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  • Consultation Steering Group key messages 3 March 2020

    Key Highlights

    • Discussion of the principles regarding transparency of confidential consultations
    • Insights from external Stewardship Groups’ Co-chairs meeting of 19 November 2019
    • Spotlight on specific nominated consultation matters and the implications on consultation
    • Update on proposed consultations from Treasury, Board of Taxation and the ATO
    • Overview of the role of the Tax Framework Division in Treasury

    Introduction

    Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO

    Acting Co-chair Louise Clarke opened the Consultation Steering Group (CSG) meeting on behalf of ATO Co-chair Jacqui Curtis, Chief Operating Officer. Jacqui Curtis was not available due to commitments with the Parliamentary Senate Estimates hearings.

    Louise Clarke welcomed members and noted that Georgina Wade, Assistant Commissioner, Strategy and Integration, will be attending future CSG meetings and replaces former CSG member Sandra Roussel who is no longer in the ATO.

    Louise Clarke noted that Jacqui Curtis had advised members last week that due to an internal rearrangement of responsibility for the CSG, the role of ATO Co-chair has been designated to Second Commissioner, Law Design and Practice, who currently is Jeremy Geale.

    Co-chairs’ opening comments

    Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO; and Michelle de Niese, Corporate Tax Association

    Acting Co-chair Louise Clarke updated members on recent ATO matters.

    • The ATO has established an internal Bushfire Assistance Committee to coordinate and govern the ATO’s response to the bushfire crisis. It provides governance, coordination of decision-making, identification of issues and coordination and planning of stakeholder communications.
    • On 14 February 2020, a decision was handed down by the Federal Court in the Travelex caseExternal Link. The ATO is considering the decision and whether an appeal is appropriate.
    • The Superannuation Guarantee Amnesty measure has been passed in both Houses of Parliament and is awaiting Royal Assent.
    • Digital Identify – myGovID – there has been a rapid uptake with more than 500,000 downloads of the myGovID app since July.

    Co-chair Michelle de Niese noted the impact of the Coronavirus on large corporates and the broader impacts this is likely to have on the community.

    Confidential consultations

    Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, ATO

    Andrew Orme provided CSG members with an overview of the principles regarding transparency of confidential consultation activities (discussion related to action item CSG 1911/01 Confidential consultations).

    Members have previously noted that the CSG should be aware of all confidential consultation processes undertaken by the ATO.

    Andrew Orme noted that the ATO’s general approach to consultation was to consult widely with the community to make well-informed decisions and shape the ATO’s future services and advice. The ATO’s aim is to:

    • identify opportunities to improve the client experience or the administration of the law
    • design and implement new solutions by partnering with relevant stakeholders
    • implement administrative approaches for new legislation.

    The ATO is committed to openness, transparency, trust and integrity when consulting with the community, industry and the tax profession. However, on occasion circumstances may require a consultation process to be confidential. There are criteria for ATO staff to follow that helps determine if a consultation process needs to be confidential. The ATO has identified that staff have not always complied with the guidelines, so the ATO’s public advice and guidance community has been tasked to reinforce the requirements. Recent changes to the process have seen an increase in notifications to the Consultation Hub that has improved transparency.

    Members raised a concern about the ongoing challenges of the confidential process where a participant may nominate a member who is a subject matter expert to represent their association. However, the participant is constrained in reporting back to the association on the consultation. Members noted that there are instances where additional expertise or discussion within the association would assist in providing feedback to the ATO.

    Andrew Orme agreed to consider the limits of confidentiality some more and report back to the group.

    Insights from Stewardship Groups Co-chairs’ meeting

    Michelle de Niese, Corporate Tax Association

    Michelle de Niese noted that the meetings of the external Stewardship Groups Co-chairs have been valuable. The key points from the 19 November 2019 meeting were:

    • stability and consistency across the external Co-chair roles is important due to changes in ATO Co-chairs across the stewardship groups
    • the ATO Secretariat should be responsible for ensuring action items are managed and actioned between Stewardship Group meetings
    • the ATO Secretariat should summarise the action items coming out of Stewardship Group meetings at the end of each meeting
    • pre-meeting calls with the ATO Chairs should occur across all Stewardship Groups to ensure both Chairs understand the context and expectations of each agenda item
    • short briefing notes on specific topics, such as those prepared for the Large Business Stewardship Group, should be provided by the ATO where appropriate
    • ATO presentations that are rolled out across the stewardship groups should be contextualized, i.e. tailored to the audience
    • external Co-chairs should present to the ATO Stewardship Co-chair meeting on a rotating basis.

    Michelle de Niese noted that Robyn Theacos will be invited to the next external Co-chairs’ meeting to provide an overview of the role of the CSG due to the lack of understanding of its purpose by the external Co-chairs.

    ATO Consultation matters

    Members raised three recent consultation activities for review.

