• Consultation Steering Group Minutes - 21 March 2016 meeting

    Meeting details

    Venue:

    Australian Taxation Office - Sydney
    L12.725 Training room
    52 Goulburn Street
    Sydney NSW 2000

    Chair:

    Andrew Mills, Second Commissioner, Law Design and Practice

    Attendees

    Organisation

    Name

    Australian Taxation Office

    • Erin Holland, Deputy Commissioner, Tax Practitioner, Lodgment Strategy and Compliance Support
    • Lesley Slevin, Assistant Commissioner, Design and Change Management
    • Shirley Forlin, Senior Director, ATO Consultation Hub, Design and Change Management (Advisor / Secretariat)
    • Robyn Theacos, Senior Director, ATO Consultation Hub, Design and Change Management (Advisor / Secretariat)
     

    Treasury

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

    Board of Taxation

    Michael Atfield, A/g Secretary

    Chartered Accountants Australia and New Zealand

    Michael Croker

    Corporate Tax Association

    Michelle de Niese

    CPA Australia

    Gavan Ord

    Institute of Public Accountants

    Tony Greco

    Law Council of Australia

    Adrian Varrasso

    The Tax Institute

    Thilini Wickramasuriya

    Independent member

    Keith James

    Tax practitioner

    Keith Clissold

    Apologies

    Organisation

    Name

    Council of Small Business of Australia

    Peter Strong

    SMSF Association

    Andrea Slattery

    Australian Taxation Office

    Jorge del Busto

    Additional guest attendees

    Organisation

    Name

    Australian Taxation Office

    • Will Day, Deputy Chief Tax Counsel, Public Advice and Guidance (via teleconference) (Agenda item 5 – Attachments 5B & 5C)
    • Paul Korganow, Assistant Commissioner, International Profit Shifting, Public Groups and International (via teleconference)
      (Agenda item 5 – 201498)
    • David Truong, Director, Law Interpretation Officer, Public Groups and International (via teleconference) (Agenda item 5 – 201496)
    • James Campbell, Director, Risk & Strategy – Banking & Finance, Public Groups and International (Agenda item 5 – 201495, 201492 & 201491)
    • Dean Lynch, Team Leader – Risk & Strategy – Banking & Finance, Public Groups and International (Agenda item 5 – 201495)
    • Jane Robinson, Technical Leader - Risk & Strategy – Banking & Finance, Public Groups and International (Agenda item 5 – 201492 & 201491)
    • Colin Walker, Assistant Commissioner, Tax Practitioner, Lodgment Strategy and Compliance Support (Agenda item 5 - 201504 & 201503)
    • Deborah Jenkins, Assistant Commissioner, Indirect Tax (Agenda item 5 – 20159)
    • Andy Ditchfield, Senior Director, Indirect Tax (Agenda item 5 – 20159)
    • Jonathan Woodger, Deputy Chief Tax Counsel, Tax Counsel Network (via teleconference) (Agenda item 5 – 201575)
    • Peter Maher, Director, LB&I Infrastructure, Public Groups and International (Agenda item 5 – 20158)
     

    Minutes

    Agenda item 1: Meeting open

    End of example

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

    The Chair opened the meeting and welcomed new CSG members Kathryn Davy from the Revenue Group in Treasury, Michael Atfield, Acting Secretary for the Board of Taxation and Lesley Slevin, Assistant Commissioner, Design and Change Management.

    The Chair also welcomed Shirley Forlin and Robyn Theacos. He noted that this will be the last meeting for Shirley Forlin who is retiring at the end of March after 13 years working in various roles from strategic planning to more recently establishing the ATO Consultation Hub in 2013 and driving the implementation of the newly revamped consultation framework.

    The Chair thanked Shirley for her contribution to the work of the CSG and wished her well in this new stage of her life. The Chair noted that Robyn Theacos will be taking over Shirley’s role in the ATO Consultation Hub.

    Apologies were noted from SMSF Association representative Andrea Slattery and Jorge del Busto from the ATO.

    Members noted that the minutes from the 17 December 2015 meeting were available and published on the website.

    Members confirmed the meeting agenda.

    Agenda item 2: Non-ATO consultations

    End of example

    Treasury consultations

    Kathryn Davy provided members with a summary of Treasury consultation activities undertaken since the 1 October 2015 CSG meeting.

