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  • National Tax Liaison Group key messages 20 June 2019

    Key highlights

    Key highlights from the meeting included:

    • Overview of recent ATO activities
    • Update on the process of considering the Commissioner’s Remedial Power (CRP)
    • Explanation of various ATO panels, including their purpose, processes and membership
    • Discussions on the Review of the Tax Practitioners Board and the operation of the Tax Agent Services Act 2009 and the Inspector-General’s Report on the Future of the Tax Profession
    • Overview of the ATO’s network of processes used to engage with taxpayers.

    Introduction

    Second Commissioner Andrew Mills, Law Design and Practice Group

    Second Commissioner Andrew Mills welcomed members noting that CPA Australia representative Paul Drum was standing-in as NTLG Co-chair on behalf of Grant Wardell-Johnson, who was an apology for the meeting.

    Andrew Mills welcomed Angela Lee as a new member of the NTLG representing the Law Council of Australia. On behalf of the ATO and NTLG members, Andrew Mills thanked Adrian Varrasso for his commitment and contribution to the NTLG.

    Opening comments

    Second Commissioner Andrew Mills, Law Design and Practice Group, ATO; Paul Drum, CPA Australia; and Jeremy Hirschhorn, Second Commissioner, Client Engagement Group, ATO

    Acting Co-chair Paul Drum noted:

    • the Federal election outcome and the possible impacts of reforms on the economy noting fiscal stimulus is likely to occur through tax cuts and the increase to the instant asset write-offs
    • concerns raised by association members about the impact of Single Touch Payroll for micro businesses
    • there is an opportunity for the professional associations to work together with the ATO following the ATO’s release of its Reconciliation Action Plan in December 2018.

    Second Commissioner Andrew Mills noted:

    • incoming government – The Treasurer, The Hon Josh Frydenberg MP, leads the Treasury portfolio and Hon Michael Sukkar MP is the Assistant Treasurer and Minister for Housing (and likely to have responsibility for the ATO). Treasury representatives advised that alignment of responsibilities had not yet been formally decided. Other relevant ministers are Senator the Hon Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology and Senator the Hon Michaelia Cash, Minister for Employment, Skills, Small and Family Business
    • the ATO Executive has noted a number of changes that are influencing the client experience, such as the introduction of Single Touch Payroll (STP) – both for employers generally (and small businesses particularly) and employees at Tax Time
    • the ATO noted an increased volume of objections and is examining this to determine what learnings can be obtained to enhance decision making
    • other points of interest included the ATO’s focus on debt processes, the IT outage that occurred on 3 June 2019 with the ATO extending lodgment periods, and the recent media coverage of ATO matters.

    Second Commissioner Jeremy Hirschhorn outlined other issues regarding tax time and the impact of STP on taxpayers, including:

    • there will be a significant number of taxpayers who may be expecting a payment summary but will not receive one
    • some health funds will no longer issue statements as the information will be pre-filled
    • the management of taxpayers who lodge early July where the pre-fill information is not tax ready or available
    • paper lodgments.

    The ATO noted there has been a positive uptake of STP. There is a challenge with smaller employers as they consider there is no benefit for them to move to digital solutions even though there are a number of no-cost and low-cost solutions available. The ATO noted there has recently been an increase in call volumes from employers seeking to access STP options.

    Members raised concerns regarding the delayed passage of the Low and Middle Income Tax Offset (LMITO) legislation and the impact of the legislation being passed in early July 2019 on early tax lodgers. The ATO confirmed that it can automatically amend tax returns to provide this offset once it is law.

