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  • Agenda items

    1. Welcome and introductions

    The Chairpersons opened the meeting and welcomed members. Apologies were noted.

    The system problems that occurred on Monday 15 May 2017 with the standard business reporting 2 gateway were noted. The ATO has communicated with tax practitioners via alerts and the Tax Professional newsroom that no data has been lost and that as a result of this system outage, the ATO will ensure clients are not disadvantaged and are given time to lodge and pay without penalty.

    Reference

    TPSG 1905/01

    Agenda topic

    System outages

    Action item

    Outage messages to reinforce that tax practitioners and their clients will be supported without penalties where system outages affect their ability to lodge on time.

    Responsibility

    Colin Walker

     

    Reference

    TPSG 1908/03

    Agenda topic

    Software assurance project

    Action item

    Members would like a strategic narrative that helps professionals see the context of the Government’s digital agenda such as SuperStream, single touch payroll, e-invoicing, standard reporting framework etc.

    The ATO also needs to provide a description of how the changes to the way we administer the system in operation and the use of data and analytics result in a package of experience improvements.

    Responsibility

    Claire O’Neill

    Update

    This item will be held over to the meeting in August 2017.

    Status

    In progress

     

    Reference

    TPSG 0303/01

    Agenda topic

    Australian Business Register (ABR) and future opportunities

    Action item

    Further consultation and discussion will be arranged to co-design the future requirements of business registers.

    The ATO will prepare specific questions about potential requirements for the tax profession to consider and an indicative timeline of when opportunities for change may arise.

    Responsibility

    Michelle Crosby

    Update

    This item will be held over and an update provided at the meeting in August 2017.

    Status

    In progress

     

    Reference

    TPSG 0303/2

    Agenda topic

    ATO Community Forum

    Action item

    The ATO would like help from tax practitioners who already participate in online communities or forums to be involved in testing beta versions of the ATO Community Forum. The testing will also explore the benefits of an online community for tax practitioners.

    Nominations can be sent to digitalcommunities@ato.gov.au

    Update

    Actioned

    The ATO has conducted moderated usability testing with Tax professionals, Individuals and Small businesses in the Brisbane co-design centre.

    A number of visits have been scheduled to further discuss the community forum with Tax professionals.

    The ATO has made improvements based on user feedback including making ATO endorsed content easier to identify and understand.

    Next steps

    The ATO will conduct a second round of moderated usability testing with Tax professionals, individuals, small business and Superannuation professionals and make improvements based on their feedback.

    The ATO will conduct unmoderated usability testing with Tax professionals, Individuals, Small businesses and Super professionals through our ATO BetaExternal Link testing service and make improvements based on their feedback.

    The ATO will provide TPSG members with a link to the community once available for public testing.

    The ATO will provide the TPSG with an overview of preliminary findings at the next meeting.

    The ATO will be collecting ongoing feedback through a survey and will continue to improve the site based on this feedback.

    The ATO will evaluate value and risk to the community and the ATO at the end of tax time 2017.

    Responsibility

    Jonathon Thorpe

    Status

    Propose to close

    2. Federal Budget 2017

    The ATO provided an overview of the 2017 Federal Budget. Of particular interest was the measure relating to capital gains tax for foreign investors. The measure extends Australia’s foreign resident capital gains tax regime by:

    • denying foreign and temporary tax residents access to the capital gains tax main residence exemption from 9 May 2017, however existing properties held prior to this date will be grandfathered until 30 June 2019;
    • increasing the capital gains tax withholding rate for foreign tax residents from 10 per cent to 12.5 per cent, from 1 July 2017; and
    • reducing the capital gains tax withholding threshold for foreign tax residents from $2 million to $750,000 from 1 July 2017.

    The measure aims to improve the integrity of the foreign resident capital gains tax regime by applying the principal asset test on an associate inclusive basis from 9 May 2017, for foreign tax residents with indirect interests in Australian real property.

