Private Groups Stewardship Group key messages 19 November 2020

Cash Flow Boost and Early Release of Super

The Cash Flow Boost and Early Release of Super stimulus measures are at their final stages.

We are monitoring a number of taxpayers who for the first time included W1 and W2 in their activity statement and now have withholding. To ensure continued positive behaviour and withholding where appropriate, contact will be made to those who stop reporting withholding to work through a process to ensure payments are being treated correctly.

Super guarantee amnesty

The Super Guarantee amnesty has now been finalised.

A majority of the people who came forward either paid in full or have entered into a payment arrangement. We are working with a small number of people who have an outstanding debt and have not entered into a payment arrangement, to ensure that they remain eligible for the amnesty by making a commitment to pay.

• For those who have not acted on the opportunity to engage with us, we will start to engage with them and potentially move to disqualification.
• Teams have started to issue the first Part 7 penalties under the law. Part 7 penalties are generally a minimum of 100% of the shortfall for employers who could have come forward but did not during the 12-month Amnesty period.
  • The first approach when issuing a Part 7 penalty is to notify the employer to ask them to check their records. If they make a voluntary disclosure, that will be considered when considering the application of penalties.
   

Your Future, Your Super

The Government has announced ‘Your Future Your Super’. Legislation is yet to be enacted. The new legislation has three focus areas:

• If an employee does not provide a fund, the employer will make a request to the ATO to provide them with a fund to make super guarantee payments.
  • The employer will move the employee into a default fund only when a fund does not exist.
   
• The ATO website will provide information on the performance of funds provided by the Australian Prudential Regulation Authority (APRA), so employees are able to determine the overall costs and services particular funds are paying.
• APRA is taking sanctions on funds that have been non-performing for a period of time.

Income Tax Update

Updated research and development (R&D) legislation

An administrative approach has been put in place to implement those measures and changes. Due to the new changes commencing 1 July 2021, there will be a graduated update to our web guidance so as not to confuse taxpayers with what they do currently, and what they will need to do from 1 July 2021.

Work is under way for appropriate changes to the company tax return R&D schedule and the online ATO calculator in preparation for 1 July 2021.

100A and Professional firms

Work on both 100A and Professional firms rulings was placed on hold due to COVID-19. Development has recommenced.

Temporary full expensing and loss carry back

The ATO is focused on getting ready for Tax Time 2021, including the following new measures: temporary full expensing, loss carry back, small business concessions, and the changes for aggregated eligibility.

Initial public advice and guidance will be released in December for the temporary full expensing and loss carry back measures, followed by more detailed advice in early 2021. We will also look to update various ATO calculators moving forward.

Next 5,000 tax governance

Guidance on how to prepare for a Next 5,000 streamlined assurance review was published on the ato.gov.au in late September. This guidance includes details of the typical questions we ask during the reviews. The typical questions, which have been discussed at prior Private Groups Stewardship Group meetings, have been refined based on feedback received. Further changes were made recently based on members' feedback.

When clients are notified of an upcoming streamlined assurance review, they have a period of three months before the review commences in which they are encouraged to consider the typical questions. During the review, we follow the justified trust methodology including considering tax governance.

The ATO respects the taxpayer's right to assert legal professional privilege and accountant’s concession. We want to work with taxpayers and advisers to obtain documents to ensure the correct tax has been paid.

JobKeeper

The JobKeeper program is halfway through.

Eligibility requirements for JobKeeper have changed where the required decline in turnover is now based on actual turnover as reported at label G1 of activity statements.

Systemic fraud has not been seen however, there have been instances of opportunism. There is continued recognition of honest mistakes where we do not look to apply penalties and that will transition into JobKeeper 2.

Since 28 September; improvements in the risk filters have been put in place to identify issues with the decline in turnover and tiers of payments. Letters were issued to taxpayers who have participated in JobKeeper to advise that their 2019 quarterly BAS was outstanding which will impact their basic test for JobKeeper eligibility. From those letters, further 2019 activity statements were subsequently lodged.

The ATO acknowledges the pressure tax agents have at this time of year and will work through the deadlines with them to achieve outcomes and forward planning.

Advice and guidance continues to be updated on the ATO website.

JobKeeper Compliance Program

A key focus area in the JobKeeper compliance program is the shift from a projected decline in turnover test to an actual decline in turnover. Businesses can be expected to be contacted by the ATO with questions around the reasons particular activity statements where amended after the announcement of the JobKeeper rules.

