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  • National Tax Liaison Group key messages 21 March 2017

    Role of the Chief Information Officer – Enterprise Solutions and Technology

    Ramez Katf, Chief Information Officer, Enterprise Solutions and Technology, ATO 

    The Chief Information Officer (CIO) has the overall management of the ATO’s information and communication technology services. This includes the delivery of technology services to support ATO staff and to provide a better and enhanced client experience.

    Enterprise Solutions and Technology includes areas with a functional role:

    • design – responsible for the business strategy
    • build – responsible for understanding the business requirements and building business solutions as needed
    • operations – responsible for monitoring systems’ performance and responding to incidents.

    The strategy is designed to reflect the ATO focus:

    • Digital business: provide an enhanced client experience and business support
    • Infrastructure: world-class infrastructure to support a 24/7 business with continuous operational support
    • Data: supporting business through data and enabling the tools to support data as a key capability
    • People: working to increase capabilities through leadership and training.

    Members sought the CIO’s views on various aspects of the ATO’s IT systems. The CIO noted that the ATO has a ‘digital by default’ mindset and works with business groups to determine what should be digitised vs manual and what that should look like from an end-user perspective.

    Members noted that from a strategy perspective the ATO is a world leader with a single integrated view of clients, a consolidated accounting system and the integrated broader use of the ‘ecosystem’ of software developers to extend the availability of technology. The ATO’s mission is to provide a contemporary digital interaction to the community.

    Role of Risk and Assurance

    Frances Cawthra, A/g Second Commissioner, Risk and Assurance, ATO 

    Three areas of focus:

    • Develop a new organisational approach to risk management with streamlined and contemporary risk frameworks. This includes developing a clear statement of the ATO’s risk appetite and establishing an Enterprise Risk Management Committee. A Chief Risk Officer has also been appointed.
    • Review ATO governance structures to ensure that they are contemporary and streamlined.
    • Review business continuity management system - Post-incident review looking at how the ATO responded to the recent system outages. It was noted that the ATOs business continuity management framework has been recognised and shared internationally.

    ATO system outages

    Matthew Pawson, The Tax Institute; Clint Harding, Law Council of Australia (LCA); Tony Greco, Institute of Public Accountants (IPA); Ramez Katf, Chief Information Officer; and Frances Cawthra, A/g Second Commissioner, Risk and Assurance, ATO 

    Members raised concerns on the impacts of the outages on tax practitioners and their clients, and the ATO’s response to the outages. The CIO noted:

    • Outages were caused by faulty hardware.
    • The ATO engaged with and has received feedback from professional bodies on the restoration of systems.
    • Focus is now on recovering with better stability with new, more robust hardware for the data array. Transitioning to the new hardware has begun. Also looking at alternatives of what the ATO needs to have in place to ensure 24/7 business support, noting the ATO was able to restore from backups.
    • ATO recognises the need for communications to users to focus on services rather than applications. Users need to know what they can do and what services they can access and consume, rather than which applications are up or down.
    • Reviews of the ATO’s systems outages are being undertaken by PricewaterhouseCoopers and Hewlett Packard Enterprise and the reports are being finalised.

    Members acknowledged the Commissioner’s apology for the system outages. Members commented that the digital transformation must improve outcomes as there is loss of productivity and reputational damage for agents who cannot get work done for clients when the systems fail.

    Members queried if the ATO was satisfied with the communications to agents and the concessions provided during the December and February outages. Members noted that the ATO was more proactive with communications with the February outages. The ATO is open to hearing from practitioners regarding the adequacy of the concessions allowed by the ATO in response to the outages.

