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  • Consultation Steering Group key messages 25 May 2017

    Introduction

    The Chair, Acting Commissioner Andrew Mills noted that Andrea Slattery, Chief Executive Officer (CEO) of the SMSF Association and representative member of the Consultation Steering Group (CSG) had recently stepped down as CEO. The Chair expressed his appreciation for Andrea Slattery’s commitment and contribution to CSG meetings and wished Andrea every success in the future.

    Treasury update

    Ronita Ram, Manager, Cross-Border Taxation Unit, Corporate and International Division, Revenue Group, Treasury 

    An update on Treasury activities included:

    • The Black Economy Taskforce consultation opened on 9 May 2017 and closes on 30 June 2017. There are also a series of public meetings and industry roundtables occurring around Australia. The final report is expected in October 2017.
    • The 2017-18 Budget measures are currently undergoing a prioritisation process, which will determine timing, drafting resources and consultation strategies.
    • Treasury and the Office of Parliamentary Counsel were provided with additional funding over four years in the 2017-18 Budget to provide dedicated law design and drafting resources for tax and financial system legislation.  The purpose is to ensure that Treasury can sustainably deliver on the government’s reform agenda. The funding provides for the creation of two new drafting teams for the Office of Parliamentary Counsel and the expansion of Treasury law design team. This is expected to increase certainty for stakeholders by reducing delays in implementing legislation. There is a process underway for filling of positions but they are still to be advertised outside of Treasury. A member raised the question of whether the funding included resources for private sector drafters of legislation and Treasury agreed to confirm this.
    • A question was raised on the current state of the measure for GST low value goods. A Senate reportExternal Link was released on 9 May 2017 and at this stage there does not appear to have been any response from Government. Treasury agreed to confirm the current status of this measure.

    Action item CSG 1705/1 – Private sector involvement in drafting legislation

    Action item CSG 1705/2 – GST on low value goods

    Stapled Structures consultation updates

    An update was provided on the Treasury and ATO consultations.

    Treasury: A consultation paper was released on 24 March 2017 with a four week consultation period.  Stakeholders indicated that given the nature of this matter this period for responses was inadequate and on 2 May 2017 the Treasurer announced an extension of the review until the end of July 2017 to allow more time to develop the policy in consultation with stakeholders. Treasury have received approximately 58 submissions so far.

    The Board of Taxation has not been involved in the Stapled Structures measure however they have been requested to provide a submission.

    ATO: The Chair advised the ATO is consulting on two items:

    • The Framework: The draft of the Privatisation and Infrastructure – Australian Federal Tax Framework (which includes a section on veto rights giving rise to control [negative control]). Written feedback on the Framework is due by 30 June 2017.
    • Taxpayer Alert 2017/1: Re-characterisation of income from trading businesses. The ATO asked for suggestions about areas for further consultation on this Alert and advised this would not occur before early June 2017. (This will allow further discussion about difficult staple proposals like Student Accommodation, Agriculture, etc).

    Board of Taxation update

    Karen Payne, Chief Executive Officer, Board of Taxation 

    The Board of Taxation is hearing concerns about the current volume of announced but unenacted measures and also the need for administrative guidance to assist. The Board is currently preparing a stocktake of current board reports where action has not been taken for a variety of reasons. It is intended that the list of these reports and their current status will be made public. It was acknowledged that a level of uncertainty particularly in the business community is occurring because the community is unaware of the current status of recommendations from these reports.

    Members raised a concern that although Treasury have been provided with additional funding to reduce the volume of unenacted measures this is likely to be a short term fix. It is possible that in the longer term the problem will reoccur. Members sought to understand whether consultation was an element contributing to delayed implementation of the measures. It was identified that if there has been good consultation through the Board process and the legislation is consistent with the Board’s recommendation, then consultation should not re-litigate the policy but focus on the issue to be resolved in implementation of the policy. Treasury do not feel that consultation is the only reason for the outstanding unenacted measures as there are a range of factors that drive this.

    Members suggested that if the length of time and matters raised during consultation is a concern then it should be raised in this forum. It was suggested that at the next meeting of the Consultation Steering Group this should be explored for the current list of unenacted measures with a representative of the Office of the Parliamentary Counsel to attend to assist the conversation.

    Karen Payne agreed to circulate a summary of the Australian Government Guide to Regulation to CSG members.

    The Chair requested that the Consultation Hub provide the end-to-end process for announced measures engaging with Treasury to coordinate this.