    • The Funds Management Working Group (FMWG) was established to make the Australian financial services sector more internationally competitive. The working group met three times between September and November 2015. These discussions included:
      • the current and future shape of the funds management industry, including strategic objectives
      • the 2009 Johnson Report recommendations to confirm that the outstanding recommendations remained priorities for the industry
      • whether current and proposed policy initiatives will support growth of the funds management industry into the future.
       
    • Innovation proposals – Treasury has recently consulted on the Tax Incentives for Early Stage Investors and the New Arrangements for Venture Capital Limited Partnerships measures:
      • The Tax Incentives for Early Stage Investors was a public consultation process with around 50 stakeholders. These stakeholders included experienced investors, start-up founders, industry bodies and universities
      • The New Arrangements for Venture Capital was a targeted consultation process that included venture capital fund managers, industry leaders, peak industry bodies and advisers from the legal and accounting fields.
       
    • Superannuation transparency – On 10 December 2015 the Government released for comment exposure draft legislation and regulation for choice product dashboard and portfolio holdings disclosure regimes. Targeted consultations were undertaken on the exposure draft legislation and a revised draft of the legislation, requesting advice on any technical issues that may arise in the application of the legislation.
    • Application of the GST to cross border supplies of digital products and services - the Government announced on 12 May 2015 that it would extend the application of the GST to cross border supplies (GST cross border) of digital products and services imported by consumers from 1 July 2017. This measure was developed in conjunction with an announced but un-enacted measure from the 2010-11 Budget that seeks to avoid non-resident businesses from being drawn into the Australian GST system unnecessarily (the business to business measure).
    • Consultations on both measures included representatives from the Organisation for Economic Cooperation and Development (OECD), the OECD business advisory working group, resident and non-resident business, cross-border tax and accounting professionals and other government departments.
    • In August 2015 the Government released the Wine Equalisation Tax (WET) Rebate Discussion Paper and announced the formation of the WET Rebate Consultative Group to consider submissions and provide advice to the Government on possible options for reform.
    • BEPS – Transfer Pricing - A consultation paper was released in February 2016 seeking views on updating Australia’s transfer pricing rules to incorporate the OECD’s recent revisions to their recommendations.

    Kathryn Davy also briefed members on what consultation activities can and cannot take place in the possible event of parliament being prorogued for an election.

    Board of Taxation consultations

    Michael Atfield provided a summary of Board of Taxation activities:

    • the Board has continued to provide more real time policy advice as issues arise and this has been bedded down
    • In January 2016 Treasury requested the Board to provide policy suggestions and ideas to promote economic growth. A number of ideas were put forward to Government. This will be an annual activity for the Board and will be undertaken in November rather than January
    • the Tax Policy Working Group has finalised the voluntary tax transparency code consultation and the tax policy development framework
    • implementation of G20 OECD anti-hybrid rules in Australia – the Board of Taxation is ready to finalise its report on the OECD hybrid arrangements.

     

    Agenda item 3: Consultation improvement activities

    End of example

    Shirley Forlin briefed CSG members on the following activities:

    Post-implementation Review Action Plan

    • The action plan arising from the post-implementation review contains 33 deliverables, of which 21 have been completed and 12 are in progress.
    • Key focus areas were on communication, meeting arrangements and reporting to the CSG.
    • There are 12 action items outstanding – it is expected that these will be largely completed by June 2016. A decision will be made as to whether to conduct a survey at the end of June 2017 to monitor the quality of topics being consulted, outcomes achieved and the consultation process.

    Stewardship groups / membership arrangements

    • Most stewardship groups have completed their membership refresh with all groups having finalised or in the process of finalising the refresh of membership.
    • The Not-For-Profit group is working through the outcomes of the recent Government announcement on the continuation of the ACNC – this group has been very effective to date in addressing the sector’s issues.
    • Co-chairs exist in the NTLG (Grant Wardell-Johnson), LBLG (Michelle de Niese), GST (Kevin O’Rourke) – current chairs discussed using co-chairs in February 2016, and moving forward, other stewardship groups will look to co-chair arrangements in the future.

    Video – ATO Consultation Arrangements

    • A consultation video has been produced.
    • Andrew Mills is the champion, driver and key participant in ATO consultation arrangements
    • Community views help us shape our products and services and importantly test the effectiveness of our approaches
    • A video provides a universal experience to both internal and external audiences.
    • The ATO Consultation Arrangements video can be accessed on the ATO’s website.

