National Tax Liaison Group key messages 8 September 2020

Key highlights

• Overview of the Modernising Business Registers Program including the introduction of Director Identification Numbers.
• Discussion of ATO’s compliance approach for Phase 1 of the JobKeeper program.
• ATO’s approach to debt collection in the current climate and post-COVID environment.
• Voluntary Tax Transparency Code and the low take-up and adoption by large corporate groups.
• Overview of the ATO Corporate Plan 2020–21.
• Update on OECD Pillar 1 and Pillar 2.

Opening comments

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

National Tax Liaison Group (NTLG) Co-chair Deborah Jenkins welcomed members acknowledging the current situation affecting the Victorian members. Deborah Jenkins noted that The Tax Institute’s representatives Professor Robert Deutsch and Stephanie Caredes (NTLG Professional Bodies’ Coordinator), and Georgina Wade, Assistant Commissioner, Enterprise Strategy and Design, are stepping down from the NTLG. On behalf of NTLG members, Deborah Jenkins thanked them for their contributions to the NTLG.

NTLG Co-chair Grant Wardell-Johnson noted that this year has been a challenging one due to the COVID-19 crisis with impacts that will be difficult, deep-seated and long-term. There is an opportunity to reconsider how to deal with matters such as debt, budgets and other issues that have not yet surfaced.

Modernising Business Registers program

Michelle Crosby, Deputy Commissioner and Deputy Registrar, Commonwealth Business Registry Service, ATO; Eleanor Beer, Director, Commonwealth Business Registry Service, ATO

Michelle Crosby provided an overview of the Modernising Business Registers program, noting the following:

• The ATO is leading the program to revise and modernise the Government’s multiple business registers. The regulatory responsibility for the relevant subject matter remains with the respective agencies.
• The new registry service will consolidate the Australian Securities and Investments Commission and the Australian Business Register registries at the ATO and provide a digital user interface for the full business registry lifecycle.
• Progress on the program has been impacted by COVID-19 over the last six months.
• The Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019External Link was passed by Parliament in June 2020.
• The appointment of the Commonwealth Business Registrar is expected in early2021.
• Public consultation for the data standards and disclosure framework legislative instruments is planned for September–October this year. This will determine what information may be public versus private for director identification numbers.
• The Director Identification Number will enhance company and director data improving the ability to detect illegal phoenix activity and providing full transparency of companies a director is linked to and the changes over time.
• A communication campaign will be rolled out to educate directors on their obligations. Additional campaigns will be designed to educate directors on the requirement to link their Director Identification Number to their companies, once the Companies register is transitioned to the new registry platform.
• There are additional proposed changes to the ABN system as part of the ‘Strengthening the ABN system initiative’ with legislation to be introduced in early 2021
  • from 1 July 2021, ABN holders will be required to lodge an income tax return
  • from 1 July 2022, ABN holders will be required to annually confirm the accuracy of their information on the Australian Business Register.
   

Members raised the following questions:

• Have the efficiencies for government and business been identified? The ATO noted that it is expected to deliver efficiencies for business.
• What is the status of costs? The ATO will collect fees related the maintenance of the register, for example, annual renewal fees, business name registration.
• What is the role of intermediaries? The ATO noted that a director must apply for a Director Identification Number. Intermediaries can inform directors of their obligations and support them during the application process.
• What happens if a director does not participate? The ATO noted that a company will have to nominate the identification numbers of its directors. In addition, there will be penalties for not participating.
• Will the Director Identification Number be linked to the TFN? The ATO stated that in the application for the Director Identification Number, the director will be asked to supply their TFN, but it is voluntary.

JobKeeper

Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; James O’Halloran, Deputy Commissioner, JobKeeper Payment Program, ATO; Michael Morton, Assistant Commissioner, Public Groups, ATO; and Sandra Farhat, Assistant Commissioner, Integrated Compliance, ATO

The existing JobKeeper scheme runs until 27 September 2020 (Phase 1). The Government has announced that the JobKeeper scheme will be extended from 28 September 2020 until 28 March 2021 (Phase 2). Members raised this item to discuss the ATO’s compliance approach to Phase 1 of JobKeeper and how this will be balanced against the roll-out of Phase 2.

James O’Halloran noted that the work for JobKeeper Phase 1 is continuing concurrently with the work for JobKeeper Phase 2. Phase 2 provides for continued economic support with a tightening of criteria covering turnover and eligibility. Phase 2 introduces the tiering of payments based on the number of hours worked.

James O’Halloran advised that the ATO is seeking to improve its processes and is aiming for less interventions prior to making payments. The ATO will assist taxpayers to complete the application process by providing visibility of information that it currently holds, for example, variances or previous ineligibility, that is relevant to determining turnover. This should provide a better user experience and assist with the ATO’s monitoring for compliance.

