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  • National Tax Liaison Group key messages
    21 March 2018

    Introduction

    Co-chairs Andrew Mills and Grant Wardell-Johnson addressed members and noted the following:

    • Building trust and confidence in the tax system is a theme the ATO is adopting as part of its 2024 vision
    • KPMG recently released a report (The last frontier: shining a light on the black economy) with specific recommendations for government to consider.

    Environmental Scan

    All members

    Members noted various matters that are on the horizon and may have an impact on the taxation and superannuation systems. Topics included:

    • work related expenses
    • deductible Gift Recipient reforms.

    Treasury report

    Paul McCullough, Division Head, Corporate and International Tax Division, Revenue Group, Treasury

    Paul McCullough provided an update on Treasury matters:

    • Petroleum Rent Resource Tax (PRRT) – the Government has not yet made an announcement on the findings and recommendations from the report of the Callaghan Review into the operation of PRRT.
    • Multilateral Instrument – positive feedback received from consultation. It is expected that enabling legislation will be introduced into Parliament next week.
    • Multinational Anti Avoidance Law – expect enabling legislation to be introduced into Parliament next week.
    • Stapled structures – an announcement is likely soon with the next step to be consultation on the implementation of any changes.
    • Hybrids – currently consulting with positive feedback being received.
    • Small business CGT concessions – legislation to be introduced into Parliament next week.

    Members raised the following:

    • status of Whistleblowers legislation
    • information on safe harbours for thin capitalisation and exemption for withholding tax for foreign super funds.

    Treasury took these matters on notice and will provide an update in due course.

    Action item:

    NTLG 1803/1

    Due date:

    Out of session

    Responsibility:

    Treasury

    Treasury reports

    Members raised the following matters:

    • Status of Whistleblowers legislation
    • Information on Safe harbours for thin capitalisation and exemption for withholding tax for foreign super funds.
     

    FIRB Guidance Note 47

    Roger Brake, Division Head, Foreign Investment Division, Treasury; and Bridie McAsey, A/g Manager, Foreign Investment Division, Treasury

    Members previously raised their concerns about the additional tax conditions being placed on applicants which are not part of the standard tax conditions as outlined in FIRB Guidance Note 47. Members noted they would like the guidance note reviewed or some other form of guidance to be available to provide advice on additional tax conditions.

    Roger Brake advised that FIRB Guidance Note 47 is currently being reviewed by Treasury and the ATO and is expected to be finalised by June 2018. A draft version of Guidance Note 47 will be shared with The Tax Institute and Law Council of Australia NTLG representatives who offered to assist with this review.

    The proposed changes include providing:

    • more information on the role of the standard conditions and when one or more may be imposed
    • clarity on the ATO’s approach for assessing tax risks and what is determined as low, medium and high tax risks.

    The business application checklist is also being reviewed. The updated checklist will include information that is relevant to a tax risk assessment. This will assist applicants to ensure all requirements have been included in their application. Members noted this will be very helpful to applicants to understand what information is required in a FIRB application.

    Single Touch Payroll

    John Shepherd, Assistant Commissioner, Single Touch Payroll, Small Business, ATO

    John Shepherd briefed members on the progress of Single Touch Payroll (STP) as the ATO supports substantial employers (20 or more employees) to transition to STP reporting from 1 July 2018. Employers will need to do a headcount of the number of employees they have on their payroll on 1 April 2018.

    Subject to legislation being introduced and passed in Parliament, employers with 19 or less employees will start STP reporting from 1 July 2019.

    STP includes reporting to the ATO payments such as salary and wages, PAYG withholding and super information for each employee. Employers may not need to provide employees with a payment summary at the end of the financial year. The ATO will make that information available to employees through myGov.

    There are 24 employers now reporting through five payroll software solutions and the ATO is providing feedback to help them as the digital service providers roll out their products to all employers.

    The ATO noted some large employers are nervous about the readiness of their payroll software products to report STP by 1 July 2018. There are rumours from industry that they believe that the ATO will extend the date for everyone. The ATO has addressed this in the media and clearly stated there will be no blanket extensions. There will be flexibility however, with deferrals for digital service providers and/or employers based on their individual circumstances, recognising that some employers and products have a bigger task to implement.

