Making it easier to comply 2005-06
Making it easier to comply 2005-06
If you would prefer to read this publication in portable document format (PDF), download Making it easier to comply here (911kb).
In seeking to optimise collections we:
- strive to make it as easy as possible for taxpayers to comply with their tax obligations, and
- verify compliance using a risk management approach.
Through this publication, we have regularly reported to our stakeholders (tax practitioners, business and community groups, and other government agencies) on the first element.
This third edition of Making it easier to comply reports on the progress of our easier, cheaper and more personalised program, as well as our complementary work on practical compliance improvements and implementing the government's review of aspects of income tax self assessment recommendations. It also sets out some of our plans for the future.
Our easier, cheaper and more personalised program began in 2002-03 as a community-driven initiative to improve your experience in tax administration. It does not focus on tax policies or laws - which are matters for government - but on improving the tools and processes that largely determine the quality of people's interactions with us.
We are proud of what has been achieved, particularly in introducing products like the tax agent and business portals that make it easier for people to carry out transactions with us. More can be done, particularly in the area of reducing red tape, and the program is now actively nurtured through the extensive network of consultative forums we have with taxpayer, business and professional representative bodies.
One of our priorities this year has been to begin the progressive roll-out of a client management system, which will allow us to provide improved phone services, more personalised and accurate information, and quicker responses for tax agents, businesses and individual taxpayers. However, the implementation of this and other systems will be a major challenge and will require some downtime to skill up our people. Service levels may fluctuate while the new processes are bedded down.
I'm confident that the advances in service delivery we've achieved over the past three years demonstrate our ongoing commitment to make your dealings with us as easy as possible. But I also ask for your understanding as the program's focus moves from the introduction of high-profile products such as the tax agent and business portals to the less visible but equally important redevelopment and integration of the systems that provide our operational platform. This major and difficult task is intended to secure the ongoing viability of our accounting systems, and will provide the springboard for further significant improvements to our transparency, accountability and our dealings with you, and in the ease and convenience with which you can deal with us.
Michael D'Ascenzo
Commissioner of Taxation
The Tax Office is undertaking three key initiatives to make it easier for the Australian community to comply with their tax obligations.
These initiatives are the:
- easier, cheaper and more personalised program
- practical compliance improvements, and
- implementation of the Australian Government's review of aspects of income tax self assessment (ROSA) recommendations.
These initiatives follow a period of major change to the tax system and respond to reviews and consultation undertaken by the government and the Tax Office.
This booklet sets out what we delivered in 2004-05 and what we expect to deliver in 2005-06 and beyond.
The easier, cheaper and more personalised program is strongly informed by the listening to the community initiative, which began in 2002.
Our aim was to find out how the community wants to deal with us and co-design with our clients an improved tax administration system.
We began with user clinics, creative retreats and user observation sessions involving individual taxpayers, small business operators, tax agents and our staff. At these forums, taxpayers and their advisers discussed their interactions with us, identified irritants and offered ideas and suggestions for improvements.
Taxpayers and their advisers told us that they wanted:
- better, faster telephone services
- access to account information and transactions online
- more certainty in their dealings with us
- letters that are more personalised and easier to understand, and
- us to know who they are and their history with us when they call.
Starting in 2003 these improvements, as well as improvements identified through other consultative and research activities, were translated into a program of improvements to the tax system which we call the easier, cheaper and more personalised program. While originally intended to be conducted over three years, the program is now an ongoing commitment.
We are continuing to work with the community in a number of ways, including:
- through advisory groups with tax agents, small and large business and other community representatives
- by engaging tax agents and taxpayers in the co-design of products and services they use, and
- through research activities designed to evaluate the initiatives.
In 2004, we introduced a new initiative to complement the easier, cheaper and more personalised program's focus on improvements to products and services. This initiative - known as practical compliance - aims to reduce compliance costs and provide greater certainty for taxpayers by ensuring that the requirements of compliance with the law are as practical as possible. It has also become an ongoing program.
These two Tax Office initiatives are now being complemented by changes recommended by the government's review of aspects of income tax self assessment, which were announced in December 2004.
In total, 54 recommendations were made which aim to move the balance of fairness markedly in favour of taxpayers who act in good faith, without weakening our capacity to protect the revenue for the benefit of the whole community. Those recommendations that require administrative responses from us, or for which legislation has been passed, are being implemented progressively.
When we say easier, we mean making it easier for you to comply with your obligations.
Cheaper means making it cheaper for you by reducing the workload, time and effort needed to meet your obligations.
By personalised we don't mean providing a service tailored individually to everyone. We mean being able to offer products and services that make sense to you and that fit with the systems you use in your daily life as much as possible.
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In response to what the community told us they wanted, we adopted a set of principles to guide the design of products and services under the easier, cheaper and more personalised program. These principles underpin all our initiatives to make it easier to comply.
These principles are that, as far as possible:
- you will be able to do business with us online - whether through our services or your commercial services
- you will have online access to information that is personal to your dealings with us
- you will deal with a tax officer who has an understanding of your dealings with us and, in some cases, your industry
- you will receive notices and forms that make sense in your terms and that reflect your personal dealings with the revenue system
- you will receive high quality responses to your issues and interactions along with quick turnaround times
- we will be reasonable about the level of record keeping required that is necessary for you to practically comply with your tax obligations
- we will facilitate the use of commercial services developed to ease the cost of your record keeping and compliance with the law, and
- you will experience compliance action which takes into account your compliance behaviour, personal circumstances and level of risk in the system.
If you are a tax agent we will also acknowledge the important role you play in the administration of our revenue laws and will develop an open and constructive relationship with you, recognising your practice management issues in our administrative design.
The Tax Office's efforts to make it easier for taxpayers to comply with their tax obligations involve three main components of work:
- developing improved information and transaction products for taxpayers dealing with the Tax Office through the easier, cheaper and more personalised program
- delivering practical compliance improvements for taxpayers, and
- improving the self assessment system in the context of ROSA.
Although these components address functionally different areas, 'a whole of Tax Office' focus on the client experience ensures that work across them is integrated. For example, increasing certainty for taxpayers is a key goal of changes recommended by ROSA. This objective is supported by the new platforms, which will enable the Tax Office to accommodate the changes without increasing the risk to the revenue.
The aim of the easier, cheaper and more personalised program, which began in 2002-03, is to offer taxpayers and tax agents better online, phone and paper products and services.
In the first three years the emphasis was on responding to immediate community concerns, particularly those arising out of the pressures of tax reform. We upgraded phone services and introduced online services that enable tax agents and businesses to register for tax, lodge statements and returns, and manage accounts. We also continued to develop e-tax and provided a number of other services for individuals.
These initial improvements have been successful, as gauged by the level of community support. For example:
- use of the tax agents' transaction gateway to the Tax Office (the Tax Agent Portal) has been high. The number of agents accessing the portal frequently increased by 12 percentage points, from 71% to 83%, from 2004 to 20051
- satisfaction with the Tax Agent Portal has also increased with significantly more agents rating the portal as 'very useful' in 2005 - 81% compared with 72% in 20042
- there has been steady growth in the use of the Business Portal - at the end of September 2005 there were approximately 90,000 registered users of the portal, and
- more than one million individual taxpayers used our e-tax product to lodge their 2003-04 income tax returns online.
