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  • National Tax Liaison Group key messages 25 March 2020

    Key Highlights

    Key highlights from the meeting:

    • COVID-19: Overview of ATO’s role in the Government’s stimulus package and the ATO’s administrative response to client impacts. The ATO expressed its appreciation of the positive response by the professional associations
    • Briefing on the ATO’s administration of reform measures for illegal phoenix activity under the new legislationExternal Link effective on 1 April 2020
    • Update on Treasury activities including the Board of Taxation’s report on the Review of Small Business Concessions.

    Introduction

    NTLG Co-chair Kirsten Fish, Acting Second Commissioner, Law Design and Practice Group, ATO; and Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand

    Kirsten Fish welcomed members and noted that she will be acting in the Second Commissioner, Law Design and Practice role until 30 June 2020.

    The ATO has established a COVID Response Committee with Jeremy Geale, Chief Disaster Response Officer, leading this committee. Jeremy Geale has oversight of internal and client-facing processes to ensure the ATO’s response is comprehensive and coordinated. Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation is leading the work on the announced economic stimulus package with Treasury, and Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance is overseeing the release of public advice and guidance related to the Government’s stimulus package and to other issues raised by the community.

    Grant Wardell-Johnson noted that the NTLG’s brief is to deal with systemic issues in the tax and super systems and, in the current environment; the group needs to be proactive to develop new approaches and solutions to address the many unprecedented COVID-19 impacts. Grant Wardell-Johnson outlined three principles that the group should adopt to guide the approach:

    • There is a need to act in new ways as organisations will be faced with problems for which there is no precedent
    • Quick and agile decisions will need to be taken in relation to matters as they arise
    • Practical solutions to priority issues should be developed with clear and decisive parameters.

    Solutions implemented to address emerging issues could apply for a limited period of time and this would provide certainty for taxpayers in an uncertain environment. Members noted that the principles outlined by Grant Wardell-Johnson are important and there is a need to have clear rules that are not necessarily based on individual facts and circumstances, as they have may have been previously. Members identified that deductions for home office expenses and deferrals for lodgment are priority matters that require clarity in the current circumstances.

    Illegal phoenix activity – Administration of reform measures

    Will Day, Deputy Commissioner, Integrated Compliance; and George Montanez, Assistant Commissioner, Integrated Compliance, ATO

    Will Day noted that the new legislation Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019External Link received Royal Assent on 17 February 2020 and is effective on 1 April 2020.

    Will Day and George Montanez briefed members on how the ATO will administer phoenix measures, including public guidance that is being prepared and the ATO’s approach to compliance.

    The current COVID-19 situation is impacting businesses in a number of ways. The Government has announced a moratorium on the rules applying to insolvent trading. The ATO is also cognisant of the fact that insolvencies will increase significantly and of the need to distinguish legitimate insolvencies from illegal phoenix activity.

    The ATO is very aware that businesses and individuals are focused on what’s important in the current environment and, when undertaking client interactions, the ATO is very conscious of the need to be empathetic and not to cause taxpayers additional distress or distract them from what is important.

    The ATO is currently monitoring potentially fraudulent activity around the current stimulus package, particularly in the area of refunds. The ATO will continue with its normal risk-based compliance approaches, being mindful of the need to focus on reducing the burden on taxpayers with genuine claims.

    In the Mid-Year Economic and Fiscal Outlook (MYEFO) Statement, the ATO and ASIC received additional funding to establish a data sharing, data fusion and improved analytics capability between ATO and ASIC and to undertake additional compliance work. The new data sharing measure will assist the ATO in distinguishing between legitimate business insolvencies resulting from the current economic conditions and those involved in illegal phoenix activity.

    The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 amends the Corporations Act 2001 to, among other things, introduce new phoenixing offences to prohibit creditor-defeating dispositions of company property and to improve the accountability of resigning directors. The Act also contains three tax measures.

    The ATO briefed members on the following elements of the new legislation:

    Extension of estimates for GST

    • The existing provisions allow the ATO to make estimates for a number of taxes. The new provisions will allow the ATO to also make estimates of GST, Luxury Car Tax and the Wine Equalisation Tax liabilities for businesses that are not meeting their lodgment obligations.
    • The ATO has undertaken considerable consultation on the estimates provision and has implemented a number of safeguards on when and how the ATO will administer the provision. This includes that an estimate will only be made after the ATO has attempted to contact the taxpayer unsuccessfully multiple times through multiple channels and that approval must be given by an ATO senior executive officer to apply an estimate. Practical Compliance Guideline PCG 2020/2 was published on 18 March 2020 explains how the Commissioner will administer the expanded estimates power.

