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  • National Tax Liaison Group key messages 9 September 2019

    Key highlights

    Key highlights from the meeting:

    • Members acknowledged the 35th anniversary of the National Tax Liaison Group (NTLG) with its inaugural meeting held on 15 August 1984
    • The Commissioner expressed his appreciation to NTLG members for their contributions to the administration of the tax system
    • The Inspector-General and Taxation Ombudsman Karen Payne provided an overview of her role and focus on improving the administration of the tax system for all taxpayers
    • Briefing on the proposed measure for the disclosure of business tax debts to credit reporting agencies
    • Discussion on Small Business income tax gap
    • Overview of ATO Corporate Plan 2019–20.

    Introduction

    Andrew Mills, Second Commissioner, Law Design and Practice Group, NTLG Co-chair, ATO

    Second Commissioner Andrew Mills welcomed members and noted this year is the 35th anniversary of the NTLG since it was established with its inaugural meeting on 15 August 1984 also noting that this meeting would be the 125th meeting for the Group.

    Opening comments

    Andrew Mills, Second Commissioner, Law Design and Practice Group, NTLG Co-chair; Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand, NTLG Co-chair; and Jeremy Hirschhorn, Second Commissioner, Client Engagement Group, ATO

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

    • Tax Time 2019 started on 1 July 2019 with a 25% increase in lodgments compared to the same time last year
    • Single Touch Payroll (STP) is well underway with positive feedback from those who have taken up STP reporting. Small business employers are required to start STP reporting by 30 September 2019
    • Black economy – the ATO launched the new Tax Integrity Centre on 1 July 2019. There has been a large increase in the number of community referrals received. The ATO has been visiting local and regional businesses to provide advice on how to improve record keeping
    • The Australian Small Business and Family Enterprise Ombudsman has announced an inquiry into the R&D Tax Incentive
    • On 3 September 2019 the Federal Court handed down its judgment in Glencore Investment Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia [2019] FCA 1432. The ATO is considering whether to appeal the decision
    • Activity Statement Financial Processing (ASFP) – this project will bring together the ATO’s accounting processes into a single enterprise system with multiple accounts. It is proposed to deploy this change over the December 2019 to January 2020 holiday period to reduce the impact on clients
    • The ATO is launching a new program of work called ‘Better as Usual’ led by Second Commissioner Jeremy Hirschhorn on behalf of the ATO Executive.

    Second Commissioner Jeremy Hirschhorn briefed members on the ‘Better as Usual’ program. This program includes four initiatives that collectively will improve the end-to-end client experience with the tax system.

    • Highest client impact actions – focussed on intentional actions that may have a high impact when dealing with clients. This is to ensure the ATO has a consistent set of cultural and procedural safeguards across the organisation when dealing with issues. This work is led by Assistant Commissioner Nicole Dykstra, Debt and Lodgment.
    • Complex case and issues program – led by Assistant Commissioner Justin Untersteiner, this is a new function in the Integrated Compliance business area. It is recognised that there are cases that involve complex technical and behavioural issues that require specially trained officers working in a project management approach.
    • Quality improvement – currently there are robust quality assurance techniques that focus on ensuring the rate of error is below a certain threshold. However, there is potential to draw actionable insights to identify improvements required to processes. The quality improvement insights work is led by Acting Deputy Chief Tax Counsel Hoa Wood and the quality improvement systems work is led by Assistant Commissioner Cathrine Purcell.
    • Pipeline reviews – currently the ATO’s systems are designed to focus on an ATO segment-based client experience. The reviews will move towards an integrated end-to-end experience that is fair, transparent and tailored to clients’ circumstances. This work is led by Assistant Commissioner Kath Anderson.

    It was agreed that the ‘Better as Usual’ program be further discussed at the next NTLG meeting on 28 November 2019.

    Co-chair Grant Wardell-Johnson referred to the recent OECD report Tax Policy Reforms 2019External Link, which noted a lull in the introduction of tax reform policies across most leading economies.