    Members suggested that background material be included with the video when it is distributed.

    Agenda item 4: Update of action items

    End of example

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

     

    CSG 1507/03

    Appointment of Co-Chairs by Working Groups

    Members noted the update.

    CSG 1512/1

    Post meeting communication options for working groups

    Members noted the update.

    CSG 1510/1

    Establishment of Country by Country consultation working group

    Members discussed that adopting a legalistic approach may not be appropriate. Michelle de Niese to send an email to Lesley Slevin advising on the way forward for this group.

     

    Members agreed that the following action item was completed and should be closed:

     

    CSG 1512/2

     

    Improving reporting of time to complete matters for consultation

    Members noted the update.

     

    Agenda item 5: The assessment and effectiveness of the ATO's consultation arrangements in accordance with the COAG principles

    End of example

    Report on ATO consultation activity

    This discussion was led by Shirley Forlin who presented the Report on ATO consultation activity since the last CSG meeting on 17 December 2015.

    Snapshot of consultation activity since the last meeting

    • New matters

    Six new matters were registered for consultation since the last CSG meeting on 17 December 2015:

    • [201577] Digital by default
    • [201578] Employee share schemes
    • [20161] Green certificates
    • [20162] Fringe Benefits Tax: the operation of Division 2 - car fringe benefits of the Fringe Benefits Tax Assessment Act 1986
    • [20163] Proposed public ruling - The meaning of the phrase ‘alteration, extension or improvement’ as it appears in Division 43 of the Income Tax Assessment Act 1997.
    • [20164] Significant global entities lodging general purpose financial statements.
    • Completed matters

    Seven matters for consultation were completed since the last CSG meeting on 17 December 2015:

    • [201374] Alienation of income through discretionary trust partners
    • [201456] Improving the private groups and wealthy individuals client experience with the ATO
    • [201534] Guidance update - interpretation of ‘in Australia’
    • [201537] Review of private advice
    • [201543] Foreign hybrid election
    • [201576] Tobacco excise gap
    • [201577] Digital by default.

     

    Assessing consultation effectiveness on advice products

    Will Day briefed members on the new Public Advice and Guidance Centre in the Tax Counsel Network business line. The Centre has corporate responsibility for all forms of the ATO’s public advice products and reflects our commitment to more effective public advice and guidance.

    Will Day provided a summary of changes the ATO has implemented for public advice and guidance:

    • increased our focus on consultation before advice and guidance products are drafted
    • consulting earlier and maintaining consultation through the life-cycle of the guidance to ensure we have the right content and the right product
    • we have implemented an effectiveness survey with external stakeholders about our advice and guidance products to assess the effectiveness of our consultation. The results will identify how to improve our consultation.

    Members noted that there is an emergence of new products and that there will be more public advice products in the future.

     

    Consultation matters greater than 12 months

     

    Matter number and topic

    Summary of discussions

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

    Consultation lead: Paul Korganow (via teleconference)

    • The consultation has presented a range of challenges.
    • The next meeting is on 16 April 2016, looking to finalise two Tax Determinations.
    • There are remaining broader international issues.

    Members commented that the consultation was going well, as expected, but need to resolve the two pending issues. Members also queried what the remaining broader international issues were.

    Action item CSG 1603/1 (refer below)
    Following the 16 April 2016 consultation meeting, Paul Korganow to provide a list of remaining broader international issues to Assistant Commissioner Lesley Slevin to determine whether new consultation activities would need to be established.

    [201496] Application of TOFA to repurchase agreements (repos)

    Consultation lead: David Truong (via teleconference)

    • There are legislative issues around the application of Division 230 to repurchase agreements and whether it causes an inappropriate outcome.
    • Issued a ‘comfort letter’ which outlined our compliance approach to repurchase agreements to apply to their clients.
    • Raised with the Australian Banker’s Association the idea of creating a changed compliance guidance product in respect of vanilla repurchase agreements.
    • It appears there is a lack of interest from industry as there were no responses.
    • Given the lack of interest from industry, it is suggested that the consultation be discontinued.