    Consultation matter 201921 Extension of the Reportable Tax Position (RTP) Schedule to large private companies and corporate groups

    Michelle de Niese, Corporate Tax Association; Kasey Macfarlane, Assistant Commissioner, Private Wealth, and Michael Morton, Assistant Commissioner, Public Groups International, ATO

    Michelle de Niese noted the planned extension on the use of the RTP schedule beyond the large market (economic groups and single entities with an annual turnover greater than $250 million). The ATO noted that it does not intend to extend the use of the RTP beyond the large market. Currently an RTP schedule is only required to be lodged by public and multinational companies. The extension will apply to private groups within the large market.

    The consultation process was very effective in identifying the need to delay the start date from 1 July 2019 to 1 July 2020 to assist large private groups to be able to provide the required information. The ATO is currently working through the practical implications and will provide guidance and tailored support. The matter is a standing agenda item at Private Groups Stewardship Group meetings.

    Consultation matter TR 2019/D5 Fringe benefits tax: car parking benefits

    Michelle de Niese, Corporate Tax Association; Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, James O’Halloran, Deputy Commissioner, Superannuation and Employer Obligations, and Jenny Lin, Assistant Commissioner, Superannuation and Employer Obligations, ATO

    Members raised concerns that the consultation process did not achieve the ATO’s commitment to early, open and productive consultation.

    The ATO acknowledged the significant period of time that has elapsed from the time the decision in Commissioner of Taxation v Qantas Airways Ltd (‘Qantas’) was handed down to the issue of the draft ruling. The issue was originally addressed when the ATO released a decision impact statement. Members noted that decision impact statements are not always carefully reviewed as they often do not provide helpful content. A review of the value of decision impact statements may be appropriate.

    Prior to the release of TR 2019/D5 some targeted consultation had been undertaken although many professional associations missed the opportunity to contribute. The ATO acknowledged the concerns and appreciated the impact this has had. The ATO looks forward to any contributions from the professional associations during the open consultation period.

    Consultation matter TR 2019/D6 Income tax: application of paragraph 8-1(2)(a) of the Income Tax Assessment Act 1997 to labour costs related to the construction or creation of capital costs

    Michelle de Niese, Corporate Tax Association; Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, ATO; and Marcus Ryan, Assistant Commissioner, Tax Counsel Network, ATO

    Members asked whether the Rulings Panel was engaged for draft ruling TR 2019/D6 before it was released.

    In response, the ATO said that the Rulings Panel was not engaged because there was an extensive consultation process. The ATO noted there were numerous discussions and consultation activities in the development of the draft ruling, including the circulation of a confidential draft ruling prior to the TR2019/D6 being issued. Consultation involved a broad cross-section of the industries, professional associations and major firms. The targeted consultation was very effective and resulted in a number of changes from the confidential draft.

    The ATO noted that the Rulings Panel has seen approximately six draft rulings or determinations each year over the last four years with around half of these relating to GST matters.

    Tax Framework Division in Treasury

    Graeme Davis, Division Head, Tax Framework Division, Treasury

    Graeme Davis provided an overview of the role of the Tax Framework Division (TFD) in Treasury. The TFD brings a whole-of-system perspective to major tax policy issues. The TFD does not look at a specific policy issues and is not involved in developing detailed reform proposals.

    A focus is on what a well-functioning tax system looks like which involves developing an understanding of how the current system operates and what changes are needed to improve it. The TFD considers the history of the tax system, how the system is currently functioning and how it has evolved over time. In addition, the TFD will review how tax systems work in other countries and considers proposed tax policy changes, for example, TFD reviewed in detail the US corporate tax changes introduced by the Trump Administration. The TFD collects and considers intelligence from a range of sources including other areas in Treasury, tax professionals, and academic studies.

    Members thanked Graeme Davis for his attendance and explanation of the role of the Tax Framework Division.

    Proposed consultations

    Kathryn Davy, Principal Adviser, Corporate and International Tax Division, Revenue Group, Treasury; Michael Atfield, Secretary, Board of Taxation; Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, ATO

    Treasury

    Treasury provided a summary of Treasury consultations completed since July 2019 to members for their information.

    Kathryn Davy advised:

    Board of Taxation

    Michael Atfield provided an update on the Board of Taxation’s activities.

    • Corporate tax residency rules - the Board is finalising its review
    • Review of CGT roll-oversExternal Link – the Board will be conducting face to face consultation session following the release of its Consultation Guide on its review of capital gains tax (CGT) roll-over rules. The Board is expected to report to Government by 30 November 2020
    • review into granny flat arrangements – the Board has provided recommendations to the Government for consideration.

    ATO

    Andrew Orme noted the following draft public advice and guidance products are to be released shortly:

    Members noted a concern that the working group for the matter on Allocation of Professional firm profits have not seen a final draft of the guideline.

    Other matters to note:

    Members noted the work being undertaken for work related expenses and that they would appreciate an understanding of the full program of work. The ATO noted that currently work is being undertaken on treatment of meals and accommodation, particularly where taxpayers are working away from home.

