Welcome and introductions
The Chair welcomed attendees and noted that minutes for the meeting will be published the ATO website.
ATO staff are now returning to the office, at least three days a week. If possible, we will look to schedule the next Australian Banking Association (ABA) Steering Group meeting as a face-to-face meeting.
The ATO noted that there have not been any systemic issues coming through to the group this time, which is indicative of the good working relationship it has with the ABA and its members.
Opening statements
Rebecca Saint,, Deputy Commissioner Public Groups International (PGI) and Bill Neskovski, Assistant Commissioner Banking and Finance Strategy
ATO–PGI Plan 2021–22 and early thoughts for 2022–23
The ATO made the following comments:
- There is no significant change anticipated in the ATO’s work programs for the next year, with a number of program commitments staying reasonably consistent year on year.
- The ATO is in the process of nuancing the Top 100 and Top 1,000 Programs.
Staffing/structure changes within PGI
The ATO has been recruiting during the pandemic and there have been some movements in the senior levels at the ATO.
Michelle Sams has been permanently promoted to lead Engagement and Assurance in Melbourne and will also look after Staff Experience.
Sydney Engagement and Assurance is now split under two Assistant Commissioners. Bill Neskovski will continue to have leadership over Banking and Finance Strategy, and Tim McCarthy will have a strategic focus on intangibles. Each of Bill and Tim’s portfolios will have a diverse range of industries.
Despite the split in Sydney, Tim, Bill, James and Virginia will continue to work very closely such that it will be business as usual for ABA members.
There are some further upcoming changes in senior leaderships for various programs – the ATO will make those announcements once they are confirmed.
2022 Budget outcomes and messages
One of the items out of the 2022 Budget for the ATO is the two year extension of Taskforce to 30 June 2025 with a renewed investment of $650 million. This is considered a great sign of confidence from the government in the ATO’s programs and the ability to deliver under these programs.
The renewed investment makes forward planning easier for the coming 12 month period and allows the ATO to continue to shape bigger system programs.
The Justified trust (JT) program is funded by Taskforce, and the ATO will continue to build and embed the JT program into its approach for the large market. Other programs funded by Taskforce such as compliance and advisor programs will also have the confidence going forward.
The ATO continues to exceed its commitments under Taskforce, although this is decreasing over time. This is because the larger cases with larger adjustments are typically done at the beginning. Additionally, there is an increase in voluntary compliance over the duration of the various programs. The ATO’s focus is on gross tax performance – how many taxpayers are getting it right on tax return lodgment.
Some other Budget measures that may have an impact on large business include the extension of the Patent Box regime, and a new levy on oil and gas companies.
The ATO’s International area continues to engage and assist with Treasury regarding Pillar 1and 2. Internally, the ATO is looking at how to integrate Pillar 1 and 2 into existing programs and how to best assist taxpayers in adopting them. The ATO is keen to engage with businesses and to provide early support the market might require.
There is a collaboration between the tax administrators of the US, UK, Canada, Netherlands and Australia to develop the best practice for tax for multinational entities. This will involve tax regulators sharing best practice examples and developing a road map to best practice. There is a lot of interest in Australia’s JT program, Practical Compliance Guidelines and Advisor Strategy.
Top 1,000 program update
The ATO is about to launch a refined Combined Assurance Review (CAR) program, with changes focused on the GST element.
Currently, taxpayers have a GST risk review in the CAR, and may then be referred to an intensive GST review via a Streamlined Assurance Review (SAR). The ATO conducts around 70–80 of these SARs in a year.
The feedback from the market is that taxpayers would like GST assurance ratings through the CAR as they receive for income tax. Currently, the work done for GST is not enough to provide an assurance rating.
As such, the ATO is looking to expand the GST component in the CAR in order to provide assurance ratings. For many taxpayers in the CAR program, this will mean performing a GST Analytical Tool (GAT), which can be completed in no more than 6 months as opposed to an eAudit which typically takes 12 months.
The ATO notes that some taxpayers and industries are not suited for GATs. Particularly, for financial service taxpayers, they will not be required to undertake a GAT but will be undertaking other means of data testing.
The ATO will be conducting around 20 CARs in the Financial Service sector over the year, with the first reviews to commence in April. There will be a tailored set of questions for banking, financial services in insurance taxpayers.
The ATO anticipates that all documents will be published online for the whole program with the view to enhance transparency for the program. Longer response times for reporting financial institutions (RFIs) will be built in to reflect the longer GST review.
Other key messages
The ATO has received questions on taxation of multinationals for the upcoming Senate Estimates. The issue of how large business tax performance is progressing continues to garner interest.
Top 100 program update – future developments
The ATO made the following comments:
- Over 50% of taxpayers in the Top 100 program have achieved high assurance. This underpins the ATO’s high levels of confidence in tax compliance with large business and is critical for community confidence in the large market as well.
- There will be further enhancements and improvements to the Top 100 program, focusing on GST and assurance ratings more generally.
- With respect to GST, the ATO will focus on appropriately tailoring GST inquiries to the taxpayer’s business.
- There has been feedback from corporates that they are unsure of the certainty provided by a high assurance rating under a JT review. The ATO will be conducting work on how to provide taxpayers with greater certainty.