Alternative tests for determining turnover and payment rates will be available in some circumstances. Taxpayers will be required to advise the ATO when an alternative test is being used and this will assist with the ATO’s processes. The ATO has a good understanding of scenarios that apply to taxpayers and this will inform the public advice and guidance that is required.

Co-chair Grant Wardell-Johnson congratulated the ATO on some of the positions it has taken during Phase 1, for example, Practical Compliance Guideline PCG 2020/4 Schemes in relation to the JobKeeper payment providing guidance on the application of Section 19 of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020External Link and what is derived in the ordinary course of business for the aggregate turnover test. Co-chair Deborah Jenkins thanked members for their contributions to the JobKeeper consultations.

Debt collection

Michael Croker Chartered Accountants Australia and New Zealand; and Vivek Chaudhary, Deputy Commissioner, Debt and Lodgment, ATO

Members wanted to discuss how the ATO intends to undertake debt collection in the current climate and post-COVID-19 environment.

A meeting with representatives from a small group of professional associations was held on 12 August 2020 to discuss the ATO’s approach regarding small business with debt. Following the discussion, the professional associations provided a summary of professional perspectives on COVID-19 impacts related to small business.

Deputy Commissioner Vivek Chaudhary noted that both pre and post COVID-19 most taxpayers made payments on time and most amounts are paid without any intervention. In the current environment, there has been an increase in the number of taxpayers seeking additional time to lodge or seeking a payment plan. The ATO has developed a plan for tailored engagement focused on providing assistance to taxpayers facing difficulty meeting their obligations and will work with taxpayers to determine what support may best suit their circumstances.

Members noted concerns that some taxpayers have been asked to confirm that they would become insolvent without a deferral. The ATO noted that deferrals may be provided in a range of circumstances, not limited only to insolvency concerns. In considering deferrals, there is a distinction between taxes collected or withheld from others and passed on or tax to be paid, for example, an entity’s own income tax. The ATO advised that further consideration of the approach was necessary and confirmed that a panel was established to consider deferral requests. The panel has worked well and continues to operate.

Members discussed the current status of debt litigation. The ATO noted that existing cases continued but there has been a pause on some compliance work that may impact on preparing further cases for litigation.

The ATO encourages taxpayers facing difficulty meeting their obligations to come forward and discuss this with the ATO so assistance can be provided in a timely manner.

Voluntary Tax Transparency Code

Jeremy Hirschhorn, Second Commissioner, Client Engagement; All members

The ATO encourages large corporate groups to adopt the Voluntary Tax Transparency Code (the Code). This includes entities treated as companies for Australian tax purposes and foreign multinationals with operations in Australia.

Jeremy Hirschhorn noted that there has been a low take-up of the Code and asked members for their views on:

• why there has been a low take-up of the Code
• what the professional associations are doing to encourage take-up
• the role of the private sector in increasing take-up
• the quality and consistency of current disclosures.

Members noted that there is no resistance to adopting the Code but there may be a lack of understanding by corporates of the opportunity and benefits to disclose under the Code rather than viewing it as another compliance cost.

Members comments included:

• Several entities have signed up, but never reported, while others have only reported once.
• Some entities do not see the value in providing this information. For example, one organisation noted that this information is in their annual report and it would be an additional cost to provide the information according to the Code.
• Corporations are already providing a lot of the information to the ATO with NTLG members acknowledging that the ATO cannot share this information.
• Published reports can be accessed at data.gov.auExternal Link. There are many broken links on the website to this information. Members discussed the quality and consistency of information being provided by taxpayers to the ATO.

Members noted they are keen to engage with the ATO to consider how they can assist and encourage corporates to adopt the Code.

The Board of Taxation undertook a Post-Implementation Review of the code, with initial consultation held in August, September and October 2018. Members asked about the status of the review and whether The Board was expected to outline any suggested changes to the code.

ATO Corporate Plan 2020-21

David Allen, Deputy Commissioner, Enterprise Strategy and Design, ATO; and Georgina Wade, Assistant Commissioner, Enterprise Strategy and Design, ATO

Deputy Commissioner David Allen provided an overview of the ATO Corporate Plan 2020–21 that was released on 19 August 2020. The ATO took a more streamlined, top-down approach to develop the plan, driven by the ATO Executive. A summary of the ATO’s role in supporting the Government’s response to COVID-19 has been included in the Corporate Plan.