    Chair Andrew Mills commented that in discontinuing the consultation, the outcomes of this consultation be integrated into the broader TOFA review, with David Truong consulting with Will Day regarding guidance on other TOFA related matters.

    Action item CSG 1603/2 (refer below)
    In discontinuing consultation matter 201496, that the outcomes be integrated into the broader TOFA review, with David Truong consulting with Will Day regarding guidance on other TOFA related matters.

    [201495] Branch Attribution: s820-300(3) Authorised Deposit-taking Institutions (ADI) Equity Capital and Controlled Foreign Entity Equity

    Consultation leads: James Campbell and Dean Lynch

    • Issue under consultation is of statutory construction - what is the meaning of ‘attribution’ in terms of the minimum level of capital required by ADIs?
    • A working group has been established comprising of representatives from the Australian Bankers’ Association (ABA).
    • The first meeting of this working group was held on 3 December 2014. This meeting discussed the ATO's perceptions of the current uncertainties in section 820-300. The ATO prepared a discussion paper based on the feedback received from participants at that meeting.
    • The discussion paper was circulated to ABA members with an initial response provided on 8 August 2015. Further discussions were held at ABA meetings on 3 September 2015 and 8 October 2015. Industry agreed to provide specific examples of PE funding models. Some responses have been provided and the discussion paper has been updated and circulated internally for feedback.
    • The section on attribution of Controlled Foreign Entity Equity has undergone significant revision. The updated paper will be circulated to working group members in April 2016 for any further feedback prior to finalisation.

    Members noted:

    • there are complex issues and interdependencies involved, including with other provision of the law
    • the leads should be advising consultation participants of what additional information or input they are looking for and setting reasonable deadlines to receive that input.

    [201492] Application of Subdivision 820-D to Authorised Deposit-taking Institutions using APRA conglomerate rules

    Consultation leads: James Campbell and Jane Robinson

    • The impact of APRA’s new conglomerate rules on the application of Subdivision 820-D of the Income Tax Assessment Act 1997 (ITAA 1997) to ADIs was discussed with the Australian Bankers’ Association (ABA) on 8 October 2014.
    • A working group has been established comprising representatives from the ABA, ATO and APRA.
    • The first meeting of the working group was held on 26 November 2014. ABA members agreed to provide written comments regarding their views on the feasibility of an approach for thin capitalisation using APRA’s conglomerate prudential rules as a foundation for meeting the arm’s length test.
    • The ABA provided their comments on 4 March 2015. A meeting was held on 17 March 2015 with key internal stakeholders and discussed the way forward and the approach proposed by the ABA.
    • The draft discussion paper has been prepared and reviewed by internal members of the thin capitalisation working group. The ATO is currently assessing the latest ABA response and is determining its position.

    [201491] Interpretation of section 215-10 in relation to when certain non-share dividends paid by Authorised Deposit-taking Institutions are un-frankable

    Consultation leads: James Campbell and Jane Robinson

    • The design of replacement guidance in relation to the interpretation of paragraph 215-10(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) was discussed with the Australian Bankers’ Association (ABA) on 8 October 2014.
    • The first meeting of the ABA-ATO working group on the interpretation of section 215-10 was held on 8 December 2014.
    • In consideration of feedback received from the ABA, the ATO has developed a compliance guideline on the expectations of the Commissioner on the application of paragraphs 215-10(1)(c) and 215-10(1)(d) from a compliance perspective. The draft guideline was circulated to members of the ABA working group on 19 June 2015.
    • ABA-ATO working group meetings were held on 23 July, 10 August and 30 November 2015 to discuss feedback on the draft compliance guideline, including practical aspects of the capital raising process.
    • The ABA is currently preparing written feedback by way of examples for the compliance approach on paragraph 215-10(1)(d) in the context of pool of funds.

    [201503] Supporting the tax profession during 2015–16

    Consultation lead: Colin Walker

    • The Future of the Tax Profession 2015-2016 Working Group met on 18 February 2016 and discussed progress of the transition from the Electronic Lodgment Service (ELS) to the standard business reporting (SBR) enabled Practitioner Lodgment Service. More information is being published as work progresses providing more clarity around what will be delivered.
    • Also discussed an update regarding the ATO’s transition plan for software developers. It described progress to date and issues faced, including those related to the time it took for the ATO to address issues raised. The group discussed potential impacts and issues, support for agents, communications, gap analysis and next steps.

