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  • GST Stewardship Group minutes 21 February 2018

    Welcome

    Kevin O'Rourke opened the meeting.

    There were no outstanding items from the 31 October 2017 meeting.

    Online BAS Check project

    Phil Jones, Maria-Luisa Roache, Helen Hesse-Patching, Anne-Marie Pergolese

    The ATO Online BAS Check project team outlined the key features of this project.

    The Online BAS Check is a concept supported by the ATO’s Reinvention program and aligns with the ATO Corporate Plan 2016–17. New policy proposal funding has been allocated to support the development and implementation of the Online BAS Check to meet commitments to the GST Voluntary Compliance Program. The Online BAS Check aims to have a positive impact on the client experience for GST registrants lodging their BAS through electronic channels.

    Current state

    • Client engagement activities and ATO data intelligence have identified a number of preventable and inadvertent GST reporting errors.
    • When a client’s BAS is reviewed and an adjustment is made, over half the adjustments are to correct common errors and honest mistakes (eg calculation errors or wrong values entered) against a number of labels.
    • Unintentional errors relate to the following risks (note, ATO systems cannot currently identify these errors prior to a BAS lodgment):
      • 41% of adjusted cases for refund integrity
      • 90% of the adjustment cases for integrity of business systems.
       

    Impacts

    • Errors detected by the ATO after lodgment delay the processing of the BAS and refunds.
    • Errors made in BAS that are not stopped may result in incorrect refunds or GST liabilities.
    • Manual intervention is required by the ATO to contact the client to confirm or update information.
    • This post lodgment approach is costly for clients and the ATO.

    Future state

    • The Online BAS Check applies to all clients and automatically checks electronic BAS lodgments to detect potential errors before lodgment is completed.
    • Clients identified making potential errors will receive a message electronically, and can self-review and correct any errors prior to lodgment, ensuring the net amount is reported accurately.
    • Messages will be tailored. Clients who enter amounts that are within acceptable ranges will not receive a message.

    Benefits – client experience

    • Clients will be better equipped to 'get it right' the first time and have greater confidence their BAS is correct.
    • Clients will have more time to manage their business as a result of a reduction in ATO-initiated interactions to deal with BAS errors.
    • Reduced costs for clients by removing irritants in ATO electronic lodgment channels and potentially faster delivery of refunds.
    • Greater transparency and community confidence that BAS’s are monitored and checked by the ATO for errors.

    Next steps

    • A series of user research interviews to socialise the Online BAS Check concept and seek user views are currently being conducted to ensure the final design contributes to an improved client experience.
    • Testing the messages with clients.
    • Visiting a number of businesses, tax agents and BAS agents during February and March 2018.
    • The aim is to have Online BAS Check implemented by 30 June 2019.

    GST Stewardship Group members will be invited to provide feedback on the Online BAS Check concept and the proposed messaging.

    Action item

    Action item:

    A - 21/02/2018

    Due date:

    19 March 2019

    Responsibility:

    Secretariat

    Seek feedback from members in relation to the Online BAS Check concept and proposed messages.

    Shifting away from paper-based activity statements

    Matthew Umina, Frances McMorrow

    Matthew Umina provided an overview on current work being undertaken relating to shifting away from paper-based activity statements.

    The ATO is seeking to reduce paper activity statements and identify opportunities for streamlining and automation. As part of a pilot, the ATO is calling clients who have recently registered for GST/PAYGW roles and inviting them to update their channel preference to digital. Once systems changes are made the ATO will then focus on transitioning current paper lodgers.

    Benefits to going digital

    Savings

    • Digital interactions are generally more efficient and cost effective. Many business software products allow clients to prepare and lodge directly from their software, reducing the time spent preparing activity statements.
    • Lodgment and payment due dates are extended by two weeks for self-prepared quarterly BAS lodgments when they are submitted electronically (Tax and BAS agents get an extra four weeks to lodge and pay when they lodge online).

