Meeting theme
The theme of the meeting was dispute resolution.
Key highlights
- The ATO provided an overview of its current approach to the management of objections. Members discussed potential improvements that could reduce objection processing timeframes and were encouraged to provide feedback on how the ATO should prioritise its workload.
- Members discussed the ATO’s proposed expansion of the Small Business Independent Review (IR) program. Members were supportive but noted that education may be required to increase the level of engagement with the IR program.
- The ATO provided an update on the progression of a new system of federal administrative reviewExternal Link. Members discussed the potential impact this may have on professional bodies.
- The administration of the ATO’s small business litigation funding program and proposed changes to this program were discussed. Members were supportive of the program and provided their feedback on the ATO’s proposed changes.
- ATO settlement and litigation trends were discussed, including the need to balance taxpayer secrecy whilst simultaneously providing sufficient transparency on developments that occur in this space.
- The ATO provided an overview of the General Anti Avoidance Rules Panel activity throughout 2023.
- Members discussed ideas for potential National Tax Liaison Group (NTLG) meeting topics for 2024.
Opening comments
Kirsten Fish, Second Commissioner, Law Design and Practice Group, ATO; Peter Godber, The Tax Institute
Co-chairs Kirsten Fish and Peter Godber welcomed members.
Kirsten expressed her appreciation for Peter’s support and guidance as departing external co-chair and NTLG member. The new external NTLG co-chair will be confirmed next year.
The NTLG member refresh is underway with professional associations requested to nominate new representatives. NTLG membership changes will be announced in early 2024.
ATO objections and processing improvements
Tim Rowe, Acting Deputy Commissioner, Objections and Review, ATO; Farisha Ali, Assistant Commissioner, Objections and Review, ATO; Mia Clarebrough, Law Council of Australia
The ATO provided an overview of its current approach to managing different types of objections. There are different drivers and management approaches for objections within and outside scale markets.
Many significant events and programs have impacted scale market objections requiring prioritisation of resources. These include the Lodge and Pay reset, the interception of fraud and Operation Protego, military super (the Douglas decision) and large-scale remediation projects.
The ATO is facing labour market pressures and internal competition for resources.
There has been a significant increase, approximately 25% in objections in the last 12 months.
The ATO is generally able to adjust quickly to such an increase in work and shift to different peaks, however, given the sharp increase in receipts, the ATO is currently seeing delays in the allocation of objections. There are currently around 8,000 objections in the system; more than a tolerable level for a desired client experience.
The ATO invited member feedback on what work should be prioritised.
Action item | NTLG 2312/1 – ATO objections priority work |
Status | In progress |
Responsibility | Sumitha Krishnan, The Tax Institute Australia |
Description | Members are invited to provide feedback on the work that the ATO should consider prioritising to progress the large numbers of objections currently in the system. |
Members suggested looking at call centre scripting to ensure it does not promote unnecessary objections, and raised specific concerns regarding certain amounts in tax returns that appear to be auto amended without notice to the tax agent. The ATO requested that examples be provided for further investigation.
The group discussed objections submitted to preserve rights and whether legislative change is required to allow out of time objections.
Members suggested the ATO could allow a taxpayer to categorise their objection application as urgent or as an objection made to preserve rights to assist with prioritisation.
In the large market, the ATO has not seen a significant increase in objections.
The ATO is facing resourcing challenges in these areas, particularly around the recruitment of people for senior roles. Additionally, there can be difficulties associated with managing independence. For example, if an expert or Tax Counsel Network staff have been engaged at audit, they cannot be engaged at the objection stage.
The ATO noted taxpayers may produce new information at the objection stage which can cause delays. Some jurisdictions, such as the United States of America, require the case to be sent back to audit if new information is provided during the review process. While a similar policy setting may assist to address objection delays, the ATO noted that it is not feasible to complete every audit to a litigation standard.
Regarding prioritisation, the ATO asked members to consider what should be seen as more important:
- resolution readiness: well-formed objections that are ready to resolve
- source: objections that are sourced in ATO action versus client initiated
- age: first in, first out
- whether the objection is refund or debt driven
- whether the taxpayer is represented or unrepresented
- effort required.
The ATO acknowledged that it continues to focus on identifying improvements, including the way it shares timelines, pathways to resolution, and speaking with taxpayers about objection matters.
Independent review programs
Richard Mold, Assistant Commissioner, Objections and Review, ATO; Tim Rowe, Acting Deputy Commissioner, Objections and Review, ATO; Grace Lynn, Law Interpretation Director, Objections and Review, ATO
The ATO proposes to expand its small business independent review (IR) program to include the middle market (small businesses with a turnover between $10 million and $15 million). The ATO requested member insights, based on their experiences of small and large market IR, to inform the design of the expanded program.
