3. Tax Time update and future directions
This was a jointly presented agenda item.
David Leslie from ATO Corporate provided an overview of some new products available for Tax Time 2013.
He noted that in keeping with community expectations, there is an increased government focus on making services available online. The ATO has explored what it might deliver as part of Tax Time to support this direction, given that individuals are a key market.
Some key initiatives for Tax Time 2013 include:
- a mobile application for smart phone devices or tablets, ATO Tax 2013. This provides key information and reduces complexity for interactions that don’t require individuals to authenticate themselves. For example, it includes information about lodging tax returns, answers frequently asked questions and allows monitoring of the progress of tax returns. It is available free from the Apple Appstore and Google Play and has been downloaded more than 100,000 times.
It was recently rated the Number 1 finance app and was Number 12 among free apps, demonstrating that there is a level of demand which is expected to increase over time. The app will continue to evolve, and the ATO is also exploring the development of a business app.
- an online Taxtime Magazine which provides an interactive online alternative to paper tax return instructions. It is available from app stores and Google Play and includes:
- what’s new
- video clips and top tips
- easy to understand tax instructions, and
- links to tools and calculators to help in the preparation of a tax return.
Its uptake has been reasonable to date, given the first year typically involves considerable challenges around the initial design, and that it is intending to do some promotion of the product shortly using social media.
- a new-look ATO website, which makes it easier for people to find what they’re looking for. Compared to the ATO’s former website, key changes include:
- the large number of entry pages that previously existed have been significantly reduced
- the home page shows the top five tasks that people have been looking for, and these can change cyclically according to the time of year and particular events.
- the right hand navigation now offers tools, calculators, forms and publications that are contextual to where the user is searching, while the left hand side navigation helps people move around within a webpage
- considerable work has gone into rewriting pages in plain English to support getting people to where they want to go
- paper products are being migrated to online, with a forward focus on both writing for and delivering products online
- there is now an option for individuals to register for authenticated services, a first step towards being able to transact electronically.
David demonstrated the features and operation of the Taxtime magazine and tax app at the meeting. In concluding, he advised that the ATO is on a continuous path of improvement and that it would continue to evolve both its website and the online products and services it offers.
Elaine Anthony (Chair) provided an overview of how Tax Time 2013 is progressing.
- There have been around 1 million downloads of e-tax to date this Tax Time.
11% of these have been for the Mac version of e-tax that is now available and which has received generally positive social media commentary.
- ATO processing is going smoothly
- There have been some issues relating to transitioning paper lodgers to online which were the subject of some negative community reaction.
The ATO had reviewed making paper instructions available through newsagents as in past years the ATO had printed a large number of instructions, and the majority of these were not lodged with the ATO. Anecdotal information suggested that many people obtain paper instructions and forms as a contingency, but actually lodged online.
This Tax Time, the ATO moved to asking people to order their paper instructions and forms directly from the ATO rather than obtaining them at newsagents. By doing this, the ATO is seeking to better understand the numbers and the demographics of paper lodgers – this will inform the future strategy for influencing people to lodge online, but providing a paper option for those who need it.
The ATO produced a postcard for newsagents to use to promote its digital tax magazine and advise how people could order paper tax return instructions. However it underestimated the demand for paper products that this would generate in its Call Centres. Resources have been increased in Call Centres and improvements were made to how calls about ordering paper tax return instructions are managed.
- Changes in Tax Time 2013
- people with business and professional items can only lodge online. There are a very small proportion of lodgers impacted, some of whom do not need to lodge. The ATO advised relevant lodgers of this change in writing ahead of Tax Time. There have been few complaints, and where people are not able to lodge electronically, the ATO is offering alternative online lodgment options through its ATO Shopfronts and Tax Help.
- the supplement instructions are now only available online. Again, relatively small numbers of lodgers are impacted. There have been some community reactions to this and the ATO is working through these.
Elaine commented that 2013 is the ATO’s first year of directing some segments of lodgers to online, and the ATO is working with affected taxpayers to make sure they are not disadvantaged.
While the ATO recognises its communication about these changes was not as good as it might have been, it is endeavouring to mitigate the difficulties and will also be bringing forward its usual communication campaign about the end of Tax Time this year and using it to encourage people who need paper products to order them early.
Farisha Ali from Small Business/Individual Taxpayers provided an update on prefillling in Tax Time 2013.
She advised that more than 600 million transactions are reported to the ATO annually from third party sources such as banks, share registries, employers. These are used by the ATO for both pre-filling of tax returns and compliance.
A key challenge for the ATO is to bring this data into the ATO as early as possible for pre-filling, given the statutory due dates for third parties to provide this is much later than the commencement of Tax Time. Using relationship managers, the ATO works with data providers to receive data as early as possible and this has been quite successful.
