ATO to receive compensation to “recoup costs” of website outages, but hundreds of SMEs will miss out

The Australian Taxation Office has reached a financial settlement with Hewlett Packard Enterprises after a disastrous week-long outage of its systems in December 2016, but it looks unlikely SMEs will be receiving any compensation for the thousands they say they’ve lost through the disruptions.

It’s an issue that the Council of Small Business of Australian intends to question the tax office over, with chief executive Peter Strong telling SmartCompany small businesses are becoming increasingly vulnerable to such technical outages.

On Tuesday ATO Commissioner Chris Jordan faced Senate Estimates hearings and unveiled details of a “commercial settlement” that has been reached with HPE after a review into the chaotic knock-out of systems last year, which left countless accountants and tax agents unable to do their jobs in the lead-up to Christmas.

In his opening statement yesterday, Jordan highlighted that a report into the failure, due to be released next week, will explain that: “The turnkey service of data storage as per the 3PAR SAN [storage area network] provided by HPE failed us”.

The report will explain that the fibre optic cables that fit into the ATO’s storage area network were “not optimally fitted” and the disk drives involved had “software bugs”.

Jordan said the ATO has reached a confidential settlement with HPE that “recoups key costs incurred by the ATO, and provides additional and higher grade IT equipment”.

However, what doesn’t appear to be on the table is compensation for the hundreds of businesses who were stumped by the outage, and several other periods of system downtime, over the past six months.

Accountants have previously told SmartCompany the outages made them delay their Christmas holidays, left them stranded with no work to do and prevented clients from paying thousands of dollars in invoices because nobody could access the tax agent portals needed to complete work.

Since the fallout, the ATO has experienced an unplanned outage or issue on average once per month, and clients are still regularly taking to social media to complain about irregularities in services even when they are online, such as continued issues with the “Departing Australian Superannuation Payments” platform.

SmartCompany contacted the ATO this morning for more information on whether the settlement could potentially include compensation for SMEs affected by the sustained period of dropouts, but did not receive a response prior to publication.

Meanwhile, tax professional association The Tax Institute tells SmartCompany its only focus is now on making sure systems are ready and stable before the end of the financial year.

“With tax time 2017 one month away, much work has been done by the ATO to stabilise their systems in time,” Tax Counsel Stephanie Caredes said this morning.

“The main priority here is that tax agents and tax payers are not penalised as a result of these outages, and that tax agents have the relevant systems available to them to undertake their essential role in helping taxpayers meet their compliance obligations.”

However, Council of Small Business Australia chief executive Peter Strong questions why the tax office should receive a settlement to recoup its costs while its clients and small business owners also have to cop the brunt of the failure.

“I think that creates the question if the supplier of the service gets compensation, surely they’re obligated to pass that down. I think we’ll certainly be in contact with the tax office on this,” he says.

The ongoing saga is a reminder to business owners about their vulnerabilities to system failures, Strong says.

He believes there’s no doubt similar widespread outages will affect the business community in future, given all organisations, not just the ATO, are so heavily reliant on complex digital systems.

“This will not be the only time this happens: There will be others, outages or people hit by cybersecurity attacks,” he says.

“We keep telling people to insure themselves, but we need to sit down and say this will happen again.”

The ATO had plenty to discuss before Senate Estimates this week, with Commissioner Jordan also speaking in detail about the fallout from the investigation into an alleged $165 million tax fraud scheme.

He says the office is aware this is a challenging time for perceptions of the organisation.

“I want to impress on you our heightened sense of responsibility and accountability for the performance and confidence in the ATO right now,” Jordan said yesterday.

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