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  • Consultation Steering Group key messages 20 November 2017

    Treasury update

    Kathryn Davy, Principal Adviser, Corporate and International Tax Division, Revenue Group

    Kathryn Davy updated members on Treasury activities including:

    Board of Taxation update

    Karen Payne, Chief Executive Officer, Board of Taxation

    Karen Payne reminded members that updates on the Board of Taxation’s work are available through the CEO updatesExternal Link on its website. The November 2017 CEO updateExternal Link included a list of possible projects that the Board were considering. This advance notice has prompted some stakeholders to identify to the Board their willingness to engage on particular topics. This can be an effective way to identify stakeholders with a real interest in the relevant project.

    Karen Payne responded to specific enquiries on the Board’s projects and work program.

    Work is continuing on drafting a working paper on contingent consideration. A member commented that the consultation appears to be restricted to discrete complex issues rather than the regime as a whole. The member queried whether the Board of Taxation set the scope for the consultation or if it was prescribed.

    Tax Transparency Code – The Board will be selecting a number of published transparency reports for review to confirm what tax information and transparency approaches the Code has encouraged and to identify any areas of disclosure that may warrant further guidance.

    Possible review of the small business tax concessions – the review will consider if they are achieving the policy intent, if they are the right mix and to identify if there are any gaps. Karen Payne noted that the scope of the review has not yet been determined and encouraged members to send their views on this to the Board of Taxation.

    Other forums or consultations of interest

    All members

    A member commented that the Office of Tax Simplification in the UK has just released its Value Added Tax (VAT) report. There could be recommendations about aligning capital allowances in taxation legislation to accountancy principles that may be of interest.

    Non-ATO co-chair update – Tax Practitioner Stewardship Group

    Matthew Addison, Executive Director, Institute of Certified Bookkeepers

    Matthew Addison outlined his experience as the Co-chair of the Tax Practitioner Stewardship Group (TPSG). Matthew Addison advised that the TPSG works very well and that the openness of discussions and consultations creates an environment where they are able to deal with items formally and informally. Robust and genuine discussions make members feel they are trusted as they get an understanding of the ATO’s activities and objectives.

    Having an ATO Co-chair and a non-ATO Co-chair works well and provides an opportunity for the non-ATO Co-chair to incorporate different views on matters. The Co-chairs collaborate to shape and prioritise topics on the agenda.

    Matthew Addison tries to promote adequate preparation for each agenda topic. Each item has papers distributed in advance to enable due consideration prior to the meeting.

    Some suggestions for improvements were:

    • For late agenda items provide speaker notes to members before the meeting
    • Improve feedback to TPSG members on outcomes following any critical feedback being provided on a topic
    • Knowledge experts to consider any issues in advance and then provide a summary at the meeting to avoid discussion on too much detail
    • Non-ATO members to meet to discuss the agenda either before or after the TPSG meeting
    • In some situations a pre-meeting webinar to discuss the agenda and papers would increase members’ understanding and aid true consultation in the meeting itself.

    Report on ATO consultation activity

    Robyn Theacos, Director, ATO Consultation Hub, Design and Change Management

    The August 2017 to October 2017 report on ATO consultation activity covered matters discussed at Stewardship Group meetings, details of new matters raised and completed matters for consultation and changes to special purpose and stakeholder relationship groups.

    Spot check on matters (6)

    201512 – Safe Harbours – Fringe Benefits Tax (FBT) and remuneration

    Anna Longley, Assistant Commissioner, Private Groups and High Wealth Individuals; and Phil Turnour, Assistant Director, FBT Risk & Intelligence, Private Groups and High Wealth Individuals

    The consultation for this matter started in November 2015 and members wanted to discuss their concerns on the slippage of timelines regarding this. Anna Longley noted the following:

    • Infrequent or minor use of exempt vehicles – the ATO is expecting to publish a Practical Compliance Guide (PCG) addressing red tape issues with exempt vehicles on 8 December 2017. Anna acknowledged that consultation has taken longer than anticipated.
    • Minor and Entertainment Benefits – the ATO engaged in internal consultations that identified legislative challenges limiting the scope for implementing a safe harbour in relation to these benefits. As a result the ATO has decided not to progress with a PCG. The ATO is currently considering whether there are other avenues to provide employers with the guidance sought.