As at 28 July 2013, more than 250 million data items were available for pre-filling, with 3.3 million download requests made through e-tax and the tax agent portal.
Despite being successful in obtaining data from private health insurance providers early, there have been some difficulties with the ATO making this data available due to data quality and download rates, therefore it is not expected to be ready for prefillling until the second week of August 2013. In the meantime, people can register their email or mobile details with the ATO so they can be notified that their data is available. They can also lodge their tax return based on the statement they received from their fund. The ATO has updated its Call Centre scripting to reflect this.
- In light of some difficulties outlined by the ATO relating to ordering paper products, it was queried whether the ATO had any means of determining if there were less lodgments than it expected. The ATO commented that due to the increase in tax thresholds from 1 Jul y 2012, less people are expected to lodge, however it will be reviewing lodgments of paper lodgers that it does expect to receive. There has also been some increase in the number of complaints by people who have mistakenly used commercial online tax return lodgment sites instead of e-tax, which may indicate people are using e-tax for the first time this year.
- A member tabled a paper at the meeting summarising some impacts of withdrawing paper instructions from newsagents. While accepting ATO comments at the meeting about the context behind this and the ATO’s desire to better understand paper lodgers, it was hoped that the ATO would consider the learnings for Tax Time 2014.
The ATO advised of its willingness to work with the community to make this process as easy as possible and that it will need to review the paper lodgments received in 2013 (this is expected to reduce). It also highlighted that the processing turnaround for online lodgments was significantly faster as the inadvertent errors associated with paper lodgments can cause long delays, and the prefillling option is very handy for people.
- There was discussion about the demographics of paper lodgers, the ATO advising that less than 6% of all lodgers use paper. It was postulated that older groups were more likely to lodge via paper, the ATO advising there was no one single category and that many older Australians lodge online using the Tax Help program.
- It was suggested that the ATO promote the processing standards for online lodgment Vs paper, particularly for those who are entitled to refunds.
The ATO encourages further feedback about Tax Time, which can be provided via the Secretariat.
4. 2013 Federal budget overview
Craig Dunn from the ATO’s Small Business/Individual Taxpayers area attended the meeting to provide an overview of measures announced in the 2013 Federal Budget that may potentially impact on individual taxpayers. He spoke about the following new measures.
- Increase in the Medicare levy
The Medicare levy will increase by 0.5% from 1 July 2014 to provide funding for DisabilityCare Australia.
This will be dedicated to DisabilityCare Australia to provide certainty to Australians with a disability, their families and their carers.
- Phase out of the net medical expenses tax offset
Only taxpayers who claimed the net medical expenses tax offset for the 2012-13 income year will continue to be eligible to claim for the 2013-14 income year if they have eligible out of pocket medical expenses above the relevant thresholds.
Similarly, those who claim the offset in 2013-14 will continue to be eligible in 2014-15.
Taxpayers who have medical expenses relating to disability aids, attendant care or aged care expenses are exempt from this two year phase out and do not have to have previously claimed the offset to be eligible. For these taxpayer groups, the offset will cease to apply from 1 July 2019 when DisabilityCare Australia is fully operational and aged care reforms have been in place for several years.
- Reforms to work-related self-education expenses
It is proposed to better target work-related self-education expense deductions by capping these at $2,000 from 1 July 2014.
Deductible self-education expenses are costs incurred in undertaking a course of study or other education activity, where these expenses are incurred in the production of the taxpayer’s current assessable income.
The Treasury released a consultation paper inviting submissions on the proposal, which is now closed.
- Removing the discounts applying to up-front and voluntary payments made under the Higher Education Loan Program from 1 July 2014
The following discounts will be removed:
- the 10% discount available to students electing to pay their student contribution up-front, and
- the 5% bonus on voluntary payments to the ATO of $500 or more.
- Conversion of Student Start-up Scholarships to income contingent loans from 1 January 2014.
The current Student Start-up Scholarships program will be converted into an income contingent loan program, and offered to full-time higher education students in receipt of Youth Allowance, Austudy or ABSTUDY.
The measure will only apply to new recipients of Youth Allowance, Austudy and ABSTUDY from 1 January 2014.
Current recipients and new recipients up to 31 December 2013 will continue to receive the scholarships while they remain on their income support payments.
- Support for farmers – Farm Finance
From 1 July 2014, a package of measures will be available to provide support and assistance to farmers experiencing acute levels of debt and help improve their ongoing financial resilience.
Farm Finance includes:
- changes to the Farm Management Deposit scheme to allow Farm Management Deposit owners to consolidate existing accounts that have been held for longer than 12 months without triggering tax liabilities
- increasing the non-primary production threshold for Farm Management Deposits from $65,000 to $100,000.
