Private Groups Stewardship Group key messages 27 November 2019

Strategic initiatives to improve the Privately Owned and Wealthy Groups client experience

Property and construction industry update

Scott Walker – Assistant Commissioner, Private Wealth, ATO

Members were provided with an overview of what we are seeing in the property and construction industry focused on the following four areas:

• uncertainty whether a transaction is on capital or revenue account
• incorrect timing of deductions and recognition of income
• head contractors reducing their business and tax risks by better management of their sub-contractor populations
• not returning income and GST.

The overview also explained what the ATO is doing to assist taxpayers involved in the industry. This included:

• what public advice is available
• details of the intent of the commercial deals program where taxpayers and their advisers, who are involved in significant commercial deals, engage with us early before lodgment
• details of early engagement for advice opportunities, where access to subject matter experts and specialists to discuss technical issues about complex arrangements and transactions is available. Refer to ato.gov.au for more information.

There was a general discussion on:

• the number of private groups involved in the property and construction Industry and key metrics of this group compared to the industry overall
• the taxable payments reporting system (TPRS) for identification and management of sub-contractors – supporting head contractors.

Superannuation and Employer Obligations update

James O’Halloran – Deputy Commissioner, Superannuation and Employer Obligations, ATO

James highlighted a number of the recent consultation papers and forums.

The following key points were highlighted.

Single Touch Payroll

• Implementation is continuing successfully.
• Volume of data now means we are getting some insights from the large withholders.
• As at 15 November 2019, around 540,000 employers are now reporting year-to-date salary and wages, pay as you go (PAYG) withholding and superannuation information through Single Touch Payroll (STP).

Protecting superannuation

• The Commissioner now has new powers to proactively consolidate certain ATO-held super amounts, including inactive low-balance accounts, into an eligible active super account for the individual.
• The ATO has received over 2.3 million inactive low balance accounts from super funds, valued at approximately $2.16 billion.
• As at 18 November 2019, we have reunited just over 1 million accounts worth nearly $1.66 billion.

SG amnesty

• We understand some employers may be 'holding off' lodging a superannuation guarantee charge (SGC) statement in anticipation of an amnesty.
• Until the proposed amnesty, 'Extending the superannuation guarantee amnesty to reunite members with unpaid super' is enacted by parliament, the ATO will continue to apply the existing law to the SGC statements lodged with us.

Superannuation guarantee (SG)

• High income earners, with multiple employers, can now apply to opt-out of receiving SG from some of their employers. The new measure, to take effect from the quarter commencing January 2020, is designed to help this group avoid unintentionally exceeding their annual concessional contributions cap.
• The ATO recently completed an examination of SG contributions for approximately 400,000 employers for Q1, Q2 and Q3 in 2018–19. The ATO is now using this data to 'nudge' and warn employers where we have identified they have paid some or all of their contributions during this time after the due date or who appear to have underpaid SG.
• STP and other systems changes have allowed good visibility of tax positions of clients.

SMSF – Non arm’s length Income (NALI)

• Changes to the calculation of the NALI, and the inclusion of expenses, apply from the 2018–19 financial year onwards. We have published various communications, including SMSF annual return (SAR) instructions and web content.

Top 500 and High Wealth Private Groups Programs update

Kasey Macfarlane – Assistant Commissioner, Private Wealth, ATO
Glenn Cooper – Senior Director, Private Wealth, ATO

Members were asked for feedback and comments on the proposed new letters used to communicate case findings, insights and outcomes. Two draft letter templates for Streamlined Assurance Review/Completion and two draft Streamlined Assurance Outcomes Report templates were tabled for comment and feedback.

The intent of the letters/reports is to communicate the ATO's view of the extent to which potential tax risks are mitigated, and to highlight any areas for improvement and future engagement.

Key insights discussed included:

• Authorised contact would be the recipient of the letter, however it was noted that it would end up being presented to the Boards/Family members.
• Detail within the letters/reports is discussed with the advisers before they are issued.
• Letters/reports to include detail of steps taken by advisers/taxpayers to resolve any issues.
• Management of timeframes and the overall approach with regards to engagement through the review period, and when or if a review would go to audit.

Timeframe for implementation to be decided – there is a broad expectation that they will be implemented when ready, not restricted by financial year. Further updates to be communicated to members.

Justified Trust for Top 500 program

Kasey Macfarlane – Assistant Commissioner, Private Wealth, ATO
Greg Nielsen – CPA Australia
Greg Dick – Assistant Commissioner, Private Wealth, ATO

This item focussed on the ATO’s engagement under the Top 500 private groups tax performance program, the use of the Tax Governance Tool, ATO internal quality review processes and Justified trust.

Key insights discussed included:

• There are some different processes – risk based approach vs systemic approach (proof of absence). Assurance of what has occurred in the past, and justified trust that the future will be managed (whole of tax issue view).
• Providing the Commissioner assurance that the future tax risks for a client will be appropriately managed and mitigated.
• Consistent arrangements for Private and Public Groups, without burdening clients with unnecessary compliance costs, all data already available will be used.
• Individual client ratings will not be published, however there may be a point in the future where aggregated data and ratings may be published.

Members raised key points of interest:

• Messaging regarding the differences between this and the previous programs to provide more clarity to clients and advisers.
• There is an impost on clients for the extra work that needs to be considered – value and time clarity is important for clients.
• Clients like the idea of justified trust but there may be resistance to investing resources where the benefits are not clearly visible or understood. Acknowledgement that it is ultimately a business decision.
• Once a client has justified trust, what does the future engagement and management with the ATO look like?

AUSkey transition

John Dardo – Deputy Commissioner, Enterprise Solutions and Technology, ATO

Members were updated on:

• AUSkey will be officially decommissioned by 30 March 2020
• myGovID; Relationship and Authorisations Manager (RAM) services – new system is 'best in class' and overcomes a number of immediate and future security risks. The new credential is associated with an individual and stays with them on their personal device. RAM is for a business to authorise an individual with a credential to access their accounts.
• What businesses can do now to prepare
  • people will need to access a smart device
  • individuals should get credentials early to ensure that any documentation issues can be resolved
  • individuals without Australian documentation will have an exception process that will allow them to send overseas documentation directly to the ATO, and we will manually authorise their credential
  • an awareness campaign will commence in first week of December 2019, and there is also a large amount of information already available on ato.gov.au.
   

Law policy and advice update

Income tax update

Scott Treatt – Assistant Commissioner, Private Wealth, ATO
Justin Dearness – Assistant Commissioner, Tax Counsel Network, ATO
Glenn Nottingham – Director, Private Wealth, ATO

Members were updated on the development of preliminary ATO Guidance on Section 100A – reimbursement agreements.

There was a discussion on further consideration on both the view of law and the practical application.

High Wealth Private Groups Income Tax Gap

Kasey Macfarlane – Assistant Commissioner, Private Wealth, ATO
Sharon Sutcliffe – Director, Private Wealth, ATO

Members discussed the pending release of the High Wealth Private Groups income tax gap, the key messages and communication activities to inform the community of our current analysis and methodologies.

Wrap up and close

Co-chairs Tim Dyce and Wendy Foster thanked the members for their attendance and contribution, and noted their appreciation for the open and honest discussion from all members.

Attendees

Apologies