Welcome
The Private Groups Stewardship Group welcomed new and re-appointed members to the Committee.
Next 5,000 finalisation letter and streamlined tax assurance report
The finalisation letter and streamlined tax assurance report that will be issued to clients and their advisers at the conclusion of an engagement under the Next 5,000 program was presented to stewardship group members.
Updates have been made to the letter and the report based on feedback from advisers, clients, stewardship group members and ATO staff. The content of the letter is intended to be aligned with letters and reports from other similar assurance focussed programs
The streamlined tax assurance report differs from a position paper that might arise in the context of an ATO review or audit. In particular, the streamlined assurance report is intended to be a summation of the outcomes (our findings and next steps) of ongoing discussions with clients and their advisers throughout the Next 5,000 engagement. The content of the report will confirm:
- the key transactions, activities and events that have been assured in the income year (or years) that were reviewed
- next actions that the client and/or the ATO will undertake to address any transactions or events that were not able to be assured
- any identified areas where a client’s governance processes might be refined/improved and proposed actions that the client should take into consideration in this regard.
It was noted that assurance is provided on an evidence-based approach for the years that have been reviewed and assurance is not provided on a forward-looking basis. However, understanding of the taxpayer’s governance processes and practices will inform likely areas of focus for future assurance reviews. As part of next actions, we may make some observations around potential future year activities, transactions or events that we become aware of as part of our engagement during the review.
Members’ comments
Members expressed the view that the report is a very useful record to demonstrate that the ATO, as a key regulator, has oversight of a client’s governance processes and has been able to assure the tax treatment of key transactions and events for a given period.
The report is summation of ongoing discussions with the client and the adviser throughout the review; there should be nothing that comes as surprise in the final report. This approach aligns to other similar assurance programs within the ATO.
Temporary full expensing (TFE)
Since the measure was announced, the ATO has been focussed on ensuring appropriate initial guidance is available to:
- ensure awareness of the measure and how it operates
- support clients and their advisers to understand the eligibility requirements so they can start to consider their own circumstances and whether they will be eligible
- support clients and their advisers with practical information and guidance about what they will need to do to claim a deduction under temporary full expensing.
It was noted that eligible businesses who do seek to claim a deduction under temporary full expensing will need to provide us with information about their aggregated turnover, as well as the number and value of assets that they are claiming for and or opting out of temporary full expensing.
It was noted that additional labels will be included in 2020–21 and 2021–22 tax return forms so that businesses can tell us about their temporary full expensing claim and provide the required information about aggregated turnover.
Members were also advised that we now have a form available on ato.gov.au that will allow businesses who are seeking to lodge early, for example, SAP balancers or those lodging a part year return, to tell us about their temporary full expensing claim.
There are a number of technical interpretative issues in relation to temporary full expensing that the ATO is now focussing on and will be seeking to provide further guidance on through various public advice and guidance products, including a proposed law companion ruling.
Loss carry back (LCB)
One of the differences between LCB and TFE is a proactive choice must be made to make an LCB claim. The choice must be made in the approved form. Additional labels to enable clients to make the choice in the approved form and to make their LCB claim will be included in the 2020–21 company tax return forms.
Some of the areas for advisers/clients to consider when expecting a potential change in lodgment patterns where clients are incentivised to lodge early to take advantage of any cash flow benefits (where their LCB claim results in a refund) are:
- inadvertent errors in the franking account which impact the closing balance. In preparation to claim we suggest undertaking a review the franking account early to ensure that your client or the client 'gets it right'.
- determining the aggregated turnover for more complex groups may take some time
- for LCB there is an additional aggregated turnover label which relates to 2019–20. We can confirm that an entity completing the LCB claim form will only need to complete the label for the loss year, that is you only need to complete the 2019–20 aggregated turnover label if you are carrying back a loss for that year.
Forms for early balancers and part year lodgments for the 2020–21 income year have been published including guidance and instructions to support clients who want to claim before 1 July 2021. Forms for early balancers will be different to the LCB forms for Tax Time 2021, as the 2020–21 company tax return forms are not yet available; however the same information will be requested in both. Clients using the early balance / part year forms must submit the form five business days prior to lodgment of the company tax return to ensure we can process these together in a timely manner.
Further guidance on 'how to claim' for Tax Time 2020–21 is planned to be published in late March, early April.