    Communications of the new STP reporting requirements have increased with media releases being issued with the ‘Get Ready’ message. Information is also being published on the ATO’s website. The ATO will be hosting a series of short STP webinars for employers, tax professionals and industry associations.

    Allocation of profits with professional service firms

    Tony Greco, Institute of Public Accountants; Will Day, Deputy Commissioner, Private Groups and High Wealth Individuals, ATO; and Martin Jacobs, Assistant Commissioner, Technical Excellence, Private Groups and High Wealth Individuals, ATO

    Members noted their concerns regarding the suspension of risk assessment guidelines which has caused uncertainty in the market place.

    Will Day and Martin Jacobs noted that in reviewing the guidelines, the ATO became aware the guidelines may have been misinterpreted resulting in arrangements that go beyond the scope of the guidelines. The ATO has suspended the application of the guidelines and would like to provide additional guidelines noting the existing guidelines would form the basis for interim advice on arrangements.

    The ATO has updated this information on its website, provided information through tax professionals’ newsletters and has contacted individual advisers/firms who practice in this area.

    A working group has been established to review the existing guidelines with a view to issuing revised and updated guidance by 30 June 2018. The ATO noted that if people have uncertainty, they should approach the ATO to discuss their concerns.

    ATO research and development (R&D) reviews

    Paul Drum, CPA Australia; Will Day, Deputy Commissioner, Private Groups and High Wealth Individuals, ATO; and Martin Jacobs, Assistant Commissioner, Technical Excellence, Private Groups and High Wealth Individuals, ATO

    Members raised this item to discuss the ATO’s findings on current ATO research and development (R&D) review activities.

    The ATO noted it is working closely with AusIndustry (Department of Innovation and Science Australia) to assist the market to understand claims that are eligible and not eligible. A number of Taxpayer Alerts have been issued which has been followed by some guidance. The ATO is working on further guidance.

    The ATO is considering how to provide education and awareness of the requirements for R&D claims. It was noted there are unique R&D consultants to help industry with the requirements.

    Members discussed issues in claims that could arise such as potential fraud claims. The ATO noted claims should be for eligible activities where R&D has occurred with records of expenses to support claims. The ATO noted a concern in relation to the level of record keeping and the documentation held to support the claim. To address this, the ATO is considering further guidance on how taxpayers can demonstrate that the expenditure was on eligible activities.

    FBT and motor vehicles

    Paul Drum, CPA Australia; Will Day, Deputy Commissioner, Private Groups and High Wealth Individuals, ATO; and Martin Jacobs, Assistant Commissioner, Technical Excellence, Private Groups and High Wealth Individuals, ATO

    The ATO released draft PCG 2017/D14 Exempt car and residual benefits: compliance approach to determining private use of vehicles for public consultation as it was identified as an area that would benefit from more guidance.

    Members requested an update on ATO findings regarding FBT and motor vehicle use. There is no specific compliance program on this element however the ATO noted a working group is working through the feedback received on the draft PCG and are considering how to reduce administrative costs.

    Cryptocurrencies and blockchain

    Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; Paul Drum, CPA Australia; Will Day, Deputy Commissioner, Private Groups and High Wealth Individuals, ATO; and Ben Brown, Senior Director, Private Groups and High Wealth Individuals, ATO

    The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017External Link received royal assent on 13 December 2017. Members wanted to discuss the ATO’s strategy for tax issues that may arise.

    The ATO noted it has published guidance on the Tax treatment of cryptocurrencies and welcomed feedback on improving the guidance. The ATO is considering how to integrate compliance activities into existing strategies across the individual, small business, and superannuation markets. The ATO will also coordinate with other agencies’ compliance work in this area, for example, AUSTRAC.

    The ATO is comfortable in their view and have started to identify topics that may become a challenge. The ATO is referring to US and UK and other large markets to learn from them. Where appropriate, specific consultation processes will be set up for these topics.

    Members queried if the ATO proposes to include questions regarding Bitcoin in tax returns or if prompts should be available for tax professionals to avoid incorrect information being provided. The ATO noted that to provide clarity this information is being included in the guidance.

