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  • Consultation Steering Group minutes 23 July 2015

    Meeting details

    Venue:

    Australian Taxation Office - Sydney
    L.12.725 Function Room,
    52 Goulburn Street, Sydney CBD

    Co-Chair:

    Andrew Mills, Second Commissioner, Law Design and Practice, ATO

    Co-Chair:

    Paul Horrocks, Principal Adviser, Corporate and International Tax Division, Revenue Group, Treasury

    Attendees

    Organisation

    Name

    ATO

    Erin Holland, Deputy Commissioner, Tax Practitioner, Lodgment Strategy and Compliance Support

     

    Thomas Ryan, Assistant Commissioner, ATO Corporate

     

    Jorge del Busto, Senior Executive Advisor, Office of the Chief Tax Counsel

     

    Shirley Forlin, Senior Director, ATO Consultation Hub

     

    Annalissa Alexander, Director, Corporate Committee Services (Secretariat)

    Chartered Accountants Australia and New Zealand

    Michael Croker

    Corporate Tax Association

    Michelle de Niese

    CPA Australia

    Gavan Ord

    Law Council of Australia

    Mark Friezer

    SMSF Association

    Andrea Slattery

    The Tax Institute

    Thilini Wickramasuriya

    Independent member

    Keith James

    Tax practitioner

    Keith Clissold

    Apologies

    Organisation

    Name

    CPA Australia

    Mark Morris

    Board of Taxation

    Matthew Brine

    Institute of Public Accountants

    Tony Greco

    Council of Small Business of Australia

    Peter Strong

    Additional guest attendees

    Organisation

    Name

    ATO

    Michael Cranston, Deputy Commissioner, Private Groups and High Wealth Individuals (Agenda item 4A) 

     

    Michael O’Neill, Assistant Commissioner, International, Public Groups and International (Agenda item 4B) 

     

    Ann Middleby, Public Groups and International (Agenda item 4B) 

    Minutes

    Item 1: Meeting open

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    Chair’s opening remarks including confirmation of agenda, attendance and apologies

    Co-Chair Andrew Mills opened the meeting and noted the apologies from Matt Brine, Peter Strong and Mark Morris.

    Mr Mills welcomed Gavan Ord, who was attending for Mark Morris as the CPA Australia representative and Thomas Ryan, who has taken over from Peter Coakley as Assistant Commissioner in ATO Corporate.

    Mr Mills also noted that we have started to make some changes in the direction recommended by the post-implementation review of the ATO’s consultation arrangements. The agenda is now more focussed on consultation matters and ATO attendees are only those that need to be a member on a continuous basis. He thanked Andrew England and Jeremy Hirschhorn for their contributions to the CSG.

    Mr Mills noted that the minutes of the CSG meeting on 23 April 2015 had already been published and were available on the ATO website.

    The agenda for the meeting was confirmed by members.

    Item 2: Non-ATO consultations

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    Treasury consultation update

    Co-Chair Paul Horrocks provided an update on consultations by Treasury. Over 820 submissions had been received in response to the Tax White Paper Discussion paper, with Treasury now progressing their review.

    Initial themes emerging from submissions noted the complexity of the tax system, that dividend imputation should be retained, the corporate tax rate is too high and reform is needed in a number of areas, like superannuation concessions, negative gearing, personal income tax and the CGT discount, but no consensus on what the reforms should be. There are divided views on GST reform, corporate tax reform and reforms impacting SMEs.

    The Tax White Paper website has been used as an effective tool to make tax concepts, such as negative gearing, more accessible and easier to understand to the general public.

    Treasury’s Sydney office is now open, which allows more effective engagement and interactions with the private sector. A number of private sector secondees have been appointed to the office, which is assisting in facilitating engagement. The opportunity to recruit from Sydney is also facilitating the transfer of knowledge capacity. There is also the intention to open an office in Melbourne, as conditions permit and building on the experience from the Sydney office.

