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  • National Tax Liaison Group key messages 28 November 2019

    Key Highlights

    Key highlights from the meeting:

    • National Tax Liaison Group (NTLG) members thanked Andrew Mills for his chairmanship of the NTLG and for his contribution to the advancement of taxation administration
    • The Commissioner expressed his appreciation to Second Commissioner Andrew Mills for his outstanding contribution to the ATO and to the ATO’s consultation processes and activities as Co-chair of the NTLG and as Chair of the Consultation Steering Group
    • Overview of ATO’s ‘Better as Usual’ program that will improve the ATO’s clients’ experience with the tax system
    • Discussion on key changes for agents including the transition to the new Online Services for Agents platform with the closure of the Tax and BAS portals for tax professionals; the Activity Statement Financial Processing upgrade; and the implementation of myGovID to replace AUSkey.

    Introduction

    NTLG Co-chairs Andrew Mills, Second Commissioner, Law Design and Practice Group, ATO; and Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand

    Second Commissioner Andrew Mills welcomed members and noted this would be the last meeting for the following members:

    • CPA Australia representative Paul Drum. Elinor Kasapidis will be attending NTLG meetings as CPA Australia’s representative and a replacement for Paul Drum
    • Assistant Commissioner Sandra Roussel who is leaving the ATO to take up a role in the Department of Prime Minister and Cabinet leading their cultural change program.

    Co-chair Andrew Mills thanked Paul Drum for his significant contribution to the NTLG and other ATO forums over many years. Andrew Mills also thanked and acknowledged Sandra Roussel for her work in leading the strategic direction of the NTLG which has been appreciated by all members.

    Co-chair Grant Wardell-Johnson noted this would be the last NTLG meeting for Co-chair Andrew Mills due to his retirement at the end of December 2019. Grant Wardell-Johnson thanked Andrew Mills for his chairmanship of the NTLG and for his contribution to the administration of tax law and noted that Andrew Mills is highly regarded by members and has provided outstanding leadership with integrity. Andrew Mills has given valuable insights and with his vast experience and business savviness is able to solve problems in difficult situations.

    On behalf of NTLG members, Grant Wardell-Johnson thanked Andrew Mills for his contributions to the NTLG and wished Andrew Mills all the very best for the future.

    Commissioner's comments

    Chris Jordan AO, Commissioner of Taxation

    The Commissioner attended the meeting and acknowledged the contribution of Andrew Mills to the ATO as Second Commissioner, Law Design and Practice. The Commissioner noted highlights of Andrew Mills’ successful career including the significant improvements to ATO dispute resolution, advice and guidance and the Tax Counsel Network. The Commissioner also noted Andrew Mills’ significant contributions to the ATO’s consultation processes and activities as Co-chair of the NTLG and Chair of the Consultation Steering Group. The Commissioner commented that Andrew Mills’ great expertise and professionalism have helped build and strengthen the ATO’s relationships with the tax profession, Treasury and other stakeholders.

    The Commissioner thanked Andrew Mills for his contributions to the ATO, the NTLG and for his contributions over a long and illustrious career. The Commissioner wished Andrew Mills all the very best for the future and his retirement. Andrew Mills thanked the Commissioner for the opportunity of contributing to the work of the ATO.

    Co-chairs' opening comments

    Andrew Mills, Second Commissioner, Law Design and Practice Group; and Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand

    Co-Chair Second Commissioner Andrew Mills updated members on recent ATO activities:

    • On 23 October 2019, the ATO appeared before the Senate Economics Legislation Committee Supplementary Budget Estimates. The Commissioner’s opening statement is published on the ATO’s website
    • The ATO is assisting individuals and businesses affected by recent natural disasters - the drought and the catastrophic bushfires in QLD and NSW. The ATO is helping people with:
      • more time to pay
      • waiving penalties or interest charged at a time they were affected
      • payment plans with interest free periods
      • adjusting pay as you go (PAYG) instalments to better suit their circumstances
      • tax incentives for primary producers
       

    On 30 October 2019 the Federal Court handed down its decision in Addy v Commissioner of Taxation [2019] FCA 1768External Link. The decision relates to whether an individual that entered Australia as a working holiday maker was a resident of Australia for tax purposes and whether that individual paid tax at the 15% tax rate applicable to working holiday maker income or at the rates applicable to residents including the tax-free threshold.