    Treasury report

    Maryanne Mrakovcic Deputy Secretary, Revenue Group, Treasury; and Paul McCullough, Division Head, Corporate and International Tax Division, Revenue Group, Treasury

    Treasury provided the following update:

    • thirteen tax measures have passed the Senate and received Royal Assent since the 4 March 2019 NTLG meeting
    • Treasury is discussing with Government the priorities for outstanding legislation when Parliament was prorogued in April 2019 noting that the main priority for Government is personal tax cuts
    • consultation was undertaken on the Petroleum resource rent tax: review of gas transfer pricing arrangementsExternal Link on 5 April 2019 closing on 14 June 2019. Eight submissions were received
    • a significant focus is the digitalised economy due to the release of the OECD’s work program
    • following the election, Treasury ministers have been briefed on a broad spectrum of issues.

    Future priorities for ATO and Treasury following the Federal election

    Paul Drum, CPA Australia; Paul McCullough, Division Head, Corporate and International Tax Division, Revenue Group; and Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO

    Members provided a list of announced but not enacted measures and wanted to discuss the new Government’s priorities for these.

    Members queried the progress of a number of measures including the proposed three year audit approach for SMSF, Division 7A, the tax residency rules for individuals, foreign residents and main residence exemption, and an Australia/Hong Kong Double Tax Agreement.

    Members also noted there is uncertainty regarding the Research and Development (R&D) expenditures with the impact being that a number of large corporate taxpayers have either stopped undertaking R&D activity or were undertaking the activity outside of Australia and not claiming the offset. Treasury noted that the Treasurer is still considering the Senate Economics Legislation Committee’s report on the legislation provisions surrounding the R&D tax incentive.

    Commissioner’s Remedial Power

    Michelle de Niese, Corporate Tax Association; Louise Clarke, Deputy Commissioner, Policy Analysis Branch, ATO; and Usha Narain, Assistant Commissioner, Policy Analysis and Legislation, ATO

    The Commissioner of Taxation has limited powers to modify the operation of tax law in circumstances where entities will benefit, or at least be no worse off, as a result of the modification. This power is known as the Commissioner's Remedial Power (CRP).

    Members requested an update from the Commissioner’s Remedial Power Advisory Panel meeting held on 4 June 2019.

    Michelle de Niese noted that since the advisory panel was established, 43 matters have been raised for consideration with only two being successful in the application of the CRP. There was concern the advisory panel was not being involved at the right time. However, this has been addressed with the revised process provided to members.

    Michelle de Niese further noted that it appears that the provision is not operating in accordance with the statement of intent for the legislation. Michelle de Niese suggested that a post-implementation review of the CRP may be required.

    The ATO noted that The Tax and Superannuation Laws Amendment (2016 Measures No. 2) Act 2017, which introduced the CRP, allows for the Minister to ask for a review of the legislation between three and five years after the start date (1 March 2017).

    Tony Greco queried whether the application of CRP could be considered for tax agents/accountants to access information regarding deceased estates through the ATO tax agent online portal. There are strict legal requirements and agents are currently not able to access this information through the portal. The ATO noted that it would consider whether there was scope for access to be provided under the existing law. If an administrative solution could not be implemented, consideration would be given to whether the issue could be addressed through the CRP.

    Action item

    NTLG 1906/1

    Due date

    9 September 2019 NTLG meeting

    Responsibility

    Louise Clarke, Deputy Commissioner, Policy Analysis Branch

    Description

    Consideration of agents/accountants’ access to the ATO tax agent online portal for information on deceased estates.

     

    The ATO to consider:

    1. If access can be provided under the existing law
    2. If an administrative solution cannot be implemented, whether the Commissioner’s Remedial Power can be applied to allow tax agents/accountants to access information on deceased estates through the ATO tax agent online portal.

    ATO panels

    Clint Harding, Law Council of Australia; Kirsten Fish, Chief Tax Counsel, ATO; Jeremy Geale, Deputy Commissioner, Review and Dispute Resolution, ATO; and Scott Treatt, Assistant Commissioner, Private Wealth, ATO

    Members raised this item to discuss the various panels the ATO operates including the composition of members, the number of matters considered by the panels, how members of the panels are selected and who can appear before them. Of particular interest to members was information regarding the General Anti-avoidance Rules (GAAR) Panel, the Settlements Panel, the Fraud and Evasion Panel and the application of Section 45B and Section 45C.

