National Tax Liaison Group key messages 11 June 2020

Key highlights

• Vale Paul Drum – Condolences were expressed on the sudden and unexpected loss of former National Tax Liaison Group (NTLG) member Paul Drum.
• Update on Treasury’s review of JobKeeper scheme
• COVID-19 response and discussion on further emerging issues related to stimulus package measures. Members commented that the public advice and guidance products and general support by ATO staff was exceptional. The ATO noted that consultation with NTLG members was valuable and appreciated.
• Overview of the administration of the ‘temporary reduction in monetary thresholds to zero’ measure by the Foreign Investment Review Board in response to COVID-19 – Members noted that the administration of the current zero threshold is working well.
• Discussion of the impacts of COVID-19 on Tax Time 2020 and on the progress of work for OECD Pillar 1.

Opening comments

Kirsten Fish, Acting Second Commissioner, Law Design and Practice Group, ATO; and Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand

NTLG Co-chair Kirsten Fish welcomed members and explained that the agenda has been restructured to focus on four broad topic areas – Policy, Law, Administration, and Operations. Kirsten Fish reiterated that the objective of the NTLG was to provide a forum for the discussion of important strategic and systemic issues for which members have an interest in working together to develop collaborative solutions.

NTLG Co-chair Grant Wardell-Johnson noted that it is important to take the positive learnings and behaviours from the COVID-19 environment and take them forward into the post-COVID environment. Grant Wardell-Johnson acknowledged the NTLG’s role in consultation on the Government’s recent stimulus measures, particularly regarding the JobKeeper scheme. Grant Wardell-Johnson expressed his appreciation to the ATO and Treasury for the trust placed in NTLG members and providing them with the opportunity to provide feedback on the measures.

Vale Paul Drum

On behalf of the Commissioner, the ATO and NTLG members, Kirsten Fish expressed her condolences on the sudden and unexpected loss of former NTLG member Paul Drum, General Manager of External Affairs, CPA Australia. Paul Drum was a highly respected member and made a significant contribution to the NTLG and other ATO forums over many years.

Grant Wardell-Johnson acknowledged the unexpected loss of Paul Drum noting that he was a very influential, practical and compassionate person. Paul Drum’s humour in expressing his concerns in a very witty way had a lot of impact.

NTLG Treasury representative Maryanne Mrakovcic expressed her condolences on the sad loss of Paul Drum.

OECD Pillar 1

Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; Maryanne Mrakovcic, Deputy Secretary, Revenue Group, Treasury; and Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO

Members raised this item to discuss the status of the OECD Pillar 1 work and the progress of this work during the COVID-19 crisis.

Treasury representative Maryanne Mrakovcic noted that work is continuing, however, it is almost inevitable that the impact of COVID-19 may have implications for the currently planned timeframes. Countries are keen to reach a solution but there is some disagreement on the details and whether the solutions for Pillar   and Pillar 2 could be delivered as a comprehensive package. The OECD is working with all countries to try to resolve the issues.

No word as yet on a public consultation process.

International tax policy settings

Clint Harding, Law Council of Australia; Peter Godber, The Tax Institute; Maryanne Mrakovcic, Deputy Secretary, Revenue Group, Treasury; Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO; and Karen Rooke, Acting Deputy Chief Tax Counsel, Tax Counsel Network, ATO

Members provided examples of recent court decisions and ATO rulings that members considered have contributed towards ambiguity and inconsistencies within the international tax policy settings.

Members noted concerns around uncertainty, unfairness and a lack of consistency, particularly the disparity of treatment for discretionary and fixed trusts and that there was some confusion regarding the policy settings for this. The ATO noted that the relevant legislation was intentionally very targeted and deliberately distinguished between discretionary and fixed trusts.

It was agreed that Kirsten Fish and interested NTLG members further discuss out-of-session the next steps regarding the issues raised on this matter.

Treasury review of JobKeeper

Maryanne Mrakovcic, Deputy Secretary, Revenue Group, Treasury; Michelle Rak, Assistant Secretary, JobKeeper Division, Treasury; Kathleen de Kleuver, JobKeeper Division, Treasury; Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, ATO; Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation; ATO; and Anna-Maria Stephens, Assistant Commissioner, Tax Counsel Network, ATO

Members wanted to discuss how they can continue to contribute to the review of the JobKeeper scheme being undertaken by Treasury. Members indicated they would like to be involved in consultation on any proposed modifications that may be introduced in the next phase of the scheme.

Treasury representative Michelle Rak advised that Treasury has commenced a review of the JobKeeper scheme and that the review is expected to be completed by the end of June 2020. The Government is proposing to incorporate the outcomes of the review in the Government’s economic and fiscal update on 23 July 2020.

Grant Wardell-Johnson asked if there are any insights from the consultation process that was undertaken for the JobKeeper scheme. Michelle Rak noted that it was a very limited consultation in relation to the initial rules due to time constraints. The consultation process was successful in that feedback was provided quickly and had identified the key issues.

Michelle Rak noted that if there are any proposed changes to the JobKeeper scheme, Treasury will again consult with NTLG members and other stakeholders for feedback. Michelle Rak thanked members and acknowledged the members’ role in participating in consultation and providing feedback to date.

