Commissioner's address to the Tax Institute's Tax Summit 2021

Commissioner Chris Jordan, AO
Address to The Tax Institute Tax Summit
21 October 2021
(Check against delivery)

Thank you

Hello, it’s great to be here. Thank you for that kind introduction.

The last time I spoke at the Tax Institute Summit was March 2020. I remember the terrible traffic in Sydney that morning and arriving to a packed auditorium at the International Convention Centre. No one was wearing masks, and we didn’t yet know much about social distancing, let alone practice it.

I don’t need to tell you how much has changed since then, and how much we have all been through together.

One of the things I have been most proud of during this time is the strong relationship we have with the tax profession, and our shared commitment to supporting the community.

You have been vital in helping clients navigate government stimulus measures and changes to the tax system, and we have appreciated everything you have done.

With your help, the ATO was able to administer vital stimulus payments to millions of Australians in a time of need.

At last count, this included:

• $89 billion in JobKeeper
• $36 billion in Cash Flow Boost
• $38 billion in Early Release Super

Despite the challenges of the last 18 months, at the ATO we have remained committed to our transformation.

That commitment is what put us in a strong position to deliver such a huge stimulus program in a short space of time, and it has meant we have continued making progress in a complex and ever-changing environment.

I want to take the opportunity today to talk about how we are helping you and your clients, and look ahead to what we have planned for the future to improve your experience with the system.

In the ATO corporate plan, we have seven strategic initiatives to sharpen our focus on our transformation to 2024. I will touch on several of those initiatives today, at the heart of our transformation, which will be of particular interest to the tax profession.

I know many of you are tired – tired of change, tired of uncertainty and large workloads – but the ATO is here for you.

Every change we make or piece of guidance we issue is about strengthening the system and making things easier for you and your clients, so we need you on this journey with us.

Partnering with you

The hope of an easier, or at least more settled 2021 was short-lived for many of us as we continue to live through COVID-19 lockdowns and restrictions.

While many businesses and their advisers have been doing it tough, we know some businesses continue to operate as usual. Some have even thrived during this time.

This uncertainty has of course continued to impact our approach to compliance, lodgment and payment.

Last year, we acknowledged the huge impact on the community and paused much of our compliance work. We took a considered approach to turning it back on towards the end of last year, and have remained flexible. The last thing we want is to put added pressure on people who are experiencing financial distress.

Many people have continued to rely on tax professionals to access the help and support available; like the new state-funded stimulus measures with different eligibility criteria. So we’ve done what we can to alleviate some of the extra pressure on you.

We have provided extra time for clients to lodge and pay, remitted certain interest and penalties, given you access to low interest payment plans on behalf of your clients and allowed some flexibility with PAYG instalments.

I know many of you are worried about your lodgment program, but you won’t be adversely impacted if you don’t meet the requirements. We use this benchmark so you can understand where you sit in comparison to your peers, and so we can better understand who may need some extra help from us.

We’ve learnt the best way to help is to work with you to tailor a solution to suit your needs and those of your clients, whether that is a deferral for a small number of your clients, or more tailored support for long-term difficulties.

Reach out to us via the Supported lodgment program for extra help. Tax Practitioner Assistance is also available for issues you’ve been unable to resolve online or by phone.

We continue to monitor and adjust our approach. As you know, in response to bushfires in late 2019 we provided blanket deferrals for certain lodgment obligations, and this continued to be our response early in the pandemic.

But over the last 12 months, we realised that for COVID we needed to be more sophisticated in targeting our support. We couldn’t just put in place a lodgment deferral for all the taxpayers living in a specific postcode or a specific industry.

Blanket deferrals mean some people stop engaging with the tax system. They also make it challenging to keep your clients engaged with you. It’s so important your clients stay engaged rather than burying their head in the sand. So, now our support is designed to keep people engaged.

Lodging gives them certainty of their tax position and allows you to work with them to plan their path to recovery. If they are struggling, we will listen. Our staff understand the need to be empathetic and will do what they can to tailor a solution that helps your clients get back on track.

Our continued transformation

While continuing to support you and your clients in any way we can, we have also remained committed to our transformation program.

