- Members’ request for the ATO to consider how COVID has changed practicalities of commercial operation and the implications of that for the ATO’s approach to the tax treatment of Permanent Establishments. In particular, to what extent can our approach and guidance be made more contemporary within the current law, and to what extent is consideration of policy change warranted.
- Treasury update, including the changes to the Offshore Banking Unit regime announced by the Government on 12 March 2021 and the status of the OECD’s Pillar 1 and Pillar 2.
- Treasury’s approach to submissions (including pre-Federal Budget submissions) and post-submission engagement with stakeholders. Treasury to consider appropriate ways to engage with the National Tax Liaison Group (NTLG).
- The Government’s proposal to expand education deductions. Members noted their support for the proposal that it could encourage individuals to retrain and reskill.
- Next steps for the Review of new legislation guidance material being conducted jointly between Treasury and the ATO.
- The development of a Legal Professional Privilege protocol by the ATO that is proposed to be distributed for broader consultation in May 2021.
- Members commended the ATO on its work in the administration of the JobKeeper scheme.
- The ATO’s post COVID-19 approach to debt, lodgment and compliance activities, overview on the status of stimulus programs and progress on ATO strategic initiatives for:
- improving small business tax performance
- optimising interactions through self-service
- unlocking our data potential.
Kirsten Fish, Acting Second Commissioner, Law Design and Practice Group, ATO and Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand
NTLG Co-chair Kirsten Fish welcomed members and advised that Sam Reinhardt, First Assistant Secretary, Corporate and International Tax Division, Treasury has joined the NTLG. Kirsten noted that Clint Harding, representative for the Law Council of Australia, and Paul McCullough, First Assistant Secretary, Individuals and Indirect Tax Division, Treasury, are stepping down from the NTLG. Kirsten thanked Clint Harding and Paul McCullough for their contributions to the NTLG and wished them all the very best for the future.
NTLG Co-Chair Grant Wardell-Johnson commented that the COVID environment has significantly changed the way we live and work accelerating trends that were previously occurring. The ATO has responded swiftly in many ways. This is impacting globally and causing issues for the mobility of staff internationally and on Permanent Establishments for companies. Grant noted that existing rules and requirements may be outdated now that roles are globally and regionally based rather than country based. Grant suggested that existing tax treaties are based on outdated models and that there may be a need for the ATO to consider to what extent our approach and guidance can be made more contemporary within the current law, and to what extent consideration of policy change is warranted.
Maryanne Mrakovcic, Deputy Secretary, Revenue Group, Treasury
- The budget is an increasing area of focus with additional resources being dedicated to the work.
- On 12 March 2021 the Australian Government announced changes to the Offshore Banking Unit Regime removing the preferential tax rate and closing the regime to new entrants. On 17 March 2021, the Government introduced into Parliament the Treasury Laws Amendment (2021 Measures No 2) Bill 2021External Link to abolish the Offshore Banking Unit (OBU) regime.
- Since the 26 November 2020 NTLG meeting three tax measures have passed Parliament and have received Royal Assent.
- Consultations have been undertaken on Requiring Deductible Gift Recipients (DGRs) to Register as CharitiesExternal Link and on Education and training expense deductions for individuals.External Link
- There is one tax measure before the House of Representatives with no tax measures awaiting Royal Assent.
Members asked about the priority of the corporate residency legislation. Treasury advised that the legislation for corporate residency is being drafted.
Members noted that a submission had been made to Treasury to consider applying the approach for the full expensing measure to small entities. Treasury advised this is currently being considered.
OECD Pillar 1 and Pillar 2
Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; and Maryanne Mrakovcic, Deputy Secretary, Revenue Group, Treasury
Treasury provided an update on OECD Pillar 1 and Pillar 2 noting that the US approach to negotiations remains a key issue. However, it is hoped that with the new US administration there will be some clarity on this issue.
Members questioned if timeframes for implementation of the new rules had been considered. Treasury advised that timeframes will be set with recognition of the complexity of the rules.
Members noted that the OECD’s website included submissions regarding the simplification of proposals. Treasury noted that there may be some scope for simplification as part of the process of reaching an agreement.
Treasury responses to submissions and post-submission engagement with stakeholders
Grant Wardell-Johnson, Chartered Accountants Australia and New Zealand; Peter Godber, The Tax Institute; Sam Reinhardt, First Assistant Secretary, Corporate and International Tax Division, Treasury; and Maryanne Mrakovcic, Deputy Secretary, Revenue Group, Treasury
Members raised this item to discuss opportunities for members to engage with Treasury in relation to submissions and for Treasury to provide an update on the steps being taken in response to the observations in the Retirement Income Review.