We also track our progress towards delivering an easier, cheaper and more personalised tax administration system by measuring the community's perceptions. Our research indicates that we are making good progress in some areas, particularly for tax agents, but there is still a great deal of work to be done.
Tax agents
From April 2004 to May 2005 tax agents consistently agreed that it is now easier to deal with the revenue system (at levels from 75% to over 90%).
There has been a gradual increase in the proportion of agents who perceive the administration of the tax system is becoming less complex (49% up from 44% in April 2004). However, 50% of agents still do not believe that this is the case.
When asked whether the information and assistance we provide is tailored to their needs, tax agents have shown no significant change since July 2004 (with levels steady between 78% and 80%, up from 74% in April 2004).
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Information obtained from the Quarterly tracking of tax agents' perception of services and usage of channels, surveys from April 2004 to May 2005.
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Business
Overall, 84% of businesses thought that the Tax Office treated them in a fair and impartial way. However, their views on whether dealing with us was easier, cheaper and more personalised were less favourable than those of tax agents.
In May 2005, 54% of businesses agreed it is now easier to deal with the revenue system (this has moved between 48% and 52% since June 2004).
When asked whether the Tax Office tries to make it as easy as possible for them to comply with their business tax obligations, 76% of businesses agreed (ranging from 72% to 76% over the past year). However, only 41% of businesses thought that it now takes less effort to complete their business tax return than in previous years (up from a low of 35% in June 2004).
Only 48% of businesses thought the Tax Office took their circumstances into account when making decisions (down from 52% to 53% in recent periods).
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Information obtained from the Business Perception Survey, survey waves 1-4, from June 2004 to May 2005.
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Individuals
Individuals' perceptions that tax matters are easier, cheaper and more personalised are not as favourable as those of tax agents. For example, 38% of individuals surveyed agreed that the effort involved in completing their tax return is less now than in previous years (this is trending upwards from 36% in June 2002 and 37% in June 2003).
When asked whether the Tax Office looks for new ways of doing things to help taxpayers, 46% of individuals agreed (up from 43% and 44% in 2003 and 2002 respectively).
Individuals were divided as to whether the Tax Office takes into account their circumstances when making decisions (34% of respondents agreed, 33% disagreed and 22% neither agreed nor disagreed).
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Information obtained from the Community Perception Survey, surveys from June 2002 to June 2004. Note that these surveys use the White Pages® as a sampling frame to select individuals, so there is a small chance that a tax agent or business owner may be selected.
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Improvements to products were largely delivered as planned in 2004-05. However, the rollout of the client relationship management system, originally scheduled for April 2005, was delayed until September 2005 to ensure a smooth transfer of information between systems.
Major improvements delivered in 2004-05 included:
- allowing users of the tax agent and business portals to register and update details for goods and services tax (GST) and pay as you go (PAYG) withholding obligations
- introducing real time processing of activity statements for tax agents and businesses via the tax agent and business portals
- enabling portal users to lodge activity statements directly from a commercial accounting package, with additional software developers being provided with the specifications to incorporate this functionality into their products
- enabling auditors to lodge a contravention report for a self managed superannuation fund via the Tax Agent Portal
- involving approximately 650 individuals in a trial that allowed them to have their medical expense information downloaded from the Health Insurance Commission into their income tax returns when they used e-tax to lodge
- contacting new businesses to offer assistance in setting up their tax affairs
- adding a youth section to the Tax Office website, and
- redesigning a number of business registration forms in consultation with users.
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For more on our outcomes against our plans in 2004-05, see appendix 4.1.1.
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During 2005-06 clients dealing with us over the phone will notice that our staff will be able to provide them with more personalised, faster and more comprehensive service with the progressive roll-out across the Tax Office of a client relationship management approach.
To support this approach, the roll-out of the client relationship management system into call centres will take place during the first half of 2005-06. This will give contact staff a single consolidated view of a taxpayer's information and client contact history (including phone calls and letters). It means progressively that staff will have easier access to all of a client's details and this will minimise the need for clients to bring our staff up to speed on their situation when they call. Following a further release scheduled for April 2006, when clients need to be transferred to another tax officer during a phone call the details of their enquiry will be automatically transferred with the call.
Other major product improvements we will deliver in 2005-06 include:
- a secure messaging function for users of the portals to send enquiries and requests for tax technical assistance and advice and get a response, and
- an electronic record keeping tool for individuals that will enable them to export information directly into e-tax.
Continuing the work started in 2005-06, the future will see further enhancements to support the client relationship management approach. Inbound correspondence will be imaged, tracked and made available electronically to all front-line staff. As well as providing a complete view of a taxpayer's client contact history for contact staff, this will help ensure that client correspondence gets to the right tax officer in the first place.
Contact staff will be also able to advise clients of the progress of enquiries and requests they have previously made as we progressively introduce an organisation-wide case management system which will enhance our ability to ensure consistent treatment and recording of your dealings with the Tax Office.
Beyond 2006-07 will see real time processing of more forms lodged electronically. For example, users will be able to receive real time assessments for lodgments including income tax returns and fringe benefits tax returns, in addition to activity statements. This will mean that many people will get an immediate response when lodging these forms online, with refunds deposited directly into their bank accounts.
Online forms will be increasingly pre-populated with information held by the Tax Office and other government and non government organisations. Forms will also be tailored to the taxpayer's circumstances. For example, where a taxpayer does not have a GST obligation their activity statement will not include GST fields.
Taxpayers will be able to register, view and update their details online for most obligations and benefits, including elections they have made, such as variations to instalment rates.
Much of our longer-term effort is about integrating our dealings with taxpayers across the full range of their tax obligations. Currently, the Tax Office maintains separate accounts for taxpayers for their different obligations, which is partly a function of having separate processing systems for each tax product. As well as being administratively complex, this can result in a taxpayer having a credit in relation to one tax obligation while having a debit with another. Integrated processing will, among other things, enable accounts to be viewed on a consolidated basis, where the law allows this.
As well as integrating the experiences that taxpayers have with the Tax Office, we are also exploring opportunities with other government agencies. For example, we will build on our data link with the Health Insurance Commission for users of e-tax, and our systems links with Centrelink.
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For more details on our plans for beyond 2005-2006, see appendix 4.1.3.
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Working closely with professional associations involved in one of our peak advisory groups, the National Tax Liaison Group (NTLG), the Tax Office is examining procedural requirements to ensure they are not unnecessarily onerous and do not impose costs that are disproportionate to the scale of a transaction.
As with streamlining transactions and improving the self assessment system, this program of work addressing practical compliance issues seeks to align tax administration as closely as possible with existing community and business practice. For example, we aim to avoid imposing tax-specific requirements for collecting data, maintaining records and reporting financial information if the needs of compliance can be met through established accounting practices.
