National Tax Liaison Group key messages 15 June 2022

Key highlights

• The ATO provided information to members regarding public advice and guidance (PAG) it is preparing for trust matters in the lead up to 30 June.
• Members were provided an overview of the Data Availability and Transparency Act 2022 and the data ethics the ATO employs to ensure it remains a trusted data custodian.
• Treasury provided a summary of the work that has been undertaken to brief the new Ministers and noted media reports of an October Budget. Updates were given on the progress of OECD Pillar 1 and Pillar 2 proposals.
• Members appreciated the insights the Inspector-General Taxation Ombudsman (IGTO) provided regarding the IGTO’s role, and look forward to the interim report the IGTO will release on the review into The Australian Taxation Office’s Administration and Management of ObjectionsExternal Link.
• The ATO noted the progress it had made on implementing the recommendations in the IGTO review: An investigation into the effectiveness of ATO communications of taxpayer rights to complain, review and appealThis link will download a file PDF 5.55MB).This link will download a file
• Members acknowledged the difficulty in being able to measure the effectiveness of PAG. Members will provide further thoughts on other measures that could be used to report on the effectiveness of PAG.
• Members found the out-of-session meeting on the effectiveness of ATO consultation processes useful. They have provided several comments and suggestions to consider.

Opening comments

Kirsten Fish, Second Commissioner, Law Design and Practice Group, ATO; Peter Godber, The Tax Institute.

The National Tax Liaison Group (NTLG) Co-chair Kirsten Fish welcomed members and advised that Laura Berger-Thomson from Treasury will be joining the NTLG having been appointed First Assistant Secretary for Individuals and Indirect Tax Division, Revenue Group. Kirsten thanked Marty Robinson for his contribution to the NTLG.

NTLG Co-chair Peter Godber welcomed the return to a face-to-face meeting and noted the items on the agenda were of keen interest to members and the anticipated discussions.

Measuring the effectiveness of public advice and guidance

Fiona Dillon, Chief Tax Counsel, ATO; Lisa Clifton, Assistant Commissioner, Tax Counsel Network, ATO

Measuring the effectiveness of PAG was discussed at the 28 April NTLG meeting. Following that meeting members advised that the discussions were very useful and noted that due to time constraints, there was not sufficient opportunity to work through the questions that were posed in the agenda pack. Members suggested an out-of-session workshop to delve into the issues in more detail.

A workshop was held on 6 June where members acknowledged that measuring effectiveness is difficult and they would further consider if there are other measures that could be considered. Members will provide a written response to the questions raised about the proposed measures.

Members asked if the focus on measuring effectiveness was the result of the restructure in the Law Design and Practice area. The ATO noted that the work had already been underway and that we are aiming to ensure we produce appropriate, purposeful PAG. The restructure was to ensure there was an elevation of focus on PAG and will result in some streamlining of processes. The Chief Tax Counsel has corporate accountability for PAG, but it is produced across the ATO with technical officers located in various business lines.

Members noted their interest in understanding how we determine what topics need PAG (both public rulings and website content) and their desire to contribute to the discussion on these topics and the development of those products. Members recognised that consultation needs to be balanced against timely delivery. The ATO noted that where information needs to be made available broadly to the community, website guidance is often most appropriate.

Members suggested there had been a reduction in the number of PAG products being issued because of the low numbers of Taxation Rulings being released in recent years. The ATO noted that there has not been a reduction overall, with many products issued covering not only Taxation Rulings but also Taxation Determinations. Further, website content is often released in addition to Taxation Rulings.

Members were interested in how test cases fit within our approach. The ATO noted that test cases, where appropriate, fit into our broader strategy to provide certainty on issues. However, test cases can take a long time and it can be difficult to identify cases that contain the issues that we would like to have clarified by the judiciary. The ATO applies a multifaceted strategy in supporting an effective tax system with PAG being one of the strategies used.

