Consultation
Members expressed interest in discussing the ATO and government's current approach to consulting on tax related matters.
The ATO drew members’ attention to the package of reforms announced by the government on 6 August 2023 in response to the PwC tax leaks scandal. The reforms include short–term legislative changes to improve system integrity and further changes within 2 years following a systemic review led by Treasury.
There are ongoing parliamentary inquiries into the management and integrity of consulting services. The ATO provided the Senate with a timeline of events relating to the PwC matters in response to a question on notice. The timeline outlined various engagements with the market around issues of concern, including legal professional privilege protocol and large market adviser principles.
Members queried the use of particular advisers or tax agents by large business entities. The ATO confirmed that choice of representation is a matter for large businesses. The ATO’s interest is in the assurance and tax risk–related matters associated with a review, and cooperation with the ATO’s information gathering and enquiries, irrespective of the tax adviser or tax agent involved.
The ATO is committed to consultation that is consistent with the ATO Consultation Framework, with a preference for open consultation. The use of confidential consultation was raised, with members providing feedback that their preference is for open consultation. The ATO will consider this feedback.
Compliance risks and emerging issues
The ATO updated members on key focus areas in Public Groups (PG) for 2023–24:
- where applicable, ensuring suppliers of digital products and services and low value imported goods are registered for GST, and have adequate processes in place to determine whether recipients are Australian consumers
- ensuring financial service providers, funds and insurers meet their GST obligations, particularly when determining extent of input tax recovery on costs, applying reverse charge provisions relevant adjustment provisions
- ensuring consistency and clarity across the market in relation to the correct GST classification of food and health products
- the correct treatment of property transactions, particularly the characterisation and classification of supplies and acquisitions for GST purposes
- ensuring the correct treatment of GST on costs associated with securities transactions such as initial public offerings, mergers, demergers, company acquisitions or similar activities for businesses that are not in the financial services sector
- deficiencies in governance framework leading to incorrect reporting of GST
- correct characterisation of payments for income tax purposes, including the application of the transfer pricing provisions, the withholding tax provisions and other provisions that impact whether amounts are deductible or assessable
- transfer of intangible assets out of Australia, including where the transfer is not acknowledged in related party agreements
- formation (entry and exits from a tax group), including the use and transfer of losses, and the tax consequences of any acquisition or disposals
- inappropriate access to tax concessions, such as where concessions are intended for small and medium businesses or conditions for concessional tax treatment on the return on foreign investment are not met.
The ATO is continuing work to achieve justified trust that large market taxpayers are paying and claiming the right amount of tax through:
- the Top 100 assurance program
- Combined Assurance Reviews (CARs) for Top 1,000 taxpayers
- specific engagements in respect of higher priority or emerging risks, or where tax risks are not addressed through the assurance programs.
Upcoming insights reports for 2022–23
The ATO is preparing for the release of the corporate tax transparency report in November. Entities will be advised of their proposed inclusion in the report from mid–September.
Information in the report is for the 2021–22 income year. Therefore, the report does not include information about entities' most recent income tax year.
The ATO will shortly publish findings reports on the Top 100 assurance program, Top 1,000 assurance program, PG advice and guidance program, and Reportable tax position category C disclosures by large public and multinational business.
Top 1,000 working group outcomes and next steps
The ATO recently sought feedback on early engagement settings relating to the CAR program for the Top 1,000 population.
Working group feedback demonstrated CARs are integral to the client experience and early engagement with the case team sets reviews up for success.
The working group also touched on the information request response time of 56 days and asked the ATO to consider whether information could be prioritised and provided in tranches.
The working group noted that the ATO findings report was beneficial in preparing for a CAR.
Treasury
Treasury provided an update on their forward work program and the Organisation for Economic Cooperation (OECD) Two–Pillar Solution.
Treasury is developing an exposure draft to implement Pillar Two based on the GloBE rules. The timing of its release is a decision for government based on whole of government priorities. Current planning is based on the release of the exposure draft in early 2024, with the intention to introduce legislation in mid to late 2024. Pillar One discussions are continuing around Amount A and Amount B.
Treasury confirmed impact analysis assessments have replaced regulatory impact statements. Like regulatory impact statements, they will be reported in explanatory memorandums.
Multinational tax integrity package
Treasury provided an update on the progress of the multinational tax integrity package, focused on amendments to the thin capitalisation rules. Treasury noted the Senate Economics Legislation Committee is currently considering the legislation. Treasury will consider the recommendations in the committee's report.
Members expressed interest in greater consultation prior to exposure drafts being released. Treasury confirmed they are open to feedback to improve the current approach to consultation.
Board of Taxation
The Board of Taxation (Board) provided an update on the Review of the tax treatment of digital assets and transactions in Australia. The Board received 41 submissions and has engaged with international revenue authorities. It is in its final stages of drafting the report.
Members asked if the Board’s advisory panel would be refreshed. The Board explained the advisory panel was recently dissolved as it no longer provided an optimal mix of expertise. The future of the advisory panel will be considered once the Board’s forward work program has been agreed with the Treasurer.
Members would like to receive updates on pieces of work commenced by the Board. The Board confirmed it is willing to consider this for future agendas.
Other business
Members requested an update on ATO processing issues. The ATO acknowledged the complexity involved in processing forms for large businesses. The ATO is focused on retraining staff to handle this complexity and is working through the backlog.
The ATO provided an update on corporate residency, noting that Practical Compliance Guideline PCG 2018/9 Central management and control test of residency: identifying where a company's central management and control is located is not likely to be finalised until October.
Members suggested the ATO consider introducing self–service elements, which the ATO was happy to include in its forward work agenda.
The ATO advised that ato.gov.au is being upgraded to a new platform.
The ATO also provided an update on the draft integrity declaration currently being considered by the National Tax Liaison Group. A further update will be provided to members once the draft is finalised.
Attendees
|
Organisation |
Attendees |
|---|---|
|
ATO |
Rebecca Saint (Co-chair), Public Groups |
|
ATO |
Faith Harako, Public Groups |
|
ATO |
Hector Thompson, International Support and Programs |
|
ATO |
Megan Croaker, Public Groups |
|
ATO |
Melissa Spurge, Public Groups |
|
ATO |
Michael Ingersoll, Public Groups |
|
ATO |
Michelle Sams, Public Groups |
|
ATO |
Rebecca Irvine, Public Groups |
|
Australian Banking Association |
Darren Norman |
|
Australian Petroleum Production and Exploration Association |
Michael Fenner |
|
Australian Retirement Trust |
Ian Roberts |
|
BHP Billiton Limited |
Premila Roe |
|
Big 4 Representative |
Cindy Perryman |
|
BlueScope |
Irene Filippone |
|
Board of Taxation |
Michelle Calder |
|
Business Council of Australia |
Pero Stojanovski |
|
Corporate Tax Association |
Michelle de Niese (Co-chair) |
|
Law Council of Australia |
Adrian Varrasso |
|
Group of 100 |
Marc Lewis |
|
Multiplex |
Angela Giunta |
|
Property Council of Australia |
Kelly Wong |
|
South32 |
Brian Purdy |
|
The Tax Institute |
Pete Rhodes |
|
Treasury |
Diane Brown |
|
Treasury |
Craig Merry |
Apologies
|
Organisation |
Member |
|---|---|
|
Lion |
Megan Williams |
|
Treasury |
Marty Robinson |