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  • Private Groups Stewardship Group key messages 20 September 2017

    Update on Privately Owned and Wealthy Groups including improving the client experience

    Opening remarks

    Will Day, Deputy Commissioner, Private Groups and High Wealth Individuals, ATO 

    Will Day welcomed members to the meeting and acknowledged the importance of this forum in providing key insights and perspectives to better understand Privately Owned and Wealthy Groups and contributing ideas to improve the client experience.

    Privately Owned and Wealthy Groups, Improving the client experience

    Sally Druhan, Assistant Commissioner, Private Groups and High Wealth Individuals, ATO 

    Sally provided members

    • An overview of the Privately Owned and Wealthy Groups Client Experience program of work for the 2017-18 year - In linking this to the ATO Corporate Plan for 2017–18This link will download a file strategic objectives, it was confirmed in 2017–18 we will continue to work with our partners to ensure we deliver the best client experience for Privately Owned and Wealthy Groups.
    • A summary of the findings of the Private Groups Research commissioned by the ATO – The findings confirming we should continue to focus on improving the Privately Owned and Wealthy Group client experience through our focus on Excellent Working Relationships, Right Services, Transparency and Tailored Engagement.

    Members indicated there is a strong interest from both tax practitioners and some of the larger Privately Owned and Wealthy Groups to develop a one to one relationship with the ATO. Members also acknowledged given the large number of Privately Owned and Wealthy Group clients a one on one relationship is not possible with all members of the client population.

    Members were keen to work with the ATO to contribute to shaping our client relationship and tax governance initiatives and help promote key messages.

    SMSF events based reporting

    Kasey MacFarlane, Assistant Commissioner, Superannuation, ATO 

    Kasey MacFarlane provided an update on SMSF events based reporting given the large number of Privately Owned and Wealthy Group clients who have a self-managed superannuation fund.

    • From 1 July 2018 SMSFs will be required to report transfer balance cap events that impact on an individual member’s transfer balance on an events basis via an approved form known as the transfer balance account report (TBAR).
    • The events that are required to be reported by SMSFs on a more regular basis are limited to the transfer balance cap and events that impact an individual’s transfer balance account.
    • Reporting is only required if there is an event that impacts upon an individual member’s transfer balance. It is not the case that all SMSFs will have to report to the ATO every month or every quarter.
    • Those SMSFs that do not have any members in retirement phase (approximately 52% of all SMSFs) will not have anything additional to report from 1 July 2018 until such time as one of its members starts to receive a retirement phase income stream or pension.
    • SMSFs who wish to start reporting members’ transfer balance cap events before 1July 2018 will be able to do so from November 2017.

    Members indicated there are differing levels of awareness amongst SMSF’s regarding their reporting obligations. They suggested some differentiation in messaging for those SMSF’s who are close to the $1.6 million cap. Kasey stated members’ comments and those received through the ATO public consultation on this matter would be taken into account in developing the framework.

    Tax and superannuation update and general discussion

    Update on superannuation

    James O’Halloran, Deputy Commissioner, Superannuation, ATO 

    James provided members with an update on Super Guarantee together with an update on ATO Resource materials recently released to assist SMSFs as well as a brief update on the first home super saver scheme.

    Superannuation guarantee gap

    • The ATO released its first estimate of the superannuation guarantee (SG) gap on 29 August 2017. The estimate covers the six-year period between 2009–10 and 2014–15.
    • ATO analysis shows the vast majority of employers do the right thing, however a gap exists because some employers are not meeting their super guarantee obligations either by not paying enough or not paying at all.
    • The estimate takes into account the direct impact of ATO compliance activities ($414m for 2014–15) and includes $768m estimated in unpaid super guarantee in the cash economy.
    • ATO actions to reduce the gap focus on changing employer behaviours, education and enforcement.
    • Further details are available about the super guarantee gap and ATO methodology or by searching ‘Superannuation Guarantee Gap’ on www.ato.gov.au.

    Superannuation guarantee reforms

    The package includes:

    • More frequent reporting of contributions received by super funds
    • Expanding the rollout of Single Touch Payroll (STP) from 1 July 2019 to include employers with less than 20 employees
    • Enhanced debt recovery powers specifically targeting super guarantee debt
    • Easing the current disclosure restrictions that limit our ability to communicate with employees
    • Stronger enforcement powers
    • Establishing a taskforce to address super guarantee non-compliance
    • These announcements reflect some of the key recommendations in the final reportExternal Link of the Superannuation Guarantee Cross-Agency Working Group established by the Minster late last year.
    • Following an announcement by the Minister for Revenue and Financial Services on 14 July 2017, it is anticipated the Government will introduce amendments to prevent employers from using salary sacrificed amounts to reduce the ordinary time earnings base upon which super guarantee contributions are calculated. The amendments would also prevent contributions made under a salary sacrifice arrangement from counting toward the employer’s contribution.
    • We have strengthened our cross agency cooperation with APRA, ASIC and the Fair Work Ombudsman through the newly established Employer Regulators Forum.