Members noted their concerns with the lack of feedback on submissions provided to Treasury. Members wanted to understand the processes of submissions and suggested that a pre-budget meeting with the professional bodies would be valuable and could help them improve the effectiveness of their submissions. Members also noted that post-budget it would be helpful to potentially have a similar forum for tax measures where experts in Treasury can discuss key issues that should be considered.
Treasury noted they have received approximately 650 submissions for consideration in relation to the budget this year. The submissions are reviewed with key issues summarised and provided to the Treasurer’s office.
Treasury took on board the suggestions of pre-budget and post-budget discussions with the NTLG. Treasury noted that due to the volume of submissions it would be difficult to follow-up and engage on all submissions, but consideration can be given on what steps could be taken.
Retirement Income Review
Treasury noted that the Retirement Income Review report is very comprehensive providing a snapshot of the current superannuation system. Treasury is currently deliberating the next steps noting the complexity of the system and the issues raised. There should be future opportunities for consultation on the Government’s response.
Proposal to expand education deductions
Tony Greco, Institute of Public Accountants; Elinor Kasapidis, CPA Australia; Angela Lee, Law Council of Australia; Paul McCullough, First Assistant Secretary, Individuals and Indirect Tax Division, Treasury
Members wanted to understand the policy design for this proposal while supporting the plan to encourage individuals to retrain and reskill. Members were interested in how the approach to this policy is progressing and whether the tax system would be used to deliver the measure. Members noted there is a significant number of elements to be considered and that they were willing to assist in the decisions to be made regarding these elements.
Treasury noted that a consultation paperExternal Link was released last year, and additional roundtable discussions were held in early 2021. A summary of the consultation feedback will be provided to the Treasurer’s office for consideration. There were no universal views on whether the tax system would be the appropriate avenue to deliver this measure.
Review of new legislation guidance material
Michelle de Niese, Corporate Tax Association; Sam Reinhardt, First Assistant Secretary, Corporate and International Tax Division, Treasury; Andrew Orme, Deputy Chief Tax Counsel, Public Advice and Guidance, ATO; and Louise Clarke, Deputy Commissioner, Policy Analysis and Legislation
Members have previously raised concerns about the development of guidance materials for new legislation and guidance that resulted in action item NTLG 1903/3. A review is being conducted jointly by Treasury and the ATO with the Terms of Reference provided to members for their feedback. Members have subsequently provided their feedback for consideration.
A meeting between the ATO and Treasury is planned for the end of March to develop a work program which we will update members on at the next NTLG meeting. It is expected that consultation papers on each type of guidance material outlining its objective will be produced.
Treasury noted that a separate process for Explanatory Memoranda is underway which has a broader focus. The focus will be on each type of guidance rather than a broad consultation framework. It will not cover consultation on pre-policy considerations.
Members asked if the existing Treasury and ATO protocol will be reviewed. Andrew indicated that the review was not looking at the protocol, but it may touch on how aspects of the protocol work in practice.
Legal Professional Privilege
Clint Harding, Law Council of Australia; Angela Lee, Law Council of Australia; Jerome Tse, The Tax Institute; Elinor Kasapidis, CPA Australia; Rebecca Saint, Deputy Commissioner, Public Groups, ATO; Belinda Darling, Assistant Commissioner Public Groups International, ATO; Fiona Knight, Acting Deputy Chief Tax Counsel, Tax Counsel Network, ATO; and Danielle Ellershaw, Assistant Commissioner, Tax Counsel Network, ATO
Members raised this item to discuss the Legal Professional Privilege protocol. The ATO’s approach to Legal Professional Privilege (LPP) was previously discussed at the 30 November 2018 NTLG meeting. Following the meeting Jeremy Hirschhorn, Second Commissioner, Client Engagement, provided supplementary information in relation to the ATO’s approach to advisers to the large market, the role of Legal Professional Privilege, promoter penalty legislation and other provisions. This information was published with the key messages on the ATO website.
The ATO has developed an LPP protocol which is a practical guide addressing issues of concern previously noted by the ATO. The protocol is focused on the situation where the taxpayer has received a formal notice from the ATO. The protocol outlines best practice approaches, how the taxpayer can engage with the ATO and what to expect from the ATO. The best practice approach has three core elements:
- assessment of the engagement subject to possible LPP setting out a differentiated approach depending on the proposed risk level
- for higher risk situations, additional particulars required to obtain ATO confidence around those claims
- a certification process – asking clients and advisors to certify best practice approach was followed.
Following the protocol is voluntary.
Consultation has been undertaken with the feedback generally positive and constructive with focus areas being:
- the proposed approach for different types of engagement with some suggestions provided
- certification – whether it is necessary and who can provide the certification
- independence – does the LPP claim need to be considered by a person independent to the engagement.