The program of work addresses issues raised in consultative forums as well as our day-to-day work in compliance and education. Priorities are set by an NTLG sub-committee based on issues identified through professional associations and our industry partnerships. In developing solutions we ensure that:
- the approach is consistent with the policy intent of the law
- we achieve compliance at reduced cost
- as far as practical, the approach reflects industry practice
- any resulting risks to the revenue are appropriately managed
- adverse impacts on third parties are avoided, and
- taxpayers are able to choose whether to adopt the approach or not.
The solutions are communicated through a range of products including a dedicated series of practice statements.
If an administrative solution is not possible, the issue is returned to the NTLG for further consideration. Where appropriate, it will be referred to Treasury as a proposal for a possible legislative solution.
Practical compliance issues fall into two broad categories:
- the need for flexibility in timing requirements in relation to procedural events (such as making elections and other choices), and
- the need to recognise and align with community practices (such as recognising that taxpayers no longer always receive a traditional receipt and accepting alternative forms of documentary evidence to substantiate claims for deductions, where appropriate).
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For details of the program of work in 2004-05 and our plans for 2005-06, see appendices 4.2.1 and 4.2.2.
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Making the self assessment system work better for taxpayers who try to comply is another key element of making it easier to comply.
Self assessment necessarily requires the Tax Office to carry out post-assessment reviews and audits to verify compliance. In Australia the process is strongly risk driven, designed to identify areas of high risk and also to minimise the intrusiveness of compliance activities on complying taxpayers.
In 2004, the Treasury conducted a review looking into whether the right balance had been struck between protecting the rights of individual taxpayers and protecting the revenue for the benefit of the whole community. A theme that emerged strongly from the community response to ROSA was that taxpayers needed more certainty and protection, and this is reflected in the ROSA recommendations.
The Tax Office is now working to implement the recommendations, building on work already done in recent years to increase certainty and reduce taxpayer compliance costs.
Implementing the recommendations will move the balance of fairness markedly in favour of taxpayers who act in good faith, without weakening the capacity of the tax system to cope with aggressive tax planning, avoidance and evasion.
The aim is to:
- improve certainty by providing clearer Tax Office advice, and making that advice more accessible, more timely, and binding on the Commissioner in a wider range of cases
- improve certainty by reducing the periods in which the Tax Office can increase a taxpayer's liability in certain situations
- lessen the interest and penalty consequences of taxpayer errors arising from uncertainties in the self assessment system, and
- provide for future improvements through better policy processes, law design and administrative processes.
The review made a total of 54 recommendations, most of which are expected to be implemented in 2005-06. The majority of these recommendations required legislative change with the remainder requiring administrative or regulatory change.
The key changes include:
- Tax Office advice - taxpayers have greater protection in relation to tax, interest and penalties when relying on Tax Office advice, they are able to seek private rulings on a greater range of matters, and advice will be more accessible and clearer
- shorter periods of review - the period of review in which the Tax Office can come back and adjust assessments is reduced to two years for more than eight million individual taxpayers, as well as for small business taxpayers who opt into the simplified tax system, and
- interest and penalties - interest on income tax shortfalls (where an amendment has increased the tax owing) is reduced for the period between the due date for the original assessment and the due date for the additional tax payable; penalties will be imposed in a narrower range of circumstances and the process for imposing penalties will be more transparent.
Shorter periods of review can be accommodated without a corresponding increase in risk to the revenue partly because our compliance activities are becoming more targeted and timely, particularly for taxpayers with more straightforward tax affairs. New systems and techniques will progressively support a move towards more real time compliance work, enabling us to more quickly identify emerging risks and, conversely, low-risk taxpayers - and treat them accordingly.
This is expected to enable us to go beyond the ROSA recommendations for shorter periods of review. Our goal is to be able to advise low-risk taxpayers shortly after we send them their notice of assessment that their tax affairs for the year are closed, and that we will not be undertaking any further review.
The Tax Office recognises that the easier, cheaper and more personalised program, and other initiatives to make it easier to comply, need to be client driven in order to meet our long-term objectives.
Right from the inception of the easier, cheaper and more personalised program, we have consulted with the community. We began by conducting a series of user clinics, creative retreats and user observation processes, and continue to respond to evolving demands.
We actively involve the community in administrative design. We work very closely with tax agents and their industry bodies to identify problems and build solutions. We also work with individuals and businesses to co-design solutions to the issues that they raise through advisory groups and other forums. The experience of our staff with existing systems and dealing with clients provides an equally valuable contribution to the program. User based co-design can involve a number of techniques, including:
- field visits
- focus groups
- prototype development and testing, and
- user testing of products and services.
Our simulation centre brings designers and users of the tax system into a common space that provides creative support and the ability to test products.
Design and testing for the internal Tax Office environment uses the simulation centre and a number of other devices to replicate the internal service delivery environment.
Case study 01 - closure the key
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The past five years have been a rollercoaster ride for Adelaide tax agent Wendy Macdonald.
'For the two years or so following tax reform in July 2000 we were in a grey haze,' she says. 'It was difficult to communicate with the Tax Office. We didn't have time to deal with them, they didn't have time to deal properly with us. The whole accounting fraternity was at its wit's end.'
But the last two years have seen a remarkable turnaround, Wendy says. At the centre of this has been the internet-based Tax Agent Portal.
'Until these services arrived, if we wanted any paperwork, such as a replacement activity statement, we would have to call the Tax Office. And it would take 10 or 12 days to arrive,' she says. 'I'd have a staff member on the phone for 12 to 15 hours a week.'
The result of this was 'enormous and ever growing piles of uncompleted paperwork'.
The portal was accompanied by a dedicated phone enquiry service for tax agents.
'I could key in a number and get directly to the right area,' Wendy says. 'Instead of waiting for half an hour we would usually get straight through. It's all changed. We're on and off the phone quickly.'
These services enable Wendy's practice to complete transactions and information searches in one go. They reduce time demands on staff, saving money and enabling the business to grow.
Wendy says she has noticed further improvements in Tax Office services in the past 12 months, 'particularly in the way we can sort things out for clients with outstanding obligations'.
But there is always room for improvement. Wendy wants information that is more concise and accessible. Not just for her and her staff, but also for clients.
'If clients get any more than two or three paragraphs from the Tax Office, they ring me,' she says.
'We need documentation from the Tax Office in a more concise form that would help us with clients. Simple fact sheets we can download and give to clients to back up our advice.
'We need information on, for example, deductions presented concisely. I think the information is all there, it's just a matter of finding it.'
She also says that quality of correspondence from the Tax Office in terms of clarity and completeness could be improved.
This year the Tax Office delivered an enhanced search facility for ato.gov.au which makes it easier to access information on our website. The quality and timing of our correspondence will also progressively improve with system improvements to be delivered through the easier, cheaper and more personalised program.
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Case study 02 - 'I like things I can finish, I can sign-off on'
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Sue Griffin, office manager at Gold Coast-based company inQbator, is a strong advocate for the Business Portal.
She switched to the portal for lodging her company's activity statement not long after it was turned on in 2003.
'It was easy to install,' she says. 'And lodging the activity statement is really, really easy - it's only a matter of filling in five or six numbers.'