    Responding to a query by members, it was clarified that the joint ATO / Treasury work on the drivers of complexity is a separate exercise, which may feed in the Green Paper. Similarly for the current Board of Tax work on potential reforms in the area of Fringe Benefits Tax (FBT), which the Board is taking on its own initiative and the outcome of which may feed into the Green Paper process.

    Members commented that the Secretary to the Treasury attended a recent meeting of the Superannuation Industry Advisory Group, which provided an opportunity for a very open and engaging discussion. Treasury is open and proactive, working closely with the ATO and the private sector.

    Board of Taxation consultation update

    Co-Chair Paul Horrocks also provided an update on Board of Tax consultations.

    The Board is facilitating consultations on the Tax White Paper through its working groups on large business, small business and international issues. A separate working group on deregulation issues is currently focussing on potential FBT reforms, in addition to exploring suggestions made by members of the Board’s Advisory Panel.

    The Board has been asked to consult on implementing G20/OECD rules to neutralise hybrid mismatch arrangements, reporting by March 2016, and work with business, Treasury and the ATO in developing a voluntary code on increased public disclosure by companies, particularly large multinationals, reporting by May 2016. Terms of reference for these projects were released on 15 July 2015. Consultations on the voluntary code will begin in August and on the hybrid mismatch arrangements later in the year.

    Members noted that apart from the above referrals, it appeared that the modus operandi of the Board was leaning more towards shorter term projects, compared to the previous multi-year post-implementation reviews.

    The Board is considering its role in providing an avenue for stakeholders to raise issues related to the care and maintenance of the tax system, including through providing input to the exercise of the Commissioner’s Statutory Remedial Power.

    Other members’ relevant forums and consultations

    Members noted their interest in discussing the implications of the limitations on the ability to transfer UK pension funds to Australia in line with the requirements set by Her Majesty’s Revenue and Customs (HRMC) for Recognised Overseas Pension Schemes (ROPS). Paul Horrocks undertook to make enquiries within Treasury and provide advice to interested members.

    Action item: CSG 1507/1
    Due date: CSG meeting, 1 October 2015
    Responsibility: Paul Horrocks, Treasury

    Advice regarding the implications of the limitations on the ability to transfer UK pension funds to Australia
    Paul Horrocks to make enquiries within Treasury and provide advice to interested members on the implications of the limitations on the ability to transfer UK pension funds to Australia in line with the requirements set by Her Majesty’s Revenue and Customs (HRMC) for Recognised Overseas Pension Schemes (ROPS).

    End of example

    Other matters of significance relating to consultation

    Co-Chair Paul Horrocks noted that on 8 July 2015 the Government released draft legislation on the foreign resident capital gains tax withholding measure, seeking submissions by 7 August 2015, with the intention to introduce this measure in the Spring 2015 parliamentary sittings.

    Members commented that consultations on this measure were a very good example of Treasury and ATO engaging early with stakeholders and contributing to an appropriate consideration and handling of the issues.

    Co-Chair Paul Horrocks also provided a brief update on legislation that had been recently passed by Parliament and received Royal Assent, including the Investment Manager Regime, closing loopholes in the Offshore Banking Unit regime, the small company tax cut and the accelerated depreciation for primary producers.

    With respect to the Budget 2015 tax integrity package, consultations on the exposure draft had closed on 9 June 2015 and the ATO was now to release its draft guidance. Stakeholders had raised in submissions the need to define key terms such as “low or no tax” and “substantial economic activity”. It was noted that the collaborative approach undertaken by Treasury and ATO, working concurrently on the development of draft legislation and associated guidance, assisted in ensuring that legislation was understood by stakeholders in the way it was intended.

    It was also noted that the exposure draft on country-by-country reporting will be released shortly and will take into account the OECD’s implementation package released by the OECD.

