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  • Australian Banking Association Steering Group key messages 12 June 2019

    Disclaimer

    ABA/ATO Steering Group agendas, minutes and related papers are not binding on the ATO or any of the other bodies referred to in these minutes. 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 materials reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change. It is strongly recommended that where a formal ATO view does not exist for an issue contained in these Minutes that, for the abundance of clarity and certainty, Private Rulings be sought.

    Welcome and introductions

    The Chairperson opened the meeting and welcomed attendees.

    Confirm draft minutes and action items of previous meeting

    The draft minutes from the last Australian Banking Association (ABA) Steering Group meeting of 28 February 2019 were confirmed.

    Tax Challenges of the Digitisation of the Economy – International Banking Federation (IBFed) submission

    Discussion was had around recent developments in the Organisation for Economic Co-operation and Development's (OECD) review of the tax challenges arising from the digitalisation of economy.

    The ABA emphasised the need for international consensus on any change to the taxation rules impacting digital businesses, and submitted that the existing international corporate tax framework adequately captures profits earned by banks.

    Section 353-10 notice to a third party financial institution – access protocol

    The ABA raised concerns in relation to the increasing administrative burden associated with the increasing number of requests for information which are being issued from the ATO in relation to customer information. The ABA suggested that it would be an opportune time to review of the existing protocol to ensure to streamline information requests.

    The ATO acknowledged that the existing request protocol may no longer be fit for purpose and suggested a move to electronic Statutory Information and Garnishee Notices (eSIGN), incorporating automated retrieval of customer details and transactions as a potential solution. This solution would reduce errors, time and resources for both the ATO and banks.

    Business transactions through payment systems (BTTPS)

    The ABA raised concerns with the BTTPS regime which currently requires a bank to report on electronic business transactions received by wholly owned subsidiaries of its income tax and GST consolidated groups. The ABA contends that this is inconsistent with the single entity rule in s701-1 given that under the consolidation regime, such transactions are exempt from taxation.

    The ABA raised the need for a concessional approach to reporting to reduce compliance costs given there is significant cost and effort involved to put together this information.

    The ATO advised that they are investigating options to resolve this issue via an amendment to a legislative instrument.

    Top 100 and Top 1000 programs

    Pathway to High Assurance in our Tax Asssurance Review (TAR) and Streamlined Tax Assurance Review (STAR) products

    Top 100

    • In March 2019, a Corporate Tax Association workshop was held with Top 100 taxpayers to discuss the seven qualifying factors and quantitative threshold required for taxpayers to achieve high assurance, and what taxpayers can expect post-high assurance. It was noted:
      • further work was required around evidence and documentation in particular around tax governance (evidencing control operational effectiveness), and understand offshore operations.
      • in relation to Criteria 3 - international related party dealings, branch attribution and controlled foreign company - minimum medium assurance, this criteria includes cross border branch dealings.
      • in relation to the analysis of taxpayers' Effective Tax Bourne, there will be a particular focus around defining an Australian-linked business offshore.
       
    • In relation to future Top 100 reviews, it noted that:
      • the ATO is working to ensure consistency across future assurance products and TARs. This may mean that for some taxpayers, the next round of TARs will be more comprehensive in nature and address a larger range of specific tax issues.
      • a justified trust credential will be issued in conjunction with the TAR when taxpayers attain high assurance. There is no intention to undertake an intensive justified trust review every year. Once high assurance is attained, taxpayers will be put on a 'light touch' rolling program of assurance which will likely mean a justified trust review every three years to maintain high assurance. In intervening years, the ATO expects taxpayers to engage with the ATO if there are new transactions or significant changes. These changes will not necessarily trigger a full review of the business unless it undermines the trust that has been obtained ie taxpayers are expected to maintain justified trust. For taxpayers under Annual Compliance Arrangements, these taxpayers will be subject to a higher standard of review as the ATO provides sign-off under these products.
      • at present the majority of Top 100 taxpayers have obtained a medium, or medium-high assurance in their TARs. For most groups, these assurance ratings are driven by information gaps, rather than red flags eg systematic/industry level risks. We expect that most Top 100 taxpayers should attain justified trust by 2020.
       