    Diverted profits tax

    Robert Deutsch, The Tax Institute; Andrew Mills, Second Commissioner, Law Design and Practice, ATO; and Neil Olesen, Second Commissioner, Client Engagement, ATO

    The ATO released draft PCG 2018/D2: Diverted profits tax for public consultation on 7 February 2018 with comments closing 9 March 2018. Members raised their concerns that the examples in the draft PCG were focused on transfer pricing issues and that they should be addressed as transfer pricing issues. Members suggested that clarity was needed in the draft PCG on where the diverted profits tax (DPT) would apply and when transfer pricing would not apply.

    The ATO noted DPT would not ordinarily replace transfer pricing as it applies to most transfer pricing disputes. Rather, the respective regimes would operate in tandem, with the DPT potentially applying where there is a principal purpose of tax avoidance (among other things). The ATO also noted that it could not accept a suggestion that DPT will not even be considered until the transfer pricing rules have been exhausted.

    The ATO advised that it will consider updating draft PCG 2018/D2: Diverted profits tax to provide clarity on the interaction of DPT and transfer pricing. In cases of potential mispricing or mischaracterisation of international related party dealings, the transfer pricing provisions are expected to be the provisions applied by the Commissioner in most cases. The DPT has higher thresholds for its application, requiring not only mispricing or mischaracterisation but also tax avoidance purposes, and is accordingly expected to be applied less frequently. Members agreed with this approach.

    GST and residential property

    Paul Drum, CPA Australia; Emma Rosenzweig, A/g Deputy Commissioner, Indirect Tax, ATO; and Kate Roff, Assistant Commissioner, Indirect Tax, ATO

    The Treasury Laws Amendment (2018 Measures No. 1) Bill 2018External Link proposes changes to the law regarding GST and residential property. This Bill has not yet received royal assent.

    Members requested an overview of the ATO’s strategy for educational material, guidance and communications.

    The ATO noted it has published information on GST and property on its website. This page will be updated with more information once the Bill has received royal assent. The ATO is preparing:

    • a draft Law Companion Ruling (LCR) which will be published in April 2018
    • a podcast to be published in April 2018
    • webinars to be held in May 2018
    • to publish articles in various tax professional associations’ newsletters and publications.

    The ATO is working with the Law Societies and the Australian Institute of Conveyancers regarding the information to be included in the two online forms. The ATO is also working with the Law Societies on changes that need to be made to the standard Contract for Sale of Land forms.

    A series of seminars will be held for education on the measures. Fourteen (14) seminars will be held around Australia in April 2018, further to be organised. The ATO offered to make staff available to present to professional bodies. There will be a joint ATO presentation at The Tax Institute’s Conference in Adelaide in April 2018.

    The Tax Practitioners Board is providing clear guidance to assist conveyancers to understand how the measure interacts with tax services.

    The ATO is holding discussions with the Real Estate Institute of Australia with an article being prepared for their members. Discussions are also being held with the Housing Industry Association, Property Exchange Australia (PEXA), the Property Council of Australia and the Australian Construction Industry Forum. There will also be advertising closer to the start date.

    A member complimented the ATO on its strategy and requested if the planned list of external engagement/education initiatives could be made available after the Bill has received royal assent.

    Action item:

    NTLG 1803/2

    Due date:

    Next NTLG meeting – 28 June 2018

    Responsibility:

    Deputy Commissioner, Indirect Tax

    List of external engagement/education activities for GST residential property measures

    A member requested if the planned list of external engagement/education initiatives could be made available to members after the Bill has received royal assent.

    US tax reforms

    Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; Jeremy Hirschhorn, Deputy Commissioner, Public Groups, ATO; Paul McCullough, Division Head, corporate and International Tax Division, Revenue Group, Treasury; Paul Korganow, Assistant Commissioner, Public Groups and International, ATO; and Ryan Kinsella, Director, International Tax Structuring & BEPS, Public Groups and International, ATO

    Members discussed the implications for Australia and possible global responses as a result of 2018 US tax reforms. The ATO’s focus is on the potential impact the US reforms will have on compliance behaviour. It is anticipated that there may be behavioural response by taxpayers in Australia to either take advantage of, or avoid, the impact of the US tax reforms. Policy implications will need to be considered.

