- Members were interested in the test case litigation program – criteria for selection and funding.
- Members noted that the ATO consultation refresh has resulted in a succinct draft consultation framework and that the challenge for the ATO will be the implementation. Members have been invited to provide further feedback on the draft framework.
- The ATO provided an update on the implementation of the recommendations from the New Legislation Guidance Review and is consulting with external bodies to identify and prioritise matters of the highest importance.
- Members highlighted the importance of a coordinated approach on digital assets and transactions between professional bodies and understanding the right stakeholders to approach.
- Treasury provided members with further details on the Technology investment boost initiative which will be administered by the ATO and an update on the progress of the October Budget focus areas.
Kirsten Fish, Second Commissioner, Law Design and Practice Group, ATO; Peter Godber, The Tax Institute
National Tax Liaison Group (NTLG) co-chair Kirsten Fish welcomed members and, with external co-chair Peter Godber, acknowledged Angela Lee for her contributions to a range of significant discussions during her NTLG tenure. Tax barrister Mia Clarebrough will represent the Law Council of Australia in 2023.
Fiona Knight, Deputy Commissioner, Office of the Chief Tax Counsel, ATO; Justin Byrne, Law Council of Australia
The ATO explained that the test case funding program exists to clarify the law for taxpayers where their issue has wider significance. This involves issues where there is uncertainty about how the law operates or may involve a contentious point of law. Test case funding outlines which cases may be considered for funding and the application process.
- whether the ATO retains a list of issues suitable for test case funding
The ATO advised that it does not have a list of issues. Most cases are taxpayer initiated or are cases that the Commissioner of Taxation wishes to appeal.
- if a test case for ‘home space for work with no office’ should be considered
- if there is a fixed budget for test cases
The ATO confirmed that there is no fixed budget. The ATO actively manages costs involved in all external legal expenditures, of which test case funding forms a part.
- where there is an unfavourable result for the ATO, and the ATO appeals, if these appeals under these circumstances qualify for test case funding
The ATO noted that this would depend upon the circumstances of the case, but test case funding would be likely (except for anti-avoidance cases).
- whether objections are being unactioned as invalid where the objection is not fully formed (for example, as a result of the taxpayer being unsophisticated or unrepresented)
The ATO noted that significant effort is made to work closely with taxpayers to allay their concerns, whether it be to explain decisions or to develop a valid objection case.
- whether education could be of assistance, particularly for small business clients
The ATO confirmed there is work being undertaken to remove technical language that may deter taxpayers from objecting and exercising their rights.
Members noted they would like to understand more about the test case selection process and how referrals are completed, as it is perceived that the selection of cases by the panel lacks transparency. The ATO confirmed that the Test Case Litigation Program page on ato.gov.au provides criteria and expectations, with a link to the test case litigation register which details test case funding decisions and funded case outcomes.
Peter Walmsley, Deputy Chief Tax Counsel, Office of the Chief Tax Counsel, ATO
Over the 2021–22 financial year, General Anti-Avoidance Review Panel (the panel) cases primarily involved international issues, including cross-border debt financing structures, transfer pricing and diverted profits tax matters.
Singular matters dealt with by the panel included:
- treaty shopping
- alienation of income
- dividend stripping
- Division 165 of A New Tax System (Goods and Services Tax) Act 1999
- an employee remuneration trust.
Of those matters brought to the panel in the 2022–23 financial year, approximately half feature international issues, including cross-border debt financing, capital restructures and diverted profits tax.
General advice has been provided about the potential application of Part IVA of the Income Tax Assessment Act 1936 (ITAA 36) to case studies involving multinational tax integrity matters.
The panel also considered arrangements which shared features with those that have been identified in Taxpayer Alert TA 2020/4 Multiple entry consolidated groups avoiding capital gains tax through the transfer of assets to an eligible tier-1 company prior to divestment.
Other panel matters during 2022–23 include:
- an arrangement involving the application of section 177EA of the ITAA 1936 to a restructure purportedly entered to exploit the relevant entity’s tax-exempt status
- arrangements involving the alienation of income, and the application of the main residence exemption in section 118–110 of the Income Tax Assessment Act 1997
- a matter involving section 19 of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 about JobKeeper and paragraph 5(1)(g) of the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020.
Justin Byrne, Law Council of Australia; Peter Walmsley, Deputy Chief Tax Counsel, Office of the Chief Tax Counsel, ATO; Marcus Ryan, Assistant Commissioner Public Groups and International; Fiona Dillon, Chief Tax Counsel, ATO; Emily Webster, Senior Technical Advisor, Office of the Chief Tax Counsel, ATO
The ATO confirmed the Review of process for supporting new tax laws with extrinsic materials and ATO guidance report has been endorsed and is published on ato.gov.au
The ATO is reviewing and updating:
- key procedural documents and protocols supporting the new law design process
- the ATO’s public advice and guidance (PAG) processes.
There is a particular focus on maintaining regular and effective feedback channels between the ATO and Treasury to support the PAG design process. This will ensure that the highest priority issues are being shared with relevant stakeholders to develop quality PAG.