It’s what allowed us to deliver through the pandemic and it’s our transformation that will prepare us for future challenges – whatever they will be. That’s why we kept our focus on this important work.

At the core of our transformation is the vision of making it easier, cheaper, and safer for the tax profession, businesses and individuals to interact with government. The ATO is taking a lead role in delivering better whole-of-government services for the Australian community.

Central to this is the introduction of the Australian Business Registry Services (or ABRS), which will bring together more than 30 government business registers through the Modernising Business Registers program. The new ABRS is an important step towards offering better, more streamlined interactions with government for business.

I am very proud to have been appointed Registrar of the ABRS, and I think it makes perfect sense for the ATO to be responsible for administering tax, super and registry services.

The new director identification number, or ‘director ID’, is the first service offered by the ABRS, available in public beta from next month. The tax profession has played a vital role in shaping private beta trials and helping us get to this point.

By verifying the identities of all directors, director ID will go a significant way towards combatting illegal phoenixing and creating a fairer environment for honest business.

Directors will soon be able to apply, so I ask you all to make sure you are ready to support your clients as needed.

Similar to a TFN, they need to apply for it themselves. It is free to apply, and directors who apply online will receive their director ID instantly.

There are more details on our new ABRS website, including advice on who needs to apply for a director ID and when – so please check it out.

We are also introducing a change to the Australian Business Register so ABN holders can tell us more about their business activities. From late this year, they will be able to record an additional four business activities against their ABN. So a winery that is also a restaurant and accommodation will be able to show that, meaning it will make it easier for businesses to access support and grants for specific industries.

The data can then be used by agencies like the Australian Bureau of Statistics to more accurately profile the business landscape.

E-invoicing is another major initiative in standardising digital business interactions. Exchanging invoices via business software will remove manual intervention and help make businesses more efficient, boost their cashflow and the productivity of the overall economy.

The ATO is working with all levels of government, intermediaries and businesses to raise awareness of the new way to send and receive invoices and how to get on board. The ATO is leading this initiative because we have the right experience delivering large scale change for business, like STP and JobKeeper, not because e-invoicing has a tax compliance objective. Encourage your clients to get on board – it will make doing business easier and smarter.

As you know, myGovID and Relationship Authorisation Manager already make engaging with us easier. These services were both critical in businesses applying for a range of stimulus measures and allowed clients to work from home and still access our digital services.

The next step is ‘Strong myGovID’. It incorporates liveness detection and face verification technology to strengthen myGovID to a higher level. It will also make interacting with the tax system easier by allowing Australians to access higher risk and higher value services online and in real-time, like the online TFN application.

As of 19 October, there have been over 560,000 Strong myGovIDs issued, 580,000 successful face verifications and over 11,900 online TFNs issued.

This has saved people the trouble of attending a post office to request a TFN and waiting the standard 28 days for it to be issued – a significant improvement in the client experience.

Also coming up is STP 2, the expansion of Single Touch Payroll. This next phase will ease the reporting burden for employers who need to report information about their employees to multiple government departments. It will also help Services Australia customers, who might be employees, get paid the right amount at the right time.

We know the start date comes at a busy time for you and some employers, so we have committed to taking a flexible approach. While the start date is 1 January 2022, given your clients will be reliant on their software providers to be able to start reporting, the first step is to check whether their software provider has been given a deferral.

If the software is ready to go by 1 January then as long as your clients can start reporting by 1 March 2022, they will be considered to have started on time and don’t need to apply for a deferral.

If a software provider has been granted extra time, this will apply to their customers as well. Employers can apply for individual deferrals from December this year. We will be flexible and reasonable with the transition.

Clear and fair advice

An essential part of supporting you is providing clear advice on issues that prove challenging. We have remained focused on providing practical guidance on technical and administrative issues so you have clarity.

We recognise ongoing complexities in the consistent understanding and application of Division 7A and 100A and we are working to provide more guidance. Arrangements that undermine confidence and integrity in the tax system and enable the party who receives the benefit to avoid tax on that benefit are concerning.

The release of this guidance has been delayed in recognition of the pressure you and your clients are under. We expect to release it for public consultation in the new calendar year.

