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Taxation Reform Implementation

Michael Carmody

Commissioner of Taxation

Sydney

22 March 2000

The New Tax System will be a reality from 1 July this year.

This fact clearly hit home to businesses from the start of the year. From 1 January we have seen clear evidence of business actively taking up the implementation task. Research undertaken across a broad spectrum of business sizes demonstrated their confidence that they would be ready to operate under the New Tax System from day one. We believe we have the education and support programs to meet the needs of business and turn that confidence into a reality.

The other key party in all this is you in the professions. Just as we in the ATO need to promptly meet businesses’ needs in their terms when they turn to us for assistance, so too do you need to be in a position to do the same for your clients.

As we are supporting the same parties in this endeavour it makes sense that we work together to not only ensure successful implementation of tax reform but that we do it in a way that sets all of us up for a better future.

With a little over three months to go, I am today announcing further initiatives to pursue achievement of that goal.

The first of these initiatives is the deferral of the May lodgement dates to provide you with space for a concerted ABN application drive in the first two weeks of April.

The second is the development of an improved avenue for you to have your particular uncertainties and queries addressed.

Both these initiatives have been developed with key

professional bodies, including the ASCPA.

They represent the emergence of a partnership between the ATO and key professional bodies to support you and therefore your clients, Australian businesses, in successfully implementing our New Tax System.

The ABN: Your Entry to the New Tax System

The ABN is your entry to the New Tax System. It provides benefits for business. Equally there are very real downsides if a business who needs to register fails to do so.

If you do not have an ABN and sell goods or services to other businesses then almost 50% of your receipts from those sales may be withheld under the new Pay As You Go system and remitted to the ATO.

If you do not have an ABN and do not then take the additional step of registering for the GST then, unless your turnover is less than $50,000 ($100,000 for charities and on-profit organisations) you will still have to pay the GST but will not be entitled to claim back the GST you have paid on goods and services you acquire to run your business.

If you are an income tax exempt charity or another organisation that is entitled to receive tax deductible gifts, you will lose these entitlements if you do not register for an ABN and take the additional step of being endorsed for these purposes. (Gift deductible funds specifically named in the law are not required to be separately endorsed for their gift status.)

It seems businesses have now well and truly heard these messages. The last three weeks have seen a surge in applications for an ABN.

As of Monday we had received some 770,000 applications.

Around 460,000 ABN’s have now been issued. We have also just introduced streamlined processing arrangements to remove backlogs and put us in a position to assure businesses that if they lodge their ABN application by 31 May they will have their ABN for the commencement of the New Tax System.

Currently over 70% of all applications are being processed within four weeks. Around 50% of applications are being made electronically and over 70% are processed within one

week, 85% within two weeks.

The new streamlined arrangements mean that where we have received essential information necessary for registration we will immediately issue an interim advice and ABN. We will then follow up any omissions or errors on the applications after the ABN has been issued.

Essential information for the immediate issue of an ABN clearly includes correct information about the enterprise itself.

It is an interesting reflection on our current tax system and the planning it seems to generate that it is not uncommon to receive a sole trader application from a business person who in fact conducts his business under alternative legal forms.

To keep the ABN momentum going we have worked with key professional bodies to extend the current May return lodgement dates.

This is designed to free up space for tax agents to put in a concerted effort in the first two weeks of April to get their clients the ABN they need.

Under these arrangements, the current 1 May lodgement date for level 2 and 3 income tax returns will be extended to 12 May (non-taxables, refunds and level 1 returns will also now be due on 12 May);

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non-taxable company and superannuation fund lodgements will be extended from 1 May to 1 June; and

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QPT lodgements will be extended from 1 May to 8 May. ●

These extensions are for electronic lodgers only. Further details are being sent to you by email and fax today. This includes details of common questions and errors to assist you in lodging, electronically, accurate ABN applications.

To further support you we will be upgrading our agents’ infoline over the ABN fortnight. We will also arrange for someone to come to your premises to give you practical advice in undertaking this initiative if that would be of help to you.

