LATE changes to the tax system has caused havoc for software vendors, with one firm saying it will lose money on this year's tax packages, and another facing possible legal action. A group of Melbourne accountants has hired a legal firm to contact vendor MYOB regarding delays in its taxation software, while Solution 6 said the numerous changes to its tax packages meant it would effectively make a loss on those products. Software vendors said that late changes to tax legislation and changes introduced the Budget have made this a particularly difficult year.

The Australian Taxation Office (ATO) last week granted an extension on business activity statement lodgements to accountants using MYOB, Handitax and Elite software, because those vendors had not been able to newer versions of their software out by the end of the 2000 - 2001 financial year. CPA Australia has also called for an extension to the deadline for electronic tax returns, although the ATO said this was unlikely because most returns did not have to be lodged until next year.

Tax agents who use MYOB, Handitax and Elite products have been granted a two-week extension for lodging business activity statements, but assistant commissioner for tax practitioners David Diment said the month-long extension requested by the CPA did not appear necessary. "We're aware of the issue and we're working closely with software producers ... it's far too early to offer an extension on those lodgement dates, it's not until May that many of them are due," Mr Diment said.

MYOB and Handisoft, whose products combined account for about half of the income tax return software market, both failed to release new versions of their products by the end of the 2000 - 2001 financial year. Law firm Phillips Fox has been engaged by a group of accountants to approach MYOB about customers who have been affected by the delays. It has not launched proceedings, but yesterday sent a letter to MYOB in an attempt to open communication on the matter.

CPA Australia senior taxation consultant Garry Addison said while Solution 6 had its software to market in time for the start of the tax period, tax agents had complained of glitches in its software. MYOB and Handitax had yet to release their software for business and superannuation fund tax returns, he said.

Both vendors said the late changes to the tax regime had made it difficult to have their products ready in time. MYOB's chief executive Craig Winkler said its business and superannuation return forms would be released at the end of the month. Company tax returns were often not completed until later in the year anyway, he said. "It takes a while for people to get up to doing company returns, because of the compliance requirements. "It's been a particulary painful year, and we're all in the same boat to a degree," Mr Winkler said. Handisoft managing director Alan Osrin said Handitax company return forms were released on Wednesday, and only superannuation forms were outstanding. Mr Osrin said he would be lobbying the ATO to either limit late changes to the tax regime or to provide the specifications earlier in future years. "We do have regular sessions with the Tax Office, and I think we'll be asking for a bit more assistance. I think it's in everybody's interests to work a bit closer on this," he said. Solution 6, which said its products are used for 43 per cent of all returns filed, said it would not be a profitable year for the taxation software. "It has cost us considerably more to deliver the tax product to the profession than we make from it," spokesman Mark Elliott said.