Tax Commissioner hints at possible delays with tax returns

Commissioner of Taxation Michael D’Ascenzo has hinted that taxpayers and tax practitioners may face delays as the Australian Taxation Office prepares to face its first tax season with its new and trouble-plagued IT system.

In a message sent to tax practitioners late yesterday, D’Ascenzo said the ATO’s processing targets for 2010-11 are to process 94% of electronically lodged returns within 14 days and 80% of paper returns within 42 days.

However, he said the ATO will be scrutinising potential fraudulent lodgements in a process that will add two days to the lodgement cycle.

While the ATO expects that these extra two days can be incorporated into the standard 14 day processing cycle, D’Ascenzo has warned tax practitioners not to promise clients that a tax return will be made in less than 14 days.

And he’s also delivered a stern message for tax agents who might start fretting over processing times.

“If we have to answer telephone calls about the progress of returns that are still within these service standards, we may not be able to address, at the same time, other enquiries from tax practitioners or the public.”

Tax office processing times have become a very touchy issue in the tax community this year following a major computer upgrade in January, which saw the ATO shift 27 million taxpayer records, 32.5 million accounts and 282 million forms across to its new system.

It is estimated 500,000 tax returns and 100,000 superannuation co-contributions were delayed due to the backlog caused by problems with the software upgrade, and the issue eventually prompted the Government to launch an inquiry into the matter.

Tax counsel from the Institute of Chartered Accountants, Yasser El-Ansary, say his group has been in constant discussions with the ATO in recent weeks to try to get a clearer picture of “potential risks” heading into 2010-11.

“What we will continue do over the next few days and into the new financial year is really understand what are major risks that they believe exist in flicking over to the new financial year,” he says.

“The more information the ATO can share with practioners and taxpayers, the better the outcome will before stakeholder who simply don’t want to see major delays.”

The issue is particularly important for tax practitioners, who often use business models whereby they have to wait for an individual’s tax return to be processed before they get paid themselves.

“Delays and disruptions often have a very direct impact on the cashflow and the viability of individual tax practices.”

He says that while taxpayers and tax agents will be happy to give the ATO a few days grace, the recent problems with processing times have made the sector wary.

“The fact of the matter is that it turned out to be much longer than a few days here and a few days there,” El-Ansary says.

“If the reality this time proves to be that there are more major disruptions, taxpayers and practitioners will have grounds for concern.”

“We all understand that the new system has presented some challenges to the ATO… but what is most critical in the lead up to the new financial year is for the ATO to be as open and transparent as possible as delays and the possibility of hiccups in the system.”