    The Board has been asked to contribute to the consultation on the implementation of the Mandatory disclosure regime. The consultation has included a consideration of resetting the framework. A report is required by 30 June 2017 on how the regime be implemented in light of all the other disclosure measures.

    Action item CSG 1705/3 – Circulation of summary of the Australian Government Guide to Regulation

    Action item CSG 1705/4 – End-to-end process for announced measures

    Other forums or consultations of interest

    The following items of interest were raised by members:

    • Company tax rate reduction - when is a company carrying on a business?

    At the Tax Practitioner Stewardship Group meeting on 19 May 2017 the ATO was asked to clarify its view on when a company would be considered to be carrying on a business because of the implications of the small business entity. The ATO has reached a position and will be discussing with Treasury the implications of the ATO view in the context of the policy intent. Members generally indicated they understood it to be a low threshold but one member suggested there were some practitioners who misunderstood what a small business entity is.

    Tax practitioners are now realising one implication of the company tax rate reduction is that not all of the franking credits can be used because of the maximum benchmark formula for calculating the franking credit. Members indicated that clear guidance needs to be issued.

    • Lowering of the non-resident capital gains tax threshold from $2million to $750,000

    This is one element of the measures to extend Australia’s foreign resident capital gains tax regime and will encompass a much wider volume of real estate transactions. The change to the threshold applies from 1 July 2017 and is an integrity measure. This measure was necessary to give effect to changes to the main residence exemption. The members felt that a strong education campaign would be necessary for this measure.

    • Main residence exemption

    Members noted that there is a small but vocal group of advisors concerned about people seconded overseas and lack of information on the detail of this measure. Treasury advised that there have been discussions with stakeholders and some of the concerns have been considered in the development of the announcement.

    Non-ATO Co-chair update - Not-for-profit Stewardship Group

    Joe Zabar, Director, Strategic Policy and Engagement, Economic Policy, Catholic Social Services Australia 

    Joe Zabar attended the meeting and outlined his experience as the Co-chair of the Not-for-profit Stewardship Group. Joe stated that he has been on a number of Government groups and this group is one of the more productive groups. The ATO team has shown leadership and a marked change in the way it engages with this sector. The change of focus has been well received, with the group provided the opportunity to dig into deep issues. Conversations are more robust but this is not impacting on the relationship.

    Joe Zabar noted that travelling to the meetings can be expensive and a significant cost for the organisations. It was suggested that more use of the telepresence facilities available in ATO offices could be a way of reducing these costs.

    The following matters were raised by members:

    • Private ancillary funds and connection to High Wealth Individuals

    Joe Zabar clarified that the Not-for-Profit Stewardship Group is considering issues regarding private ancillary funds.

    • Lack of continuity in position holders in Charities/non-profit organisations

    Joe Zabar agreed with this concern and acknowledged that something needs to be done. This matter is on their agenda for future consideration.

    • Stewardship Group members

    A question was raised about how the Stewardship Group members were identified and future membership. Joe Zabar advised that some of the original members of the Charities consultation stayed on for the Stewardship Group but also a request was sent out to various charities seeking their interest in being involved. A refresh of the membership is due in 2018.

    Report on ATO consultation activity

    Lesley Slevin, Assistant Commissioner, Insights and Engagement, Design and Change Management 

    Consultation report was taken as read. It covered matters discussed at Stewardship Group meetings, new matters raised and closed and changes to special purpose and stakeholder relationship groups. Assistant Commissioner Lesley Slevin asked if there were any comments on the consultation activities from February 2017 to May 2017.

    Members suggested that the consultation information on matters need to be clearer around when the consultation is about the ATO establishing its position.

    New matters (40)

    Matters registered February 2017 to April 2017

    201702 - Division 7A - Proposed guidance on unpaid present entitlements (UPE) under sub-trust arrangements

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

    201704 - Post incident review of service outages

    201705 - 201707; 201710 - 201731; and 201734 - 201736 all relate to the remaking of legislative instruments

    201708 - GST and non-commercial rules - benchmark market values

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

    201732 - Suggestions for Administrative Safe Harbours

    201733 - Tax debt transparency measure

    201739 - Streamlined registration for not-for-profits

    201740 - Layered approach to access advice and guidance - version history

    Completed matters (39)

