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  • How we are making it easier

    As part of making it easier for our clients to meet their obligations, we have introduced a range of services and products that improve the client experience.

    Educational programs

    Our education programs and services for new and existing small businesses help them to get their GST and other tax and super responsibilities right from the start and avoid costly mistakes down the track.

    For example, in partnership with the Department of Industry, all newly registered businesses receive an introductory series of educational emails throughout their first year of business to help them understand their key obligations (over 500,000 businesses have been introduced to this service since it began in February 2016). Our early education programs have a strong focus on planning for paying tax when it is due, especially in relation to taxes collected during the year, such as GST and PAYG withholding from employee wages.

    We stay in touch with new and existing small businesses via our flagship service, the Small Business Newsroom, to keep them up to date when things change. An increasing number of small businesses are learning more about how to stay on top of their GST, tax and super obligations through our face-to-face education workshops and webinars – over 15,000 small businesses attended a workshop or webinar this year. In addition to workshops presented by ATO staff, we work with a number of community partners to reach a wider audience of small businesses Australia-wide, in metropolitan and rural areas.

    Digital services

    In 2016–17, the cash and hidden economy program included over 23,000 visits to small business to showcase our digital service offer and help them to use the products we have available. We have seen direct improvements in BAS and income tax lodgments in the populations we visited.

    All of our staff have access to a comprehensive client profile to support them in their discussions with clients. In addition to providing information on the reasons the client has been identified, the profile also includes details of third-party data obtained about the client. This, along with a focus on improving staff capability and case selection, has led to significantly improved results for the program.

    Increased client interaction digitally through voice authentication in the ATO app. ATO Beta continues to trial new digital concepts and services directly with the community online.

    A number of strategies have been deployed to assist in transitioning customers to digital. This includes Digital activity statements, ongoing promotion of myGov and updating customer digital details, improving the integrity of the client register and success rates of digital campaigns. Individual customer’s experience improvements through supporting promotion of digital services tailored to their needs.

    Simpler BAS

    From 1 July 2017, small businesses with a GST turnover of less than $10 million will be automatically transferred to Simpler BAS and only be required to report:

    • G1 total sales
    • 1A GST on sales
    • 1B GST on purchases.

    Small businesses currently reporting GST using instalments can continue to report using the instalment method. Clients will not be asked to re-elect this method each year. Their annual GST return will resemble the Simpler BAS.

    Improved communication channels

    The GST Outbound Campaign aims to conduct enterprise checks to gather intelligence, cancel unnecessary GST registrations and to detect and deter GST credit refund fraud in the community. New ATO web content, We check your refund, has been developed for small business taxpayers to explain why we stop GST refunds for verification. The new content also lists the key documents required during the verification process.

    We are making it easier for small business to meet their obligations by trialling the use of an SMS to remind small businesses, who have not lodged and paid their quarterly activity statement by the due date, to do so. The SMS is a convenient and quick way to communicate with small business owners and is targeted to small businesses that are not supported by an agent. These pilots have delivered positive results.

    We are investigating how we can expand the use of SMS in the future. We have an ongoing focus on supporting small businesses to use digital channels to meet their lodgment obligations. New communication products and improved ATO online services are enabling activity statements to be lodged by sole traders and individuals.

    Resolving disputes

    We are engaging earlier to help settle disputes, aiming for fair, efficient and respectful resolution. A number of initiatives have been introduced to reduce the time and lower costs. We continue to develop and use different resolution strategies targeted to suit the taxpayer’s circumstances and the nature of the dispute to ensure a better, more tailored experience.

    From July 2016, we adopted a client-focused model for managing objections. This focus, coupled with the Fast Intensive Treatment process implemented in March this year, has supported earlier, and more tailored resolving of disputes. Adopting the Fast Intensive Treatment strategy means we are talking to clients about their dispute soon after it is lodged to understand the issues in dispute and the appropriate next steps.

