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  • GST Stewardship Group record of meeting 31 October 2017

    Meeting details

    Venue: ATO Offices, Level 13 Rooms 713 and 714, 52 Goulburn Street, Sydney

    Date: 31 October 2017

    Start: 10.00am Finish: 13.20pm

    Chair: Tim Dyce

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

    Members

    Tim Dyce

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

    Lucy Libertone

    Assistant Commissioner, Indirect Tax, ATO

    Gordon Brysland

    Senior 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

    Chris Plakias

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

    Bastian Gasser

    The Tax Institute

    Andrew Sommer

    Partner, Clayton Utz,
    Member Law Council of Australia

    Paul Suppree

    Corporate Tax Association

    Professor Michael Walpole

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

    Guest attendees

    Jeremy Geale

    Deputy Chief Counsel, ATO

    Janine Clark

    Assistant Commissioner, ATO Corporate
    (via telephone for item 2)

    Victor Bobrowski

    Director External Engagement and Governance, ATO Corporate
    (via telephone for item 2)

    George Montanez

    Assistant Commissioner, Indirect Tax, ATO

    Katie Welsh

    Assistant Commissioner, Indirect Tax, ATO

    Marina Dolevski

    Assistant Commissioner, Indirect Tax, ATO

    Ian Ayrton

    Director, Indirect Tax, ATO

    Jenny Spiliotopoulos

    Director, Indirect Tax, ATO

    Apologies

    Andrew Howe

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

    George Nikolaou

    Coles Finance

    Agenda summary

    • Welcome
    • Update on Taxpayer Charter review
    • Discussion on the Implementation of Cross Border Measures
    • GST Large Business Program
    • Discussion on Industry Issues in terms of New developments / business models / emerging risks
    • Next steps summary and close

    Discussion summary

    Welcome - Tim Dyce

    Tim Dyce opened the meeting.

    One action item remains outstanding from 23 August 2017 meeting re RDR attend meeting to discuss with members the new self-objection process. This item will be presented at the 21 February 2018 meeting.

    Action item

    ID:

    Due date:

    A – 31/10/2017

    December 2017 to secretariat

    Responsibility:

    Action

    All members

    Members to consider future subject topics that have broader impacts on the GST system. These subjects may provide the opportunity for deep exploration and discussion at future meetings.

    Update on Taxpayer Charter review - Victor Bobrowski

    The Inspector-General of Taxation released the findings of the ‘Review into the Taxpayers’ Charter and taxpayer protections’ in December 2016. The full report is available at: http://igt.gov.au/publications/reports-of-reviews/taxpayers-charter-and-taxpayer-protections-review/External Link. The ATO sought feedback on the recommendations in the report via the ATO’s Let’s Talk channelExternal Link and members of the ATO Stewardship groups were encouraged to contribute. Victor provided a summary of the consultation process and the feedback received to date. Victor also offered to include as part of the review any additional feedback the GST Stewardship Group members might have.

    Action item

    ID:

    Due date:

    B - 31/10/2017

    30 November 2017

    Responsibility:

    Action:

    Secretariat

    Seek feedback from members on the Taxpayer's Charter and provide to Victor Bobrowski.

    Discussion on the Implementation of Cross Border Measures - Ian Ayrton

    The cross-border supplies of imported services and digital products measure is running well and work is proceeding on the low value imported goods measure. In Australia registrations for digital services and products compares favourably with other jurisdictions who have implemented a similar regime. The initial success of the implementation is no doubt due to the approach undertaken. This has included a significant investment in engaging with potential registrants, their representatives and Taxation authorities in the various jurisdictions across the wold. First quarter payment expectations so far have been achieved with a number still to pay by end October, noting that Australia is likely to exceed initial Budget projections for the measure. There are a number (not as yet quantified) who are in the full GST registration system.

