2024 Completed matters

To understand how the ATO can support agents to promote the benefits and adoption of a Strong online access strength (OAS) to compromised individuals within their practice client list.

Encouraging compromised taxpayers to adopt a Strong OAS has the benefits of restoring real-time access to digital services and pre-fill access for registered agents. It facilitates easy access to taxpayers’ superannuation, personal details and ATO mail via their myGov Inbox. The Strong OAS pilot, which commenced in July 2024, aims to leverage the trusted agent-client relationship and the support of registered agents to promote the benefits of OAS to their clients.

• Tax Practitioner Stewardship Group
• Tax agents

Insights and observations from the pilot were used to draft 4 recommendations which will help encourage the adoption of Strong OAS and provide a better experience for agents with compromised clients. The recommendations will be referred to relevant ATO business areas for consideration in future continuous improvement programs.

Scott Bradford, Frontline Business Improvement
Scott.Bradord@ato.gov.au
Phone 03 9215 3537

To seek feedback on proposed changes to foreign resident capital gains withholding (FRCGW) website guidance to ensure the content is clear, relevant, and meets stakeholders’ needs.

The FRCGW regime in Australia requires Australian residents to obtain a clearance certificate from the ATO to avoid having 12.5% of the sale price withheld on property sales of $750,000 or more. Foreign residents have 12.5% withheld, which is paid to the ATO by the purchaser. Without a clearance certificate, Australian residents are treated as foreign residents, and the withholding applies.

Legislative changes to the FRCGW regime were announced in Mid-Year Economic and Fiscal Outlook 2023–24 and will come into effect from 1 January 2025. The key changes include:

• increasing the withholding rate from 12.5% to 15%
• removing the $750,000 withholding threshold
• applying the changes to relevant capital gains tax assets.

These changes are expected to significantly increase the number of clearance certificate applications.

We are updating our website guidance on the FRCGW to reflect the upcoming legislative changes. We are seeking feedback from law and conveyancing professional associations to ensure the proposed content is clear, relevant, and meets stakeholders' needs.

• Law and conveyancing professional associations

Feedback from targeted consultation on the proposed changes to FRCGW website guidance was invaluable in assisting the ATO to shape and improve our guidance material, ensuring the content is understood and meets stakeholder’s needs.

We provided draft content of the proposed changes and received feedback from stakeholders. This will be incorporated into the content under development, which will be updated in due course.

As part of the consultation, a number of other matters were raised by law and conveyancing professional associations. These will be addressed separately.

Louie Markovski, Superannuation and Employee Obligations
Louie.Markovski@ato.gov.au
Phone 03 9275 5333

To seek feedback on the proposed draft Practical Compliance Guideline from superannuation industry representatives prior to the publication of the draft for public consultation.

Following the outcome from earlier consultation [202407] Delivering Better Financial Outcomes (Quality of Advice) – Recommendation  7, the ATO is developing a Practical Compliance Guideline to provide superannuation funds with a compliance approach in relation to the amendments made to the Income Tax Assessment Act 1997 (ITAA 1997) under Schedule 1 of the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024 (the Act).

The amendments under Schedule 1 of the Act provide a legal basis for payment of advice fees from a member’s superannuation account and clarify the associated tax consequences.

The ATO is seeking feedback on our proposed compliance approach for:

• working out the income tax deduction under item 5 of the table in subsection 295-490(1) of the ITAA 1997
• historical PAYG withholding obligations under paragraph 307-10(e) of the ITAA 1997.

Feedback from superannuation industry representatives will assist to refine and enhance the guidance before the draft is published for public consultation.

• Industry representatives
• Professional associations
• Superannuation funds
• Tax professionals
• Relevant government agencies
  • Australian Securities and Investments Commission
  • Australian Prudential Regulation Authority

Feedback received from the consultation provided valuable insights on the impact of the proposed compliance approach to superannuation funds. These insights will be considered in developing our compliance approach under this draft Practical Compliance Guideline.

Jay Gao, Public Groups
jay.gao@ato.gov.au
Phone 02 9374 5168

To seek feedback on proposed website guidance that focuses on informing operators about key tax implications throughout the retirement village lifecycle.

