• ACCF minutes, June 2013

    Meeting details

    Venue:

    ATO Offices

    Ewing Board Room -L9.716

    747 Collins Street Docklands

    Melbourne

    Date:

    5 June 2013

     

     

    Start:

    10:00am

    Finish:

    3:30pm

    Chair:

    Pauline Zdjelar

     

     

    Contact and Secretariat:

    Mercia Needham

    Contact phone:

    02 6216 1759

    Attendees

    ACCF Industry members and representatives

    Chris Callen

    Coca-Cola (Aust) Pty Ltd

    Katrina Edillor

    Winemakers' Federation of Australia

    Suzie Farley

    Tarac Technologies Pty Ltd

    Rebecca Fraser

    Customs and Border Protection Service

    Sam Haggan

    Metcash Ltd

    Troy Houston

    SABMiller (Fosters Group Ltd)

    Sonia Icanovski

    Lion Ltd

    Steven Logan

    Schweppes Australia Pty Ltd

    Frank McNamara

    Treasury Wine Estates

    George Nikolaou

    Coles

    Leigh Obradovic

    KPMG

    Matt O'Connell

    Carlton and United Breweries

    Behn Payten

    Cider Australia

    Stephen Riden

    Distilled Spirits Industry Council of Australian Inc. (DSICA)

    Sonia Rudi

    Wilmar BioEthanol (Aust) Pty Ltd

    Mike Shearer

    Coopers Brewery Ltd

    Bob Smart

    Samuel Smith and Son Pty Ltd (Yalumba)

    Gerry Taylor

    Metcash Ltd

    George Theoharis

    Treasury Wine Estates

    Australian Taxation Office

     

    Anthony Barnard

     

    Peter Harding

     

    Dennis Holloway

     

    Steve Hood

     

    Martin Kelly

     

    Jack Keshishian

     

    Apologies

    Brenda Berkley

    Treasury

    Rebecca Carter

    Diageo

    Paul Evans

    Winemakers' Federation of Australia

    Stafford Grudgings

    Metcash Ltd

    Steve Guy

    Wine Australia

    Ranjeev Maharaj

    Australian Customs and Border Protection Service

    Justin O'Halloran

    Coles

    Sandra Przibilla

    Liquor Merchants' Association of Australia

    Warwick Ryan

    KPMG and Distilled Spirits Industry Council of Australia Inc.

    Anthony Seebach

    Australian Customs and Border Protection Service

    Denita Wawn

    Brewers Association

    Agenda items

    Disclaimer

    The Alcohol Corporate Consultative Forum (ACCF) agendas, minutes and related papers are not binding on the Australian Taxation Office (ATO) or any of the other bodies referred to in these papers. While every effort is made to accurately record views expressed, the wording necessarily represents a summary of statements of general position only, and care should be taken in interpreting those statements. These papers reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change.

    1. Welcome, previous minutes and action items

    Pauline Zdjelar welcomed everyone to the meeting and advised that the following topics would be covered over the course of the day:

    • key Fuel Tax Credit (FTC)/Excise Equivalent Goods (EEG) messages and updates
    • Wine Equalisation Tax (WET) Producer rebate
    • new WET blending measures and moves to work with industry to assist and ensure compliance, and the
    • Customs policy prohibiting the use of ‘First In First Out’ (FIFO).

    The Previous Minutes were endorsed without change. The action items from the May 2012 meeting were completed prior to the meeting.

    2. WET Wine Equalisation Tax Rebate and ATO Strategy

    2.1 Wine Equalisation Tax, Producer Rebate and ATO Strategy

    2.2 WET

    2.1 Jack Keshishian joined the meeting to provide an update on the WET Producer Rebate and the Division 165 - GST general anti-avoidance provision.

    Jack stated that the WET rebate is limited to $500,000 per annum, per producer and is classed as assessable income.

    Following a conversation with members, and in particular Coles, it was agreed that the ATO would meet with Coles to go over the arrangements that Coles have in place to meet the WET producer rebate guidelines, and to ensure that they have a good understanding of the new legislative impacts.