Organisations need to complete the eligibility form each quarter, of the actual turnover test, including the percentage decline selected, the GST turnover and whether an alternative test is being used.

Guidance was published on ato.gov.au in late October providing examples in relation to eligible business participants and the sorts of evidence and reasonable efforts that organisations could be expected to go to when selecting the right tier. The ATO continues to review employer eligibility and employee eligibility, as well as multiple employer claims and satisfaction of the wage condition.

JobMaker

JobMaker was announced by government to bring into the workforce new employees under the age of 35 years. Rules are currently out for public discussion and law has not yet passed, however the ATO is ready to open registrations when the rules are passed.

Tax gap

Medium business income tax gap

The medium business income tax gap was published as a part of the ATO's annual report in October. It is the last of the income tax gaps that have been published. As detailed in the annual report, the tax gap is an estimate of the difference between the amount of tax the ATO collects and what we would have collected if every taxpayer was fully compliant with the law. The 2017–18 year was utilised.

• The medium business population involves companies with a group turnover of between $10–$250 million, and also includes individuals who control those companies.
• We measured that medium businesses voluntarily contributed 92.4% of the revenue we expected from them in 2017–18. In terms of dollar value, an estimated amount of $860 million was not collected in income tax.

To reduce the gap, our primary focus is to improve voluntary compliance. We have published a number of advice and guidance products to assist in the removal of uncertainty to make it easier to comply. Tailored support products have also been developed, such as our early engagement and commercial deals programs, along with advice on good tax governance and record keeping.

Excise gap

We estimate that the Alcohol tax gap for the 2017–18 year is 9.6%, which equates to $596 million.

To reduce the gap, there has been updated web guidance on the type of activities that attract our attention, and how legitimate businesses can report and avoid the illicit schemes. A retailer strategy has been developed to let retailers know our concerns – that they can be made liable for unpaid duty and how they can manage the risks of inadvertently getting involved in supplying illicit products.

Wine equalisation tax gap

We estimate the wine equalisation tax gap for the 2018–19 year is 3.1%, which equates to $27 million. This gap has remained steady for the last four years. Law amendments were made to improve and clarify the producer rebate provisions. We provided education for the market around the new laws, their obligations and highlighting areas of concern and how to avoid them.

Fuel excise tax gap

We estimate the fuel excise tax gap for the 2018–19 year is 0.5%, which equates to $90 million. The gap is low due to the high concentration of the industry into a relatively small number of compliant payers.

Fuel tax credits gap

We estimate the fuel tax credits tax gap for 2018–19 is negative 0.1%; this is a negative gap because it consists of over and under claims.

To reduce both sides of this gap, several guides, safe harbours and tools have been developed. This particularly helps small businesses who are underclaiming. For over claimers, we are working with advisers to develop Product Rulings to provide taxpayers with more accurate claims and greater certainty.

Product stewardship for oil program

The product stewardship for oil program tax gap for the 2018–19 year is 1%.

Luxury car tax gap

We estimate the luxury car tax gap for the 2017–18 year is 7.8%, which equates to $58 million. Work is underway to reduce and manage the compliance risks. We have updated our web content to highlight the behaviours of concern and how people can avoid those problems.

myGovID and RAM post implementation update

In March 2020 myGovID and Relationship Authorisation Manager (RAM) successfully replaced AUSkey.

The transition has exceeded expectations on all indicators including client adoption and usage, reduced escalations compared to AUSkey and creating increased security over access to government online services.

The ATO continues to work with other government agencies to onboard their services to myGovID and RAM.

The delivery for this program of work and reaching milestones has been on time and within budget.

There is a private beta in progress for individuals to connect their myGovID to their myGov account to log-in and access ATO Online services for Individuals. This will become a public beta with the ability to access individual accounts in December 2020.

The next stage for myGovID is to develop face verification technology to provide a higher level of assurance on who owns the identity (IP3), protecting your ID and your personal information, and allowing you to do more online in the future.

myGovID will also sit in-front of Director Identification, to ensure we know who the directors of an entity are.

Private Groups Stewardship Group Charter

Minor changes based on member feedback have been made and circulated to the group.

The Private Groups Stewardship Group provided no further comment and did not request any further changes to the Charter.

Membership refresh

A process will commence soon to review membership and undergo a refresh process, as the current term expires at the end of this year. Membership refreshes occur across all Stewardship groups. Members and their organisations will be contacted in coming weeks for further discussions.

Reflections

Discussions on the effectiveness of the Group commenced and further feedback will be requested via email to improve the working group in the coming year.

Attendees

Apologies