Sue does her end of month reconciliation in a commercial software package, transfers the figures manually to the online activity statement 'and then all I have to do is press submit'.
'The portal allows me to check any queries regarding earlier activity statements as well as access the company's running balance account,' she says.
'When signing up I discovered I had a credit with the Tax Office for an earlier activity statement which had been logged incorrectly as a nil return. I was able to correct it immediately by submitting a revised activity statement. It could have taken months to realise a problem existed by relying on the paper statements.'
Sue welcomed the real time processing of forms lodged online, including revisions.
'I like things I can finish, I can sign-off on,' she says. 'An activity statement lodged online is processed immediately and the refund is usually in the bank within days.'
inQbator provides assistance to start-up companies through the Australian Government funded Information and Communications Technology Incubator Program.
Sue's job at times involves providing assistance, including sourcing bookkeeping services, to inQbator's investee start-ups, and she encourages both the bookkeepers and the companies to deal with the Tax Office electronically.
Sue nominates two main improvements she would like. One would be the ability to lodge other forms, including company income tax returns, online. The other would be a portal for bookkeepers, which provides dedicated information channels for both employed and contract/self-employed bookkeepers.
'Bookkeepers pick up problems early,' she says. 'It would be great for all bookkeepers to have access to all their clients' details through the portal - a single access point would make it easier for them to monitor their clients' compliance.
'Contract/self-employed bookkeepers are in a no-man's land at present. To lodge an activity statement they have to be associated with an accountant. I believe more businesses would take on a bookkeeper if the bookkeeper could complete and lodge the activity statement, without incurring accountant fees.'
The Tax Office is consulting with the Bookkeeper Industry Advisory Group to come up with ways of supporting the tax-related work of Australia's bookkeepers. In particular, it is developing an option for legally compliant bookkeepers and activity statement service providers to lodge activity statements electronically.
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4.1.1. What we promised and delivered in 2004-05
Through the listening to the community initiative in 2002 we captured the community's expectations of the Tax Office and articulated these in terms of the experience taxpayers would have when dealing with us. These statements became known as the client experiences.
The client experiences were translated into a program of improvements to the tax system - the easier, cheaper and more personalised program - and first documented and published in 2003 as Making it easier to comply.
Since then, the client experiences have continued to be driven by the community and focus on improvements to products and services. This publication is our contract with the community and the success of the program is gauged on the delivery of these client experiences.
Client experience
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Tax agents
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Business
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Individuals
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Channel: online
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Via the portal you will be able to register, view and update details for GST and income tax withholding obligations.
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Delivered December 2004
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Delivered December 2004
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We will be testing the first instalment of real time processing with some forms (that is, when you lodge a form online you will receive immediate turnaround if there are no problems). These forms will be pre-populated with details, saving you time and reducing the possibility of errors.
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Real time processing of activity statements via the Tax Agent Portal delivered November 2004.
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Real time processing of activity statements via the Business Portal delivered November 2004.
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Not delivered - the capability to deliver this will not be available until 2007-08.
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We will pilot a suite of services to allow you to lodge activity statements from within commercial accounting packages. The services have been developed collaboratively with industry and software developers and will be available for software developers to incorporate into their products in 2005.
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Delivered February 2005 - this was piloted with one software provider then made available more widely.
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Delivered February 2005 - this was piloted with one software provider then made available more widely.
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We will continue to deliver decision tools and calculators that make it easier for you to comply, including a:
- decision tool for self education eligibility, and
- self education calculator.
We will also deliver downloadable applications for tax agents, including:
- family tax benefit 2004
- baby bonus 2004
- residency 2004, and
- AMP demerger.
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- Self education tools delivered September 2004.
- Downloadable applications delivered October 2004.
- Another seven tools were also delivered this year.
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- Self education tools delivered September 2004.
- Another seven tools were also delivered this year.
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As an approved auditor or actuary, you will be able to lodge an Auditor/actuary contravention report for a self managed superannuation fund via the portal.
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Delivered December 2004
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Delivered December 2004
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We will expand on the pilot, and develop the link to allow e-tax users to download net medical expense data from the Health Insurance Commission.
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Delivered July 2004 - a pilot was conducted with 650 users. The pilot was expanded to 2,000 users in July 2005.
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Channel: website
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We will establish a youth section on our website to help you understand your obligations and responsibilities.
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Delivered October 2004
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We will work with you to identify your information and navigation needs, including developing new publications and online forms.
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Delivered progressively in 2004-05 - including, for example, an online form for complaints and the Commissioner's online update.
In addition enhanced search facilities were brought forward from 2005-06.
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Delivered progressively in 2004-05 - including, for example, an online form for complaints and the Commissioner's online update.
In addition enhanced search facilities were brought forward from 2005-06.
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Delivered progressively in 2004-05 - including, for example, an online form for complaints and the Commissioner's online update.
In addition enhanced search facilities were brought forward from 2005-06.
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Channel: phone
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In addition to the current online facility, you will now have access to an automated phone service to search for any superannuation or retirement savings accounts (RSA) that have been reported to a central register (the Lost Members Register) because your superannuation fund or RSA provider has lost contact with you.
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Delivered December 2004
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Continuous improvements to our phone services will provide you with more personalised and accurate information, quicker responses and improved service delivery.
When you phone using your identifier, the person you talk to will immediately have access to:
- a growing list of your (and for tax agents - your clients') dealings with us, and
- details of any special circumstances.
Our staff will be better trained and have access to improved reference systems and content.
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Delivered between September and December 2005.
Improved reference systems will be available later in 2005-06.
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Delivered between September and December 2005.
Improved reference systems will be available later in 2005-06.
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Delivered between September and December 2005.
Improved reference systems will be available later in 2005-06.
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We will continue to test and evaluate a specialised 'industry' phone service (with farmers and builders) where someone who understands your industry can speak to you at a time that suits you.
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A trial of this service has commenced and the trial period has been extended into 2005-06.
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We will expand our specialised phone service by initiating phone contact to assist people who are starting a business for the first time.
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Delivered August 2004
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Channel: paper and correspondence
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We will develop standards for tax invoices which will support your record keeping needs.
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Delivered August 2004
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Delivered August 2004
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Delivered August 2004
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Better sequencing of information for your individual clients who have an amended return.
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Delivered February 2005
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Better sequencing of information for sole traders who have an amended return.
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Delivered February 2005
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Better sequencing of information if you have an amended return.
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Delivered February 2005
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Letters, notices and information will be:
- more relevant to your circumstances, and
- consistent with other correspondence.
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Delivered - in total 846 improved letters were endorsed during 2004-05.
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Delivered - in total 846 improved letters were endorsed during 2004-05.
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Delivered - in total 846 improved letters were endorsed during 2004-05.
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For large business clients, we are taking a new approach to handling requests for private binding rulings on complex matters in order to achieve commercially realistic turnaround times. The new approach requires collaboration between you and the Tax Office.
Once you notify us that you have a significant, time sensitive transaction and we are satisfied that it meets certain criteria, we will assign a senior experienced case manager to bring together the expertise required to resolve your issue in a timely manner.