    Steve Riden from DSICA asked for information on the scale of the fraud with the rebate. Jack advised that there are possibly fifty arrangements under investigation, however, he assured members that most producers are doing the right thing. Jack stated that the role of the ATO is to make sure that those that are entitled to receive the rebate, actually do. The ATO focus is trying to protect legitimate producers and is examining fraudulent claims and behaviours. Jack advised that detection rates are increasing. Division 165 is aimed at ‘artificial’ or ‘contrived’ schemes that have three elements:

    1. scheme

    2. GST benefit, and

    3. purpose/effect.

    In examining fraud in this area the ATO has discovered:

    • schemes are generally limited to certain regions and groups
    • entities usually involve family, friends, associates and employees of wine entities
    • participants are coached by others, and have very little knowledge of the wine industry or transactions their entity has made
    • new entities have 'explosive' start up sales
    • invoicing within the network including new entities to each other - round robin transactions to create chains of claims, and
    • main entity may request third parties issue invoices to new entity.

    The ATO advised that regular discussions take place between the New  Zealand and Australian Governments and regular checks are made on the product that comes to Australia from New  Zealand. The ATO confirmed that there were very strict controls on the New Zealand paperwork. Peter Harding agreed to provide information on the amount / proportion of producer rebate that goes to New  Zealand.

    2012- 13 ATO compliance activities include:

    • redressing inequities that place genuine producers and winemakers at a commercial disadvantage
    • a dedicated team to address WET arrangements
    • exploitative rebate networks artificially creating WET rebates for multiple entities
    • applying the WET Act and GST anti-avoidance provisions
    • General Anti Avoidance Rules (GAAR) Panel, and
    • key individuals in these networks, including brokers.

    The GAAR panel is an advisory panel set-up to examine fraud and anti-avoidance mainly in the income tax area, however, the panel also reviews GST and Indirect Tax fraud. Panel members include:

    • senior ATO technical experts, and
    • external legal and academic representatives.

    Action Item:

    05062013-2-1

    Responsibility

    Due Date:

    As soon as possible

    Coles and Tax Office

    (George Nikolaou and Stephen Griffin/Jack Keshishian

    Jointly examine WET producer rebate arrangements and new legislative impacts

    Secretariat note: Discussion has taken place; issue has been resolved. Source - email from George Nikolaou 27 June 2013.

    Action Item:

    05062013-2-2

    Responsibility

    Due Date:

    As soon as possible

    Tax Office

    (Peter Harding)

    Advise forum members on the amount/proportion of producer rebate that goes to New Zealand.

    Secretariat note: Information has been provided to members. Source  -  email from Peter Harding 1 July, 2013.

    2.2 WET

    Amendments to the wine Producer rebate announced in the Budget

    New blending laws

    Industry workshop outcomes

    Pauline provided an overview of the amendments to Division 19 of the Wine Producer rebate announced in the 2012-13 Budget noting that the amendments were made to protect the integrity of the rebate system. Some areas still to be refined include:

    • wine industry processing is usually based on percentage and quantities over volume of wine. The dollar value attributable doesn’t usually drive sales
    • producers must track exact dollar amount of earlier rebates on parcels of wine
    • current provisions focus on ‘entitlement’ to rebate, rather than whether the rebate has already been claimed or if there is an intention to claim.

    The new law explicitly refers to amounts to which a producer is ‘entitled’ to in relation to earlier rebates. Requirements apply equally to Australian producers, and approved New Zealand producers.

    The ATO recognises that record keeping is difficult for industry and is working with Treasury to attempt to resolve blending tracking issues. Communication products are being developed in consultation with industry for industry. The producer pro forma will capture everything. Communication products including key messages, has commenced and should be ready soon. The ATO website will also include updated information.

    In summary:

    • the ATO recognises that tracking is an issue particularly for smaller producers
    • communication and fact sheets are being prepared; the ATO is working with industry to develop these, and
    • the ATO will keep industry informed as changes and issues are resolved.

    3. Compliance program and focus areas for 2013/14

    Peter Harding provided an outline of the risk and compliance focus for 2013-14.

    The ATO focus will be on:

    • arrangements that maybe considered a “scheme” under Division 165
    • monitoring unusual or new structured arrangements
    • targeted active compliance work
    • continued industry consultation
    • the reporting of goods for export -
      • e.g. wine that is exported and diverted back into the domestic market by means of data matching
       
    • imports -
      • parallel imports (maybe be legal; not necessarily illegal)
      • regulatory issues, and
      • classification issues
       
    • cider, and
    • excise equivalent goods (EEGs).