    Numerous submissions and consultations over December 2016 to February 2017

    Andrew Mills, Second Commissioner, Law Design and Practice, ATO 

    This topic was discussed at the 23 February 2017 Consultation Steering Group meeting and the Chair briefed members noting:

    • There were 14 ATO and 8 Treasury submissions and consultations identified that were issued over the December 2016 and January 2017 period. Concerns were raised on the impact on the quality of consultations and submissions issued over the busy end of year and January holiday period and that it is difficult to obtain stakeholder input due to the unavailability of stakeholders over this period.
    • Consultations are often driven by Government and this can impact on Treasury and ATO timeframes. Treasury is conscious of this constraint on industry and factor that into advice to Government. Treasury and ATO try to maximise timeframes wherever possible.
    • CSG members noted that where there are short timeframes, it would help if the changes in submissions/consultations were identified and tracked to make it easier and less time consuming to review.
    • The ATO will explore options for a consultation register which would include Government announcements.

    Environmental Scan

    All members 

    Members noted various issues for information. Topics included:

    • new ASIC funding model, in which supervisory costs may be recouped from users of ASIC systems
    • Australian Law Reform Commission – Elder abuse inquiry
    • uptake of online services in Australia falling behind other countries in the Asia-Pacific region
    • current infrastructure does not support regional Australia and how they operate eg. users in those areas do not have ‘any time / anywhere’ access to the internet, and often need to travel to specific locations. This is out of step with metropolitan communities.
    • impact on the industry of key closures on the tax and accounting profession, both as members of the affected communities and as providers of services to affected individuals and businesses
    • Transparency of Tax Debt, currently under consultation, with potential impacts on small business clients
    • changing behaviours of multinationals reflecting impact of ATO activity
    • debate about the distinction between active and passive companies. There will be an impact on franking credits.

    Treasury reports

    Maryanne Mrakovcic, Deputy Secretary, Revenue Group, Treasury 

    An update on Treasury activities included:

    • Diverted Profits Tax Bill 2017 has been endorsed by the Senate Economics Legislation Committee in its current form
    • small business company tax rate changes currently before Parliament
    • Black Economy taskforce interim report due shortly with the final report later in 2017
    • review of the Petroleum Resource Rent Tax report due in April 2017
    • GST on low value imported goods – planned start date 1 July 2017. There are some issues still to be progressed with agreement of the States required
    • Hybrid Mismatch rules – planned start date 1 January 2018
    • mandatory disclosures and whistleblower protections – papers have been issued and submissions are being considered.

    Other points of interest raised by members included:

    • Treasury’s project to enshrine the ‘objective of superannuation’ into legislation is progressing
    • anti-hybrid rules – now with Treasury who will consider the recommendations from the Board of Taxation and put a policy proposal to the Government
    • Multilateral Instrument – Australia has to lodge its reservations before the scheduled signing ceremony on 7 June 2017
    • The Australian Law Reform Commission’s proposal to regulate the legal and accounting professions under anti-money laundering measures on the same basis as banks
    • R&D Tax Incentive Review – the ‘Triple F’ paper has been issued.

    Increasing transparency of the beneficial ownership of companies

    Tony Greco, (IPA); Michael Cranston, Deputy Commissioner, Private Groups & High Wealth Individuals (PGH); and Mathew Umina, A/g Deputy Commissioner, International, ATO 

    Members noted this is a G20 initiative and queried how the ATO will use the information. The ATO noted this is a a global reform with Australia required to meet the G20 and Financial Action Task Force (FATF) Standards. Consultation was conducted by the Markets Group in Treasury. Submissions closed on 13 March 2017 with 29 submissions received for review. Members commented that the consultation paper did not cover trusts.

    Embedding the transfer pricing guidelines in the tax law

    Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand (CA ANZ); Jeremy Hirschhorn, Deputy Commissioner, Public Groups; and Mathew Umina, A/g Deputy Commissioner, International, ATO 

    Members queried whether there will be any changes in the ATO’s approach to review transfer pricing cases as a result of the revised 2015 OECD transfer pricing guidelines. The ATO noted it does not expect to forsee a dramatic change in the way we deal with transfer pricing cases. The changes to the 2015 guidelines provide more clarity rather than change the ATO approach. The ATOs transfer pricing approach are quite well established and implementation of the 2015 guidelines is not expected to shift the ATO’s approach.

