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  • GST Stewardship Group minutes 23 August 2017

    Meeting details

    Venue: ATO Offices, Level 9.716 Ewing Board Room, 747 Collins Street, Melbourne

    Date: 23 August 2017

    Start: 9.30am Finish: 12.20pm

    Chair: Kevin O'Rourke

    Secretariat: Alison Zeitlhofer, Indirect Tax; contact phone: (02) 6216 1013

    Members

    Jeremy Geale

    Deputy Commissioner, Indirect Tax, ATO (Co-Chair)

    Lucy Libertone

    Assistant Commissioner, Indirect Tax, ATO

    Jo Drum

    Tax Counsel, ATO

    Giles Wilmer

    Director, Commonwealth Taxes Unit,
    Queensland Treasury

    David Pullen

    Indirect Tax and Not for Profit Unit, The 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

    Guest attendees

    Neil Olesen

    Second Commissioner,
    Client Engagement, ATO

    Amy James-Velagic

    Assistant Commissioner, Indirect Tax, ATO

    Kelly Canavan

    Director Indirect Tax, ATO
    (via telephone for item 3)

    Prashant Ramkumar

    Indirect Tax and Not for profit Unit,
    The Treasury

    Apologies

    Chris Plakias

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

    George Nikolaou

    Coles Finance

    Professor Michael Walpole

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

    Agenda summary

    • Welcome
    • Consultation on the Property at Settlement NPP measure
    • Precious metals and retrospective operation of the measure
    • Discussion on online tour operators
    • Update on private advice sunset / assurance clause
    • Process for GST and self-assessment objections
    • When General Power of Administration will be exercised - trends being identified by ATO / committee members
    • Update on industry issues in terms of New developments / business models
    • Next steps summary and close

    Discussion summary

    Welcome - Kevin O'Rourke

    Kevin O'Rourke opened the meeting.

    There were no outstanding action items from 18 May 2017 meeting.

    Consultation on the Property at Settlement NPP measure – David Pullen

    David outlined the background and progress towards implementing this integrity measure. Informal consultations were summarised, and key features were discussed in light of these changes. Issues discussed included the model for implementation, transitional issues, the effect on policies such as the margin scheme, legal liability and definitional issues.

    Additional issues were raised in discussions such as different payment arrangements and different types of parties. It was decided these would be further discussed offline.

    Action item

    ID:

    Due date:

    A – 23/08/2017

    Next meeting

    Responsibility:

    Action

    Kelly Canavan

    Kelly Canavan and Prashant Ramkumar will liaise out of session to look at different payment arrangements and different types of parties.

    Precious metals and retrospective operation of the measure - Kelly Canavan

    Initial intelligence suggests that some smaller businesses did follow the law change regarding Precious metals from the announced commencement date of 1 April 2017. Instead of reverse charging the GST on the supply (ie allowing the purchaser to withhold and remit the GST payable), some businesses have been charging GST on supply and / or have relied on the supplier to remit GST on purchases.

    We are actively supporting those who have been complying as well as those who have been trying to do the right thing but have got it wrong. We are providing messages that those who did not comply with the announcement (now enacted) and now need to go back and rectify the transaction. We will require both suppliers and recipients (ie purchasers) to correctly account for the reverse charged GST on supplies of valuable metals. We do not intend to focus on penalties, rather our strategy is to work with industry and get it right.

    Action item

    ID:

    Due date:

    B – 23/08/2017

    September 2017

    Responsibility:

    Action

    Kelly Canavan

    Kelly Canavan to provide link to website for Precious Metals information via secretariat for members.

    Discussion on online tour operators - David Pullen

    David Pullen led a discussion on online tour operators and the potential impact on the domestic market.

    A carve out from accommodation services regarding on-line tour operators was made under Division 188 as historically clients using this service were predominantly non-residents. In line with other online purchase trends, there has been a marked increase in recent times with Australian residents using this service. This is creating perceptions of an unlevel playing field with domestic accommodation services that pay GST. Perhaps this exemption should be reconsidered to bring this service in line with the imported services and digital products measure which commenced on 1 July 2017 and GST on low value imported goods commencing on 1 July 2018.