    [201504] Future of the tax profession in the longer term

    Consultation lead: Colin Walker

    The next meeting of the Future of the Tax Profession 2020 Working Group is yet to be confirmed. The next area of discussion with this group is around the concept of ‘trusted advisor’.

     

    Action item: CSG 1603/1
    Due Date: 30 April 2016
    Responsibility: Assistant Commissioner Paul Korganow (consultation lead)

    [201498] Interpretation issues regarding new sub-division 768-A
    Following the 16 April 2016 meeting, Paul Korganow to provide a list of remaining broader international issues for consultation to Assistant Commissioner Lesley Slevin to determine whether new consultation groups would need to be established.

    End of example

     

    Action item: CSG 1603/2
    Due Date: 4 April 2016
    Responsibility: David Truong (consultation lead)

    [201496] Application of TOFA to repurchase agreements (repos)
    In discontinuing consultation matter 201496, that the outcomes be integrated into the broader TOFA review, with David Truong consulting with Will Day regarding guidance on other TOFA related matters.

    End of example

     

    Spot checks

    The following ‘spot check’ matters were nominated by external CSG members for discussion.

    Matter number and topic

    Summary of discussions

    [20159] – Safe harbours - GST

    Consultation leads: Deborah Jenkins (in person) and Andy Ditchfield (via teleconference)

    Michelle de Niese from the CTA is interested in hearing the group’s views on challenges on costing and parameters.

    Members noted:

    • The current focus is on ‘barter’ transactions and looking at options to provide safe harbours, including via a purely technical approach or a compliance approach
    • How does the ATO determine compliance cost, noting ‘barter’ transactions are in many cases revenue neutral, but there could be savings through red tape reduction.
    • The GST safe harbours group is going back to the GST Advisory Group to check that the right topics are being explored and that work is on the right track.

    Andrew Mills noted that compliance cost assessment is welcome but not essential.

    201575] Revision of PSLA 2005/24

    Consultation lead: Jonathan Woodger (via teleconference)

    Members noted:

    • Jonathan Woodger advised that the last consultation had taken place today with those who had provided feedback on the draft practice statement.
    • The process was treated like a public ruling process and worked well.
    • Looking at including examples in a web based document that could be updated as different examples come up, but this would follow the release of the practice statement.

    [20158] Infrastructure privatisation

    Consultation lead: Peter Maher

    Adrian Varasso (LCA) raised the matter for a discussion with the team on how the process is running, with Thilini Wickramasuriya (TTI) interested in the proactive and novel approach to issuing guidance by the ATO.

    Members noted:

    • The ATO’s decision to identify long running key issues to get ATO advice into the public domain in a proactive way
    • There is now a central point of contact for industry since the establishment of the Infrastructure Privatisation team
    • Chapter 1 of infrastructure framework guidance document published, includes some safe harbour positions along with other advice and compliance documents
    • Proposing to issue two further documents in relation to a number of related topics and there will be further consultation as work progresses.
    • The ATO is working closely with the Foreign Investment Review Board in relation to infrastructure projects.

     

    Blockers to consultation

    Shirley Forlin provided members with a brief overview of the blockers for effective consultation that were identified during consultations From December 2015 to February 2016. These blockers were:

    • timeliness – it was noted that where topics for consultation were complex and participants recognised the need to take time to fully consult, it is important to keep everyone informed during long consultations.
    • transparency – it was noted that consideration should be given to choose consultations as targeted or public - the difference being that public consultation has a paper published (or similar) that anyone can contribute to and targeted consultation is limited to a selected group of people.

    Shirley also noted from the earlier discussion on action item CSG1510/1 that having the right people can impact on the effectiveness of the consultation.

    Agenda item 6: Potential new matters for consultation

    End of example

    No potential new matters for consultation were suggested.

    Agenda item 7: Other business

    End of example

    Any other business:

    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 5D)
    • Technical and Special Purpose Working Groups 2015-16 (Attachment 5E).

     

    Meeting close

    End of example

    Closing remarks

    There being no further business, the Chair closed the meeting at 3:35pm.

    The next meeting will be held on Thursday, 19 May 2016 from 1.30pm to 5.00pm (AEST) via telepresence. This meeting will focus on the Report on ATO Consultation Acitivity.

      Last modified: 18 May 2016QC 48998