GST Stewardship Group key messages 21 March 2023

Key messages discussed at the GST Stewardship Group meeting 21 March 2023.

On this page

• Welcome and introductions
• ATO Second Commissioner update
• Cybersecurity in the GST system
• Engaging with clients in the Private Wealth market on GST
• Community and industry insights roundtable
• Small business by the numbers – Microbusinesses and GST
• Shadow economy program
• Membership refresh
• Treasury and ATO
• Attendees
• Guest attendees
• Apologies

Welcome and introductions

Co-chairs Will Day and Andrew Howe opened the meeting, which has the theme of ‘protect GST’. Conflicts of interests were canvassed, none declared. Will Day welcomed members and guests, including state and territory representatives from South Australia and Western Australia.

ATO Second Commissioner update

ATO Second Commissioner Jeremy Hirschhorn addressed the group, highlighting that consulting with Stewardship Groups provides the ATO with the insights to help make the tax system work better.

Jeremy outlined why the ATO has worked hard to develop effective measurement of tax gaps, utilising the resultant greater understanding of why things are not working well to improve the tax system. A big step forward will be to develop a ‘bottom up’ GST gap to supplement the current ‘top down’ measurement.

Jeremy discussed the significant opportunities digitalisation brings for the tax system, from a client segment perspective, particularly for small business, and from a tax perspective, for GST. Key to much of the tax digitalisation (and data holding) discussion is what, if any are the natural systems of business and how can we move/shape the tax system around those systems and data holdings. Jeremy also spoke about how the benefits of greater digitalisation can create a range of cybersecurity issues, such as digitally enabled identity fraud.

Members discussed the nature of natural systems and whether accounting systems are the natural GST systems or simply back-end processing systems. If they are not the natural systems for GST, what are the alternatives? Banking systems?

Cybersecurity in the GST system

The ATO outlined the impacts to business of cybersecurity attacks and the ATO’s system integrity controls. The 3 key areas that affect the ATO and other organisations are:

• scams
• identity protection issues
• cybersafety.

The ATO monitors and reports identified scams to relevant regulators and works closely with the Australian Competition and Consumer Commission and its Scamwatch area to manage scams. The ATO discussed identity protection measures, and the importance of responding to any messages about suspect usage and changes to your digital identity or ATO online accounts, in addition to keeping your digital identity secure.

The ATO advised members the Prime Minister had recently announced the appointment of a national coordinator for cybersecurity, who will sit within the Department of Home Affairs. The work of the Australian Cyber Security Centre also provides useful cyber safety guidance materials.

Member comments

Many of Australia’s top digital service providers do not report back to Australian authorities on cybersecurity issues because they are foreign-owned.

The number one security improvement for email systems to help stop identity fraud is to use multi-factor authentication (MFA). There was general discussion on how to encourage users to implement MFA to help prevent their systems being compromised.

Engaging with clients in the Private Wealth market on GST

The ATO briefed members on how the ATO currently engages with private groups on GST matters. An overview was provided on the tailored approaches taken across the Top 500, Next 5,000, Medium and Emerging and Commercial Deals programs, which includes assurance and risk-based approaches. Where appropriate, engagements will take an integrated approach with income tax.

An assurance approach is generally only undertaken in Top 500 integrated engagements. The assurance ratings for GST will contribute to the Top 500 private groups overall assurance rating.

Members’ questions focused on what, if any, trends are being seen by the ATO. For the Top 500 assurance approach, discussion focussed on understanding of the level of governance within the private wealth market and insights on how the GST Accounts Analysis tool (previously consulted on with members) has been implemented.

Community and industry insights roundtable

Members provided feedback and insights on a range of topics including consistency through the justified trust process in relation to the GST classification of goods, particularly food and medical supplies. Members said the lack of consistency in approach and the level of uncertainty on specific products were causing some anxiety among members of their associations.

Members talked about the role formerly played by the ATO industry food partnership forum which enabled the ATO and taxpayers to work together to try and resolve uncertainties. They said growth in the list of products necessitated the need to work more closely together to achieve greater certainty.

The ATO noted that it is working to update relevant public advice and guidance. It is looking to develop a comprehensive engagement strategy with all cross-sections of the industry to resolve issues and provide greater certainty, noting complex rules where multiple factors need to be considered.

A member said a recent survey they had undertaken highlighted a range of issues in relation to GST classification and other advice and guidance.

There was also discussion about how the ATO might be able to provide more specific information for tax agents on a range of topics relating to GST, including financial services and clients registering for GST.

Small business by the numbers – Microbusinesses and GST

The ATO provided members with an update on the demographics of the small business population, with a focus on microbusinesses (small businesses reporting less than $75,000 business income per year) and GST attributes.

Around two-thirds of Australia’s small businesses are considered microbusinesses. Only around 20% of these microbusinesses are GST-registered, compared to around 55% of all small businesses. The top 2 industries for GST-registered microbusinesses are Transport, Postal and Warehousing, and Construction.

The ATO is undertaking further work, including trend analysis, on this sector and will present more information at a future meeting.

Members asked a range of questions focused around obtaining a deeper understanding of this small business population.

Shadow economy program

The ATO noted that the Shadow Economy program is now focusing on reducing recoverable debt and investing in compliance, prevention, the Black Economy Standing Taskforce and the Illicit Tobacco Taskforce.

The ATO took members through Electronic Sales Suppression Tools (ESST), outlining what they are, how they have become more sophisticated and how the ATO is addressing them.

Member comments

A range of questions were asked relating to ESST including its contribution to the tax gap, ease of access to software and the feasibility to implement it.

Members spoke about the prevalence of quotes being provided in the construction and property renovation sector without GST included, potentially opening up the conversation for cash payment in return for no GST being charged.

A member acknowledged the ATO now refers to this program of work as the shadow economy but raised a concern that the prescribed name of the taskforce still contains a cultural insensitivity.

Membership refresh

Will Day updated members on the 2023 GST Stewardship Group membership refresh. This included the approach, how existing associations and individual members will be contacted, the incorporation of an expression of interest process, the appointment of a new external co-chair and its expected completion ahead of the meeting on 15 November.

Treasury and ATO

Members were provided with an opportunity to ask any questions on updates provided which included:

• legislation and consultation updates
• news and program updates
• GST public advice and guidance updates
• GST litigation updates.

Attendees

Guest attendees

Apologies