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  • Large Business Stewardship Group key messages 26 March 2018

    Research and development

    Issue raised by external stakeholders

    • Consistency of administration

    Key messages

    • The Research and development (R&D) tax incentive program is jointly administered by the ATO and the Department of Industry, Innovation and Science (DIIS). R&D activities must be registered with AusIndustry (the program delivery division of the DIIS) before the tax offset is claimed, and the ATO determines if the expenditure claimed in the tax return (in respect of the R&D activities registered with AusIndustry) is eligible for the tax offset. Where the ATO is concerned that the activities may not be eligible, it will refer these cases to AusIndustry.
    • The ATO and AusIndustry also work jointly in developing and publishing guidance.

    Tax performance in Australia

    Issue raised by external stakeholders

    • Discussion around the ATO’s objective of ensuring community confidence in the corporate tax system and how it intends to communicate the message of ‘justified trust’ in the context of recent integrity, disclosure and compliance measures.

    Key messages

    The ATO has released several recent publications that are aimed at enhancing community confidence in the corporate tax system, including:

    • Tax and Corporate Australia and release of the large corporate groups tax gap issued on 11 October 2017
    • Report of entity tax information 2015–16 as well as contextual information and analysis of corporate tax transparency report issued on 8 December 2017
    • ATO statement on corporate tax, media release on 14 February 2018
    • ATO submissions to, and opening statements at, the Parliamentary inquiry into corporate tax avoidance and minimisation

    Justified trust, Key taxpayer engagement and Top 100/1,000 programs

    Issue raised by external stakeholders

    Discussion on:

    • outcomes from joint CTA/ATO workshop
    • details on the      
      • number of reviews now underway
      • number of concluded reviews
      • progress on Tax Assurance Reports (TARs) and Streamlined Tax Assurance Reports (STARs)
      • Number of issues moved to audits
      • systematic issues arising
    • ATO’s vision of engagement post Justified Trust reviews
    • What incentives are offered to taxpayers who obtain Justified Trust?

    Key messages

    • Joint CTA/ATO workshops held last year brought together taxpayers and ATO staff. The workshops fostered a shared understanding of the whole of tax approach for indirect and income taxes. A shared outcomes document has been developed capturing the key messages and answers to commonly asked questions.
    • Income tax Annual Compliance Arrangements (ACA), Pre-lodgement Compliance Reviews (PCR) and Streamlined Assurance Reviews (SAR) are progressing well with increasing numbers of TARs and STARs being provided to taxpayers. Increasing numbers of indirect tax PCRs and SARs are being commenced and the justified trust methodology is being applied in increasing numbers of ACAs with an indirect tax focus. A wide range of technical issues have been identified with a relatively low percentage, at this stage, moving to audit.
    • Where we obtain high assurance taxpayers benefit from greater certainty in relation to their tax affairs as well as a ‘lighter touch’ where we shift to more service focused approaches. We continue to work with those taxpayers where we are yet to achieve high assurance.

    Public advice and guidance

    Issues raised by external stakeholders

    • ATO’s recent approach of setting best practice in public advice and guidance in the large corporate market
    • ATO’s priorities in terms of taxpayers achieving best practice in a resource constrained environment
    • education of ATO officers around applying guidance as guidance only based on facts and circumstances and not as a checklist.

    Key messages

    • The ATO is cognisant that not every aspect of our public advice and guidance products applies to every client. As an example of one of our products, the aim of the Tax risk management and governance review guide is to provide a flexible, scalable and non-mandatory framework for all stakeholders to use when assessing tax governance and risk management processes against the ATO’s best practice framework.
    • Fact finding procedures, which are based on Agreed-upon procedures, aim to reconcile and agree factual data of businesses. These procedures allow the ATO to complete necessary factual checks in a way that is more streamlined and sensitive to the impacts the ATO’s work can have on businesses.

    Country-by-Country reporting

    Issue raised by external stakeholders

    Discussion included:

    • an update on lodgment statistics
    • observations around the first year of reporting
    • updates on guidance on reporting FX gains/losses
    • ATO access to documents previously supplied by the taxpayer.

    Key messages

    As at 15 February 2018:

    • 2,400 reporting entities have self-assessed as a significant global entity
    • more than 3,500 Country-by-Country (CbC) statements have been lodged, which include more than 40 CbC Reports, 1,400 Master files, 2,100 Short Form Local files, 1,900 Local file Part A and 1,700 Local file Part B

    The final version of the guidance on FX gains and losses is the same as the latest draft version released pre-Christmas 2017. The ATO is in the process of finalising the publishing of the guidance. The ATO will continue to work with the regulated finance sector on specific issues.

    Single Touch Payroll

    Issue raised by external stakeholders

    Employers with 20 or more employees required to report from 1 July 2018. Discussed corporate readiness and ATO position where payroll provider is late in providing solutions.

    Key messages

    • Single Touch Payroll (STP) was designed to align with an employer’s natural business processes in payroll and provide employers and digital service providers (DSPs) with flexibility in reporting around those processes. That flexibility includes the ability to correct mistakes in the next report as well as provide a 12 month penalty-free transitional period from 1 July 2018.
    • STP allows both DSPs and employers not ready to report from 1 July 2018 to apply for deferrals for a specific period of time based on supporting evidence, including a clear transition plan.
    • The ATO has just released its deferral process for those employers that are not in a position to start reporting from 1 July 2018 and are not covered by a DSP deferral.

    Compliance risks and emerging issues

    Indirect tax

    Updates were provided on the following:

    • digital products and services and low value imported goods new measure
    • outcomes of consultation sessions with industry associations and advisors on the GST cross-border new measures and their impacts for the financial services and insurance industry
    • GST at settlement – Treasury Laws Amendment (2018 Measures No. 1) Bill 2018 currently before Parliament.

    Income tax

    The ATO’s current focus in terms of income tax includes:

    • valuation of intangibles
    • hybrid mismatch rules
    • Taxpayer Alert 2018/2 – Structured arrangements that provide imputation benefits on shares acquired on a limited risk basis around ex-dividend dates – issued on 13 February 2018.

    Emerging risks and issues currently being considered by the ATO include:

    • Interest withholding and TOFA
    • Residency, re-domiciling and tax consolidation.

    OECD International compliance assurance program (ICAP)

    Issues raised by external stakeholders

    • ATO feedback on the level of taxpayer engagement and whether interest picked up since US Tax Reform was enacted.
    • Update on timeframes.
    • How key differences in approach between countries are being managed.
    • PE and transfer pricing are listed as risks being covered – will the MAAL and DPT feature in issue resolution?

    Key messages

    • ICAP is a voluntary program that will use CbC reports and other information to facilitate open and co-operative multilateral engagements between multinational entities (MNE) and tax administrations.
    • The pilot commenced in January 2018 for a duration of approximately 12 months. Outcome letters are expected to be issued in December 2018.
      Last modified: 26 Apr 2019QC 58678