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  • Consultation Steering Group key messages 22 August 2017

    Introduction

    The Chair Andrew Mills noted that Peter Strong, Chief Executive Officer of the Council of Small Business of Australia (COSBOA) and representative member of the Consultation Steering Group (CSG) has advised that due to significant time pressures, COSBOA is unable to continue with its participation in the CSG. The Chair expressed his appreciation for Peter Strong’s contribution to the CSG noting that COSBOA is represented on the ATO’s Small Business Stewardship Group.

    Non-ATO co-chair update - GST Stewardship Group

    Kevin O’Rourke, Chartered Accountants Australia and New Zealand 

    Kevin O’Rourke attended the meeting and outlined his experience as the Co-chair of the GST Stewardship Group. Kevin advised that it’s a cohesive group that works very well with robust conversations focused on community outcomes.

    The current membership is smaller than previous and is therefore more efficient. There is quality input from members in agenda topics for meetings. The use of co-chairs is also beneficial in keeping meetings on track. Members’ attendance at meetings is high and to ensure continuity the group does not generally allow replacement of members at meetings. The group’s membership includes a States and Territory representative.

    The group has strong relationships and is a trusted group to provide a confidential sounding board for Treasury and the ATO. For example, group members were involved in a one day workshop to discuss the budget measure on GST on low value goods. This early involvement in the design of the measure was valuable and helped to shape the drafting of the instructions. There have been three similar workshops held in the last 18 months for specific topics and these have been a successful approach to tackle more complex issues.

    Community perceptions towards the Tax and Superannuation Systems and the ATO

    Lesley Slevin, Assistant Commissioner, Insights and Engagement, Design and Change Management (DCM); Shelly Cumming, Director, Research and Intelligence Services, DCM; and Chris Harper, Assistant Director, Research and Intelligence Services, DCM 

    The ATO has in place a number of mechanisms that capture community perceptions from the general community and from clients who have had a recent interaction with the ATO.

    An overview was provided on findings from recent tracking of community perceptions. Members were asked for their views, observations and if there were any implications from their perspectives on the findings from the community.

    • Service outages - issue of ‘perceived reliability of ATO systems’

    In December 2016 there was a noticeable fall in community perceptions that “Overall, the ATO is doing a good job”. The ATO has seen impacts since December 2016 in relation to perceptions of security of our online services, and satisfaction with our online services from people who had recent interactions with us.

    • Operation Elbrus

    The media attention about the alleged connection with an ATO officer had an impact on community perceptions of the ATO particularly in the individuals’ market segment. There was a decline in the individuals’ perceptions that the ATO is fair and professional, acts with integrity, is trusted and provides a high quality service. Small business’ perceptions on these dimensions remained stable and some perceptions since June 2017 have significantly improved. The views of tax professionals did not display any significant changes across this period.

    • Treasury’s six week advertising campaign ‘earned here/taxed here’

    This campaign appears to have had a beneficial effect in relation to awareness of the Tax Avoidance Taskforce. After the campaign, tracking indicated that 56% of the community were aware of this Taskforce building the community’s perceptions of fairness of the tax system and becoming more confident that large corporates will pay their fair share of tax.

    Members acknowledged the research programs and mechanisms available to help understand community perceptions of the tax and super systems and it was noted that immense value can be extracted from the collection of community views over time. Members commented they appreciated the visibility of community perceptions and are interested to see more, particularly in relation to findings about, or which may help, tax professionals.

    End-to-end policy and legislative design process

    Kathryn Davy, Principal Adviser, Corporate and International Tax Division, Revenue Group, Treasury; Peter Quiggin, First Parliamentary Counsel, Office of Parliamentary Counsel; Tom Reid, Division Head, Law Design Office, Revenue Group, Treasury; and Karen Payne, Chief Executive Officer, Board of Taxation 

    During discussions at the 25 May 2017 meeting it was suggested that the end-to-end policy and legislative design process be discussed at the 22 August 2017 meeting.

    Members noted the current ATO-Treasury Protocol includes a diagram that outlines the end-to-end process for announced measures that is published on the ATO’s website. An overview of the process outlined in the diagram was provided and discussed. This included information about Treasury’s and the ATO’s involvement, the Office of Parliamentary Counsel’s engagement and Cabinet’s formal processes in the end-to-end process.

    The process for legislative change is long and involved. A number of points were noted during the discussion:

    • ideas for policy change can come from many sources
    • for a policy to be in the May Budget it needs to be considered and completed by the end of March
    • sometimes consultation will take place in working out the design of the policy
    • the approaches to the process is varied and dependent on the type of measure
    • it is an iterative process to developing a suite of materials for Cabinet
    • the formal process with Cabinet is very involved
    • costings involve the Revenue Analysis Branch and Treasury
    • often the ATO is involved but some measures are tightly held
    • the Office of Parliamentary Counsel (OPC) is not involved until drafting instructions are prepared unless required for Budget night. There is generally no co-design on drafting instructions but the OPC will work with Treasury once received.