COVID-19 response and further or emerging issues related to stimulus package measures

All members, Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, ATO; Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO; and Anna-Maria Stephens, Assistant Commissioner, Tax Counsel Network, ATO

Kirsten Fish invited members to raise any emerging issues related to the stimulus package measures.

Members commented that the public advice and guidance products and the general support by ATO staff was exceptional through COVID-19. Members provided positive feedback on some of the guidance the Commissioner has issued, particularly regarding the usefulness of the examples given in the guidance for service entities. Members acknowledged that the ATO’s response to emerging issues was quick and that guidance on issues was timely. Andrew Orme noted that it was a very challenging period and that consultation with NTLG members was valuable and appreciated.

Members queried whether there would be a process in place for end-of-year Tax Time technical issues related to COVID-19 to be raised and how these should be communicated to the ATO, for example Division 7A, and debt.

Kirsten Fish noted that issues under consideration were being published on the ATO website. Andrew Orme advised he would confirm if the issues under consideration were still currently published on ato.gov.au and their location. Andrew Orme also advised the ATO is considering how to improve and integrate the publishing of information on end-of-year key technical issues with the information currently published related to the stimulus measures rather than continuing to publish frequently asked questions.

Andrew Orme noted that the ATO will be implementing a streamlined process to apply for administrative relief for taxpayers who are unable to make the minimum yearly repayments on their Division 7A loans for the 2019–20 year.

Andrew Orme invited members to send any issues related to COVID-19 they consider would benefit from further advice and guidance to COVID-19Taxissues@ato.gov.au

Kirsten Fish asked members to consider, from a user perspective, where and how COVID-19 information could be presented and published and to send their suggestions to COVID-19Taxissues@ato.gov.au

Post meeting comment:– COVID-19 issues the ATO is currently considering are available and published on the ATO website COVID-19 frequently asked questions.

Administration of the ‘temporary reduction in monetary thresholds to zero measure’ by FIRB

Michelle de Niese, Corporate Tax Association; Roger Brake, Division Head, Foreign Investment Division, Treasury; Michael Ingersoll, Acting Deputy Commissioner, International, ATO; and Keir Cornish, Assistant Commissioner, International, ATO

On 29 March 2020, the Treasurer announced that due to the impacts of COVID-19, all monetary thresholds will be temporarily reduced to $0External Link, and that the Foreign Investment Review Board (FIRB) will work with applicants to extend the timeframes for decision making to up to six months.

Members wanted to discuss how the ATO is approaching FIRB applications in the context of the ‘zero monetary thresholds’ measure. Treasury representative Roger Brake provided an overview of the Government’s approach to ensure adequate oversight of foreign investment in Australia during the COVID-19 period. Additional resources helped to deal with cases quickly with a streamlined process and attention on cases that were urgent. Treasury and the ATO have worked closely for a quick turnaround of cases considering the impact on the economy and jobs.

Members noted that the administration of the current zero threshold is working well.

Members queried the drivers for the recently announced reforms to Australia’s foreign investment frameworkExternal Link that will be effective from 1 January 2021. Roger Brake noted that there have been several changes to the broader environment including changes in technology, privatisation of state assets, and use of data, as well as the importance of national security, that were considered prompting the reforms.

FIRB – Guidance Note 47

Roger Brake, Division Head, Foreign Investment Division, Treasury; Michael Ingersoll, Acting Deputy Commissioner, International, ATO; and Keir Cornish, Assistant Commissioner, International, ATO

Treasury provided members with a draft FIRB Guidance Note 47 that included revisions reflecting members’ request for clarity on a process for how an applicant could engage in tri-partite discussions with Treasury and the ATO. This would provide an applicant with the opportunity to understand why a condition is imposed and not to question the condition itself.

Roger Brake noted that tri-partite discussions would be possible for complex or novel cases, and it would not generally be used for standard tax conditions. An applicant can request a tri-partite discussion if they would like to engage with Treasury and the ATO.

Members provided positive feedback on the inclusion of the information on tri-partite discussions and tax risks in the draft Guidance Note. Members noted that previously there was a reference to undertakings being provided to achieve a low risk rating where certain required information cannot be provided. Members queried if this information should remain and be included in the draft Guidance Note. Roger Brake noted that he will confirm this issue to members out-of-session.

Members noted they will provide further feedback to Roger Brake on the draft FIRB Guidance Note 47.

Tax Time 2020 update

Tony Greco, Institute of Public Accountants; Grant Brodie, Deputy Commissioner, Client Account Services, ATO; Hoa Wood, Deputy Commissioner, Individuals and Intermediaries, ATO; and Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, ATO

This item was to discuss anticipated tax time pressures for the profession and the ATO, and to consider how the professional associations and the ATO can work together to address those pressures.

Discussions focused on the early lodgment of returns before pre-fill information is available, the increased demand for information about new payment types and deduction claims, and the impacts of COVID-19 on how the tax profession is preparing for Tax Time 2020.