    Director penalties

    • The new provisions will extend the director penalties regime to make directors personally liable for their company’s GST liabilities in certain circumstances.
    • The existing administrative procedures in place for Director Penalty Notices for PAYG withholding amounts, superannuation guarantee charges and estimates of PAYG withholding liabilities and superannuation guarantee charges will apply to GST liabilities.

    Retention of tax refunds

    • The amended legislation extends Commissioner’s discretion to retain tax refunds where a taxpayer has failed to lodge a return or provide other information that may affect the amount refunded.
    • The ATO has implemented a number of procedural safeguards that govern the administration of the retention of a refund, including the need for this to be approved by an ATO officer at or above Executive Level 2.
    • The ATO will issue a Practice Statement outlining how these provisions will be administered.
    • There is a mechanism for a review under the Administrative Decisions (Judicial Review) Act 1977.
    • The discretion is focussed on taxpayers engaged in high-risk behaviour. The ATO has given an undertaking that in the first 12 months the measure will only be applied where there are reasonable grounds to believe the taxpayer is engaged in phoenix behaviour. After the first 12 months it will be extended to other forms of high-risk behaviour.

    Members noted that during the current environment, many businesses could be going into insolvency. The ATO needs to provide clarity about when the provisions will be applied. The ATO will consider the data closely to identify only targeting businesses that are engaging in illegal phoenix activity.

    The ATO asked members to provide information on the actions undertaken by their professional associations to stamp out practitioners who engage in illegal phoenix behaviour.

    Action item:

    NTLG 2003/1

    Due date:

    11 June 2020 NTLG meeting

    Responsibility:

    NTLG members

    Description

    Phoenix activity – addressing agent behaviour

    NTLG members to advise the ATO on the actions undertaken by their professional associations to stamp out practitioners who engage in illegal phoenix behaviour.

    Environmental scan – COVID-19

    Jeremy Geale, Chief Disaster Response Officer, COVID Response Committee, ATO; Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO; and Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, ATO

    The COVID-19 situation is changing rapidly, and the Government has announced a number of measures to help the community and the economy withstand and recover from the economic impact of COVID-19.

    Prior to the meeting, members provided a summary of a range of tax and superannuation issues that required consideration. Members will continue to incorporate further issues and develop practical solutions for consideration by the ATO and Treasury. The ATO suggested that members prioritise the issues.

    Jeremy Geale expressed his appreciation of the positive response by the professional associations. Jeremy Geale noted that support from the profession is critical and the ATO welcomes their input and will work together with them to adopt pragmatic solutions.

    Members raised the possibility of blanket deferrals for lodgments. The ATO noted that a blanket deferral for all lodgments was not possible. However, the ATO is willing to consider different types of lodgments where deferrals may be appropriate. The ATO asked members to consider in more detail the type of lodgments that are of concern, the period of extension for lodgment that may be appropriate and if a concession for late lodgment penalties would be sufficient. The members agreed to consider this in more detail and provide the information to the ATO. The ATO noted that questions of policy should be directed to Treasury.

    Action item:

    NTLG 2003/2

    Due date:

    As soon as possible

    Responsibility:

    NTLG members

    Description

    Lodgment deferrals

    NTLG members to provide the ATO with information on possible lodgment deferrals and if a concession for late lodgment penalties would be sufficient.

    Members questioned the impact the current situation was having on the operational capability of the ATO, particularly in light of a potential lock-down where staff would need to work from home. The ATO noted that the provision of ongoing essential service by the ATO will be robust. The ATO has recently rolled out new technology that will support the continued delivery of critical services, including our call centres in a lock-down scenario. Where it is operationally possible for staff to perform their role from home, it has been suggested that staff work from home.

    Tony Greco noted that he has received a number of questions from members of his association regarding the Government’s stimulus package, in particular, the BAS measure. Tony Greco noted that the number of calls to the ATO could be reduced if the Institute of Public Accountants was able to provide its members clear guidance on the new measures that could be communicated to their clients. Louise Clarke and Andrew Orme noted they would advise who would be the best placed officer to discuss this matter with Tony Greco.

    Members noted that there are three issues to be considered:

    • administrative matters, eg lodgment deferrals
    • interpretation of new measures considering technical weaknesses and unintended consequences
    • new environment for the application of existing legislation, eg home office deductions.

    Members can provide information or questions directly to Andrew Orme or via email to COVID-19Taxissues@ato.gov.auThis link opens in a new window

    More information is available on the COVID-19 webpage on the ATO’s website. This information is updated regularly and includes information on COVID-19 support available and some frequently asked questions on common tax questions about COVID-19.

