Co-chair general update
The ATO provided an update on reports published since the last Large Business Stewardship Group (LBSG) meeting including the Corporate tax transparency report and the total revenue effects. This was supported by findings reports for the Top 100 program, Top 1,000 program, advice and guidance, reportable tax positions and the first settlements report.
Reports show strong levels of large market compliance as well as the sectors requiring more work. ATO messaging accompanying the release of these reports ensures people are well informed when talking about the sector.
Members discussed media coverage of the Corporate tax transparency report and agreed it was quite balanced compared to prior years and not just focused on nil tax paying entities.
Members queried the use of the findings reports externally and their benefit compared to the resourcing required to produce them. The ATO noted these are some of the most important reports available on the large market. The reports provide good discipline within the organisation to reflect on the programs and gain insights around their effectiveness.
There was also discussion on the nature of the conversation around transparency from 2015 to now and whether the ATO needs to be more proactive in telling the story. The ATO commented there is not much more transparency that can be provided to the market due to secrecy provisions and that companies need to put their own narrative out there.
Public advice and guidance – consultation
Consultation on the final update to Practical Compliance Guideline PCG 2018/9 Central management and control test of residency: identifying where a company's central management and control is located was undertaken with stakeholders in the public groups market, and the ATO has adopted suggestions where possible. The changes should provide increased certainty for public groups and reduce compliance costs.
Members acknowledged improvements to the practical compliance guideline and the increased certainty it provides. Members noted there is still uncertainty on the standard to apply in the application of the corporate residency subsidiary public disclosure amendments still before Parliament.
Capital management
In June 2023 the ATO published a consultation paper seeking feedback on opportunities to improve public advice and guidance on certain capital management topics- namely returns of capital and dividends paid in connection with a disposal of shares- with the objective of providing greater certainty and efficiency in the rulings program.
The consultation process has now closed. Initial themes include the need for more contemporary examples and clarification on the treatment of identified profits and factors relating to section 45B of the Income Tax Assessment Act 1936. The ATO is now reflecting on the feedback to identify key themes and examples before commencing the prioritisation of public advice and guidance.
Integrity declaration
The ATO provided information on the new integrity declaration. ATO stewardship group membership is voluntary and members are appointed without a procurement process. Integrity declarations are intended to ensure appropriate due diligence by the ATO.
Noting each ATO stewardship group has a charter, the integrity declaration has been kept high level and asks that members maintain personal tax obligations, maintain their entity's obligations, and raise conflicts of interest.
Main questions raised by members related to:
- conduct in relation to a clients’ tax affairs
- head of tax roles
- personal declaration of own tax affairs.
The ATO agreed minor changes could be made and a new integrity declaration issued to LBSG members. Exceptions or additional discussions can take place with ATO co-chair Rebecca Saint.
Large business service offerings
The ATO updated members on improvements to large business service offerings relating to digitisation, transitioning clients to Online services for business, and reductions in large market processing and registration.
Members noted delays in processing certificates of residency and highlighted the benefits of automation. The ATO acknowledged processing delays and advised members this issue is receiving attention at the executive level. The ATO is in the process of reinvigorating client engagement surveys and will seek feedback from members.
Compliance risk and emerging issues
Emerging business models in the property industry
The ATO is engaging with taxpayers undertaking build-to-rent developments to understand potential tax issues in this space. Early observations indicate entities are generally well across relevant provisions on input tax credit entitlement where land acquisition and development costs relate to future input taxed supplies of residential premises. Other areas for consideration include the apportionment of corporate overheads, the treatment of related party transactions, and adjustments required for GST purposes when property is acquired as part of a going concern.
Inappropriate access to tax concessions and entries into consolidated tax groups
The ATO has identified a number of cases where taxpayers have claimed the refundable loss carry-back offset when lodging their income tax return for the same income year as the year the taxpayer joined a new consolidated group, impacting their ability to meet the conditions to claim the offset.
The available loss-carry back offset is limited by the surplus in a taxpayer’s franking account on the last day of the income year in which the tax offset is claimed.
When a subsidiary member joins a consolidated group, any surplus in its franking account is transferred to the head company's franking account at the joining time, reducing the surplus in the joining entity’s franking account to zero.
Taxpayers in these circumstances are encouraged to self-review and, where appropriate, proactively approach us to amend their assessments before a review commences.
ATO guidance on working out the amount of the offset and the effect of the consolidation provisions on the franking account balance is available:
- Working out the tax offset
- Special rules for consolidated groups and multiple entry consolidated groups.