    The ATO provided an overview of the ATO’s panels, the membership and the processes for the panels.

    GAAR Panel – This has a purely consultative role, hears submissions and provides recommendations to the ATO decision maker. The panel is comprised of ATO officers and external members and sits once a month from February to December. Twenty-eight matters were heard during 1 July 2018 and 30 June 2019.

    Most matters for which the GAAR may apply are referred to the Panel before a final decision is made. The panel does not investigate matters but makes a recommendation based on what is presented to them. An officer from the ATO’s Tax Counsel Network is always involved in a possible Part IVA case and that officer usually suggests where it might be useful to involve the GAAR panel in a matter. The GAAR panel also considers specific anti-avoidance provisions.

    Members noted that previously the NTLG was provided with an overview of the matters that went before the GAAR Panel. The ATO noted that it would consider whether further information about the issues considered by the GAAR Panel should be made more widely available.

    Section 45B and Section 45C – before an officer can apply these sections, they need to refer the matter to the Tax Counsel Network. These issues are not usually referred to the GAAR Panel, and the panel has not been asked to consider application of these sections since 2016.

    Public Advice and Guidance (PAG) Panel – The PAG Panel is a consultative panel that considers and advises on the proposed interpretation of the law and other issues that emerge in the development of public advice and guidance. The panel offers advice on interpretative matters and technical accuracy, and may advise on a range of related issues associated with the preparation of public advice and guidance.

    The use of the PAG panel has changed over the years as the ATO has changed its processes for the development of advice and guidance products. Where extensive consultation has been conducted for a product, the PAG Panel may not be used. The panel members include barristers and practitioners in the private sector. The ATO will engage who is best placed to give consideration to the issue put before the panel. Other stakeholders are not invited to the panel meeting but submissions can be provided to the panel for their consideration. The ATO takes into consideration the views of the PAG Panel but ultimately decides the position that goes into the ruling or other guidance/advice.

    National Fraud or Evasion Advisory (FE) Panel – This panel, in its current form, has been established for 12 months. The purpose of the panel is to provide advice to any ATO officer who is considering forming an opinion of fraud or evasion.

    The FE Panel will comprise at least three senior ATO staff. One member must be from the referring business area (but not a member of the case team) and one member must be from Tax Counsel Network. For a case to be considered, it needs to be escalated to a decision maker who is a senior ATO officer. The case is presented to the taxpayer in a position paper before it is submitted to the panel. The taxpayer has an opportunity to respond to the position paper. Their response is provided to the panel and submitted to the decision maker. The panel’s opinion is a recommendation to the decision maker.

    Settlements Panel (Independent Assurance of Settlements) – The Independent Assurance of Settlements program reviews and advises on the ATO’s largest and most significant settlements. The panel is not involved in making the settlement, they assess whether the outcome of the settlement is fair and reasonable for the Australian community.

    The program involves four former Federal Court judges who provide a view on whether the settlements are fair and reasonable. Settlements selected for review include those involving multi-national enterprises, those arising from Corporate Tax Avoidance Taskforce operations for income tax or indirect tax (GST, excise).

    There are settlement panels in some ATO business areas that review settlement proposals and provide advice to audit teams whether matters can or should be settled.

    Action item

    NTLG 1906/2

    Due date

    9 September 2019 NTLG meeting

    Responsibility

    Chief Tax Counsel, Tax Counsel Network

    Description

    Information on issues considered by the GAAR Panel.

     

    ATO to review and consider providing further information on the issues considered by the GAAR Panel.

     

    Action item

    NTLG 1906/3

    Due date

    9 September 2019 NTLG meeting

    Responsibility

    Chief Tax Counsel, Tax Counsel Network

    Description

    Update to ato.gov.au website content on Panels.