    Treasury report

    Paul McCullough, Division Head, Corporate and International Tax Division, Treasury; and Bede Fraser, Principal Adviser, Individuals and Indirect Tax Division, Treasury

    Paul McCullough noted:

    • Treasury is supporting the Treasurer as part of the National Cabinet
    • Treasury has established a Coronavirus Business Liaison UnitExternal Link to deal with issues and suggestions from business and industry groups and triaging those issues for emerging problems
    • members should approach the ATO for measures that have been legislated
    • corporate residency – The Board of Taxation’s process is continuing.

    Bede Fraser provided an update on Treasury’s view regarding the Board of Taxation’s report on the Review of Small Business Concessions:

    • The Board made 12 recommendations that would normally be considered through a Budget process. The Budget has now been deferred. There may be an opportunity for some recommendations to be picked up in future Government announcements, for example, the instant asset write-off that was announced as part of the Government’s stimulus package.

    Members queried whether the Government will make an announcement regarding the Division 7A measure as this had a 1 July 2020 start date. Paul McCullough advised that there are also other measures with a start date of 1 July 2020 which are held up as Parliament has now risen. Paul McCullough suggested that members send an email to Coronavirus Business Liaison UnitThis link opens in a new window with information of other measures that fall into this category. Members were also invited to email any issues arising out of the current stimulus measures. Members noted they would also provide a list of matters that could potentially be deferred.

    Members queried whether the Government considers the accounting profession as an ‘essential service’ as it has been recognised in New Zealand. Paul McCullough advised members to submit the issue to the Coronavirus Business Liaison UnitThis link opens in a new window mailbox.

    Inclusive Framework discussion of Pillar 1 and Pillar 2, OECD ‘Digital tax’ – Treasury Roundtables

    Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand

    Grant Wardell-Johnson noted that there has been a letter from the US Treasury to the OECD suggesting that Pillar 1 should be a ‘safe harbour’ regime. On 30 January 2020, the OECD released a statement (PDF,559KB)This link will download a file noting that “in relation to a ‘safe harbour’ approach, detailed consideration would be required to assess key impacts and issues of implementing such an approach.”

    There have been a series of working groups and committee meetings with a view to having a solution mid-year. Due to the current situation with COVID-19, there is a concern that it will not be possible for issues to be given the attention required to progress the work. Members noted there are significant issues on Pillar 1 that require consideration to identify preferred solutions. It was suggested that members keep Treasury informed of any views on those issues.

    NTLG action items update

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

    Justen Nixon provided a status update on open action items:

    • NTLG 1903/3 – Consultation arrangements for new legislation and related guidance

      Members noted this discussion has been deferred to the 11 June 2020 NTLG meeting.
    • NTLG 1911/1 – Establishment of NTLG sub-group to consider compliance costs

      Members noted the status update that the Large Business Stewardship Group (LBSG) has responsibility for this matter. At the 19 March 2020 LBSG meeting, this matter was deferred to the next LBSG meeting on 23 June 2020. Members noted that the focus of the LBSG was to consider compliance costs for Justified Trust reviews, now that these had become ‘business as usual’.

      Members considered that it would be appropriate for the NTLG to have a broader discussion on this issue in relation to whole of system compliance costs. Members agreed that this discussion be deferred to the 11 June or 8 September 2020 NTLG meeting.

    Members agreed that action items NTLG 1903/3 and NTLG 1911/1 remain in progress.

    NTLG Charter

    Robyn Theacos, Director, Consultation Hub, ATO

    Robyn Theacos advised members that the NTLG Charter will be updated to align with the standardised charter for all stewardship groups. The updated draft NTLG Charter will be provided out-of-session to members for their consideration and endorsement.

    Attendees

    Attendees are listed below

    Organisation

    Members

    ATO

    Kirsten Fish (Co-chair), Law Design and Practice

    ATO

    Jeremy Hirschhorn, Client Engagement Group

    ATO

    Justen Nixon, Tax Counsel Network

    ATO

    Robyn Theacos, Enterprise Strategy and Design

    Chartered Accountants Australia and New Zealand

    Grant Wardell-Johnson (Co-chair)

    Chartered Accountants Australia and New Zealand

    Michael Croker

    Corporate Tax Association

    Michelle de Niese

    CPA Australia

    Elinor Kasapidis

    CPA Australia

    Alexis Kokkinos

    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

    Peter Godber

    The Tax Institute

    Stephanie Caredes

    Treasury

    Paul McCullough

    Apologies

    Apologies are listed below

    Organisation

    Members

    ATO

    Georgina Wade, Enterprise Strategy and Design

    Treasury

    Maryanne Mrakovcic

      Last modified: 10 Jun 2020QC 62839