ATO confirms it will go ahead with income tax IT system upgrade

News comes at last minute after weeks of speculation about agency's largest upgrade

The Australian Tax Office (ATO) will go ahead with the largest upgrade of its IT systems in history in the early hours of Friday, January 22.

In a statement on its website, the ATO said the decision to proceed with the upgrade after weeks of speculation was a "watershed" moment.

"This is a watershed decision to replace our National Taxpayer System that has worked well since the mid 1970’s, with a new integrated core processing system. The scale of the deployment is enormous even against global benchmarks," the statement reads.

"Confirming our previous advice, while we move from the current system to the new one, many of our systems will be unavailable from 12.01am ESDT Friday, 22 January to 6.00am Wednesday, 27 January 2010 as we progress with full implementation.

"As a result there will be no access to information through our portals during this period. Also, our call centre staff will only be able to provide limited assistance as they will not have full access to your personal or account information.

"If you have lodged an income tax return, please be aware that there may be a delay while we work through the stockpiled returns."

Despite the enormity of the upgrade and interest in the public the ATO has waited until the last minute to announce its decision, declining to provide an update in the lead up weeks.

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.

"History tells us we can expect some teething issues after we deploy a new system of this magnitude" the ATO statement reads. "We will begin by processing a small number of forms in the new system, gradually increasing as we bed in the system. We are putting in place extensive arrangements for managing the problems that will arise. Nevertheless, there will be impacts on our service standards which we will take all possible steps to minimise."

The statement goes on to say the agency chose this timing as it would "have the least impact on the community".

"It is the best window of opportunity as most people and businesses have already lodged their returns and only about five per cent of lodgments occur around this time. Given increasing workloads and the need to have systems arrangements ready for Tax Time 2010, the next window of opportunity for the deployment of the new system would otherwise have been the Christmas period during 2010/11."

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)".

This week, senior industry analyst and former ATO employee, Kevin Noonan, told <i>Computerworld</i> the ATO had 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."

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”.

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.

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.

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