    Rebecca Fraser from Customs and Border Protection Service (Customs) advised that Customs has a team examining parallel imports and counterfeit goods. She stated that Customs can only examine these goods if there has been a complaint. Customs is working with the ATO and AFP to stop dubious goods at the border. Notice of Objection and fact sheets can be found on the Customs website. Where action is taken it is civil matter not a criminal matter. The ATO does testing from time to time to ensure authenticity and correct classification. The ATO focus is on lower tier entities as they have a greater impact on industry.

    Mike Shearer mentioned issues with invoices being undervalued. The ATO will follow-up with Mike.

    A question was asked as to the extent of fraud in the home brew industry. Pauline advised that the ATO has intelligence on this sector and data indicates that it is not a major issue.

    It was noted that there has been a significant growth in the Cider industry. In  2012  the cider industry recorded its fifth consecutive year of double digit growth. Flavoured ciders have meant a shift from the WET space to the excise space. Peter reminded members that a cider fact sheet, (developed after consultation with industry) was published in January, 2013. An updated version will be published shortly.

    There will be a continuation of:

    • warehouse checks focussing on maintaining assurance of regulatory controls for Excise Equivalent goods (EEGs)
    • audits and reviews will be risk based seeking assurance of record systems
    • analysis on the use of multiple clearance codes
    • integrity checks of business systems
    • investigations into refund integrity fraud
    • examination of international cross border issues, and
    • working with Large clients through their Client Relationship Managers  (CRMs) .

    Peter also advised that the ATO has introduced a strategy to review ‘new to excise’ clients to ensure they understand their obligations for reporting, manufacture, storage and movement of products. The ATO will continue to work together with industry to encourage voluntary compliance. The ATO is always happy to receive intelligence; all information will be treated confidentially. The ATO Serious Evasion hotline phone number is - 1800  060 062.

    4. Large business relationship management model

    Dennis Holloway attended the meeting to provide an update on the new relationship management model for Large business.

    Dennis advised that the new Large business relationship model is still under development. The relationship model is based on the Risk Differentiation Framework (RDF) which is used to assess tax risk and determine how the ATO will engage and interact with taxpayers in the large market. Taxpayers are placed into one of four broad categories based on a risk categorisation. Reassessments are undertaken on a periodic basis and an entity may move between categories over time. The RDF increases transparency between the ATO and taxpayers by letting taxpayers know how they are viewed by the ATO. This allows taxpayers to make informed choices about how they work with us.

    The focus of the new relationship model is on the lower consequence clients i.e. medium and low risk clients which number approximately 1300. Those clients in the top half of the RDF are generally considered clients with complex needs so would more than likely maintain their dedicated Client Relationship Manager (CRM). Single issue clients in the top level of the RDF would also maintain their  CRM .

    George Nikolaou advised that the current CRM consultation / relationship model works well. Industry members all agreed that they wished to maintain the current approach to CRM responsibilities. There was unanimous support of the forum in its current form.

    5. Updating of alcohol industry guidelines

    Anthony Barnard advised that the ATO has updated the Excise guidelines for the alcohol industry to reflect legislative changes. The ATO is progressing through final technical clearance by a senior technical officer to ensure consistency with similar industry and technical accuracy. We anticipate publishing by the end of June  2013. Summary of main changes to reflect legislative changes:

    • Chapter 2 - the discussion on the meaning of manufacture or produce has been updated to reflect the discussion in Excise Ruling ER 2012/1 and ATO Interpretative Decision 2013/10
    • Chapter 3 - the discussion on secrecy requirements has been updated to reflect changes made regarding the confidentiality of taxpayer information through the Tax Laws Amendment (Confidentiality of Taxpayer Information) Act 2010. Confidentiality provisions are now located within the Taxation Administration Act 1953.
    • Chapter 6 - the discussion on Periodic Settlement Permissions (PSP) has been updated to reflect recent changes to section 61C of the Excise Act 1901 through the Excise Amendment (Reducing Business Compliance Burden) Act  2011.
    • Chapter 7 - the discussion on microbrewery provisions has been updated to reflect the change to eligible brewery through Excise Amendment Regulation 2012  (N0  3) , and the discussion on the meaning of legally and economically independent has been expanded to provide greater guidance.
    • Chapter 11 - added reference to the ATO view that a licence to manufacture excisable goods issued under the Excise Act 1901 can specify multiple premises
    • Chapters 11 & 13 - changes to record keeping requirements
    • Chapter 14 - added a reference to ATO view on cider, and
    • throughout the document the reference to current excise rates and modified the explanation regarding “Deliver into the Australian domestic market” has been updated.