    Clients who have booked accommodation are also missing out on input tax credits as GST is not being charged. It is not an issue of revenue but more an issue of annoyance regarding input tax credits.

    It is expected that it would be a relatively minor legislative change in line with other changes. Members felt that a lead time of three to six months for operators in this market to update their systems would be sufficient, should this carve out be removed, as other jurisdictions already charged a GST or VAT.

    Update on private advice sunset/assurance clause – Amy James-Velagic

    Amy advised that this item is a progress update based on feedback we received recent Big 4 meetings and Large Business Stewardship Group. We are still considering these clauses and seek to obtain further feedback as we progress our thinking.

    Currently indirect tax private rulings do not have an end date and therefore remain binding on the Commissioner until there is a change in law or the ruling is revised. We have identified that it may be appropriate to consider a sunset/assurance clause where:

    • it is highly likely that the scheme/facts will change within a certain period
    • complex technical issue where the legal position is unsettled (eg pending appeal or decision form a higher level court) but the client requires certainty for a specific period
    • there are private ruling requests with assumptions where we may not have otherwise ruled eg section 357-110.

    Given GST is generally a transactional tax we do not consider this would be appropriate for all private rulings.

    Income tax private rulings already have sunset clauses, and from feedback so far there is a general support for sunset clauses.

    Assurance clauses (i.e. where an organisation provides an assurance that the scheme has been implemented/not changed) we have received feedback, some querying the benefit of the clause. For example if the scheme was not implemented as per the private ruling then the client would just not have the protection of the private ruling. We have also received feedback that this would however provide an additional level of certainty in regards to their tax governance processes, and/or additional assurance for both the client and the ATO. We have also recently identified circumstances where clients were of the view that they could still rely on their private rulings without undertaking that assurance process recently.

    CTA – raised that most large organisations have assurance processes in place that the assurance step to confirm that the scheme was implemented for their governance.

    Jeremy Geale advised that there may be other clients who don’t have that quality of process (i.e. the smaller market) and/or length of time where they have not re-considered for later tax periods.

    We are continuing the process of consideration as to both the sunset/assurance clause, in particular what would be the benefits, would provide more certainty and provide the ATO with assurance if relied upon, what would an assurance clause would look like who would give the assurance?

    We are seeking further feedback. Procedures may come back to the GST Stewardship group for further consultation if we progress down that path.

    Process for GST and self-assessment objections – open forum

    This matter was listed on the agenda following a discussion at the recent Big 4 meeting which Kevin O’Rourke attended. Kevin perceives that the self-objection process has become more challenging, since the introduction of review and dispute resolution (RDR). He understands why RDR business line was created, but would like to directly engage with the Indirect Tax business line where the activity originated. Since the introduction of the self-assessment system which removed the ‘stop the clock’ notices under section 105-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA), practitioners are raising self- objections as an insurance mechanism in case a dispute cannot be resolved during early engagement.

    Kate Roff Assistant Commissioner Indirect Tax has been in discussions with RDR to look at alternate mechanisms to improve the client experience. For self-objections, RDR officers will work jointly with Indirect Tax case officers on the objections however the RDR officers would be the primary contact point for the taxpayer and have the final decision on the matter.

    For objections, Indirect Tax officers would be offered the opportunity to comment on any new information by the taxpayer at the objection stage.

    We are currently trialling a couple of matters per the new approach (parallel to developing the protocols).

    At the next GST Stewardship Group meeting in October – we will look to invite RDR to attend to discuss the new processes.

    Action item

    ID:

    Due date:

    C – 23/08/2017

    Next meeting

    Responsibility:

    Action

    Secretariat

    RDR attend meeting to discuss with members the new self-objection process

    When General Power of Administration will be exercised – trends being identified by ATO/committee members – Amy James-Velagic

    This item was raised in response to Kevin O’Rourke’s and other Big 4 Firms' perception that the ATO is giving inconsistent treatment as to when the general power of administration will be exercised. Kevin also raised the inconsistency between GPAs and similar circumstances/reasons for which PCGs have been published.