    The ATO is thinking about ways it can assist taxpayers including whether a Practical Compliance Guide for pricing shareholder debt is appropriate.

    Taxpayer alerts

    Adrian Varrasso, (LCA); Grant Wardell-Johnson (CA ANZ); Will Day, Deputy Chief Counsel, Public Advice and Guidance; Michael Cranston, Deputy Commissioner, PGH; and Jeremy Hirschhorn, Deputy Commissioner, Public Groups, ATO 

    Members asked if there has been a shift in the use of taxpayer alerts by the ATO, noting that as an example, TA 2017/1 seemed to have a broader application than previous Taxpayer Alerts, that is, it would capture a variety of industries and structures.

    Members noted this discussion was on the purpose and administration of taxpayer alerts generally, that is how taxpayer alerts are used, their scope, the process and their position in the tax system.

    Practice Statement PS LA 2008/15 Taxpayer Alerts provides guidance for initiating and issuing a taxpayer alert. The ATO issues taxpayer alerts as an early warning of concerns about new or emerging higher risk tax or superannuation arrangements, or issues that the ATO has under risk assessment. The ATO’s aim is to share concerns early to help taxpayers make informed decisions about their tax affairs.

    Taxpayer alerts do not provide the ATO view and are issued where the ATO considers certain arrangements might breach the law. Following the taxpayer alert, the ATO would generally aim to provide advice or guidance on the arrangement in the taxpayer alert if such advice or guidance is appropriate.

    Members acknowledged the breadth of PS LA 2008/15; however, they queried whether as a matter of practice there has been a shift in the scope of taxpayer alerts. Members noted in particular the importance that taxpayer alerts play for taxpayers and linkages across the tax system (for example, with justified trust and reportable tax position schedules), especially with the heightened media coverage – including press releases and media briefings – that has accompanied the delivery of recent alerts.

    Michael Cranston will convene further discussions with NTLG members Michelle de Niese, Adrian Varrasso and Michael Croker and ATO officers Jeremy Hirschhorn and Will Day to discuss the impact of taxpayer alerts on large corporates and how the Taxpayer Alert system may be improved to manage unwanted impacts.

    Action item NTLG 1703/1 – Impact of taxpayer alerts on large corporates and how the Taxpayer Alert system may be improved to manage unwanted impacts

    Diverted profits tax

    Grant Wardell-Johnson (CA ANZ); and Jeremy Hirschhorn, Deputy Commissioner, Public Groups, ATO 

    Members noted the report from the Senate Economics Legislation Committee on the Diverted Profits Tax Bill 2017 that was tabled on 20 March 2017. Members queried what the ATO is doing following the release of the Exposure Draft.

    Members were informed that the ATO will have a specific process for dealing with diverted profits tax (DPT) cases which will include a specialist DPT team, an internal DPT panel, and mandatory escalations to both a preliminary and a full GAAR panel. The process will ensure that DPT decisions are made with both independent input and oversight at a senior level within the ATO, consistent with the ATO’s recognition that the DPT is a provision of utmost significance to affected taxpayers.

    Protections for tax whistleblowers

    Tony Greco, IPA; Greg Wood, Treasury; and Jeremy Hirschhorn, Deputy Commissioner, Public Groups, ATO 

    Treasury released a consultation paper on 20 December 2016 on the Review of tax and corporate whistleblower protections in Australia. Submissions closed on 10 February 2017 with 36 submissions received. Treasury is now considering issues in the context of developing a policy proposal. The aim is for an exposure draft to be released in the middle of the year however further consultation may be necessary before its release.

    The consultation paper was intended to complement the work of the Parliamentary Inquiry into whistleblower protections in the corporate, public and not-for-profit sectors. The Parliamentary Inquiry is due to report on 30 June 2017.

