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  • Australian Financial Markets Association Liaison Group minutes 17 May 2018

    Meeting details

    The meeting was held on 17 May 2018 at the ATO's Sydney office and chaired by Anthony Marvello, Assistant Commissioner, Public Groups and International.





    Rob Colquhoun

    David Lynch

    Bank of America Merrill Lynch

    Johanna Tang

    BNP Paribas

    Andrew Condous


    Jonathan Harrex

    Deutsche Bank

    Ross Baker


    Jeff Tan

    JP Morgan

    Alice Lam

    Macquarie Bank

    Kane Nicholson

    Societe Generale

    Anley Viengkhou


    Anthony Marvello

    Stephanie Long

    Mary Carra

    Anna-Maria Stephens

    Justen Nixon

    Reuben Pace

    Ivar Kvistad

    James Campbell

    Brendon Chapman

    Melissa Gile

    Phil Daniel

    Vasuki Seemampillai

    Justine Suh


    AFMA/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.

    1. Welcome and opening remarks

    • Minutes of the last ATO/AFMA liaison meeting on 12 September 2017 were accepted as final
    • AFMA members were advised that going forward, all minutes of the ATO/AFMA liaison meeting will be published on the ATO website.
    • It was agreed that any items considered to be commercially in-confidence (as agreed between AFMA and the ATO) would not be published on the ATO website.

    2. Disclosure item on the IDS and CbC reports in relation to FX gains/losses on related party dealings

    The ATO provided an update on the disclosure of FX gains/losses in the International Dealings Schedule (IDS) and Local File/Country by Country (CbC) reporting. Key points of note were as follows:

    • Submissions had been received and meetings held with various financial sector members in relation to Local File reporting of FX gains/losses, followed by discussions with ATO experts with the aim of developing a solution for Year 3 local file reporting. [On 14 June 2018, the ATO CbC team provided revised guidance for Year 3 local file reporting of FX gains/losses for financial institutions making the financial reports election under Division 230.]
    • In the first year of CbC reporting, some taxpayers had elected to lodge their local file Part A early in lieu of section A of their IDS. The ATO requested feedback from the industry regarding how many members intended to take up the option to lodge their local file Part A early in lieu of Section A of the IDS for Year 2 (2018 income year). This would assist the ATO in determining the level of guidance to be provided to industry in relation to Year 2 reporting of FX gains/losses.

    The ATO provided an update on proposed changes to the Year 2 local file. Key points of note were as:

    • The changes were mainly to resolve transitional administrative issues by adding specific labels for specific things, such as average balance of borrowings/loans, which in the Year 1 Local File had to be included at more generic labels. Examples were new labels for loan balances, capitalised interest, book values for IRPD debt factoring/securitisation and an indicator for directly connected IRPD agreements.

    The changes would be clear once the local file instructions were issued. [The 2018 Local File and instructions have now been published on the ATO website.]

    Action item




    AFMA members to provide feedback on the approximate number of members intending to take up the administrative solution by choosing to lodge Part A of the 2018 local file early in lieu of Section A of their 2018 IDS.

    3. Provision of General Purpose Financial Statements for the purposes of the section 3CA requirement

    The ATO provided an update on the General Purpose Financial Statement (GPFS) requirements. Key points of note were as follows:

    • The ATO had not received any feedback from taxpayers to date regarding potential challenges to be faced in the second year of the GPFS reporting requirements without the transitional administrative approach.
    • It was agreed that AFMA would make a submission regarding issues faced by their members, eg where the head entity of an Australian branch was a Non-operating Holding Company (NOHC) not required to lodge GPFS.
    • The ATO was close to finalising their guidance in relation to GPFS requirements.
    • Any specific questions from members in relation to the guidance or their lodgement obligations could be directed to the SGE mailbox to be provided.

    Action item




    Final guidance to be issued in relation to the section 3CA requirement.

    ATO to provide email address for AFMA members to raise any queries and to provide submissions in response to final guidance once issued.

    [Queries may be directed to]


    Action item




    AFMA to provide submission in response to final guidance once issued where any gaps are identified by members.

    4. Interaction of the Branch Hybrid Mismatch Rules with Part IIIB

    The ATO provided an update on the application of the Branch Hybrid Mismatch rules. Key points of note were as follows:

    • The ATO is currently bound by confidentiality requirements until the bill is released.
    • Treasury has given consideration to AFMA’s submission, especially regarding the interaction of the Branch Hybrid Mismatch rules with Part IIIB.
    • The ATO and Treasury considered what practical solutions could be implemented in response to AFMA’s issues and recommendations.
    • The bill to be introduced will address some of the issues raised. Additionally, it may address AFMA’s query regarding a deferral to 2020 where the jurisdiction of the head office of an Australian entity has not implemented the rules.
    • The next steps were for the bill to be introduced. A follow up discussion between the ATO and AFMA would be organised once the bill was published.
    • The Branch Hybrid Mismatch rules were expected to take effect from 1 January 2019.

    AFMA noted that this was an area where further guidance from the ATO would be warranted.

    Action item




    ATO to organise follow up discussion with AFMA once the bill is published.