    2017 budget measures

    • Legislation for the first home super saver scheme (FHSSS) and contributing the proceeds of downsizing to superannuation (Downsizing) measures was introduced into the Parliament on 7 September 2017.
    • The ATO has commenced consultations with super providers on the ATO’s proposed administrative design. Subject to the measures’ passage through parliament, the ATO will commence broader consultation and user testing for both measures.

    ATO guidance resources

    • The ATO is assisting and providing certainty to individuals, employers and tax and superannuation professionals through the release of a range of resources to effectively navigate these superannuation changes.
    • These resources include Law Companion Guidelines, Guidance Notes and Practical Compliance Guidelines. The ATO is also responding to all requests for advice and guidance from individuals and tax and superannuation professionals.

    Update on indirect taxes

    Jeremy Geale, Assistant Commissioner, Indirect Taxes, ATO 

    Jeremy provided members with an update on two GST issues impacting Privately Owned and Wealthy Groups.

    GST Cross border new measures

    • GST on imported services and digital products sold to Australian consumers commenced on 1 July 2017.
    • GST on low value goods imported by consumers into Australia commences on 1 July 2018. Commencement of the measure is not conditional upon the review of the same currently underway by the Productivity Commission.
    • The ATO has been supporting the implementation of the measures. We have developed a simplified electronic online registration and payment system for overseas suppliers and are deploying a targeted communication and education campaign to promote voluntary compliance by overseas suppliers. We have also built a profile of affected overseas suppliers and stand ready to deploy more active compliance interventions where required.

    GST withholding

    • From 1 July 2018, the Government will strengthen compliance with the GST law by requiring purchasers of newly constructed residential properties or new subdivisions to withhold and remit the GST directly to the ATO as a disbursement of funds at the time the property settles.
    • Treasury have been leading the consultation with industry.
    • Drafting Instructions for new legislation are in the process of being finalised.
    • The system build to deliver the design of the withholding measure has been drafted.

    Update on income tax

    Martin Jacobs, Assistant Commissioner, Private Groups and High Wealth Individuals, ATO 

    Martin Jacobs provided an update to members on upcoming consultation relevant to Private Groups, including an update on changes to the webpage relating to 'what attracts our attention'  

    • Consultation is planned for a number of draft guidance products on issues affecting trusts:
      • Trust law and tax law consequences of trusts vesting
      • Deductibility of interest expenses incurred by beneficiaries of discretionary trusts
       
    • We anticipate commencing preliminary consultation with stakeholders in November 2017 on the tax implications of 'trust splitting' before releasing a draft Ruling for broader comment.
    • The ATO website provides information on what we are consulting about, how to raise a matter for consultation and matters under consideration for consultation. In respect of the Commissioner’s Remedial Power (CRP), there is a form which allows external stakeholders to suggest candidates for the potential application of the CRP. In addition, to contribute ideas for tax system improvement and red tape reduction, visit the Board of Taxation websiteExternal Link.
    • Three guidance products have issued since the June meeting of this group: PCG 2016/16 - Fixed Entitlements & Fixed Trusts , PCG 2017/13 - Div 7A - unpaid present entitlements under sub trust arrangements maturing in the 2017 or 2018 income years and Draft TD 2017/D3 - Income Tax Division 7A - application of s109T of the ITAA 1936. The Draft TD is currently progressing towards finalisation and in response to public consultation. Additional examples are being prepared for web content
    • ‘What attracts our attention’ webpage makes our key areas of focus transparent for both clients and staff. Recent focus including:
      • Property and Construction cases are considered around areas around the appropriate treatment of funds at the time of sale (whether capital or revenue), whether deductions have been inflated or if a self-managed super fund has been used to undertake the development.
      • Lifestyle assets are of interest when there is a possibility that asset use or private pursuits are mischaracterised as business activities, or there is an inappropriate apportionment of the use of these assets.
       

    Member’s views were sought on the level of client awareness of 'what attracts our attention' and relevance of the content. Members agreed it was useful, offering suggestions on how awareness of changes to the publication could be improved and more broadly shared including using their networks as members of the Private Groups Stewardship Group to distribute messaging.

      Last modified: 30 Oct 2017QC 53806