    Certainty

    • Pre-lodgment validation checks prevent activity statements being lodged that contain calculation errors. Online lodgment also provides confirmation that forms have been lodged so clients don’t have to worry about whether their form has been lost in the mail.

    Convenience

    • Clients can lodge from any place and at any time.
    • Clients can access and review their lodgment status and history in one place.

    Barriers

    Community perceptions of the barriers to interacting digitally include:

    • Clients preferring to receive paper activity statements as a reminder to lodge.
    • Quality and availability of our current services.
    • Complex and varied registration processes (eg myGov or AUSkey).
    • Technical issues with newly released products.
    • Incompatible operating systems or software.
    • Availability of digital services at peak times.
    • Lack of digital options or limitations with existing services to meet user needs/obligations.
    • Hurdles to accessing myGov correspondence.
    • Correspondence being sent to an individual rather than their tax professional, and vice versa.

    Where to from here – a phased approach

    Phase one will focus on setting clients up to be digital from the start. This includes a change to ATO systems to automatically set digital as the channel preference for new clients:

    • Paper will remain as an available channel.
    • Ahead of this system change, the ATO plans to pilot this new process with clients that register for GST/PAYGW roles over the phone. The pilot will simulate the system change.
    • During the pilot, clients registering over the phone will have their channel preference set to digital unless they specifically request paper.
    • ATO staff will guide clients through the online lodgment process (including how to get online) and following the conversation clients will receive supplementary support material via email.

    Phase two will focus on transitioning the remaining inbound and outbound paper clients to digital.

    All activity statement data will be reviewed to identify new opportunities to transition clients to digital. The ATO will do this through:

    • Broad consultation with tax and BAS agents to co-design effective transition strategies.
    • Targeted consultation with agents of clients that are lodging via paper to understand what support is required to help them transition to digital services.
    • Leveraging the release of enhanced functionality and new services within ATO online.
    • Actively promoting digital services through a range of interactions with clients.
    • Enforcing existing legislative requirements for digital interactions for large clients.
    • Using the myGov inbox to send correspondence to individuals where possible.

    GST stewardship group members were generally supportive of this initiative but expressed some concerns along the lines of what is outlined in 'Barriers' above. The ATO noted these concerns and indicated that community consultation is critical to ensuring an improved client experience. Accordingly, members were encouraged to provide further feedback about this initiative to the secretariat.

    Action item

    Action item:

    B - 21/02/2018

    Due date:

    11 April 2018

    Responsibility:

    Secretariat

    Seek further feedback from members regarding this initiative.

    Update on cross border issues

    Ian Ayrton

    Ian Ayrton provided an update on recent ATO engagement and education activities relating to the GST on imported low value physical goods measure.

    In the 2016–17 Budget, the Government announced that it would apply GST to consumer imports of low value physical goods. As part of the new measure, the ATO recently conducted the first stage of an international outreach program through holding interactive seminars with business and professional advisers. The regions selected were based upon modelling undertaken by the ATO. The three key regions with the highest revenue potential and largest number of clients being visited are the USA, Europe, China and Hong Kong. The primary objective of these seminars was to inform and educate overseas businesses and tax professionals on the new measure, including promoting compliance with the new law and how the ATO will administer the law.

    Feedback from the seminars has been very positive. The ATO engaged with over 150 participants during the seminars, held additional one-on-one meetings with large clients and government officials, and met with eight key partners during these engagements (including the Big 4 firms in each jurisdiction).

    Since these engagement activities, the ATO has:

    • actively considered approaches to practically assist business compliance
    • almost finalised web-based advice including information for clients about ATO compliance
    • again written to about 2,800 clients, this time to advise them on steps they need to take to register
    • almost finalised development of a stage 2 international engagement strategy that will focus on key clients (including EDPs).

    The ATO noted there is a currently a broad spectrum in terms of client readiness for this new measure, but is confident that its outreach, awareness and education activities will significantly help clients understand what needs to be done and by when.