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Delivered March 2005
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We will continue to improve forms. They will be easier to complete because they will be self-guiding and contain relevant information.
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Five improved business registration forms delivered February 2005.
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Five improved business registration forms delivered February 2005.
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Channel: face-to-face
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Clients will be able to register for a tax file number with Centrelink when registering for a Centrelink benefit.
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Trialled October 2004, then generally available.
|
(Appendix 4.1.1 continued)
Client experience
|
Non-profit and government organisations
|
Channel: specialised services
|
|
Improved charity endorsement process that allows a charity to be endorsed to access income tax, GST and fringe benefits charity tax concessions on the one application form.
|
Delivered July 2004
|
The ability to download a charity or deductible gift recipient endorsement application form and instructions when you successfully apply online for an Australian business number (ABN).
|
Delivered July 2004
|
Guidance on the overall tax treatment of fundraising events.
|
Delivered April 2005 - through the publication of Non-profit organisations and fundraising.
|
Whole of government approach to the provision of information.
|
Delivered through the three more specific client experiences listed below.
|
Targeted publications for government organisations.
|
Four Australian Business Register guides were delivered in August 2004.
|
A joint Tax Office and Department of Finance and Administration superannuation guide for government employers.
|
The publication Superannuation obligations for Australian government employers under the Productivity Benefit Act was delivered in the 2003-04 year (March 2004).
|
Greater use of the publication A better practice guide for the management of GST administration as a tool of cooperative compliance.
|
This guide was delivered in the 2003-04 year (May 2003).
|
4.1.2. What is planned in 2005-06
|
A tick in the following table indicates the people who will be affected by the client experience.
|
Client experience
|
Tax agents
|
Business
|
Individuals
|
Channel: online
|
|
|
|
We will continue to work with software developers to identify and pilot programs. This will enable software to be developed that can interact with Tax Office systems.
|
|
|
|
Continuous improvements to the tax agent and business portals will allow you to send and receive enquiries and requests for technical assistance in relation to tax matters.
|
Partially delivered. 'Send' functionality delivered October 2005. 'Receive' functionality is scheduled for delivery in 2006-07.
|
Partially delivered. 'Send' functionality delivered October 2005. 'Receive' functionality is scheduled for delivery in 2006-07.
|
|
Subject to testing, an electronic record keeper will be able to be downloaded into e-tax.
|
|
|
Delivered July 2005 for record keeping during 2005-06.
|
We will complete transition of portal security arrangements from PIN and password to public key infrastructure (PKI).
* Note: the completion of this client experience has been brought forward from 2006-07.
|
|
|
|
We will continue to develop more tools and calculators for additional topics including capital gains tax (CGT) and superannuation.
|
Delivered July 2005
|
|
Delivered July 2005
|
We will continue to improve e-tax by making Centrelink payment summary information available to all e-tax users.
* Note: this is a new client experience.
|
|
|
Delivered July 2005
|
Channel: website
|
|
|
|
We will continue to improve the way content is presented and make our website easier to navigate. We are also enhancing our search facility so you get more accurate search results.
|
Improved search facilities were delivered in 2004-05. Enhanced content will be available during 2006-07.
|
Improved search facilities were delivered in 2004-05. Enhanced content will be available during 2006-07.
|
Improved search facilities were delivered in 2004-05. Enhanced content will be available during 2006-07.
|
We will continue to improve our website by enhancing the search facility in the legal database so you get more accurate search results.
* Note: this is a new client experience.
|
|
|
|
Channel: phone
|
|
|
|
Continuous improvements to our phone services will provide you with more personalised and accurate information, quicker responses and improved service delivery.
When you phone using your identifier, the person you talk to will immediately have access to:
- a growing list of your (and for tax agents - your clients') calls, correspondence and dealings with us
- details of any special circumstances, and
- the details of some of the correspondence that we have sent you.
Our staff will be better trained and have access to improved reference systems and content.
* Note: delivery of some parts of this client experience have been delayed from 2004-05.
|
|
|
|
We will continue to test and evaluate a specialised 'industry' phone service (with farmers and builders) where someone who understands your industry can speak to you at a time that suits you.
|
|
|
|
You will be able to order publications 24 hours a day, seven days a week via a self service, natural language recognition telephone system.
* Note: this is a new client experience.
|
|
|
|
Channel: paper and correspondence
|
|
|
|
Letters, notices and information will be:
- more relevant to your circumstances, and
- consistent with other correspondence.
* Note: this is a continuing client experience from 2004-05.
|
|
|
|
We will provide standards for payment summaries to software developers to help ensure you/your clients have consistent documents.
|
|
|
|
We will continue to improve forms. They will be easier to complete because they will be self-guiding and contain relevant information.
* Note: this is a continuing client experience from 2004-05.
|
|
|
|
(Appendix 4.1.2 continued)
Client experience
|
Non-profit and government organisations
|
Channel: specialised services
|
|
The ability to view the endorsement status and tax concessions of charities on the Australian Business Register.
|
Delivered July 2005
|
We will continue to provide relevant information on our website and respond to individual queries through the private rulings system.
|
|
4.1.3. What is planned for beyond 2005-06
|
A tick in the following table indicates the people who will be affected by the client experience.
|
Client experience
|
Tax agents
|
Business
|
Individuals
|
Channel: online
|
|
|
|
We plan to offer you real time assessment and an electronic payment or refund service for selected tax forms.
|
|
|
|
We will work with large business to design a new access management system for the Business Portal.
|
|
|
|
Continuous improvements to the Tax Agent Portal and Business Portal will allow you to:
- see a single view of your accounts
- register, view and update details for most obligations or benefits
- send and receive enquiries and requests for technical assistance in relation to tax matters
- find out the status of your enquiries, technical requests and transactions with us3, and
- receive reminders to lodge which in some cases may include tax forms that are pre-populated with available data and tailored to meet your specific needs.
|
|
|
|
With progressive improvements, you will receive communication that:
- is personalised and tailored, based on improved client profiling and channel choice
- contains only relevant information
- is consolidated to cause the least intrusion to you, and
- is delivered through your preferred communication channel.
When we send you correspondence that needs action, you will receive it when you need it with supporting information products.
|
|
|
|
We will be working to continue to improve e-tax by:
- working with the Health Insurance Commission to make the net medical expenses import available to all e-tax users
- expanding the information available from Centrelink to include the 30% child care rebate information, and
- exploring opportunities to provide information from other government programs.
* Note: this is a new client experience.
|
|
|
|
We will be upgrading e-tax and record keeping tools to work on most personal computers and to integrate with other government and privately developed tax software.
* Note: this is a new client experience.
|
|
|
|
With the consent of their client, tax agents will be able to view data online to assist in the completion of individual tax returns. Initially, this will include Centrelink payment summary and the 30% child care rebate information.
* Note: this is a new client experience.
|
|
|
|
We will progressively increase the range of data available to you through the pre-population framework to include information from non-government third parties.
* Note: this is a new client experience.
|
|
|
|
We will continue to work with software developers to identify and pilot programs. This will enable software to be developed that can interact with Tax Office systems.