IR occurs before the finalisation of an audit. If the IR finds that the taxpayer has the better view, the ATO administratively binds itself to the IR decision.
Members noted that while they support the current IR program, they do not see a lot of program engagement. Therefore, it is difficult for members to say what is or is not working or suggest improvements.
The ATO acknowledged that IR numbers are lower than expected. Auditors offer IR to eligible taxpayers but the take up is low. It was suggested that taxpayers may not be motivated to engage with the ATO until the opportunity for IR has passed.
The group discussed issues and challenges specific to the middle market, noting it has features of both the large market (complex issues) and small market (low levels of engagement). Members noted middle market taxpayers may find it difficult to access appropriate professional advice for the range of issues they may have.
Members acknowledged the need for education to increase engagement levels with the ATO’s middle market IR program and suggested promoting it through events run via professional bodies such as The Tax Institute. It was suggested that case studies from the pilot program will also assist people to understand what is involved.
Given the earlier discussion on labour market pressures and internal competition for resources, members questioned whether resources put into the IR program would be better allocated elsewhere within the ATO. The ATO confirmed IR staff are redeployed in other areas when not undertaking IR work.
Members emphasised the importance of incentivising engagement (that is, provision of all relevant information) from taxpayers earlier in the compliance process. The following were raised as potential areas of consideration in how the ATO approaches IR and its broader compliance program:
- a differentiated approach for different types of issues / compliance programs
- the possible use of facilitation as a method to conduct IR for middle market taxpayers
- the appropriate use of communication strategies and launch methods of the expanded IR program.
A new system of federal administrative review
Jonathan Todd, Acting Deputy Commissioner, Office of the Chief Tax Counsel, ATO
The ATO outlined the progression of the new system of federal administrative review, and how the new body may impact professional bodies and their clients.
On 7 December 2023, the government introduced the Administrative Review Tribunal Bill 2023 which would establish the new Administrative Review Tribunal (the Tribunal) and re-establish the Administrative Review Council. The legislation has been referred to a committee.
The Tribunal’s commencement date will depend on the timing of the passage of legislation and other transitional arrangements.
There is a strong impetus for the Act and practice directions to be as uniform as possible.
It is proposed that the Administrative Review Tribunal will:
- employ a transparent appointment process and have a simpler, 4-tier membership structure
- have clearer roles for the president and registrar, a publicly available code of conduct and a rigorous process for the disclosure and management of conflicts of interest
- have 8 jurisdictional areas including business and taxation
- have greater emphasis and clarity on efficient management of issues and failure to comply with directions, which should promote effective case management.
For taxation matters it is proposed that Part IVC will continue in its operation largely unchanged with one proposed exception where the exemption for giving reasons in taxation matters is removed (with exceptions such as the provision of a 14ZYA notice).
A key difference of the Tribunal is the proposal to use a Guidance and Appeals Panel (GAP) to deal with matters raising a systemic issue and decisions affected by a material error. Parties can apply to send a matter to the GAP or the president can decide to refer a matter. A matter can go directly to the GAP or, if it has been heard and there is a material error, parties can appeal to the GAP.
Parties will still have appeal rights to the Federal Court.
The group discussed the selection criteria for Tribunal members and questioned whether legal qualifications are required. The group reflected that experienced tax professionals may not get through the selection process. The ATO noted non-lawyers were not excluded and encouraged all tax practitioners to apply.
Small business litigation funding program
Andrea Jennings, Acting Assistant Commissioner, Office of the Chief Tax Counsel, ATO; Jonathan Todd, Acting Deputy Commissioner, Office of the Chief Tax Counsel, ATO, Mia Clarebough, Law Council of Australia
The group discussed the administration of the current funding program and proposed changes the ATO wishes to make to the program.
Members expressed support for the ATO extending the program and shared positive feedback regarding their past experiences with the current scheme.
Members questioned whether the policy intention of the program remains the same (that is, to level the playing field) and, if so, questioned whether there should be an underlying value judgment as to whether the ATO provides funding. The ATO acknowledged the intent of the program is to promote trust and confidence in the tax system by enabling equal representation. It is corrosive to public trust and confidence if the ATO is seen to be providing funding to cases involving potential fraud or tax avoidance.
Members raised additional concerns regarding the program, including:
- requesting increased clarity regarding matters that will be covered (prior to applying for the program)
- uncertainty about what is covered due to lack of clear agreement terms
- administration, including the level of detail required on invoices.
The ATO acknowledged member concerns about what is funded and confirmed a new deed and fact sheet are being drafted which will provide further clarity.
ATO settlements and litigation trends
Grahame Tanna, Assistant Commissioner, Office of the Chief Tax Counsel, ATO; Andrea Jennings, Acting Assistant Commissioner, Office of the Chief Tax Counsel, ATO; Michelle de Niese, Corporate Tax Association
Members noted that settlements are tightly managed by the ATO.