    Karen Payne provided members with a draft summary of the Australian Government Guide to RegulationExternal Link for discussion. This included information on the Regulatory Impact Statement that outlined guidance on consultation. A member commented that the draft summary is a good training tool for new people to industry.

    Treasury Update

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

    An update on Treasury activities included:

    • working on exposure draft for corporate investments
    • Affordable housing exposure draft expected early September 2017
    • draft whistle blower legislation is expected in the last quarter of 2017
    • work on the Petroleum Resource Rent Tax (PRRT) is continuing
    • Staples structures – there may be an announcement by the end of 2017
    • Mandatory disclosure – this is with the Minister for consideration.

    A member queried the status of the Division 7A 2016 budget measure. Treasury agreed to confirm the current status of this measure.

    Action item 1708/1 – Current status of Division 7A 2016 budget measure

    Board of Taxation update

    Karen Payne, Chief Executive Officer, Board of Taxation 

    Karen Payne advised that the Board of Taxation is currently considering a number of projects including the issue of ‘contingent consideration and earn outs’. A number of projects are also coming to a close. Other activities included:

    • the Board of Taxation to meet with stakeholders to obtain feedback on challenging matters
    • joint review by Boyce Chartered Accountants (Cooma) with the rural industry’s R&D associations regarding tax concessions in agriculture
    • since the establishment of the Board of Taxation, there have been 39 Board of Taxation reports. There are seven reports related to small business that have not been acted upon or implemented yet. Karen Payne encouraged CSG members to contact the Board if they would like to discuss any of these.
    • ten ideas that have come through the Sounding Board have been allocated to Board members to investigate.

    Other forums or consultations of interest

    Members commented that the Simpler BAS co-design webinar was a creative way to engage with large numbers of stakeholders and that it worked very well.

    Advice products

    Louise Clarke, A/g Deputy Chief Counsel, Public Advice and Guidance 

    Assessing consultation effectiveness on advice products

    A report outlining the consultation effectiveness on advice products issued as final rulings and final Law Administration Practice Statements (LAPS) between 1 January 2017 and 31 July 2017 was provided to members. The report included:

    • 3 consultations on Taxation Rulings
    • 9 consultations on Practical Compliance Guidelines (PCGs) (including 3 that are part of the Super Reform)
    • 6 consultations on Law Companion Guidelines (part of the Super Reform).

    Members noted the ATO continues to work on improving the quality and usefulness of all of its public advice and guidance products and improving its consultation processes by consulting earlier and ensuring that products are developed in a timely manner.

    Members commented that the ATO needs to be clearer about what the ATO is consulting on. It was also noted that for complex issues it would be helpful to establish a triage process for the issues.

    ATO draft advice products

    A summary of ATO draft advice products released for consultation since the 23 February 2017 CSG meeting was provided to members for their information.

    Report on ATO consultation activity

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

    The May 2017 to July 2017 report on ATO consultation activity covered matters discussed at Stewardship Group meetings, new matters raised and closed and changes to special purpose and stakeholder relationship groups.

    New matters (7)

    Matters registered May 2017 to July 2017

    201750 - Taxpayers’ Charter review

    201749 - Meaning of ‘collectables’ and ‘antiques’ when applying GST law to dealings in second-hand goods

    201748 - Meaning of 'carrying on a business'

    201747 - Draft PCG 2016/D16: Fixed entitlements and fixed trusts

    201746 - Draft PCG 2017/D4: ATO compliance approach to taxation issues associated with cross-border related party financing arrangements and related transactions

    201745 - Effective life review of assets

    201742 - GST and customer owned banking institutions

    Completed matters (13)

    Matters completed May 2017 to July 2017

    201604 - Significant global entities lodging general purpose financial statements

    201621 - Partner relationship model and pilots

    201636 - Tax incentives for early stage investors

    201639 - Effective life review of assets

    201650 - Division 50-50 Special conditions

    201661 - Superannuation New Measures

    201701 - Scholarships

    201703 - Income tax and GST on financial assistance payments and levies in the point to point transport industry

    201709 - Draft Taxation Ruling TR 2017/D2 – Central Management and Control test of residency

    201732 - Suggestions for administrative safe harbours

    201737 - Remaking of legislative instrument to exempt classes of government related entities from taxable payments reporting

    201742 - GST and customer owned banking

    201747 - Draft PCG 2017/D16: Fixed entitlements and fixed trusts

    Matters in progress > 12 months

    There were no matters in progress greater than 12 months that have not come to the attention of the Consultation Steering Group in the last 12 months.

    Spot check on matters (3)

    201621 - Partner relationship model and pilots

    Tim Roach, Assistant Commissioner, Intermediaries and Lodgment 

    Assistant Commissioner Tim Roach advised that the partner relationship model and pilots project is in the final stages of closing noting that consultation was completed before the ATO outages. Tim Roach provided an overview of the pilots.

