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  • Private Group Stewardship Group key messages 22 June 2017

    Update on Privately Owned and Wealthy Groups including improving the client experience and the ATO’s transformation program

    Opening remarks

    Neil Olesen, Second Commissioner, Client Engagement Group, ATO 

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

    • The ATO values the contribution of all our consultation groups and takes their contribution seriously as it helps further the development of our administration.
    • Current events and system issues illustrate there is room for improvement and we are working towards a smoother operational environment, but we are also reminded that our culture and controls are in place and effective. We take these lessons forward to identify opportunities and clearer emphasis on our front line performance.
    • We recognise there is a Tax Gap. Every Administration has a Tax Gap but when you look at our tax system we have a really healthy system. Voluntary Compliance is our best strategy and we will work with the community to reduce the gap across the various populations by using a rational evidence based approach to focus our efforts and community awareness.
    • Consultation has delivered big changes on what we do. We are now more open about what we do and we see that we producing more timely rulings, more companion guidelines, more practical advice and a more practical approach to dealing with issues.

    Private Groups, client pathway and research

    Lucy Libertone, Assistant Commissioner, Private Groups and High Wealth Individuals, ATO 

    • Clients have told us we need to understand how private groups see themselves including the commercial and business environment in which they operate. This includes understanding what motivates their actions and decisions so we can improve and tailor our services and interactions with them.
    • The ATO commissioned an external agency to conduct research amongst private groups. The report is currently in draft, however initial insights indicate:
    • A key characteristic of almost all groups interviewed was that decisions of importance were usually made by a small group of owners – often only one or two people.
    • Some private groups believed a formalised corporate governance structure unnecessary as it may lead to reduced speed in decision making and agility within the business.
    • Private Groups range from high corporate structures to family owned structures. The business direction and investment is driven mostly by owners movitivation. Succession planning is a key issue for private groups.
    • We will share insights from this research with members. The research findings are used to identify opportunities to further improve the client experience.

    Early engagement

    Greg Dick, Assistant Commissioner, Private Groups and High Wealth Individuals, ATO 

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

    • There are a number of different ways that we engage with Private Groups and High Wealth Individuals Each of the Early Engagement initiatives is aimed at ‘prevention before correction’ approach, ultimately aimed at increase willing participation.
    • Early engagement for advice service for Private Groups and High Wealth Individuals, has been in place since November 2015 and provides clients and advisers with the opportunity to engage with specialist officers to discuss technical issues for complex transactions that are being planned or have recently been implemented, before lodging a formal advice request. It also allows us to understand the client’s circumstances; work together to resolve identified issues and determines additional information requirements as early as possible so that clients can obtain the level of certainty that meets their needs.
    • The Commercial Deals process involves the ATO contacting clients who have, or are about to, undertake, significant commercial deals. This involves the ATO contacting the client or their representative to discuss the income tax treatment with an aim of reaching agreement and thereby minimising disputes if they arise.
    • The Top 320 Tax Performance Program involves the ATO working 1:1 with the largest privately owned and wealthy groups in an early engagement context to influence tax outcomes for these groups.
    • Members agreed additional work should be undertaken by the ATO and members to further promote and refine the early engagement initiatives.

    Privately Owned and Wealthy Group Story including update on tax gap

    Kent Perdrisat, Assistant Commissioner, Assistant Commissioner, Tax Practitioner and Lodgment Strategy, ATO 

    Rose Di Stefano, Senior Director, Private Groups and High Wealth Individuals, ATO 

    • The tax gap estimates form part of a suite of high level measures that track the performance and integrity of the tax system. Estimating tax gaps forms part of the ATO’s broader accountability and transparency as a leading administrator and is consistent with contemporary international best practice in tax administration.
    • The ATO’s focus on prevention and encouraging willing participation rather than raising liabilities, minimises the gross gap and will drive a client service mindset which is consistent with our early engagement and prevention before correction approach.
    • We have delayed the publication of some of our tax gap estimates while we improve our methodology and gather further data to ensure the figures we report are reliable and credible.
    • In developing and validating gap estimates, we worked closely with tax gap experts, other government departments, overseas tax administrations and industry stakeholders, as well as our expert panel. We are utilising the insights we are gaining from this work both in terms of informing the strategies of taskforces and also improving our help and assist services.
    • Members agreed work should be undertaken by the ATO and members to develop and refine the key messages that that balance community perceptions about private groups.