PAG end of financial year preparations – Trust matters

Louise Clarke, Deputy Commissioner, Private Wealth, ATO; Fiona Dillon, Chief Tax Counsel, ATO; Justin Dearness, Assistant Commissioner, Tax Counsel Network, ATO; Chris Ryan, Assistant Commissioner, Private Wealth, ATO; Alexis Kokkinos, CPA Australia

Members were provided with 2 papers prior to the meeting:

• a brief guide for tax agents and trustees on how to deal with Section 100A for 30 June 2022
• an update on recently released guidance following the Greensill decision.

In addition, on 10 June 2022 Decision Impact Statement Commissioner of Taxation v Carter was released along with an accompanying media statement.

The ATO advised members that we are working to finalise the PAG on Division 7A noting there was not much feedback received on the Draft Taxation Determination 2022/D1 Income tax: Division 7A: when will an unpaid present entitlement or amount held on sub-trust become the provision of 'financial accommodation'?

On Section 100A, the ATO met with a broad range of people to discuss the initial responses to the Draft Practical Compliance Guideline PCG 2022/D1 Section 100A reimbursement agreements - ATO compliance approach. We anticipate further consultation on additional changes we propose with the aim of finalising the guidance by the second half of the year. There will be a focus on providing more examples in the green zone, refining the examples in the red zone, and removing examples from the blue zone.

Members questioned whether the brief guide for tax agents will be distributed by the ATO, or whether the ATO was expecting tax advisers to distribute. The ATO confirmed it wished to maximise the distribution channels. Members noted the use of LinkedIn is a useful addition to the ATO’s communication approach particularly when it is used by senior leaders in the ATO.

Members identified that the single example provided in the brief guide on 100A could be misleading and recommended that it be changed or removed.

Members noted concerns with proposed Tax Determinations listed on the advice under development program for more than 12 months. The ATO confirmed that the program is for transparency purposes and it does not necessarily mean we have a decided view already. If the ATO was to only list items once a view had been determined, we would lose transparency for the community on where our focus is.

Members asked whether improved engagement can be achieved by the use of an ‘options’ paper to commence conversations earlier. The ATO noted that an options paper could work for some issues.

Data Availability and Transparency Act

Elinor Kasapidis, CPA Australia; Marek Rucinski, Deputy Commissioner, Smarter Data, ATO; Peter Phillips, Assistant Commissioner, Smarter Data, ATO

The Data Availability and Transparency Act 2022 (DATA) has commenced and requests for data are expected to flow through the system from August. The National Data Commissioner will provide regulatory oversight to the DATA Scheme.

The ATO is a data custodian under the Act – while we can share data, we are not compelled to do so. Accredited users may request our data for 3 permitted purposes:

• Government service delivery
• informing government policy and programs
• research and development.

The data cannot be shared for enforcement or compliance purposes and there are privacy protections in place. The ATO has strong governance frameworks and ethics principles in place to maintain community confidence in how we manage the data we hold throughout the data lifecycle. This includes when we share data where it is lawful and ethical for us to do so.

Our guiding principles to ensure the community has confidence in how we manage data requests are:

• our participation in the DATA Scheme should not compromise public trust and confidence in how we handle their information
• we refer requesters to existing resources, including Tax Statistics and ATO information maintained by the Australian Bureau of Statistics
• we use existing data exchange pathways where they exist
• we only share identifiable unit records with state and commonwealth government requesters AND will have strong governance and stewardship arrangements in place, particularly where it is for service delivery purposes
• for policy development and research purposes, we will generally only share de-identified data with non-government accredited users, except where the taxpayer specifically provides consent to do so.

The ATO has data ethics principles which encompasses how we use artificial intelligence (AI) to make decisions. AI is not used in a deterministic fashion and is a tool to assist in decision-making. All staff have been trained in the application of our data ethics principles which are:

• Act in the public interest, be mindful of the individual
• Uphold privacy, security and legality
• Explain clearly and be transparent
• Engage in purposeful data activities
• Exercise human supervision
• Maintain data stewardship.

