – “Lets help you save costs” promise. As a skeptic, with some IT knowledge, I predict this software change will have a far greater implications over the long term.

Having accounting systems that communicate directly with each other allows the ATO, to specify the data it wants. As the program gets rolled out and bedded down, I foresee the possibility that a great deal of “additional” data might be added to the list of things the ATO might want to see or analyse.

At the moment the only data the ATO can see is what it’s given. Sales are what the sales are.

But lets consider a possible future scenario.

At the moment, the sales of a business on an accrual basis are those that are invoiced. So if you don’t invoice until later, the GST and income tax implications are not disclosed until the next BAS and tax return.

Take a business that invoices at the end of every month. Instead of invoicing and dating the June invoices as of June 30, if it does so as July 1, then it can effectively delay a significant GST and ultimately the income tax that would be paid on those invoices for around 4 months (GST) and up to 18 months for income tax which be helpful at times.

What if the new reporting regime allowed the ATO to request any invoices raised say 3 days after the end of the month and the ATO deemed those to be June sales? Things change!

To be fair, SBR will improve the quality of reporting. It will allow us all to see the same data and that is a good thing. But it will give a great deal of power to the government agencies that want more information to data match against the data sourced through other collection processes.

Personally, while I don’t have anything to hide, I’m happy to report my information when I need to, but not before. It’s my information and no one else’s to admire, analyse or interpret.

On our end, we will keep our clients abreast of the changes that are happening in this area and we’re developing strategies to ensure the control of financial affairs remain in your hands. What are your thoughts on these new ATO processes?

Macartan Gaughan

Financial Controller at Glendale Care

You can follow my thoughts @ macartan.com.au about the HUGE impact cloud computing is having on small business environment in Australia and throughout the world.