Implementation of the recommendations will involve a new consultation methodology. Members are encouraged to nominate, including the reasons behind the nomination, what they consider to be the highest priority legislative matters to support effective implementation of new measures.
All new law design measures will adopt the recommended approach. For other law design measures already in the pipeline, wherever possible, the ATO will apply the new approach to the guidance being developed. This will be integrated into project plans for all new measures.
Members acknowledged that the ATO’s work with Treasury and PAG is working well. Members further noted that:
- it was suggested the Sharing Economy Reporting Regime legislation could be a good test case
- the PAG needs of the range of Private Wealth businesses are sometimes neglected
- the ATO - Treasury Protocol needs to be updated.
Post-meeting update – The NTLG Secretariat provided members' views on the ATO - Treasury Protocol to relevant internal stakeholders.
Kate Wilson, Assistant Commissioner, Enterprise Strategy and Design, ATO
Members were provided with the draft consultation framework and a paper that outlines the next steps of the ATO’s consultation review and refresh of its consultation process. The draft framework has been written so that an external party outside the ATO can understand the ATO’s consultation principles and purpose. It is the result of a collaborative joint effort with internal stakeholders and the feedback provided from NTLG group members during 2022.
The draft framework contains 6 consultation principles ATO officers should account for during the consultation process and outlines the responsibilities associated with key consultation roles.
The ATO is updating its internal consultation templates and focusing on how to best support staff who will be involved in future consultation work.
Members have been encouraged to consider the draft framework and provide feedback to the ATO.
Members acknowledged that the consultation framework has been simplified and provides clarity. Members suggest the ATO:
- establish topic-based stakeholder registers to assist ATO staff to identify stakeholders
It was noted that professional bodies are happy to share their contacts where is it appropriate.
- include a checkpoint to ensure that the right stakeholders are involved
The ATO noted it needs to be clear if the ATO is consulting with a single member representing a group or the body itself.
- provide clarity surrounding situations where the ATO will not consult
- provide additional explanation in relation to accountability – specify what is expected and who is accountable throughout the consultation process, consider additional learning and development for ATO staff undertaking consultation
- consider attending relevant professional body meetings and subcommittees.
Members noted that the timing of and use of consultation surveys should be approached with care. Members commented that it can be difficult to provide survey recipients a fulsome explanation of all the consultation details in this format.
For confidential consultation matters, members suggested:
- more guidance is needed to ensure sensitive information is treated appropriately
- a standing confidentiality agreement could be used in some circumstances
- consequences for breaching confidentiality should be clearly outlined.
Members reflected on the draft consultation protocol used by external bodies which they provided just prior to the meeting and noted that further work will be done.
Peter Godber, The Tax Institute; Len Hertzman Assistant Commissioner, Office of the Chief Tax Counsel, ATO
An out-of-session conversation was held on 10 November 2022 that discussed potential joint approaches and coordinated efforts to address the issue of digital assets and transactions. Parties that attended included NTLG members, the Board of Taxation, the ATO and Treasury.
NTLG members and the ATO agreed it was important to continue to work jointly and cohesively upon priority issues with specialist assistance where necessary to develop clear and effective guidance.
The Board of Taxation has terms of reference for the Review of the Tax Treatment of Digital Assets and Transactions in Australia Working Group which includes the ATO, Treasury and some NTLG members.
Members asked whether an NTLG sub-committee could be established when guidance is needed. The ATO noted it was not necessary to have a standing sub-committee group, however the ATO may approach NTLG members to assist in sourcing the right stakeholders to prioritise future guidance that may be needed.
Members observed that there is currently no guidance for taxpayers on capital gains tax (CGT) losses associated with crypto exchanges that have been placed into administration, such as FTX Trading Ltd. The ATO confirmed this will be discussed separately with internal stakeholders, with an update to be provided to NTLG members.
Post-meeting update – The ATO is considering a form of website guidance to address the issue of CGT losses arising from crypto asset exchanges placed in administration.
We have drafted updated web guidance and it is going through the necessary review and approval processes within Client Engagement Group. We expect updates to Loss or theft of crypto assets to be published by mid-March.
Laura Berger-Thomson, Acting Deputy Secretary, Revenue, Small Business and Housing Group, Treasury
Treasury provided the following updates in relation to the October budget and progress of legislation.
- The Government election commitments: Multinational tax integrity and enhanced tax transparency (PDF 516KB)This link will download a file package is progressing. Treasury will consult on the explanatory materials in the first half of 2023.
- ATO compliance programs have been allocated additional funding.
- The Sharing Economy Reporting Regime received royal assent on 12 December 2022.
- Submissions for consultation on the Improving the integrity of off-market share buy-backsExternal Link measure closed on 9 December 2022.
Treasury gave an update on the status of announced but unenacted measures of the former government, noting that 12 announced but unenacted measures have been legislated and a further 10 are before parliament. Decisions taken on 12 tax and superannuation announced but unenacted measures were announced in the 2022–23 October Budget, with 9 measures reversed and date changes made to a further 3 measures. Members expressed some concern about the decision not to proceed with the 2016–17 Budget measure for a redesign of the Taxation of Financial ArrangementsExternal Link provisions. In response to a question from members, Treasury undertook to provide further information if available about the rationale behind the status of the recommendation regarding the Cash Payment LimitExternal Link which originated as part of the Black Economy Package.
