Putting out more flags

Speech by Michael D’Ascenzo, Commissioner of Taxation
NIA Public Practice Symposium
Perth, 17 April 2008

The conference theme – “Keeping between the flags” – could almost serve as a metaphor for all the compliance effort of the Tax Office.

Keeping between the flags – whether they are set out on the beach or by the ATO – ensures safety.

Outside the flags there’s the potential danger of rips and sharks – and that applies to taxpayers as well as surfers.

I’m told that here in Western Australia sharks can be particularly aggressive. So, beware of promoters of schemes that seem too good to be true. The lessons from the past are that they are likely to get you into danger.

Promoter penalty laws

Indeed, some of the new flags I would like to talk with you about today concern tax exploitation and the new promoter penalty laws.

I’d like to reassure you that the intent of the new laws does not affect ordinary tax advice work.

Today, I am releasing two practice statements¹ on our application of the promoter penalty laws. These have been co-designed with a subcommittee of the National Tax Liaison Group.

Are tax exploitation schemes increasing? We don’t think so. But we know from past experience that this is an area that requires constant vigilance. In the past they have been known to grow like mushrooms.

It is encouraging to know that most taxpayers want to be in the low risk category – between the flags.

It is also encouraging that when we issue a taxpayer alert on these schemes we are now seeing tax professionals contact us with information corroborating the concerns in our warning.

Often the “brains” of these schemes are offshore and they are dependent on local firms with a client base to distribute the exploitative product. My advice to you is don’t get caught up in this, and bring such matters to our attention early².

Supporting tax professionals

We are always trying to find ways to improve the service for tax agents.

Late last year, as part of a pilot for all CGT calls during September to December, we allocated more experienced technical staff to assist with answering CGT questions then and there.

If the initial call centre representative was unable to resolve the issue they were referred to one of these specialists or were offered a booking time for one of our specialists to discuss the matter. This approach was used for the 7500 CGT queries during this period.

The evaluation of the pilot was completed last month and there was strong support from agents that this effort led to a better service. This has encouraged us to commence work to roll out the service to all CGT issues, as well as expanding the approach to cover more topics in the new financial year including fringe benefit tax, superannuation, consolidations, goods and service tax, research and development, and Division 7A.

Part of our service focus is to make it easier for tax agents handling complex issues or who need technical guidance on progressing a difficult or sensitive matter, by being able to call a senior ATO officer.

Another trial, which commenced with 30 agents in March this year, is known as ‘professional to professional’. One tax agent within a tax practice has been given a nominated senior ATO officer as their contact point.

The senior ATO officer has an understanding of the tax practice’s client base and circumstances, and takes ownership of the issue, listening, evaluating and working to resolve the matter. To date, there has been ten issues raised and resolved through this initiative.

If the ATO officer cannot resolve the matter they will involve other officers to bring the matter to a conclusion or provide the necessary advice.

The aim is to provide tax professionals with more personalised assistance and guidance in resolving matters.

Lodgment program

We are continuing to put out new flags in lodgment, with the 2007-08 program reflecting the outcomes co-designed with the Lodgment Working Party.

It was encouraging to hear one Adelaide tax practitioner comment at a recent working group:

“I personally don’t have any real lodgment issues at present.”

In fact this view seems to be broadly representative of where agents stand in regard to the current lodgment program, and so the changes this year are minimal.

We are not looking to make change for the sake of change but we will tweak the program to ensure the program has more flexibility for tax agents. In deciding the program, I particularly value the advice provided to me by practitioners and their representatives via the Lodgment Working Group.

The changes to be made in 2008-09 are:

• the removal of the 3 June income tax return lodgment date, and
• giving effect to a previously informal arrangement by formally aligning the FBT lodgment and payment dates to 28 May.

These changes further simplify the program by decreasing the number of lodgment due dates, taking into account agents’ workloads, ATO revenue obligations and Government expectations.

Pre-filling

Pre-filling can help tax agents and their clients by removing the need for them to find and supply a range of information.

In 2007-08, the pre-filling options available in the Tax Agent Portal and e-tax will be identical. This means everyone will have access to:

• Baby Bonus information. In 2006-07 this was available only through e-tax.
• Pre-filling of PAYG payment summaries, this was piloted in 2006-07 on e-tax only.
• Family Tax Benefits status indicator, only available through the portal in 2006-07.

We know pre-filling is popular with many tax practitioners, and we are constantly working to improve the range, quality, volume and timeliness of the information that we can provide.

New pre-filled information that will be available through both the Tax Agent Portal and e-tax in 2008 includes:

• ATO-held data on the Higher Education Loan Program and prior year deductions.
• Payment summaries in cases where the employer provides details to us electronically. Last year we piloted this. In 2008 any employer who has provided timely electronic information will have details loaded for pre-filling.
• Private health insurance details from Medicare.
• Dividend and interest information from more financial institutions.

Pre-filling is an area where we would like to do even more with in the future.

Change Program

The ATO’s Change Program is designed to make ‘keeping between the flags’ a significantly better tax and superannuation experience.

The final release of our system changes will be fully implemented by our centenary year - 2010.

Tax agents will be able to see a complete view of their client account information in the one statement. For example, income tax, GST, PAYG and FBT transactions will be reported on the one statement.

Tax agents will also be able to select the correspondence they want to receive on behalf of their client and nominate the correspondence to be sent direct to the client.

We will also be able to receive and respond to more of your enquiries electronically.

Assisting your clients

Our change program is not just a major IT innovation – it is about putting the taxpayer and their adviser at the centre of what we do.

