Are you feeling overwhelmed by the growing complexity of tax reporting requirements?
You’re not alone. Many companies are facing similar challenges, with tax department budgets not keeping up and technology being underutilized. To make matters worse, the ATO is raising the bar for governance without extending filing deadlines.
So, what’s the solution? The key is to choose the compliance model that works best for your business.
1. Insourcing: The Tax Department undertakes all compliance obligations in-house.
This approach is well-suited for larger tax teams, providing them with more control over the process. However, most businesses utilise little or unsophisticated technology for their tax and small businesses may lack the capacity or expertise to handle everything in-house.
2. Outsourcing: Outsourcing is when a company hires a third-party service provider to handle some or all of its tax compliance obligations.
It may involve as little as a high-level review of an FBT return that was prepared in-house, outsourcing of a corporate tax return preparation, or even full accountability of the end-to-end process in a managed service.
Outsourcing can bring a wealth of benefits to your business, such as access to lower costs, specialized labour, and advanced technology. Plus, it can take the burden of managing a tax department off your plate. With outsourcing, you also gain the expertise and connectedness of experienced external advisers to ensure your reporting responsibilities are met and executed to the fullest.
There are also potential downsides to keep in mind. Outsourcing can sometimes lead to important obligations falling through the cracks, and relying too heavily on email communication can create a governance gap resulting in inefficiencies or even failures. But with the right provider and clear communication, you can mitigate these risks and enjoy all the benefits outsourcing has to offer.
3. Hybrid: This approach involves investing in transformative technology and implementing third-party tools to seek more automation.
This model combines the use of transformative technology and third-party tools to automate certain aspects of the tax process. By investing in this approach, you can achieve increased automation and efficiency while reducing the risk of human error.
But it’s not just a simple flip of a switch, this approach requires a shift in thinking and a significant investment in systems configuration. This means constantly updating content like rules and rates, implementing governance over data flows, and utilizing analytics to identify trends and outliers. The end goal is to ensure that those responsible for tax reporting are comfortable with the positions taken and returns filed. With the right approach and investment, a hybrid model can bring significant improvements to your tax compliance process.
4. On System: A future state where an organisation has decided to migrate to ERP cloud software.
While prolific in the US and UK, this is still a few years ahead for Australia.
Some Australian companies have started to explore system opportunities for GST, withholding tax, fixed assets, operational transfer pricing, tax provision, and tax return calculation as they migrate to the cloud.
Conclusion
Ultimately, all tax compliance models have their pros and cons. It’s up to you to weigh these pros and cons and make an informed decision that aligns with your company’s needs and resources. You need to ensure that all compliance practices are upheld and final positions are traceable, supported by evidence, and easy to explain to other stakeholders.
So, choose wisely and stay compliant!
Source: accountantsdaily | Compiled & Edited by Tailored Accounts
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