Consultation Steering Group Minutes - 1 October 2015 meeting
Australian Taxation Office - Melbourne
Ewing Boardroom L9.716
747 Collins Street, Melbourne CBD
Andrew Mills, Second Commissioner, Law Design and Practice
Paul Horrocks, Principal Adviser, Corporate and International Tax Division, Revenue Group, Treasury
Australian Taxation Office
Erin Holland, Deputy Commissioner, Tax Practitioner, Lodgment Strategy and Compliance Support
Shirley Forlin, A/g Assistant Commissioner, ATO Corporate
Annalissa Alexander, Director, Corporate Committee Services (Secretariat)
Chartered Accountants Australia and New Zealand
Corporate Tax Association
Michelle de Niese
Institute of Public Accountants
Law Council of Australia
The Tax Institute
Chartered Accountants Australia and New Zealand
Council of Small Business of Australia
Australian Taxation Office
Jorge del Busto
Additional guest attendees
Thayanee Jayandan, Tax Counsel, Tax Counsel North, Tax Counsel Network (Agenda item 4/1 - 201320)
Michael Jenkins, Assistant Commissioner, Public Groups International (Agenda item 4/1 - 201338)
Glenn Davies, A/g Deputy Chief Tax Counsel, Tax Counsel Network
(Agenda item 4/1 - 201352)
Simon Webster, Director, Private Groups and High Wealth Individuals (Agenda item 4/1 - 201374)
Simon Matthews, Assistant Commissioner, Public Groups International (Agenda item 4/1 - 201376)
Michael Majoor, Director, New Measures and Priority Issues, Small Business Individual Taxpayers (Agenda item 4/2 - 201529)
Rachna Reddy, Director, Public Groups International (Agenda item 4/2 - 201558)
Item 1: Meeting openEnd of example
Chair’s opening remarks including attendance, apologies and confirmation of agenda
The Chair opened the meeting and welcomed members including CAANZ representative Grant Wardell-Johnson who attended for Michael Croker. Apologies were received from Michael Croker (CAANZ), SMSF Association representative Andrea Slattery, independent member Keith James, COSBOA representative Peter Strong and Jorge del Busto from the ATO.
Andrew Mills also welcomed Shirley Forlin who attended as Acting Assistant Commissioner and noted that Thomas Ryan had recently been appointed as the Australian Electoral Officer for Queensland. Andrew Mills thanked Thomas Ryan for his contribution to the work of the CSG and wished him well in his new role.
Andrew Mills noted that this was the last meeting for Co-Chair Paul Horrocks who would be taking up a secondment to the OECD secretariat in Paris in October 2015 and for Board of Tax representative Matthew Brine who had been seconded to the “Innovation Taskforce” in the Department of Prime Minister and Cabinet. Andrew Mills thanked both Paul Horrocks and Matthew Brine for their contributions to the CSG.
Andrew Mills advised that as discussed at the 23 July CSG meeting, the Group was moving forward with changes to the Group’s effectiveness. The agenda now was more focussed on consultation matters with a single new CSG report on ATO consultation activity for discussion at Agenda item 4.
The new report captured all the information for members to determine the effectiveness and efficiency of the ATO consultation. This will ensure the right people are consulting on the right topics in a timely manner. Feedback from members would be welcomed regarding the new report.
Members noted that the minutes from the 23 July 2015 CSG meeting were published and available on the ATO website.
Members confirmed the meeting agenda.
Item 2: Non-ATO consultationsEnd of example
Treasury consultation update
- New Ministers
- IMR consultation process
Paul Horrocks briefed members on the new Treasury Portfolio Ministers. From 21 September 2015 the new Treasurer is Mr Scott Morrison, Ms Kelly O’Dwyer is the Minister for Small Business and Assistant Treasurer and Mr Alex Hawke is the Assistant Minister to the Treasurer.
Members noted that under the new arrangements, the Treasurer Scott Morrison and the Assistant Treasurer Kelly O’Dwyer are both in the Cabinet. The Treasurer will oversee tax policy and the Assistant Treasurer will oversee tax administration.
Treasury consultation activities
Paul Horrocks provided a brief summary of Treasury consultation activities:
- the current process for the Tax White Paper is expected to conclude next year. The Tax White Paper will set out the policy that the Government will take to the next election
- Treasury has stated its interest in tax reform to allow people to work, save and invest more and allow the economy to adapt, diversify and be more agile
- Treasury is seeking to more clearly communicate the potential benefits of tax reform to the public and industry as engagement is vital to achieve tax reform
- the OECD’s Final Report on the Base Erosion and Profit Shifting (BEPS) Action Plan will be released on 5 October 2015.