    We may settle a dispute where we consider it consistent with good management of the tax system. In doing this, we balance our responsibility to collect taxes with the need to administer the tax system sensibly, having regard to relevant factors, such as the relative strength of the positions of both parties, the cost versus the benefits of continuing the dispute, and the impact on future compliance for the particular taxpayer and the broader community.

    This year, we settled 75 cases. The original ATO position was $193 million and the settled amount was $152 million. In 2015–16, we settled 49 cases with an original ATO position of $179 million, and a settled amount of $155 million.

    We received 859 objections in 2016–17 (291 lower than last year) and completed 934. The lower number of audits completed and our range of dispute resolution strategies during audits contributed to the decrease in objections received.

    Objections completed decreased over the last 12 months, commensurate with the decrease in receipts. It is noted that, last year, a long-term project involving approximately 220 cases was finalised, significantly skewing the completed cases for 2015–16.

    Client perceptions of fairness continue to show good results, in line with our corporate objectives. These perceptions are measured via quarterly surveys of a sample of cases across all markets.

    Cases involving significant risk, including precious metals and property, continue to be of major focus, with a number of precious metals cases moving into litigation.

    Original audit liabilities of $353.4 million (including penalties) were considered over the year, with amounts in dispute being $340.6 million with $29.5 million being allowed at objection. This is significantly different to recent years due to precious metal objections being disallowed.

    Cash economy cases received were 195, with 194 finalised. Cases allowed in full were 24% (46) and allowed in part 34.7% (67). A total of 8.3% (16) were disallowed.

    Table 8: GST objections – amounts in dispute

     

    2014–15

    2015–16

    2016–17

    Objection Type

    Tax

    Penalty

    Tax

    Penalty

    Tax

    Penalty

    Original audit liabilities

    $333m

    $110m

    $114m

    $53m

    $238m

    $115m

    Amount in dispute

    $299m

    $104m

    $363m

    $51m

    $223m

    $118m

    Amount allowed

    $54m

    $12m

    $58m

    $16m

    $20m

    $10m

    Net audit liabilities

    $279m

    $98m

    $57m

    $37m

    $219m

    $105m

    Amount allowed %

    16%

    11%

    50%

    30%

    8%

    9%

    Litigation

    Current GST-related litigation case numbers remain at a relatively low level compared to previous years. Current case numbers have decreased by 10% since last year, with 69 current cases at 30 June 2017. It is anticipated that the litigation caseload will remain at similar levels moving into 2017–18.

    Of the cases as at 30 June 2017, 93% were before the Administrative Appeals Tribunal (AAT). Of these cases, 68% involved micro enterprises and 30% involved small and medium enterprises.

    In 2016–17, we received 53 new cases and completed 61 cases.

    There were 13 GST-related decisions involving the Commissioner (non-debt) delivered by the courts and the AAT during the year, with all of these decisions being favourable to the Commissioner.

    Important decisions during 2016–17 dealt with the following issues:

    • ride-sharing arrangements (taxi travel)
    • sham transactions in relation to labour hire activities
    • apportionment of input tax credits relating to the development of retirement villages
    • attribution of GST in barter scheme arrangements
    • denial of input tax credits for the acquisition of scrap gold (evidence and onus-of-proof issues).

    At 30 June 2017, around 21% of GST litigation cases involved property-related issues, which is 5% higher than the previous year. Around 50% of cases dealt with largely non-technical issues where taxable supplies had been understated or input tax credits over-claimed. These cases arise largely from serious evasion, refund integrity and cash economy audits.

    Significant court decisions

    Case

    Issue

    Outcome

    Uber B.V. v Commissioner of Taxation

    [2017] FCA 110

    Federal Court (17 February 2017)

    This case concerned the issue of ride-sharing arrangements (taxi travel). Uber sought a declaration from the court that the services provided by the uberX Partners (drivers) to uberX Riders (passengers) did not constitute the supply of taxi travel within the meaning of section 144-5(1) of the GST Act.

    The court noted that the central issue in the case was one of statutory construction.