    The ATO also provided an undertaking that it will keep GST Stewardship Group members updated on material developments regarding this measure.

    GST at Settlement New Measures update

    Josh Pooley (Treasury)

    Treasury expressed its appreciation for the contributions made by GST Stewardship Group members to date regarding this measure.

    The Bill is currently before Parliament and provides for a start date on 1 July 2018 (transitional arrangements apply to contracts entered into before that date).

    The ATO is engaging with the Law Council of Australia, Australia Institute of Conveyancers, Property Exchange Australia and other affected parties and implementation plans are well advanced. Communication and education strategies have also commenced rolling out with the introduction of the Bill to Parliament. A related draft Law Companion Guideline will be issued for consultation in March or April.

    Broad class legislative instrument for recipient created tax invoice concept

    Amy James-Velagic

    Amy James-Velagic advised members of a proposal to introduce a new broad class of recipient created tax invoices (RCTI) for small to medium businesses (GST turnover of less than $20 million). It is proposed to replace the numerous industry specific classes of RCTIs.

    In developing this proposal, the ATO recognises that:

    • It is time consuming for businesses to identify an applicable RCTI class from the diverse 52 instruments, to apply for an RCTI class (where one does not already exist) or continue to administratively comply with tax invoice requirements where an RCTI class is not available.
    • There is a lack of awareness of an applicable RCTI class by businesses, challenging and potentially result in failure to access this concession.
    • Minor variations on conditions under various classes may result in unintentional non-compliance.

    The proposal seeks to achieve the following:

    • Allow all businesses regardless of their turnover to issue RCTIs where it is more efficient and effective for the recipients to do so.
    • Make it easier for small and medium businesses to comply with the requirements to issue RCTIs by making it easier to assess their eligibility and providing universal conditions for issuing RCTIs.
    • Align with the Government’s policy to reduce red tape and their commitment to increase competition, productivity and growth for small businesses by removing unnecessary instruments and broadening the eligibility of the concession.
    • Make an agile and enduring class of RCTI.

    GST Stewardship Group members supported this proposal and provided feedback including proposed options to mitigate potential risks that may arise under a broader class RCTI for small to medium businesses.

    The external community will soon be invited to provide feedback on this proposal via the ATO’s Let’s Talk Consultation Hub.

    2024 vision of the GST product

    Kelly Canavan

    Kelly Canavan provided a high level overview of some of the themes the ATO has been considering as part of the ATO’s 2024 vision for the GST product. Four central themes have been identified that present potential challenges and opportunities to delivering future improvements for clients dealing with the ATO on GST matters:

    • Emerging technology – will continue to influence how we work and tax in the future:
      • Blockchain will change the transaction landscape
      • Artificial intelligence and machine learning
      • Sharing Economy will disrupt traditional business models
       
    • Law and policy – ensuring the legislation is fit for purpose in dealing with emerging technology and disruptive business models:
      • The rise of artificial intelligence, big data and social networking
      • Effectively managing risks to privacy, fraud and identity theft
      • The sharing economy is reshaping the nature and definition of employment and increases the risks to PAYG and GST refunds (contractors)
      • Intangible assets are an increasing source of revenue and present challenges for tax administrations in an increasingly globalised world
       
    • Capability, people and systems – future-proofing our people and systems
      • Artificial intelligence provides opportunities for improving client service delivery and engagement
      • Compliance work to be performed by adopting a more holistic client approach
       
    • GST/VAT Global Shifts – learning from the experiences and initiatives of international GST/VAT administrators

    Several members commented that many of the themes and issues being considered by the ATO are also relevant to the organisations they represent.

    Other business and close

    Amy James-Velagic, Kevin O'Rourke

    Financial Services & Insurance (FSI) GST Strategy

    Amy James-Velagic advised that the ATO will be seeking further member feedback related to the implementation and effectiveness of the FSI GST strategy during the 2018 financial year. Such feedback will assist with the development of the updated 2018–19 strategy.