    Commissioner’s opening comments

    Chris Jordan AO, Commissioner of Taxation

    The Commissioner acknowledged the NTLG’s 35th anniversary and expressed his appreciation and thanked members for their contributions. The Commissioner noted that looking back over the history and achievements of the NTLG, it is clear that the NTLG has played an important role in shaping the way the tax system is administered today.

    The NTLG is a trusted group and its contribution reflects the ATO’s ongoing commitment to using community consultation and feedback. The Commissioner acknowledged the NTLG’s contributions and feedback, in particular on the ATO’s reinvention program. The Commissioner noted that the NTLG has continued to meet the intent of its Charter to identify significant issues and drive improvements in the tax system.

    The Commissioner’s comments included:

    • the ATO has had a busy start to Tax Time 2019 with legislation passed for the Low and Middle Income Tax Offset five days before the system was to be implemented
    • STP – there are now over 400,000 employers reporting through STP, including over 333,000 small employers, covering around 10.2 million employees. The ATO has been receiving seven million individual transactions reported daily at the peak of Tax Time 2019
    • the ATO has received more than eight million lodgments and issued $15 billion in refunds. The ATO has received over three million phone calls which are close to one million more than the same time last year. The ATO has generally maintained its service standards with issuing refunds in two weeks of online lodgment.

    The Commissioner noted that it is important for the ATO to be able to road-test, consult and be open to feedback from externals to ensure that its systems and processes are fit for purpose now and into the future. The NTLG is working well with continued real-time feedback, openness and transparency. It is helpful to the ATO that professional associations pass on information about the ATO to help and educate their members on current issues. Andrew Mills noted that members should raise issues with the ATO at any time and not wait until the next NTLG meeting.

    Co-chair Grant Wardell-Johnson thanked the Commissioner for his comments and for the recognition and value of input from NTLG members. Grant Wardell-Johnson acknowledged the way the Commissioner has transformed consultation, including the openness and transparency of discussions at NTLG meetings.

    Environmental scan

    All members

    Members noted the general downturn in Australia’s economy and the impacts on small business and taxpayers’ debts.

    Inspector-General and Taxation Ombudsman

    Karen Payne, Inspector-General and Taxation Ombudsman

    Ms Karen Payne was appointed Inspector-General and Taxation Ombudsman (IGTO) commencing on 6 May 2019. Karen Payne provided an overview of the Taxation Ombudsman complaints management service for taxpayers and the Inspector-General of Taxation review and public reporting function, both of which are directed at improving the tax administration system for all taxpayers. Karen Payne noted the Senate Economics Review Committee inquiry into the performance of the Inspector-General of Taxation – which had received a number of public submissions (including from the IGTO) and was due to report in early December 2019.

    Karen Payne noted that the NTLG could be a useful forum to raise and understand issues regarding the administration of the tax system. Karen Payne invited NTLG members to make suggestions to the IGTO for areas of tax administration review. The IGTO’s role is to improve tax administration for everyone and is independent from the ATO and the Tax Practitioners Board. The IGTO seeks to help taxpayers with complaints about the administrative actions of the ATO. The IGTO acts as an independent agency to investigate complaints and review ATO operations and make recommendations based on factual evidence and fairness.

    Tim Neilson queried if there is a clear demarcation between the IGTO and the Board of Taxation. Karen Payne advised they have different roles. The IGTO has a role to advise on how to improve tax administration (including tax administration laws) – but not substantive tax policy. The Board of Taxation advises on tax policy.

    Tax Practitioners Board and Tax Agent Services Act 2009 (TASA) Review

    Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; Keith James, Chair, TPB Review; Neil Earle, Assistant to Keith James, TPB Review; Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation, ATO; Adam Kendrick, Assistant Commissioner, Individuals and Intermediaries, ATO; Usha Narain, Acting Assistant Commissioner, Policy Analysis and Legislation, ATO; and Nick Westerink, Principal Adviser, Individuals and Indirect Tax Division, Revenue Group, Treasury

    Members raised this item to discuss the potential outcomes from the Review with Keith James, Chair of the Review of the Tax Practitioners Board and TASA. Grant Wardell-Johnson noted that the Tax Practitioners Board (TPB) is dependent on the ATO and queried the model that is being considered for achieving the appropriate balance.