The ATO is refining the protocol considering the feedback received.
It is proposed that the LPP protocol will be distributed for broader consultation in May 2021. Further updates will be provided at future NTLG meetings.
Post COVID-19 approach
Peter Godber, The Tax Institute; Jerome Tse, The Tax Institute; Elinor Kasapidis, CPA Australia; Jeremy Hirschhorn, Grant Brodie, Deputy Commissioner, Debt and Lodgment, ATO
The ATO provided an overview on the status of stimulus programs and the ATO’s transition back to usual compliance approaches.
Outbound interactions with taxpayers in relation to debt and lodgment activities were suspended in November 2019 due to the bushfires and more broadly in response to COVID-19 in March 2020. Recommenced with ‘Help and Assist’ approach in July 2020 helping taxpayers to get back on track and to meet their obligations.
From 1 April 2021 the imposition of failure to lodge penalties will recommence. Where appropriate the ATO will start to take firmer action including legal action.
The ATO will generally take firmer or stronger action where:
- we have sufficiently attempted to contact and engage the client to resolve through help and assistance
- reasonable time has passed to allow the taxpayer to reach out for support if they need it, either with us directly or with their tax professional
- we have provided the taxpayer with advance warning – the aim being to encourage the taxpayer to engage with us first, which is our preferred alternative as opposed to pursuing other actions.
The ATO noted that general audit activities have recommenced where they had been previously suspended and there will be an increase in activity across all markets.
ATO Corporate Plan
Elinor Kasapidis, CPA Australia; Jerome Tse, The Tax Institute; Deborah Jenkins, Deputy Commissioner, Small Business, ATO; Emma Rosenzweig, Deputy Commissioner, Strategy and Support, ATO; and Marek Rucinski, Deputy Commissioner, Smarter Data Program, ATO
Members requested an update on three of the ATO’s strategic initiatives including an overview of the initiatives and the proposed consultation plans.
Improve Small Business Tax Performance
The aim of this initiative is to create an environment that improves the tax performance of small businesses (reducing the tax gap) – through the use of data and digital. The initiative is focussed on exploring potential administrative and technology changes rather than policy or legislative change. The definition of a small business is a business with a turnover of less than $10 million. There are approximately 4.2 million entities in this category.
The ATO will investigate how it can:
- improve the use of and create value from a range of data
- integrate obligations into existing small business processes
- leverage its capabilities in building partnerships and designing solutions that improve data viability and usage.
The ATO reviewed small business attributes to understand which small businesses this initiative should focus its efforts on. Based on that information, the ATO has decided to initially focus on small business companies who employ. In the next few months, the ATO will work with digital service providers and other key stakeholders using a co-creation approach to finalise problem statements and consider options to address them, noting that the implementation of any changes will take time.
Optimising Interactions through self-service
The aim of this initiative is to have a deliberate and coordinated focus to the way the ATO interacts with clients, both taxpayers and their representatives. Primarily, this will mean maturing the way it delivers services so they better support clients and their agents to transact and self-serve online.
There has been a significant uptake of digital services in the last 12 months with people working and interacting in new ways online. The ATO wants to build on this momentum to ensure it is delivering the right services through the right channel and making deliberate decisions about preferred channels and safety net options.
The aim is to provide better self-service options to enable ATO staff to be more available to work with clients and agents on higher complexity issues. Self-service options are for both taxpayers and agents and there is no goal to shift people to become self-preparers.
There are three themes the ATO will focus on:
- improving ATO content across all platforms to ensure information supports taxpayers
- improving its own digital ecosystem
- investing in helping clients and their representatives to adopt digital services and be successful in using them.
It is expected the ATO will engage with the tax profession to understand the impact this will have on their business practices to ensure it is considered as part of the design process and that the solutions are fit for purpose.
Unlock our data potential
The aim of this initiative is to improve and refine the way the ATO collects, manages, shares and uses data to build confidence and drive actions that maximise value for the ATO and the community. The ATO will build on existing capabilities, streamlining and industrialising its capabilities.
There is a focus on simplification; that is, using data to make experiences simpler for clients and to consider how data from existing infrastructure can be used to streamline interactions with partners who supply data, avoiding an additional data collection impost.
The ATO has moved to the streaming of some data on a continual basis rather than receiving it periodically. The ATO will investigate how it absorbs and uses the data – increasing the use of robotics to allow humans to focus on higher order issues.
The ATO has developed a Data Ethics Framework that is expected to be published later this year.