    • Pilot 1 – Tailored Lodgment Program

    Remains open, as the project team are in the process of completing the final report based lodgement data and post pilot consultation with participants to assess the outcomes and benefits of the pilot. The consultation progressed as planned. The project team is currently finalising Pilot 1 and preparing recommendations for ATO executives to consider.

    • Pilot 2 – Client Profile View

    This pilot has been finalised with the consultation progressing as planned. The review of pilot 2 was completed in January 2017, with the recommendations from this this pilot feeding possible options for the ATO Online future integration roadmap.

    • Pilot 3 – Re-engagement of non-lodgers

    Consultation did not progress beyond the initial scoping workshop, due to the announcement of a consultation paper on “proposed changes to penalties for small business and individuals”.

    Based on the recommendation from the consultation process, a new project team was established within the ATO to take lead in implementing the recommendations. Pilot 3 was deemed no longer viable and no further action was taken.

    Members noted that the consultation for Pilots 1 and 2 was of great value, as it allowed definitive benefits to be assessed and quantified. These included:

    • assessing the value and impact to tax professionals by reducing individual lodgments from four dates to two (pilot 1)
    • reduction in completing administrative tasks (pilot 1)
    • improving levels of compliance for participating tax agent clients (pilot 2)
    • influencing future ATO online design (pilot 2)
    • increase and improve current collaborate co-design approach with intermediaries
    • allowing the ATO to test and apply rapid design prototyping and piloting.

    The consultation also allowed the project team to progress the application and testing of the Partner Relationship Model which sets out a process for how to establish, sustain and evolve mutually beneficial relationships for our partners and the ATO.

    201746 - Draft PCG 2017/D4: ATO compliance approach to taxation issues associated with cross-border related party financing arrangements and related transactions

    Louise Clarke, A/g Deputy Chief Tax Counsel, Public Advice and Guidance; and Shahzeb Panhwar, Assistant Commissioner, Public Groups and International 

    Members queried whether consultation was undertaken before the release of the draft Practical Compliance Guideline (PCG). The ATO provided an overview of the consultation process and noted that the draft PCG was in development for 15 months before it was released. To assist with its position, the ATO consulted with three groups before undertaking formal consultation. The ATO received significant feedback and material changes were made to the draft metrics.

    When a position was reached, the ATO issued embargoed copies to a range of stakeholders for consultation with six weeks to provide comments. The ATO received 13 formal submissions and there were numerous informal conversations held.

    Members discussed the risk levels and noted there is a need for greater clarity in the description of risk levels and also regarding how much education and research the ATO has undertaken before a position is reached.

    201748 - Meaning of 'carrying on a business'

    Michael Ingersoll, Assistant Commissioner, Law Interpretation and Advice, Instalments, New Measures and Priority issues, Case Leadership and Strategy and Engagement (LINCS), Individuals; and Blair Davidson, Director, LINCS 

    Members queried the consultation process for this matter as it has received significant media attention which indicated there may be a need for legislative reform. Members commented that it would be beneficial for the ATO to provide additional advice and guidance regarding this issue.

    The ATO noted that it engaged with the Tax Counsel to draft a discussion paper and that information was available as soon as possible to support legislation. The ATO advised consultation was undertaken with members of the National Tax Liaison Group and the Tax Practitioners Stewardship Group. Some feedback had been received with no comments resulting in substantive change to the draft advice.

    Other business

    All members 

    Members raised the following:

    • Tax Gap reports - whether embargoed copies would be available for professional associations
    • Deductible Gift Recipient discussion paper - emerging issues regarding Private Ancillary Funds
    • Cyber security – for transparency, members would like to see case studies on how breaches occur and how they will be prevented in the future
    • Need more information about SES and their responsibilities available publicly
    • Diverted Profits Tax – current status of draft Practical Compliance Guideline.

    Action item 1708/2 – Diverted Profits Tax - current status of draft Practical Compliance Guideline

    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 action item CSG 1702/1 - Combined ATO and Treasury consultation schedule remain as ongoing. Members agreed to close the following action items:

    • CSG 1705/1 – Private sector involvement in drafting legislation
    • CSG 1705/2 – GST on low value goods
    • CSG 1705/3 – Circulation of summary of the Australian Government Guide to Regulation
    • CSG 1705/4 – End-to-end process for announced measures.

    Attendees

    Organisation

    Name

    Australian Taxation Office

    • Andrew Mills, Second Commissioner, Law Design and Practice (Chair)
    • 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

    Board of Taxation

    Karen Payne, Chief Executive Officer

    Chartered Accountants Australia and New Zealand (CA ANZ)

    Michael Croker

    Corporate Tax Association

    Paul Suppree

    CPA Australia

    Gavan Ord

    Law Council of Australia

    Adrian Varrasso

    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

    Corporate Tax Association

    Michelle de Niese

    Council of Small Business of Australia

    Peter Strong

    Institute of Public Accountants

    Tony Greco

    SMSF Association

    John Maroney

     

      Last modified: 22 Nov 2017QC 53952