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  • Private Groups Stewardship Group key messages 4 April 2018

    Strategic initiatives to improve the privately owned and wealthy groups experience

    Tax gap

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

    • Sally introduced this topic and provided an update on what the ATO has been working on since the group met in September 2017.
    • Members discussed the general perception held within the community in respect to privately owned and wealthy groups. Members recognised that factual data is a base on which a narrative can be built but by itself it may not increase confidence in the community that all groups are paying their fair share of tax. For a diverse audience we need a story that supports the data and language that does not lead people to a predetermined conclusion.

    When we tell the story it is not just about a label but the reality of private groups and their contribution in a broader story.

    Common Reporting Standard (CRS)

    Anthony Siouclis Assistant Commissioner, Public Groups and Internationals, ATO

    • Following on from the meeting in November 2017 Anthony led a conversation on the Common Reporting Standard (CRS), the technical elements in the work and what we have learned from discussions with early adopter countries. The network of early adopters have provided us with insights into what we can expect now that we are six months away from the first lodgment deadline. We continue to update our guidance and reach out to affected entities to ensure they are prepared for lodgment. We are encouraging entities to test their lodgment system early to ensure they have time to fix any problems so they can successfully lodge by the due date.
    • Members were interested in the sources, quality and future use of the information being received. We recognise that there will be data integrity issues in the early years and we will work with reporting entities to resolve these issues. We are also aiming to leveraging our Foreign Account Tax Compliance Act (FATCA) experience to improve data match rates to ensure data can be used effectively.
    • We recently organised a CRS stakeholder group and encourage interested members to join that group so that they can receive timely announcements and alerts related to CRS. Interested members can request to join the group by sending an email to CRS@ato.gov.au and put “Subscribe” in the subject line.

    Early engagement

    Ash Khera Assistant Commissioner, Private Groups and High Wealth Individuals, ATO

    Jade Isaacs Assistant Commissioner, Private Groups and High Wealth Individuals, ATO

    • Together Ash and Jade led a conversation on the outcomes of the November 2017 workshop and the progression of our approach to managing the application of shortfall penalties in an environment of early engagement. There was discussion of the concept of Justified Trust and recognition that private groups members are looking to understand the commercial benefits, as well as the process to establish and maintain mutual trust in to the future. There was discussion about a number of practical factors influence commercial entities in their priorities, that a process can only do so much and that the cost will need to be justified by the visible benefit. Also a business or its advisers may find the concept of Tax governance to be more engaging than the term Early engagement.
    • In the context of our current legislative framework, we discussed the potential lack of comparative fairness where voluntary disclosures provisions are not available to pre-lodgement disclosures and the lack of guidance relating to appropriate remission of penalties where disclosures are made pre-lodgement and before the relevant statement is made. We are not yet there and we are continuing to develop our approach.
    • There was a consensus that the Early engagement concept was a move in the right direction and that we would continue to work together to progress the respective elements of this approach, the language and focus of the work.

    Law policy and advice update

    Income tax update

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

    • Upcoming consultation is planned for a draft Taxation determination (TD) on Division 7A. The draft TD seeks to address the issue of whether a trustee can suffer undue hardship due to payment of a debt for the purposes of paragraph 109G(4)(a) of the Income Tax Assessment Act 1936. We anticipate commencing preliminary consultation with stakeholders in April 2018 before releasing the draft TD for broader comment.

    Professional firms

    • As part of the review process, we have become aware the web guidance has been misinterpreted and applied to arrangements exhibiting high-risk factors.
    • Since then, we have suspended the application of the guidelines and the web guidance and started consulting with interested stakeholders on replacement guidance (which would apply prospectively) and the application of any required transitional arrangements.
    • We have ongoing consultations with professional bodies, tax practitioners via the Tax Professionals Newsroom and ATO Open Forums at various locations. A working group has been established to consult on the technical issues.

