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  • Australian Banking Association Steering Group minutes 22 November 2019

    Disclaimer

    ABA/ATO Liaison Group agendas, minutes and related papers are not binding on the 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. 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 Chair welcomed attendees and noted a record of the meeting would be made available on ato.gov.au and that discussions in this forum are limited to strategic industry wide issues concerning the ATO’s administration of legislation governing Australia’s corporate tax system.

    Australian Banking Association Steering Group (ABA) will not consider specific tax technical issues, which are to be progressed at the income tax - GST Working Groups.

    Confirm draft minutes and action items of previous meeting

    The minutes from the previous ABA meeting of 12 June 2019 were confirmed as finalised.

    Opening statements and key messages

    Public Groups Rebecca Saint, and Assistant Commissioner Banking and Finance Strategy Christopher Ferguson provided an update.

    Discussions were had on the tax performance of large corporates in the context of recent integrity, disclosure and compliance programs of work:

    • an update of the large corporate groups income tax gap was released on 17 October 2019, the report finds the tax gap for large corporate groups has been relatively steady for a number of years, and decreasing over the most recent years from 2013–14 to 2016–17
    • an update of Tax and Corporate Australia has been published to reflect updated findings of the large corporate groups income tax gap
    • the Corporate tax transparency report for the 2017–18 year and contextual information-analysis is scheduled to be published shortly
    • the annual risk differentiation framework moderation process has recently finalised. Taxpayers will be notified of the results of the moderation process in tranches over the coming months
    • Interim Findings Report Top 100 Program (income tax) was published on 22 November 2019. The report details the ATO’s key findings from income tax assurance reviews completed to 30 June 2019. Currently 80% of taxpayers reviewed have obtained a medium assurance or above, with 6% of taxpayers obtaining an overall high assurance rating. The number of taxpayers obtaining an overall high assurance rating is expected to increase to approximately 20% in the coming months as further tax assurance reviews are finalised. The results for the top 100 banks forms part of the Banking, Finance and Investment, Superfunds and Insurance industry grouping
    • with regard to the justified trust program for GST, it was noted that this would be conducted via a Top 1000 or Top 100 assurance product. The Top 1000 GST products will leverage off the work done by the Top 1000 assurance reviews on income tax. The ATO confirmed the trial use of the GST analytical tool for justified trust reviews will not currently extend to the financial services industry. A more tailored product is instead being developed for the financial services industry, and some members may be contacted at a later point in time to pilot this product.

    Discussion was also had around escalation of matters within the ATO. It was acknowledged that in certain circumstances some matters will require escalation. Where this occurs, matters should be escalated appropriately through the proper escalation channels.

    Hybrid mismatch rules

    An exposure draft to amend the hybrid mismatch rules is expected imminently. As such, the ATO will not be issuing any class rulings for new Additional Tier 1 (AT1) instruments given the expectation of an announcement in the near future.

    Once a Government announcement is made on the matter, the ATO intends to release public web-based guidance on an interim administrative approach for deductible/frankable AT1 arrangements after consultation with industry pending the enactment of any law.

    ATO is starting to look at the circumstances when foreign income tax deductions can arise from AT1 distributions and is open to developing further guidance if the industry believes there is still uncertainty.

    Justified Trust update

    Top 100 and Top 1000 programs

    The ATO has not identified any systemic 'red flag' risks in the banking and finance sector and expect a majority of taxpayers to reach high assurance by 2020.

    It was noted that the justified trust concept has expanded to GST for the Top 100 population however there has been a change in resourcing and intensity in relation to GST justified trust as the ATO focuses on resolving GST legacy issues.

    Further work is required around evidence and documentation in particular around the areas of tax governance, transfer pricing and branch attribution, and capital allowances. It was noted that a medium assurance rating in relation to transfer pricing and branch attribution and or not achieving a stage 3 rating on governance does not of itself prevent a taxpayer from obtaining high assurance.

    The longer-term aim is for income tax and GST to be reviewed together as part of an integrated assurance product.

    There remains a requirement for real time disclosures and tax return review in intervening years once taxpayers attain high assurance which forms part of the normal Annual Compliance Review and Pre-lodgment Compliance Review arrangements.