Small business entity turnover threshold
The aggregated turnover threshold has been lifted from $10 million to $50 million, therefore expanding the population that are eligible for a range of concessions, noting that accessibility is staggered with some concessions already being available for the expanded population, with others being available at a later date.
The uplift in the threshold from $10 million to $50 million means that clients in the private wealth market will now be eligible to access the relevant concessions when previously this was not the case.
Once again, with aggregated turnover being the primary determinative factor for eligibility, additional guidance that the ATO is planning to provide in relation to aggregated turnover will be important.
Members’ comments
Members did not raise any particular issues in relation to the measure. However, a specific scenario regarding start-up companies and the determination of aggregated turnover where the start-up is linked to a larger company interested in their activities was noted. It was agreed that further details of this example will be shared and further considered offline.
Action item
Action item |
1003–1 |
|---|---|
Status |
In progress |
Responsibility |
Members |
Action item details |
Small Business Entity Turnover Threshold
Concerns were raised regarding start-up companies linked to larger entities eligibility due to the size of the entity. Example will be shared offline to investigate the structure, facts and aggregated turnover to assist with guidance. |
Income tax
Consultation on the reimbursement agreement has commenced on the draft 100A ruling and associated Division 7A tax determination. Discussion focused on the ATO's associated compliance approach and proposed view on the meaning of financial accommodation, interaction with unpaid present entitlement, and sub trust arrangements. The transition arrangement to the new approach and how the ATO will support small businesses and advisers was also discussed.
On Friday 1 March 2021, the draft practical compliance guide was published for professional firms; section 100A. Public consultation is open until 27 March 2021. This is not technical but guidance on the Commissioner of Taxation's view of where the risk is identified and how the ATO will apply compliance resources when looking at allocation of professional firm profit into the hands of Income Tax Product.
- This will come into effect on 1 July 2021; however, reliance on the suspended guidelines will be allowed provided the arrangements are commercial and not high risk.
- A two-year grace period will be granted to those who find themselves now in a moderate to high risk category under the transition guidelines. ATO encourages these taxpayers to make contact.
Information has been published in relation to two campaigns within the internationals program on non-withholding resident tax, related to interest expenses paid overseas for the 2018–19 income years.
ATO will be reaching out and raising awareness of new guidance to taxpayers who relied on the arm’s length debt test to determine the maximum allowable debt in financial-cap purposes in 2018–19.
Members’ comments
Members provided some comments regarding the draft practical compliance guide published for professional firms; section 100A.
There is consultation underway for this draft practical compliance guide where written feedback will be considered.
Superannuation and employer obligations
Your Future, Your Super will go live 1 July 2021. Consultation will commence once legislation has passed. Two elements under prototype within the package that ATO is responsible for are:
- the comparison tool which will be hosted on ato.gov.au
- employers are responsible to log on to the stapling tool to find the employees preference in funds when onboarding.
The super guarantee amnesty has ceased. ATO is contacting registered individuals who did not follow through with lodgment of statement and are at risk of the 100% penalty. Communications are being developed to raise awareness.
The transfer balance cap indexation will be going live 1 July 2021. This will be a source of confusion for the sector, with ATO heavily relied on as the one source of truth to identify the transfer balance cap. Communication is being created to support the other indexations of caps.
ATO will continue to work with self-managed super funds to provide real time data.
The early release of super measure finished 31 December 2020. Fraud identified was very marginal.
The cash flow boost measures final quarter was September 2020 with statements due 28 November 2020.
JobMaker hiring credits
On 6 October 2020, the government announced the JobMaker Hiring Credit scheme as an incentive for businesses to hire additional young jobseekers, which is administered by the ATO. The scheme was opened on 6 December 2020 for eligible employers to register and be ready to make a claim by 1 Jan 2021.
The update also included some of the observations on the JobMaker Hiring Credit scheme to date, and a summary of the assurance program and ongoing support to ensure oversight on the program.
A suite of guidance material has been released to support employers to claim JobMaker Hiring Credit payments to help with the cost of hiring additional eligible employees. Employers must register online to claim payments in arrears, in a three-step process.
Employers are to have tax and GST lodgments up to date to participate and report through single touch payroll or have a pay as you go withholding roll. ATO is working with Services Australia to confirm eligibility. False claims of age and income have been seen to date.