* Note: this is a continuing client experience.
|
|
|
|
Channel: website
|
|
|
|
Content will be of a consistently high standard through the implementation of a new publishing system. This system will provide greater rigour around our online publishing process and will improve our accountability and integrity around our website content4.
|
|
|
|
Channel: phone
|
|
|
|
When you phone us, the person you talk to will know the details of all the correspondence we have sent to you.
* Note: this is a new client experience.
|
|
|
|
You will be able to find out the status of all your enquiries, technical requests and transactions with us by phone and face-to-face5.
|
|
|
|
We will offer income tax return lodgment nationally via self-help interactive voice response software over the phone.
|
|
|
|
Channel: paper
|
|
|
|
Letters, notices and information will (where appropriate):
- notify you of any changes in obligations
- provide information only when you need it
- be concise and relevant to your circumstances
- be consistent across channels
- have information products that are relevant to you delivered with correspondence
- be consolidated across client accounts
- be better sequenced, and
- be delivered through your preferred channel.
|
|
|
|
With progressive improvements, you will receive communication that:
- is personalised and tailored, based on improved client profiling and channel choice
- contains only relevant information
- is consolidated to cause the least intrusion to you, and
- is delivered through your preferred communication channel.
When we send you correspondence that needs action, you will receive it when you need it with supporting information products.
|
|
|
|
You will have access to more forms that are easier to complete as they are self-guiding, contain relevant supporting help and are personalised.
|
|
|
|
Channel: face-to-face
|
|
|
|
You will be able to find out the status of all your enquiries, technical requests and transactions with us by phone and face-to-face6.
|
|
|
|
(Appendix 4.1.3 continued)
Client experience
|
Non-profit and government organisations
|
Channel: specialised services
|
|
Online lodgment of charity and deductible gift recipient endorsement applications.
|
|
4.2.1. Work program for 2004-05
In 2004-05 we examined the issues listed below to identify and, where possible, implement solutions to make it easier to comply.
Area of improvement
|
Market
|
Issue
|
Response
|
Flexible timing
|
|
|
|
Monthly activity statements
|
Business
|
Some new micro businesses and small to medium enterprises (SMEs) are mistakenly choosing to lodge monthly activity statements when they start a business and register for an ABN.
If the business wants to change from monthly reporting to quarterly reporting within the first year, the law states that they must make a request in writing. This requirement is costly and time-consuming for businesses.
|
An interpretative solution that enables new to business taxpayers to change their reporting option over the telephone before lodging their first activity statement is now in place.
|
Wrong use of recipient created tax invoices (RCTIs)
|
Business
|
In commission-based business, some suppliers (usually micro business and SMEs) don't know how much they will be paid for their goods or services. This means that they cannot issue their own tax invoices and are instead using an RCTI.
Without notifying the Tax Office or having a RCTI agreement in place, the RCTIs do not comply with legal requirements and the recipient cannot claim GST credits.
|
A practice statement - PS LA 2004/11 - was released in November 2004.
GST publications will be updated to clarify the appropriate use.
|
Application of the margin scheme
|
Business
|
To apply the margin scheme to establish the GST on a taxable supply of real property a supplier must choose to apply the margin scheme at or before the time it makes the supply.
Suppliers who do not choose to apply the margin scheme at this time must calculate the GST as 1/11th of the consideration for the supply, rather than 1/11th of the margin. Where the GST calculated on the margin would have been small, the financial implications can be significant.
|
A practice statement - PS LA 2005/2 (GA) - was released in October 2005.
|
Forgiven loans, payments and debts
|
Business
|
The law provides for certain payments, loans and debts forgiven by private companies to shareholders or shareholders' associates after 4 December 1997 to be deemed unfranked dividends.
In some circumstances, loans made prior to 4 December 1997 are also caught by the provisions. Micro businesses and SMEs who do not realise this may not be aware of the possible impact of the statute of limitations on at call loans made prior to 4 December 1997. The statute barring of such loans may cause the creditor to lose the right to recover the debt, and may result in the loan being considered forgiven debt and deemed dividends raised. This can have significant financial implications.
|
A draft practice statement is currently being reviewed and is expected to be released in early 2006.
|
Extended time frame to put loans on a commercial footing
|
Business
|
Changes were announced in the 2004-05 Federal Budget and enacted with effect from the 2004-05 income year and later years.
The announcement offered an extended time frame to repay or put loans on a commercial footing. The businesses who acted on the basis that the changes would take effect from the year of the announcement rather than the subsequent year may not meet the requirements of the law as it currently stands for some loans. This means some loans will be treated as unfranked dividends in the hands of shareholders and/or associates and will result in a debit to the franking account of the business.
|
A practice statement - PS LA 2005/3 (GA) - which extends the concession to the 2003-04 income year was released in October 2005.
|
Attributed personal services income
|
Individual
|
Individuals with attributed personal services income have difficulty meeting the time frame for lodging their activity statement for the fourth quarter.
To work out the amount of attributed personal services income, the entity needs to work out their income and expenses. However, this may not happen until after the activity statement is due to be lodged. This makes it difficult to meet the lodgment requirements and often forces taxpayers to use the services of a tax agent.
The legislation doesn't allow for differing due dates for lodging activity statements based on entity type or non-arm's length relationships.
The effect is that the individual incurs additional costs either through lodging late or engaging a tax agent to determine the amount of attributed income and lodge activity statements under their extended lodgment program.
|
The Tax Office believes the practice statement PS LA 2003/6 and the fact sheet Alienation of personal services income - additional pay as you go (PAYG) withholding obligations address this issue.
We will test this with the National Tax Liaison Group.
|
Recognising and aligning to community practice
|
|
|
|
Activity statement revisions
|
Business
|
If GST assessments for more than one tax period are issued at the same time, businesses will receive a separate assessment notice for each period.
For example, if a quarterly GST payer has a systemic activity statement error for every tax period since July 2000, to correct the error the business would need to revise 17 activity statements. This would result in the business receiving 17 separate notices of assessment as well as penalty notices if any penalty is applicable.
The additional paperwork is an irritant to business and adds to their compliance costs.
|
A process for issuing single notices of assessment has been implemented.
|
Foreign exchange realisation gains
|
Business
|
PAYG instalment income generally includes gross rather than net amounts of income.
However, most corporate groups (usually large or medium-sized businesses) account for foreign exchange gains and losses on a net rather than a gross basis in their accounts.
Considerable rework would be needed to determine the gross foreign exchange gain and loss amounts. In many instances these amounts cannot be determined during the year of income.
Guidance is required because there is uncertainty about when businesses can include net foreign exchange gains in PAYG instalment income and how this can be accomplished without undermining the PAYG instalments base.
|
A practice statement - PS LA 2005/17 - was released in September 2005 and applies retrospectively from 1 July 2003.
|
CGT small business roll-over relief
|
Business
|
The Administrative Appeals Tribunal recently found that small business taxpayers cannot choose roll-over relief until they have satisfied all of the conditions for the roll-over. This includes acquiring a replacement asset.