    Members discussed the volume of clearance certificates that may be required as a result of lowering the withholding threshold and a range of concerns relating to intermediaries providing tax advice.

    The ATO has taken questions on notice in relation to:

    • the consultation process for implementation of the measure
    • the volumes of requests for clearance certificates
    • community and ATO readiness for implementation
    • clear instructions in relation to certificates for partners in a partnership
    • system and process checks in relation to automated certificates and lodgment due dates.

    Reference

    TPSG 1905/01

    Agenda topic

    Federal Budget 2017

    Action item

    The ATO will provide advice to members in response to the matters raised regarding the foreign resident capital gains tax regime.

    Responsibility

    Michael Ingersoll

    The measure relating to the collection of GST on new residential properties and residential land subdivisions has a start date of 1 July 2018. It does not change the amount of GST payable or reported on the sale of taxable sales by property developers. For sales of new residential properties and residential land subdivisions on or after 1 July 2018, the purchaser of the property will withhold and remit the GST directly to the ATO as a disbursement of funds used to settle the purchase of the property.

    The ATO will continue to consult with tax practitioners and professional associations on all budget measures in particular the measures minuted above.

    Members were interested in aspects of the Housing Affordability Package and the small business capital gains tax concessions that have a start date of 1 July 2017. Members discussed the intent of the changes to depreciation deductions for purchasers of residential real estate investments. Associations also discussed capital gains tax relief when there is sufficient connection to a small business and how the measure will affect taxpayers who are currently seeking to claim small business concessions on assets that are unconnected with a small business. 

    In addition to the changes announced in the Federal Budget 2017, the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 received royal assent on 19 May 2016. These changes take effect from 1 July 2016 and include:

    • Reducing the company tax rate over 10 years to 25 per cent for companies with an aggregated annual turnover of less than $50 million.
    • Increasing the small business entity turnover threshold from $2 million to $10 million giving small business entities access to a range of small business concessions.
    • Increasing the tax discount for unincorporated small businesses incrementally over 10 years from 5 per cent to 16 per cent for entities with turnover less than $5 million.

    The ATO discussed with members how franking credits will be treated for the 2016–17 year. The maximum franking credit that can be allocated to a distribution is based on a corporate tax entity's applicable corporate tax rate for that income year. This is 27.5 per cent for a small business entity for their 2016–17 income year. Different rules apply to small business entities in the 2015–16 income year.

    Where a small business has issued 2016–17 distributions based on a 30 per cent corporate tax rate, they should notify their members of the correct dividend and franking credit amounts based on the 27.5 per cent tax rate. They can do this by sending a letter or email to their members. The ATO should also be notified of the correct amounts through the company's annual dividend reporting process.

    Pay as you go instalment payers have had the lower tax rate of 27.5 per cent included in the instalment amount due on the fourth quarter activity statement. If the activity statement does not reflect the reduction in corporate tax rate, instalment payers can vary the instalment rate or amount. Companies that choose to vary to reflect the rate reduction will not be subject to a variation penalty.

    The ATO has published PCG 2017/D7 Enterprise Tax Plan: Small business over-franking in 2016-17 income year because of tax rate change to assist small business and tax practitioners with the change.

    Members cited situations where franking credits are wasted. The ATO advised that this was an outcome of the current franking credit policy settings on a tax paid basis. Scenarios were also noted where deceased estate returns (or departed persons) lodge early with 30 per cent credit claimed for a dividend from an entity that will now be a 27.5 per cent entity

    Members discussed some facts and circumstances relevant to decisions about when an entity is carrying on a business. The ATO agreed to further consult with members with a view to developing some additional guidance in situations where a business is in receipt of passive income.

    Reference

    TPSG 1905/02

    Agenda topic

    Federal Budget 2017

    Action item

    The ATO will arrange an out of session consultation on the issue of when a company is ‘carrying on a business’.