Members’ comments
Concerns were raised of the narrow policy band of the measure causing the low appetite to participate. Feedback is to be provided to Treasury.
Online services for business
The Small Business Experience provided an overview of the Online services for business platform to Private Groups Stewardship Group members.
Go live is scheduled for early-mid 2021 for Online services for business. The platform provides a secure modern channel, replacing the business portal and the electronic superannuation audit tool which will be decommissioned later this year. Online services for business provides access to clients and their authorised delegates to multiple entities, with options to create payment plans and view communication history, including copies of income tax returns. Authorised personnel can act on behalf of the entity; this includes lawyers.
A private beta was conducted in October 2020 with a small number of small businesses. This beta provided insights to improve the system.
A public beta commenced in January 2021; positive insights were obtained with:
- high traffic displayed for the December quarterly business activity statement period
- the system performing well
- a demonstrated range of usage across the platform.
Members’ comments
Smaller entities with lawyers may need access to this online service for business.
Payment plan facilities is for simple payment plans; there is an intent to tailor, based on client circumstances over time.
2021 Reportable tax position schedule
ATO is seeking feedback on the proposed changes to category B in the large market segment.
There are new questions in category C, all entities that are affected by the lodgment requirement for the reportable tax position to consider.
Other business
Debt
Analysis from different populations has brought to light debt levels for the private wealth area. The chair recommended clients be encouraged to contact the ATO to discuss options.
Communication is being developed and will be released to encourage contact while being mindful of individual circumstances.
Members’ comments
Potential reasons for non-payment due to migration from paper to email reminders.
Concerns of taxpayers’ ability to access credit if a payment arrangement is in place with the tax office.
Some taxpayers are holding off till end of March to decide whether to go into administration and unable to make to commit to an arrangement with the ATO.
Not actively engaging with advisers.
Consultation
Members made an observation that they have recently been invited to a number of consultation sessions and some members may not have enough time to devote to all the requests due to competing priorities.
Consultation on issues and public advice and guidance is recommencing; however, the ATO will ensure that the consultation is targeted and spread out to various members.
Members can also decline invitations due to competing priorities.
The invitation for consultation is for the individual member; however, in some cases, if the member identifies a more suitable candidate in their organisation, they can make that recommendation to the ATO for consideration.
Future items
Request for an update on data leaks as the last update from the Integrated Compliance branch was in 2019. Members are seeking insights and learnings that can be applied elsewhere.
Attendees
Organisation |
Attendee |
|---|---|
ATO |
Tim Dyce (Co-chair), Private Wealth |
ATO |
Amy James-Velagic, Private Wealth |
ATO |
Andrew Watson, Small Business |
ATO |
Anita Challen, Small Business |
ATO |
Anthony Mavello, Economic Stimulus Branch |
ATO |
Dana Fleming, Superannuation and Employer Obligations |
ATO |
Glenn Cooper, Private Wealth |
ATO |
Elissa Walker, Enterprise Solutions and Technology |
ATO |
Jade Hawkins, Private Wealth |
ATO |
Jessica Luu (Secretariat), Private Wealth |
ATO |
Kasey Macfarlane, Private Wealth |
ATO |
Kathrina Weinhonig (Secretariat support), Enterprise Strategy and Design |
ATO |
Michael Drogaris, Private Wealth |
Arnold Bloch Leibler |
Paul Sokolowski |
Chartered Accountants Australia and New Zealand |
Karen Liew |
CPA Australia |
Elinor Kasapidis |
Fox Private Group |
Garry Voigt |
Greenwoods & Herbert Smith Freehills |
Andrew White |
Independent Member |
Paul Brassil |
KPMG Australia |
Bernadeene Cangelois |
Law Council of Australia |
Angela Lee |
Lowy Family Group |
John Fanning |
Oatley Family Group |
Peter Gillett |
PFD Foods |
Peter Cartsidimas |
PwC |
Michael Dean |
Tax Bar Association |
Terry Murphy QC |
The Tax Institute |
Chris Wookey |
7-Eleven Group |
Kenny Cheong |
Apologies
Organisation |
Member |
|---|---|
Chartered Accountants Australia and New Zealand |
Michael Croker |
Deloitte Private |
Michael Gastevich |