- There are 10 Annual Compliance Arrangements (ACAs) in operations, covering various taxes.
- As the JT program matures, the ATO has been considering the need and benefit for the continuation of the ACA program. The current thinking is that the world has changed significantly since the time the ACAs were first implemented. Now, JT is the centrepiece for corporate tax compliance.
- Linking to the point raised earlier in the meeting about enhancing certainty on what high assurance means for taxpayers can lend itself to a model that suits all taxpayers in the Top 100 population.
- The ATO will be reaching out to ACA taxpayers to have a further discussion on what a transition to a full JT experience will look like and what time period it will be done within. It is expected that there will be a transition period.
In relation to the above, the ABA noted:
- What does the ATO suggest as a transition from ACAs to full JT? What will the ATO require from taxpayers in the interim?
- High assurance under JT denotes an element of trust – would this potentially translate to a lighter touch interaction in the future?
- It is important for both sides to sit down and discuss what is required in order to satisfy each party’s needs from the interaction before the issuance of any future RFIs.
In response, the ATO stated:
- It is anticipated that the biggest change in moving away from ACAs will be that the ATO is unlikely to provide a full sign-off on the taxpayer’s income tax return each year, though there will still be substantial certainty via high assurance under the JT program.
- Other things that currently exist within ACA such as review of new and/or significant transactions will remain in place.
- The principles underpinning the monitoring and maintenance phase of JT came out of ACAs – for example, the requirement for continued transparency regarding disclosures to the ATO came from the terms of the ACA.
- The point raised earlier in the meeting about providing greater certainty on what the assurance ratings mean for taxpayers will also be key to this work.
- It is recognised that each taxpayer has different businesses – some complex, diverse businesses will require ongoing engagement whereas other businesses that tend to be stable year on year may require less engagement. As such, the ATO will reach out to each ACA taxpayer to discuss this in further detail.
New and emerging issues in banking and finance
The ABA made the following comments:
- The governor of the Reserve Bank has been putting a dampener on speculation that interest rates will go up this year. Media commentary on interest rates tends to look at western countries, particularly the US and UK for comparison. However, the governor has been quite clear that Australia’s economy is more akin to Asia or a hybrid between Asia and the west.
- While Australia is experiencing a decrease in unemployment, this has not translated into an increase in wages.
- Banks have noted that housing loans have dramatically increased over the recent years, from an increase in movement during COVID-19 as well as a low interest rate environment translating to people bidding up house prices. Banks are monitoring debt-to-income ratios in terms of overall new lending. There is a wider concern regarding whether people are able to pay back their loans when interest rates start to rise.
- Banks have seen a huge increase in consumer and household deposits, but despite recent lockdowns, there has not been long term decrease in expenditure. This is likely due to the fact that Australia was in a low interest rate environment before COVID-19.
- With a low interest rate environment, the Reserve Bank of Australia was hoping that people will invest their money into riskier productive asset, for example, business investment, but that did not eventuate. However, some people have been investing in high-risk assets such as crypto assets.
- There was an expectation that after an economic shock there will be an increase in non-performing assets, but this has not yet eventuated.
Other business
The ATO will conduct a review of the Annual Pricing Arrangement (APA) program, led by Simon Hellmers. Taxpayers are invited to participate in that review over the coming period.
Reviews in the past have been around the process, but this review will focus on the substance of the APAs and what it should try to deal with.
The Chairperson thanked attendees and drew the meeting to a close.
Action item |
PGI organisational chart |
Due date |
As soon as possible |
Responsibility |
ATO |
Action item details |
The ATO to provide an updated PGI organisational chart when available. |
Attendees
Organisation |
Attendees |
|---|---|
ATO |
Bill Neskovski (Chair), Public Groups and International |
ATO |
Adrian Mow, Public Groups and International |
ATO |
Anna-Maria Stephens, Tax Council Network |
ATO |
David White, Tax Counsel Network |
ATO |
James Campbell, Public Groups and International |
ATO |
Johanna Tang, Public Groups and International |
ATO |
Michelle Sams, Public Groups and International |
ATO |
Rebecca Saint, Public Groups and International |
ATO |
Timothy McCarthy, Public Groups and International |
ATO |
Virginia Gogan, Public Groups and International |
ATO |
Yan Diu (Secretariat), Public Groups and International |
ANZ |
Darren Norman |
Australian Banking Association |
Michelle Jakubauskas |
Australian Banking Association |
Prashant Ramkuman |
Bank of Queensland |
Alexia Pepicelli |
Bank of Queensland |
Dominic Grimson |
Bank of Queensland |
Michael Hellier |
Bendigo and Adelaide Bank |
Andrew Wright |
Bendigo and Adelaide Bank |
Benjamin Edwards |
Commonwealth Bank of Australia |
George Spathis |
Commonwealth Bank of Australia |
Jeff Barcham |
HSBC |
Jeff Tan |
Macquarie Bank |
Ambrose Leung |
Macquarie Bank |
Ernest Chang |
National Australia Bank |
Anita Schembri |
National Australia Bank |
Mark Killer |
National Australia Bank |
Stephen Southon |
Rabobank |
Anthony Lo Russo |
Rabobank |
Philip Duffy |
Suncorp |
Leah Colley |
Westpac |
Chris Plakias |
Westpac |
Michael Barbour |