    The ATO has appealed to the Full Federal Court against the decision. The ATO will continue to administer the working holiday maker income tax rates in line with current practice until the appeals process is exhausted.

    • Tax Time 2019 – Tax time was overall very successful. As at 1 November 2019, the ATO received over 12 million electronic lodgments which is a 10% increase on the previous year, and has received over 177,000 paper lodgments.
    • E-invoicing – On 1 November 2019, the ATO was established as the Australian Peppol Authority. The Peppol framework provides a standard that allows suppliers and buyers to exchange e-invoices directly. It is a significant step that will improve the payment experience for Australian businesses.

    Co-chair Grant Wardell-Johnson noted there are major developments in international tax and that there should be a focus on increasing Australia’s productivity.

    Self-assessment, lodgment and review, data collection and analysis

    Tim Neilson, The Tax Institute; Tony Greco, Institute of Public Accountants; Michael Croker, Chartered Accountants Australia and New Zealand; Alison Lendon, Deputy Commissioner, Individuals and Intermediaries, ATO; and Adam O’Grady, Acting Assistant Commissioner, Individuals and Intermediaries

    Members raised this item to discuss the resources and methodologies the ATO will apply to review all individual returns. Alison Lendon provided an overview of the ATO’s risk management approach including preventive measures for individuals. The overview noted the:

    • demographics for individual entities – in 2017–18, the individuals market (all entities) accounted for 52% of the ATO’s tax collection
    • ATO’s overarching risk management approach for pre-issue corrections and data acquisition and optimisation has become much more sophisticated and is multi-pronged, centred on the principle of ‘prevention before correction’
    • ATO is continuing to expand pre-filled data noting that the biggest gap is during July as the data is not available
    • there are gaps in the ATO data particularly regarding rental properties but the ATO is exploring ways to address this
    • The average claim for work related expenses has declined in 2017–18.

    The ATO suggested that a more detailed discussion could be undertaken early in 2020.

    Draft legislation and ATO administration

    Tony Greco, Institute of Public Accountants; Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation; Alison Lendon, Deputy Commissioner, Individuals and Intermediaries; Karen Foat, Assistant Commissioner, Individuals and Intermediaries; James O’Halloran, Deputy Commissioner, Superannuation and Employer Obligations; and John Ford, Assistant Commissioner, Superannuation and Employer Obligations, ATO

    Members wanted to discuss how the ATO is planning to administer the measures applying to limit deductions for vacant land, and the reintroduced Superannuation Guarantee Amnesty.

    In the 2018–19 Federal Budget the Government announced that it would limit deductions for expenses associated with holding vacant land. The changes are contained in Treasury Laws Amendment (2019 Tax Integrity and Other Measures No.1) Act 2019External Link which received Royal Assent on 28 October 2019.

    The members noted the Senate’s recommendations and the subsequent amendments to the bill, and the retrospective start date. Members also noted that advice and guidance is needed to clarify the intent of the law.

    Karen Foat advised the members that there is information on the ATO’s website to assist taxpayers to understand how the measure applies. Members were asked to provide feedback on what further guidance may be needed. Members suggested that a law companion ruling may be required to clarify the application of the law.

    Superannuation Guarantee Amnesty measure - James O’Halloran noted that the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019External Link was currently before the House of Representatives. James O’Halloran advised that employers, who have come forward before the law has been enacted, will be reviewed by the ATO to consider if the amnesty can be applied if and when the reintroduced law passes.

    OECD paper on Digital Tax

    Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; Hector Thompson, Principal Adviser, Corporate and International Tax Division, Treasury; Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO; and Mark Konza, Deputy Commissioner, International, ATO

    Members wanted to discuss the implications of the recent Digital Tax paper released by the OECDExternal Link and the outcome of Treasury’s Digital Tax Roundtable meetings.