The ATO’s reinvigorated assistance program for small business also reflects this philosophy.

A recurring theme from business and tax agents in recent time has been concerns of small business, particularly about compliance costs.

We have taken this on board, and the first offering of a new approach is our brochure called ‘Helping Small Business Stay on Track’ which features:

• practical help - ‘no strings attached’
• simple guidance, and
• a clear message that we will treat people as people, and help those who are trying to do the right thing to get over the line.

However, we are responsible for promoting a level playing field to ensure honest businesses do not suffer unfair disadvantage caused by those who seek to avoid their civic obligations.

We have promoted the ethos of this approach as part of a cultural change project across the ATO.

Making mistakes in the BAS is an on-going concern for many taxpayers.

In a meeting I had with COSBOA, most of the small business proprietors present did not know that minor amendments could be self-corrected in the next BAS.

Our Small Business Assistance Program has helped 54,000 businesses in the last nine months alone. Assistance can be arranged by the business or their agent simply by booking an assistance visit online at our website or calling us on 13 28 66.

We’re looking to get the word out about this assistance, and here is a short promotional video we’re using to help us do this.

The ATO provides help in many tax and superannuation areas to meet business needs, including:

	Assistance in record keeping. We can help new businesses install e-Record, the free record keeping tool. We distribute about 130,000 copies annually. We will shortly release a new version of e-Record. It has new functionality allowing businesses to lodge their PAYG withholding annual summaries electronically – meaning this information can be made available in pre-filled electronic tax returns.
	Our Record Keeping Evaluation Tool helps businesses assess their record keeping practices to identify gaps and help with improvements. It can be downloaded from our website. We will help with installation over the phone or even help install personally in a visit.
	Help in completing activity statements. We’re not looking to do anyone out of a job here – simply help business determine what they need to put in their BAS so that when they contact their tax agent, BAS provider or self lodge, they know what to provide.
	Help in meeting employer obligations. For example, we offer assistance on how to withhold the correct amount of tax, how to remit this to the ATO, how to issue payment summaries, and how to meet superannuation obligations for employees.
	Telephone assistance to help businesses determine whether to register for GST and helping them register.
	Computer assistance to help connect to our Business Portal. Security dictates come into play here, but we have streamlined them so businesses can register for the portal online. Once a digital certificate is issued we can help businesses install it on the Portal over the phone or as part of a visit.
	Tax debt is another on-going concern. We take a community-first approach, including consideration of individual circumstances. We seek to help keep viable businesses in business by providing the business with payment and other options. For example, small residual General Interest Charge (GIC) amounts can be remitted on completed promises to pay, and there are flexible, easy to understand payment arrangements for debts under $25,000. The ATO has increased its focus on Superannuation Guarantee Charge (SGC) debt. Consequently we are recovering more employee super entitlements on their behalf. Last year we raised $350 million in SGC and will exceed that amount this year. As at February 2008 we have collected approximately $130 million in SGC and commenced legal action against 1100 employers for outstanding SGC debt.
	We also help businesses gain access to initiatives designed to provide benefits to business and/or to reduce their operating costs. Examples are the Fuel Tax Credit Scheme which, incidentally, expands on July 1 to cover more businesses, as well as the new Small Business Concessions.
	The ATO can help businesses avoid online scams by providing practical advice for online security protection via the whole-of-government Stay Smart Online initiative.
	Our visits to businesses are aimed at being helpful – with no strings attached. We will sit down and work through a range of issues – we’re doing it with them rather than telling them what to do. If any of your clients are experiencing business issues you may want to leverage off the support we can provide to assist them. If any of our support services suit your clients, flag it for them or contact us directly to get assistance.
	We recognise, however, that some taxpayers are reticent about dealing directly with us. And unfortunately there are some who try to stay out of our radar for their own reasons. For those with concerns about dealing with us, we urge them to seek assistance through their business association or local chamber of commerce. We have active programs with organisations like COSBOA and the Australian Chamber of Commerce and Industry to provide help and guidance for businesses in getting their tax and superannuation affairs in order.
	One concern raised when I talked with the Board of Taxation in Perth was a perception of limited training opportunities for small business. In fact, we run regular and free training events. For example, since July 2007 as part of our ongoing commitment to regional tax professionals we have delivered seminars on topical technical issues to practitioners in locations such as Mandurah, Bunbury, Geraldton and Albany. In addition, we have delivered 36 seminars and workshops focusing on the needs of small business. These sessions covered topics such as tax basics, record keeping and employer essentials for small business, and self managed superannuation funds for fund trustees. Nationally we have delivered 595 seminars and workshops designed to assist tax practitioners and/or their clients with a total attendance of over 16,500 participants.

Let’s be clear: We have a real and tangible commitment to help small business swim safely between the flags – including swim training, flotation devices and lifeguards.

And we are committed also to minimising your compliance costs and allaying any concerns people may have about dealing with us.

Conclusion

The title of my speech today – “Putting out more flags” – comes directly from Evelyn Waugh’s classic 1941 wartime novel about an England struggling with the threat to its very existence.

Your businesses and their clients will not face a threatening atmosphere if they take note of the flags we are clearly laying out.

My appreciation and thanks for your support in helping us identify and then co-design solutions for a range of issues that provide the community with confidence and certainty.

Thank you.

Footnotes

¹ Practice statement 2008/7 (Application of the promoter penalty laws to promotion of tax exploitation schemes) and 2008/8 (Application of the promoter penalty laws to schemes involving product rulings)

² For example, through the Tax Agent Integrity Line: 1800 639 745

Last Modified: Thursday, 17 April 2008