    Responsibility

    Michael Ingersoll

    The ATO will conduct an extensive communication campaign utilising multiple channels including the Tax professional’s newsletter, Small Business newsroom, ato.gov.au and social media to advise the community of the changes that are part of the Enterprise Tax Plan. Return form instructions and other information products will be updated to assist taxpayers with the changes.

    Members discussed the legislative program, in particular the growing list of ‘announced but un-enacted’ measures, and how the ATO was managing this. The ATO’s policy and legislation area liaise with Treasury on these matters. Notwithstanding the legislative program is a matter for government, members were invited to make the ATO aware of any particular legislative measures that are of interest to them or to their association members. The ATO acknowledged that Division 7A reforms from Federal Budget 2016 were of interest to members.

    3. 2018 Superannuation changes and impacts on agents and clients

    With superannuation changes starting from 1 July 2017, the ATO has released a range of resources to help tax and superannuation professionals effectively prepare their clients.

    The resources will help advisers better identify which clients will be impacted, how they will be impacted and what action is necessary to ensure they’re compliant with the legislative regulations.

    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. These resources have been developed to help provide early certainty and the Commissioner’s stance on the new laws.

    Six Law Companion Guidelines have been released, with more to be released in the near future:

    1. Transfer balance cap and transition to retirement: transitional CGT relief
    2. Transfer balance cap
    3. Concessional contributions defined benefit interests and constitutionally protected funds
    4. Total Superannuation balance
    5. Capped defined benefit income streams: non-commutable, lifetime pensions and lifetime annuities
    6. Capped defined benefit income streams: pensions or annuities paid from non-commutable, life expectancy or market-linked products

    The Guidance Notes currently available are:

    Transitional CGT relief

    The ATO has also planned a series of webinars on a range of key super changes topics, and has published frequently asked questions and answers.

    To ensure people are able to understand their superannuation position, ATO Online screens will be available in MyGov to explain the total superannuation balance and understand a person’s non-concessional contribution bring forward position. Tax agents can contact the ATO via the Tax Agent Portal to request these details.

    The total superannuation balance will influence access to non-concessional contributions cap, co-contributions eligibility, access to claim spouse offset and access to the segregation method for exempt current pension income purposes for the 2017/18 financial year.

    Although there will be a relatively small number of people directly impacted by most of the new measures, tax practitioners will play an important role in keeping their clients informed about their own circumstances to allow people to make decisions so as to not be in a position to have to pay any additional tax. The ATO and superannuation funds will be working on solutions to be able to give relatively real time information to people in relation to their tax and superannuation position.

    The ATO noted that there will be a mail out to people that may be nearing thresholds and caps to prompt consideration and make informed decisions. The letters are not in relation to any review or audit, they are for information.

    As the ATO and tax professionals move to implement the law changes, the ATO asked members and associations to provide feedback on what is of concern to the community.

    4. ATO Community Forum

    The ATO has been exploring how to increase engagement with the online community and expand ATO social media presence. The ATO spoke about online forums that are currently operating where tax and super questions and discussions are occurring. The ATO is undertaking user research to understand the role of online communities and the need for a place to discuss tax and super topics online, in a trusted environment.

    There has been consultation with stakeholders to understand the current usage of online communities and to determine the appetite for an ATO moderated online community.

    Members were given a demonstration of the concept of an ATO moderated online forum. Participants in the online forum may be browsing posts and responses, they may be looking for information on a specific topic or they may post a question or a comment where others are able to post answers or responses.

    The ATO showed an example of a question posted by a participant. Others had posted responses to that question. The ATO then demonstrated to members how the posts would be moderated. Users can click on a button that will take them to the ATO accepted solution/ response to a question. Where the ATO considers the responses to be correct and accurate, the post will be marked with a tick. The ATO may then post additional material that would usually consist of links to information on the ATO website. Registered tax and BAS agents are able to include a tag in their user details to show that they are a registered tax agent.