This year’s Corporate Plan identifies eight strategic initiatives that demonstrate the ATO’s priority areas for 2020–21 contributing to the ATO’s 2024 aspirations – or most significant in terms of the ATO’s role in supporting economic recovery:

• Four initiatives collectively demonstrate the ATO’s ongoing commitment to transformation and are crucial to realising the ATO’s 2024 aspirations:
  • Focus on what matters most: – Become a more purposeful organisation and improve client and staff outcomes by ensuring our operating model focuses on the highest value activities, understood and measured on an end-to-end basis.
  • Optimise interactions through self-service channels: – Create better experiences, making self-service channels the preferred option for the majority of clients and their agents.
  • Improve small business tax performance: – Improve the tax performance of small businesses by integrating tax reporting mechanisms and making verifiable data easier for them to provide, access and use.
  • Strengthen cybersecurity: – Protect our organisation, clients and other ecosystem partners from cyber threats and data breaches.
   
• Two initiatives relate to the ATO’s response to COVID-19:
  • Deliver government stimulus measures: – Administer government stimulus measures in response to COVID-19 in a way that meets community expectations and ensures fairness in the system.
  • Embed new ways of working: – Harness insights from COVID-19 and build on our progress to create an agile workforce with the right culture, capability and staff experience to position us for the future.
   
• One initiative relates to the ATO’s ongoing focus on being streamlined, integrated and data-driven – harnessing the breadth of opportunities related to data:
  • Unlock our data potential: – Improve the way the ATO collects, manages, shares and uses data, to build confidence and drive actions that maximise value for the ATO and the community.
   
• One initiative relates to building core government services:
  • Establish the Commonwealth Business Registry Service: – Operationalise a single business registry service, including director identification numbers, to support streamlined services and make it simpler for businesses to interact with government.
   

Members discussed various sections reported in the Corporate Plan, including:

• Appendix A – ATO performance
  • The information notes that the targets are constant through to 2024 rather than increased performance or decline due to COVID-19. The ATO noted they are steady targets as the ATO strengthens the governance of the system. An increase in targets may be reflected in the next Corporate Plan as the relevant information becomes available.
   
• Performance measures – Strategic objective C1
  • There is a reference to the cost of compliance for the individuals market. Members noted that this should cover the information across all markets.
  • Compliance cost – The ATO noted the cost of compliance is one of the measures the ATO is reviewing across several initiatives. There is a current focus of red tape reduction in the small business initiative.
  • ‘Tax assured’ taxpayers – Members noted it would be helpful for the ATO to provide more detail about how the ATO reaches a ‘tax assured’ position as it appears that this is now being applied across more markets and queried how the calculation of 46% was reached.
    The ATO noted ‘tax assured’ is a positive indicator of health of the system. One element is regarding one to one interaction at the top end of the market and the other element is driven by third party data, for example, salary and bank interest. Information regarding this is available on the ATO website.
   
• Small business performance initiative
  • Members requested a more detailed discussion about small business performance improvement, for example, more information about the terms used, the role of the profession and noted that co-design would be required. The ATO advised that consultation would be undertaken in due course at the stewardship group level followed by a strategic discussion with NTLG members.
   

Treasury Update

Maryanne Mrakovcic, Deputy Secretary, Revenue Group, Treasury

Maryanne Mrakovcic noted:

• The 2020–21 Australian Federal Budget will be announced on 6 October 2020.
• Treasury are finalising processes for the Government to reach final decisions on measures.
• Progress of legislation
  • 14 tax measures have passed the Senate and received Royal Assent since the 11 June NTLG meeting. These included the Instant Asset Write-off extended to 31 December 2020, the variation in the gross domestic product (GDP) adjustment factor on pay as you go instalments, technical amendments to cash flow boost measures and the hybrid mismatch rules.
  • There are currently five tax measures before the Senate including the Research and Development Incentive and superannuation.
   

Members queried whether the delay of the Federal budget from May 2020 to 6 October 2020 would impact the timing of a budget announcement next year. Members were interested in the lock-up arrangements for the October 2020 budget. Maryanne Mrakovcic noted that, at this stage, it is expected that the usual budget announcement will occur in May 2021 and that the Federal Government will also provide a Mid-Year Economic and Fiscal update. The government is currently working on the proposed lock-up arrangements for the 6 October 2020 budget.

Post-meeting update – The Treasurer, The Hon Josh Frydenberg MP and Senator The Hon Mathias Cormann, Minister for Finance, issued a joint media release on 11 September 2020 regarding the Budget 2020–21 lock- up arrangementsExternal Link.

Update on OECD Pillar 1 and Pillar 2

Michael Croker, Chartered Accountants Australia and New Zealand; Kathryn Davy, Principal Adviser, Corporate and International Tax Division, Revenue Group, Treasury; and Eugene Mazzulla, Acting Senior Adviser, Corporate and International Tax Division, Revenue Group, Treasury

Members requested an update on the status of the OECD Pillar 1 and Pillar 2 work.