    Item 3: Update of action items

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    Members agreed that the following action item will remain as ongoing:

    CSG 1504/05

    Review of Stewardship Committees
    Members noted that a meeting with Andrew Mills and the Stewardship Committee Chairs is scheduled for Monday, 27 July 2015 (moved to Monday, 24 August 2015).

    Members agreed that the following action items were completed and should be closed:

    CSG 1504/01

    Red tape reduction report
    Members noted that a copy of the March 2015 quarterly report was circulated out of session to CSG members on 10 June 2015.

    CSG 1504/02

    Membership of working group for consultation on tax secrecy and transparency (administrative arrangements for reporting entity arrangements)
    Members noted the list of attendees of the working group for the consultation on tax secrecy and transparency (administrative arrangements for reporting entity arrangements) was distributed to CSG members on 27 April 2015.

    CSG 1504/03

    Consultation group for privately owned groups and wealthy taxpayers – update
    Members noted that an update will be provided at Agenda item 4 Health of Consultation Arrangements – broad oversight topics – 4A.

    CSG 1504/04

    Consultation on Single Touch Payroll
    Members noted the list with the names of the stakeholders consulted and a further update on the Single Touch Payroll initiative was distributed to CSG members on 28 May 2015.

    CSG 1504/06

    Establishment of a new managed investment trusts early guidance working group
    Members noted the update on the establishment of the working group and that its first meeting will be held following the release of the first set of guidance materials in late July.

    Consultations have been held with Treasury on a draft project timetable, which will be shared with the working group when the first set of guidelines will be released.

    It was clarified that Treasury is leading a separate working group consulting on the draft legislation but that the activities of the two working groups were coordinated and consistent.

     

    Item 4: Health of Consultation Arrangements - broad oversight topics

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    Item 4A - Update on the Private Groups Stakeholder Group (related action item CSG 1504/03)

    Michael Cranston provided an update on the activities of the Private Groups Stakeholder Group. A meeting held on 11 June 2015 was very productive, highlighting the diversity of issues faced by these groups and the challenges in establishing trust and ensuring their appropriate engagement.

    Members concurred on the importance of early engagement and supported establishing dialogue with family business operators, in addition to the ongoing dialogue with business advisors, as this allowed wider interactions and gathering different perspectives.

    Members commented that tax issues were of importance for internally funded closely held businesses. Dealing appropriately with rollovers and the Budget announcement on relief for restructurings were issues of importance to this group. Also dealing with demergers and other tax law relevant issues, which may require the involvement of Treasury.

    Members also commented on the importance of conveying the right messages in ATO communications, as those used in letters sent to a number of taxpayers noting that their income tax affairs for the previous years will not be subject to further review. It was important to note that record retention requirements continue to apply and that the letters did not imply a departure from past practice, the difference only being that the ATO is conveying the outcome of its practice. It was suggested that this clarification may be included in an upcoming Commissioner’s speech.

    Members also noted the importance for the ATO to be open with taxpayers about the data it holds on them in the background, to allay any privacy concerns they may have.

    Item 4B – Update on foreign investment reforms

    Michael O’Neill and Ann Middleby presented on this topic, including on the establishment of a limited life working group until 31 December 2015 to assist with the implementation of the foreign investment reforms. It was acknowledged that the establishment of the working group had followed the suggestion for early engagement made by Michael Croker.

    The presentation included the background to the activities of the working group; the need for the ATO to monitor compliance with tax and other Australian laws; the timeframes for the implementation of the reforms; ATO intended strategies; the identified key stakeholders to be part of the working group; ATO resourcing and related projects.

    As part of the timeframes, it was noted that a reduced penalty period applied from the announcement of the reforms on 2 May 2015 until 30 November 2015. Working group members will be engaged in assisting with the communication of the reforms to stakeholders.

    It was also noted that implementing the reforms requires complex project management, ensuring tight deliverables are met. The assistance of three related teams dealing with third party data, foreign resident withholding tax and GST on property transactions will be involved.

    Members noted that the composition of the working group appeared large, which may affect its effectiveness.