    Members asked the ATO to carefully consider if this is going to meet the needs of the targeted demographic. Whether this community exists or not, the target demographic may look for tax and superannuation information in other places in any case. Considering this further, there was a view that the ATO could also participate in other online forums and make reference back to the ATO Community forum, as the place to get correct and accurate responses to questions.

    Members discussed the appropriateness of the ATO as a regulator, having a moderating role in an online forum and the potential resource investment.

    Overall members acknowledged that people will want to access digital or online services to crowd source information. Members agreed that this group has a role to play in how we work through the development of that online environment.

    The ATO will conduct unmoderated usability testing with tax professionals, individuals, small businesses and superannuation professionals through the ATO BetaExternal Link testing service to continue to evaluate the online community forum concept. Tax and BAS agents are encouraged to test the prototype and provide feedback by using the feedback button on the home screen.

    5. TaxTime 2017

    Tax time is a very important time for the ATO and the community. It is the one time of the year that a large number of the community interact with the ATO. They either lodge a form or contact the ATO. A successful tax time is important in building community confidence in the tax and superannuation systems.

    Ahead of tax time the ATO prepares to have good, governance, identification of risks and mitigation strategies. The ATO outlined to members the daily meetings that occur from the beginning of July 2017 within the ATO to monitor all aspects of Tax Time operations.

    The ATO demonstrated the daily Tax Time reporting tool that is used across the office by executives to monitor contact centre performance, processing, complaints, myGov, voice authentication, online services and social media. Members were shown live reporting data relating to practitioner lodgment service in comparison to electronic lodgment service and the decreasing volumes of paper returns lodged by self-preparer and tax practitioners.

    Reference

    TPSG 1905/03

    Agenda topic

    Tax Time 2017

    Action item

    Members will be provided with a report showing the system capacity testing that has been undertaken in relation to the practitioner lodgment service in readiness for peak lodgment volumes.

    Responsibility

    Matt Hay

    Members discussed some of the contact centre statistics shown year to date. Trends show that calls are being answered quickly and the average handling time has increased. This indicates the low complexity queries are being resolved in other ways and that the calls to the contact centres are increasing in complexity. The ATO also conducts analysis on the first point of contact resolution, to ensure callers have the best opportunity to have their query answered without having to be transferred or receive a call back. The contact centre queues for tax practitioners and the queues into the debt contact centres receive priority.

    Members were also shown how returns that are taken offline for processing are monitored. Returns may be taken offline where there is a mismatch of information included in the return or where figures included trigger an integrity check to stop fraudulent refund claims. Tax agents receive a report showing the returns where processing is delayed beyond the usual service standards.

    The ATO outlined the four risk areas that are the focus of tax time risk assessment and planning.

    1. Information technology and systems performance

    Due to the service and system outages, the testing environment leading up to tax time has been limited. To mitigate the risk of the systems not performing as they should, there will be a greater level of real time testing on labels and calculations to ensure the system performance is aligned to system design.

    1. People resources

    Staff training needs to be in place to ensure our people are able to assist the community in areas that are new. The ATO must ensure that the right level of resourcing is available to the community during the busy tax time period.

    1. Clients including tax practitioners

    The ATO will ensure clients have the ability to lodge a return, have the return processed and receive a refund. Irritants in the system need to be addressed quickly, which is why they ATO will hold weekly meetings with members of this group to make sure problems come to our attention and are resolved quickly.

    1. External partners and the wider community

    Ensure a greater level of accountability to, and communication with government and Ministers.

    Members were interested in the messaging to the community about supporting tax agents. The ATO confirmed that messages in previous years have been about recognising the role that tax agents play at tax time. This year the focus to the community will be about ‘choice’. People should consider their own circumstances and make a choice about managing their own tax affairs or using the services of a registered tax agent.