    Louise Clarke advised members that the Terms of Reference for a working group to be established to clarify the role and intended purpose of Explanatory Memoranda and Law Companion Rulings for new legislation are with Treasury for consideration.

    Potential new matters for consultation

    All members

    Members noted the following topics:

    • Changes to CGT and the impact on Australians living abroad – the ATO should consider undertaking a clear and appropriate communications strategy
    • New measure to limit deductions for vacant land is raising a number of scenarios that need consideration and may need advice and guidance developed
    • Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019External Link – there is a need for the ATO to provide advice and guidance for calculating the R&D intensity premium
    • Sharing economy reporting regime – This measure will apply to other industries from 1 July 2022. The ATO should drive any consultation for the implementation in these new industries and use learnings gained from the initial implementation
    • The rolling forward of unused $25,000 concessional cap for superannuation – the ATO should consider promoting this measure. Andrew Orme noted he would advise the relevant business area in the ATO.

    Other business

    All members

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

    • ATO consultation activities since the last meeting
    • feedback received on consultation activities
    • outcomes achieved by Stakeholder Groups for the period 1 January 2019 to 31 December 2019
    • outcomes achieved by Special purpose working groups for the period 1 July 2019 to 31 December 2019
    • snapshots of the Stakeholder Relationship and Special purpose working groups as at 28 February 2020.

    Members raised concerns about the Fringe Benefits Tax working group regarding its purpose, scope and approach. The CSG secretariat will raise the matter with Deputy Commissioner, Superannuation and Employment Obligations for consideration.

    Action item

    CSG 2003/01

    Due date

    23 July 2020 CSG meeting

    Responsibility

    Deputy Commissioner, Superannuation and Employment Obligations

    Description

    Fringe Benefits Tax working group

    Members raised concerns about the Fringe Benefits Tax working group regarding its purpose, scope and approach. The CSG secretariat will raise the matter with Deputy Commissioner, Superannuation and Employment Obligations for consideration.

    Action items update

    Robyn Theacos, Director, Enterprise Strategy and Design; Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, ATO; Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO; and Kathryn Davy, Principal Adviser, Corporate and International Tax Division, Treasury

    A status update was provided on the six open CSG action items.

    Action item CSG 1907/1 – Review and redraft CSG Charter for members’ feedback

    Robyn Theacos outlined the changes that had been made to the Charter following the feedback provided by members at the 11 November 2019 CSG meeting. A further change is now required to reflect the move of the ATO Co-chair responsibility to Second Commissioner, Law Design and Practice. Members endorsed the Charter subject to this change. The final version of the CSG Charter will be distributed to members.

    Action item CSG 1911/01 – Confidential consultations

    The update for this action item was provided by Andrew Orme in the related discussion under the agenda item confidential consultations.

    Action item CSG 1911/02 – Corporate residency matters

    Louise Clarke advised that there is not an increased focus within the Client Engagement Group on corporate residency matters.

    Action item CSG 1911/03 Whistle-blower protections – support products

    Andrew Orme noted that website guidance would be published shortly which will contain practical examples.

    Action item CSG 1911/04 - Black Economy Taskforce – legislated measures

    Kathryn Davy provided a written update.

    Action item CSG 1911/05 - Treasury consultation on the new tax debt reporting regime

    At the 11 November 2019 CSG meeting, Tony Greco noted his concern regarding the consultation process that was undertaken separately for the three elements of the new tax debt reporting regime.

    Kathryn Davy noted that Treasury had met with Tony Greco in February 2020 to further discuss the issues. The concern was the length of time that occurred from the time of announcement to implementation of the measure noting that consultation occurred over a long time. Contributors did not understand how feedback had been taken into account. Treasury recognised that another round of consultation would have assisted noting that Treasury provide all feedback to government for consideration.

    Members noted greater transparency is required about the outcomes of feedback provided to Treasury.

    Members agreed that action items CSG 1907/1, CSG 1911/02, CSG 1911/03, CSG 1911/04 and CSG 1911/05 can be closed. Action item CSG 1911/01 to remain open.

    Attendees

    Attendees are listed below.

    Organisation

    Members

    ATO

    Louise Clarke (A/g Co-chair), Policy Analysis and Legislation

    ATO

    Andrew Orme, Public Advice and Guidance

    ATO

    Georgina Wade, Enterprise Strategy and Design

    ATO

    Robyn Theacos, Enterprise Strategy and Design

    Board of Taxation

    Michael Atfield

    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

    Clint Harding (part meeting)

    Tax practitioner

    Keith Clissold

    The Tax Institute

    Stephanie Caredes

    Treasury

    Kathryn Davy

    Apologies

    Apologies are listed below.

    Organisation

    Members

    ATO

    Jacqui Curtis, Chief Operating Officer (Co-chair)

    Board of Taxation

    Lynn Kelly

      Last modified: 18 May 2020QC 62655