This decision (in the Sherlinc Enterprises Pty Ltd case) was contrary to the Commissioner's established practice for administering the CGT small business roll-over relief.
Prior to this decision, the Commissioner had allowed small businesses with a genuine intention to acquire a replacement asset to defer accounting for the gain until the period allowed for acquiring a replacement asset had lapsed.
Small business taxpayers who qualify for the roll-over relief need clarity so that they can apply the concession correctly.
|
CGT concessions for small business have been reviewed by the Board of Taxation and a report provided to the Treasurer. The Tax Office does not plan to take further action until that report is released and the Treasurer publishes his response.
|
Bees as trading stock
|
Business
|
The Tax Office has determined that bees are trading stock. However, there is no ready means of valuing them.
Anecdotal evidence indicates that, as a result, apiarists are not valuing bees as trading stock. However, there is no practical way for apiarists to do this.
|
A position paper for the valuation of bees as trading stock by apiarists is being prepared for industry consultation. We expect this to be completed by 31 March 2006.
|
Oysters as trading stock
|
Business
|
The law states that oysters must be valued as trading stock using the per stick method. However, there is uncertainty about the continued use of this method.
Oyster farmers may not be complying because of this uncertainty.
|
A draft practice statement is being prepared and is expected to be publicly released in April 2006.
|
Superannuation records
|
Business
|
Income tax law requires most records to be held for five years. However, trustees of superannuation funds must keep some records for a minimum of five years and other records for a minimum of 10 years.
The different and lengthy periods of time for which records need to be kept make compliance difficult and more costly.
|
We have tested this with the Australian Prudential Regulation Authority and no administrative solution is available.
|
Consolidations over-depreciation adjustments
|
Business
|
The problem relates to adjustments for over-depreciated assets that are required under the consolidations rules, in particular the number of assets excluded from access to the short cuts for resetting the tax cost. This problem mainly affects large business.
Business is having difficulty calculating the over-depreciation adjustment required under the consolidation provisions.
This issue was partly addressed by a practice statement released in 2004 (PS LA 2004/12). However, the list of assets excluded from the shortcuts needed to be reviewed to allow wider application of the shortcuts.
|
The Consolidation reference manual has been updated and the constraints on the use of short cuts narrowed so that the only depreciating assets excluded are grapevines and horticultural plants (see Section C2-4-640 of the manual).
|
Recipient created tax invoices (RCTIs)
|
Business
|
Many RCTIs contain various charges and taxes. For example, it is common in the primary production industry for invoices to include stock agent fees, state government taxes, freight costs and vet fees.
Breaking the invoice up into a multitude of transactions is onerous and time consuming but has no effect on the ultimate tax liability. This problem affects micro businesses in particular.
|
We have been unable to find an administrative solution that does not compromise the integrity of the GST system.
We will update GST publications to better explain this.
|
Record keeping in the scrap metal industry
|
Business
|
For the scrap metal industry, record keeping requirements for amounts under $55 are inconsistent across taxes and there is confusion within the industry. This inconsistency is adding to the compliance burden.
|
GST documentary requirements for amounts under $50 have been aligned to the income tax requirements set out in Taxation Ruling TR 96/7.
|
Claiming expenses
|
Individuals
|
The law states that to claim work expenses, certain car expenses and business travel expenses, the expenses must be substantiated. This means that a taxpayer needs to have a document issued by a supplier containing certain details about the purchase.
Technology has advanced significantly since the introduction of this law and taxpayers no longer always receive a traditional receipt. For example, taxpayers who purchase goods or services on the internet may receive only a reference number rather than a full receipt.
The impact on taxpayers is that some people may not be able to comply strictly with the letter of the law (but in practice, deductions will be allowed if they can prove a reasonable basis for a claim). On the other hand, some people may not claim their true entitlement as they lack the required documentation.
|
A practice statement - PS LA 2005/7 - has been released to provide guidance to tax officers on what documentary or other evidence will normally be accepted as sufficient to substantiate an individual taxpayer's claim for deductible work and car expenses where these expenses relate to non-business and non-investment income.
|
Foreign tax credits
|
Individuals
|
The law requires investors to make a complex calculation to determine their correct entitlement to foreign tax credits. Anecdotal evidence shows that investors are claiming the actual amount of foreign tax credits reported on the distribution statement. In many cases this will not be correct.
This issue affects both clients of managed funds and the managed funds themselves. Those who rely on statements may claim an incorrect amount of credit. Those who attempt the calculation may get it wrong.
|
On 10 May 2005, the Treasurer announced further reforms to Australia's international tax arrangements, including changes to the foreign tax credit rules. We expect this issue to be addressed as part of that review.
|
Record keeping to evidence tax deductible gifts
|
Individuals
|
Guidelines about the records non-business individuals must keep to evidence tax deductible gifts are required to address uncertainty in the community.
Situations under consideration include:
- donations made directly to a deductible gift recipient (DGR), and
- deductions made through intermediaries and also 'bucket collections' by DGRs.
Although the burden of proof will still rest with the taxpayer, the Tax Office is considering what records of claims are acceptable evidence.
|
A practice statement - PS LA 2005/12 - dealing with the treatment of donations made to 'bucket collections' for the Boxing Day 2004 Tsunami appeal was released on 30 June 2005. General rules for donations will be communicated through ato.gov.au
|
Beneficiaries of trusts
|
Individuals
|
Where multiple beneficiaries of an investor directed portfolio service trust receive a share in a single asset as part of a trust distribution, they are not treated as having absolute entitlement. This means a pre-CGT asset will lose its pre-CGT status and incur a CGT liability when the asset is sold. At present trustees are treating multiple beneficiaries as a single beneficiary.
If the strict letter of the law is applied, some taxpayers will be disadvantaged and incur additional tax liability.
|
Detailed analysis and consultation has been undertaken in relation to joint and multiple beneficiaries in a range of scenarios. We have been unable to identify a practical administrative solution and the matter is being discussed with Treasury.
|
Other issues
|
|
|
|
GST collection
|
|
Some small businesses that operate a single bank account spend the GST they have collected and then can't make their tax payment.
Taxpayers end up owing money to the Tax Office and this can be compounded by general interest charge and late payment penalty.
Some advances have been made in the taxi industry to deal with this issue that may be suitable for broader application.
|
The taxi industry trial has concluded and been evaluated.
While there is support for extension of the concept, other business priorities mean we are unable to progress this in the short term.
We will refer it back to the National Tax Liaison Group for further prioritisation.
|
Electronic options
|
|
There is inconsistency in the way records and information must be transmitted.
Taxpayers often have to keep a mixture of paper and electronic records to evidence their compliance obligations. Time and resources must also be allocated to reconcile paper records with electronic records or systems.
|
Several record keeping solutions and electronic reporting options are under consideration and/or development, including for:
- activity statements
- withholding payment summaries
- tax file number declarations, withholding tax and Medicare levy declarations
- fringe benefits tax (FBT), and
- various superannuation evidentiary requirements.
|
CGT
|
|
Tax Office compliance activities that focus on CGT have found that there are practical difficulties in complying with record keeping requirements. There are degrees of non-compliance and compliance burden as a result of record keeping requirements.
|
Analysis has commenced. The Tax Office believes there is very limited scope for an administrative change. Record keeping solutions are being considered.
|
4.2.2. Work program for 2005 onwards
In 2005-06 we will continue to work on those issues from the 2004-05 program that have not yet been completed as well as examine the new issues listed below to identify and, where possible, implement solutions to make it easier to comply.
