Speaking to Accountants Daily, senior tax counsel Professor Robert Deutsch said the tax profession would likely be seeing a technological push as the ATO seeks to adopt a proactive approach.
Such a push could see real-time data around tax claims being shared with the tax office on the very day they were incurred, as the ATO seeks to close the $8.7 billion individual tax gap.
Last week, the ATO released its individual tax gap report, citing a higher number of adjustments to tax agent-prepared claims as opposed to self-prepared claims by a taxpayer.
“With deductions there's very little real-time information provided between tax agent acting on behalf of taxpayers and the ATO currently,” said Professor Deutsch.
“The main direction I can see the profession going in is strong and better interfaces between the profession and the ATO and more broadly the regulators in general.
“I think it's a good thing but it needs to be handled with care and the transition to a more integrated electronic interface is going to take some time but it will be a critical component of the future of the tax profession because that's where we're going to get better results for both sides in the sense that professionals will be more efficient and the tax office will get more real-time information,” he added.
“The future will be that if you incur the deduction today, you'll scan a copy and immediately send it to the tax office and it will be lodged in their program under your name so in that sense it will be real-time information, the tax office will have real-time information about what your likely level of deductions are going to be so they can make adjustments to how much tax is being taken out.”
While the technology may change, Professor Deutsch believes it will not make tax agents redundant, unless they refuse to embrace the change.
“Their work will change and there are big changes in the way tax agents will operate but unless the law changes fundamentally, somebody will still have to work out what is deductible, what is not deductible and what you need to send to the tax office.
“It's the timeliness of the information that will change but it's still going to be humans that will work out whether something is a deduction or whether something is income.
“Agents who just say I am going to ignore all that are just not facing realities of the way the world is evolving. I know why they don't like it and I can understand why but I think there needs to a huge education program particularly amongst smaller agents where they are not up to date with all of this,” he added.
“We are still going to have problems with agents who are doing the wrong thing and claiming deductions that shouldn't be claimed but the difference will be that the ATO will have real-time information about that and might be able to get on top of those things more quickly than under the current arrangements where two year passes before they know there is a deduction.”
Real-time reporting has already started its rollout in the ATO’s superannuation division, with the advent of the transfer balance cap requiring up-to-date transparency of balances and contributions.