Members noted the community at large is unaware of the ATO’s access to data and asked how the ATO intends to reassure the public on our access and use of data. The ATO acknowledged its role and the need to engage with the community as use of data expands. Members noted that for a future meeting they would be interested in what information has been requested under the Act and how we have managed the process.

Treasury update

Laura Berger-Thomson, First Assistant Secretary, Individuals and Indirect Tax Division, Revenue Group, Treasury; Maryanne Mrakovcic, Deputy Secretary, Revenue Group, Treasury

Following the election, Treasury now has 4 new ministers managing its portfolio with several departmental and administrative changes announced.

Treasury noted that members will be aware of the government’s tax election commitments, and media reports of an October Budget.

Treasury noted that the new government was focussed on implementing its election commitments and providing certainty for announced but unenacted measures, with those measures that are due to start on 1 July 2022 a key priority.

Treasury confirmed that the proposed measures on the Sharing economy and the power of the Administrative Appeals Tribunal (AAT) to pause or modify ATO debt recovery action in relation to disputed tax assessments under review have lapsed due to the Federal election. Treasury noted that extensive consultation has already been undertaken, including with virtual platform providers in relation to the Sharing economy.

Treasury welcomed feedback on the announced but unenacted measures that are important to the tax community. Members noted the following priorities:

• Thin capitalisation exclusion rules and interest restrictions
• Corporate residency
• Small business technology investment and skills and training measures
• AAT power to impact ATO debt action for small businesses in a tax dispute.

Members noted concern with the care and maintenance of the tax system.

Treaty negotiations are continuing with Greece, Portugal and Slovenia. Negotiations with Iceland and India have recently concluded at the official’s level. The government will be considering the future of the tax treaty program.

Treasury noted an upcoming meeting on the Inclusive Framework for Base Erosion and Profit Shifting with an expected focus on OECD Pillar 1 and whether there will be a delay for the implementation timeframe.

Inspector-General of Taxation and Taxation Ombudsman

Karen Payne, Inspector-General of Taxation and Taxation Ombudsman

The Inspector-General of Taxation and Taxation Ombudsman (IGTO) provided an insight to the role of the IGTO noting that topics for investigation are sourced from a variety of avenues including stakeholder suggestions and complaints.

A member asked if the topics listed on the website are all the topics the IGTO have received, or are they triaged and only those of possible future investigation listed. The IGTO confirmed that the website lists all suggestions received.

There are currently 3 reviews underway.

The ATO’s Administration and Management of Objections

There has been a lot of interest in this review. An interim report, which will not contain any recommendations, will be published. It will include significant data and statistics about objections including their source (for example, ATO action or self-amendment). Stakeholders will be able to provide further submissions to the review after considering the interim report. Submissions do not have to include proposed solutions as the IGTO will independently investigate issues raised.

Several themes have arisen in the submissions so far, including:

• the experience of the process
• independence and impartiality
• timeframes for allocation and determination of the objection
• quality of the objections lodged
• penalties
• lack of clarity in the objection decisions
• familiarity with the objection process
• alternative dispute resolution.

Other points noted were debt recovery action while a dispute exists and ATO resources assigned to determining objections. The IGTO confirmed the focus is on opportunities to improve the process.

The Exercise of the Commissioner’s Remedial Powers

The Commissioner of Taxation has a statutory discretion to modify the operation of certain provisions in the tax law where those provisions are not operating as intended. The discretion is only able to be exercised where certain conditions have been met which includes a negligible budget impact.

It has been noted that there appears to be a lack of clarity on:

• how issues are raised for Commissioner's Remedial Power (CRP) consideration
• whether the processes underlying consideration of these matters are sufficiently robust to consider relevant factors and expert stakeholder views
• how the budget impact criterion is determined.