    Grant Wardell-Johnson noted that the OECD released two public consultation papers on Pillar 1 (PDF, 525KB)This link will download a file and Pillar 2 (PDF, 714KB)This link will download a file and that Treasury held a series of Roundtable meetings in November 2019 regarding these. Grant Wardell-Johnson complimented Treasury on the meetings undertaken. Further roundtable meetings are occurring in early December 2019.

    Treasury noted that it will seek industry views through working groups in 2020. The ATO noted that it is providing support to Treasury.

    Overview of ‘Better as Usual’ program

    Kath Anderson, Assistant Commissioner, Individuals and Intermediaries, ATO

    The ATO has launched a new program of work called ‘Better as Usual’ that is led by Second Commissioner Jeremy Hirschhorn. This program is supported by a steering committee comprising of select ATO Executive members and Deputy Commissioners who represent business areas across the ATO.

    The program is about continuous, systemic and sustained improvements and includes four work streams that collectively will improve the ATO’s clients’ experience with the tax system:

    • Quality improvement – the ATO has access to a wide range of information. In every complaint, objection or quality assurance result, there is an insight into a better way of doing things. The ATO needs to draw these together to develop actionable insights. Insights about client and staff experiences will also drive iterative and holistic improvements to the ATO’s systems
    • Pipeline – this will provide an end-to-end understanding of all the interactions a taxpayer has with the ATO. It will help the ATO to understand the downstream impacts of the things the ATO does and does not do, to optimise the end-to-end client and staff experience
    • Highest Client Impact Actions – there are times when the ATO’s actions for some clients can have a particularly high impact. The highest client impact stream is about reviewing and implementing a series of procedural and cultural safeguards to reduce and ultimately eliminate cases where the ATO’s actions cause unintentional impacts
    • Complex Issues and Case Program – this is a dedicated area to deal with the most difficult, contentious or organisationally significant issues and/or cases across the ATO.

    GAAR Panel report

    Peter Walmsley, Deputy Chief Tax Counsel (Special Tax Adviser), Tax Counsel Network, ATO

    Peter Walmsley briefed members on the operation of the GAAR Panel during 2019 noting there were 24 matters considered.

    Issues and trends included:

    • International issues continue to be brought to the Panel in 2019 including cross border financing, Cross Currency Interest Rate Swaps, debt dumping, hybrids and hybrid mismatch
    • There has been a decrease in the number of dividend strip cases relating to SMSFs in 2019
    • There has been a decrease in the Multinational Anti-Avoidance Law (MAAL) types of cases relating to digital companies in 2019
    • In Private Wealth segment, Division 7A, SMSF entities, trust stripping, gold schemes and other variations on these issues continue to be brought to the Panel in 2019.

    Peter Walmsley noted that a high proportion of the cases are settled with only a small number proceeding to litigation.

    Tripartite discussions between FIRB, the ATO and the taxpayer

    Michelle de Niese, Corporate Tax Association; Clint Harding, the Law Council of Australia; Paul McCullough, Division Head, Corporate and International Tax Division, Treasury; David Woods, Principal Adviser, Foreign Investment Division, Treasury; and Mark Konza, Deputy Commissioner, International, ATO

    Members commented that, following previous NTLG discussions, Guidance Note 47: Tax Conditions was updated to explain the role of the ATO, but did not cover the process on how an applicant could engage in tripartite discussions with Treasury and the ATO. Members noted clarity is required on the circumstances where tripartite discussions should be allowed. This would provide an applicant with the opportunity to understand why a condition is imposed and not to question the condition itself.

    David Woods noted that Treasury will consider engaging on bespoke tax conditions. Treasury is currently updating FIRB Guidance Note 47: Tax Conditions to include more examples of the additional and complex tax conditions that could be applied. David Woods took on notice the request by members that the Guidance Note provide clarity on the mechanism by which applicants could seek a tripartite discussion.

