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  • Consultation Steering Group key messages 25 October 2021

    Key highlights

    • Closure of the Consultation Steering Group
    • Overview of processes for confidential consultation activities
    • Updates on the ATOs approach to Public Advice and Guidance
    • Discussion and debrief on open and completed consultation matters.

    Introduction and opening comments

    Kirsten Fish, Chief Law Officer, Law Design and Practice, ATO; and Michelle de Niese, Corporate Tax Association

    ATO Co-chair Kirsten Fish opened the Consultation Steering Group (CSG) meeting and welcomed members to the final meeting for 2021.

    Kirsten noted the decision by the ATO to have the responsibilities and accountabilities of the CSG be part of the National Tax Liaison Group (NTLG) remit. The ATO recognises that the oversight of consultation processes and ensuring they are operating effectively is a critical part of how we operate.

    A structured approach to consultation will continue to occur as part of NTLG, within its broader remit, and will provide more value for the system and for all the participants. There are several matters that will be worked through as change is implemented. Feedback is welcomed throughout the transition.

    The NTLG charter will be amended to broaden its scope, with an increase to the number of meetings to accommodate the additional workload. A forward work plan will be developed to provide visibility and assurance for standing items as well as sufficient time for emerging issues.

    Kirsten expressed her thanks and appreciation for the dedication from the members of this group, calling out the differences that have been made to the system and processes through the active and positive participation.

    External Co-chair Michelle de Niese advised that she had shared with members, her concerns around the closure of the CSG prior to the meeting.

    Michelle noted that:

    • there are concerns regarding the conduct of consultation processes and whether the outcomes of consultation are meeting the needs of taxpayers
    • there is a sense that interpretative guidance comes second to risk-based guidance
    • the processes around consultation are subject to increasingly less public governance
    • lack of genuine external input are concerns that will bubble to the surface if the transition from the CSG to the NTLG is not managed carefully.

    Michelle also noted the Commissioner of Taxation’s speech at the Tax Institute and the ATO’s commitment to consultation and encouragement to engage with delegates to raise concerns. This highlights the importance of a members' role to raise community’s issues.

    Members noted:

    • the quality of consultation and outputs need to continue to be managed and reviewed
    • consideration of NTLG membership to include a superannuation industry representative and independent tax practitioner
    • agreement with concerns raised by Michelle and understanding how the conclusion to merge the two forums was reached, and noted the benefits
    • a post implementation review be completed after 12 months to ensure the intentions of the merge are being met.

    Kirsten thanked members for their feedback and reiterated that discussions will be continued as implementation is progressed.

    Stewardship groups co-chairs meeting insights

    Michelle de Niese, Corporate Tax Association and Kirsten Fish, Chief Law Officer, Law Design and Practice, ATO

    The purpose of this item was to provide members with outcomes from recent meetings of the Stewardship group co-chairs.

    External co-chairs

    External Stewardship group co-chairs meetings commenced two years ago to support engagement across the Stewardship groups. It was noted that the co-chairs have seen improved consistency across the groups and thanked the ATO secretariats for their support. The co-chairs discussed:

    • concerns that some meetings are used as consultation shields with issues being tabled and closed without addressing the issues
    • insufficient time being allocated to enable a proper discussion of ATO topics
    • a debrief culture across all groups with potential scope for updates to be provided at the NTLG and internal co-chairs meetings.

    Internal co-chairs

    ATO Stewardship group co-chairs discussed the closure of the CSG noting potential for scope creep due to the proposed increase in the number of NTLG meetings, which may result in the same topics being discussed in multiple groups. The ATO is proposing the development of a forward work plan for the NTLG which will specifically incorporate consultation.

    Three key themes from the external Stewardship group co-chairs meeting were discussed:

    • membership refresh – it has been noted by the ATO co-chairs and will be managed in due course within each group
    • consultation activities – we are working on updating ato.gov.au to demonstrate the varied approaches used to consult with external stakeholders
    • debrief culture – this request has been noted, an item at the next NTLG will cover Public advice and guidance debrief process for rulings.

    Confidential consultation

    Kirsten Fish, Chief Law Officer, Law Design and Practice, ATO

    The purpose of this item was to provide members with an overview of processes for confidential consultation activities.

    Guidance on parameters on confidential consultation

    • Guidance already exists for ATO staff to assist them to determine if consultation is confidential. The Consultation Hub has a conversation with the consultation lead when a confidential consultation is registered to determine if the matter is truly confidential and if details can be published on the ATO website.
    • We will update the website to include information on the difference between open, targeted, and confidential consultation.
    • We are considering developing specific criteria for when consultation should be conducted for Public advice and guidance (PAG) products.
    • Other additions will be made to ato.gov.au to clarify the role of Stewardship groups in consultation.