We are also close to publishing revised guidance for professionals when considering the allocation of profits by professional firms.

This revised guidance will address concerns around arrangements where taxpayers redirect their income to an associated entity from a business or activity which includes their professional services.

A draft guide we have recently released for consultation sets the recommended approach for making legal professional privilege (LPP) claims in response to a formal notice.

The guide is most relevant for the small number of large businesses that receive formal notices as part of an audit, and reflects the misuse of LPP that we have publicly spoken about.

It is our preference to gather information by simply requesting what we need from taxpayers. In most cases, this happens without having to use our formal powers.

It is voluntary, but following the guidance will provide taxpayers with more certainty about their LPP claims. This allows everyone to focus on progressing the substantive tax issue rather than diverting efforts and resources to disputes about information gathering.

We fully respect LPP is a fundamental common law right. We respect this communication between lawyer and client should remain confidential. But we’re concerned when baseless and reckless LPP claims are made in an attempt to withhold information from us during our investigations.

We are not, and do not seek to be, the arbiter of privilege claims. This is the role of the Courts. However, to appropriately conduct investigations and audits, the ATO must be able to properly consider, and potentially challenge, claims for privilege. This requires contextual information on the underlying communications, which most taxpayers provide voluntarily.

Our continued focus on addressing high risk behaviours

Given the level of influence tax practitioners can have over their clients’ compliance with their tax and super obligations, the ATO has an important role to both support you to help your clients and protect the system from high-risk behaviours.

Our tax practitioner engagement strategy sets out how we tailor our interactions with you, based on the risks we see in your client base, and in your own affairs. Where our data indicates that a practice may be drifting into risky behaviour, we reach out to the agent early. For example, this year, under our shadow economy program, we plan to engage with over 500 tax agents where our experience indicates most of these agents will voluntarily correct errors and improve their processes as a result of the engagement.

However, where we observe high risk behaviours such as facilitating fraud, phoenix activity and scheme promotion, we undertake comprehensive reviews and audits looking at the agent’s client base, their practice and where warranted, compliance with their personal tax affairs.

From targeted compliance activities in 2020–21, the ATO made 169 evidence-based referrals, and made 605 referrals based on intelligence we hold, to the Tax Practitioners Board – from which we operate fully independently.

After its own investigations and consideration of these referrals, 36 registrations were terminated and a range of other sanctions were imposed.

Most tax professionals do the right thing and we don’t want you to ever get in a situation where you are tempted to get involved in some dodgy tax arrangements.

You will have seen the recent reports on the Pandora Papers. We will analyse information that becomes available, compare it with data we already have and, where necessary, will investigate and take action against those who are involved in offshore tax evasion. If you have any doubts over the legality of an arrangement, come to us for advice. We will always be keen to help you stay on the right path.

While the ATO has always had a strong focus on fraud against the tax and super systems, our delivery of economic stimulus measures and even greater digital engagement reinforced the need to remain vigilant and embed a fraud prevention mindset into the design of the programs we administer.

Our new System Integrity Program brings together the ATO’s response to external fraud. It will strengthen the ATO’s ability to identify fraud vulnerabilities and determine if our countermeasures work effectively.

With the large amounts of sensitive information the ATO and the profession hold, and the growing instances of cybercrime like refund fraud, we all need to be prepared to take that extra step to protect the community. This may mean we ask you for a stronger level of identity proofing and additional verification before accessing our systems or seeking information.

There are steps you can take to protect your business and your clients too. The ATO and Tax Practitioners’ Board have been working closely with the tax profession to help tighten cyber security controls and take practical steps to improve physical security measures.

New guidelines have been developed for registered tax practitioners when verifying the identity of their clients. Adopting these new practices will help to protect you and your clients from identity theft, and the broader tax and super systems.

The Future

As you know, I am very much committed to the ATO’s ongoing transformation, and this means looking beyond current issues to investing in where we want the tax, super and registry systems to be in 2024 and beyond.

I mentioned earlier our seven strategic initiatives in our corporate plan that sharpen our focus for the next few years.

Two of the initiatives are aiming to change the way you and your clients interact with the tax system for the better:

• Improving small business tax performance, and
• Optimising interactions through self-service.