    Action Item

    Action item:

    C - 21/02/2018

    Due date:

    TBA

    Responsibility:

    Secretariat

    Seek feedback from members in relation to the implementation and effectiveness of the FSI GST strategy to during the 2018 financial year.

    • ATO’s review of legislative instruments on waiver of tax invoices and adjustment notes following a decision of a court or tribunal

    Amy James-Velagic provided an update in relation to the legislative instruments on waiver of tax invoices and adjustment notes following a decision of a court or tribunal. The ATO has made a decision not to remake the instruments. The Commissioner or the AAT member can exercise the discretion under subsections 29-70(1B) and 29-75(1) of the GST Act to treat another document as a tax invoice or adjustment note to give effect to a tribunal or court decision on a case by case basis.

    Relying on the discretion allows the ATO to deny a GST credit or a decreasing adjustment in appropriate cases. It also affirms the importance to keep proper records and in particular, to hold tax invoices and adjustment notes when claiming GST credits and decreasing adjustments. It will provide greater equity for taxpayers: taxpayers whether at objection, review or appeal will be subject to the same onus and will be now required to show grounds why the Commissioner should exercise the discretion.

    Closing comments

    The co-chair acknowledged the excellent work performed by Alison Zeitlhofer over the last few years in her role as GST Stewardship Group secretariat.

    The meeting concluded at 1.30pm.

    The next meeting will be held on 16 May 2018 in Sydney.

    Meeting details

    Venue: ATO Offices, Level 9 Ewing Board Room, 747 Collins Street, Melbourne

    Date: 21 February 2018

    Start: 10.00am     Finish: 1.30pm

    Chair: Kevin O'Rourke

    Secretariat: Rod Walker, Indirect Tax; contact phone: 02 6216 6513

    Members

    Jeremy Geale

    Deputy Chief Tax Counsel, ATO (Co-Chair)

    Kelly Canavan

    Assistant Commissioner, Indirect Tax, ATO

    Gordon Brysland

    Senior Tax Counsel, ATO

    Giles Wilmer

    Director, Commonwealth Taxes Unit,
    Queensland Treasury

    Kevin O'Rourke

    Chartered Accountants Australia and New Zealand
    (Co-Chair)

    Ken Fehily

    Principal, Fehily Advisory, Member CPA Australia

    Andrew Howe

    Director, Greenwoods and Freehills Pty Ltd,
    Member Property Council of Australia

    Bastian Gasser

    The Tax Institute

    Andrew Sommer

    Partner, Clayton Utz,
    Member Law Council of Australia

    Paul Suppree

    Corporate Tax Association

    George Nikolaou

    Coles Finance

    Professor Michael Walpole

    Professor and Associate Head of School (Research),
    School of Taxation & Business Law, University of NSW

    Guest attendees

    Amy James-Velagic

    Assistant Commissioner, Indirect Tax, ATO

    Kate Roff

    Assistant Commissioner, Indirect Tax, ATO

    Phil Jones

    Assistant Commissioner, Indirect Tax, ATO

    Maria-Luisa Roache

    Director, Indirect Tax, ATO

    Helen Hesse-Patching

    Enterprise Strategy and Design, ATO

    Anne-Marie Pergolese

    Indirect Tax, ATO

    Matthew Umina

    Assistant Commissioner,
    Small Business Experience, ATO

    Frances McMorrow

    Assistant Commissioner,
    Client Account Services, ATO
    (via telephone for item 3)

    Ian Ayrton

    Director, Indirect Tax, ATO
    (via telephone for item 4)

    Josh Pooley

    Indirect Tax and Not for Profit Unit,
    The Treasury (via telephone for item 5)

    Apologies

    Tim Dyce

    Deputy Commissioner, Indirect Tax, ATO

    Chris Plakias

    Head of Tax, GST and Technology Westpac,
    Member Australian Bankers’ Association

      Last modified: 24 Apr 2018QC 55177