    Professional body engagement with confidential consultation

    • This has been discussed at previous CSG meetings. The ATO position is that any person who is party to a confidential consultation must sign a consultation agreement. If the ATO engages with a specific person and they purport to represent the views of an association, they can ask the ATO consultation lead to engage someone on their central committee and have them sign a confidentiality agreement. The confidentiality guide will be updated to make this position clearer.

    Robyn Theacos will share the proposed updates to ato.gov.au with members for their feedback.

    Public advice and guidance

    Alex Affleck, Acting Deputy Chief Tax Counsel, Public Advice and Guidance, ATO

    The purpose of this item was for the ATO to discuss matters that had been raised by members.

    Review of new law guidance material

    The ATO is currently undertaking a review of new law guidance. The purpose of the review is to clarify the role of guidance products, measure their effectiveness, identify best practices, and produce recommendations to improve our processes. The review is being undertaken in parallel with Treasury’s review of extrinsic materials.

    The ATO prepared a background paper which outlined the role of new law guidance and examined aspects of the system that work well, as well as identifying challenges. Representatives from the NTLG have been engaged to provide feedback on the issues raised in the background paper and to consider three case study topics.

    A workshop was held on 7 October 2021, which discussed the background paper and considered the Diverted Profits Tax case study. This was a very effective and constructive meeting. Key points from the workshop included:

    • the ATO confirming its support to continue to produce new law guidance
    • the preference for the law to work effectively rather than having to rely on new law guidance to resolve issues
    • the tension between producing new law guidance in a timely manner and having the guidance cover sufficient scope and detail
    • understating the priority of issues and producing discrete new law guidance based on that priority
    • understanding that some aspects of the law design process are beyond the control of the ATO, for example, consultation processes with respect to law development.

    A second workshop is scheduled for 27 October 2021 and will consider two case study topics – Combatting illegal phoenixing and Stapled products. The final workshop is scheduled for 18 November 2021 to discuss potential best practice opportunities.

    Members noted that the first workshop was valuable and that the law companion rulings are a valued and useful product for advisers. They also highlighted the importance of the timing of publishing new law guidance.

    Use of options paper and debrief process

    The ATO acknowledged and thanked members concerning the submission received from the joint bodies on PAG processes, noting that issues relating to PAG will be scheduled for discussion at the upcoming NTLG meeting.

    The ATO will focus this financial year on developing effectiveness measures for PAG. It was acknowledged that there are difficulties with measuring effectiveness of technical products. Part of the process is establishing the purpose for the PAG being published, and then identifying if that purpose has been achieved. The ATO is considering how effectiveness can be measured from both quantitative and qualitative perspectives.

    Members supported the development of effectiveness measures for PAG.

    The use of an options papers in the development of PAG was discussed. The use of an options/discussion paper needs to be considered on a case-by-case basis. A recent example was the Discussion paper on the Tax implications of Inter-bank Offered Rate reform. Alex Affleck expressed some concern with imbedding the use of options papers as a standard process in developing PAG as it may impact the timeliness in which PAG is produced. However, it was acknowledged that it is important that we have external engagement to understand the issues that need to be addressed in our PAG products. It is also important for the ATO to be transparent in publishing a draft view where we have developed a preliminary view on an issue.

    While members agreed with the intent of publishing PAG in a timely way, there were observations that the use of a discussion paper can assist with identifying issues to be addressed through PAG.

    Proposed consultation

    ATO

    Alex Affleck, Acting Deputy Chief Tax Counsel, Public Advice and Guidance, ATO

    • Professional firms Practical Compliance Guideline (PCG)
      • Consultation was undertaken on 17 August 2021, with professional associations to canvas implementation issues.
      • Consultation was undertaken on 29 September 2021 with the PCG working group on implementation issues.
      • The joint bodies provided some matters for consideration in a letter received 18 October 2021.
      • External communication is planned following publication of the final PCG. The ATO will engage with professional associations concerning targeted communication.
      • The suggestion that an online calculator be developed has been determined not feasible at this time.
       
