It's 1.30pm and Frank Pirera has filed only one tax return today. At this time of year the accountant's staff of four in North Melbourne is normally working flat out to file returns for his clients. But he can only file "I" (individual) returns electronically.

The software he and many tax agents and accountants use does not adequately handle Business Activity Statements, partnerships, trusts, companies or superannuation funds. This year, the dual complication of tax reform and software failure has brought accountants and tax agents' practices, such as Pirera's, to their collective knees.

It means delays for taxpayers waiting on refunds and increased pressure on those preparing the returns. Pirera splits time that would otherwise go into preparing returns making phone calls and doing odd jobs. It's mostly wasted, though, because much of it can't be recovered in client fees. Recoverables are down by half and costs are up, caused by increasing tax law complexity.

The Simplified Tax System is yet to appear and, in the meantime, accountants bear the brunt of the cost of tax reform. And clients, unable to drive their new desktop accounting software, are innocently contributing to the mess. It has sent Pirera, who has used electronic lodgment to the Tax Office for eight years, back to pen and paper. He has filed about 50 Business Activity Statements manually this quarter, while he waits for a software update, and has a score more waiting.

He has been forced into this position because his tax software, MYOB, can't handle even the simplest partnership, business activity statement (BAS), or company return, he says, although the company disputes this. He's given up on any electronic BAS lodgments this quarter. Making matters worse for Pirera is the lack of support from the software vendor, he says. "One of the biggest problems with MYOB is we haven't been able to get through to them," Pirera says. "We paid our subscription to MYOB before June and were promised we would receive the software.

The software was not available until mid-July, then we had problems installing it. Normally you would be able to contact their support line. Even if we send e-mails they don't respond." The only time a MYOB representative contacted him, was to e-mail him the unlock code for the software. Other than that, nothing. He hasn't spoken to a human being, only computers. Installation frustrations have forced Pirera, who has installed his own network software each year for eight years, to shell out for an independent software consultant.

His is one of about 4000 practices the National Tax Accountants' Association (NTAA) estimates have migrated to MYOB after the software company took over Teletax. The new software slows down the network and often causes it to crash, taking out all the PCs connected to the server at a hit.

He says MYOB sales consultants did not tell him before he upgraded from Teletax that he would need more memory for the network. He characterises this year as the most "exasperating" he's experienced in 20 years' practice. "A couple of my colleagues have already jumped ship, even though they've paid for MYOB," he says.

NTAA president Ray Regan says the association gets up to 200 calls a day relating to MYOB problems. He anticipates an exodus of older accountants unable or unwilling to deal with the manifest problems of tax reform and its related information systems problems. Other firms and sole practitioners will merge even while fees rise. 'The big losers are the genuine taxpayers who have genuine expenses and refunds and have no money in the bank," says Regan, of the 5 per cent of taxpayers he places in that category.

"For the first time since 1992 you would be better going to a manual method, and the ATO should give special concession to accountants going manual because their software houses can't keep up. "Tax reform has broken the back of software houses and is forcing accountants to lodge paper returns." Software vendors firmly blame Canberra.

MYOB chief executive Craig Winkler blames politicians fiddling with the detail close to tax time for an "awkward" start to the season. "It's a system that, on the whole, works reasonably well, so from that respect it's really not broken," Winkler says. "We see that connection between small business and the accountant being more important than ever before because of the level of change and complexity of issues, so we work to smooth the path of information flow between small business and their accountant and vice-versa.

"The other issue starts at the other end in timeframes, so if something (legislation) comes down (on) May 1 and it's complex, the ATO has an enormous challenge to turn that announcement into a process. "We have to create code, test and deliver it and, in the meantime, you see another series of (legislative) revisions or have to start again from the beginning."

Winkler denies there has been any undue delay in offering BAS, partnership or trust modules for accountants, but acknowledges early problems with the first downloaded upgrade of the software, caused by a glitch in the Microsoft server.

Files were placed randomly on about half of MYOB's professional customers' machines during installation. "While we do very thorough regression testing, it's impossible to test every combination (of customer's systems)," Winkler says. "It may be that someone comes up with something that doesn't work." He says the module to handle companies' returns is due within a week and super funds shortly after.

Software vendors have also had to cope with further changes, even as they were implementing changes. ATO trial gateways that enable them to test their lodgments have not been available. The NTAA's Regan has sent a letter to the ATO asking it to intervene directly between the software makers and tax professionals.

"It's not a surprise that certain software houses would have monumental errors," he says. "MYOB has monumental software problems communicating with the ATO. "Some criticism should go to the ATO in that it should have been pro-active, working with software houses anticipating software problems."

ATO assistant commissioner David Diment acknowledges it has been a "tough" year for agents but says the choice of a software package is a commercial decision between the agent and the software maker.

The ATO is in daily contact with software makers but its role is solely to ensure software communicates with its gateway servers, he says. "But we don't give it the ATO tick of approval and that's what some agents don't understand, because they're sometimes fed misinformation by the software providers," Diment says.

