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  • Consultation Steering Group key messages 27 August 2018

    Introduction

    The Chair, Second Commissioner Andrew Mills welcomed new Consultation Steering Group (CSG) member Sandra Roussel, Assistant Commissioner, Enterprise Strategy and Design.

    Stewardship Groups’ non ATO Co-chair update – Superannuation Industry Stewardship Group

    Dr David Knox, Senior Partner, Mercer

    Dr David Knox attended the meeting and outlined his experience as the non-ATO co-chair of the Superannuation Industry Stewardship Group (SISG). David Knox noted that the value of the group is that members come from across the whole industry and is the only superannuation forum where all parts of the industry and regulators are together. The group is larger than what was originally anticipated but works well. Members focus on the broader issues at hand with robust and wide-ranging discussions.

    Meetings provide the opportunity for industry leaders to understand the policy issues that are being addressed with exposure to what is happening at a broader regulatory level.

    David Knox noted that a particularly useful document is the strategic map the ATO prepares for SISG meetings. This document outlines superannuation activities that the regulators (APRA, ASIC, Treasury and the ATO) are involved in as well as policy announcements that have not yet been legislated.

    Two examples where the breadth of SISG membership and relationships within the group have been of value was SMSF event-based reporting and the transfer of the small business superannuation clearing house.

    Stewardship Groups’ External Chairs meeting

    Michelle de Neise, Executive Director, Corporate Tax Association

    Michelle de Neise provided an update on the inaugural meeting of the Stewardship Groups’ External Chairs on 27 June 2018. Members were provided with the outcomes of the meeting with Michelle noting that its purpose was to give everyone an opportuntity to have a clear position of their roles, draw out learnings and inconsistencies across the groups.

    The key points of the discussion were:

    • create consistent expectations of non-ATO co-chairs across the stewardship groups – that is, shared understanding of their responsibilities
    • understanding the role of the Consultation Steering Group (CSG) and how key messages from those meetings are or should be considered
    • discussing how the stewardship groups interact with relevant working groups
    • role of all stewardship group members.

    Potential learnings included:

    • co-chairs to take a more active role in briefing new members on their roles and responsibilities as members of a stewardship group
    • raising the profile and objective of the CSG within each of the stewardship groups.

    Treasury update

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

    Members were provided with a list of Treasury completed and upcoming public consultations undertaken since the last CSG meeting on 14 May 2018. These included:

    • 2018–19 Budget Black Economy Measure – Government procurement – completed June 2018
    • 2018–19 Budget Black Economy Measure – Collecting tobacco taxes and duties at the border – completed August 2018
    • Improving the integrity of the thin capitalisation rules – completed August 2018
    • Removing luxury car tax on re-imported cars refurbished overseas – completed August 2018
    • Reforms to combat illegal phoenixing – closes 27 September 2018.

    Members raised concerns with the volume of consultation activities during August 2018. It was noted that the majority of these were for recently announced budget measures. Treasury advised that it does consider consultation times but they are subject to the requirements of the government.

    Members noted that due to tight timeframes they may not have commented on some consultation activities but they may still have concerns with the proposals. Treasury advised that stakeholders can send an email to Treasury outlining the issues they have concerns with.

    Board of Taxation update

    Karen Payne, Chief Executive Officer, Board of Taxation

    Karen Payne provided an overview of the Board of Taxation’s activities, noting:

    • there are three different scenarios for consultation that the Board engages with. These are
      • the issue involves government policy and consultation would help frame the policy
      • there is no government policy but the Minister has requested feedback to help form a policy
      • the Board is considering issues that it determines are important for improvements to the tax system
       
    • each of these different scenarios will inform the manner in which the Board consults and whether there are limits or terms of reference which determine what the Board is consulting on
    • in light of the feedback from stakeholders at the meeting, the Board will consider whether a register of issues arising can be included on its website as consultations progress – to assist stakeholders manage and coordinate their responses to submissions
    • to provide as much transparency as possible, the Board publishes on its website and through the CEO update, the issues the Board is consulting on.

    The Board of Taxation is currently consulting on:

    • a review of FBT compliance costs
    • further consultation on aspects of the Board’s review of residency rules for individuals
    • Voluntary Tax Transparency Code – the Board is conducting a review of the Code to identify areas for improvement and in light of the various developments in tax transparency both in Australia and overseas.

    Advice products

    Andrew Orme, Deputy Chief Tax Counsel, Tax Counsel Network

    Public advice and guidance – consultation processes and timeframes for approving final products

    Members raised concerns about the consultation processes and timeframes for approving final products and provided two examples (the Diverted Profits Tax and Central Management and Control) where there were delays in issuing the final Practical Compliance Guidelines (PCGs). Members suggested that the CSG review the processes for these two PCGs.

    Andrew Orme outlined the timelines for these products noting that these topics are highly significant and complex and cut across a number of areas resulting in a large amount of time undertaken on consultation. The ATO will take the appropriate time to focus on the issues that are important and time critical to ensure it gets these products right.

    The ATO noted that products of this significance have several levels of reviews by Deputy Commissioners, the Deputy Chief Tax Counsel and that a Ministerial brief is also required.

    Members noted there is no visibility of what happens within the ATO once they provide feedback on products and queried where the final decision point is if there are conflicting views within the ATO. The ATO noted that there is no single decision point and it would depend on the product, matter and the issues. It was acknowledged that the ATO could do better with keeping stakeholders informed about delays in processes.