Investment Management Regime (IMR) consultation process
Paul Horrocks provided members with a snapshot of the IMR consultation process including the background for the consultation, how Treasury engaged in the consultation and the effectiveness of the consultation.
In August 2015 the then Treasurer and Assistant Treasurer directed Treasury to revisit the IMR policy and consult with key stakeholders to ensure that the policy and legislation were workable and refer to industry as it applies to them. Treasury’s open approach to consultation greatly assisted with the speedy implementation of IMR. The following worked well through the consultation process:
- preparing documents that outlined the policy parameters for discussion
- providing industry with sufficient time to review the relevant documents ahead of consultation meetings
- face to face meetings were very important in building relationships and networks
- stating the objectives of the meetings at the beginning to ensure that the consultation discussions were on track
- advising stakeholders of the progress of the consultation. Industry appreciates updates on progress and timing
- giving industry the opportunity to question aspects of the policy and legislative design and asking for their views.
Other observations included:
- difficulty to get consensus with too many stakeholders bringing different interests and views. It is more productive to break up consultation into smaller groups initially
- stakeholders are unprepared. It is important to give stakeholders sufficient time to view new materials
- it is necessary and desirable to consult with those affected by policy changes and not just the professional advisers
- consult with industry overseas where they have experience in how industry operates internationally and how that can assist in policy development.
Paul Horrocks noted that the IMR consultations were strongly supported.
Board of Taxation consultations
.Paul Horrocks provided a summary of Board of Taxation activities:
- the Board is shifting its focus to provide more real time policy advice as issues arise
- the Tax Policy Working Group is considering two issues:
- arrangements for the development of community consultation on tax reform
- voluntary tax transparency code – the working group has completed the first round of consultations. Seventeen public consultation meetings have been held in Sydney, Melbourne, Brisbane and Perth that included attendees from diverse industries, industry associations, community groups and academics. Further consultation will occur after the release of the proposal paper later this year
- implementation of G20 OECD anti-hybrid rules in Australia - a discussion paper will be published shortly after the OECD releases its final guidance on the implementation of anti-hybrid rules
- deregulation – the working group has completed a review of the FBT regime. One hundred and fifty (150) proposals for simplification have been received and the Board is actively considering these.
Other matters of significance relating to consultation
Paul Horrocks briefed members on legislation that had been recently passed by Parliament and received Royal Assent.
Item 3: Update of action itemsEnd of example
Members agreed that the following action item will remain as ongoing:
Appointment of co-chairs by working groups
Members noted that the consultation leads of the working groups have been contacted to ask external members to nominate an external co-chair.
A report will be provided at the next CSG meeting.
Members agreed that the following action items were completed and should be closed:
Review of Stewardship Committees
Members noted that a meeting with Andrew Mills and the Stewardship Committee Chairs was held on Monday, 24 August 2015.
The next meeting of Stewardship Committee Chairs will be scheduled in February 2016.
Advice regarding the implications of the limitations on the ability to transfer UK pension funds to Australia
Members noted that Paul Horrocks provided advice to CSG member Andrea Slattery on Friday, 7 August 2015.
Members’ feedback on the post implementation review of the ATO’s Consultative Arrangements
CSG members provided feedback that was incorporated into the draft action plan.
Transfer Pricing Rules and Customs Valuations working group
Assessment of the need of the working group
Members noted that the final meeting of the Transfer Pricing and Customs Valuations Working Group was held on 21 August 2015.
Publication of the finalised PS LA will be progressed via the Division 815 Rulings Program Working Group.
Trust Working Group 1 – Closely Held Trusts
Assessment of the need for the working group
Members noted that the Chair agrees that Trust Working Group 1 – Closely Held Trusts should be disbanded and that members have been advised.
The group will be reconvened when in a position to progress the resolution of any of the items currently on hold.
Further clarity on noted matters under consultation
Members noted that the updates were provided to Michelle de Niese on Friday, 25 August 2015.
Item 4: The assessment and effectiveness of the ATO’s consultation arrangementsEnd of example
Report on ATO consultation activity (Attachment 4A)
This discussion was led by Acting Assistant Commissioner Shirley Forlin who presented the new style report on ATO consultation activity since the last CSG meeting on 23 July 2015.