    Top 1000

    • Top 1000 taxpayers are at the end of the third year of the taskforce. The current expectation is that the Tax Avoidance Taskforce will continue to 2023.
    • There will be a future focus on next action work such as further review/compliance activity.
    • Medium assurance taxpayers are likely to be dealt with via compliance work under targeted 'projects'.
    • The ATO has not identified any systemic 'red flag' risks.

    Update on book-to-tax reconciliation standardised approach

    The ATO is developing a standardised expectations statement for the banks which will assist us in our move to a light touch due diligence approach to the book-to-tax reconciliation review process for the major banks. The ATO and ABA will meet to discuss a set of specifications for working papers used in the book-to-tax reconciliation process in the preparation of their tax returns to progress this work.

    Emerging issues and trends in banking and finance

    No issues were raised by attendees.

    Hybrid mismatch rules

    As part of the 2019–20 Federal Budget, the Federal Government announced it would make a number of clarifying technical amendments to Australia’s hybrid mismatch rules to:

    • stipulate how the rules apply to multiple entry consolidated groups and trusts
    • limit the meaning of foreign tax; and
    • specify that the integrity rule can apply where other provisions have applied.

    The ATO has released the following guidance on the OECD hybrid mismatch rules:

    • Draft Law Companion Ruling LCR 2019/D1 OECD hybrid mismatch rules - targeted integrity rule – which provides guidance on the hybrid mismatch targeted integrity rule set out in subdivision 832-J of the Income Tax Assessment Act 1997. Public consultation closed on 10 May 2019.
    • Draft Law Companion Ruling LCR 2018/D9 OECD hybrid mismatch rules - concept of structured arrangement and Draft Practical Compliance Guideline PCG 2018/D9 OECD hybrid mismatch rules - concept of structured arrangement - which provide guidance on the concept of 'structured arrangement' set out in section 832-210 of the Income Tax Assessment Act 1997. These two pieces of guidance are in their final stages of internal review and are expected to be published shortly.

    The ATO is also working with Treasury to draft further amendments to the hybrid mismatch rules. Future guidance is also being developed on the interaction of foreign law interactions with Division 832.

    Other business

    Discussion was had around:

    • Buyback/redemption of hybrid instruments - the ATO is currently investigating the option of a public advice and guidance product to provide certainty on the application of market valuation substitution rules upon the buyback/redemption of hybrid instruments occurring.
    • AFI exemption - Tax Determination TD 2019/8 Income tax: in the definition of 'financial intermediary business' what is meant by 'a business whose income is principally derived from the lending of money'? had been published on the ATO website on 22 May 2019.
    • Research and development - the ATO noted the administrative process of amended assessments following decisions by AusIndustry.

    Introduction and welcome of GST attendees

    The Chairperson opened the meeting and welcomed any new attendees.

    Update on Indirect Tax (GST) integration into Public Groups within the ATO

    The ATO provided an update on the integration of the Indirect Tax (ITX) business line into the Client Engagement Group following the Client Engagement Group realignment. In relation to the management of ITX related matters:

    • The ATO expects to be fully integrated by July 2020. In this regard:
      • over the next 12 months, Public Groups and ITX programs of work will run in parallel, with income tax staff slowly transitioning to undertake work on GST issues over this period. Per the 2018–19 Mid-Year Economic and Fiscal Outlook, the Australian Government has committed to funding the GST compliance program for a further four years from 2019–20.
      • the resolution and progression of existing GST issues will continue to be undertaken by specialised GST teams.
       
    • The day-to-day management of Banking and Finance Public Groups and International (B&F PG&I) ITX client relationship matters will be led by Rebecca Saint as Deputy Commissioner of Public Groups. The first point of contact for the resolution of ITX matters will continue to be the relevant Client Engagement teams. Where relevant, B&F PG&I ITX technical matters will be escalated to Deborah Jenkins, as custodian of the GST specialist risk and program management function which is situated within the Small Business line.