    House of Representatives Tax and Revenue Committee inquiry into taxpayer engagement in the tax system and the Black Economy taskforce

    Tim Neilson, The Tax Institute; Maryanne Mrakovcic, Treasury; and Emma Rosenzweig, A/g Deputy Commissioner, Small Business, ATO 

    Members queried how the ATO plans to approach the House of Representatives Tax and Revenue Committee inquiry into taxpayer engagement in the tax system and the Black Economy Taskforce as there seems to be some overlap between the two.

    The ATO noted the Tax and Revenue Committee inquiry and the Black Economy taskforce are two different processes. The taskforce is looking at the black economy (including its impact on taxpayer engagement) and will report at the end of March 2017. The Tax and Revenue Committee inquiry is looking at taxpayer engagement more broadly with its report due at the end of October 2017.

    Superannuation Guarantee charge ‘gap’

    Tony Greco (IPA); James O’Halloran, Deputy Commissioner, Superannuation; and Kent Perdrisat, Assistant Commissioner, Performance Measures and Tax Gap, ATO 

    The Senate Economics References Committee inquiry into Superannuation Guarantee non-payment is due to report by 22 March 2017. Submissions closed 17 February 2017 with 62 submissions received.

    Members raised the issue of whether the ATO has been able to quantify the Superannuation Guarantee charge ‘gap’ for the purpose of determining the tax gap.

    The ATO noted the proposed Single Touch Payroll (STP) will simplify taxation and superannuation interactions for employers. It was noted that STP does not change the timing of the payment but will provide liability information which can be reconciled to the payment. Use of STP is mandated for businesses with 20 or more employees from 1 July 2018.

    To support tax professionals, the ATO intends to issue a Law Compliance Guideline followed by general guidance and will conduct seminars. Letters will also be issued to tax agents highlighting the actions that they need to take both before and after the start date of 1 July 2018.

    Commissioner’s Remedial Power

    Michelle de Niese, Corporate Tax Association; Lisa Clifton, Assistant Commissioner, Law and Policy Design, Policy Analysis and Legislation (PAL); and Paul Heginbothom, Director, ATO Policy Integration, PAL, ATO 

    The Commissioner’s Remedial Power (CRP) has been passed and the first round of candidate issues are being considered for the application of the power. Members discussed the ATO’s response and process for administering the CRP.

    Taxpayers and their representatives can raise issues via the CRP Application Form that is available on ato.gov.au. The information in the form will help to assess whether the remedial power can be used to resolve the identified issue. The form is tailored for use by the profession. The assessment process aims to ensure the CRP is only used where appropriate. In particular, the CRP is not intended to remedy individual grievances, and is only to be considered where administrative processes are not feasible or appropriate.

    Central to the administration of the power is a CRP Panel, with members drawn from the ATO, Treasury and the tax and accounting professions. The ATO advised that it is looking for nominations for new external members for the panel. The intention is to have a broad range of expertise on the panel to tailor the composition of the panel for each issue. Members acknowledged how quickly and effectively the ATO established the CRP Panel.

    Attendees

    Organisation

    Name

    Australian Taxation Office

    • Andrew Mills, Second Commissioner, Law Design and Practice (Co-chair)
    • Neil Olesen, Second Commissioner, Client Engagement
    • Carlo Paje, Senior Technical Adviser, Tax Counsel Network
    • Robyn Theacos, Senior Director, ATO Consultation Hub, Design and Change Management (Secretariat) 
     

    Treasury

    • Maryanne Mrakovcic, Deputy Secretary, Revenue Group
    • Rob Raether, Division Head, Corporate and International Tax Division, Revenue Group
     

    Chartered Accountants Australia and New Zealand (CA ANZ)

    • Grant Wardell-Johnson (Co-chair)
    • Michael Croker
     

    Corporate Tax Association

    Michelle de Niese

    CPA Australia

    Paul Drum

    Institute of Public Accountants

    Tony Greco

    Law Council of Australia

    • Adrian Varrasso
    • Clint Harding
     

    The Tax Institute

    • Matthew Pawson
    • Tim Neilson
     

    The Tax Institute -
    Professional Bodies Coordinator

    Stephanie Caredes

      Last modified: 28 Jun 2017QC 52700