The Exercise of the General Powers of Administration

Several pieces of legislation specifically provide the Commissioner of Taxation with general administration of the relevant Act. These provisions grant the Commissioner discretion in relation to the administration of provisions set out in the respective Acts. It is arguable that any administrative decision made by the Commissioner (or a delegate, or duly authorised officer) that is not a decision under a specific legislative power is an exercise of the General Powers of Administration (GPA). In this sense, the scope and breadth of the GPA is extremely broad.

The IGTO’s investigation does not propose to examine every type of decision that may be made under the GPA but will draw from case studies to identify and investigate areas raised as examples of exercise of the GPA that should be investigated. In particular, the IGTO is interested to understand how broad-based GPA decisions, that is, those affecting large groups of taxpayers, are identified and determined. Importantly there are limited avenues to challenge the exercise of either the GPA or the CRP.

The IGTO will prepare options describing the different approaches to the GPA, and present these to the ATO for comment. Members agreed this approach would be helpful.

IGTO investigation on taxpayers' rights

Tony Greco, Institute of Public Accountants; Richard Mold, Assistant Commissioner, Review and Dispute Resolution, ATO; Leigh McCarthy, Governance Director, Review and Dispute Resolution, ATO

In October 2021, the IGTO released An investigation into the effectiveness of ATO communications of taxpayer rights to complain, review and appealThis link will download a file PDF 5.55MB) This link will download a filemaking 6 recommendations.

The ATO agreed with all 6 recommendations stating the focus as:

• staff understanding of the importance of communication rights of review, complaint, and appeal
• readily available public information about those taxpayer rights
• continued review of the Taxpayers' Charter to ensure it provides the appropriate protections.

The ATO is on track to implement 5 of the 6 recommendations by 30 June 2022. The recommendation which relates to considering whether the Taxpayers' Charter contains sufficient information about communication of taxpayer rights will be delayed while a broader review of the Charter is undertaken.

Implementation of the recommendations has included:

• updates to staff training packages and procedures to ensure staff awareness of their responsibilities to communicate taxpayer review rights, manage taxpayer complaints and respect taxpayers' rights of review
• development of a communication strategy for staff
• updates to internal forms to be able to identify which element of the Charter a complaint relates to
• updates to the search function on ato.gov.au so that information that pertaining to taxpayer rights to complain, review and appeal are easily located.

Information regarding the avenues to complain to the ATO will be made more easily accessible on ato.gov.au once the key word search improvements have been implemented.

Members thanked the ATO for the update and noted their interest in the ATO’s complaint process. Members felt there is a perception that people will not complain during an audit because of concern that there may be an impact for active audit cases. The ATO noted that there is a difference between escalating a concern and complaining. Members suggested additional information on the ATO website about escalating matters would be helpful.

The IGTO offered to provide feedback to the ATO on the complaints process, noting that some complaints that come to the IGTO would be better more directly managed through the ATO.

It was agreed that it would be worthwhile to have a discussion on the ATO’s complaint process and how concerns during an ATO review of taxpayer affairs could be escalated outside the review team at a future meeting.

Effectiveness of ATO consultation processes

Robyn Theacos, Governance Director, Enterprise Strategy and Design, ATO

The effectiveness of ATO consultation processes was discussed at the 28 April NTLG meeting. Following the meeting members advised that the discussions were very useful and noted that due to time constraints, there was not sufficient opportunity to work through the questions that were posed in the agenda pack. The members suggested an out-of-session workshop to delve into the issues in more detail.

A workshop was held on 6 June where the opportunity was given to identify and discuss the current pain points, potential opportunities, and best practices in 3 phases – that is, prior to consultation commencing, during consultation and at the end of consultation.

At the workshop, it was noted that the current pain points included:

• the consultation objectives are not always clear
• the scope of the consultation is not always clear
• participants are unaware of their role
• lack of mutual trust between the ATO and those being consulted
• capability of ATO staff conducting consultation
• perception of consultation being conducted after an ATO position has already been determined
• unclear when consultation has finished
• outcomes are not communicated to consultation participants.