Deputy Commissioner Grant Brodie noted that the ATO’s call volumes are significant and these are expected to increase in July 2020. It is also expected there will be a surge in early lodgments to access refunds as soon as possible. Members asked whether the ATO could provide some information on the common errors that occur as a result of early lodgment before pre-fill information is complete. Deputy Commissioner Hoa Wood agreed to share the information on common errors with NTLG members.

Members anticipated there could be requests for information regarding the tax treatment of payments made under the JobKeeper and Jobseeker schemes and in relation to work-related expenses. Hoa Wood noted that the ATO has published information on Tax Time essentials 2020 that includes guidance for the lodgment of tax returns.

Kirsten Fish invited members to provide Hoa Wood with information on any other emerging issues related to Tax Time and to provide suggestions if additional guidance on issues is required.

Hoa Wood noted that the ATO is working with members of the Tax Practitioner Stewardship Group to develop communications and content for the professional associations’ newsletters.

Administration in near term and transition to traditional activities

Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; Jeremy Hirschhorn, Second Commissioner, Client Engagement, ATO; Kirsten Fish, Acting Second Commissioner, Law Design and Practice, ATO; and Deborah Jenkins, Deputy Commissioner, Small Business, ATO

Second Commissioner Jeremy Hirschhorn provided an overview of the ATO’s compliance activities during the COVID-19 period.

• The ATO contacted taxpayers for any compliance work that was in progress to provide the option to either continue or pause the activity.
• No new ‘ordinary’ compliance work was commenced but the ATO has continued to commence work and increased its focus on fraud related compliance activities.
• In general, most debt recovery work was put on hold resulting in an increase of outstanding debts.
• There has been significant work on providing advice and guidance on issues related to the stimulus measures.
• ATO staff have been redeployed to priority areas to assist with the implementation of the stimulus measures and to call centres to assist with the increased volume of calls particularly during Tax Time. It is expected that staff will return to their substantive positions in the next few months.
• The ATO is currently working on a detailed strategy to progressively transition and return to its traditional compliance activities noting that this will vary for the different market segments.

Deputy Commissioner Deborah Jenkins briefed members on the activities undertaken relating to small business and GST during the COVID-19 period.

• All client compliance activity has been deferred to 31 August 2020 (this does not include ‘pre-issue’ work such as GST refund integrity). However, around 50% of clients, when asked, chose to continue their compliance work during this time.
• The ‘Small Business Income Tax Gap’ is underpinned by the Random Enquiry Program that is used to inform the income tax gap. The ATO is considering how to progress this work noting that the Program involves contact with the taxpayers through compliance activity.
• The ATO has increased its focus on GST refund integrity activities to identify fraudulent refund claims.
• The ATO has suspended its activities relating to the Black Economy Program during this time.

CPA Australia representative Alexis Kokkinos noted that the deferral of all client compliance activity to 31 August 2020 had not been communicated to some members of the tax profession. Deborah Jenkins asked that members provide the ATO with any specific examples where the ATO did not contact taxpayers to provide the option to either continue or pause a compliance activity that was in progress. Deborah Jenkins agreed to review the information and discuss this issue with Alexis Kokkinos out-of-session.

CPA Australia representative Elinor Kasapidis noted that in the current environment there are many businesses facing potential insolvency. It was noted that a checklist of indicators for insolvency would be useful for tax professionals to assist them to identify clients that indicated potential insolvency risk and should be referred to an insolvency practitioner. Deborah Jenkins noted that an out-of-session discussion will be undertaken with Elinor Kasapidis regarding the development of a checklist of indicators for insolvency.

NTLG action items update

Justen Nixon, Senior Technical Adviser, Tax Counsel Network, ATO

Justen Nixon provided a status update on open action items:

• NTLG 1903/3 – Consultation arrangements for new legislation and related guidance

This action item was deferred for discussion at the 8 September 2020 NTLG meeting.

• NTLG 1911/1 – Establishment of NTLG sub-group to consider compliance costs

This item was to be deferred for discussion at the 8 September 2020 NTLG meeting. Grant Wardell-Johnson noted that it may be more appropriate to discuss this action item in six months when the current environment has improved. The proposed discussion is to focus on compliance costs across all markets and will be deferred to the 26 November 2020 NTLG meeting.

The ATO noted that PwC had recently published a report that suggested that Australia’s compliance costs for the Individuals market are going down. The ATO will circulate the PwC report to NTLG members for their information.

Post meeting comment:– The PwC report – Where next for Australia’s tax system? (PDF 2.3MB)This link will download a file was circulated to members on 19 June 2020.

• NTLG 2003/1 – Phoenix activity – addressing agent behaviour

A further discussion is planned between Elinor Kasapidis, Michael Croker, Will Day and George Montanez.

• NTLG 2003/2 – Lodgment deferrals

This matter was discussed at an out of session NTLG meeting on 20 April 2020.
The ATO has updated its website Support for tax professionals with published information relating to lodgment deferrals and the waiver of penalties for clients impacted by bushfires and COVID-19.

Members agreed that action item NTLG 2003/2 can be closed. Action items NTLG 1903/3, NTLG 1911/1 and NTLG 2003/1 are to remain in progress.

Attendees

Apologies