    Keith James advised that the 1992 National Review of Standards for the Tax Profession was an NTLG initiative. The TPB was established as the regulator of tax agents with, amongst others, the objective of contributing to a reduction in the tax gap by removing agents who contributed to poor tax compliance. It was expected that the TPB and the ATO would work together closely with the ATO providing administrative and financial support. For example, the ATO would have the data that exposed the behaviour of an agent and could make a complaint to the TPB about an agent. However, the TPB will independently determine whether there has been a breach and what action it will take. Recent evidence on the tax gap suggests this has not worked out as expected. Discussions are being held as to what needs to be done to get improved outcomes.

    Keith James noted the TPB needs to be seen to be an independent regulator and observed that, in a legal sense, the TPB should be separate and independent from the ATO.

    A report of the Review will be provided to Government by 31 October 2019.

    Superannuation Guarantee amnesty

    Paul Drum, CPA Australia; and James O’Halloran, Deputy Commissioner, Superannuation and Employer Obligations, ATO

    On 24 May 2018, the Minister for Revenue and Financial Services announced a one-off amnesty period ending 23 May 2019 for employers to disclose the non-payment of superannuation guarantee. The proposed amnesty was intended to cover any non-payment back to 1992.

    The legislation for the amnesty was introduced into Parliament on 24 May 2018. However, the legislation was not enacted and did not become law when Parliament concluded on 3 April 2019. Members wanted to discuss the ATO’s approach to employers who made voluntary disclosures in anticipation of the amnesty.

    James O’Halloran noted that there is an obligation for employers to disclose if they have not paid superannuation guarantee. When employers came forward during the proposed amnesty period, the ATO was assessing them against the proposed amnesty criteria. Due to the proposed amnesty, the ATO suppressed the non-discretionary $20 administration fee which applies per employee per quarter. When it became clear that the legislation would not be enacted, the ATO could no longer suppress the $20 fee under the existing law. In March 2019 the ATO sent letters to affected employers advising the $20 fee would now apply as the proposed legislation for the amnesty did not go ahead.

    In response to a query from Paul Drum if general interest charges would be applied on the late payments, James O’Halloran noted that generally nominal interest and the administration fee would apply. It was noted that the nominal interest charged was paid into members’ accounts.

    Treatment of Uber and other ride sharing services for the purpose of FBT

    Members wanted to discuss how to resolve the inconsistent treatment of Uber and other ride-sharing services for FBT and GST purposes. James O’Halloran noted that Treasury released on 6 September 2019 an Exposure Draft of an Omnibus Bill – Miscellaneous amendments to Treasury portfolio laws 2019External Link for consultation with comments closing on 27 September 2019. A key proposed amendment is to change the definition of ‘taxi’ for FBT purposes to mean ‘a car used for taxi travel (other than a limousine)’.

    Reporting of outstanding tax debts to credit reporting agencies

    Paul Drum, CPA Australia; and Melinda Smith, Chief Service Delivery Officer, Service Delivery, ATO

    The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No 1) Bill 2019 was introduced into Parliament on 24 July 2019. The Bill was referred to the Senate Economics Legislation Committee and a reportExternal Link was released on 5 September 2019. The disclosure of business tax debts measure permits, but does not require, the ATO to report the tax debt information of entities to credit reporting agencies.

    Members wanted to discuss the ATO’s plans for the implementation and administration of this measure. Melinda Smith noted the ATO is drafting advice and guidance explaining how this measure will be administered, who it will affect, and how to avoid having debts that will be reported.

    Melinda Smith noted that the report included a recommendation that the ATO engages with the IGTO to design the implementation of the measure to address the range of concerns raised by the IGTO. Some of these include not reporting debts where an entity has made a complaint to the IGTO and extending the notice period for payment of debt to 28 days rather than the current 21 days.

    As a safeguard the ATO will provide written notice advising that if arrangements are not made to manage the debt, the ATO will disclose the debt to a credit reporting agency.

    The ATO is preparing a draft Deed of Agreement that registered credit reporting agencies will need to sign. The Deed of Agreement will be published on the ATO’s website. Following the disclosure of debt, it is expected that when a client engages with the ATO in relation to the debt, the details of the debt will be removed from the credit reporting agency’s report as soon as possible.