    • Draft Taxation Determination TD 2019/D12 Hybrid mismatch rules – submissions have been received and are under consideration. It is anticipated that this product may issue in early 2022. Finalising TD 2019/D12 has taken priority over developing a PAG product to address whether a payment between members of a US consolidated group can be ‘subject to foreign income tax’.
    • Draft Taxation Ruling TR 2021/D5 Income tax: expenses associated with holding vacant land – submissions are being worked through with finalisation expected in November 2021
    • Draft Goods and Services Tax Determination GSTD 2021/D2 Goods and services tax: is the supply of a burial right in respect of a public cemetery subject to GST – Two webinars have been conducted to explain the ATO views. The ATO is consulting with the Australian Small Business and Family Enterprise Ombudsman and industry representatives.
    • Aggregated Turnover Tax Determinations – consultation was undertaken with the Large Business and Private Groups Stewardship Groups on draft Tax Determinations that were published on 13 October 2021
      • TD 2021/D2 Income tax: aggregated turnover – application of the ‘connected with’ concept to partnerships, foreign hybrids, and non-entity joint venture
      • TD 2021/D3 Income tax: aggregated turnover – application of the ‘connected with’ concept to corporate limited partnerships
      • TD 2021/D4 Income tax: aggregated turnover – application of the public entity exception to the indirect control test
      • Taxation Determination TD 2021/7 Income tax: aggregated turnover – calculating the annual turnover of a connected entity or affiliate with a different accounting period to you was published on 13 October 2021
      • Feedback is being considered regarding developing further PAG for aggregated turnover tests.
       
    • A Draft Taxation Determination concerning whether water access entitlement rights are taxable Australian real property is being developed.

    Board of Taxation

    Christina Sahyoun, CEO, Board of Taxation

    Christina briefed members on the Board of Taxation’s (BoT) activities, including:

    • Joint administration of Research and Development – the formal process has been completed through five virtual working group sessions consisting of 40 stakeholders.
      • Eighteen submissions have been received with consistent themes between the written and virtual meetings.
      • A questionnaire has been issued to understand the compliance cost involved.
      • The BoT is currently engaging with foreign jurisdictions to understand methods of administration for the regime.
       
    • GST Low value imported good – the formal process has been completed through six working group sessions and several written submissions received.
    • CGT rollover – the formal consultation process has been completed and interim advice has been provided to the Minister. The BoT is in the process of preparing the final report.

    Treasury

    Kathryn Davy, Assistant Secretary, Corporate & Internal Tax Division, Revenue Group

    A summary of Treasury consultations completed from July 2021 to September 2021 was circulated to members for their information. Consultation is still being planned for the corporate residency rules this year. Treasury has established a stakeholder group for the Digital OECD work and welcome any feedback or submissions on Pillar 2 issues.

    Members sought to understand if Treasury undertakes consultation with the Australian Accounting Standards Board or the equivalent International Accounting Standards Board (IASB). Treasury noted that members of the IASB have attended relevant meetings, but they indicate their focus is to support financial reporting and not tax compliance matters.

    Potential new matters for consultation and feedback on current open consultation processes

    All members

    • A proposal has been made to Deputy Commissioner Hoa Wood to convene a group to explore if ATO is adequately positioned for the impact of COVID-19 for future work from home deductions, deductibility of rapid antigen tests, FBT matters and vaccination incentives.
    • Members are seeking an update on status of the ATO review of the Taxpayer’s Charter following the Inspector General of Taxation – Investigation into the effectiveness of ATO communications of taxpayers’ rights to complain, review and appeal.
    • Members are seeking a better understanding on how consultation will be progressed for the Modernising Business Register (MBR) program particularly migration of company records and linking of director ID.

    These topics will be included in the NTLG forward work program.

    Call over of open consultation matters

    Strengthening the ABN system [201931]

    Michelle Kleyn and Nicola Black, Australian Business Registry Services, ATO

    Due to delays, consultation has not yet commenced. The time frames for consultation cannot be confirmed yet but will be conducted widely once the legislation has passed. Consultation on the draft law is a matter for government.

    Members noted that the ATO is continuing to cancel ABNs when the relevant income tax returns do not include business income. The sense is the ATO is proceeding along the lines of the proposed legislation without it being law. The ATO noted that there has been no change to the ABN cancellation program or the requirement for ABN holders in business to lodge income tax returns and report all business income, including where there is zero business income.

    Members also noted the recent announcement regarding changes to the ANZSIC codes to improve the Australian Business Register (ABR) as well as concerns that ANZSIC codes noted on income tax returns are not transferred to the ABR. It was recommended that this be included in the consultation activities as it will raise many questions.

    Director identification number [201937]

    Tammy Gardner, Australian Business Registry Services, ATO

    Consultation and co-design have occurred through several channels including:

    • co-design with members of the community
    • consultation and co-design with government agencies, industry, intermediaries
    • consultation and co-design through various MBR and ATO forums
    • formal private beta process from April 2021 – October 2021.

    Consultation has proceeded as planned with some delays due to the MBR program sign off by Government and impacts of COVID-19. Consultation will proceed beyond the public beta due to dependencies of other program deliverables. A program delivery roadmap was developed and continues to be refined and amended as needed.