- the key statistics for consultation activity as at 31 August 2015
- trends for matters including progress of matters under consultation by month for the previous 12 months and trends for matters received internally and externally in 2014-15 that excluded submissions that were actioned through other processes
- an overview of agenda items and key issues for discussion at the last stewardship committees’ meetings. Common themes discussed at the meetings were the Reinventing the ATO program, the Tax White Paper and the post-implementation review of the ATO’s consultation arrangements.
Members focused on the consultation matters identified in the report for discussion with consultation contacts attending to address any concerns members may have regarding the relevant matter under consultation.
Part 1: Consultation matters greater than 18 months
Matter number and topic
Summary of discussions
Guidance on the application rules to the rights to future income amendments
Consultation lead: Thayanee Jayandan (via teleconference)
- Two TDs outstanding
- Submissions were received on the draft TD. Points raised in the submissions are being considered by key internal stakeholders
- Difficult complex issues which have taken a lot of time and effort
- Considering finalisation strategies, including whether there is still a need for the TDs.
In subsequent discussion members noted:
- the need for the ATO to communicate progress / status of consultations, particularly when there are long-standing topics
- Comment made about whether there should be a TD at all. Suggestion that the issue might be better dealt with at the taxpayer level by taxpayers identifying the issues and making it a reportable tax position.
Application of new transfer pricing laws (Division 815)
Consultation lead: Michael Jenkins
- Developed and executed the work program
- Consultation undertaken early and as work progressed
- Early consultation of the draft products with the working group influenced and shaped our thinking and the proposed ATO direction
- Noted legislation is broader than OECD guidelines
- Scope for international overview.
In subsequent discussion members noted:
- Country by country reporting would be beneficial to have broader consultation.
ACTION ITEM: CSG 1510/1 (refer below)
- Set up new working group for country by country consultation
- Email the group when setting up a new consultation group to raise awareness.
Income tax treatment of exploration expenditure and the rewrite of Taxation Ruling TR 98/23
Consultation lead: Glenn Davies (via teleconference)
- Consultation with industry has continued but is now nearing completion
- Difficult technical issues
- No individual consultation with ATO due to commercial and in-confidence interests
- Chief Tax Counsel to consider whether the draft should be referred to the Public Rulings Panel for consideration.
- ATO has been open and transparent
- An iterative process to redraft ruling
- Positive feedback on efficiency and trust in the process with good outcomes.
- The approach of discussing key principles first before progressing a ruling may also be beneficial in future cases
Alienation of income through discretionary trust partners
Consultation lead: Simon Webster
- Taxpayer Alert was released
- Consultation helped with co-design of risk-based products
- Delivered effective outcomes
- Finished face to face meetings in May 2015 with some out of session meetings
- Final steps set down
- Difficult issue as there is no legal precedent and there is a need for certainty.
- Self-assessing aspect is positive.
- A practical solution would be to have a test case for certainty.
- Excellent co-design of guidelines.
- Impressed with product.
- Consider addressing any residual issues in another way
- Need to understand preliminary views. Inform all participants and members how early preliminary views will be managed
- The ‘in confidence’ aspect to be focussed on not sharing the preliminary position.
Tax secrecy and transparency legislation
Consultation lead: Simon Matthews (via teleconference)
- ATO released a consultation paper on 13 March 2015
- 13 submissions were received
- A consultation workshop was held with interested members from the Large Business Liaison Group, the Minerals Council of Australia and the Energy and Resources Working Group
- ATO to publish guidance on ATO website.
- Guidance material to be published will be prepared in consultation with the attendees of the workshop.
- Consultation moved quickly this year.
- Process went well.
Responsibility: Assistant Commissioner, Public Groups and International
Establishment of Country by Country consultation working group
Due to the broader impact of the legislation, the ATO to establish a Country by Country working group for consultation.
Part 2: Spot checks
The following ‘spot check’ matters were nominated by external CSG members for discussion.
Matter number and topic
Summary of discussions
ATO guidelines when contacting clients of tax practitioners
- CSG member Erin Holland addressed this matter.
- Issues with Tax Agent Portal and MyGov Client Correspondence List
- First round of discussions at ATPAG
- Correspondence preference is an issue.
- Co-design of guidelines.
- Revised guidelines to be discussed at the next ATPAG meeting in November 2015.
- This is a very long standing issue that is causing frustration with many tax practitioners
- This has been ongoing for a lengthy period
- Gap identified regarding how an organisation that is not represented gets information
- Digital interactions are good but there is a need for flexibility and availability of the portal.
Domestic travel allowance expenses – reasonable rates and safe harbours for meals, incidentals and accommodation
Consultation lead: Michael Majoor (via teleconference)
- Guidance across a range of taxpayers (industry)
- Performing artists
- Long distance truck drivers.