    Anna Longley advised that consideration of safe harbours has been subject to difficulties in clarifying how the terms ‘infrequent’ and ‘irregular’, as they appear in the FBT regime, can be interpreted in a way that avoids measurement of frequency and regularity and, consequently the red tape created by measurement.

    A member commented that the above issues were not brought to the attention of the Safe Harbours Steering Committee (SHSC) and expected that the SHSC should have been involved more intentionally. Members agreed that Michael Croker and Michelle de Niese discuss with the Louise Clark A/g Deputy Chief Tax Counsel, Public Advice and Guidance, the next steps for the Safe Harbours – Fringe Benefits Tax (FBT) and remuneration working group. Members suggested that an update of the learnings from this consultation be provided to the SHSC.

    Process for draft remedial power determinations

    Lisa Clifton, Assistant Commissioner, Policy Analysis and Legislation; and Paul Heginbothom, Director, Policy Analysis and Legislation

    Members complimented the ATO on the consultation undertaken for matter 201760 Draft remedial power determination – small business restructure roll-over noting that the advisory group was efficient, participants were open with concerns and they were kept informed.

    Lisa Clifton advised that it was a two-step process that included engaging with the internal Commissioner’s Remedial Power (CRP) secretariat for assessment and then progressed to the CRP Panel for consideration. The CRP Panel ensured feedback and strong engagement with good suggestions to improve products. Involvement with the Board of Taxation and Treasury was also helpful.

    The CRP Secretariat also noted input from CRP Panel members and the Board of Taxation in considering candidate issues and developing materials to give effect to remedial power modifications had been of great assistance.

    Members queried if a report of decisions on requests to use the Commissioner’s Remedial Power was available. A suggestion was made for the ATO to consider how it can make this information transparent.

    201764 – Provision of general purpose financial statements for significant global entities

    Anthony Siouclis, Assistant Commissioner, Public Groups & International; and Mary Carra, Director, Public Groups & International

    Members raised concerns with the consultations undertaken and the delay in releasing the draft guidance. Anthony Siouclis advised there was a delay due to some technical aspects that required expert legal interpretation in the first round of consultations.

    In addition to the recent publication of the draft guidance, stakeholders had a further opportunity to comment and identify any additional issues that may arise given the complexities of account preparation for significant global entities in their global operations. Submissions and comments were due 27 October 2017 with seven submissions being received.

    The Tax Counsel Network is working on the more significant issues including working with the Australian Securities and Investments Commission (ASIC). The aim is to address the majority of smaller issues and to reissue the draft guidance or compendium of issues for consultation before end December 2017 for feedback by February 2018. It is expected to release the final Practical Compliance Guideline around February or March 2018. The more complex issues will take longer to consider. It was acknowledged that the guidance should be published as soon as possible (early December 2017).

    Diverted Profits Tax – draft Practical Compliance Guideline

    Nick Maley, Assistant Commissioner, Diverted Profits Tax and BEPS, Public Groups & International

    Members queried the current status of the draft Practical Compliance Guideline (CSG action item 1708/2 Diverted Profits Tax – draft Practical Compliance Guideline).

    Nick Maley advised there are three forms of guidance being prepared:

    • draft Law Companion Guide (LCG)
    • draft Law Administration Practice Statement (PS LA)
    • draft Practical Compliance Guideline (PCG).

    Targeted confidential stakeholder consultation (including Treasury) has been undertaken for the draft LCG and draft PCG to ensure the guidance is addressing the core issues. It is expected that the LCG will shortly be available for public consultation with an eight week period for comments.

    Currently undertaking final clearance processes to publish the PS LA which had some revisions following targeted consultation.

    Targeted consultation is providing good insights and helping to identify other practical matters that may need to be addressed in the PCG. For example, the draft PCG will include significant economic substance examples which were developed in consultation with industry leads. This work has contributed to the delay in releasing and publishing the PCG.

    In response to a member’s comment, the confidential consultations have taken approximately two to three weeks, were very helpful and did not contribute to delays in issuing the PCG.

    201757 – Transfer Balance Cap and Self-Managed Superannuation Funds (SMSFs) event based reporting framework

    Kasey Macfarlane, Assistant Commissioner, Superannuation

    From 1 July 2017, there is a new limit on the total amount that can be transferred into retirement income stream accounts, such as pensions and annuities. Members raised this matter as it will have significant implications for practitioners.