    Director ID has been well supported in the community, industry bodies and government, with the objective for the consultation clearly defined and understood by the participants. The program engagement strategy has ensured the right stakeholders have been identified and provide the participants with sufficient time to consider matters.

    Members suggested the ATO consider closing consultation matters that are impacted by delays with them only published on ato.gov.au when consultation is active.

    Debrief of completed consultation matters

    Reimbursement agreements – scope and ordinary family and commercial dealing exceptions [201935]

    Justin Dearness, Tax Counsel Network, ATO

    Consultation has occurred over two years due to pauses caused by COVID-19, this matter closed in September 2021 with participants receiving a finalisation note providing outcomes.

    Consultation papers, with targeted questions, on the elements of section 100A that were subject to the consultation were issued with the draft rulings. The objectives were technical matters, implementation issues including date of effect, suitability of Tax Ruling as a channel and value of supplementary Practical Compliance Guidance.

    The consultation met the intent and purpose and through the process identified:

    • content to be clarified or added to support community understanding
    • market effects that would need to be managed/supported based on different choices for date of effect
    • communication needs for different market segments. Validated and gained ideas and support for post release training and awareness campaign
    • views on scope of complementary PCG material

    Prefill notice for tax agents [202113]

    Lloyd Williams and Brad Patrucco, Individual and Intermediaries, ATO

    Each year the ATO issues around 3 million messages to self-preparers to wait for prefill, then another notice when that prefill is ready. In the 2020 post implementation review of the process, a recommendation was made to provide a similar system for tax agents and tax agent clients.

    Consultation was held with 12 agents with participant split on the value of such a system. This work will continue through the Tax Practitioner Stewardship Group (TPSG) to gain more insight into the tax practitioner’s appetite to progress the recommendation.

    Members noted that the consultation process was effective. Members indicated that their position was that whatever is available to their clients should be available to tax practitioners.

    Concern was raised that the Tax Practitioner Digital Implementation group have asked for a call over on the smaller projects that relate to the Online Services for agents, but this has not occurred.

    Transition to strengthening client verification [202111]

    Ken Kua, Individuals and Intermediaries, ATO

    Engagement and consultation with the TPSG informed the development of the client verification guidelines with the ATO and Tax Practitioner Board (TPB) working together to tighten requirements. Through public consultation from April – June 2021, 28 submissions were received from a wide range of participants with the feedback incorporated into the guidelines.

    It was acknowledged that the consultation occurred in the lead-up to tax time during the pandemic which was not ideal. Existing networks and communication platforms were used to advise the community of consultation. The ATO aims to publish voluntary interim guidelines in the shorty term. Further activity is planned for consideration of mandatory minimum requirements and long-term digital client verification solutions.

    Members noted that:

    • the joint approach between the ATO and TPB and consultation with the TPSG has worked well
    • the ATO has been engaging with the TPB on ensuring alignment and consistency of approach
    • clarity is needed regarding the role of the TPB and the ATO in terms of enforcing standards versus specific rules around use ATO systems to access client information.

    Action items update

    Robyn Theacos, Director, Consultation Hub, ATO

    A status update was provided on the following open CSG action item.

    • CSG 2007/01 – Draft Practical Compliance Guidance on Professional firms – allocation of profit guidelines and Everett assignment

    The status update noted that following further consultation with the working group in late 2020, the draft Practical Compliance Guideline was published for public consultation on 1 March 2021. Members agreed to close the action item.

    Two matters listed as completed on the action item register:

    • CSG 2107/1 – Clarification of announced Budget reforms to the administration of not-for-profit entities. Response provided by Assistant Commissioner Jennifer Moltisanti.
    • CSG 2107/2 – Update on ATO’s review of its website. Information shared with the Tax Practitioners Stewardship Group ATO chair.

    Other business

    Reports

    The following reports were tabled at the meeting for members’ information:

    Attendees

    Attendees list

    Organisation

    Attendee

    ATO

    Kirsten Fish (Co-chair), Law Design and Practice

    ATO

    Alex Affleck, Public Advice and Guidance

    ATO

    Kate WIlson, Enterprise Strategy and Design

    ATO

    Usha Narain, Policy Analysis and Legislation

    ATO

    Robyn Theacos, Enterprise Strategy and Design

    Association of Superannuation Funds of Australia

    Glen McCrea

    Board of Taxation

    Christina Sahyoun

    Chartered Accountants Australia and New Zealand

    Michael Croker

    Corporate Tax Association

    Michelle de Niese (Co-chair)

    CPA Australia

    Elinor Kasapidis

    Institute of Public Accountants

    Tony Greco

    Law Council of Australia

    Angela Lee

    Tax practitioner

    Keith Clissold

    The Tax Institute

    Julie Abdalla

      Last modified: 10 Dec 2021QC 67470