There was discussion about the potential for increased complexity for people who receive disability funding – for example, determining the tax implications where this funding is used to employ a carer or to purchase disability aids.
The ATO commented that funding received under National Disability Insurance Scheme is exempt from income tax, and that when it is used for the purchase of approved supplies it is GST exempt. Further information is available at www.disabilitycareaustralia.gov.auExternal Link.
However where funds are used to employ a carer, there may be pay as you go withholding and superannuation guarantee obligations.
5. Treasury consultation paper on Lost and Unclaimed Superannuation money
Karen Wantling from the ATO’s Superannuation area led a discussion about lost and unclaimed superannuation money.
On 7 June 2013 the Government released a discussion paperExternal Link on lost and unclaimed superannuation money, setting out additional initiatives that could facilitate reuniting members with their lost super accounts. It sought views on further opportunities to enhance the existing suite of strategies, and new strategies, to reduce the number of lost and unclaimed super accounts.
Members were provided with a link to this paper Unclaimed Superannuation Money, as pre-reading and were invited to provide feedback at the meeting.
Karen outlined some initiatives the ATO is currently implementing, including:
- enhancements to its SuperSeeker tool to include active super accounts, lost super held by funds, and any ATO held super, and to consolidate other super accounts into the preferred fund
- making proactive payments of unclaimed super amounts less than $200
- providing funds with updated addresses for lost members so they can re-establish contact
- a new employee enrolment process so new employees can consider account consolidation or using an existing super account when they commence new employment.
The definition of ‘lost super’ was queried. Karen advised:
- The super provider never had an address for the member; or
- Two written communications or, if the trustee so chooses, on written communication has been sent by the provider to the member’s last known address and returned unclaimed; and
- No contributions have been received in the last 12 months.
- Member has been a member for more than two years
- The member joined the fund as a standard employer-sponsored member, and
- The superannuation provider has not received a contribution or rollover in respect of the member in the last five years.
A member will not be reported as lost if within the last two years of the member’s membership the trustee of the fund has verified that the member’s address is correct and has no reason to believe that the address is now incorrect, or the member is permanently excluded from being a lost member.
Lost super accounts remain with the super fund but go onto their Lost Register which is reported to the ATO annually. The ATO conducts matching activities, and through SuperSeeker endeavours to re-engage with the owners of lost super. Unclaimed amounts under $200 are transferred to the ATO.
A member queried the feasibility of linking unclaimed super and the larger of multiple accounts. Karen commented that in the past, inactive accounts would not be reported to the ATO but this has changed this year. Super funds are now required to report inactive super accounts to the ATO, and the ATO will be promoting messages to encourage people to re-check SuperSeeker for any inactive accounts that may have been recently reported.
There was a question about what information is required to search for lost super. The ATO advised a tax file number, name and date of birth were required to search SuperSeeker quick search. If monies are located individuals will be required to go through the full authentication process which also requires a number of shared secret details to log on or register, such as previous notice of assessment, bank account information or other income details from your last income tax return.
The issue of agents who provide a fee or percentage-based service to assist claimants with lost money was raised. Karen commented that people with unclaimed super were required to authenticate themselves.
Karen explained that a significant amount of unclaimed super relates to non-residents, even though there are processes to address this as non-residents enter and leave Australia – non-residents not intending to return to Australia can claim their super by completing a form. Feedback provided at the meeting recommended taking a more proactive approach with back packers.
There is also unclaimed super money relating to deceased persons which beneficiaries can claim directly from the ATO. Another common reason for unclaimed super relates to employers making super guarantee payments for new employees late in the financial year before a super fund can be nominated.
It is proposed to increase the threshold for unclaimed super to be transferred to the ATO from $200 to $2,000 to protect small account balances being eroded by fees. From 1 July 2013, the ATO is also required to pay interest on these accounts.
Members’ feedback was sought about the ATO being able to transfer unclaimed money across to an active account without the consent of its owner. For example, the ATO might send a letter to the account owner advising them they had unclaimed super and notify them it would be transferred to an active account unless they contacted the ATO within 30 days.
This proposal received positive feedback given the ATO was acting in the person’s best interests and providing an ‘opt-out’ mechanism, but it was recommended that a longer period such as 45 days be offered.
When members were queried about whether the size of the account balance should influence the ATO’s processes relating to unclaimed money, they expressed a preference for the ATO to contact people and provide them with some options, rather than automatically consolidating super money into another account.
In relation to the ATO proactively paying unclaimed amounts less than $200 to their owners, a higher than expected number of cheques remained unpresented, and the ATO sought other suggestions for other ways of reuniting these amounts with their owners.