    The court made a declaratory order that the relevant uberX service constituted ‘taxi travel’ under the provisions of the GST Act.

    A costs order was made in favour of the Commissioner. Uber did not appeal this decision.

    Sunraysia Harvesting Contractors Pty Ltd (Trustee) v Commissioner of Taxation

    [2017] FCA 694

    Federal Court (20 June 2017)

    This case was a taxpayer’s appeal to the Federal Court from a decision of the AAT. The case involved labour hire, sham, income tax and penalty issues.

    In the decision under appeal, the AAT found that the taxpayer was involved in sham arrangements.

    The taxpayer’s appeal was dismissed by the Federal Court. In his decision, Logan J found that the AAT correctly applied the doctrine of sham and the onus of proof, and concluded that the decisions reached were supported by the evidence.

    Following this decision, the taxpayers lodged an appeal to the Full Federal Court. However, the appeal was subsequently withdrawn.

    RSPG v Commissioner of Taxation

    [2016] AATA 687

    (The taxpayer’s name was suppressed in this case.)

    AAT (7 September 2016)

    The case dealt with the calculation of input tax credits available to the taxpayer relating to the construction of a retirement village.

    The question raised was to what extent the acquisitions related to supplies that would be input taxed.

    Although the Commissioner generally accepted the taxpayer’s apportionment formula, it was his view that the taxpayer’s application of the formula resulted in a distorted outcome.

    The AAT concluded that the taxpayer’s approach did not produce a fair and reasonable apportionment of the acquisitions. The AAT also rejected the taxpayer’s argument that the retirement village should be characterised as commercial residential premises.

    Taxology Pty Ltd v Commissioner of Taxation

    [2016] AATA 565

    AAT (2 August 2016)

    This case dealt with attribution issues. The taxpayer applied for a private ruling relating to GST and barter transactions. The question was whether the taxpayer could attribute GST payable on its taxable supplies made under the barter scheme at the time it redeemed its barter trade credits for goods and services.

    The ruling was unfavourable to the taxpayer who then objected. The taxpayer’s objection was disallowed and the taxpayer sought a review in the AAT.

    The AAT firstly noted that, on a review of an objection decision relating to a private ruling, the AAT is not permitted to redefine the ‘arrangement’ as stated by the Commissioner in his ruling.

    The AAT referred to the attribution provisions contained in section 29-5 of the GST Act and considered that those provisions applied to the taxpayer’s circumstances. In the AAT’s view, there was no provision which allowed for a deferral of the attribution of GST on the taxpayer’s supplies.

    The AAT considered that this outcome was consistent with the Commissioner’s view in GSTR 2003/14 dealing with the GST implications of transactions between members of a barter scheme.

    Eastwin Trade Pty Ltd v Commissioner of Taxation

    [2017] AATA 140

    AAT (10 February 2017)

    The issue in this case was whether the taxpayer had made creditable acquisitions of scrap gold.

    The AAT decided that the taxpayer had not satisfied the onus placed upon it to show that it had made creditable acquisitions of scrap gold. The related penalty assessment was also affirmed.

    This is an important decision for the Commissioner because there are a number of other current litigation cases that deal with transactions involving gold. The amount of revenue at risk in these cases is significant.

    Other matters of interest

    The significant Federal Court case of Travelex Limited has now been heard and is awaiting a decision. The taxpayer seeks a declaration regarding the calculation of delayed refund interest that is contrary to the Commissioner’s view. The case arises from a GST matter. It is anticipated that a decision in this matter will be handed down later this year.

    At 30 June 2017, there were 11 current litigation cases relating to disputed gold transactions. These cases mainly involve taxpayer claims for input tax credits relating to purported acquisitions of scrap gold, and taxpayer challenges to the Commissioner’s retention of GST refunds. These cases are likely to require considerable litigation resources throughout 2017–18. They pose a significant revenue risk and are being project managed within the ATO.

      Last modified: 30 Jan 2018QC 54336