    Budget measures update tax and super

    Update on superannuation

    James O’Halloran, Deputy Commissioner, Superannuation, ATO 

    Single Touch Payroll

    • Single Touch Payroll is a government initiative to streamline business reporting obligations.
    • Information on Single Touch Payroll can be obtained on the ATO website 
    • Progress on implementation of new superannuation measures commencing on 1 July 2017.
    • The ATO has been working with the superannuation industry to progress the implementation of new superannuation measures commencing on 1 July 2017. Implementation is on track.
    • The resources include Law Companion Guidelines that describe the ATO view on how the new laws will apply, and Guidance Notes with examples of how the law may operate in practice. The ATO has a series of webinars on a range of key super changes topics, and has published frequently asked questions and answers on its website in response to enquiries we have received on the superannuation changes. The ATO has also released Practical Compliance Guidelines that describe how the ATO will apply its compliances resources in three key areas of the superannuation changes. To raise awareness, correspondence has also issued to individuals the ATO believes may be impacted by the changes.
    • On 17 May the ATO published an article in the Tax Professional Newsletter that promoted a new online service for tax professionals allowing them to request information for their client base on their total superannuation balance and bring forward arrangements. This service has seen a significant take up.

    Update on indirect taxes

    Tim Dyce, Deputy Commissioner, Indirect Taxes, ATO 

    Combatting fraud in the precious metals industry

    • From 1 April 2017 supplies of precious metals will be taxable supplies (ie subject to GST) regardless of their fineness. Taxable supplies will be reverse charged, making the buyer liable for the GST payable not the seller.
    • Consultation has been completed on this measure. Legislation has been drafted and has been introduced into Parliament. When passed the law will retrospectively apply from 1 April 2017
    • For other information refer to Link

    Tax Integrity Package – improving the integrity of GST on property

    • 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 will lead the consultation with industry. This measure is not yet law

    Update on income tax

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

    Division 7A update

    • The 2016-17 Budget announced targeted amendments to improve the operation and administration of Division 7A of the Income Tax Assessment Act 1936 which treats certain kinds of benefits from private companies to shareholders or associates as unfranked dividends.
    • These proposed changes will provide greater certainty for taxpayers and assist in easing their compliance burden.
    • The new provisions commence on 1 July 2018. This measure will require accompanying law companion guidelines. Treasury is proposing to release an implementation paper for external consultation.

    Safe harbours

    Internationals update

    Multinational anti-avoidance law

    • The Multinational anti-avoidance law (MAAL) is designed to counter the erosion of the Australian tax base by multinationals with ‘operate here – bill overseas’ arrangements to avoid the attribution of Australian sales profits to an Australian taxable presence. The MAAL program is a key part of the Tax Avoidance Taskforce.
    • The new legislative amendment to MAAL will ensure that taxpayers are not able to use artificial structures to avoid application of the MAAL. This law change supplements the three taxpayer alerts we have issued cautioning taxpayers and their intermediaries to be aware of the tax risks of entering into artificial and contrived arrangements to try to defeat the MAAL.

    Diverted profits tax

    • The Diverted Profits Tax will apply if under a scheme, or in connection with a scheme a taxpayer has obtained a tax benefit in connection with the scheme in an income year.
    • Consultation took place in May in respect to our Draft Law Companion Guide and the Draft Law Administration Practice Statement. A Practical Compliance Guideline will be published in due course.

    Penalties for significant global entities

    • Administrative penalties for statements and Failure to Lodge penalties for Significant Global Entities will increase from 1 July 2017. Administrative statement penalties will double and Failure to Lodge penalties increase by a factor of at least 100.
    • The ATO proposes to maintain the current approach for the imposition and remission of penalties for significant global entities and will undertake an education campaign to raise awareness of the increased penalties and our administrative approach.

    Related party debt

    • We have published the draft Practical Compliance Guideline 2017/D4 to assist taxpayers to risk assess the transfer pricing outcomes of their cross border related party financing arrangements, specifically related party loans.
    • The risk framework used in the draft Practical Compliance Guideline reflects principles endorsed by the Full Federal Court in the Chevron decision.
    • The draft Practical Compliance Guideline is open for public consultation until 30 June 2017 and once completed is expected to apply from 1 July 2017.
      Last modified: 18 Aug 2017QC 53124