     

    ATO to review and update information on ato.gov.au for the GAAR Panel, PAG Panel and Fraud or Evasion Panel.

     

    The ATO will consider whether the information on the Independent Assurance of Settlements (IAS) can be updated to include key information on the findings of the IAS directly on the web page rather than linking to the relevant section in the Annual Report.

    Environmental Scan

    Paul Drum, CPA Australia

    CPA Australia has launched a Green paper on regulatory burden and advisory services - impact on professional accountants and their clients (PDF, 861 KB)External Link.

    Paul Drum provided an introduction of the CPA Australia’s Green Paper and will give a presentation on the paper at the next NTLG meeting on 9 September 2019.

    Inspector-General’s report on the future of the tax profession

    Tim Neilson, The Tax Institute; Tony Greco, Institute of Public Accountants; and Alison Lendon, Deputy Commissioner, Individuals and Intermediaries, ATO

    The Inspector-General’s (IGT) report on the Future of the tax professionExternal Link was publicly released on 3 April 2019. Members wanted to discuss the progress of issues noted in the report that could impact tax agents.

    The ATO noted it is starting to work through the recommendations. The ATO had a stakeholder relationship group that was focused on the future of the tax profession but this was put on hold due to the IGT review. The ATO is now considering the best approach to focus on the possibilities the recommendations in this report offer. The ATO will explore this with representatives from the profession.

    Review of the Tax Practitioners Board and TASA

    Tim Neilson, The Tax Institute; Louise Clarke, Deputy Commissioner, Policy Analysis Branch, ATO; and Usha Narain, Assistant Commissioner, Policy Analysis and Legislation, ATO

    On 5 March 2019 the Government announced an independent review of the effectiveness of the Tax Practitioners Board and the Tax Agent Services Act 2009 to ensure that tax agent services are provided to the public in accordance with appropriate professional and ethical standards.

    Members raised this item to discuss the review. Chartered Accountants Australia and New Zealand, CPA Australia, the Institute of Public Accountants and The Tax Institute provided submissions to the review and copies were provided to NTLG members.

    Tim Neilson noted there is a perception that one catalyst for the review was the way non-compliant agents are being disciplined and whether the ATO and Tax Practitioners Board (TPB) were working together effectively.

    Nick Westerink, Treasury Principal Adviser for the review, noted that initial consultations have been held with most of the professional associations, as well as representatives from the tax clinics and the software industry. Meetings with numerous agencies including the ATO, TPB, ASIC, FASEA, AAT, and ASBFEO have been conducted and a webinar was held to give those who could not attend the consultation, the opportunity to ask questions.

    Thirty eight submissions were received with the following recurring themes:

    • generally positive for the work the TPB is undertaking
    • governance – independence of the TPB from the ATO, membership of the Board
    • tax financial advisers (TFA) – regulatory overlap, should TFAs be administered by the TPB or ASIC
    • Code of Professional Conduct – should it be strengthened
    • sanctions – should there be a wider range of sanctions
    • safe harbour – should it be strengthened
    • unregistered agents – should they be regulated by the ATO or TPB.

    Nick Westerink noted that the submissions by the professional associations did not address or provide feedback on the safe harbour elements which were thought controversial when it was introduced.

    A discussion paper is due to be published on 15 July 2019 with further, targeted consultation planned. A report will be provided to Government by 31 October 2019.

    Post meeting update: The discussion paperExternal Link was published on 1 August 2019 with comments closing on 30 August 2019.

    Network of processes for ATO to engage with taxpayers

    Clint Harding, Law Council of Australia; Michelle de Niese, Corporate Tax Association; and Scott Treatt, Assistant Commissioner, Private Wealth

    Clint Harding noted that over the last five years the focus on earlier engagement has evolved. Members wanted to discuss the ATO’s network of processes with a focus on early engagement with taxpayers particularly in the area of Private Binding Rulings.