    Kasey Macfarlane advised that the ATO issued a position paper in August 2017 on how often SMSFs would report to the ATO under the new transfer balance cap measure based on two possible alternative options. Feedback included concerns regarding effort, cost and administration impacts to timelier reporting outside of current requirements.

    Further consultation was undertaken which resulted in a balanced approach which was well received. On 9 November 2017 it was announced that SMSFs with clients with balances of less than $1 million will only need to report annually. This would apply to 85% of SMSFs. Further information will be developed for SMSFs on how they can comply. A webinar will be held on 21 November 2017.

    Members noted that this consultation enabled the ATO to understand the complexity of the range of operating environments and implement a good and sensible outcome.

    201753 – Downsizer contributions to superannuation

    Julie Rowland, Employer and Individuals Client Engagement, Superannuation; and Cathryn Hummel, Director, Employer & Individual Client Engagement, Superannuation

    The Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Bill 2017 is before Parliament. It was introduced into the Parliament on 7 September 2017, and passed by the House of Representatives on 18 October 2017 where it is awaiting further debate in the Senate.

    Members raised this consultation to query if there was any planned or current consultation with the SMSF sector as it is expected that implementation will affect small and large funds.

    Julie Rowland advised that the ATO is keen to work with the SMSF sector. While initial consultations have commenced with a small group of super industry representatives on the proposed administrative design, once the law is enacted, further and more detailed consultation will be undertaken. This will include broader consultation and user testing covering individuals that are aged over 65, as well as prospective first home buyers for the proposed First Home Super Saver Scheme. Cross agency consultations with the Department of Human Services and the Australian Securities and Investments Commission in mid-2018 are also envisaged.

    Matters in progress > 12 months (1)

    201655 – Improving Digital Services for tax practitioners

    Andrew Watson, Assistant Commissioner, Intermediaries and Lodgment

    Due to the December 2016 and February 2017 outages, this project was put on hold. The consultation has restarted with the project following the successful implementation of Tax Time 2017 changes. It is expected the project will be completed in late 2018.

    Consultation has progressed well and has been an integral part of the change process. There will be a group of tax practitioners testing the services of the ATO beta functionality once it is deployed in December 2017. Consultation will continue until it is no longer required. This change is a major one for the profession and the end of the consultation will be determined by practitioner readiness.

    Potential new matters for consultation

    All members

    A member asked whether further guidance was proposed for the definition of ‘base rate passive income’ following the release of the draft small business ruling (TR 2017/D7). The Consultation Hub will provide an update out of session.

    A member noted that the Small Business Stewardship Group cannot deal with pure technical issues as the membership focus is on providing industry insights. It was suggested that there is a need for a small group to consider technical issues. Andrew Mills noted that any creation of sub-groups should be recorded through the Consultation Hub for visibility; however, there needs to be careful consideration before creating new groups.

    CSG action items update

    Robyn Theacos, Director, ATO Consultation Hub, Design and Change Management

    Robyn Theacos updated members on the status of CSG open action items. Members agreed that all action items can be closed:

    • CSG 1702/1 Combined ATO and Treasury consultation schedule
    • CSG 1708/1 Division 7A 2016 budget measure
    • CSG 1708/2 Diverted Profits Tax – draft Practical Compliance Guideline

    Attendees

    Organisation

    Name

    Australian Taxation Office

    • Andrew Mills, Second Commissioner, Law Design and Practice (Chair)
    • Tim Roach, A/g Deputy Commissioner, Intermediaries and Lodgment
    • Lesley Slevin, Assistant Commissioner, Insights and Engagement, Design and Change Management
    • Robyn Theacos, Director, ATO Consultation Hub, Design and Change Management
     

    Treasury

    Kathryn Davy, Principal Adviser, Corporate and International Tax Division, Revenue Group

    Board of Taxation

    Karen Payne, Chief Executive Officer

    Chartered Accountants Australia and New Zealand
    (CA ANZ)

    Michael Croker

    Corporate Tax Association

    Michelle de Niese

    CPA Australia

    Gavan Ord

    Institute of Public Accountants

    Tony Greco

    Law Council of Australia

    Adrian Varrasso

    SMSF Association

    John Maroney

    The Tax Institute

    Stephanie Caredes

    Independent member

    Keith James

    Tax practitioner

    Keith Clissold

    Apologies

    Organisation

    Name

    Australian Taxation Office

    Erin Holland, Deputy Commissioner, Intermediaries and Lodgment

      Last modified: 21 Feb 2018QC 54626