    Matters completed February 2017 to April 2017

    201739 - Streamlined registration for not-for-profits

    201733 - Tax debt transparency measure

    201704 - Post incident review of service outages

    201702 - Division 7A – Proposed guidance on unpaid present entitlements (UPE) under sub-trust arrangements

    201665 - Foreign currency conversion legislative instrument

    201660 - Proposed amendments to GSTR 2006/9

    201652 - Exploration expenditure deductions - ATO compliance approach

    201644 - Taxation of capital gains of a non-resident beneficiary

    201545 - Lease-in Lease-out (LILO) arrangements

    201511 - Safe harbours – Transfer pricing

    201498 - Interpretation issues regarding new sub-division 768-A

    201705 - 201707; 201710 - 201731; and 201734 - 201736 all related to the remaking of legislative instruments

    Matters in progress >12 months (2)

    201604 - Significant global entities lodging general purpose financial statements

    Anthony Siouclis, Assistant Commissioner, International Transparency and New Policy Implementation, Public Groups and International; and Mary Carra, Director, International Transparency, Public Groups and International 

    Assistant Commissioner Anthony Siouclis advised that the consultation period ended in April 2017 and delays have only been caused by issues in finalising guidance. The technical issues have taken time due to the need to engage with ASIC and the Standards Board. The draft ATO guidance will be released to the consultation group for their review before it is broadly released and published on ato.gov.au/law to give stakeholders an opportunity to identify any errors or showstoppers. Feedback will not impact the ATO view. The timeframe for release is June 2017.

    While acknowledging the difficulties with this matter, members raised concerns with the delay in issuing the guidance as it impacts the lodgment of returns. The concern arises as the penalties for failing to lodge are due to be increased significantly. The problem is also compounded by some changes to accounting standards on financial instruments, leases and revenue which will have some implications for entities and how they set up their systems to comply.

    The ATO is currently working through how it is going to apply the new penalties regime. In the short term the penalties will not be automatically applied. The ATO will consider each case to ensure we have confidence that it is a genuine failure to lodge before a penalty is applied.

    The process of consultation involved an initial discussion paper issued in August 2016 on which numerous feedback and comments were received. Following feedback, a compendium of issues was brought to the attention of the stakeholder group. Subsequent consultation was targeted and specific to those issues.

    Members agreed consultation was thorough but took too long. A suggestion for the future is that the ATO releases segments of the guidance as they are finalised. The ATO acknowledged that in the future a staged approach may be more appropriate.

    201615 - Single Touch Payroll


    John Shepherd, Assistant Commissioner, Single Touch Payroll – Assistant Commissioner Single Touch Payroll and Superstream; and Lainie Alexander, Director, Stakeholder Engagement, Single Touch Payroll 

    Assistant Commissioner John Shepherd advised members that consultation is continuing on the design of Single Touch Payroll (STP).

    At the end of 2015 the Minister reframed the approach to STP moving to a reporting system only. Voluntary reporting would be available from 1 July 2017 with mandatory reporting from 1 July 2018 for employers with 20 or more employees. The Minister also committed to a pilot with smaller employers to identify the benefits of STP.

    Initially there was a single consultation group which was quite large and did not work well. A refocused consultation approach has been put in place with the key group being the STP Advisory group to provide strategic industry insights. This group is supported by four smaller and specific groups:

    • Small Business pilot group – provides input and guidance for the small business pilot
    • Design Working Group – developing operational/tactical collateral
    • Readiness Working Group – guidance from industry on our readiness activities
    • Software Developer technical working group – focus on technical elements of the software solutions.

    Industry stakeholders are very responsive and contribute to STP working groups and deep dive processes. The ATO will continue to consult with industry throughout the 2017-18 transition year to finalise the consultation.

    The consultation framework used for STP is being developed as a case study for the Australian Business Software Industry Association as a good example of how to approach consultation for a large scale matter that needs to be implemented.

    Members noted that an emerging issue will be the governance arrangements for the payroll industry.

    Spot check on matters (3)

    201663 - Improving small business benchmark useability


    Bryan O’Connor, Director, Small Business, Cash and Hidden Economy 

    A limited life working group was formed in October 2016 to make industry benchmarks more useful, relevant and intuitive for businesses. Subsequent meetings have been held with good contributions from the diverse range of members. Consultation was completed in April 2017.

    Some of the issues identified included:

    • timing of the release of the benchmarks
    • clarity around the industries covered
    • need to improve the explanation of Business codes required to be used by taxpayers
    • improved connections between information on the ATO website
    • improved format and explanation of the benchmarks.

