“Red tape and grief”: Fears new ATO digital system will place fresh burdens on tax agents and clients

Accounting industry leaders will meet with the Australian Taxation Office (ATO) on Thursday to voice their concerns over a new agent-linking system some tax professionals fear will cause hours of extra work and new frustrations for small business operators.

As first reported by Accountants Daily, several professional association members of the Tax Practitioners Stewardship Group, including CPA Australia and the Institute of Public Accountants (IPA), will today convene with high-ranking ATO figures to discuss the digital client-to-agent linking process.

The system was introduced on a trial basis in mid-2022, in an attempt to make it harder for fraudsters to impersonate business leaders and submit fake tax refund claims through their tax agents.

“We need to further strengthen the security of our online services to respond to increasing efforts by criminals to impersonate legitimate users to lodge fraudulent tax returns, or gain access to data that they can make money from,” the ATO says.

The trial initially targeted major companies with significant in-house accounting resources, before rolling out to most public and multinational companies in December last year.

But with a small business roll-out on the horizon, some accountants fear there has been a lack of consultation over the reforms, which will place new obligations on independent operators.

Six-step system under trial

Small business clients have traditionally signed engagement letters with accountants authorising them to handle their tax affairs, but the new six-step process requires clients to actively nominate their agent through an online portal.

First, new clients must register for a MyGovID. Clients must then link that digital ID to their Tax File Number either by accessing the digital Relationship Authorisation Manager (RAM), or by contacting the ATO directly.

Businesses can also choose to authorise other individuals, like employees, to act on their behalf through the RAM.

Using their MyGovID, first-time clients must then log onto the ATO’s online services for business portal, where they can search for and nominate their preferred tax agent.

The final step involves clients informing their agent of the nomination, with tax professionals given seven days to accept.

Through its reliance on the MyGovID system, the new agent-linking system also mirrors the Director ID Number roll-out, which also requires company leaders to establish a MyGovID.

That process caused major annoyances for company leaders ahead of its November 30 deadline, and as many as 500,000 company directors still went without Director IDs in early December, technically putting them in breach of corporate law.

Accounting groups feel member “frustration” as ATO seeks improvements

Although existing client links are not affected by the updated process, major accounting representatives have reservations about the burden the system could place on small businesses.

Elinor Kasapidis, Senior Manager Tax Policy at CPA Australia, told SmartCompany small business owners may not have the capacity to add another administrative task to their workload.

“Small business owners are busy ensuring their operations are successful in tough economic times,” she said.

“The last thing small businesses need right now is to be wrangling with new ATO systems and processes simply to get help with their tax affairs.”

While supporting efforts to crack down on tax fraud, Kasapidis said the ATO’s efforts could be focused elsewhere.

“Tax agents are trusted partners of small businesses and most fraud has nothing to do with tax agents,” she said.

“Fraud is a wide ranging issue that needs a broader solution.”

The Institute of Public Accountants, which has previously acknowledged the need for new digital safeguards, will also meet with the ATO on Thursday.

“We understand the frustrations of our members, and their concerns about the new system,” an IPA spokesperson told SmartCompany.

“We are working closely with the ATO to help relieve the administrative burden that this creates for accountants and their clients, and develop a pragmatic solution that will benefit all parties involved.”

Lisa Greig, a small business tax consultant and Principal at Perigee Advisers, says the “band-aid” solution would likely add hours of extra work for small business owners should the roll-out expand any further.

“It’s going to cause a lot of red tape and grief for small business clients to do this because they’re not set up to do it,” she said.

Many small business owners “don’t have any support in-house for overhead, or infrastructure, or admin” like bigger companies do, Greig adds.

“If anyone’s doing any of the back-end work it’s all done outside of hours. They can’t afford a full-time person. They can’t even afford a part-time person. They take a few hours of our time, basically, to say, ‘Hey, you sort it out for me,'” she said.

“That’s all they want: ‘Just make sure you keep us compliant.’ And that’s all they want us to do.”

While the ATO plans to “progressively expand” the system, the tax office has informed tax professionals it intends to take their feedback on board.

“We recognise this new step adds to what you and your client need to do to interact with us,” the ATO noted in December.

“We’re working hard to balance ease of use of our services with the need for security. We’ll work with you to make improvements to the process where needed.”