Members asked for an update on wellbeing budgeting. Treasury noted the Measuring What Matters statement in the October Budget and indicated that Treasury continues to work with the government on how to track broader measures of progress and quality of life, as a complement to traditional macroeconomic measures.
Treasury gave an update on the tax treaty program and pointed members to the public consultation on the expansion to Australia’s tax treaty program. Members noted the significant work going on in this area and suggested that there would be benefit from public messaging that clearly explains how tax treaties support free trade agreements. Members also requested that a tax treaty with Hong Kong be progressed.
In response to recent high-profile data breaches, members queried whether the ATO has appropriate security measures in place relating to data kept by private Australian companies (for the purpose of reporting tax).
NTLG 1911/1 – Establishment of NTLG sub-group to consider compliance costs
Members noted that reducing compliance costs remains a relevant topical issue for the NTLG and its associated network of organisations. Members expressed that they would still like the opportunity to provide tailored feedback according to client segment.
Members noted the methodology for externals is not fit for purpose. Feedback was provided to Small Business Assistant Commissioner Andrew Watson on 17 November 2022. Members questioned whether this could be a digital efficiency benefit instead.
Members suggested that compliance costs should be given due consideration when new laws are introduced and questioned whether an additional question for ATO consultation leads about compliance costs could be incorporated into the Consultation framework.
Members were of the view that the topic of compliance costs should not be an action item but an agenda item as it is complex and diverse.
The ATO noted that whilst consideration is given to compliance costs when implementing a new measure, this could be undertaken in a more visible and overt manner. It was acknowledged that the costs of compliance can be difficult to ascertain when Treasury is forming new policy.
The ATO further noted that it is much more difficult to include large business strategy compliance costs into the corporate plan. This is unlike Individual compliance costs, which are included.
NTLG 2204/2 – Digital assets and Transactions
Members held an out of session conversation with the ATO, Board of Taxation and Treasury on 14 November 2022.
NTLG 2204/1 – Measuring the effectiveness of Public Advice and Guidance
Members noted it had been a challenge to measure PAG effectiveness. For now, members accepted the indicators previously provided by the ATO.
Post-meeting update – On 20 December, members provided their collective feedback to the ATO.
NTLG 2208/2 – Consultation Refresh
Members were provided with an updated draft consultation framework and have been requested to provide their feedback for the ATO to consider.
NTLG 2208/1 – Consultation Refresh
Members provided the ATO with a draft external consultation protocol.
NTLG 2210/1 – New Measure – Technology Investment BoostExternal Link
Treasury confirmed that the ATO will administer this measure once it has been passed.
Members noted they are keen to receive further guidance from the ATO. Members confirmed the need for further clarity surrounding the term ‘digital uptake’ used in the Explanatory Memorandum.
Members noted that:
- the transfer of the responsibilities of the Consultation Steering Group to the NTLG has been beneficial
- the expansion of the number of meetings to 6 to cater for the additional responsibilities has been adequate
- they have provided insightful feedback on the development of the ATO Consultation framework
- discussions have aligned to the purpose and scope in the NTLG charter
- papers and agendas are becoming increasingly focused and engaging
- there should be a focus on improved administration and timeliness of NTLG papers face-to-face meetings have been working well and allow for sharing of knowledge and insights.
The ATO and members discussed the development of a forward work program noting that the focus may include:
- matters of significance to shaping or operation of the tax and super systems (law, policy, administrative and/or operational) – future meetings can be based on a theme relevant to the professional bodies
- member-led discussions on a topic of interest (for example, an emerging area of risk for the tax system)
- a guest speaker from the ATO or another agency.
Specific topics identified for consideration include:
- refreshed Taxpayer Charter
- ATO Digital strategy
- compliance costs
- connections with Stewardship groups without confusing the purpose of each group with the NTLG focus
- taxpayer segmentation strategy
- Australian Business Registry Systems and Modernising business registers
- ATO recruitment strategy for specialised skills.
Members collectively expressed their appreciation towards Treasury officials, the NTLG Secretariat and Professional Bodies’ coordinator Julie Abdalla.
Kirsten Fish (Co-chair), Law Design and Practice
Dominic Gilbert, Office of the Chief Tax Counsel
Emily Webster, Office of the Chief Tax Counsel
Chartered Accountants Australia and New Zealand
Chartered Accountants Australia and New Zealand
Corporate Tax Association
Michelle de Niese
Institute of Public Accountants
Law Council of Australia
The Tax Institute
Peter Godber (Co-chair)
The Tax Institute Professional Bodies Coordinator
Jeremy Hirschhorn, Client Engagement Group
Faith Hughes, Office of the Chief Tax Counsel
Martin Pook, Office of the Chief Tax Counsel
Robyn Theacos (Secretariat), Enterprise Strategy and Design