- The main issue is to gain certainty for taxpayers and the profession in claiming reasonable deductions without the fear of audit, etc.
- There is still confusion whether it is ‘living away from home allowance’ or not, or the issue of FBT, etc.
- Consider use of a safe harbour
- Need clarity on what the reasonable rate encompasses
- Is there a role for an independent arbitrator board?
Effective Tax Borne (ETB)
Consultation lead: Rachna Reddy (via teleconference)
- A pilot project has commenced to test and further refine the effective tax borne model
- Issue regarding the timing of the pilot as the timing crosses over with the Board of Tax work on the voluntary tax transparency code
- Decision depends on the results of the pilot
- Feedback from pilot participants has been received
- ETB project evaluation report is being drafted.
- New initiative, there has been significant concern raised by those potentially subject to the methodology as to what it will achieve and whether it in fact enables ‘like for like’ comparisons
- Currently rolled out as a pilot but is intertwined with the timing of the Board of Tax process on the voluntary disclosures code.
- Need to raise awareness of the timing of pilots as this may impact the capture of the findings in determining how ETB fits within ATO and government directions.
Part 3: Snapshot of consultation activities since the last meeting
Shirley Forlin provided members with a brief summary of the following items in the report:
There were 15 new matters for consultation received since the last report at the 23 July 2015 CSG meeting as noted in the report.
There were nine completed matters for consultation since the last report at the 23 July 2015 CSG meeting. The report included information on the assessment of effectiveness from the consultation leads and selected external participants for the relevant consultations.
Positive feedback was received from the external participants including that the ATO had conducted the consultations fairly and impartially and was transparent.
Assessing consultation effectiveness on advice products
Members noted the report.
ATO draft advice products released for consultation since the last meeting
Members noted the report.
Stakeholder Relationship Management Groups and Technical and Special Purpose Working Groups
The following documents were provided to members as agreed at the 23 April 2015 CSG meeting for a six-monthly update of the groups:
- Stakeholder Relationship Management Groups 2015-16 (Attachment 4D)
- Technical and Special Purpose Working Groups 2015-16 (Attachment 4E).
Part 4: Blockers to consultation
Shirley Forlin provided members with a brief overview of the blockers for effective consultation that were identified during consultations in August and September 2015. These blockers were:
- timeliness - particularly when there is limited capacity and availability to respond to requests, make comments on documents or attend meetings from both profession and ATO representatives
- transparency - in particular where conversations are being held between participants outside group conversations
- engagement - ensuring consultation is widely based to have the right people involved.
In final comments, Shirley Forlin thanked all members for their contributions to the spot check list and explained the process for selecting the next round of topics for the next CSG meeting.
Agenda item 5: Potential new matters for consultation
Andrew Mills invited members to suggest potential new matters that may be considered for consultation. Members provided the following topics:
- TD 95/60 - Income tax: are fees paid for obtaining investment advice an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for taxpayers who are not carrying on an investment business?
This topic was proposed by Tony Greco. Members’ comments were that it would be timely to have a refresh of this ruling.
- PS/LA 2005/24 Application of General Anti-Avoidance Rules - (This practice statement also outlines the role and operation of the GAAR Panel of the Tax Office)
This topic was proposed by Grant Wardell-Johnson. Members’ comments were that a submission has been lodged regarding Part IVA and that a high-level review of the GAAR Panel may be warranted.
Secretariat note: These matters will be referred to the relevant area in the ATO for consideration through the ATO Consultation Hub.
Agenda item 6: Other business
Any other business:
Schedule of 2016 CSG meetings
Andrew Mills asked members for their views for the scheduling of next year’s meetings. Members agreed that the group continue to meet four times per year with one-day face to face meetings (10.30am to 3.30pm).
Next meeting – Optional meeting on Friday, 11 December 2015
Members agreed that the next CSG meeting will be scheduled for Friday, 11 December 2015. This meeting will be a three hour meeting and discussions will focus on the Report on ATO consultation activity as at end November 2015.
Post-meeting secretariat note: Due to changing circumstances, the proposed meeting for 11 December 2015 has been rescheduled for Thursday, 17 December 2015 via video-conference at 10.00am to 1.00pm.
Meeting closeEnd of example
There being no further business, the Chair closed the meeting at 3:00pm.
The next meeting of the CSG will be Thursday, 17 December 2015Consultation Steering Group minutes - 1 October 2015 meeting