    5. Changes to TR 2005/5

    AFMA noted that they were still working on their submission to the ATO in response to the proposed changes to TR 2005/5. Key points to be raised in their submission were as follows:

    • compliance issues in allocating overhead costs to specific activities
    • issues faced in relation to underwriting
    • whether the ruling was being updated in relation to all countries with a relevant treaty clause
    • administrative issues in relation to different wording and interpretation across different treaties

    Action item




    AFMA to provide their submission to the ATO.

    6. TA 2018/1

    AFMA provided the following feedback in relation to the release of TA 2018/1:

    • The alert had been well received.
    • No members had provided feedback to date that they were unsure of what transactions fell within the alert.

    The ATO noted the following:

    • The alert was drafted to be accessible to the broader community, but with sufficient detail to enable sophisticated participants in such arrangements to understand the ATO’s concerns, including as potentially applicable to arrangements other than those expressly set out in the examples.
    • The ATO welcomed any feedback regarding the application and interpretation of the rules in preparation for the publication of future ATO guidance.
    • The ATO also welcomed taxpayers to come forward regarding any transactions they considered could potentially fall within the alert.

    7. Liquidity Management Discussion paper

    AFMA noted that they were still working on their submission to the ATO in response to the liquidity management discussion paper. Key points to be raised in their submission were as follows:

    • the extent to which members would be able to comply with green zone examples
    • the extent to which a discussion of Part IIIB should be incorporated in the discussion paper
    • whether assets held offshore are necessarily not held for Australia’s benefit
    • the interaction with TR 2005/11
    • the interaction with the TOFA rules.

    The ATO noted that AFMA’s comments would be taken into consideration. However, the key focus of the discussion paper was on the following:

    • the threshold requirements for deductibility
    • the range and transparency of liquidity models employed by the banks
    • green zone examples and key red flags
    • the requirements of APS 210. To this end it was noted that the ATO had already met with APRA.

    The next steps were agreed as follows:

    • AFMA to provide a submission in response to the discussion paper
    • First working group meeting to be held following submission. AFMA noted that the key participants from AFMA would be representatives from the foreign banks, affected members from the outbound financial institutions, and advisory firms with experience in regulatory capital matters. The paper had also been circulated to the Bank Treasurers Forum.
    • It was agreed that AFMA would prepare the agenda for the first working group meeting with sufficient detail of what they would like to discuss for each issue.
    • It was agreed that AFMA would manage the interaction with the domestic banks and the ABA going forward.

    Action item




    • AFMA to provide submission in response to discussion paper
    • AFMA to prepare the agenda for the first working group meeting with sufficient detail of what they would like to discuss for each issue.

    8. Top 1000 program

    The ATO provided an overview of the Top 1000 program work to date. Key points of note were as follows:

    • the review will be undertaken on the entire economic group rather than on particular legal entities
    • the plan was to stagger the review of the banking taxpayers within the Top 1000 over the life of the 3 year program
    • there would be a focus on face to face meetings with both the tax team and key members from the bank’s business lines
    • A standard set of questions for all taxpayers within the Top 1000 has been placed on the ATO website. However, the questions issued to the banks under review would be tailored based on industry specific issues.
    • The review will look at a number of key areas including:
      • governance
      • book to tax calculations
      • tax risks flagged to the market
      • specific transactions.
    • Key areas of focus for foreign banks with branch operations were as follows:
      • business activities of the branch and tax performance in Australia, including an analysis of management accounts and reports
      • attribution of income, expenses and funding to the Australian operations
      • transfer pricing methodologies
      • remuneration of key personnel in the context of business and tax performance.
    • An overview of the process (in general) was provided as follows:
      • The first request for information would be issued.
      • The taxpayer would provide a presentation regarding the business (including presentations from key members from the bank’s business lines and discussions regarding attribution issues).
      • Follow up questions following the presentation and review of information provided.
      • Further requests for information.
      • Streamlined assurance report to be issued to the taxpayer with ratings for tax governance and levels of assurance for specific areas.
    • AFMA members raised the following questions:
      • To what extent would information previously provided to the ATO be known to the Top 1000 team?

        The ATO noted that whilst such information was taken into account, it may be some years since that information was provided. The ATO would still need to ensure that the information on file was contemporaneous and up to date.
      • Will taxpayers receive a rating relative to their industry peer group?

        The ATO noted that taxpayers would not receive a rating relative to their peers, but rather against the best standard of practice.
    • Will feedback be provided at an industry level to document how the banking industry is performing and common industry issues, for example through a formal industry report?

      The ATO noted the following:
      • A formal industry report will not be issued.
      • However, there are currently some gaps in the ATO’s understanding of the commercial and tax performance of some banks. The ATO may be in a better position to correct the record on the perceived performance of the industry as a whole where information is provided by taxpayers in order to close these information gaps.
      • This topic will be a rolling agenda item on the AFMA meeting agenda going forward.
      • The ATO will do a stocktake intermittently to determine whether guidance is warranted for common industry issues.

    9. Other business

    Other questions raised by AFMA were as follows:

    • Whether there had been any SGE penalties issued to date within the banking industry.
      The ATO noted that based on their knowledge to date, no SGE penalties had been raised within the banking industry.
    • Whether there had been any examples of the DPT applying to AFMA members in the banking industry.

    Action item




    ATO to provide feedback to AFMA regarding circumstances in which the DPT could apply to members in the banking industry.

      Last modified: 05 Nov 2018QC 57290