We are seeking to publish web-based content that consolidates existing guidance which identifies tax issues, income tax and GST at each stage of a retirement village lifecycle. This web guidance does not introduce new views and is not intended to cover tax technicalities related to retirement villages. It aims to make taxpayers aware of their income tax and GST obligations using a lifecycle approach.

• GST Stewardship Group
• Private Groups Stewardship Group
• Property and Construction Stakeholder Relationship Forum

Minimal feedback was received. Where appropriate, feedback was incorporated into the website guidance.

Rosie Cicchitti, Private Wealth
rosie.cicchitti@ato.gov.au
Phone: 07 3213 8073

To seek feedback on a prototype digital objection process that has been designed to replace the current paper objection process for individuals.

For individuals to lodge an objection with the ATO, they currently need to download, fill out, and return post or fax a paper form. The ATO digital strategy outlines an aspiration to be fully digital by 2030. To meet this challenge, we are consulting with community members and tax agents to understand their views on a prototype digital objection process that has been designed to replace the current paper objection process for individuals.

Feedback will ensure the design of the prototype digital objection process meets the needs of stakeholders and will assist to identify any areas for improvement.

• Individuals

User research has been considered in the development of digital objections prototypes. Further consultation may take place on prototype iterations in the future.

Dejan Markov, Enterprise Strategy and Design
dejan.markov@ato.gov.au
Phone 08 8208 3608

To understand what drives preferences for the retention of paper activity statements and the blockers to transitioning to digital channels.

The ATO digital strategy outlines an aspiration to be fully digital by 2030. To meet this challenge, the ATO is looking to consult with agents around the current and future use of paper activity statements and understand the impediments that may exist to a continued transition towards digital lodgment.

• Professional associations
• Tax agents

Feedback will be used to identify ‘pain points’ in the transition from paper to digital and will guide the development of proposals intended to drive increased digital lodgments and assess the potential impacts on agents.

Steve Windeyer, Frontline Business Improvement
steve.windeyer@ato.gov.au
Phone 08 9268 6888

To seek feedback on the instructions supporting Local File/Master File (LCMSF) Schema, Version 4.0, and the updated requirements which incorporate short form local file reporting.

From 1 January 2025, country-by-country reporting entities will use an updated version of the LCMSF service for lodgments, for reporting periods starting on or after 1 January 2024. LCMSF Schema Version 4.0 will incorporate the short form section of the local file into the Message Structure Table.

The ATO will seek feedback on updated Version 4.0 short form local file reporting, including what further clarification or examples may be provided in the reporting instructions. Consultation will ensure the instructions and updated requirements meet the needs of stakeholders involved in the reporting process.

• Large corporations and multinationals
• Tax agents and advisory firms
• Industry bodies
• Digital service providers 

Feedback received from consultation provided valuable insights and suggestions for potential improvements or clarifications to the Local File/Master File Schema Version 4.0 and instructions.

As a result of feedback, immediate changes were made to the Message Structure Table design. Feedback on other issues is being considered and is expected to result in changes to the instructions which are in the process of being finalised.

Emily Worthing, Public Groups
LCMSFversion4@ato.gov.au
Phone 02 9374 1951

To seek feedback on the new self-review guide and checklist for GST classification of products to ensure it meets the needs of taxpayers.

The ATO has developed a self-review guide and checklist for GST classification of products. The self-review guide and checklist is designed to provide taxpayers with practical step-by-step guidance to:

• undertake regular self-review of the GST classification of their supplies
• assess the robustness of business system processes and controls that directly impact the decisions on GST classification of supplies.

Feedback will ensure the self-review guide and checklist meets the needs of taxpayers and will help to identify any areas for improvement.

• Industry representatives
• Advisory firms
• Members of the GST Stewardship Group

Feedback provided some valuable insights which will be incorporated into the self-review guide and checklist for GST classification of products to improve the documents and ensure they meet the needs of taxpayers.

Feedback provided helped improve sections of following documents:

• Self-review guide for medium to large businesses
• Self-review checklist for small to medium businesses

Virginia Hernandez, Public Groups
Virginia.Hernandez@ato.gov.au
Phone 03 860 19383

To seek feedback to inform potential public advice and guidance on additional tier 1 (AT1) capital note issuances.

