Why Indirect Tax Teams Need a Fitness Tracker

For years the Australian Taxation Office (ATO) has embraced a proactive and technology-forward approach to keeping taxpayers informed of its changing compliance requirements. Recently, the ATO launched an effort to educate tax groups within non-resident businesses that may be liable to register for and pay the country’s goods and services tax (GST) once they sell more than $75,000 (AUD) to customers in Australia in a 12-month period. These sales include digital products and services.  

The ATO provides non-resident taxpayers with two types of registration systems: standard and simplified. Once registered, non-resident taxpayers must file GST returns and pay taxes. The simplified registration allows taxpayers to file and pay on a quarterly basis. (Here’s an ATO page with more detailed registration information.) 

This type of requirement makes it crucial for non-resident businesses that sell to Australian customers to monitor their sales thresholds. Since Australia is far from the only country with these types of thresholds, companies based in the U.S. and other countries that sell globally need a responsive, technology-forward way of tracking all relevant thresholds, regardless of whether they involve sales and use tax, VAT, or another form of GST.  With e-commerce firms selling both direct and via marketplaces, who collect and remit on their behalf, it can get complicated.

By proactively monitoring sales against these thresholds, tax groups can gain a near real-time view of compliance risks. That’s important. Remote sellers that fail to comply with local tax requirements risk incurring penalties and, in more countries than you might expect, being barred from using payment systems.

The most advanced remote sellers deploy what amounts to a fitness tracker to strengthen indirect tax compliance and improve how they manage indirect tax. These tools deliver real-time visibility and insights on progress toward meeting sales thresholds while automating larger portions of manual tax compliance and monitoring work. That’s a big benefit given that many tax groups spend 70% or more of their time on data cleansing and transaction-classification activities.  

The following questions can help tax leaders assess whether their teams might benefit from a tax intelligence solution: 

• Do we monitor our progress toward meeting tax-triggering transaction thresholds in a proactive manner? 
• Do we scramble to register with state (in the U.S.) and/or federal (globally) tax authorities after we surpass a threshold? 
• How much time and effort does our team spend on data cleansing, reclassifying transactions, and similar types of manual work? 

The ATO deserves credit for its proactive approach to helping taxpayers achieve compliance. Tax leaders who deploy a similar tactic to monitor new thresholds and other indirect tax compliance risks will receive credit from their C-suite for their strategic contributions.