The Australian Taxation Office (ATO) has signaled a significant change in how millions of Australians may soon lodge their tax returns. The shift on the horizon involves a new “assisted assessment” model that could, over time, replace the long-standing approach of self-assessment for a large portion of the population.
Although the ATO has not revealed many concrete details about when or how the change will take effect, the idea suggests a future where filing becomes more automated and less hands-on.
According to Yahoo Australia, the move reflects a growing reliance on third-party data already collected by institutions and shared with the ATO.
Moving Away From Traditional Self-Assessment
Currently, tax returns in Australia must be submitted after July 1 each year. Individuals are responsible for declaring their taxable income and claiming any applicable deductions.
Mark Chapman from H&R Block described the process as “particularly stressful” for many Australians, who need to ensure they “dot every I and cross every T” when filing. This pressure could ease, however, as the ATO expands its use of pre-collected financial data.
According to ATO Second Commissioner Jeremy Hirschhorn,
More and more information like interest and dividend income, standardised investment trust data, salary, health insurance data, and information about contractors are all going directly into tax systems.
This trend will continue – he added,
And we’ll see the classic concept of ‘self-assessment’ being gradually replaced with ‘assisted assessment’.
How Assisted Assessment Would Work
Under this future model, individuals with straightforward tax affairs would receive a pre-filled tax return containing a comprehensive picture of their financial data. If everything appears accurate, the taxpayer would simply need to hit confirm — transforming the annual tax filing into a one-click verification process.
This simplified system, however, will not be available to those with more complex tax circumstances, such as business owners or individuals with less transparent income streams. In such cases, Hirschhorn noted, the ATO would not be “privy to” certain essential data, and these taxpayers would continue using the traditional method.
Third-Party Data Drives the Transformation
Central to this overhaul is the increasing use of third-party data. The ATO already receives financial and tax information from entities such as banks, investment bodies, employers, health insurers, financial institutions, and government agencies.
Many of them are required to hand over their tax and financial information – said Hirschhorn,
Which fuels how taxpayers of all sizes interact with their tax obligations.
He noted the improvements over time:
Back in the day, you would have had to source that information yourself,
referring to pay details or bank statements. Now, much of it is automatically pre-filled, enhancing efficiency and accuracy.
Third-party data gives administrators the ability to feed information into the system that makes complying easier, and importantly, not complying harder – he said.
Redefining the Pillars of Compliance
Historically, Australia’s tax compliance framework has been built on four key pillars: registration, lodgement, payment, and correct reporting. With the rise of third-party data, a fifth pillar is taking shape, focused entirely on automated data sourcing.
Modern tax administrators… will be asking for new data sources from companies holding relevant information – Hirschhorn explained,
And tax systems will increasingly be defined around the fifth pillar of third-party data, rather than vice versa.
This marks a philosophical shift in how the ATO envisions the future of tax compliance — prioritizing systemic data flow over individual manual reporting.