    The ATO has been working closely with tax agents and the digital service providers to transition from electronic lodgment service to practitioner lodgment service. The 2017 fringe benefits tax return has successfully switched completely from electronic lodgment service to practitioner lodgment service.

    As part of raising awareness of the changes and providing support for tax agents making the switch to practitioner lodgment service the ATO has individually spoken with over 12,000 tax agents over the last year. The take up of practitioner lodgment service is steadily growing with around 30 per cent of tax agent lodgments now happening using practitioner lodgment service compared to around 10 per cent in January 2017.

    Ongoing access to the electronic lodgment service as a safety net is dependent on progressing development of practitioner lodgment service products. From 1 July 2017 the electronic lodgment service will be available, if required, for 2017 tax return forms (except fringe benefits tax returns) until the dates below:

    • from 1 October 2017 the partnership tax return will not be accepted through the electronic lodgment service gateway
    • from 11 November 2017 the self-managed superannuation fund annual return, trust and superannuation fund tax returns will not be accepted through the electronic lodgment service gateway
    • from 1 February 2018 the company tax return will not be accepted through the electronic lodgment service gateway
    • from 1 April 2018 the Individual tax return will not be accepted through the electronic lodgment service gateway.
    • from 1 April 2018 all current year tax returns must be lodged through the practitioner lodgment service.

    Tax practitioners are encouraged to work with their software providers to ensure practitioner lodgment service services are available to them ahead of the electronic lodgment service gateway closures.

    6. Cyber security

    This discussion is in response to some areas covered by the Chartered Accountants ANZ submissionExternal Link to the Joint Committee of Public Accounts Australia.

    The Chief Information Security Officer addressed the group and gave assurance that the recent global ransomware attack from the source referred to as WannaCry did not result in any data breaches nor cause the problems with the practitioner lodgment service in that same period.

    With a rise in the delivery of digital services across a growing number of channels, government and the community face an increased risk of cyber-attack, information compromise, and identity crime. In contrast to the traditional data fortress of the ATO, information now flows in a vast, trusted ecosystem incorporating tax professionals, digital service providers, superannuation funds etc. With the expansion of this ecosystem comes a shared responsibility to protect client data from misuse.

    The ATO strongly recommends all registered tax practitioners regularly review their information security software to ensure the highest levels of protection possible.

    To combat this increased threat of attack to the ATO, our partners, and to protect the information of taxpayers, the Cyber Security Working Group was formed. The Cyber Security Working Group is a consultative forum comprised of ATO representatives, software developers and tax professional associations.

    Cyber Security Tips publication for Business and Individuals was recently delivered as the result of a collaborative effort from Cyber Security Working Group. This is now available to tax professionals online and as a printable flyer for distribution to their staff and clients.

    The Online security questionnaire for individuals, small businesses and tax professionals is designed to help tax professionals identify opportunities to improve their online security practices. It provides helpful information that may assist the community to remain safe when working in an online environment.

    Delivery of the taxation and superannuation systems increasingly relies on the use of a wide range of digital service providers. These digital service providers design software and offer cloud based solutions consumed by both tax professionals and the broader community when administering their tax and super affairs. The ATO will manage the use of digital service providers through an operational framework covering registration of the provider, certification of their products and ongoing cyber monitoring of the services.

    Members discussed the need for good cyber security advice and insurance in the tax practitioner community. Following meetings with the Accounting Professional and Ethical Standards board, the ATO recommends practitioners also give regard to strong business continuity plans that cover a range of situations that might include cyber attacks, system outages or natural disasters. The ATO will be having discussions with the Tax Practitioner’s Board to explore cyber standards and expectations.

    Members were directed to the Australian Signals DirectorateExternal Link website for information security guidance.

    7. Tax agent risk profile pilot

    In November 2016, the ATO published an article in the tax professional’s newsletter outlining that work-related expense risk profiles will be shared with some tax professionals where their clients’ claims appear higher than expected.