    ABA/ATO working group arrangements post 1 July 2019

    Discussion was had around the ATO's engagement with the ABA following the internal restructure with financial supplies risk moving into PG&I. It was noted that historically PG&I and ITX held separate steering group/working group meetings with representation at the Deputy Commissioner and Assistant Commissioner level in each steering group from the relevant business line in each case.

    Moving forward, it is proposed that:

    • there should be a single head steering group led by the Deputy Commissioner of PG&I with appropriate representation from ATO senior staff. This head committee would cover all matters relevant to the business line ie income tax, financial supplies, major bank levy etc. and be a true “steering” group which covers strategic/thought leadership issues rather than tax technical issues.
    • relevant sub-committees/working groups would sit under this head committee to consider issues in more granularity, depending on priorities. One definite sub-committee/working group would be for financial supplies risk to effectively continue to progress to resolution the current matters we have at the industry level. This will be a reshaped version of the historical ITX – ABA working group.
    • the ABA emphasised the need to ensure consistency between the income tax and GST working groups.

    Attendees

    Attendees are listed below.

    Organisation

    Members

    ATO

    Sandra Farhat (Co-chair), Public Groups and International

    ATO

    Katherine Leung (Secretariat), Public Groups and International

    ATO

    Melanie Sinn (Secretariat), Public Groups and International

    ATO

    Adam Johnson, Public Groups and International

    ATO

    Anna-Maria Stephens, Tax Counsel Network

    ATO

    Arya Heryanto, Public Groups and International

    ATO

    David White, Tax Counsel Network

    ATO

    Deborah Jenkins, Small Business

    ATO

    Dheerta Shandil, Tax Counsel Network

    ATO

    Hoa Wood, Tax Counsel Network

    ATO

    James Campbell, Public Groups and International

    ATO

    Jenny Spiliotopoulos, Public Groups and International

    ATO

    John Gill, Tax Counsel Network

    ATO

    Jonathan Tang, Public Groups and International

    ATO

    Kim Stokes, Integrated Compliance

    ATO

    Megan Croaker, Public Groups and International

    ATO

    Nick Athans, Public Groups and International

    ATO

    Peter Joseph, Small Business

    ATO

    Philemon Daniel, Public Groups and International

    ATO

    Rebecca Saint, Public Groups and International

    ATO

    Reuben Pace, Public Groups and International

    ATO

    Michelle Dorey, Smarter Data Program

    ATO

    Tony Carroll, Integrated Compliance

    ATO

    Virginia Gogan, Tax Counsel Network

    ATO

    Yoke-Cheng Vaile, Public Groups and International

    ANZ

    Anthony Fitzgerald

    ANZ

    Darren Norman

    ANZ

    Jimmy Tee

    Australian Banking Association

    Essam Husaini (Co-chair)

    Bank of Queensland

    Dominic Grimson

    Bank of Queensland

    Michael Hellier

    Bendigo and Adelaide Bank

    Andrew Wright

    Bendigo and Adelaide Bank

    Ben Edwards

    Commonwealth Bank of Australia

    Candice Sng

    Commonwealth Bank of Australia

    Craig Klapdor

    Commonwealth Bank of Australia

    George Spathis

    Commonwealth Bank of Australia

    Jeff Barcham

    Commonwealth Bank of Australia

    Michael Hyland

    Citi

    John Foster

    Macquarie Bank

    Ernest Chang

    National Australia Bank

    Mark Killer

    National Australia Bank

    Stephen Southon

    National Australia Bank

    Zoe Ye

    Westpac

    Chris Plakias

    Westpac

    Michael Barbour

    Apologies

    Apologies are listed below.

    Organisation

    Members

    HSBC

    Jeffrey Tan

    Suncorp

    Kate Locke

      Last modified: 27 Nov 2019QC 60769