    Amy advised that the General Powers of Administration (GPA) enables the Commissioner to administer the taxation laws in accordance with Parliament's legislative intent, but there limitations. The Commissioner cannot use his GPA to endorse non-compliance with the law or to correct a defect in the law. Further an administrative solution may be limited in many cases to past periods.

    The administrative principles are outlined in Law Administration Practice Statement PS LA 2009/4 (PS LA 2009/4), which is the ATO’s instruction to staff on how to deal with and consider proposals. It’s important to note the difference to what we used to refer to as a routine vs non-routine matter (although noting the PS LA has recently been updated and routine matters are now referred to as within the scope of your usual duties). Routine matters are the matters that we generally consider in relation to an individual client, non-routine matters may be in relation to a class of taxpayers or industry group.

    ITX has reviewed the routine GPAs for the past 12 months (9 GPAs in total – 6 favourable and 3 unfavourable). The decisions were in line with the PS LA 2009/4 six criteria, no trends of inconsistency were identified.

    ITX also has a central function where GPAs in the advice area and client engagement areas engage with when the exercise of the GPA is requested. This assists with ensuring decisions are made consistently and consider all of the relevant factors.

    Update on industry issues in terms of new developments / business models
    Update on current issues – open forum

    A number of property type arrangements were discussed including:

    • an increasing use of ‘build to rent’ models by landlords
    • industry pushing for legislative change in line with serviced apartments
    • bigger players getting into market looking at student accommodation
    • charities and prospective state government entities around social housing.

    The Practical Compliance Guideline (PCG) on barter transactions was also discussed and members asked:

    • Where feedback is it at?
    • How was it working and was it reducing compliance costs?
    • Could be look at extending cash component?

    Discussion occurred on ATO consideration whether to remake WTI 2004/1 and WAN 2004/1

    ATO raised that it is considering whether to remake:

    • WTI 2004/1 – Waiver of tax invoice following decisions of Courts and Tribunals
    • WAN 2004/1 – Waiver of adjustment note requirements following decisions of Courts or Tribunals.

    The sunset period on the above legislative instruments expired in April 2017. The ATO is currently considering whether to remake these legislative instruments.

    The ATO explained some of the reasoning as to why we are considering not remaking the legislative instruments, including where it was not appropriate that a taxpayer was able to rely upon the legislative instrument, such as Davsa Forty-Ninth Pty Ltd AFT Krongold Ford Business Unit Trust v FCT [2014] AATA 337 and where the ATO had been critiqued as to the outcome of the availability of the legislative instruments such as Bayconnection Property Developments Pty Ltd and Ors v. FC of Taxation 90 ATR 488.

    The ATO explained that if the legislative instruments are not remade, the Commissioner, or the AAT member (standing in the Commissioner’s shoes) 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.

    While there was previously a consultation period undertaken, the ATO is seeking any further feedback from GST Stewardship Group members.

    Action item

    ID:

    Due date:

    D – 23/08/2017

    Friday 22 September

    Responsibility:

    Action

    GST Stewardship members

    Provide feedback on:

    • whether the legislative instruments should be remade and why
    • who may be impacted if the legislative instruments are not remade.
     

    Summary and close – Kevin O’Rourke

    Neil Olesen provided his observations on some of the main themes that the ATO is focusing on, including:

    • phoenixing in general and the benefit of the property at settlement NPP measure
    • corporate tax avoidance, the cash economy and the broader public debate on everyone paying their fair share including individuals
    • ATO’s response to system issues and availability and the success of TaxTime which is proceeding very well.

    The meeting concluded at 12.20.

    The next meeting will be held on 31 October 2017 in Sydney.

      Last modified: 06 Nov 2017QC 53860