GST Advisory Group record of meeting, October 2014
Venue: ATO Offices, 747 Collins Street, Melbourne
Date: 15 October 2014
Start: 9.15am Finish: 3.20pm
Chair: James O'Halloran
Secretariat: Alison Zeitlhofer, Indirect Tax; contact phone: 02 6216 1013
James O’Halloran (Chair), Deputy Commissioner, Indirect Tax, ATO
Gordon Brysland, Assistant Commissioner, Tax Counsel Network, ATO
Paul Southwell, Assistant Commissioner, Government and Cross-Agency Relations, Indirect Tax, ATO
Caroline Arman, Analyst, Small Business Tax Division, Treasury
Chris Plakias, Head of Tax, GST and Technology Westpac, Member Australian Bankers’ Association
Ken Fehily, Principal, Fehily Advisory, Member CPA Australia
George Nikolaou Manager, GST WET and Excise, Coles Finance
Michelle de Niese, Assistant Director, Corporate Tax Association
Andrew Howe, Director, Greenwoods and Freehills Pty Ltd, Member Property Council of Australia
Matthew Nicholls, Executive Director, Ernst and Young, Member The Tax Institute
Michael Croker, Institute of Chartered Accountants in Australia
Katie Welsh, Assistant Deputy Commissioner, Reinventing the ATO working group, ATO
Giles Wilmer, Director, Commonwealth Taxes Unit, Queensland Treasury (for John Corlis)
Steve Howlin, Assistant Commissioner, Indirect Tax, ATO
Hoa Do, Tax Counsel Network, ATO (via telephone for item 4)
Peter Strong, Executive Director, Council of Small Business of Australia
John Corlis, States and Territories Representative
Rebecca Millar, Professor of Law, University of Sydney
Andrew Sommer, Partner, Clayton and Utz, Member Law Council of Australia
- GST and international developments
- GST self-assurance approach
- Reinventing the ATO
- Virtual currencies - bitcoin and others
- Refund provisions
- Consultation opportunities
The Chair reflected that this ATO stewardship committee was unique as it had not transitioned from an existing ATO committee. It is worth acknowledging the importance of having the right mix of agenda items for valuable discussion at these meetings, including broader issues raised through other forums and important events.
Next year will see some positive and challenging GST events such as OECD Working Party 9 application of VAT/GST to the international trade, the Board of Taxation’s Review of Tax Impediments Facing Small Business, and Reinventing the ATO program – all of which will ensure a meaningful work program for this committee.
As part of the ATO NTLG, a working group (consisting of professional body representatives) was formed to constructively engage with the ATO and Treasury on areas of the tax law where all stakeholders could benefit from safe harbours.
Michelle de Niese from the Corporate Tax Association (CTA) is a member of the working group. The working group identified a number of areas within the tax law where safe harbours currently exist and items relating to GST were identified. GST items included allowing mistakes to be corrected on another BAS, and allowing a recipient to retain an input tax credit that it has claimed where a transaction was incorrectly treated by a supplier as giving rise to a taxable supply - PSLA 2013–3 (GA).
Members agreed that it is appropriate for the GST Advisory Group to work in parallel and assist the working party as opportunities may present.
Members who have expressed a small business interest specifically, that is the Chartered Accountants Australia and New Zealand, and the Council of Small Business of Australia, will research the New Zealand GST environment to assist with the ATO’s reinvention transformation program.
- GST Advisory Group to work in parallel and participate and supplement the safe harbour working party/steering group.
GST and international developments
The ATO is engaging with OECD Working Party 9 to develop guidelines relating to the taxation of cross-border supplies of services and intangibles. Global agreement was reached at the Global VAT Forum, Tokyo in April 2014 in relation to the OECD guidelines concerning business to business transactions.
The guidelines recommended the use of a reverse charge collection mechanism. Governments and businesses worldwide support the guidelines. Notably, the OECD guidelines do not oblige countries to act in a particular way and each country will decide whether they choose to follow the guidelines.
The ATO’s role is to work with the OECD to gain an understanding of what is happening at an international level and influence the guidelines to ensure they are practical should they be adopted in Australia. Working Party 9 is currently considering business to consumer international guidelines for discussion and agreement at the Global VAT Forum in late 2015. The ATO advised that there has been no consideration by government on this matter and at this time the matters still are only being discussed by the OECD and countries will need to consider their individual approach at some stage in the future.
It was noted that the level of interest in this topic going forward from members was very high.
GST self-assurance approach
The ATO has been discussing the concept of integrity of business systems self-assurance for a while. The ATO is nearing the point of implementing a model. We want to move to a model and relationship with business where the ATO is given assurance by business rather than a relationship where we seek assurance. From the ATO’s perspective, self-assurance will enable us to apply more resources to those who choose not to comply. Taxpayers can expect that if they provide assurance, the ATO will apply a no touch or light touch approach.
The ATO has already discussed the matter with some accounting firms and on 16 October, the ATO consulted with the CTA in a half day workshop. We anticipate the approach will start with the large market where there is a high level of compliance, and we expect that the concept will trickle down into the other markets over time.
The ATO is seeking to implement soon once scheduled consultation is completed.