    A number of changes have been implemented to deal with these issues.

    Members acknowledged that the consultation was very good with opportunity provided to explore options. The ATO clearly listened and responded appropriately. It should be noted that the benchmarks have been used by the Commonwealth Bank in its small business software.

    Members noted that the Benchmarks have arisen in the context of the Safe harbours group with the suggestion that the ATO should show how the benchmark data can be used in a safe harbour sense.

    201661 - Superannuation new measures


    Jason Lucchese, Assistant Commissioner, Superannuation 

    Assistant Commissioner Jason Lucchese advised three targeted consultation groups were established in February 2017 with the aim of ensuring industry and the ATO were prepared for the super changes that start 1 July 2017.

    The three groups include representatives from the APRA Fund industry, SMSF industry and marketing and communication arms of the superannuation industry. The groups considered emerging issues and matters that affected the super changes effective implementation.

    Consultation had progressed as expected and is on track to wind-up meetings in June 2017. The ATO will continue to draw on these groups where required in the future. The consultation also allowed the ATO to test strategic solutions with industry representatives to ensure they were consistent with industry practice and provided a suitable outcome for all involved.

    The consultation arrangements have operated effectively with a good cross section of representatives. Jason extended his thanks to those involved and their contributions.

    201740 - Layered approach to access advice and guidance – version history

    Martin Pook, Director, TCN Public Advice and Guidance Centre, Tax Counsel Network; and Vanessa Keane, Director, TCN Public Advice and Guidance Centre, Tax Counsel Network

    Martin Pook advised that the consultation closed on 28 April 2017. The ATO consulted with the community via the new Public Advice and Guidance Community on Let’s TalkExternal Link on the ATO's website. Feedback has been received from testing on the ATO Beta site and work is underway to implement the changes. We have engaged with our colleagues about the progress.

    Consultation was short and sharp with support from the ATO Consultation Hub to give visibility to the work, however it was identified that the consultation could have been better targeted.

    CSG action item update

    Assistant Commissioner Lesley Slevin provided an update on ongoing action item CSG 1702/1 Combined ATO and Treasury consultation schedule, noting that the Consultation Hub has been in contact with the Board of Tax secretariat and will meet with Stephanie Caredes from The Tax Institute on Monday 29 May 2017 to better understand the needs of the profession in managing the consultation workload. Following the meeting the ATO will engage further with Treasury and the Board secretariat to look at what might be possible to support the professions managing the consultation workload. The ATO will continue to work with Stephanie Caredes and others to ensure any options considered will support good consultation outcomes for everyone.

    Other business

    Members raised the following:

    • ongoing concerns about the communication activities for advice and guidance products and the communications process for engaging with associations
    • concerns about the slippage in the consultation for a number of measures impacting on large business eg. Diverted profits tax, Country by Country reporting and Reportable tax position. The measures are applicable from 1 July 2017 with short timeframes for consultation on some issues or no practical compliance guide issued. The ATO will have a look at our processes and what has occurred with the matters to see if anything needs to be changed
    • a good example of consultation was the corporate residency ruling which was undertaken in a period of six weeks
    • the Small Business Minister is undertaking a number of public meetings and industry roundtable sessions for consultation on the Black Economy Taskforce during May and June 2017.

    Attendees

    Organisation

    Name

    Australian Taxation Office

    • Andrew Mills, A/g Commissioner of Taxation (Chair)
    • Erin Holland, Deputy Commissioner, Tax Practitioner, Lodgment Strategy and Engagement Support
    • Lesley Slevin, Assistant Commissioner, Insights and Engagement, Design and Change Management
    • Robyn Theacos, Director, ATO Consultation Hub, Design and Change Management
     

    Treasury

    Ronita Ram, Manager, Cross-Border Taxation Unit, 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

    Michelle de Niese

    CPA Australia

    Paul Drum

    SMSF Association

    John Maroney

    Independent member

    Keith James

    Tax practitioner

    Keith Clissold

    Apologies

    Organisation

    Name

    Treasury

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

    CPA Australia

    Gavan Ord

    Institute of Public Accountants

    Tony Greco

    Law Council of Australia

    Adrian Varrasso

    The Tax Institute

    Stephanie Caredes

    Council of Small Business of Australia

    Peter Strong

      Last modified: 22 Aug 2017QC 53140