    Item 4C – Outcomes from the post-implementation review of the ATO’s consultation arrangements and the next steps

    Shirley Forlin made a summary presentation of the key findings and suggestions contained in the report on the post-implementation review of the ATO’s consultation arrangements by Russell Miller.

    Key findings are that the current consultation system is fit for purpose and that the current governance framework, which includes the establishment of the ATO Consultation Hub and the CSG as an oversight committee, is appropriate.

    Suggestions made in the report referred to the need to improve stewardship committee engagement; introducing a members’ appointment regime; ensuring estimated completion dates are provided for each matter under consultation; improving interactivity through regular meetings of the chairs of the stewardship committees; publicising more widely the available consultation material; strengthening the governance of consultation arrangements through the CSG and providing periodic training for business line staff involved in consultations and induction training for new committee chairs.

    Members commented that it was important for those participating in particular consultations to establish their credentials that they were the right people to be involved and also to have clear understandings on where confidentiality of the matters under consultation needs to be preserved, as this enables the sharing of information and the building of trust between the parties. The importance of early engagement in consultations was also reiterated.

    Members supported in particular the suggestions made in the report on the importance of having end dates for consultations and clarity on the expected outcomes or purpose of the consultations. The suggestions for two year terms of appointments for members of the committees was also supported, as it allows membership renewal, tailored to the relevant issues that are being discussed at the time.

    Members were also supportive of the suggestion for Co-chairing arrangements of the working groups, noting that this will assist in obtaining a more rounded and complete feedback on the effectiveness of consultations.

    Members supported the suggestion for the CSG to focus on the proposed exception reporting, with a predominant focus of its oversight in ensuring that the process of consultations was effective. The use of traffic lights type indicators (green, amber and red) noting how consultation matters are tracking to meet their deadlines was also suggested.

    Members also suggested that another review of consultation arrangements should be undertaken in two to three years, to assist in continually assessing the effectiveness of the new consultation arrangements.

    Members agreed to explore the use of telepresence / video conference, which may reduce the need to meet face to face, potentially to only once a year.

    Members were asked to provide feedback to Shirley Forlin on the post-implementation review of the ATO Consultative Arrangements; in particular on where efforts should be put to implement key suggestions made in the report.

    Action item: CSG 1507/2
    Due date: Friday, 28 August 2015
    Responsibility: All members

    Members’ feedback on the post implementation review of the ATO’s Consultative Arrangements
    Members to provide feedback to Shirley Forlin on the post-implementation review of the ATO Consultative Arrangements; in particular on where efforts should be put to implement key suggestions made in the report.

    End of example

     

    Item 5: Health of consultation arrangements - reports from consultations

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    Oversight of consultation activities including discussion of the following reports:

    Item 5A – Monthly report on ATO’s consultation arrangements and Tax Issues Entry System (TIES)

    Item 5B – Summary of activities by stewardship committees

    Item 5C – Assessing effectiveness of consultations by working groups

    Item 5D – Matters for consultation register

    Members noted the proposed sample exception reporting tabled by Shirley Forlin, and agreed that it should substitute the provision of the above four reports for future CSG meetings.

    Commenting on the reports received, members requested that clarity should be included on the purpose and timelines, if appropriate, of the working groups.

    The reported matters for consultation should focus on any new consultations and those that have been finalised since the previous CSG meeting. For the working groups, the reporting should focus on any discussions held subsequently to those reported at the previous CSG meeting. The report should indicate what has been done since the previous meeting and how the consideration of the issues has been progressed.

    An additional column in the draft template should be added in future reporting to note any action item agreed by the CSG with respect to the matters under consultation or the activities of the working groups.

    Members suggested that in order to determine the working groups and matters under consultation to be covered under the proposed exception reporting, attention should be given to those that are reporting genuine blockers in consultations and those where the views from external participants suggest there is a need for a deeper examination. It is anticipated that up to three to four items could be covered per CSG meeting under the proposed ‘spot checking’ examination.