    ATO debt recovery practices

    Sue Williamson, CPA Australia; Robert Ravanello, Deputy Commissioner, Debt, ATO; and Steve Atkins, Assistant Commissioner, Service Delivery, Debt, ATO

    Robert Ravanello provided an overview of the ATO’s approach to debt collection. This included:

    • Consultation with the tax profession including the recent establishment of the Professional Services Reference Group
    • Key payment and debt statistics 2016–17
    • ATO approach to payment and debt
    • Debt recovery in disputed debt cases including disputed debt figures and a review of Practice Statement
      PS LA 2011/4 Collection and recovery of disputed debts
    • General updates on some key measures/activities.

    Members discussed issues related to disputed debts, the security over disputed debts and debts regarding the non-payment of superannuation guarantee. Some recent examples were referred to where the security offered was rejected or where it was thought that the ATO may not have appropriately considered the taxpayer’s circumstances when making decisions about debt collection. The ATO indicated that they would like to hear any examples of where the taxpayer thought they had not received a fair hearing or where the ATO had escalated the matter directly to collection activity.

    The ATO noted that Treasury released for public consultation an Exposure Draft on Transparency of business tax debtsExternal Link on 11 January 2018 with submissions closing on 9 February 2018. A ministerial submission was prepared by Treasury with input from the ATO advising on the outcome from public consultation.

    Private Binding Rulings

    Adrian Varrasso and Clint Harding, Law Council of Australia; Louise Clarke, A/g Deputy Chief Tax Counsel, ATO; and Joanna Wilson, Director, Tax Counsel Network, ATO

    Members raised the proposed move of edited versions of Private Binding Rulings (PBRs) to the ATO Legal Database.

    The ATO noted consultation was undertaken on the proposal on this move and the associated proposal to remove edited versions of PBRs over 10 years old. Feedback endorsed the move to the Legal Database generally on the basis that accessibility was improved, and therefore this proposal will proceed. However, because there was some resistance to removal of edited versions after 10 years, the ATO will now only remove edited versions over 15 years old. Further, the ATO will highlight the edited versions prior to removal, to allow users to advise the ATO that the edited version provides valuable insight and to request it be provided in an alternative form.

    NTLG action item update

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

    Justen Nixon provided a status update on ongoing action items:

    • NTLG 1703/1 – Impact of taxpayer alerts on large corporates and how the Taxpayer Alert system may be improved to manage unwanted impacts
    • NTLG 1709/2 – Regulatory reforms impact
    • NTLG 1712/1 – Beneficial ownership issues – consideration in context of treaty negotiations
    • NTLG 1712/2 – Change to deduction label D10 – Cost of managing tax affairs on income tax returns
    • NTLG 1712/3 – Draft ruling TR 2017/D7 – ATO timeline and level of interaction
    • NTLG 1712/4 – Review of FIRB Guidance Note 47 or other form of guidance on additional tax considerations.

    Members agreed to close action items NTLG 1709/2, NTLG 1712/1, NTLG 1712/2 and NTLG 1712/4. Action items NTLG 1703/1 and NTLG 1712/3 to remain open.

    Attendees

    Australian Taxation Office

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

    Treasury

    Paul McCullough, Division Head, Corporate and International Tax Division, Revenue Group

    Chartered Accountants Australia and New Zealand

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

    Corporate Tax Association

    Michelle de Niese

    CPA Australia

    • Paul Drum
    • Sue Williamson
     

    Institute of Public Accountants

    Tony Greco

    Law Council of Australia

    • Adrian Varrasso
    • Clint Harding
     

    The Tax Institute

    • Tracey Rens
    • Robert Deutsch
     

    The Tax Institute -
    Professional Bodies Coordinator

    Stephanie Caredes

    Apologies

    Treasury

    Maryanne Mrakovcic, Deputy Secretary, Revenue Group

      Last modified: 20 Jun 2018QC 56048