Small business tax performance

Small businesses have probably been the most impacted by recent events, with some not surviving.

As you will have heard me say before, when it comes to small business, our focus is on improving tax performance by helping people get things right up-front. We do this through practical strategies and support – not just audits.

Audits will still have their place, but they will not drive the sort of change in small business engagement and compliance we are looking for.

What we are interested in long-term is how we can influence performance through non-traditional means – which is where the strategic initiative around improving small business tax performance comes into play.

Successful small businesses, even in a recovery phase, are the ones that keep good records, use technology to run their business, and have regular contact with their tax or business advisor.

When tax and super obligations are integrated into natural business systems and records are easy to keep, business owners will generally perform better.

That’s why we are working with Digital Service Providers to embed more into their software to help small business owners get it right up front. We are looking at sharing more of our risk rules and insights from our data with DSPs so software can tell businesses if they are ‘off track’.

We are still in the exploratory phase of that work and will continue to engage with the profession as we explore new possibilities.

So how can tax professionals help support small business? I ask you to encourage clients to be digital-ready. Keep digital records and use software to run their businesses better.

It will make their business more resilient, and make their day-to-day work easier. It will also give you better information to work with when you are trying to support them.

Optimising interactions through self-service

Even though we face continued challenges and uncertainty in the environment around us, there is reason to be optimistic about tax and the service you and your clients will receive from the ATO.

The strategic initiative, ‘Optimising interactions through self-service’ is aimed at making interactions with us easier and more seamless for clients and agents. From the ATO’s point of view, making more online services available and improving the online experience also frees up our staff to focus on higher-value work, like helping you work through complex issues.

When we talk about self-service and making tax easier, some people in the profession feel like their livelihoods are at risk. I can assure you that nothing is further from truth. Tax will never be simplified to the point where it can be totally self-service. There’s a reason why an entire profession has been built around tax interpretation and advice.

But our role, and yours, needs to move with the times and reflect advancements in technology.

Clients have become used to accessing a range of online services – from banks to travel agents – 24 hours a day, 7 days a week. It makes sense for them, and you, to expect a similar level of online service from government.

This benefits the profession too – if clients are better prepared when they meet with you, you can hopefully spend less time shuffling through that shoebox and more time discussing how to best position their business for success.

The next few years are going to be big:

• There will be a new website in the next financial year. We’re trying hard to get the balance right between technical detail and simplicity. The new website will make it easier to find the right information in the right detail.
• We are addressing pain points in the current self-service ecosystem, including overhauling our client register to help make sure our communications are going to the right place.
• You will see improvements with the lodgment deferrals process – online and on the phone. We listened when you told us there are circumstances when you just need to get on the phone, and we’ve responded with the limited phone deferral service. We’re also improving deferrals in Online services for agents – making it quicker and more transparent to apply for a deferral.
• We are making continual improvements to managing disputes – we know this is an area of concern for you and we are working to improve the online dispute lodgment experience.

Our evolving service offer to you is at the forefront of much of our work right now.

Our future depends on you

The past 18 months has prompted many of us to reflect on what’s important.

As Commissioner of Taxation, I have always been committed to leading an organisation that puts clients at the centre of everything it does.

Last year this was brought into sharp focus when the Government looked to us to deliver record amounts of stimulus to millions of Australians in need.

We did this with speed, empathy and accuracy, while maintaining our core products and services.

We also made progress on our transformation program, provided the community with support to continue to meet their tax obligations, and looked after the wellbeing of our people.

I am proud of what we did, and know it was our commitment to our clients that enabled us to truly step up at an extraordinary time.

But we didn’t do it alone.

The profession has been alongside us at every step. Your dedication to your clients enabled us to deliver quality service. Your feedback and input on our transformation has made it possible for us to make real improvements to the way we interact with you and the community.

The ATO’s achievements of the past 18 months are shared with the tax profession. We have more work to do to continue our transformation, but our shared commitment to supporting the community and delivering quality service will keep us in unison.

I look forward to the next step on our journey together.

Thank you. Happy to take questions.

In his annual address to the Tax Institute of Australia, the Commissioner reflects on the topic of partnering with the profession to lay the foundations for the future.