Area of improvement
|
Market
|
Issue
|
Flexible timing
|
|
|
GST revenue neutral transactions
|
Business
|
A GST revenue neutral transaction (sometimes referred to as a GST 'wash' transaction) typically occurs where a GST registered business supplies a product or service that should include GST to another GST registered business but fails to charge GST.
Since the recipient is also registered, they would be entitled to claim a GST credit if the transaction was treated as a taxable supply by the supplier.
Correcting these errors can be costly and time consuming for businesses.
Some concessions are already provided to businesses in relation to these transactions, which are outlined in our GST 'wash' transactions practice statement (PS LA 2003/2). We are considering extending these concessions.
|
Recognising and aligning to community practice
|
|
|
Electronic retention of fringe benefits tax (FBT) records
|
Business
|
Clarification is needed on which FBT records can be retained electronically without paper originals.
Employers and employees are uncertain about which FBT declarations can be exchanged electronically between employers and employees.
|
Employee share acquisition scheme (ESAS) - calculation of market value
|
Business and individuals
|
When certain employees acquire shares under an ESAS, the law requires them to calculate their assessable income by reference to 'market value'.
Market value is not always easily determined because the rules require taxpayers to calculate a 'weighted average'.
To comply with the letter of the law, taxpayers may incur a significant cost to correctly calculate the weighted average price.
|
Other issues
|
|
|
Does the law provide an entitlement to both delayed refund interest and interest on overpayments when a general interest charge penalty is remitted?
|
Business
|
We have undertaken an interpretive review of this question. The law only allows for the payment of either interest on overpayments or delayed refund interest but not both. We will publish this in the ATO Receivables Policy by March 2006.
|
Number and content of payment summaries for PAYG withholding
|
Business and individuals
|
Payers may be required to complete more than one payment summary in relation to a PAYG withholding event.
The Tax Office will conduct a review of the number and content of payment summaries for PAYG withholding.
The project will review:
- the form and content of PAYG payment summaries given to employees and other workers, and
- the number of different payment summary types with a view to reducing that number.
The result should be that tax agents are able to more quickly and accurately prepare tax returns for their clients, and individual self-preparers will find it easier to complete their tax returns.
|
4.3. Review of aspects of income tax self assessment
A majority of the changes resulting from the ROSA recommendations are expected to be implemented during 2005-06.
The law relating to penalties and the new interest charge was passed on 29 June 2005 and we are now implementing these changes.
The new law required for changes relating to advice and periods of review took effect in December 2005. The legislative changes for periods of review apply to income tax assessments for 2004-05 and later years. As well, we are advancing those changes that require administrative responses.
Key changes are as follows.
Advice
In 2005-06 the following changes are planned or have already been implemented.
- Our future advice products will clearly set out the level of protection provided against primary tax increases, penalties and interest charges.
- We will make it easier for taxpayers to identify what parts of our public rulings are binding on us.
- If we withdraw a public ruling, we will take all necessary steps to replace it with appropriate instructions as soon as possible.
- We have re-issued a practice statement on the application of Part IVA that provides guidance to Tax Office staff in relation to the administration of the general anti-avoidance rule for income tax (Part IVA) and other general anti-avoidance provisions for fringe benefits tax and GST.
- We will make it clear whether Part IVA has been considered in private rulings.
- We are expanding the range of matters on which legally binding private and public rulings can be provided.
- More individual self-preparers will be eligible to receive oral rulings over the phone from us on a greater range of topics, giving them greater certainty and protection from primary tax liability.
- We are making enhancements to the Tax Agent Portal to enable private rulings to be lodged electronically.
- Rulings will be more timely because we will only address the particular questions asked. Where we identify other issues that are relevant to the advice, we will refer to them but not analyse them.
- The need to request information that is readily available to us has been removed, thereby improving timeliness and reducing compliance costs associated with applying for a private ruling.
- If a trustee of a trust estate has received a private ruling, any future trustees for that estate will not need to request another ruling, provided circumstances have not changed. The original private ruling will apply to them.
Looking further ahead, to 2006-07 and beyond, we will provide more certainty to taxpayers by making our published advice, including public rulings, and our private rulings easier to understand by simplifying the way they are written.
Period of review
- For income tax assessments for 2004-05 and later years, the amendment period for most individuals and simplified tax system taxpayers is two years. After this period the Tax Office will generally not amend a taxpayer's income tax assessment unless they ask us to, they have been involved in tax avoidance or deliberately sought to evade their responsibilities.
- To provide more certainty, we will help taxpayers work out the period within which their tax affairs can be reviewed.
- Where we do intend to review a taxpayer's affairs we will notify them in a shorter time frame.
- From 2004-05, the period of review for nil liability and loss returns is equivalent to the period allowed to the Tax Office to amend assessments creating liabilities.
- Transitional arrangements will provide certainty for 2003-04 and earlier year loss and nil liability returns. These arrangements ensure that taxpayers' returns from 2003-04 and earlier years do not remain open to review indefinitely.
Penalties and interest charges
- The penalty for a tax shortfall resulting from a failure to follow a private ruling has been abolished. This applies for 2004-05 and later years.
- Where a penalty is imposed, we will explain why it has been imposed and how it has been calculated. This will help taxpayers to understand the behaviour that attracts a penalty.
- We will provide information on how to seek remission and reasons for rejecting remission requests to help taxpayers understand why a penalty or interest charge has not been remitted in full.
- The interest charge on income tax amendments for 2004-05 onwards (where taxpayers are required to pay more tax) will now be four percentage points lower than the current general interest charge rate. This lower charge is called the shortfall interest charge and will apply from the date of the original assessment to the day before any shortfall is corrected. If this shortfall is not paid by the due date, the higher general interest charge will then apply to the outstanding amount.
- The Commissioner has a broad discretion to remit the new shortfall interest charge, where he considers it fair and reasonable.
- Taxpayers will be able to object to a decision not to remit the shortfall interest charge where the remaining shortfall interest exceeds a certain percentage of the tax shortfall.
- Taxpayers will have access to rulings and practice statements relevant to our administration of penalties and interest charges including:
- a new practice statement providing clarity and guidance on tax shortfall penalties and materiality, and
- a new practice statement providing guidance on remission of the shortfall interest charge
1 Information obtained from Technology Needs of Tax Practitioners, July 2005, prepared by TNS Social Research.
2 Information obtained from Tax Agent Communication Survey 2005, August 2005, prepared by TNS Social Research.
3 Originally scheduled for 2005-06.
4 Originally scheduled for 2005-06.
5 Originally scheduled for 2005-06.
6 Originally scheduled for 2005-06.
Last Modified: Tuesday, 5 February 2008
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