The $1.7 Billion "Flush", of Tax and Superannuation members dollars..

Like one of the silent "majority" of tax payers, it is with some despair, that one watches tax money being flushed down the drain.

A few facts to start with, which politicians seem to miss:

• politics is not the best way to pick market, or technology winners or losers
• political interference, be it well intentioned, almost always distorts markets, and can actually destroy existing market participants (pink bats, solar energy)
• government departments with unlimited tax payer funding, should not compete with commercial entities on an non-commercial basis. A level playing field must actually be level.
• if a specific technology needs to be "mandated" to get anyone to use it, should sound alarm bells.

The programs in question are the Standard Business Reporting (SBR), and more recently Superstream.

These government run program names, are always interesting, SBR is anything but "standards" based, and superstream is only "super" in its ability to spend tax payers and superannuation members money.

The first look

This particular SBR program is quite strange, some obvious aspects:

• run by treasury, actually a front for the ATO, obviously some internal political issue?
• no review or accountability on any aspect of the project to-date
• after many years, and millions of $$$ already spent, almost zero adoption by any commercial organisations
• unknown millions wasted by commercial organisations, when promised returns are never realised.
• after many years, still cannot process a basic "Individual Tax Return"
• recently closed down for 4 days for "updates".. this is simply not commercially viable.
• use of ATO propriety technologies, that have never been deployed anywhere in the world, for this type of application, the sole country with limited usage, is Denmark, and they could not get any commercial take up
• technologies that any competent technologist, would advise again using, as simply not fit for purpose.

Yet it continues... and in fact this year..
To overcome the almost zero adoption of the program, the current government has decided to mandate usage, rather than doing a traditional review of the BC, this is after an expenditure in excess of $400 Million to date.

If it looks like a dodo, acts like a dodo, it is likely to actually be extinct.
Bit like John Cleese's "parrot" it is only on the perch because it is nailed there, it is actually deceased.

Superstream is a good example, of something gone amiss.
"The main purpose of SuperStream is to ensure employer contributions are paid in a consistent, timely and efficient manner to a member’s account."

Today, and for the last 15 years to my knowledge, employers of all sizes have been paying and reporting member payments to superannuation funds via their payroll system, and BECS for almost zero additional cost. All banks are capable of passing member data though to funds, via their existing bank data feeds.
The Problem to be solved as identified above, simply does not exist...

For anyone involved in rollovers of members superannuation funds, knows it is the Superannuation fund "hoops"  that is always the issue, not the transfer technologies.

Technologies are never good at solving "people" or "business process" issues.
Hence to suggest that something which is not broken, requires $1.2 Billion to be spent, could only exist inside a tax payer funded, government department, perhaps looking at building a "Yes Minister" empire?


So what went wrong?

• why is treasury doing commercial software development?
• why is there zero accountability for any deliverables under the program?
• why is a basic Individual Tax Returns not supported after many years?
• why is a working ELS system being trashed? rather than replacing the antiquated ATO proprietary bits with commercial technologies?.
• why are their zero client deliverables, all are internal?
• why does the system need to be closed down completely, for up to 4 days at a time, just to "update"
• why is there no review of the past $400+ million expenditure?
• when was the original BC reviewed?
• why is no common sense or normal business accountability being applied to this program?
• why would anyone invest an additional $1.2 Billion to achieve a saving of less than a cup of coffee?
• why is there a mandatory levy, to pay for the program which no-one wants (other than those with a financial gain from the program) that can be done today, using existing commercial infrastructure, for almost zero additional cost.

This program is technically flawed, would not make it past the "initial" gating process in any commercial organisation, yet has spent in excess of ~$400M (no-one has an actual figure, even treasury) to date, with zero return or quantified savings over existing systems. Plus has had a  "negative affect" on Australian Developers (the ATO paying millions to overseas companies is not developing jobs for Australians, just like we funded 100+ of factories in china to make pink bats, and sent local Australian companies broke), and is planning to spend $1.2 Billion to solve a problem that does not exist..

The technical issues are very straight forward, the politics seems confused at best..

Bottom line, after almost 10 years (2005), not a single cent has been quantified as actual savings, which is a direct result of SBR, and yet without any review another $1.2 Billion is planned to be wasted..

If the current Government was actually interested in reducing waste, they would start by looking inside the Treasurers own department..

Litmus Test
1. Google Standard Business Report or SBR, and look for any independent support, i.e not from a government department?
2. Look for any expenditure reporting and qualified savings for this program?
3. Look for any factual basis for the "potential" savings of $800 Million anywhere?
4. Look for a comparison of SBR with the existing ELS and other existing electronic programs?
5. Look for any accountable "person", political or otherwise.

This is a "Yes Minister" program, worthy of its own episode.


-- Links and additional information.
1. Extract of email to Joe Hockey, April 2015.
To: Joe Hockey
Treasurer
CC: Chris.Bowen, Wayne Swan, Emily Devine (SBR)

Dear Joe  Hockey,

Within your department there is an planned expenditure which is seriously flawed in both design and implementation, this program is a legacy from the previous Government, but has the potential to exceed the likes of the "Pink Bats" and  "School Sheds" programs.
 ...
I don't get involved in politics, I am part of the silent majority..
       But wasting $1.7 Billion to get a  return of less than a cup of coffee, is just too much to sit by and let happen.
...
Australian Software developers are one of the few areas that Australia does better than anyone else in the world today, and most likely into the future, it has the potential to replace the old world jobs rapidly disappearing in Australian..
But all of this is in jeopardy, in the same manner as poor government decisions destroyed the "home instillation", zero jobs today,and it looks like the same with the Solar Industry.."
-- end snip

2. The objective of the SBR Program in Australia is to reduce the cost of reporting for business by A$800 million over six years at a cost of A$320 million over the same period.^[5]

In October 2005 the Australian government commissioned the "Task force on Reducing Regulatory Burdens on Business," known as the Banks Review. Recommendation 6.3 called for the development and adoption of a business reporting standard, which became "Standard Business Reporting."

The SBR strategic plan was approved with a Commonwealth commitment of $243 million over four years.
On 3 July 2008 COAG endorsed Standard Business Reporting as one of nine additions to the regulation reform agenda (COAG Communique, 2008).

The business case developed by the Australian Treasury estimates that the average costs of implementing SBR by businesses will be $403 per business.

3. The costs associated with the implementation of the Super Stream measures will be collected as part of the superannuation industry levies.
The levies will recover the full cost of the implementation of SuperStream reforms and will be imposed as a temporary levy on APRA-regulated superannuation funds from 2012-13 to 2017-18 inclusive.
The amount of levy payable is subjected to the Minister’s determination.
The costs associated with the implementation of the SuperStream reforms are $121.5 million in 2012-13, $111.1 million in 2013-14, $83.1 million in 2014-15, $69.3 million in 2015-16, $41.2 million in 2016-17 and $40.9 million in 2017-18.

4. No SuperStream silver bullet: Bravura

5. Funds deeply unprepared for SuperStream

6. Using Tax File Numbers as the primary superannuation identifier

7. SuperStream working group· Tax File Numbers and account consolidation

8. The Tax File Number Scheme:  A Case Study of Political Assurances and Function Creep

Disclaimer The contents of this site should not be understood to be accounting, taxation or investment advice but rather as general product related educational information that may or may not meet your specific requirements.