    By sharing risk profiles, the ATO is seeking to gain feedback on the usefulness of the risk profile and increase our understanding of claiming practices. Two different approaches to sharing the risk profiles are being trialled.

    The first approach is to engage directly with the tax agent to discuss the work-related expense risk profile of their client base. The tax agent receives a list of their clients with higher risk work-related expense claims to review and make any appropriate amendments. The client also receives a prompter letter requesting they review their claims.

    At the end of April 2017, 180 tax agent cases have been completed under this approach and almost 11,000 prompter letters have issued to clients. Overall in this pilot group, there has been a 20 per cent rate of voluntary disclosures in relation to work-related expense claims. For those reviews where there was a voluntary disclosure the ATO reported that we are finding tax agents simply accepting statements made by their clients on face value, making claims for ‘standard deductions’ in areas where exceptions from the substantiation provisions apply and not taking appropriate steps to verify claims.

    There was general discussion about what action had the ATO and Tax Practitioners Board (TPB) had undertaken in relation to these agents. It was explained that where they are considered to be higher risk the ATO will review the claim patterns of the clients and the tax compliance of the practice and the personal affairs of the agent and where appropriate refer them to the TPB. Ian Taylor outlined the remedies available to the TPB and the information required to make a robust referral.

    The second approach is to send the tax agent a letter to set out the percentage of the agent’s client base considered to have higher risk work-related expense claims. The agent is provided with a sample of their clients with higher risk work-related expense claims to review and make any appropriate amendments.

    Over 1100 of these letters were sent on 10 March 2017. Sample client listings were capped at 20 clients. The results of this pilot are currently being evaluated. In respect of the first pilot, evaluation shows that tax agents responded positively to the work-related expense risk profiles. Many agents appreciated the understanding and educating approach that was taken. They have asked what their risk scores for other areas of the return look like, and have noted that this information would be useful at a client level just before they meet with the client to prepare their return. They have also been interested in the methodology behind the risk assessment, and the impact of using incorrect and/or not specified occupation codes.

    In response to feedback from agents that work-related expense risk profile information would be useful in real-time as they meet with their client to prepare their return, the ATO is developing a message that will be included in a client’s pre-fill report where the client’s work-related expense claims on their previous year’s return was considered high risk.

    Members discussed this initiative, including the possibility of a ‘tick box’ for agents to provide assurance that they have verified a claim. There was general discussion around the extent to which tax agents confirm a correct work related expense, exercising best practice in relation to ‘reasonable care’. For example, to what extent would a tax agent go to determine the nexus between motor vehicle expenses and earning income?

    Members also discussed the use of accurate occupation codes and how this may affect the outcomes of an accurate risk profile and the ability to properly identify taxpayers whose claims are higher than expected.

    Looking beyond the pilot, members were asked to consider if and how work related expense risk profiles might be made available to the broader tax agent community. A number of tax agents are being interviewed to test the concept and how it might be best delivered in practice.

    Reference

    TPSG 1905/04

    Agenda topic

    Tax agent risk profile pilot

    Action item

    CPA Australia will share the checklist that is recommended to their association members in relation to completing all labels in the income tax return, with members of this group.

    Responsibility

    Gavan Ord

     

    Reference

    TPSG – 1905/05

    Agenda topic

    Tax agent risk profile pilot

    Action item

    The ATO will share with the group feedback from the tax agents interviewed and report back to the group with a draft design of the real time analytics projects for tax agents.

    Responsibility

    Adam Kendrick

    8. Other business

    Out of session briefing papers were provided to members on the following topics:

    • Manage ABN connections
    • Digital Transformation Agency’s Govpass initiative
    • Improving online services.

    9. Forward agenda items and meeting close

    Topics for the agenda can be sent to the TPSG secretariat mailbox at any time.

    Proposed meeting schedule for 2017:

    Friday 18 August

    Friday 17 November

      Last modified: 13 Dec 2018QC 52974