ATO in cone of silence on system upgrade

Agency stays mum on whether the biggest IT system upgrade in its history will go ahead

The Australian Taxation Office change program

The Australian Taxation Office change program

The Australian Taxation Office (ATO) is maintaining its silence over whether it will proceed with the biggest IT upgrade in its history.

The agency has declined to provide an update on the technical deployment of the nation's new income tax IT system, scheduled to commence on Friday, despite several requests for clarification. Last week, an ATO spokesperson said to Computerworld there were no changes planned to the schedule.

In late December, the ATO said it would only proceed with the upgrade if it was confident it was ready and had planned for contingencies should last-minute problems arise.

The ATO has been advising taxpayers and tax practitioners to lodge income tax returns early as several systems could be offline from January 22-27.

The upgrade has been described by the ATO's second commissioner, David Butler, as the biggest in the agency's history. It will decommission the National Taxpayer System (NTS), which has been in use since the early 1970s.

In its place, a new income tax processing system will extend the ATO's "integrated core processing (ICP) system to income tax and higher education loan accounts (HELA)".

Senior industry analyst and former ATO employee, Kevin Noonan, told Computerworld the ATO has to "bite the bullet and proceed".

"The old income tax system, NTS, dates back to days when the computers they had didn't even do decimal arithmetic," Noonan said. "They have been converted a number of times and, under maintenance, continue to be modernised, but the underlying structure and processes date back to those early days.

"There is a high probability that there are processes in those systems that are not well understood. The tax office is right in taking a very cautious approach because this is an enormous change for them. In order to set themselves up for change in the future it is just not practical to have a system that has unknown pieces in it and a legacy that goes back so far."

Noonan said the ATO had been "very careful" in managing expectations and providing fall back options.

"Even now, where they are being careful to say it is not absolutely on until they are sure it is on, it is leaving room to move if something pops out that they hadn't expected," he said. "This is not the sort of IT project where you take one step after another. You have to allow for the high likelihood that something will pop up at the last minute."

The upgrade is part of the agency's broader Change Program, which aims to migrate it away from more than 180 legacy and paper-based systems to a single, integrated core IT system.

The program has, however, been hit by delays and budget blowouts, forcing the agency to publicly acknowledge it was under “extraordinary pressure”.

There are practices and activities that go back 30 years that have to be looked at. As you peel away the onion skins, sometimes there are a few surprises

The ATO's annual report, submitted in October last year, revealed the Change Program is high risk and mostly responsible for the office’s budget overspend last financial year.

The program commenced in December 2004 at an estimated cost of $350-450 million and was set to be completed by the end of 2007. The budget, however, has blown out to double the original figure, hitting close to $750 million.

"The amount of the blowout would have surprised even the ATO," Noonan said. "But this particular project is not just re-writing systems — it is a people change process as well. There are practices and activities that go back 30 years that have to be looked at. As you peel away the onion skins, sometimes there are a few surprises. This is the project no one would have wished to do, but it is the project you have to do at some point in time."

In September, the ATO's Change Program Steering Committee approved plans for the agency to commence processing income tax returns on the new system from 1 February, 2010.

The latest date for completion for the project is July 2010, with business activity statements (BAS) excise and other remaining tax products to be “deployed onto the integrated core processing platform”. A new portal for businesses, tax agents and BAS service providers will also be launched at this time.

In October last year the ATO also accepted the recommendations from the Australian National Audit Office (ANAO) after the latter conducted a performance audit of the Change Program.

The Change Program problems have also led many observers to question the performance of key ATO partner, global consultancy firm Accenture.

"There are lessons to have been learnt from this particular project and I think the tax office would admit to that," Noonan said.

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