The Goods and Services Tax (GST) is one of Australia's most widely applied taxes, targeting business and consumers alike. However, while it has entered its second decade of administration, corporate taxpayers are still making clerical mistakes to the tune of over $1 billion in the last three years alone. These calculation errors translate into significant overpayments which the Federal government has set a four year time limit on reimbursement.
With tax enforcement becoming the new focus for the new government eager to return the federal budget to surplus, these reimbursements for corporate Australia will have their own shelf life.
So how and why are Australian businesses literally giving their hard earned money to the Australian Taxation Office (ATO) and Federal Government without needing to? The answer simply relates to the level of automation you use in the process of collecting, collating and processing information needed to calculate the GST - something that you would think that most Australian businesses would not be taking many risks with.
Why it never pays to be wrong
Increased and increasing risks are exactly what Australian organisations are prepared to take by not addressing the benefits of automation for GST administration. We have all seen it before - Accounting has always been supplied with various spreadsheets from multiple other departments as that's the way "it's always been done". Each month every figure is laboriously entered manually by staff. Rarely checked - no time – and no audit trail - definitely no time - but always in on time. After all that's the most important thing, right? Wrong.
Australian business needs to acknowledge that taxation compliance and reporting is complex and becoming more complex. With increased complexity comes increased risk. A sure fire way of limiting your exposure to risk is to automate and validate your data, which in real terms can potentially reduce error rates by up to 100 per cent. Whilst this sounds like a common sense plan, and also quite obvious, there are one billion examples of why this is just not happening.
At a recent GST Reporting industry event, the ATO put it on the public record that the integrity of business systems will form a key component of reviews for adequate tax risk management processes.
Those same attendees polled some interesting feedback on where they stand right now with major administration and reporting issues. Data collection and analysis were the biggest challenges teams faced with monthly GST reporting and quarterly Business Activity Statements. These respondents confirmed that they were extracting information from Enterprise Resource Planning systems and multiple manual Excel spreadsheets for GST report preparation.
The audience of GST reporting teams admitted that the collation, calculation and reconciliation processes surrounding this primarily manual solution demanded multiple staff, large time commitments and high levels of stress in lodging reports on time on a monthly basis.
For many organisations with the ATO advice on the integrity of the technology underpinning their business systems ringing in their ears, they may have had cause to consider the future from a different perspective.
Taking that first step towards automation
Many Australian businesses may not be aware that advanced and automated technology is readily available and in fact, makes those first steps towards streamlined compliance and reporting achievable. It is important that business asks a range of questions of its technology solutions:
- Is this an all-in-one compliance and reporting system?
- Is it specifically designed to address Australian business unique requirements?
- Can it be deployed quickly?
- Can it be used as a stand-alone or fully integrated module with an existing taxation accounting platform?
- Is it accessible in the cloud and capable of reducing your existing compliance costs?
Available in the market today are solutions that are tailored for our unique Australian meaning your organisation can demonstrate a robust compliance process. Technology in this instance can provide integrated functionality, combining General Ledger and transaction files with audit trail limits and user traceability - helping you pinpoint the quality of your underlying data.
The robustness of a central source of truth is the result of automated calculations, greatly reduced processing time, adaptation to rule changes and reduced re-work computations when compared to the heavy manual inputting of Excel spreadsheets.
Technology is also the best friend of best practice as it inherently produces superior GST procedures on internal controls and processes, assesses qualification and compliance for specific GST schemes - reducing the risk of penalties and risks on transaction and reporting levels. The flexible exception checks available are the driver behind this enhanced level of accuracy, producing a GST declaration that any tax manager would be proud of.
Standard Business Reporting - electronic delivery is here
With the Federal Government initiative to receive all reports electronically via the Standard Business Reporting (SBR) Gateway using simple and standardised technology and processes, a single source of data starts to really make sense. Relying on multiple sources of information to populate these standard templates suddenly starts to look like a very expensive allocation of budget and time for any organisation.
The goal for every organisation today is to incorporate advanced technology solutions into business systems to ensure that the control, accuracy and compliance outcomes are actually in the hands of the tax and finance teams, allowing corporate taxpayers to better understand the overall taxation process and avoid potential penalties. However if your calculation errors are buried within multiple spreadsheets that are not subject to exception processing identification of potential errors, then you are effectively helping the Federal Government balance the books at your own revenue's expense. A billion times over.
Peter Boyle is the managing director of CCH Corporate Reporting Solutions.