Accountants experiencing software problems lodging BAS have been granted an extension until August 28 and quietly the industry is hoping that will be extended again. Despite the slowdown in lodgments experienced by Pirera and others, Diment says the impact on electronic returns has been minimal. "Our ELS returns are comparable to last year. The returns are coming in according to plan.

" Any suggestion that the ATO is in part responsible for accountants' and their clients' woes due to last-minute changes is "misinformation", he says. "There were some last-minute changes to the tax legislation but the big software provider didn't have any problems," Diment says.

He rejects Regan's assertion that the era of the 14-day refund is ended. Diment says the ATO is meeting its "operational performance standard of 14 days" on 97.03 per cent of returns. But he foreshadows the ATO will take a more pro-active role when it sits down with professional associations such as the NTAA and software vendors in October to nut out next year's strategy. "We'll certainly look at the registration process next year," Diment says. "Professional associations have a large role to play because it's the bread and butter of their members. "I don't see why we can't work in partnership with member associations and software providers."

Perth accountants Barrington Partners use software from Solution6, a big provider of accountant practice software. Barrington tax partner Bryn Scott says it has not been immune. "This year, Solution 6 only got tax-office specs in April," Scott says. "The heavy weight of tax reform and huge changes in legislation this year meant the tax office was late coming out with specs. "

Solution 6 did a good job considering the changes but it's riddled with bugs. We're up to version C and we're only at August 10, which is about 10 weeks after the introduction of the software." Scott says the software can't be trusted to trap errors in fields, a process known as validation.

A return lodged to the tax office with validation errors is rejected and usually has to be resent or handled on paper. Scott has experienced a surge in errors between what the software expects as reasonable and what the ATO will accept, leading to a sharp rise in paper returns.

"From a Solution 6 point of view, we see that we're obviously going to have a lot more downtime because of these validation errors. Everything is clunky and doesn't fit together." On a positive note, Scott says the ATO's ability to accept returns in Adobe Portable Document Format will help taxpayers in country areas.

But that is small comfort because the crippled information systems have increased his costs by $30,000 this year. "The whole process is one of complete frustration on the back of a frustrating and expensive year," he says.

"Last year, the accounting industry as a whole wore the cost of tax reform and GST. There are fee pressures throughout the whole accounting industry. "The ATO in itself probably hasn't done a bad job, given what they've had to do, but it's hard to be sympathetic to the tax office when they have to be dragged kicking and screaming to get any concession."

The Solution 6 chief executive of professional solutions, Greg Johnson, agrees with MYOB's Winkler, saying federal politicians need to take their hands off the legislative tax tiller by the end of March to avoid disruptions in later years.

"Time frames in which changes are made need to change," Johnson says. "The physical laws of mathematics or physics don't allow you to make changes this complex and not have errors. "When it comes to compliance work, the industry relies on it being efficient because it's low margin, and when there is a disruption it can be catastrophic."

He says government could compensate vendors if changes were made after a certain time. This year, 4000 changes needed to be made to software in a three-month period. This was 10 times the number for the same period last year.

And he says the worst is not over, with more changes "rippling through" from the Ralph Report in coming months. Johnson, former managing director of financial software maker CeeData, sees reflections of 1993 in the problems software houses have faced this year.

Eight years ago, CCH Software was forced into the arms of rival Cee Data when its cutting-edge tax software, Tax 93, fell over spectacularly at the end of the 1992-93 financial year. He predicts some software vendors could merge or be taken over. "It's very difficult to produce quality software when we're saying: `quick, quick, we have to get this out by this afternoon'," Johnson says.

"Back in 1993, CCH Software did something similar and we saw the same writing on the wall this year." The NTAA's Regan sees dark clouds on the horizon. He says clients have become a "contingent liability" and that in future years many will not be able to get an accountant or agent to service their tax returns.

A number of accountants said they had already "culled" their client lists. "You've got real serious problems about all those clients who have basically messed it up," Regan says. "Accountants say they are petrified when their clients do their own BAS.

They know it's wrong. "Down the track your biggest concern is when the (tax) commissioner flicks the switch from GST education to GST audits. That's your biggest nightmare. They will find so many errors." Sole practitioner Pirera says he would prefer his clients to put away their new PCs and desktop accounting packages and go back to the shoebox of receipts.

Barrington's Scott says he would rather put many of his clients on a 15-column paper cashbook or basic home-finance software such as Microsoft Money than let them use more complex software. Rather than saving time and money, self-preparation is costing accountants and their clients a fortune. "One thing we're very wary of this year is the state of the data coming from clients using MYOB and Quickbooks," Scott says.

"The New Zealand experience when they brought their GST in, when businesses used computers for the first time (was that) the quality of the data was so poor, accountants would have to throw all the data away and start again." Meantime, Pirera is still waiting for someone at MYOB to return his many phone calls and e-mails of several weeks. "We check our e-mail every day hoping we get an update from MYOB," he says. "We're too far down the track to change, because the devil you know is better than the one you don't."