Kathryn Davy and Eugene Mazzulla noted:

• There have been a number of developments on the OECD’s work.
  • Pillar 1 includes a partial reallocation of tax rights from countries producing the products/services to countries (market countries) where the products/services are consumed.
  • Pillar 2 is considering to establish a global effective minimal tax rate.
   
• Although there have been delays due to the COVID-19 pandemic, the OECD and a number of European countries have stressed the importance of trying to reach agreement in 2020.
• In June 2020 there was a proposal from some countries to refocus Pillar 1 to digital companies in a phased approach to try and limit issues to be dealt with before the G20 Finance Ministers’ and the Inclusive Framework meetings in October.
• The G20 Finance Ministers remained committed to global consensus-based position in 2020 – noted in 18 July 2020 communique.
• The OECD has given signals that it is unlikely that an agreement will be reached ahead of the G20 meeting. A suggestion is that the Inclusive Framework will report to the G20 meeting on their progress to a way forward with some European countries keen to agree to the framework as much as possible.
• Work on Pillar 2 has advanced, but agreement has not yet been reached. It is likely that the United States (US) will agree to Pillar 2 provided this does not impact on key US measures – the Global Intangible Low-taxed Income rules and the Base Erosion Anti Abuse Tax.
• There is significant complexity in both Pillars for stakeholders and administrations. However, it is not clear what level of agreement can be reach at the Inclusive Framework meeting in October 2020.

Treasury is actively involved with this work and had attended a Steering Group meeting overnight. There is a strong level of support for public consultation on both Pillars most likely to occur later this year.

Members queried how this work impacts the proposal for a European digital services tax. Treasury noted that this is imperative in the background throughout the entire process. European countries are keen for agreement as soon as possible to avoid trade disputes.

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

In Progress – Treasury has developed draft terms of reference for the mapping process for consultation with NTLG members. This will be provided ahead of the 26 November 2020 meeting.

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

On hold – This item was deferred at the June 2020 meeting for at least six months when the current environment had improved with the proposed discussion to focus on compliance costs across all markets. The discussion is likely to occur in early 2021.

Members noted that this action item will shortly be in progress for over 12 months. As there is currently a focus on red tape reduction, members asked how they could assist with progressing this work. The ATO noted it will consider this feedback.

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

Members agreed to close this action item but noted that the work continues to be progressed.

• NTLG 2006/1 – International Tax Policy settings

Kirsten Fish and Karen Rooke, Assistant Commissioner, Tax Counsel Network, discussed this matter with several NTLG members on 22 July 2020. Members were appreciative of and satisfied with the further discussion. Members will consider what further action to take in the future as the current litigation is resolved.

• NTLG 2006/2 – FIRB Guidance Note 47

On 6 July 2020, Treasury provided a response to NTLG members on this issue, along with other questions the members had also raised.

• NTLG 2006/3 – Tax Time common errors

On 24 July 2020, the ATO provided an Executive Summary outlining the common errors related to the early lodgment of returns before pre-fill information is available.

Members noted that they wanted information on errors on early lodgments with details on the adjustments that were required comparing the pre-fills and changes made. The ATO noted that due to the COVID-19 environment, this information was not available and suggested that this issue be further discussed at the Tax Practitioners Stewardship Group.

• NTLG 2006/4 – Development of a checklist of indicators for potential insolvency

A meeting was held on 12 August 2020 with a small number of NTLG members and relevant ATO staff to clarify risks, issues and opportunities to support each other on working with small business with tax debts.

The discussion and suggestions at that meeting were broader than a checklist for formal insolvency and were progressed under agenda item 3.2 Debt Collection at the 8 September NTLG meeting.

Members agreed that action item NTLG 1903/3 remains in progress and NTLG 1911/1 is on hold. Action items NTLG 2003/1, NTLG 2006/1, 2006/2, 2006/3, 2006/4 are closed.

Other business

All members

Members comments included:

• Members thanked the ATO for the information that was circulated outlining the ATO’s differentiated approach to client engagement during COVID-19 and noted the ATO has made effective and beneficial progress regarding this.
• Deborah Jenkins noted that members participation in consultations and the specific feedback provided has been excellent.
• Members suggested that it would be valuable for the rapid consultation process with NTLG members to continue with Phase 2 of JobKeeper and the Budget measures.
• Members acknowledged that with the current focus on JobKeeper 2 and the upcoming budget, many ATO ‘business as usual’ activities have been delayed.
• Deborah Jenkins reminded members they are welcome to raise any issues with the ATO at any time.

Attendees

Apologies