Board of Taxation
The Board of Taxation provided the following updates:
- the reporting date for the review of the tax treatment of digital assets and transactions in Australia has been extended to 29 February 2024
- Australia, along with other Organisation for Economic Co-operation and Development (OECD) countries, has committed to the implementation of the Crypto-Asset Reporting Framework by 2027
- a Treasury consultation paper on regulating digital asset platforms was released on 16 October 2023
- two vacant board member positions will be filled soon
- a new stakeholder engagement strategy is being developed.
Treasury
Treasury updated members on:
- work on the Mid-Year Economic and Fiscal Outlook
- a recent High Court decision considering whether the imposition of a road user charge on low or no emission vehicles by the State of Victoria is an excise
- the passage of the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023
- a series of reforms after the disclosure of confidential information by PwC; the first one being new sanctions for the Tax Practitioners Board, which should be released before the end of the year. Other reforms will be next year.
Multinational tax integrity measures
Intangibles
There are no further updates on the Multinational Tax Integrity measure from the government’s former statements. The interaction between the measure and Pillar Two is still being considered.
Public country-by-country
The government is conscious of concerns regarding confidential information and recognises the need for balance and the need to not disrupt current OECD work. Public consultation is expected to occur next year.
Thin capitalisation
Considering the changes that were out for consultation reflect the need to understand there are transactions that make commercial sense and balance it to ensure the provisions are not aggressively used to allow deductions for debt, given Australia’s tax rate is higher.
Pillar Two
Domestic minimum tax consultations have started through the digital services working group. Exposure draft legislation will be released early in the new year for public consultation.
Members discussed the involvement of corporates in the consultation process and concerns about what corporates will have to disclose.
Treasury noted the consultation process and approach to drafting is as close to the OECD rules as possible. The ATO is also undertaking consultation and will provide an update in the new year.
Members also discussed work on decarbonisation initiatives and the assessable nature of government grants. Treasury noted that from a policy perspective it is regarded as income from government and should be recorded as income on a balance sheet.
Top 1,000 program – forward plan and consultation
The ATO provided an update on the Top 1,000 program following the release of the Top 1,000 Findings report.
Improving ATO systems to better understand large corporates
The ATO demonstrated a new system called ANGIE (Automated Network Group Identification Engine) which assists staff to analyse and understand corporate group structures. The system speeds up the ability to identify new links between clients, detects relationships and patterns within data, and draws key insights that support engagement with large businesses. The tool is used when undertaking justified trust reviews.
Other business
The group discussed 2023 LBSG highlights and the forward work plan for 2024. Members suggested topics for future meetings. The ATO will provide a summary of highlights for the year and draft list for topics for next year.
Attendees
|
Organisation |
Member |
|---|---|
|
ATO |
Rebecca Saint (Co-chair), Public Groups |
|
ATO |
Hector Thompson, International, Support and Programs |
|
ATO |
Melissa Spurge, Public Groups |
|
ATO |
Michael Ingersoll, Public Groups |
|
ATO |
Michelle Sams, Public Groups |
|
Australian Banking Association |
Darren Norman |
|
Australian Petroleum Production and Exploration Association |
Michael Fenner |
|
BHP Billiton Limited |
Premila Roe |
|
Big 4 Representative |
Cindy Perryman |
|
BlueScope |
Irene Filippone |
|
Board of Taxation |
Michelle Calder |
|
Corporate Tax Association |
Michelle de Niese (Co-chair) |
|
Law Council of Australia |
Adrian Varrasso |
|
Multiplex |
Angela Guinta |
|
The Tax Institute |
Pete Rhodes |
|
Treasury |
Diane Brown |
|
Treasury |
Marty Robinson |
Guest attendees
|
Organisation |
Attendee |
|---|---|
|
ATO |
Ashitosh Raman, Public Groups |
|
ATO |
Fiona Knight, Public Groups |
|
ATO |
Gregory Dick, Public Groups |
|
ATO |
Hanisah Mohd Fadzil, Public Groups |
|
ATO |
Jeremy Hirschhorn, Client Engagement Group |
|
ATO |
Kate Wilson, Enterprise Strategy and Design |
|
ATO |
Kirsten Fish, Law Design and Practice |
|
ATO |
Megan Croaker, Public Groups |
|
ATO |
Rebecca Irvine, Public Groups |
|
ATO |
Sarah Hassen, Public Groups |
Apologies
|
Organisation |
Member |
|---|---|
|
ATO |
Faith Harako, Public Groups |
|
Australian Retirement Trust |
Ian Roberts |
|
Business Council of Australia |
Pero Stojanovski |
|
Group of 100 |
Marc Lewis |
|
Lion |
Megan Williams |
|
Property Council of Australia |
Kelly Wong |
|
South32 |
Brian Purdy |