Beancounter is a term used to describe accountants and economists chiefly concerned with fiscal matters and budgets
I might not have thought about this tax topic had not a reader emailed to gently remind me that Barnaby Joyce is not a farmer, as I said last week, but an accountant.
I could be forgiven for being lured in to that way of thinking by the way Barnaby portrays himself to the electorate. He loves a photo opportunity down on the farm, wearing the big hat and looking suitably weather-beaten. Barnaby does come from a large family of sheep and cattle farmers, but he did indeed go to university and study to become a Certified Practising Accountant (CPA). He founded his own firm in St George and ran it from 1991 to 2005.
So he might even now have some muscle memory of the tension that bean counters suffer as June 30 approaches. As we all should know, that is the lucky last day to finalise business books for the year and start afresh on the morrow.
It’s called a fiscal year, this aberration which ignores the orthodox calender and creates a ‘financial year’. In Australia and a dozen other countries, the fiscal year runs from July 1 to June 30. We are in a minority, however. Fiscal years in other parts of the world run from October to September (US), April 6 to April 5 (UK), January to December (much of Europe), April to March or variations on the theme. Some countries (New Zealand and Singapore for example), use different dates for government and other taxpayers.
Fiscal years are set by Federal governments and most State and local governments and companies follow suit.
It’s not mandatory, though. Some Australian companies stick to a January-December fiscal regime, in the main to line up with overseas partners or subsidiaries.
June 30 is the big stick held over trustees of Australia’s 595,000 self managed super funds, the carrot being the opportunity to draw a pension on July 1. The stick is meant to encourage trustees to do the right thing, less they be audited, fined or penalised for operating outside the terms of the trust deed.
But perhaps your super is in one of the 220 large super funds regulated by APRA and you can leave the detail to someone else. Lucky you.
More comebacks than Mike Tyson
Accounting standards aside, we could mark June 30 for a variety of different reasons, such as birthdays. Retired boxer Mike Tyson, former AFL player Ben Cousins and decorated US swimmer Michael Phelps shared a birthday on Wednesday.
On June 30, 1937, the world’s first emergency phone number (999) was launched in London. In 1990, June 30 saw the merging of East and West Berlin’s economies. In 1997, the UK transferred sovereignty of Hong Kong to China, ushering in an era of political instability and domestic anxiety. In 2019, Donald Trump became the first US president to visit North Korea: to what end was never fully explained.
The end of the fiscal year also ushers in a few predictable campaigns by charities, urging their benefactors to give generously (so you can claim a tax deduction). Likewise, the retail sector gears up for EOFY sales. This time round, the Delta strain of Covid-10 is playing havoc with the sales campaigns of Sydney and Brisbane retailers.
As June 30 approached, you may have noticed a rise in the level of 7pm nuisance calls from numbers started with 02 something. Scammers were out and about in June, pretending to be the ATO, pretending to be from the national broadband network (yep, she’s still out there), or just being prats.
Wikipedia has a voluminous entry (5,000 words or so) dedicated to the fiscal year as it is interpreted in different countries.
Just why Australia chose July 1-June 30 is a mystery, although one could hazard a guess. Australians tend to slack off after the running of the Melbourne Cup (on the first Tuesday in November). So I just can’t see Australians poring over their household or business accounts on Christmas Eve, can you?
The song and dance about the June 30 tax deadline is ever-so misleading. Taxpayers have until October 31 to lodge their personal returns. Individuals, businesses and SMSFs using a tax agent can postpone it as late as May the following year.
A government investigation in 2009 estimated that between 1.2 million and 1.5 million taxpayers (9% of individual taxpayers), were up to three years behind in lodging tax returns. Independent researchers Colmar Brunton found there were three basic misunderstandings which accounted for much of this non-compliance:
- People thought they were below the income threshold;
- They were unemployed and not working and therefore believed there was no need to lodge;
- They were on a pension or receiving Centrelink payments and therefore believed there was no need to lodge (Some pensioners and Centrelink recipients do need to lodge a return and some don’t, hence the confusion.Ed).
Although the research is 12 years old, it’s a fair bet those three key misunderstandings are very much in play today.
The impact of Australia’s bush fires (2019-2020) and the onset of a global pandemic certainly shows up in the ATO’s 2019-2020 annual report. Commissioner Chris Jordan said net tax collections of $405 billion was down $21 billion (5%) over the previous year.
Natural disasters and pandemics not withstanding, the ATO is a money generating machine. In 2019-2020 the organisation collected gross tax of around $537 billion, and provided refunds of around $132 billion. The ATO employs 910,000 people to deal with a formidable workload. At June 30, 2020 its client base included 11.5 million individual taxpayers (not in business), 205,000 not-for-profit organisations, 36,000 public and multinational businesses, 4.2 million small businesses (including sole traders), 595,000 superannuation funds and 178,500 privately owned and wealthy groups (linked to 856,000 entities).
Not only that, 36,000 registered tax and BAS agents interacted with the ATO on behalf of their clients. And in 2020, the ATO took on responsibility for overseeing the JobKeeper scheme, early super fund redemptions and the Covid stimulus payments scheduled by Parliament. So, if you were having a hard time getting through to the ATO hotline, bear that in mind.
The ATO says 3.01 million calls were answered in the tax period (July 1 – October 31), almost double the calls received in the previous year. Of these calls, 207,741 were abandoned (6% of calls) and 485,348 calls were blocked. The average time for a call to be answered was (yes) five minutes.The ATO exceeded its phone service benchmark of 80% (87%).
Australians spend about $1 billion a year employing accountants to manage their tax affairs. The ATO has arguably made it easier to do it yourself, with much of the information (like bank interest, pensions, benefits etc), already pre-entered through data-matching. Every year at this time, law-abiding taxpayers fret about making mistakes or being late lodging their returns; or whether they will be one of the 175,000 ABNs cancelled for lack of activity.
But clearly the organisation has its sights set on much bigger targets. In 2019-2020, more than $2.4 billion was collected in cash and another $3.7 billion in tax liabilities as various task forces investigated tax avoidance, fraud, ‘Phoenix’ companies and the black (cash) economy.
So now you can see why we (Mum and Dad taxpayers), were first asked (in 1986-1987), to ‘self-assess’ when lodging individual tax returns. It’s like hiring 11.8 million staff for a one-off (unpaid) job.
And then we get to worry about it.
FOMM Back Pages (interesting to see how the ATO workforce has grown over six years.