One point of concern was raised in relation to settlement press releases. Members noted that taxpayers are not provided with an opportunity to review the ATO press releases. This can make it difficult for the taxpayer to ensure that investors who read the ATO’s press release are receiving the right information.
Members noted the ATO has been under pressure to provide information on settlements in Senate Estimates and questioned how the ATO is managing this pressure and the need to provide confidence that settlements are not ‘sweetheart’ deals.
To ensure the integrity and independence of settlement processes, the ATO has introduced judges to undertake case reviews, post-settlement. The Australian National Audit Office (ANAO) also has an oversight role of ATO. The ATO publishes population level data in its annual reports which is then reviewed by the ANAO. This offers additional transparency around ATO settlements.
Regarding the issue of press releases, the ATO noted this is a niche issue which affects only the top end of businesses. Press releases are used to give the community confidence that there are no ‘sweetheart’ deals. The ATO acknowledges affected taxpayers’ desire to understand what the ATO is likely to say, but providing taxpayers with the opportunity to review or comment on ATO media releases could easily itself be characterised as a form of sweetheart relationship.
The ATO’s position is that, as set out in the legislation passed by Parliament, taxpayer information should remain secret, although the power of the Senate to compel that information (via decision of the whole Senate) is acknowledged, noting a long-standing convention that the Senate will not pursue taxpayer specific information. Taxpayer secrecy is important for integrity of the tax system for multiple reasons, including balancing the power of the state against the individual, as well as the ATO not becoming politicised. The ATO ensures such requests for information (sought by a single committee or senator, for instance) to go through a Public Interest Immunity claim and possibly to a vote of the Senate to ensure taxpayer information is only provided where the Senate has fully considered the pros and cons in relation to the immediate matter but also longer-term precedent.
The group discussed litigation trends and areas of focus. The ATO noted that work involving private groups has increased, and that large market, debt and transfer pricing cases are also trending upwards.
The ATO has an 80% success rate with litigation, which would suggest that the right cases are being selected to litigate and resolve. Cases where the ATO is unsuccessful test the system and assist to clarify the law. In comparison, the ATO’s success rate in the Administrative Appeals Tribunal is 90%.
The ATO is attempting to provide greater transparency regarding what is happening in the litigation settlement space across different markets. Practical Compliance Guidelines are one way the ATO provides transparency to the market on administrative settings. Members suggested it would be helpful for the ATO to provide examples of ‘green, amber and red’ scenarios.
The ATO is also focused on diversity amongst external legal counsel, ensuring greater representation from female and Indigenous counsel.
Treasury
Diane Brown, Deputy Secretary, Revenue Group, Treasury; Laura Berger-Thomson, First Assistant Secretary, Revenue Group, Treasury
Treasury provided the following updates:
- The 2023–24 Mid-Year Economic and Fiscal OutlookExternal Link, was released by the government on 13 December 2023.
- Submissions in relation to the proposed changes to the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share–Integrity and Transparency) Bill 2023External Link close on 5 January 2024. The ATO further noted it will seek input on public advice and guidance topics, prioritisation and form with respect to the new thin capitalisation measures.
- The Organisation for Economic Co-operation and Development (OECD) Pillar One and Two is continuing. Presently, the OECD is inviting comments on compliance and tax certainty aspects of global minimum taxExternal Link.
- The Council on Federal Financial RelationsExternal Link (CFFR) met to discuss the implications of the High Court decision in Vanderstock & Anor v State of Victoria [2023] HCA 30. The Court ruled that Victoria’s charge on the use of Zero and Low Emission Vehicles was invalid.
- As a part of the government’s response to the PwC matter announced on 6 August 2023, a consultation paper Enhancing the Tax Practitioners Board’s (TPB) sanctions regimeExternal Link has been released. The government is seeking stakeholder feedback on proposed reforms that will provide the TPB with a stronger and more agile sanctions regime. The consultation closes on 21 January 2024.
- Treasury thanked members for their recent engagement in a workshop which explored how consultation processes could be improved. Treasury is awaiting advice from participants on interest in a further roundtable in 2024 to continue the discussion.
NTLG reflections and year in review
Members reflected on 2023 NTLG achievements and suggested topics of interest for 2024.
Members noted themed NTLG meetings have worked well and recognised the consultation process for the revised Taxpayer’s charter as an achievement. The group’s engagement with external bodies was also commended, with members noting the importance of engaging with the TPB in particular.
Members noted that from the tax profession’s perspective, 2023 was a challenging year.
Members expressed frustration with short consultation periods and amendments passed without consultation or consultation not appearing to be taken into consideration, noting this could lead to poor policy and law outcomes. Members shared their observations that there has been a decline in volunteers to collate consultation submissions due to a perception that the government is not listening.
Suggested topics of interest for 2024 included re-building trust and integrity, the sharing economy, digital third party reporting and Artificial Intelligence and the The Hon Ed Husic inquiry Action to help ensure AI is safe and responsibleExternal Link.
The ATO encouraged external member-led agenda items for 2024 with members noting it would be helpful if they could invite guest presenters from their own professional bodies.
General Anti-Avoidance Rules (GAAR) Panel
Peter Walmsley, Deputy Chief Tax Counsel, Office of the Chief Tax Counsel, ATO
The ATO provided an update on GAAR panel activity over 2023. It was noted that many GAAR matters continued to involve international issues.
The majority of cases brought to the panel since December 2022 have originated from Public Groups and International. Several of these cases have involved treaty shopping arrangements, whilst others pertain to transfer pricing arrangements, including cross-border debt financing and capital restructures.
Other matters the GAAR Panel considered included:
- a singular diverted profits tax case presented to the panel for a full hearing
- arrangements concerning the potential application of section 177EA of the Income Tax Assessment Act 1936 (ITAA 1936)
- an arrangement featuring conduit foreign income dividends
- an arrangement involving the potential application of section 45B of the ITAA 1936
- arrangements which resulted in peculiar capital gains tax outcomes for consolidated groups.
Other panel matters considered during 2023 included:
- an arrangement involving a cost uplift, the creation of a mismatch between trust and net income and the distribution of trust income to a loss entity
- an arrangement involving the exchange of loans for shares in a company and the forgiveness of debts owed by discretionary trusts
- a ‘wash sale’ arrangement consistent with those described in Taxation Ruling TR 2008/1 Income tax: application of Part IVA of the Income Tax Assessment Act 1936 to 'wash sale' arrangements
- a matter concerning the transfer of intellectual property offshore
- a matter concerning the possible application of Division 165 of the A New Tax System (Goods and Services Tax Act) 1999 (the GST Act).
The GAAR Panel will soon need to refresh its non-judicial members. Members noted they would be open to proposing candidates to fill GAAR panel vacancies.
Action items update
2310/1 – Contact centre call volumes and processing
Responsibility – Grant Brodie, Deputy Commissioner, Client Account Services, ATO
An update was provided to the Tax Practitioner Stewardship Group on this matter. It was agreed that the item be closed.
2310/2 – Delayed private rulings
Responsibility – Jodi Williams, Director, Enterprise Strategy and Design, ATO
An out of session was held with interested members on 28 November 2023, item to be closed.
2308/5 – Confidential consultation
Responsibility – Julie Abdalla, The Tax Institute
Members have no further feedback, item to be closed.
2308/4 – Reflection on consultation processes
Responsibility – Kirsten Fish, Second Commissioner, Law Design and Practice, ATO
In progress – This item will be addressed the February 2024 NTLG meeting.
2308/2 – Potential consultation with the law profession
Responsibility – Jonathan Todd, Deputy Commissioner, Office of the Chief Tax Counsel, ATO
In progress – An update will be provided at the February 2024 NTLG meeting.
2308/1 – Multinational Tax Integrity engagement plan
Responsibility – Harjit Singh, Assistant Commissioner, Office of the Chief Tax Counsel, ATO
In progress – A copy of the consultation plan has been provided to NTLG members for their consideration. This item will be addressed at the February 2024 NTLG meeting.
2306/1 – Strategies to improve tax agent interactions with the ATO
Responsibility – Julie Abdalla, The Tax Institute
No further feedback from members, item to be closed.
Attendees
Organisation | Attendees |
|---|---|
ATO | Kirsten Fish (Co-chair), Law Design and Practice |
ATO | Jeremy Hirschhorn, Client Engagement |
ATO | Lisa Wong (Secretariat), Enterprise Strategy and Design |
ATO | Martin Pook, Office of the Chief Tax Counsel |
Chartered Accountants Australia and New Zealand | David Watkins |
Chartered Accountants Australia and New Zealand | Michael Croker |
Corporate Tax Association | Michelle de Niese |
CPA Australia | Bill Leung |
CPA Australia | Sue Williamson |
Institute of Public Accountants | Tony Greco |
Law Council of Australia | Justin Byrne |
Law Council of Australia | Mia Clarebrough |
The Tax Institute | Jerome Tse |
The Tax Institute | Peter Godber (Co-chair) |
The Tax Institute | Julie Abdalla |
Treasury | Diane Brown |
Treasury | Laura Berger-Thomson |
Apologies
Organisation | Member |
|---|---|
CPA Australia | Alexis Kokkinos |
CPA Australia | Elinor Kasapidis |