    The ATO anticipates that most will generally comply with the low value goods measure, and there is an expectation that significant GST revenue will be raised. We acknowledge that the Productivity Commission review is being undertaken however the law has been passed and we have made it clear and expect that those businesses that are required to participate will have systems in place before 1 July 2018. Entities making these supplies will be able to access the simplified registration system from 1 January 2018, and they should be registered well ahead of 1 July 2018, as this will allow them to put in place the necessary system changes required to be able to satisfy consumer invoice and customs requirements. We are working on making it clearer to overseas entities that there are tools that they can use to determine if the ABN quoted is valid and we are in ongoing talks with the Department of Industry (see our current website advice here). There is continuing interest by other jurisdictions that may look to a similar approach to tax low value goods.

    Please refer to below links for further information:

    http://www.ato.gov.au/AusGST

    http://www.ato.gov.au/AusGSTZhongguo

    Action item

    ID:

    Due date:

    C - 31/10/2017

    Next Meeting

    Responsibility:

    Action:

    Secretariat

    Organise an update on the implementation of Cross Border Measures.

    GST Large Business Program - George Montanez and Marina Dolevski

    Our client experience strategies are tailored according to each of the business population segments. Risk models continuously monitor the entire population to identify potential risks that require treatment under a compliance engagement approach. The Top 100 are Australia’s largest businesses, and how they behave, can have a significant impact on the overall health of the system.

    Key taxpayer engagement (KTE) is the overarching approach we use to engage the largest public and multinational businesses operating in Australia. The significant feature of the KTE is that it incorporates a whole of tax approach wherever practical and desirable. Working in a whole of tax approach means we can minimise or eliminate duplication of information requests across revenue types. The development of Pre-Lodgement Compliance Reviews (PCRs) for GST will further the identification of issues and will allow for prevention activities to be undertaken before any correction is needed. Integrated Tax Assurance Reports and Streamlined Tax Assurance Reports will enable taxpayers to see where our concerns are and will enable the taxpayer to work with us to reduce those concerns. We are integrating indirect taxes into the Tax Risk Management and Governance Review Guide to have a whole of tax best practice guide.

    We offer relationship managers to our Top 100 taxpayers that are categorised as key taxpayers under the risk differentiation framework. The role of the relationship manager is to build a holistic understanding of the taxpayer’s business by scanning the external environment and engaging with their respective Top 100 taxpayer. The relationship is a two way communication to foster open and transparent discussions about the identification and mitigation of perceived risks. Relationship managers also facilitate the resolution of any technical and administrative matters. The relationship manager will be part of the whole of tax team under the key taxpayer engagement approach.

    We use the risk differentiation framework (RDF) to help us assess a taxpayer’s tax risk and determine the intensity of our response. A taxpayer’s risk rating is based on an informed professional judgment, at a point in time, of the risk and the relationship we have with the taxpayer – relative to the population. Our engagement and treatment is based on the taxpayer’s risk categorisation. The three risk categories include:

    • key taxpayer
    • key taxpayer with significant concerns, and
    • higher risk.

    The whole-of-tax team determines the engagement approach we will adopt with the taxpayer based on:

    • their RDF categorisation for each tax
    • willingness to improve their RDF rating and address any concerns we have in compliance
    • level of openness and willingness to supply information
    • materiality of concerns we have across taxes, and
    • consequence to the tax system of jeopardising a good relationship in one tax to achieve an outcome in another tax.

    The three types of engagement approaches under the KTE include:

    • partnering
    • encouraging, and
    • influencing.

    To maximise the benefits of having a whole-of-tax approach we have developed a PCR for Indirect Tax (ITX) that aligns with the income tax PCR. For ITX the PCR product will be used to apply the justified trust methodology. The intent of the PCR is to identify and resolve tax risks prior to BAS lodgment wherever possible, through early, tailored and transparent engagement. That is, focusing on prevention before correction. The PCR also includes a post-lodgment review where we will be requesting 4 months of data as a representative sample to seek assurance over the entire period under review. The assessment will be evidence based and will involve:

    • reviewing and gathering evidence surrounding the taxpayer’s governance and controls
    • transaction testing for four consecutive BAS periods
    • a BAS walkthrough and an IT systems governance assessment
    • a review of the treatment of large and unusual transactions
    • an examination of how known risks are treated, and
    • assessing whether any misalignment between the taxpayer’s financial performance and its GST performance is explainable and appropriate.