    The ATO is engaged by Treasury to review a FIRB application for tax risks which may include advice on how the risks could be managed by proposed conditions. However, it is the Treasurer that ultimately decides whether to impose conditions and what conditions to impose.

    Mark Konza noted the ATO is undertaking a review of cases where tax conditions were imposed. This includes cases where the ATO determined there was a high risk to see if the high risk manifested itself, whether there was compliance with the tax laws, the required controls were adequate to control the risk and if the controls were necessary.

    The ATO is able to engage with tripartite discussions with Treasury and the applicant as required, to explain the risk and to listen to the applicant’s views.

    Key changes to the agent experience

    Alison Lendon, Deputy Commissioner, Individuals and Intermediaries; and John Dardo, Deputy Commissioner, Digital Delivery and Chief Digital Officer, ATO

    The ATO briefed members on key ATO initiatives that will have a material impact on multiple client segments - transition of agents to Online Services for Agents; Activity Statement Financial Processing (ASFP) and the transition to myGovID and the Relationship Authorisation Manager (with the decommissioning of AUSkey).

    Alison Lendon noted there are three key changes over the next few months:

    • The ATO will close the Tax and BAS portals for tax professionals on 1 December 2019 as part of the move to the new Online Services for Agents platform. There are 1,800 agents who have yet to transition to the new platform and the ATO has contacted these agents to offer support to transition to the new system
    • The Activity Statement Financial Processing project will provide an improved client and staff experience through the majority of client information being provided in one system. The deployment of ASFP will occur over the holiday shutdown period to reduce the impact on clients
    • AUSkey will be decommissioned on 27 March 2020 and will be replaced with a new digital identity solution, myGovID. The new digital credential has been in production for some months and will increase the online safety, security and privacy of the ATO’s online services. Individuals will be required to obtain an individual credential. Tax professionals will need to have access to a suitable smart device with two identity documents to meet the requirements.

    Members discussed areas of concern that could be impacted by the required change in work practices, for example, the implications of FBT on the purchase of smart devices. It was agreed that members provide information to the ATO on possible impacts for the ATO to consider if further information or guidance is required.

    The ATO noted that members can encourage the early adoption of myGovID. The ATO has an extensive range of support and guidance material such as webinars, detailed step-by-step instructional videos and guides to help tax agents with the changes.

    Environmental Scan – Retirement Income Review

    Robb Preston, Head of Secretariat, Retirement Income Review Secretariat, Treasury

    The Treasurer announced a review into the retirement income system on 27 September 2019. The Review is being undertaken by an independent panel, chaired by Mr Mike Callaghan AM PSM, with Ms Carolyn Kay and Dr Deborah Ralston as panel members. The secretariat for the Review is in Treasury and includes staff from five other government agencies.

    The panel will undertake a new analysis of the operation of the retirement income system, including modelling how the system performs today and how it will perform in the future. The panel will establish a fact base that will help improve the understanding of how the retirement income system operates. Supporting evidence is to be provided for views expressed to assist the panel in its considerations. The panel will not be making recommendations.

    Robb Preston noted that Treasury released a paper for public consultationExternal Link on 22 November 2019 with comments closing 3 February 2020.

    The panel will provide its final report to the Government by June 2020.

    Treasury report

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

    Paul McCullough noted that 16 tax measures have passed Parliament since the 9 September 2019 NTLG meeting. There are a further six measures before the House of Representatives and two measures before the Senate.

    Corporate Tax Association’s benchmark surveys

    Michelle de Niese, Corporate Tax Association

    Michelle de Niese briefed members on the Corporate Tax Association’s (CTA) benchmark surveys undertaken in 2018 and 2019 of its members’ tax functions and activities.

    A key message from CTA’s surveys was concerns regarding the cost of compliance. Michelle de Niese noted that the CTA would like to discuss this issue in more detail with the ATO. Members suggested that an NTLG working group be established to consider lower and whole of system compliance costs. After reviewing the research, the ATO will look to establish a meeting of the working group to be held in early 2020.

