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  • Legal Practitioner Annual Round Table key messages 8 May 2017

    General topics for discussion

    Consultation with the Legal Profession

    The ATO recognised the importance of consultation, the role that legal practitioners have when it comes to influencing administration policy & law design, the ATO’s commitment to partnering with the profession and encouraging their contribution.

    It was acknowledged that legal practitioners interact with the ATO and experience the tax system in different ways and there is still room to improve when it comes to consultation with the legal profession and the ATO is open to suggestions from the profession.

    The Let’s Talk - Legal practitioner communityExternal Link launched in February 2017 allows the ATO to better engage and collaborate with the profession more broadly – legal practitioners can be kept up to date through our News Feeds or participate in online consultations.

    The ATO’s Working Together Framework explores how the ATO engages with intermediaries, including legal professionals, and sets out guidelines for building stronger relationships - the intention is to have transparent and consistent approaches across the ATO. Legal Professionals are being considered as part of this more general work as between the ATO and intermediaries. For more information on the framework visit Let’s Talk – Working together frameworkExternal Link.

    Members discussed what has worked well with the current consultation approaches and what has not worked well. Members recognised that improvements have been made to ATO.gov.au which has improved information for the profession. There is a necessity to continue to have a contact (through Legal Relationships Management) - practitioners to use the Legal Profession Relationships mailbox as the initial avenue to provide feedback and raise issues with the ATO.

    There was general agreement that forums such as the Round Table were useful to expose a broader range of issues. Where the need arises, meetings outside the Round Table can be held to focus on particular matters (as has occurred in the past in relation to debt matters).

    Concerns were raised by the members regarding legal practitioners becoming the authorised contact when acting on behalf of executors/administrators of deceased estates. This is an ongoing issue that the legal profession would like resolved. The point was stressed that legal professionals are different to other intermediaries given their fiduciary relationship with their clients and their role as Officers of the Court (which comes with its own set of obligations).

    Members advised that communication, when it comes to consultation or otherwise, should be through the various peak bodies and associations and where there are barriers, they requested the ATO to inform the Round Table members. There was an offer to have items published in the Bar and Law Association newsletters.

    The profession acknowledged and appreciated the involvement of the ATO in providing continuing professional development (CPD) opportunities.

    The ATO advised that the Policy Analysis and Legislation (PAL) business line works with Treasury on policy proposals and law design and welcomes feedback from the group which can be shared with Treasury.

    It would be useful to explore possible connections between the Dispute Resolution Working Group and the Legal Practitioner Round Table.

    New approach to guidance products

    The ATO provided the group with an overview of the Public Advice and Guidance Centre (PAG), the various guidance products available and ‘Project Refresh’.

    The PAG Centre works closely with other areas of the ATO to ensure guidance products are simple, succinct, timely and relevant.

    Law companion guidelines (LCG) are a type of public ruling that offer advice on our interpretation of new legislation from the moment the Bill becomes law. The purpose and nature of these can be found in LCG 2015/1.

    Practical compliance guidelines (PCG) are not public rulings; however they provide broad law administration guidance addressing the practical implications tax laws and the ATO’s administrative approach.

    LCGs are located under public rulings and PCGs under ATO Guidelines.

    Project Refresh is an ATO initiative to update, re-write and replace the large number of public rulings that have been produced over the years. There are currently 480 public rulings to be actively reviewed; however, not all are on the ATO website. Legal practitioners are encouraged to provide feedback in relation to these rulings when they available for consultation.

    Practitioners are encouraged to vote on what rulings need reviewing, engage in consultation, provide ideas for webinars on specific topics and any other feedback via the Let’s Talk – Public advice and guidance communityExternal Link.

    Any questions in relation to this agenda item can be emailed to Legal Profession Relationships.

    Law Administration Practice Statements - PS LA 2011/4 and 2011/7

    The ATO’s representative from the Operational Policy, Assurance and Law (OPAL) area updated the group on the current status of the review being undertaken in relation to Law Administration Practice Statements – PS LA 2011/4 Collection and recovery of disputed debts and PS LA 2011/7 Settlement of debt litigation proceeding.

    Round Table members were advised that OPAL are currently reviewing the two submissions received from the profession and engaging with other areas of the ATO that deal with disputed debts. The outcome will be shared with this group once the review is completed.

    Legal practitioners raised concerns with PS LA 2011/7, specifically that there is no guidance provided in the practice statement for settlements of non-disputed debts.

    Concerns were expressed that this practice statement does not provide enough clarity around the distinction between ‘compromise’ and ‘settlement’ of a debt. While this is a fundamental distinction by the ATO, it is not for the profession. The issue seems to be one of nomenclature and the way these terms are differently understood by the ATO and the profession.

    The ATO explained that the Review and Dispute Resolution (RDR) business line undertakes settlements in relation to disputed debt while the Debt area undertakes compromises of undisputed debt. The ATO needs to ensure that it understands the situation that it is dealing with and what is actually being proposed by a practitioner.

    Discussion items from the profession

    Taxpayer alert

    The ATO gave an outline of taxpayer alerts. These alerts inform taxpayers about high risk behaviour or areas of concern and are aimed at providing transparency regarding what the ATO sees as high risk.

    Taxpayer alerts are intended to target schemes, not the people involved. Alerts can issue in relation to things we have previously risk assessed and may also come from compliance activity. They are often issued before the full extent of a scheme or arrangement is known. While the ATO aims to issue these alerts as early as possible, they are subject to reasonable governance processes prior to publication given their potential impact.