    Achieving justified trust means that we have sought and obtained enough objective evidence which confirms that a particular taxpayer has paid the right amount of tax. This is a higher level of assurance than confirming certain risks do not arise. Achieving justified trust results in:

    • providing confidence to the community
    • greater certainty to the taxpayer
    • focuses our future engagement strategy for the taxpayer
    • leads to a reduction in future resourcing for both the ATO and taxpayer.

    We use a structured approach – a justified trust methodology - to assess whether a taxpayer is paying the right amount of tax. Tax performance is one of the 4 focus areas of Justified Trust that seeks to understand and reconcile variances between accounting income and reported taxable income to ensure clients are paying the appropriate amount of tax.

    The Tax Assurance Report (TAR) is an annual report prepared by the ATO which will be shared with the taxpayer. The Report acts as a knowledge repository for the ATO ensuring a seamless transfer of knowledge where changes in ATO staff occur. It will facilitate the whole of tax capture for assurance. It summarises our conclusions and provides a meaningful outline of:

    • our understanding, analysis and conclusions of the four key areas
    • areas of concerns, identified with red flags
    • areas where assurance has been obtained
    • a plan where further work is needed to obtain higher levels of assurance (i.e. future assurance plan).

    The outcomes reported in TARs will feed into the annual RDF moderation process. Where a taxpayer obtains a high level of assurance overall, they can expect a tailored, less intensive approach moving forward.

    We are engaging with the Top 320 Private Groups through a whole of tax (WOT) approach encompassing correct registration, correct reporting, timely lodgment and timely and correct payment. The strategy consists of tailored early engagement, assurance offerings, a WOT approach with ITX engagement. We are providing the Australian community confidence that the large Private Groups are paying the right amount of tax through tailored engagements.

    We will look at registered entities who are most significant for indirect tax purposes; this may be influenced by the GST through put of the entities within the group. We use our e-Audit capability to gain an understanding of a client’s IT systems, governance and processes they have in place to support their record keeping and meet their tax obligations. The strategy involves face to face discussions with the client or advisor where the ATO explains what we know about the client, and the client or their advisor can respond / discuss the risks that are relevant given their commercial drivers and business. Where the client advises an internal audit or review has been conducted by their advisor, we will work with them to understand the scope and period of the review and tailor our engagement accordingly.

    While our client engagement strategy is focussed on the Top 320, we will also engage with the broader Private Groups through early engagement, review and audit programs. We will also continue our risk review and audit programs for client groups who do not engage or align with lodgement and reporting requirements arising from risk based case selection or escalation from engagement cases.

    Action item

    ID:

    Due date:

    D - 31/10/2017

    30 November 2017

    Responsibility:

    Action:

    Secretariat

    Provide members with copies of GST Large Business Program presentations.

    Discussion on Industry Issues in terms of New developments / business models / emerging risks – Katie Welsh

    A number of emerging business models and trends were discussed and the potential consequences for the GST system; they included:

    • There has been an existing trend towards sending internal compliance functions offshoring; this is seen to have a limited risk lifespan. In the next five years everything that is being offshored is likely to be automated or performed by robots. Will the ATO be ready to respond?
    • building support strategies to support the growth in indigenous business
    • Cyber-security threats
    • GST at point of sale is occurring in other jurisdictions.

    Summary and Close - Tim Dyce

    Tim advised that we would be looking to refresh some of the membership; generally members of Stewardship Groups are invited for a term of 2 years.

    The meeting concluded at 13.20.

    The next meeting will be held on 21 February 2018 in Melbourne.

      Last modified: 01 Feb 2018QC 54480