One suggestion was to use the EFT banking information provided on 2012-13 income tax returns to make a direct credit, but the ATO advised there were currently system limitations that prevented this (although this may become feasible in the future).
Another idea was to use the telephone and email contact details provided on income tax returns to contact people with unclaimed super, the ATO noting that both super funds and the ATO were considering this. It was further suggested that where the ATO held several different communication options for contacting people about unclaimed super (for example a postal address, mobile phone number and email address), that all of these be used.
A final suggestion was made that the unclaimed super threshold be indexed annually to reduce the proliferation of accounts.
6. Super reform updates
Karen Wantling from the ATO’s Superannuation area also provided a brief update about some recent developments in relation to Super Reform, as follows.
Individuals with an adjusted taxable income greater than $300,000 will have their tax concession on contributions reduced from 30% to 15% (excluding Medicare levy) from 1 July 2013. Adjusted income includes concessional contributions to super.
This change only applies to the excess concessional contributions that push an individual’s income above the threshold. The measure will not apply to concessional contributions that exceed the concessional contributions cap and are therefore subject to excess contributions tax.
From 1 July 2013, individuals are allowed to withdraw any amount of their excess concessional contributions from their super fund without being penalised. Excess contributions are now included in an individual’s taxable income and taxed at their marginal tax rate plus an interest charge.
This reform is intended to ensure individuals are taxed on excess concessional contributions in the same way as if they had received that money as salary or wages and had chosen to make a non-concessional contribution.
- Higher concessional contributions cap
From 1 July 2013, individuals aged 60 years and over will be eligible for a higher concessional contributions cap of $35,000. From 1 July 2014, this will cap will be extended to individuals aged 50 and over.
The concessional contributions cap remains at $25,000 for all other individuals.
- Taxation of retirement phase earnings
From 1 July 2014, earnings on assets supporting income streams will be tax free up to $100,000 a year, and earnings above $100,000 will be taxed at the same concessional rate of 15% that applies to earnings in the accumulation phase.
For defined benefits funds, where the notional yearly earnings exceed the $100,000 threshold, the amount in excess of $100,000 will be taxed at 15%.
- Low income super contribution
The low income super contribution was amended in May 2013 to operate effectively and as intended.
It came into effect on 1 July 2012 and subject to eligibility requirements, provides an annual payment of up to $500, paid automatically into a super account.
SuperSeeker allows an individual to:
- see their active and lost super accounts
- initiate a rollover between their accounts
- seek and transfer lost or unclaimed super into an active account.
The ATO is looking to enhance the functionality of SuperSeeker.
- There was feedback that some individuals had learnt about the changes to excess contributions tax too late. It was queried what member organisations should communicate to those of their constituents who had made excess contributions.
The ATO commented that individuals require an authority from the ATO before their super funds can release the excess contributions. The ATO will notify affected individuals and once the excess contributions are released from super funds, the ATO will issue amended income tax assessments.
Feedback at the meeting indicated the changes in the treatment of excess contributions were a sensible, practical and ‘vastly improved outcome’ for individuals.
- The increases to the concessional contributions caps were also considered to be sensible.
- In relation to self managed super funds, it was queried whether the taxation of retirement phase earnings applied to each individual retiree in the fund. The ATO confirmed this.
7. Open forum
This is a standing agenda item to provide members with an opportunity to:
- raise issues of concern or provide feedback to the ATO about the administration of the taxation and superannuation systems
- identify topics for consideration at future meetings.
The following issue was raised at the meeting.
ATO’s new consultation arrangements
Given the ATO is significantly reducing its number of formal consultative forums, it was queried whether this signals a ‘change of opportunity’ for forum members to contribute to ATO consultation processes.
The ATO commented that it is looking to have a small number of ongoing forums that are supported by a range of flexible approaches - different rather than less consultation.
Under the revised arrangements, this forum will have a strategic focus and be chaired by the Deputy Commissioner for individual taxpayers; the current membership of the group will continue but may be broadened to include other stakeholders to address any gaps in representation.
Feedback from members indicated:
- people need to be able to see how the forum influences the administration for it to have value
- sufficient notice needs to be provided for members to consider and co-ordinate their feedback on issues the ATO seeks contributions to
- the Commissioner’s letter to consultative forum memberships needs further clarification - members would appreciate confirmation about their involvement in the ATO’s stewardship group for individual taxpayers and the chairing arrangements.
8. Wrap up and close
In closing the meeting, the Chair thanked members for their attendance and acknowledged the ATO’s appreciation of the perspectives they had shared during the meeting.
The next meeting of the Individual Tax Liaison Group will be confirmed.