    Action item:

    NTLG 1911/1

    Due date:

    25 March 2020 NTLG meeting

    Responsibility:

    Jeremy Hirschhorn, Second Commissioner, Client Engagement

    Description

    Establishment of NTLG sub-group to consider compliance costs

    Members suggested that an NTL working group be established to consider lower and whole of system compliance costs. After reviewing the research, the ATO will look to establish a meeting of the working group to be held in early 2020.

    Offshore Banking Units

    Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand

    Grant Wardell-Johnson noted that a forum of harmful tax practices did a review in 2004 and found offshore banking units to be potentially harmful. A subsequent review has been undertaken.

    Members noted that the Government is considering the OECD’s viewExternal Link.

    Implications of Glencore decision

    Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; Mark Konza, Deputy Commissioner, International; Rebecca Saint, Acting Deputy Commissioner, Public Groups; and Fiona Dillon, Assistant Commissioner, Tax Counsel Network, ATO

    On 3 September 2019, the Federal Court handed down its decision in Glencore Investment Pty Ltd v FC of T [2019] FCA 1432External Link. Members wanted to discuss the implications of the decision for the administration of the transfer pricing provisions.

    The ATO was given an extension of time to file an appeal and it is expected that the hearing will occur in August 2020.

    The ATO will continue to administer the transfer pricing law in accordance with existing practices until the decision for the appeal is handed down.

    NTLG action items update

    Justen Nixon, Senior Technical Adviser, Tax Counsel Network, ATO; Paul McCullough, Division Head, Corporate and International Tax Division, Treasury; and Tom Reid, Chief Adviser, Law Design Office, Treasury

    Justen Nixon provided a status update on open action item:

    • NTLG 1906/1 – Consideration of agents/accountants’ access to the ATO tax agent online portal for information on deceased estates.

      The ATO noted it has considered the issues regarding agents/accountants unable to access information for a deceased person from the Online Services for Agents portal, which has been designed to conform with existing law. As a result, the Commissioner is proposing to exercise his remedial power to modify the law.

      The draft Legislative Instrument and Explanatory Statement on Taxation Administration (Remedial Power – Disclosure of Protected Information by Taxation Officers) Determination 2019 was released for public consultation on 25 November 2019 with comments due 20 December 2019.

      The ATO also noted that the Inspector-General and Taxation Ombudsman is currently undertaking a review of deceased estatesExternal Link.

      Members commended Institute of Public Accountants’ representative Tony Greco for suggesting consideration of the Commissioner’s Remedial Power as an option to overcome the issue.

    Paul McCullough and Tom Reid provided a status update on open action item:

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

      Treasury is mapping its processes from policy development to the introduction of the legislation to identify if there are any gaps in the processes. The Law Design Office is reviewing its processes for explanatory memoranda across all of Treasury’s portfolios. Draft terms of reference are being prepared and will be provided to members at the next NTLG meeting.

    Members agreed to close action item NTLG 1906/1 with action item NTLG 1903/3 to remain in progress.

    Effectiveness and contribution of NTLG for 2019

    All members

    Members were asked for their views on the effectiveness of the NTLG:

    • do discussions/outcomes meet the intent for the group
    • what works well
    • what needs to be changed
    • is the work of the group effectively communicated.

    Grant Wardell-Johnson commented that it has been a positive year for the group. There has been increased engagement between the external secretariat, Stephanie Caredes, and the ATO secretariat outside of the meetings resulting in successful and effective meetings.

    Andrew Mills noted that the NTLG has been more engaging with an increased quality of topics nominated for discussion by NTLG members. At times due to the volume of agenda topics for discussion, some topics could benefit from a deep dive discussion on the issues.

    Attendees

    Attendees are listed below

    Organisation

    Members

    ATO

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

    ATO

    Jeremy Hirschhorn, Client Engagement Group

    ATO

    Sandra Roussel, Enterprise Strategy and Design

    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

    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

    Treasury

    Paul McCullough

    Apologies

    Apologies are listed below

    Organisation

    Members

    Treasury

    Maryanne Mrakovcic

      Last modified: 02 Apr 2020QC 62042