AT1 capital is a key element of the capital structure for Australian financial institutions. The ATO receives numerous applications for binding advice through the rulings system on the tax consequences associated with AT1 capital notes for investors and issuers.

There is currently a high level of maturity and consistency in AT1 capital note issuances, including their terms and features and their tax consequences.

The current approach to providing guidance is on a case-by-case basis. The ATO is considering opportunities to streamline guidance on AT1 capital note issuances and is seeking feedback on whether a Taxation Ruling would eliminate or substantially reduce the incidence of class and private ruling requests.

• Financial Institutions
• Industry bodies
• Tax agents and advisory firms

The feedback received provided perspective on the key issues that stakeholders view as requiring consideration in respect of public advice and guidance in relation to AT1 capital note issuances.

On 10 September 2024, the Australian Prudential Regulation Authority (APRA) issued a Media Release announcing a proposal for banks to phase out the use of AT1 capital instruments. In light of this announcement, the ATO will place the project regarding potential public advice and guidance on AT1 capital note issuances on hold, pending the outcome of APRA’s proposal.

Veronica Richards, Public Groups
Veronica.Richards@ato.gov.au
Phone 02 9374 2067

To understand what guidance is required to assist taxpayers with completion of the supplementary annual GST return.

In 2024–25, the ATO is introducing a new supplementary annual reporting requirement for Top 100 and Top 1,000 taxpayers who have received a GST assurance rating through an earlier GST review.

The introduction of the return will enable us to make informed decisions about future engagements with taxpayers and enhance our treatment strategies and ability to monitor GST risks that arise in the large market.

• Advisory firms
• GST Stewardship Group
• Large Business Stewardship Group

Targeted consultation provided valuable feedback which is being considered and will be incorporated in the design and implementation of the supplementary annual GST return. For more information about the return, see Supplementary annual GST return.

Virginia Gogan, Public Groups
Virginia.Gogan@ato.gov.au
Phone 03 8632 4643

To seek feedback on the 8 recommendations made from the advance pricing arrangement (APA) program review and consider their appropriateness and if additional changes are required to the APA program.

Targeted consultation is required to assess the current state of the advance pricing arrangement program to determine if additional changes need to be implemented following the report recommendations from the APA program review that was completed 30 June 2023.

• Big 4 accounting firms
• Law firm Minter Ellison

Feedback received from the consultations was invaluable in providing the ATO with a better understanding of the market perceptions of the APA Program, including;

• identifying key issues and areas for improvement from stakeholders in the APA Program, particularly following the implementation of the APA review recommendations
• gathering suggested improvements for the APA Program
• providing an indication of how well the ATO is communicating with taxpayers and tax professionals.

The suggestions are being workshopped with internal stakeholders with a view to identifying which proposals can be implemented. Once internal decision-making is complete, these insights will be considered in the updates to the revised APA Practice Statement Law Advice.

Gloria Cassimats, Public Groups
gloria.cassimatis@ato.gov.au
Phone 07 3213 5266

To seek feedback on the frequency, usefulness, and preferred delivery channel of the ATO statement of account.

The ATO issues statements of account for a variety of reasons using different correspondence channels (paper and electronic) and is reviewing options to reduce the frequency of automated statements of account.

The ATO is consulting with taxpayers and their representatives to obtain feedback on:

• the current frequency, usefulness, and delivery method of automated statements of account
• proposed options to reduce the number of automated statements of account issued.

• Individual taxpayers
• Small business representatives
• Tax agents
• BAS agents

Feedback confirmed a preference for:

• a reduction in the frequency of statements of account
• electronic delivery channels.

These insights will be considered in the scoping and design of enhancements to the statement of account.

Peter Moore, Strategy and Support
Peter.Moore@ato.gov.au
Phone 07 3121 7282

To seek feedback on proposed website guidance and examples relating to inbound related party financing by private groups in the property and construction industry.

The ATO is seeking to publish website guidance relating to inbound related party financing by private groups in the property and construction industry including examples of financing arrangements.

