Tax agents are facing cashflow problems as the Australian Tax Office’s (ATO) new income tax processing system has been delayed.
The common practice of accountants deducting their tax preparation fee from taxpayers’ refunds has been put into turmoil as the ATO have not processed 705,000 tax returns since last year.
Adrian Raftery, CEO of accountantsRus, says that accounting firms who solely rely on fees from refunds are being greatly affected with the delay.
“What business can survive with no income for three months?” said Raftery.
Taxpayers are expected to have to wait for up to three months for tax refunds to issue as the Australian Tax Office’s (ATO) introduces a new income tax processing system.
The ATO notified tax agents that returns lodged before Christmas will not be processed before 15 February as they convert all tax records dating four decades onto a new system.
Adrian Raftery says that accountants have been inundated with phone calls from their clients wanting to know the status of their tax refund.
“All they want is to get it (their refund) to pay off their credit card debt from Christmas,” said Raftery.
Raftery says that the delay in processing is causing angst amongst his clients and feels that accountants will cop the brunt of their anger.
“It is just so frustrating … we do all the hard work to get the refund and then have to cop the flak by the client as to why the return hasn’t been processed yet by the ATO,” said Raftery.
“So not only are the accountants not being paid, they are also getting abused.”
But the worst could be yet to come as the ATO has predicted a backlog in processing once the new system is ready.
“An ATO officer has advised us that they expect some returns prepared in the first week of January won’t be processed til April,” said Raftery.
“There have been delays for returns lodged back on 23 December … now that is annoying particularly when we were expecting the systems to only commence being down over the Australia Day weekend.”
The ATO chose to introduce the change at this time of year as most people and businesses had already lodged their return with only five per cent of lodgments occurring around this time.
Raftery says that the delays are also affecting businesses who are expecting a refund on their December quarter Business Activity Statement (BAS), together with those wanting to get benefits from Centrelink and the Family Assistance Office.
The ATO have advised that taxpayers who have to wait beyond 30 days for their assessment to issue will receive interest from the ATO. Raftery expects that the interest rate will only be around 3.95%, somewhat less than credit card interest of 18%.
“Yet if you owed the taxman money they would charge 10.95%,” said Raftery.
“And you thought the banks had good margins.”
The ATO is currently converting over 27 million taxpayer records, 331 million accounts and 282 million forms from their current system which has been in operation since the 1970’s.
For more info on the ATO’s new income tax processing system:
