National Tax Liaison Group key messages 10 April 2024

Meeting theme

Building and maintaining trust and confidence.

Key highlights

• Commissioner of Taxation Rob Heferen addressed the group.
• The Australian Taxation Office (ATO) led a discussion on the importance of trust and highlighted the need for transparency in the tax system and care around taxpayer data to ensure continued high levels of public trust.
• Members led a discussion on the importance of trust in the tax profession by the community, the ATO and government and outlined steps taken by professional bodies to re-build and reinforce trust.
• The Tax Practitioners Board (TPB) reflected on the need to ensure current regulatory frameworks are fit for purpose and outlined best practice approaches taken by firms and professional bodies.
• Members discussed trust in taxpayers, including an overview of the ATO justified trust program, corporate tax transparency, and work to identify and address identity fraud.
• Treasury gave an update on relevant matters.

Opening comments

Kirsten Fish, Second Commissioner, Law Design and Practice Group, ATO; Jerome Tse, The Tax Institute

NTLG Co-chair Kirsten Fish and external Co-chair Jerome Tse welcomed members.

No conflicts of interest were declared.

Rob Heferen, Commissioner of Taxation

The Commissioner, Rob Heferen, shared insights from his time at the ATO:

• The ATO plays a crucial role in collecting the revenue used by the Australian Government to fund essential public services. In the narrative around some of the actions the ATO is taking, it is important to remember and reinforce that the ATO collects money on behalf of the government, and not for itself.
• The ATO and the tax profession are partners in the stewardship of the system. The ATO operates on the basis of trust and expects the same of its partners to ensure the system works effectively. Being authentic and declaring and managing conflicts of interest are important elements.
• Stewardship groups are a valuable mechanism for highlighting and escalating systemic issues.
• The ATO will engage and is open to making changes if required, but if something goes wrong and people abuse that trust, responses will be swift.
• A lot of work has been done to make interactions with government simpler and easier. There is always a balance between speed and ease for complying for those who want to do the right thing but not too simple for those who are doing the wrong thing.

Trust in the ATO

Jeremy Hirschhorn, Second Commissioner, Client Engagement Group; Nadia Alfonsi, Acting Deputy Commissioner, Public Groups, ATO; Peter Phillips, Assistant Commissioner, Smarter Data Program, ATO; Nicholas Shizas, Assistant Commissioner, ATO Corporate, ATO; Simon Staples, Corporate Tax Association; Alexis Kokkinos, CPA Australia; Tony Greco, Institute of Public Accountants

The ATO led a discussion on the importance of trust, the current landscape and ATO priorities.

The Australian community understands the benefits of the tax system and has a high level of trust in the ATO. Two areas of focus to ensure continued high levels of public trust in the tax system and the ATO are:

• transparency
• care around taxpayer data.

There are many ways the ATO provides transparency on the health of the tax system, including the publication of annual reports, corporate tax transparency products, information about tax gaps, total revenue effects measure, and settlements.

The ATO is transparent with taxpayers about their own affairs and provides information to assist them to make informed choices and understand how the ATO will respond to compliance issues. The ATO also provides transparency to taxpayers about the behaviour of their peers. This demonstrates consistency and promotes trust in the tax system and the ATO.

The ATO is open to exploring how greater transparency around certain settings, for example, the factors that influence payment plan decisions, could be provided. However, the desire for consistency must be balanced with the need for decisions to take account of individual circumstances.

The group discussed data ethics issues arising from the large volume of sensitive taxpayer information held by the ATO, the use of artificial intelligence, and the importance of good governance. These issues will be covered in detail at a future NTLG meeting.

Ensuring the careful treatment of sensitive taxpayer data is critical to public trust. While people are encouraged to interact with the ATO digitally, cyber-attacks are a downside of digitalisation and the ATO has observed the increased sophistication of bad actors in the system. It is important the ATO can ascertain that the people who access our systems are who they say they are.

The ATO highlighted the importance of ensuring sensitive data shared within the government system is disseminated and used properly. ATO data acquisition programs are transparent, and data is only shared with other government agencies for specified purposes.

Members noted feeling constrained from speaking publicly on issues raised during consultation once the ATO publishes a final view. This makes it challenging for professional associations to demonstrate that they advocated for their members’ interests. The ATO emphasised that part of public trust is the ability of stakeholders to represent their interests, engage in robust discussion, and criticise where appropriate.

Members highlighted the importance of the ATO providing participants with outcomes of consultation they have been involved in, before information is made publicly available. This ensures professional associations are prepared to respond to questions from their members. This is one of the consultation framework principles and has broader application than just consultation. The ATO will look at opportunities to share more information with professional associations prior to making the information public.

Members also raised the topic of transparency of the ATO’s views on middle market issues. Members have observed a reduction in the number of binding taxation determinations and limited website guidance on controversial issues affecting the middle market.

Action item	NTLG 2404/1 – Examples of debt payment approaches
Status	In progress
Responsibility	Tony Greco, Sumitha Krishnan
Description	Members to provide examples of existing cases of inconsistency in application of debt payment approaches.

Trust in the tax profession

Michael Croker, CAANZ; Michael Barbour, CAANZ; Sarah Vawser, Acting Deputy Commissioner, Individuals and Intermediaries; Michael O’Neill, CEO Secretary, Tax Practitioners Board

Members led a discussion on the importance of trust in the tax profession by the community, the ATO and the government.

Professional associations take pride in the fact they are trusted by clients. While in 2020–21 the tax profession worked closely with Treasury and the ATO on JobKeeper and the cash flow boost, recent discussion has questioned the confidence that can be placed in the profession by the government and regulators.

Recommendations arising out of the PwC matter and the Review of the Tax Practitioners Board (TPB) have resulted in substantial and complex new regulations, obligations and expected behaviours for tax practitioners.

Following the PwC matter, Treasury has taken a more targeted approach to consultation by engaging with certain trusted advisers. While this is a positive step to re-building trust, open and transparent consultation is welcomed and enables member organisations to demonstrate to members that their interests are represented.

The TPB has engaged with professional associations on the development of the new regulatory model. There is an opportunity for professional associations to be enlisted as a co-regulator and co-educator which will enable better support for members. The development of TPB guidance and case studies will also assist tax practitioners to understand the new regulatory powers and how they will be applied in practice.

The professional associations reflected a concern that increased regulation will add increased burden and cost into the profession. This may deter people from entering the profession and increased costs may be passed on to the client, reducing affordability.

Steps professional bodies are taking to engender trust include introducing mandatory ethics training; reviewing regulatory arrangements with large firms; increasing penalties; amending rules about former members; and changing confidential consultation processes. Members are generally supportive of these changes.

The group noted the importance of recognising and responding to the underlying causes, culture and environment in which the PwC matter occurred.

The ATO outlined work undertaken with the OECD Forum on Tax Administration (FTA). Three focus areas of the FTA are engendering trust through digitalisation, intermediaries and compliance, and trust and transparency.

The ATO also acknowledged:

• not all tax professionals are tax agents covered by the TASA and that this must be kept in mind in discussions
• the critical role of tax advisers in the tax system and reflected on the need for it to be good business to be a good tax adviser
• the need to ensure natural justice in investigations and the importance of this balancing the requirement for discipline
• there are firms that are systemically important, and it is necessary to have due regard to that when considering an approach whether to regulation or building trust
• the importance of reassuring tax practitioners attempting to do the right thing that they will not be targeted under the new promoter penalty regime.

TPB reflections and next steps

Michael O’Neill, CEO Secretary, Tax Practitioners Board

Issues of adviser misconduct, professional standards, supervision and control, while highlighted by the PwC matter, are relevant across the tax profession. There is a need to re-build confidence in the system and ensure regulatory frameworks are fit for purpose.

The TPB recognises that the opportunity for change brings with it challenges around practice, policy and law. The TPB is not immune to the need to be responsive to change and welcomes feedback from practitioners on practical ways to implement the reform program.

It is accepted that most tax practitioners are trying to do the right thing by the system, clients and their practices. Many firms are self-regulating and improving their own controls. Where firms disclose issues and demonstrate remedial steps, the TPB will take a proportionate approach and support them in that work.

The TPB is also engaging with professional associations on reinforcing and, where required, improving their registration, ethics, and investigative processes. Professional associations have a role in identifying patterns and trends and addressing underlying root causes. The best associations are improving consumer protection, transparency with government and resolution of complaints procedures.

Members discussed concerns around breach reporting and the need for practical guidance. New guidance on breach reporting, including changes regarding whistle-blowers, will be released shortly. Guidance on disqualified entities will also be developed.

Trust in taxpayers

Louise Clarke, Deputy Commissioner, Private Wealth, ATO; John Ford, Deputy Commissioner, Fraud and Criminal Behaviours, ATO; Grant Brodie, Deputy Commissioner, Client Account Services, ATO: Simon Staples, Corporate Tax Association; Jerome Tse, The Tax Institute; Julie Abdalla, The Tax Institute; Tony Greco, Institute of Public Accountants

Members discussed the importance of trust in taxpayers. Overall, Australian taxpayers are compliant with their tax obligations. However, taxpayers don’t necessarily trust that other taxpayers are doing the right thing. Members were asked to consider how the ATO might reinforce the mutual trust that Australians should have in each other.

The self-assessment system begins with trusting the taxpayer and then the ATO should verify the things that breach that trust. The ATO has done a lot of work through the Serious Financial Crime Taskforce and with the Joint Chiefs of Global Tax Enforcement (J5). An increasing issue is whether the ATO can trust that the taxpayer is the taxpayer. Or, when an agent is acting on behalf of a client, whether that client is really theirs.

Linking a myGovID to the ATO is the best way to safeguard an individual’s information and protect them from identity fraud. Members were keen to support the ATO in any communications to increase the use of myGovID.

The ATO provided an overview of the justified trust program and changes over the last few years which have resulted in good governance in the top 500 population. Groups have different business models, so a one-size-fits-all approach isn’t appropriate. Differentiated assurance approaches for different models have been developed so the process is more streamlined. The program is maturing and evolving with the aim that it should be easier to get to justified trust.

Members provided feedback on their experiences with the program. In some cases, it was seen to be inconsistent from year to year, but members noted it gives an organisation’s board confidence, which increases trust between taxpayers. Publishing transparency reports can help dispel misconceptions.

Corporate tax transparency puts the onus on companies to explain their affairs, and overall, there is a willingness to comply with voluntary, mandatory transparency regimes. The closer aligned the different regimes are, the easier it will be. Members reflected on whether the stewards of the system should consider what a good framework would look like.

Members noted the design of the tax system is complex and causes confusion for taxpayers. That is an issue for government, not the ATO.

Treasury update

Diane Brown, Deputy Secretary, Revenue Group, Treasury; Laura Berger-Thomson, First Assistant Secretary, Revenue Group, Treasury

Treasury provided the following updates:

• Work is nearly complete on consultation resulting from election commitments and measures from previous 2 budgets.
• There are several Parliamentary committee hearings and reviews underway in relation to PwC-related matters and any government response to these will be considered by government in the usual way.
• Treasury is in the process of preparing a consultation paper on TPB registration requirements and broader reviews of promoter penalty laws, fraud and others.
• Treasury is broadly on track with the drafting of consultation papers and do not envisage changes to previously advised timing.
• Work is well progressed on the review of regulatory structures of large consulting, accounting and auditing firms, in terms of having an initial consultation paper ready. This will be addressed in 2 phases.
• Consultation recently finished on the Response to PwC – Enhancing the Tax Practitioners Board’s sanctions regimeExternal LinkExternal Link. Feedback is being reviewed and advice is being provided to government. Professional association bodies provided a joint submission and are keen to see the outcomes.
• Treasury will inquire with Attorney-General’s Department as to the progress of consultation on proposals relating to legal professional privilege.

Action item	NTLG 2404/2 – Legal professional privilege amending laws
Status	In progress
Responsibility	Laura Berger-Thomson, Treasury
Description	Treasury to provide an update on consultation by the Attorney-General’s Department in relation to legal professional privilege.

Action items update

NTLG 2402/1 – Treasury and Board of Tax MoU

Responsibility: Laura Berger-Thomson, First Assistant Secretary, Revenue Group, Treasury

To be closed - On 3 April 2024, the Board of Tax secretariat Michelle Calder confirmed there is no MoU or protocol between Treasury and the Board of Tax.

NTLG 2402/2 – Member feedback on ATO draft confidentiality deeds

Responsibility: Jerome Tse, The Tax Institute

In progress – Assistant Commissioner Nicholas Shizas (ATO Corporate) is scheduled to meet with various NTLG members to discuss the draft confidentiality deeds on 12 April 2024.

NTLG 2402/3 – Proposed consultation

Responsibility: Jerome Tse, The Tax Institute

In progress - Members have provided feedback on 15 March and 4 April 2024. On 4 April members advised they are still considering one of the proposed consultation matters and that additional feedback will be collated and provided to the ATO.

NTLG 2312/1 – ATO objections priority work

Responsibility: Sumitha Krishan, The Tax Institute

In progress - Members will provide feedback in writing on the work the ATO should consider prioritising to progress the large numbers of objections currently in the system.

Post meeting update

On 11 April, members provided the following feedback to the ATO. Members also offered to meet with the ATO to further discuss as needed.

In relation to the feedback on ATO objections priority work, members had varied opinions on prioritisation, but a FIFO approach was prioritised by most. However, members are of the view that ultimately it is a matter of the ATO considering these factors and its resources. Also, members are convinced that the ATO should not simply prioritise easy matters without consideration of other factors and believe that a triage process should be applied. Please find below the feedback received in relation to the order of priority:

1. Age – first in, first out
2. Impact on the taxpayer - whether the objection is refund or debt-driven (consider hardship)
3. Whether the taxpayer is represented or unrepresented
4. Resolution readiness: objections that are well-formed and ready to be resolved.
5. Effort required
6. Source - objections that are initiated by the ATO versus those initiated by the client.

Action item	NTLG 2308/2 Potential consultation with the law profession
Status	In progress
Responsibility	Jonathan Todd, Deputy Commissioner, Office of the Chief Tax Counsel, ATO
Description	The ATO is continuing to work with Law Council of Australia representatives on this matter.

Attendees

Attendees list

Organisation	Member
ATO	Kirsten Fish (Co-chair), Law Design and Practice
ATO	Jeremy Hirschhorn, Client Engagement
ATO	Jodi Williams (Secretariat), Enterprise Strategy and Design
ATO	Tanya Canavan, Office of the Chief Tax Counsel
Chartered Accountants Australia and New Zealand	Michael Barbour
Chartered Accountants Australia and New Zealand	Michael Croker
Corporate Tax Association	Simon Staples
CPA Australia	Alexis Kokkinos
CPA Australia	Elinor Kasapidis
Institute of Public Accountants	Tony Greco
Law Council of Australia	Judith Taylor
Law Council of Australia	Mia Clarebrough
The Tax Institute	Julie Abdalla
The Tax Institute	Jerome Tse (Co-chair)
The Tax Institute	Sumitha Krishnan
Treasury	Diane Brown
Treasury	Laura Berger-Thomson

Guest attendees

Guest attendees list

Organisation	Attendee
ATO	Rob Heferen, Commissioner of Taxation
ATO	Grant Brodie, Client Account Services
ATO	John Ford, Fraud and Criminal Behaviours
ATO	Louise Clarke, Private Wealth
ATO	Nadia Alfonsi, Public Groups
ATO	Nicholas Shizas, ATO Corporate
ATO	Peter Phillips, Smarter Data Program
ATO	Sarah Vawser, Individuals and Intermediaries
Tax Practitioners Board	Michael O’Neill

Apologies

Apologies list

Organisation	Member
Law Council of Australia	Justin Byrne