    Trust vesting

    • Draft Taxation ruling (TR) 2017/D10 addresses the circumstances in which a trust’s vesting date can be extended and the tax consequences of the beneficiaries’ interests in the trust property becoming vested.
    • Comments from public consultations are being considered to finalise the draft TR.
    • Separate consultations are ongoing to assistExternal Link in developing our administrative approach to trusts that have vested.

    Trust splitting

    • We received detailed feedback from members on the draft TD on the tax implications of arrangements that are commonly referred to as ‘trust splitting’.
    • The comments received have been very helpful in refining our views and we appreciate the value added as we refine the draft TD before releasing it for broader consultation.

    Public guidance and new measures

    A number of public advice and guidance products have issued since our last update to members in December 2017.

    • Draft PCG 2017/D14 – sets out our proposed compliance approach to determining if private use of a vehicle was limited for the purposes of the car-related fringe benefit exemptions. We are currently considering comments received from public consultation.
    • Addendum to TR 2002/14 – Appendix 1 sets out our compliance approach to amounts payable to, or by, retirement village operators under residence contracts entered into before or after the commencement of the Retirement Villages Act 2016 (SA) on 1 January 2018. We will not seek to disturb, under TR 2002/14, the tax treatment of amounts paid under residence contracts entered into before the date of commencement of the Act.
    • TR 2018/3 – restates the view in IT2450 on the recognition of income from long term construction contracts. The TR continues to provide the long standing concessional method for reporting notional taxable income from construction contracts with reference to the new accounting standard (AASB 15 Revenue from contracts with customers, which took compulsory effect from 1 January 2018).

    Indirect tax update

    Emma Rosenzweig Deputy Commissioner, Indirect Taxes, ATO

    GST at settlement and property sector focus

    • The ATO and ITX continue to have a strong focus on the property, building and construction sectors.
    • There are high turnover levels for participants, specialised GST laws and high value transactions all leading to significant ATO work in relation to help, education and advice as well as meeting obligations and our review activities.
    • These industries are also a key focus in the Private group market.
    • The government has announced the introduction of a measure to require GST for new residential developments to be paid on settlement. This is to apply from 1 July 2018.

    GST on low value imported goods

    Overview

    • We have now finalised and published our law companion rulings.
    • We have now finalised plans for our next stage of international engagement to New Zealand to meet with key businesses that will be required to register.
    • We are finalising plans to undertake further engagement in the US, China and Europe.
    • Business engagement with the ATO has been constructive and encouraging. We expect the bulk of entities to register in the period from April to June.
    • We are still actively engaging with business to assist them to comply.
    • We are prepared to pursue compliance action where we detect non-compliance.

    Superannuation update

    James O’Halloran Deputy Commissioner, Superannuation, ATO

    SMSF regulator’s bulletin

    Transfer balance cap

    To date, we have issued 2,450 Excess Transfer Balance (ETB) Determinations to individuals who had exceeded their transfer balance cap. In late April, the Commissioner will commence:

    • issuing commutation authorities to funds where we had previously issued the individual with an ETB Determination and the individual did not act in time
    • issuing ETB tax assessments to individuals who had exceeded their cap but are no longer in excess. This would include individuals who had exceeded their cap and rectified before an ETB Determination was sent. It does not include individuals who rectified under the transitional rules
    • determining if dependent children receiving a death benefit income stream have exceeded the special child cap increment.

    See also:

    Superannuation guarantee (SG) integrity measures

    • The Draft Superannuation Guarantee Integrity Measures legislation released on 24 January 2018 is aimed at protecting employees' super entitlements. The draft bill introduces measures that will modernise the system.
    • Along with the legislation, the ATO is undertaking administrative action to improve the support the ATO offers. The expected result will be a three tiered approach to improving SG outcomes for the community, all with relevance to employers:
      • raising visibility of SG
      • improving the support the ATO offers
      • strengthening the ATO’s ability to recover unpaid SG.
       
      Last modified: 26 Apr 2018QC 55180