    Implementation of the measure will occur gradually. The initial phase will focus on raising community awareness of the measure and its implications. During this time, the ATO will build awareness through communication activities such as newsletters, articles, forums and speeches. Members noted that the professional bodies can assist by conveying the proposed measure to their members.

    Small business income tax gap

    Paul Drum, CPA Australia; and Deborah Jenkins, Deputy Commissioner, Small Business, ATO

    The ATO released the small business income tax gap on 27 August 2019. Members wanted to discuss how they could assist the ATO to communicate the small business tax gap information to their clients and the community.

    The ATO estimated the income tax gap for the small business sector in 2015–16 to be approximately 12.5% or $11 billion. Of which approximately 60% (around $7 billion) was attributable to black economy behaviour. From measuring the small business income tax gap, the ATO can see that most small businesses pay, or try to pay the right amount of tax.

    Deborah Jenkins noted the ATO released the small business tax gap when it was credible, reliable and meaningful. This estimate was reached using the results of a ‘random enquiry program’ conducted by the ATO. Due to the random nature of the program it provided the opportunity for the ATO staff to see what businesses operating well look like. The process included quality assurance of cases, undertaken by former President of the Administrative Appeals Tribunal (AAT), Stephen Frost. It is expected that the small business tax gap will be updated every 12 months.

    Positive feedback was received from members on the way the ATO communicated the small business tax gap with a focus on the behaviours of taxpayers.

    Treasury report

    Hector Thompson, Principal Adviser, Corporate and International Tax Division, Revenue Group, Treasury

    Hector Thompson provided the following update:

    • the digital economy was a focus at the 45th G7 Summit held on 24-26 August 2019 in France. It was noted that a number of nations intend to introduce unilateral digital tax measures. There is a strong desire for a multilateral solution with a unified proposal to be considered at an OECD meeting in October 2019
    • the Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019External Link and the Treasury Laws Amendment (Timor Sea Maritime Boundaries Treaty) Bill 2019External Link were passed in Parliament
    • currently 14 tax measures have been introduced into Parliament - five in the House of Representatives and nine in the Senate
    • submissions for the Petroleum resource rent tax: gas transfer pricing arrangementsExternal Link consultation (5 April 2019–14 June 2019) are available on Treasury’s website. It is expected further consultation will be undertaken before reporting to Government
    • eight legislative consultations have been undertaken since the 20 June 2019 NTLG meeting
    • the Government has announced an ambitious timeline to introduce all the necessary legislation for the financial services measures resulting from the Hayne Royal Commission. The Government is aiming to have the bills introduced to Parliament by the end of 2020. The timeline could impact on other legislative measures being introduced into Parliament.

    Professional firms profit allocation

    Paul Drum, CPA Australia; and Tim Dyce, Deputy Commissioner, Private Wealth, ATO

    This item refers to consultation matter 201806: Professional firms – allocation of profit guidelines and Everett Assignment web material. Members wanted to discuss the progress of the consultation and the release of the updated guidelines.

    Tim Dyce noted a discussion paper will be released shortly for targeted consultation before the paper is released for public consultation. The paper will include suggestions of the proposed guidance. It is expected the revised and updated guidelines will be available by end December 2019.

    Scams

    Tim Neilson, The Tax Institute; Clint Harding, Law Council of Australia; and Brett Martin, Acting Deputy Commissioner, Integrated Compliance, ATO

    Members noted that scams continue to be an issue and, in particular, become prevalent during Tax Time with some scammers going to great lengths to make their communications resemble genuine ATO communications. Members wanted to discuss how the ATO and tax professionals can protect potential victims.

    Brett Martin noted that details of scams are published on the ATO’s website. Members of the community can subscribe to receive updates of scam alerts. This information includes an 1800 phone number the community can call to ensure if an ATO interaction is genuine. The ATO conducts a variety of community awareness activities. The ATO works with other government agencies to identify and counteract scams.

    Investigation of scam activity is primarily a state law enforcement responsibility and taxpayers who report scam activity to the ATO are advised to also report any resultant loss of money to their law enforcement authority.