    Attendees agreed that the ATO’s tax position in relation to specific areas of assurance should be discussed openly and transparently with taxpayers prior to a Tax Assurance Report (TAR) being finalised. There is scope for taxpayers to ask for parts of the draft TAR prior to finalisation.

    GST Financial Services and Insurance strategy update

    The ATO provided an update on the progress of current GST public advice and guidance (PAG) products, including the interaction with other products as such private rulings. It was noted:

    Credit Cards

    • Draft GSTD 2018/D1 Determining the creditable purpose of acquisitions in a credit card issuing business is expected to be finalised as a tax ruling in December 2019, with an effective date of 1 January 2020.
    • Draft PCG 2019/D7 ATO compliance approach to GST apportionment of acquisitions that relate to certain financial supplies is expected to be finalised in December 2019, with an effective date of 1 January 2020.
    • GSTR 2006/3A3 - Addendum – the final Addendum is expected to be issued on December 2019. The Addendum clarifies the principles already set out in GSTR 2006/3.
    • The ATO will revise GST private binding rulings for consistency with the newly issued PAG products 1 January 2020. We will reach out to relevant taxpayers to discuss this process.
    • Detailed compendiums will be provided in draft to the ABA in response to ABA submissions PCG 2019/D7.

    Transaction accounts

    • The ATO will be commencing targeted consultation with the ABA in December 2019 with a view to developing a second schedule to draft GSTR 2019/D1.This Schedule will have the same date of effect as GSTR 2019/D1 when finalised.

    Securitisation arrangements

    • The ATO anticipated finalising the draft Addendum to GSTR 2004/4 on home loan securitisation arrangements in 2020. It is still being considered whether a schedule to the PCG on home loans will be developed.

    ATO update on remediation compensation payments work

    Consultation has commenced with industry on scenarios of uncertainties in relation to the GST and income tax consequences of compensation payments where industry would like guidance from the ATO.

    The ATO is currently considering developing high-level guidance for publication on ato.gov.au for payers of the compensation. This guidance will complement the guidance that has been published for Super funds and Individuals who are recipients of the remediation payments.

    The ABA has undertaken to provide the ATO with a matrix of remediation-compensation payment scenarios to assist the ATO in gauging how many scenarios are affecting the industry. Some discussions have already taken place with individual taxpayers on time sensitive specific issues.

    It was noted that guidance on scenarios may need to be addressed in broader ‘groupings’ given the breadth of scenarios that may arise.

    ABA members noted that it was important that a pragmatic approach was taken to avoid further impact to the customer experience and reputational risk for payers of remediation payments.

    Emerging issues and trends in banking and finance

    The ABA thanked ATO members involved in resolving issues arising as a result of the application of the hybrid mismatch rules to certain AT1 issuances.

    Other business

    ABA/ATO Income Tax and GST Working Group issues (next meeting 28 November)

    The following points were noted as items for discussion at the upcoming ABA/ATO Income Tax and GST Working Group:

    • Book-to-tax reconciliation standardised approach – it was noted that guidance was expected to be issued prior to Christmas
    • Section 207-158 hybrid mismatch rules
    • Bank Levy securitisation arrangements
    • Hybrid buy-backs – market value substitution rule – a discussion paper has been developed and expected to be issued shortly
    • ATO Identity Security Strategy
    • Update on credit card apportionment – credit card and transaction schedules
    • Remediation / compensation payments work
    • Feedback on GST ABA submissions.

    AusKey

    It was noted that AusKey will be retired in March 2020 and will be replaced from 1 April 2020 by myGovID and Relationship Authorisation Manager as the secure login mechanism for government online services.

    Attendees

    Attendees list

    Organisation

    Members

    ATO

    Christopher Ferguson (Chair), Public Groups and International

    ATO

    David White, Tax Counsel Network

    ATO

    James Campbell, Public Groups and International

    ATO

    Marcus Ryan, Tax Council Network

    ATO

    Megan Croaker, Public Groups and International

    ATO

    Rebecca Saint, Public Groups and International

    Australian Banking Association

    Vanessa Beggs

    Commonwealth Bank of Australia

    George Spathis

    Macquarie Bank

    Ernest Chang

    National Australia Bank

    Stephen Southon

      Last modified: 29 Oct 2020QC 63262