• Private Groups Stewardship Group
• Property and Construction Stakeholder Relationship Forum

Feedback received has been considered and discussed with consultation participants. As a result, the website guidance has been updated to improve the intent and clarity of our public advice and guidance.

Lynette Purcell, Private Wealth
Lynette.Purcell@ato.gov.au
Phone: 08 9268 6091

To seek feedback on the ATO’s proposed view on the appropriate attribution of risk weighted assets to branches for the purposes of applying the thin capitalisation rules for inward investing entities (ADI).

Foreign banks that conduct their banking business in Australia through branch(es) are subject to Australia’s thin capitalisation rules. The rules require a foreign bank to allocate a minimum amount of equity capital to its branch.

Typically, foreign banks use the safe harbour rule to work out their minimum capital amount. The rule is based on ensuring there is sufficient equity capital funding that part of the risk-weighted assets of the bank that is attributable to its branch.

The ATO does not currently have a published view on how to determine that part of the risk-weighted assets attributable to a branch. Feedback will assist in the development of an ATO view on the topic with the aim of providing certainty and a consistent industry approach.

• Foreign banks with branch operations in Australia
• Industry bodies
• Australian Banking Association
• Australian Financial Markets Association
• Tax agents and advisory firms

Feedback received on the Discussion paper – Thin capitalisation – attribution of risk weighted assets to Australian branches of foreign banks, which closed on 31 May 2024, is being considered for incorporation into the development of a draft practical compliance guidance.

Johanna Tang, Public Groups
Johanna.Tang@ato.gov.au
Phone 02 9374 1689

To seek feedback on public advice and guidance needs for the new measure addressing financial advice fees charged under section 99FA of the Superannuation Industry (Supervision) Act 1993.

The government has announced its response to the December 2022 Final Report of the Quality of Advice ReviewExternal Link by releasing an exposure draft: Delivering Better Financial Outcomes Package – reducing red tape and other measures.

Relevantly, Recommendation 7 seeks to clarify the legal basis for superannuation trustees to charge individual members for financial advice from their superannuation account, as well as the associated tax consequences.

Division 2 of the exposure draft makes amendments to the Income Tax Assessment Act 1997 to ensure that financial advice fees charged under section 99FA of the Superannuation Industry (Supervision) Act 1993 are:

• tax-deductible for the fund
• not treated as superannuation benefits of the member.

Such fees are tax deductible to the fund to the extent that the amount charged to the member’s account was not incurred in relation to gaining or producing the fund’s exempt income or non-assessable non-exempt income. The measure is proposed to have retrospective effect.

The ATO is seeking feedback on whether there are priority issues where public advice and guidance is needed to help superannuation industry stakeholders understand how the new law applies to their circumstances.

• Professional associations
• Superannuation industry representatives
• Advisory firms

Consultation provided valuable feedback which will be considered in the preparation of future public advice and guidance materials.

Ernest Lui, Public Groups
ernest.lui@ato.gov.au
Phone 02 9374 2901

To seek feedback on the ATO’s administrative arrangements for accessing a deceased person’s information, particularly where a grant of probate or letters of administration has not been obtained.

In July 2020, the Inspector-General of Taxation published the report Death and Taxes – An investigation into ATO Systems and Processes for dealing with Deceased EstatesExternal Link.

Recommendation 7(b) of the report recommends the ATO seek feedback on its administrative arrangements for accessing a deceased person’s information, particularly where executors or relatives have not obtained a grant of probate or letters of administration, to determine if the administrative arrangements are satisfactory to external stakeholders or if changes are required.

• Industry representatives
• Relevant government agencies
• Members of
  • National Tax Liaison Group
  • Tax Practitioner Stewardship Group

The consultation process identified several proposals for improvements to the administration of deceased estates and the legal framework that supports it.

The administration-related proposals are being workshopped with internal stakeholders with a view to identifying which proposed improvements can be implemented.

The suggestions for improvements that have law implications are being analysed to determine which are suitable for escalating to Treasury for their consideration.

Lloyd Williams, Individuals and Intermediaries
lloyd.williams@ato.gov.au
Phone 02 6216 1030

To explore possible valuation methodologies for both electricity and petrol expenses of a plug-in hybrid electric vehicle (PHEV).

