RSM Australia

Q&A with a tax concierge: Steve Healey

 It was 1995 when Daniel Goleman suggested to the world that emotional intelligence matters twice as much in the workplace over IQ or technical expertise. Whilst most professions including that of tax has changed significantly since 1995, the vital role that emotional awareness will play is one that our corporate tax adviser and trusted concierge, Steve Healey agrees will define the tax professional of the future.

Steve has had more than 25 years’ experience in the accounting industry including senior leadership roles at The Tax Institute and other big four and mid-tier firms. Leading the Corporate Tax division of RSM in Queensland, we sat down with Steve to get his views on digital disruption in the world of tax, proposed tax legislation changes and his passion for the Sunshine State.

Q. You refer to yourself as a ‘trusted concierge’ – what led you to coin the term and what does the role represent?Steve Healey has over 25 years' experience in the accounting industry.

A. As information and knowledge become more freely available, our clients are progressively more empowered and the traditional knowledge boundaries that historically have defined the 'professional' break down. This has already happened but of course, the amount of freely available information will continue to rise. What our clients need from us more than ever is one who can ask the right questions, help the client distil information, demonstrate genuine empathy, have a broad business acumen (i.e. an appreciation of the wider challenges for the client, beyond tax) and very importantly, recognise that he or she does not have all of the answers but can effectively connect with those that do (including digital solutions). The concierge is one who demonstrates all of these skills - empathy, questioning, connectivity and effectively works with the client and their other advisers to develop the right solutions.

Trust, of course, is central to the adviser-client relationship and as the digital agenda continues to develop, trust and human connectivity become even more critical, particularly as the trust paradigm continues to shift (i.e the rise of 'distributed trust' and a breakdown in 'institutional trust'). This means that trust in the institutions (including the firms if you will) is less important than that in the individual.

Q. You’ve been working in tax for over 25 years, across many firms, helping clients navigate intricate tax issues – how do you anticipate the shift from compliance to advisory of the tax professional, to be beneficial to the client?

A. Our clients have historically engaged us for both compliance and advisory services but compliance is being increasingly automated and hence, seems less valuable to the client in terms of service delivery. Additionally, our clients tend Steve Healey has 25 years' experience in the accounting 'factor in' a presumption that we are using leading technology solutions to deliver compliance work (even if we may not be) and their fee expectations for compliance services reflect this. Hence, it is important for the firm to evolve into a true advisory firm (some refer to this as a journey from accountant to adviser). For the reasons provided above, our clients will value more those that can help them develop the right solutions through asking the right questions and connecting with the right people (some of which may be within the firm and others outside).

We also need to shift the compliance lens. Historically, compliance may be seen as an 'assurance exercise' - to keep the regulators at bay etc.  It is a backward-looking process and we need to use the compliance process to deliver future-focussed insight. We are already doing this to some extent but I would think we still have a long way to go.

In the future, our clients won't value those that merely provide their annual compliance package (indeed, that may not be required at all as the ATO and other agencies continue to move to real-time reporting and data analysis).

Q. Having written extensively about the impact of digital and technical disruption on the future of the tax professional, what do you think the role of a tax professional in the year 2030 will look like?

A. 2030 is a big call but I would think fees from compliance will largely be a thing of the past - we might still assist our more complex clients with their compliance but for the majority of our clients/target market (mid-market), compliance will be in real time. Additionally, our advisory offerings will be coupled with sophisticated artificial intelligence (AI) and machine learning (ML) algorithms. The technical playing field amongst advisers will be effectively leveled by the adoption of these tools. The future will belong to the adviser who has the best ability to connect with clients and leverage AI and ML tools to deliver solutions than the expert that lacks empathy and connectivity. Hence, we will continue to see a shift in importance from intelligence quotient (IQ) to emotional quotient (EQ). Interestingly, two tax professors who attended my session last week agreed with this and expressed the view that teaching needs to change to develop EQ of their students.

Q. The big election issues this year appear to centre on tax – there are plans to abolish negative gearing tax refunds for all but new properties, scrap franking credit cash rebates, and increase capital gains tax liabilities, just to name a few. What are your thoughts on some of these proposed changes?

A. All of these measures represent short-term political opportunism unless they are coupled with other measures to bring about true structural tax reform. Australia needs a long term plan of tax reform as the digital economy continues to develop and both capital and labour become even more mobile. If we continue to rely on income-based taxes in this environment, our government coffers will be challenged over the long term. We need to see a reduced reliance on income taxes and an increase in taxation at the point of consumption.

Now to get off my high horse on tax reform, some of these measures may have merit. Negative gearing and the CGT discount, for example, do create distortions in the housing market in particular and I don’t think I am alone in the view that concessions such as these Steve Healey has 25 years' experience in the accounting industry.have led to higher prices in the residential property market. That said, there could still be a place for concessions such as these if they are targeted at 'productive assets'. Query whether residential property and the reliance of Australian households on discount capital gains from such property as a substantial contributor to their income is the most productive use of private capital.

Our imputation system was introduced to ensure that company profits were taxed at the company level and not subject to double taxation in the hands of the individual shareholder. Australia is one of very few jurisdictions around the world that adopts an imputation system. On the one hand, as more Australians retire and move into pension phase in their superannuation funds, the refundability of franking credits could be a major challenge for future governments from an affordability perspective (hence another reason for the nation to embark on a long-term focussed structural tax reform agenda). This is also the real reason Labor is proposing its abolition measure, but not for the long term - rather to raise revenue in the short-term in a 'politically savvy way'.

That said, our imputation system (including refundable franking credits) has driven Australians to invest in Australian companies, and this has had a positive impact on the Australian economy more generally. I am also of the view that maintaining refundability of franking credits is equitable from a taxation perspective. Specifically, the imputation system ensures that company taxed profits are not taxed twice. When such profits are distributed to the company’s shareholders, it is the shareholder’s marginal tax rate that determines whether any further tax is payable on the distributed profits. If the shareholder has a marginal tax rate in excess of the prevailing company tax rate, then 'top up tax' is payable in the hands of the shareholder. Conversely, if the shareholder has a marginal tax rate less than the prevailing company tax rate, a refund of the excess tax that was paid by the company results.

While there may be valid objections to franking credit refundability, I would argue that we need to look at the whole imputation system as part of a wider tax reform agenda if we are truly concerned about the long-term future state of the Australian economy.

Q. As a true blue native of the Sunshine State, what keeps you here?

A. Of course, the weather!!

Actually - that’s true from an economic perspective as well. Queensland has a rich history in resources, agriculture, and tourism - these sectors have for many years been seen to be the 'lifeblood' of our economy. We also are home to the world’s largest retail travel group (Flight Centre) and have seen many successful businesses outside these 'traditional' sectors. I do believe our historic reliance on income from our vast coal deposits needs to be balanced into the future. Regardless of one’s personal view on climate change, coal is not seen as sustainable long-term. Our natural climate and environment should also provide us with the opportunity to take a leading global role in the development and adoption of renewable energy solutions, particularly solar. What I would love to see is Queensland becoming a leading global player in renewables and therefore innovation. We are too reliant on the 'past sources of opportunity' but have the very real potential to demonstrate a major shift.

But I love the place regardless...

Q. What do you like to do to unwind?

A. I like to travel, dine (in and out), and I also love to cook! I enjoy a nice red and, in keeping with the beautiful Queensland environment, I love exploring the depths as a scuba diver.

Steve Healey has 25 years' experience in the accounting industry.

Get in touch with Steve

To get in touch with Steve Healey, email [email protected] or call +61 7 3225 7800.

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