Potential opportunities included:

• providing a more visible ATO consultation framework to outline the important elements of consultation
• drafting a ‘code of conduct’ to help and support all consultation participants
• ensuring greater clarity is provided on the purpose of consultation from commencement (for example, consultation could include exploring market knowledge and/or the practical implications of a change)
• providing an appropriate level of training for people leading consultation to build capability in areas like facilitation
• focusing on clearer communication in areas such as out-of-scope matters, non-negotiable positions and with participants at the consultation close-out stage
• providing a summary report of the consultation process and outcomes
• developing and seeking input on forward work programs, whilst retaining flexibility to accommodate emerging needs to supplement the program as required.

Members appreciated the opportunity to reflect on the consultation process.

Post-meeting update – The ATO provided a summary of workshop outcomes to members on 23 June 2022.

Action items update

NTLG 2204/1 – Measuring the effectiveness of Public advice and guidance

Members agreed this item would be closed once members provide their written response.

NTLG 2204/2 – Digital assets and Transactions

Members agreed this item would be closed once members provide the requested information.

NTLG 2202/1 – Effectiveness of consultation

Members agreed this item can be closed once the ATO provides a summary of the workshop. Members will continue to be engaged as the work progresses. Post-meeting update – A summary of workshop outcomes was provided to members on 23 June.

NTLG 2202/3 – Section 99B – Member submission

Members agreed this item is closed – further updates of the progress of this work will be available via the Advice under development program on ato.gov.au

NTLG 1911/1 –– Establishment of NTLG sub-group to consider compliance costs

Members met with University of New South Wales Academics to discuss next steps on 6 June and will directly engage Assistant Commissioner Andrew Watson to plan the way forward.

Other business

Members noted their concerns with the significant changes being proposed for Taxation Ruling 2021/1 Income Tax: when are deductions allowed for employees' transport expenses? The changes are considered positive but will have significant ramifications for some long-standing principles.

The decision relating to Water West Pty Limited and Commissioner of Taxation (Taxation) [2022] AATA 427 was a topic proposed for discussion at this meeting. An out-of-session conversation has been held. The ATO is continuing internal discussions on the appropriate response to this decision.

Members noted their interest in the operation of the Fraud and Evasion panel. The ATO advised that data is contained in our annual report. The ATO agreed that it would be a valuable topic to discuss at a future meeting.

Post-meeting update – Consultation on Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? brought out divergent issues on the topic and revealed that it will only be in very exceptional circumstances that travel from home to work in the course of a work from home arrangement would be deductible. For those reasons, the ATO thought it was better to deal with these situations through private rulings. We already have general principles outlined at paragraphs 75 to 78 of TR 2021/1. As part of this process, we received feedback on related content concerning home office expenses and the main residence exemption. That feedback will be considered as part of the revision of existing web content.

Attendees

Attendees list

Organisation	Attendees
ATO	Kirsten Fish (Co-chair), Law Design and Practice
ATO	Jeremy Hirschhorn, Client Engagement
ÁTO	Martin Pook, Office of the Chief Tax Counsel
ATO	Robyn Theacos (Secretariat), Enterprise Strategy and Design
Chartered Accountants Australia and New Zealand	David Watkins
Corporate Tax Association	Michelle de Niese
CPA Australia	Alexis Kokkinos
CPA Australia	Elinor Kasapidis
Institute of Public Accountants	Tony Greco
Law Council of Australia	Angela Lee
Law Council of Australia	Justin Byrne
The Tax Institute	Jerome Tse
The Tax Institute	Peter Godber (Co-chair)
The Tax Institute Professional Bodies Coordinator	Julie Abdalla
Treasury	Laura Berger-Thomson
Treasury	Maryanne Mrakovcic

Apologies

Apologies list

Organisation	Member
Chartered Accountants Australia and New Zealand	Michael Croker

Information about the key topics discussed at the National Tax Liaison Group meeting 15 June 2022.