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ATO Electronic invoicing Project

Schedule 6 to a recent taxation amendments Bill grants the Commissioner new powers to set up a national system for electronic invoicing.

Business taxpayers are now familiar with the new single touch payroll (STP) system, where businesses are required to report to the ATO, payroll and employee superannuation details in a pre-set electronic format. Essentially this requires all businesses to process payroll through an approved software system that facilitates the electronic lodgement of data to the ATO in real time. The ATO then feeds this data into employee My Gov accounts, and into ATO system including checking points for employer superannuation obligations and employer PAYG withholding obligations. Many see this development as “Big Brother” ATO policy. Others welcome the checks and balances that will accommodate the ATO focus on non-compliant employers.

In a similar way, the Commissioner for Taxation is investigating a new system for invoice generation and reporting. It’s early days, but we can certainly see similarities to STP where business will be required to report invoices raised in real time with details including ABN and gst identifying both purchaser and seller. The commissioner is serious about addressing the cash economy and under reported income and this will certainly go a long way to addressing these issues. The current annual reporting of contractor taxable payments has largely been successful with a reported $2.7 billion from being recovered from the black economy in the building and construction industry in the 2015-16 financial year. The amount has surprised everyone including treasury who are now looking for a more comprehensive, real time method to defeat tax evasion. STP has paved the way with businesses now required to use compliant software that will also accommodate this future invoice reporting requirements.

Of course the ATO may have a problem selling the plan to the business community. To sure up support (or stifle decent), the Commission has engaged a respected firm of economists.

Deloitte Access Economics estimates that electronic invoicing could provide the economy with benefits of up to $28 billion over ten years. Electronic invoicing reduces processing times and errors leading to faster payment. Electronic invoicing will reduce the costs of doing business for both government and industry and also support the Government’s policy of improving payment times to small business.

Make no mistake, the Deloitte engagement is an exercise in Public relations. The Commissioners predominant goal is to thwart the cash economy and boost tax collection.

The framework for the new system is currently under development. The New Zealand Government has committed to working together with the Australian Government to secure a trans-Tasman approach. Whilst implementation may seem some time away, ‘watch this space’. STP has laid the foundation for systems that can quickly and easily accommodate a system to meet these government objectives.

What can we expect next from ATO system development? A business and ATO Blockchain perhaps.