Reinventing the ATO
The world is reinventing and the ATO needs to make sure it stays relevant. Reinventing the ATO is taking a client focus in designing the future experience in the tax and superannuation systems – designing an experience which builds community confidence and making it easy to comply and hard not to.
The ATO is building on what we are doing well, addressing irritants in the systems to make it a better experience and adding services and approaches that make us contemporary – today and into the future. Co-design is a key part of our program – we are meeting with individuals, businesses, superannuation funds and other stakeholders to seek feedback on how we can better meet the needs of the community to assist them on ways to get things right.
This is a long term journey and just as the environment around us will continue to change, so the ATO will need to be agile, demonstrating visible progress along the way. Changes are already visible with initiatives such as the Independent Review and MyTax. Members provided parallel experiences for reinvention in their own companies and industries.
Members commented about the irritants with the AUSkey experience versus UK and NZ with similar technology. ATO’s service offerings need to be more accessible and easier to use. The ATO is investigating in new technology – for example, web chat.
We have just implemented via a soft launch a click to chat after hour’s service that provides straight forward answers online. This is the first time the ATO has had a web chat facility. It is a big step for the ATO; symbolic but important. There are lots we could learn from banks who have been transforming their online banking platforms to meet current client expectations and position themselves for the future. For example, one bank now allows customers to access accounts from more than one organisation with one authentication.
We are at the early stages of design around the future experiences. There will be further detailed design work around bringing these experiences to life.
- The ATO will provide GST Advisory Group members with a verbal update on re-inventing the ATO in November/December 2014.
- GST Advisory Group members to advise ideas for co-designing scenarios linked to both GST and excise experience, for example, what may a large GST experience be?
Digital/virtual currencies (including bitcoin)
The Senate Economics References Committee is conducting an inquiry into digital currency. The inquiry will consider arguments for an effective regulatory system for digital currency, the potential impact of digital currency technology on the Australian economy, and how Australia can take advantage of digital currency technology.
It was reported that, on 20 August, the ATO released draft GSTR 2014/D3: the GST implications of transactions involving bitcoin, along with a guidance paper: Tax treatment of crypto-currencies in Australia – specifically bitcoin. The ATO’s view is that bitcoin is neither money nor a foreign currency, and that the supply of bitcoin is not a financial supply for GST purposes. In reaching this position, the ATO took advice from the Solicitor General, Justin Gleeson SC.
The final GSTR is scheduled to be discussed at the Public Rulings Panel meeting on 13 November 2014. It is anticipated that the public ruling will be finalised and issued late 2014 or early 2015, and that it may include a further example.
Industry indicated that they were hoping that the ATO would form a different view about bitcoin but understood the approach reflected legislative requirements.
There was a general consensus that the ATO could get better at providing early advice on emerging issues, especially in this digital age where new products and services are becoming available at a rapid pace. Crowdfunding was mentioned as an example.
- GST Advisory Group members to provide feedback if practical guidance for bitcoin has not hit the mark.
New refund provisions
On 24 September 2014, GSTR 2014/D4: the meaning of the terms ‘passed on’ and ‘reimburse’ for the purposes of Division 142 of the GST Act 1999 was issued to clarify the operation of new Division 142. New Division 142 was necessary to rectify problems with prior section 105-65 which were highlighted cases such as:
- KAP motors
Comments/submissions can be made until 7 November 2014.
Historically refund restrictions have always been controversial. The fundamental principle is that GST should not be refunded if there is to be a windfall gain. Self-assessment allows taxpayers to determine against objective criteria if there is excess GST paid, whether or not GST has been passed on. The onus is on the taxpayer to show that GST was not passed on to the customer. There is no different application of Division 142 for small business; the ruling will apply equally to all taxpayers. The draft ruling includes a number of examples, as well as helpful flowcharts to assist taxpayers understand the new provisions.
Members questioned why there could not be reimbursement under a separate set-off contract. This and other queries will be taken into account in finalising the ruling, including keying/coding error situations.
The following GST matters have just been finalised or are currently being consulted on:
- GST refund verification processes submitted by the Tax Institute
- Development of financial supplies guidance products with Australian Bankers' Association and the Australian Financial Markets Association
- New apportionment assurance product for financial supply providers to help reduce compliance burden
- GST treatment of motor vehicle incentive payments with the motor vehicle industry
- Draft guide on luxury car tax with the motor vehicle industry
- Review of our advice and guidance products and processes
- Red tape reduction
- Proof of Identity procedures for non-residents
ATO to circulate: consultation paper, NTLG paper and reinventing the ATO presentation to members.
Other major events impacting on GST:
- Case outcomes
- ATS pacific 17 October 2014
- MBI Melbourne Cup day 4 November 2014
- Public Hearings
- Parliamentary Hearings into ATO and dispute resolution
- Parliamentary hearing into Large corporates and bitcoin
- Public Media
- Increasing focus on GST/ VAT and Tax Reform
Via telephone hook-up 25 November 2014
A schedule for 2015 quarterly GSTAG meetings has issued. Meetings will be held on: 19 February, 21 May, 27 August and 12 November 2015.
ATO contact: Alison Zeitlhofer, (02) 6216 1013; GSTAdvisoryGroup@ato.gov.au
The GST Advisory Group encompasses a business, academic and broader community perspective on the operation and sustainability of GST.