Practical Compliance Guideline PCG 2024/2 Electric vehicle home charging rate – calculating electricity costs when a vehicle is charged at an employee's or individual's home provides a methodology for calculating electric vehicle home charging expenses. However, the guideline does not apply to PHEVs, which use a mix of fuels (electricity and petrol) to power the vehicle.

The ATO will consult with key tax and electric vehicle experts on whether there is a possible valuation methodology, that provides a reasonable basis to split the kilometres driven fuelled by electricity or petrol for a PHEV.

• Fringe Benefits Tax Stakeholder Group
• Federal Chamber of Automotive Industries
• Electric Vehicle Council
• Subject matter industry experts

The purpose of the consultation was to engage subject matter experts and explore whether there is a possible methodology that provides a reasonable basis to split the kilometres driven fuelled by electricity or petrol for a PHEV.

The consultation has confirmed a possible method, which now requires updates to certain public advice and guidance (PAG) products. These updates have recently been noted by the ATO’s PAG Steering Committee (during October) and the ATO is now separately progressing the required updates, which will be consulted on prior to finalisation.

Mark East, Superannuation and Employer Obligations
FBT@ato.gov.au
Phone 02 6058 7124

To understand how, and what types of, ATO macro data could be made available to small businesses to help improve their tax performance.

Small businesses use third-party software, for example accounting software, to manage their business operations, understand and track their financial performance, and meet their tax obligations on time and in full.

The ATO is currently exploring the feasibility of embedding certain macro data and information into small business’ natural digital systems and software. This could include:

• ATO or other government agencies’ benchmark data and benchmark tools
• certain ATO risk rules.

This could assist small businesses and their advisers to:

• identify and understand tax risks and potential processing errors
• make informed decisions on identified tax risks
• compare their financial performance to similar businesses
• build confidence in the ATO’s administration of the tax system.

This is part of Improve small business tax performance, one of the key focus areas in the ATO corporate plan 2023–24. The ATO is collaborating with key stakeholders to build a digital-first tax ecosystem to enable small businesses to better understand their comparative tax performance and identify potential errors or tax risks prior to lodgment. This will help streamline the tax experience and make it easier for small businesses to comply with their obligations.

• Small businesses
• Tax and BAS agents
• Digital service providers
• Financial technology providers
• Tax professional partners
• Small business industry representatives
• Relevant government departments

Feedback has helped the ATO to further understand:

• the need to provide taxpayers with the opportunity to review and correct potential mistakes prior to lodgment
• the need to provide more tax certainty at the right time, removing the need for ATO corrective actions where mistakes have been made
• a potential way to reduce opportunistic or deliberate non-compliance.

The insights captured have supported the creation of a pre-lodgment check concept. This concept aims to provide information to taxpayers where their income tax or activity statement lodgment data does not match or meet ATO expectations. This provides the taxpayer an opportunity to review and correct the information (if necessary) before lodging. The ATO is considering the development of this concept.

Michael Morton, Small Business
Michael.Morton@ato.gov.au
Phone 02 9374 2043

Following stakeholder feedback on PAG topics, prioritisation and form for the new thin capitalisation measures, we will now be consulting on the high priority topics to develop specific PAG products.

On 8 April 2024, the Treasury Laws Amendment (Making Multinationals Pay their Fair Share – Integrity and Transparency) Act 2024 received Royal Assent.

The ATO is proposing to provide guidance setting out the Commissioner of Taxation’s views on, and approach to, key aspects of the proposed new thin capitalisation rules and debt deduction creation rules contained in Schedule 2 of the Act.

Stakeholder feedback is sought on potential topics, prioritisation and the form of any potential public advice and guidance.

It is intended that only the most important issues arising from the new law will be addressed through the preparation of early ATO public advice and guidance.

• Taxpayers
• Tax professional associations
• Industry bodies
• National Tax Liaison Group
• Large Business Stewardship Group
• Private Groups Stewardship Group

Targeted consultation provided valuable feedback which has assisted to identify and develop high priority draft public advice and guidance products. You can keep up to date through the Advice under development program.

Stephen Dodshon, Public Groups
Stephen.Dodshon@ato.gov.au
Phone 02 9374 8791