    Anthony advised that the ATO welcomes feedback on the focus and useability of the guidelines. Chris Callen stated that the guidelines were easy to read and used for new starters.

    Steve Hood mentioned licensing of Memstar units and suggested that members contact their CRMs to confirm responsibilities and obligations.

    Action Item:

    05062013-5-3

    Responsibility

    Due date:

    As soon as possible

    Industry

    Contact your CRM to arrange a discussion on obligations for entities that have a fixed Memstar unit/s and haven't been contacted by ATO licensing.

    6. Industry updates, environment impacts and market pressures

    Agenda items six and seven were combined.

    Industry and company representatives provided feedback on challenges to each of their sectors such as retail, cider, spirits, wine, beer, Ready To Drink (RTD) etc. Issues were discussed from the perspective of each of the sectors. The following key points and issues raised by members generated a general discussion:

    • the high exchange rate has an impact on exported product
    • an ongoing major issue is the shape of WET as opposed to volumetric tax
    • lack of WET/GST/VAT in China creates unfair competition on the Australian market
    • wines sales in China are increasing; a 1% increase in China has a huge impact in Australia. Increased sales to China will absorb any wine glut in Australia
    • it is possible that $20 wines may disappear from Australian shelves if there is an increase in sales to China
    • exports to China are being managed to try and avoid damage to brand (with parallel exports) particularly to premium wines
    • rebate reform should examine application to the finished product at the cellar door
    • exports have little impact on some sectors; imports have more impact/activity
    • proliferation of craft brewers is good for Australia; however there are concerns over looming health regulations for this sector.

    7. Industry association updates, membership, concerns, and [priorities

    This agenda item was combined with the previous agenda item.

    8. Other business

    • 8.1 discussion of current operating environment; key and emerging issues
    • 8.2 Fuel Tax Credits - key messages
    • 8.3 EEG update
    • 8.4 Customs Warehouse Licences - (First in First Out(FIFO)
    • 8.5 ATO Review of external forums
    • 8.6 Review of effective operation of the forum
    • 8.7 Charter review

    Pauline advised that given the election is taking place in September, all Government departments will be in caretaker mode in August. There may be a different direction following the election which could potentially delay and/or change legislation. Changes from 1 July 2013 include:

    • fuel tax credit rates will decrease further
    • increase in excise duty rates for transport gaseous fuels
    • possible rate change for fuel used in heavy vehicles for travelling on public roads, and
    • eligible entities will be allowed to opt-in to the carbon pricing mechanism.

    The partnership agencies completed the Excise Equivalent Goods (EEG) industry consultation in November/December 2012. Pauline thanked industry for participating in the consultation process, and for their valuable input in developing the reform options. The ATO reported the industry recommendations to Government in March, however, it is unclear when the reform options will be implemented and due in part to the changes in the Government. The ATO will inform forum members of any decisions / outcomes once available.

    As part of the biannual forum review process, members were asked to comment on the operation of the forum after considering the following questions: Does the  ACCF  forum have:

    • a clear purpose
    • a strong and fair leadership, and
    • a focussed membership.

    Industry representatives confirmed that they appreciated the opportunity to meet and discuss a broad range of issues with the ATO. Industry members confirmed that the forum is an excellent opportunity for the ATO and businesses to meet and discuss tax, and industry related issues with confidence, and in good faith.

    Pauline thanked everyone for their attendance and confirmed that a focus for the ATO was to maintain and support industry work across a ‘level playing field’.

    Next year’s meeting will take place in Sydney.

      Last modified: 21 Mar 2014QC 39654