    It was suggested that for targeted consultation during the development of products that a better approach would be for the ATO to put together a list of issues and to seek stakeholders’ views rather than spending time developing a product.

    A member queried the impact and effectiveness of joint submissions to the ATO. The ATO noted that it would be more effective and efficient for the ATO to receive a joint submission than a number of submissions.

    Snapshot of public advice and guidance consultation activity since the last meeting

    A report outlining the consultation effectiveness on public advice products finalised between May and July 2018 was provided to members. A summary of ATO draft advice products released for consultation from 10 May 2018 and 31 July 2018 was provided for members’ information.

    ATO consultation activities

    Robyn Theacos, Director, ATO Consultation Hub

    The May 2018 to July 2018 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.

    Consultation matter greater than 12 months

    201759 – Work-related expenses

    Adam Kendrick, Assistant Commissioner, Individuals, ATO

    Adam Kendrick provided an update on consultation activities for work related expenses (WRE) including:

    • the consultation is progressing as expected
    • insights from the group have been invaluable in developing initiatives to reduce WRE over claiming
    • the group examined the processes used by tax agents when preparing returns and providing advice to clients in relation to work-related expenses
    • the professional associations helped ‘soften the landing’ regarding the messages the ATO had for agents on this issue
    • the group has been able to identify and commence several high value initiatives that will streamline tax return preparation practices for agents, taxpayers and the ATO.

    A member noted that the engagement of the group was excellent and that the group was looking forward to the next phase of its work program.

    Update on use of external drafters in policy and law design in Treasury

    Simon Writer, Division Head, Law Design Office, Revenue Group, Treasury

    During discussions at the 14 May 2018 CSG meeting it was suggested that an update be provided at the next CSG meeting on how the use of external drafters in the policy and legislative design process in Treasury was progressing and how early in the process do the external drafters get involved.

    Simon Writer noted Treasury is responsible for about 25% of legislation going through parliament, around half of which is tax legislation. Given the volume of legislation, the government wanted to see whether there were alternatives available to expand the drafting resources available to Treasury. The government has allocated funding for Treasury to use private drafters and has been using private drafters since late 2017 through a pilot program to prepare primary and subordinate legislation.

    The process has allowed Treasury to progress a larger number of measures. Any legislation drafted through this process has to go through a quality assurance process with the Office of Parliamentary Counsel. Consistent with the usual practice, Treasury prepares Explanatory Materials for alternatively drafted measures.

    Treasury engages with a panel of external organisations through the whole-of-government legal services procurement process and and individual drafters are identified by the organisations. There are specific confidentiality and conflict of interest management arrangements in place.

    Caretaker Conventions and their impact on consultation activity

    Andrew Mills, Second Commissioner, Law Design and Practice, ATO; Kathryn Davy, Principal Adviser, Corporate and International Tax Division, Revenue Group, Treasury; and Karen Payne, Chief Executive Officer, Board of Taxation

    Members were briefed on the protocols for caretaker conventions and their impact on consultation activities, including:

    • during the caretaker period the business of government continues and ordinary matters of administration still need to be addressed
    • Treasury is not able to take actions to bind and commit an incoming government. Consultations where no major policy decisions are required can continue but the general approach is to postpone it. Treasury will also not appear at events/conferences
    • the ATO can proceed with policy development work during the caretaker period so it is in a position to provide advice to Treasury
    • the ATO assists Treasury to prepare for an incoming government no matter who is successful at the election. Treasury will continue to work on announced measures so it is ready to progress legislation with the new government. The ATO can work normally with Treasury on announced measures
    • apart from discussions with Treasury and other federal government agencies, there should be no consultations on new policy measures. Consultation on the interpretation and administration of existing law can continue
    • the ATO will continue to publish
      • advice and guidance which is time sensitive, that is, taxpayers require advice and guidance to assist them and this cannot wait until after the caretaker period has ended
      • non-contentious public advice and guidance which does not change an existing ATO view or create a new administrative policy
       
    • Board of Taxation – as most of the Board’s work does not involve developing government policy, the Board can continue with its consultation activities but would take a lower profile.

    Potential new matters for consultation

    All members

    Members asked whether consultation would be occurring on the following:

    • Demergers – The ATO noted it is currently undertaking some work and it is expected new draft guidance will be issued soon
    • Exemptions for financial institutions
    • Arm’s length debt test – The ATO noted that work is underway on the draft guidance.

    Other business

    All members

    • Statutory remedial power – There has been about 30 suggestions which have been considered with 27 determined to not be suitable. The ATO is working on publishing details of these.
    • Employee share schemes – members noted guidance is needed on a few discrete issues, for example mobile employees.

    Members

    Australian Taxation Office

    • Andrew Mills, Second Commissioner, Law Design and Practice (Chair)
    • Erin Holland, Deputy Commissioner, Intermediaries and Lodgment
    • Andrew Orme, Deputy Chief Tax Counsel, Tax Counsel Network
    • Sandra Roussel, Assistant Commissioner, Enterprise Strategy and Design
    • Robyn Theacos, Director, ATO Consultation Hub
     

    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

    Clint Harding

    The Tax Institute

    Stephanie Caredes

    Independent member

    Keith James

    Tax practitioner

    Keith Clissold

    Apologies

    SMSF Association

    John Maroney

      Last modified: 15 Nov 2018QC 57367