    Early engagement is an opportunity for a taxpayer and their adviser to discuss the tax outcomes of complex transactions, including commercial deals, with the ATO before applying for formal advice. Early engagement can be requested where:

    • advice is being sought, eg a private ruling, class ruling or administratively binding advice
    • when the taxpayer or their advisor is unsure of the most appropriate type of advice for your situation
    • before, during or after you have entered into the transaction.

    The ATO noted that early engagement would speed up the process and identify any obstacles.

    The ‘Commercial Deals’ program is a risk assessment product designed to assess commercial transactions identified by the ATO and work proactively with taxpayers to provide its views on those significant events before lodgment, reducing compliance costs by engaging as close to the transaction time as possible.

    Members noted the website needs to be clearer about how to access these services.

    Action item

    NTLG 1906/4

    Due date

    9 September 2019 NTLG meeting

    Responsibility

    Deputy Commissioner, Private Wealth

    Description

    Review ato.gov.au website content on Commercial deals and Early Engagement.

     

    ATO to review and if necessary update information on ato.gov.au for Commercial deals and Early engagement to ensure it is clear how taxpayers can access these services.

    Other business

    Members were asked for their views on possible future agenda items. Members noted the following would be of interest:

    • learnings from the ATO review of objections
    • pipeline reviews (end to end client experiences) being undertaken by the ATO
    • outcomes from the Review of the Compensation for Detriment caused by Defective Administration scheme (CDDA Scheme).

    NTLG action items update

    Justen Nixon, Senior Technical Adviser, Tax Counsel Network, ATO

    Justen Nixon provided a status update on the following open action items:

    • NTLG 1903/1 - link to updated published ATO organisational chart
    • NTLG 1903/2 - Commissioner’s Remedial Power – Examples of proposals considered not suitable
    • NTLG 1903/3 - consultation arrangements for new legislation and related guidance
    • NTLG 1903/4 - trial of the National Tax Clinic program.

    Members agreed to close action items NTLG 1903/1, NTLG 1903/2, and NTLG 1903/4 with action item NTLG 1903/3 to remain in progress.

    Update on FIRB application process

    Justen Nixon, Senior Technical Adviser, Tax Counsel Network, ATO

    Members requested an update on the FIRB application process resulting from various discussions that have been held at recent NTLG meetings on FIRB to ensure the process resembled a tri-partite process.

    The ATO noted that it would be made clear to applicants that if they have questions about the tax conditions, they should approach Treasury and Treasury will arrange the tri-partite discussion between the applicant, FIRB and the ATO. Members noted that it would be helpful to have the process detailed in writing, for example, in FIRB Guidance Note 47.

    Attendees

    Attendees are listed below.

    Organisation

    Members

    ATO

    Andrew Mills (Co-chair), Law Design and Practice Group

    ATO

    Robyn Theacos (Secretariat), Enterprise Strategy and Design

    ATO

    Jeremy Hirschhorn, Client Engagement Group

    ATO

    Justen Nixon, Tax Counsel Network

    ATO

    Sandra Roussel, Enterprise Strategy and Design

    Treasury

    Maryanne Mrakovcic

    Treasury

    Paul McCullough

    Chartered Accountants Australia and New Zealand

    Michael Croker

    Corporate Tax Association

    Michelle de Niese

    CPA Australia

    Paul Drum

    Institute of Public Accountants

    Tony Greco

    Law Council of Australia

    Angela Lee

    Law Council of Australia

    Clint Harding

    The Tax Institute

    Bob Deutsch

    The Tax Institute

    Tim Neilsen

    The Tax Institute

    Stephanie Caredes

    Apologies

    Apologies are listed below.

    Organisation

    Members

    Chartered Accountants Australia and New Zealand

    Grant Wardell-Johnson (Co-chair)

      Last modified: 22 Aug 2019QC 59944