    Fast Intensive Triage

    The ATO provided a summary on Review and Dispute Resolution’s Fast Intensive Triage (FIT) initiative for objection work. All objection work will now past through the FIT teams in the first instance – the FIT team consists of experienced objection officers and litigation officers, reviewing and assessing the objection in a timely manner (“triaging”).

    The FIT team have the initial conversation with the taxpayer or the representative to determine the best course of action. A large number of disputes are being resolved within one week; complex objections are being more quickly allocated to the relevant objection officer.

    It was reiterated that objections submitted on an ATO Objection form are received directly into RDR and legal practitioners are encouraged to use the form to avoid the objection being mislaid. Possible litigation cases are identified early in the process, with a view to preventing the dispute from continuing where possible.

    The FIT process is not a preferential service; rather it is a way for RDR to deal with its objection caseload with a view to improving overall the way it handles this type of work.

    Technical topics for discussion

    Debt matters

    Concerns were raised by the profession about the impact of the ATO’s use of garnishee and freezing orders. The profession asked if a discussion between the ATO and professionals could occur prior to any of these actions taking place – considering the potentially devastating impact that these actions can have on a person/business. It is imperative that the profession understands what considerations are in play when the ATO is looking to take these actions.

    It was decided that a separate meeting to discuss these issues be arranged due to the broad spectrum of scenarios involved, it would be useful to have cases studies to work through at the separate meeting.

    Australia’s Foreign Investment Framework

    An overview and brief history of Australia’s foreign investment regime was provided by the ATO’s Public Groups and International area.

    The ATO screens proposals for acquiring residential property to the Foreign Investment Review Board (FIRB) and noted there is a fee. Commercial and agricultural proposals also attract a fee but there are different thresholds. In addition, the screening of non-sensitive commercial and agricultural proposals moved from Treasury to the ATO on 1 April 2017.

    A large body of work is being undertaken in relation to the land register which is designed to collect data on purchases, sales and transfers of land and properties by foreign investors. Information on Australia’s foreign investment regime including applications, new rules relating to the land register and fees is available at ato.gov.au.

    Members advised that the medium tier law firms tend to be the ones involved in this type of work.

    Corporate Tax Avoidance Task Force

    The driver for this initiative arose out the Government’s efforts to ensure that multinational companies, public and private companies operating in Australia pay the right amount of tax. In the May 2016–17 budget the Government provided the ATO with $679 million in additional funding over four years.

    Since the implementation of the taskforce, the ATO has seen a positive impact on behaviour and an abandonment of non-compliant structures/behaviour – leading as well to an increase in GST revenue being raised.

    The Diverted Profits Tax commences on 1 July 2017. It is aimed at reducing multinational tax avoidance by preventing large corporates using schemes to avoid paying tax in Australia and transferring profits or assets offshore. The ATO is currently in the process of drafting public advice and guidance products.

    The ATO mentioned the Independent Assurance of Settlements (IAS) initiative which involves larger settlements being reviewed by former Federal Court judges. The IAS provides assurance to the community that the outcomes are fair and reasonable. The profession would like to be updated about the IAS initiative at future meetings.

    Commissioner’s remedial powers

    The ATO outlined the Commissioner’s remedial power (CRP) legislation that received royal assent on 28 February 2017. It is a discretionary power to modify the operation of the tax law in circumstances where entities will benefit. The power has limitations and any modifications made using the power must:

    • not be inconsistent with the intended purpose or object of the law
    • have a negligible budget impact
    • only apply where outcomes for an entity will be no less favourable than the existing law.

    Members highlighted that they would prefer to have legislative amendments made to the primary legislation at some point as opposed to a legislative instrument (which they would need to continue to check in addition to any legislation).

    The ATO acknowledged the difficulty for legal practitioners to continually check the legislation as well as the legislative instruments. Equally there was an acknowledged difficulty of getting these type of legislative fixes onto a legislative program - the use of the remedial power provided the ATO with a potentially quicker (and sometimes sole) option to address issues.

    It is anticipated that the power may be used approximately five times a year; it will be used as a last resort, in circumstances where there are no interpretative or administrative options available to resolve the issues.

    To date one legislative instrument has been drafted. Consultation on the CRP 2017/D1 Taxation Administration (Remedial Power-Foreign Resident Capital Gains Withholding Tax) Determination 2017 closed on 5 May 2017 and can be found on the ATO’s legal database.

    If legal practitioners have identified a situation where tax and superannuation law is leading to unintended negative consequences for taxpayers or creating excessive compliance costs, they can complete and submit a Commissioner’s remedial power assessment form.
    For queries please email the ATO at CRPSecretariat@ato.gov.au.

    Action items

    Action item LPRT 1705/1

    Consultation with the profession 

    Members to be provided with the minutes from the Dispute Resolution Working Group May 2017 meeting.

    Action item LPRT 1705/2

    Consultation – deceased estates 

    ATO to follow up on feedback on the Deceased Estates consultation.

    Action item LPRT 1705/3

    Law Administration Practice Statements – PS LA 2011/4 and 2011/7 

    A separate meeting is to be arranged to discuss the distinction between ‘compromise’ and ‘settlement’ of a debt.

    Action item LPRT 1705/4

    Fast Intensive Triage 

    A one page document on the Fast Intensive Triage to be provided to members.

    Action item LPRT 1705/5

    Debt 

    A separate meeting is to be arranged (in conjunction with Action item 3.1) to discuss in detail the ATO’s policy in relation to the use of Garnishee Orders and Freezing Orders. Members will be advised as soon as a suitable date can be confirmed.

      Last modified: 26 Jun 2017QC 52669