    To assist in ensuring that a more rounded and complete feedback is obtained, external members of the working groups should be asked to nominate a Co-Chair amongst them, who, jointly with the ATO Chair, will assist in providing feedback on progress, blockers and suggested means to address them.

    Action item: 1507/3
    Due date: CSG meeting, 1 October 2015
    Responsibility: Thomas Ryan, Assistant Commissioner, ATO Corporate

    Appointment of Co-Chairs by Working Groups
    External members of the working groups should be asked to nominate a Co-Chair amongst them, who, jointly with the ATO Chair, will assist in providing feedback on progress, blockers and suggested means to address them.

    End of example

    Members made the following comments in relation to the specific working groups:

    • For the transfer pricing rules and customs valuations working group (ref. 201432), if there is no prospect to resolve the matters under consultation within a set timeline, it should be disbanded. If a facilitator would assist in resolving the issues, its engagement should be considered. Its large size, with more than one member per organisation, also needs to be reviewed with a view to downsize it to assist with its effectiveness

    Action item: 1507/4
    Due date: CSG meeting, 1 October 2015
    Responsibility: Chair of working group (Michael Jenkins, Assistant Commissioner, Public Groups and International)

    Transfer Pricing Rules and Customs Valuations working group
    Assessment of the need of the working group
    The Chair of the working group to consider whether the working group should be disbanded if there is no prospect to resolve the matters under consultation within a set timeline.

    End of example
    • For the Division 815 rulings working group, its deadline of 31 December 2015 was noted. If other issues come up that will require attention in 2016, another appropriately established working group could be established.
    • For the trust working group 1 – closely held trusts, it was noted that as the three issues under consideration had been put on hold pending judicial decisions or possible legislative reforms, consideration should be given as to whether it should be disbanded.

    Action item: 1507/5
    Due date: CSG meeting, 1 October 2015
    Responsibility: Chair of working group (Fiona Dillon, Assistant Commissioner, Tax Counsel Network)

    Trust Working Group 1 – Closely Held Trusts
    Assessment of the need of the working group
    The Chair of the working group to consider whether the working group should be disbanded as the three issues under consideration had been put on hold pending judicial decisions or possible legislative reforms.

    End of example

    In relation to the matters under consultation, further clarity is requested on the outcomes sought and the expected timeframe for delivery on the issues related to the apportionment of expenses incurred by a superannuation entity only partly in gaining its assessable income (201358), the income tax treatment of exploration expenditure and the rewrite of taxation ruling TR 98/23 (201352) and guidance on the application rules to the rights to future income amendments (201320).

    Shirley Forlin undertook to provide Michelle de Niese with an update on each of the three consultations noted above.

    Action item: CSG 1507/6
    Due date: Friday, 28 August 2015
    Responsibility: Shirley Forlin, Senior Director, ATO Consultation Hub

    Further clarity on noted matters under consultation
    Shirley Forlin to provide Michelle de Niese with an update on each of the following three consultation matters:

    • Apportionment of expenses incurred by a superannuation entity only partly in gaining its assessable income (201358)
    • Income tax treatment of exploration expenditure and the rewrite of taxation ruling TR 98/23 (201352)
    • Guidance on the application rules to the rights to future income amendments (201320).
    End of example

    Item 5E – Assessing consultation effectiveness on advice products

    Members noted the positive comments provided by external consulters, which were welcomed, also noting their expectation that, if there were less positive feedback received, it will be equally reported.

    Item 5F – ATO draft advice products released for consultation since the last meeting

    Members noted the agenda paper provided for this item.

    Meeting close

    End of example

    Any other business

    No other business was raised by members.

    Closing remarks

    There being no further business, the Chair closed the meeting at 3:15pm.

    The next CSG meeting is scheduled for Thursday, 1 October 2015 in Melbourne.

      Last modified: 28 Aug 2015QC 46837