Tax Agent Support Programs

From the start we have recognised the important role you play in tax reform implementation. The ABN fortnight and related lodgement date extension follows a number of initiatives we have put in place to support you in your role. These include the development early in the piece of the advisors training program (recently updated) and the dedicated infoline (also recently upgraded).

Our Tax Reform Website and the Planner are also invaluable tools for you.

Currently we are running the Tax Reform and Technology Expos to give you hands on experience in the range of technological support tools we have developed to assist you and business in implementing tax reform. Around 1600 of your colleagues took advantage of the Expo here in Sydney last week.

In a further initiative, we are currently working with the ASCPA and other professional bodies to introduce a new level of service to have your practical questions addressed.

This involves upgrading the tax professions "industry" partnership.

Presently we are seeing common questions being addressed to our replyin5 service by a number of different practitioners. This is an inefficient way to deal with your queries.

We are therefore working towards developing a service whereby practitioners’ questions can be brought together and dealt with jointly by us and your representatives. Answers and relevant information can then be fully shared throughout the profession both through the professional bodies communication channels and ours.

One last comment on this, the practice we have seen in at least one significant case of sending the same list of complex questions to five or six different areas in my office is not helpful.

The Opportunities

It may sound a strange subject to bring up under the heading of opportunities but I do believe that for a large bulk of small business there is the very real opportunity from tax reform to both simplify the record keeping burden and provide new business intelligence.

This notion can be tangibly seen in our recently launched free record keeping software - E-Record.

By simply entering daily details of their sales and expenses business operators using E-Record get period by period views of their cash profit or loss position and their pattern of revenue flows and expenses.

This is invaluable business planning information that is simply not available to many small businesses who remain part of the shoe box brigade. Equally you can be a better advisor to them, and reduce your time on tax compliance issues for them, if businesses come to you with electronic records rather than a shoe box full of receipts and invoices.

Of course, our record keeping software also provides at the business operators’ fingertips the information they need to calculate their GST liability.

We have also moved to get rid of the record keeping complexity for food retailers with the recent introduction of the new simplified accounting arrangements for small food retailers who do not have the sort of sophisticated point of sale equipment that automatically identifies and records GST free sales.

For these businesses record keeping can be as simple as knowing their sales (and purchases) for the relevant period and multiplying by a factor. That factor can be one provided by us for the particular sort of business they are engaged in or one tailored for their own business by using sample record keeping periods.

When you add to this the simplified income tax system for small business proposed from 1 July 2001 there is the prospect that for a large number of small businesses, their necessary records will be little more than their business receipts and payments. And, of course, they will have available from us a free software package to keep those records and generate valuable business intelligence.

An On-Line Business Community

There is a further significant potential benefit for you and other Australian businesses coming from the way we go about implementing tax reform.

I have mentioned a number of electronic tools we have

developed to support the implementation of tax reform - our Reform website and planner and E-Record. We have also introduced for users of the more sophisticated business accounting packages the Registered Software Facility. People using "Registered" packages will have confidence that the package meets our specifications for tax calculations.

A prototype of a cash flow management tool - the GST Forecaster - has also been launched.

These tools can assist in easing the implementation and tax compliance task for you and your clients.

They can also make Australian business more comfortable with e-commerce and, hopefully, through that, make Australian business more competitive in a world market where e-commerce will increasingly invade areas of business that have traditionally been the domain of local small businesses.

To further support an on-line Australian business community we are introducing a comprehensive e-commerce interface for dealing with the ATO electronically. This includes the first major commercial roll out of Public Key Technology to ensure integrity and security in electronic dealings.

These tools and the Tax Reform and Technology Expos we have been running around the country are an investment by us in Australia’s future as well as tax reform implementation.

Conclusion

There is no doubt that implementation of the New Tax System is a major endeavour for Australian businesses.

The way we in the ATO and you in the professions go about supporting Australian businesses in this endeavour can be the difference between just getting over the line and coming through in better shape. The latter is what we are shooting for and I am pleased to see the increasing level of co-operation and shared initiative emerging between us to achieve that goal.

For other important information, go to:

ATO main page ●