Australian National Audit Office (ANAO) processes and the ATO’s administration of the JobKeeper scheme
Tony Greco, Institute of Public Accountants; James O’Halloran, Deputy Commissioner, Economic Stimulus Branch, ATO; and Jane Mitchell, Assistant Commissioner, ATO Corporate, ATO
Members raised this item to offer their collective support to the ATO in relation to the ANAO’s audit of the effectiveness of the ATO’s administration of the JobKeeper schemeExternal Link. Members commended the ATO’s work regarding the JobKeeper scheme.
The ATO noted it is not able to discuss the progress or status of in-progress ANAO performance audits.
The ATO provided members with a high level overview of ANAO audit processes noting that the ANAO flags potential audits on their website and later formally determines whether to commence an audit review. The Administration of the JobKeeper Scheme audit was formalised as an audit in January 2021, having been publicly flagged as a potential audit by the ANAO in September 2020.
The ANAO generally undertakes two to three audits per year of the ATO. The topics are at the ANAO’s discretion and could involve:
- monitoring implementation of policies in accordance with policy intent
- assessment of the effectiveness and efficiency of implementation
- consideration of governance frameworks, for example risk assessment and mitigation approaches, budgeting and expenditure frameworks
- consideration of other issues, such as those highlighted in the media, to the extent that these are related to administration, as distinct from issues with the policy itself.
Once an audit commences, the process usually involves fieldwork where the ANAO gathers information through a combination of interviews with key stakeholders and the collection of documentary evidence. The ATO is given a first draft of the report to review and provide feedback. A second draft is also made available and will incorporate the ATO’s response to recommendations. The report is then provided to the Auditor-General for approval, is tabled in Parliament and published to the ANAO’s website. The process from commencement to tabling can take six to ten months.
The ATO noted that in a previous ANAO review report released on 14 December 2020 on the ATO's management of risks related to the rapid implementation of COVID-19 economic response measuresExternal Link, the ANAO found that the ATO had been effective and had no recommendations, reflecting positively on how effectively the ATO managed the risks.
The scope of the current JobKeeper audit is to examine whether the ATO has:
- effectively administered the rules for the JobKeeper scheme
- implemented effective measures to protect the integrity of JobKeeper payments
- effectively monitored and reported on the operational performance of the scheme.
The ANAO welcomes the views and experiences of NTLG members.
Post-meeting update – The ANAO will hold a feedback session with NTLG members (or their nominated representatives) to discuss their experience of the ATO’s implementation of the JobKeeper measure.
JobMaker Hiring Credit
James O’Halloran, Deputy Commissioner, Economic Stimulus Branch, ATO
The ATO noted that it is focused on informing and encouraging the community of the availability of the scheme. A variety of approaches are being used with many industry associations and trade media being engaged. The ATO would appreciate if members could encourage uptake of the scheme. The first claim period ends 30 April 2021 and the ATO has no discretion to pay a claim that is lodged late.
Members noted the very specific criteria can be a barrier to businesses taking up the program.
Single Touch Payroll - Phase 2
James O’Halloran, Deputy Commissioner, Economic Stimulus Branch, ATO
The ATO noted that Single Touch Payroll Phase 2 requires employers to provide more details about their employees. The mandatory start date for reporting has been extended to 1 January 2022. The ATO is conducting a webinar at the end of March 2021 and is working on two key documents – a fact sheet and a detailed employer manual.
Post meeting update – On 22 March an email was sent to NTLG members providing a link to the high-level information and factsheet that have been published on ato.gov.au regarding Expanding Single Touch Payroll (Phase 2).
NTLG action items update
Kirsten Fish, Acting Second Commissioner, Law Design and Practice, ATO
Kirsten provided a status update on open action items:
- NTLG 1903/3 – Consultation arrangements for new legislation and related guidance
This action item was discussed as an agenda item at the NTLG meeting. It was agreed this action item could be closed.
- NTLG 1911/1 – Establishment of NTLG sub-group to consider compliance costs
On 3 March 2021 NTLG members provided a proposal for the establishment of a series of indices on compliance costs for the ATO’s consideration. The discussion of this action item is deferred to the NTLG meeting on 7 June 2021 to allow enough time for the ATO to consider the paper prior to a discussion.
Kirsten Fish (Co-chair), Law Design and Practice
Jeremy Hirschhorn, Client Engagement
Jessica Chiu, Tax Counsel Network
Robyn Theacos (Secretariat), Enterprise Strategy and Design
Chartered Accountants Australia and New Zealand
Grant Wardell-Johnson (Co-chair)
Chartered Accountants Australia and New Zealand
Corporate Tax Association
Michelle de Niese
Institute of Public Accountants
Law Council of Australia
Law Council of Australia
The Tax Institute
The Tax Institute
The Tax Institute Professional Bodies Coordinator