    Members noted that there is valuable information on cyber safety on the Australian Cyber Security Centre'sExternal Link website.

    ATO Corporate Plan 2019–20

    Sandra Roussel, Assistant Commissioner, Enterprise Strategy and Design, ATO

    Sandra Roussel provided members with an overview of the ATO Corporate Plan 2019–20 which was launched on 31 July 2019. The plan includes nine strategic objectives to work towards the ATO’s two aspirations for 2024:

    • building trust and confidence
    • being a more streamlined, integrated and data-driven organisation.

    The plan features 31 initiatives under nine strategic objectives with an additional three initiatives for the Australian Business Register. All are intended to deliver the transformational shifts needed to achieve the ATO’s aspirations through to 2024, with a specific focus in 2019–20 on:

    • designing an end-to-end client and staff experience as the ATO consolidates its accounting systems to deliver a single client processing system and allow a whole-of-client view
    • becoming a more real-time, data-driven organisation, through initiatives like STP that integrate ATO systems with taxpayers’ existing processes to make it easier for them to comply and give the ATO oversight to ensure the system is fair for all
    • improving the accuracy and usability of the system, by commencing work on a solution for clients and tax agents to provide substantiation of claims at the time of lodgment and expanding the ATO’s use of automation and artificial intelligence for work related expenses
    • improving how the ATO interacts digitally with clients as the ATO moves to a single digital identity, continue the implementation of myGovID to replace AUSkey, and deliver the identity solution for individuals
    • modernising business registers including developing Director Identification Numbers to support tax integrity measures
    • improving the staff experience by prioritising the tools that will make a difference and understanding how the tools will support the end-to-end client experience.

    A clear message from the ATO Executive to senior management is that when dealing with clients, it is important to have to empathy and take into account clients’ circumstances when determining the appropriate action to take.

    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 1903/3 – consultation arrangements for new legislation and related guidance
    • NTLG 1906/1 – consideration of agents/accountants’ access to the ATO tax agent online portal for information on deceased estates
    • NTLG 1906/2 – information on issues considered by the GAAR Panel
      • Peter Walmsley, Deputy Chief Tax Counsel, Tax Counsel Network, attended to discuss this action item with members. It was agreed that an annual update on the operation of the GAAR Panel be provided commencing with an update at the next NTLG meeting on 28 November 2019
       
    • NTLG 1906/3 – update to ato.gov.au website content on Panels
    • NTLG 1906/4 – review ato.gov.au website content on Commercial Deals and Early Engagement.

    Members agreed to close action items NTLG 1906/2, NTLG 1906/3 and NTLG 1906/4 with action items NTLG 1903/3 and NTLG 1906/1 to remain in progress.

    Update on FIRB application process

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

    For the 20 June 2019 NTLG meeting, members requested an update on the FIRB application process resulting from various discussions that have been held at recent NTLG meetings to ensure the process resembled a tri-partite process. Treasury noted that it is currently undertaking a review and update of all FIRB Guidance Notes to ensure all content is accurate and up-to-date. As part of this, updates to FIRB Guidance Note 47: Tax Conditions will be made to provide increased clarity on how applicants can engage with the ATO (including via tripartite discussions).

    For the 9 September 2019 NTLG meeting, Treasury provided a draft of the proposed revision to FIRB Guidance Note 47: Tax Conditions for feedback. At the meeting members noted Treasury’s proposed revision and advised that it did not reflect the outcome of the previous discussion at the 20 June 2019 meeting. Treasury representative Hector Thompson agreed to provide members’ feedback to the FIRB Division in Treasury.

    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

    Treasury

    Hector Thompson

    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

    Paul Drum

    Institute of Public Accountants

    Tony Greco

    Law Council of Australia

    Angela Lee

    Law Council of Australia

    Clint Harding

    The Tax Institute

    Tim Neilsen

    The Tax Institute

    Stephanie Caredes

    Apologies

    Apologies are listed below.

    Organisation

    Members

    Treasury

    Maryanne Mrakovcic

    Treasury

    Paul McCullough

    The Tax Institute

    Bob Deutsch

      Last modified: 17 Oct 2019QC 60398