National Tax Liaison Group key messages 20 February 2024

Meeting theme

The theme of the meeting was Consultation.

Key highlights

The Australian Taxation Office (ATO) provided an update on the revised ATO Treasury Protocol.
Members provided feedback on the latest draft ATO confidentiality deeds and discussed next steps. Members suggested the development of external and internal guidance on the parameters of confidential consultation would be useful.
The ATO gave an update on the implementation of the ATO Consultation framework and steps taken to ensure ATO consultation aligns with the consultation principles – that is it is purposeful, targeted, timely, transparent, accessible, and that we evaluate and review. Members noted improved consultation experiences since the implementation of the framework.
The group discussed the development of consultation performance measures. While the group was supportive of the proposed measures, it was agreed evaluation and review should be proportionate to the consultation.
The group discussed past and current consultation matters and reflected on the effectiveness of consultation against the consultation principles.
The ATO provided an update on proposed consultation and sought member feedback on a few issues.

Opening comments

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

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

New members Simon Staples (CTA) and Michael Barbour (CAANZ) were introduced to the group.

No conflicts of interest were declared.

Revised ATO Treasury protocol

Sheridan Harvey, Assistant Commissioner, Policy, Analysis & Legislation, ATO; Simon Staples, Corporate Tax Association

The ATO provided members with an update on the revised ATO Treasury Protocol (Protocol).

The revised Protocol was published in December 2023 and reflects a principles-based approach. The Protocol sets out key engagement principles that apply to interactions between Treasury and the ATO.

Drafting considerations included the change in the ATO’s administrative role in recent years to reflect the role of the registry system and include foreign investments; increased interest in the monitoring and evaluation of programs; and increased expectations around working arrangements and data sharing.

Members were unaware the Protocol was being revised until the new version was published and noted advance notice would have been appreciated. Notwithstanding, members were supportive of the revised Protocol noting it brings transparency to policy making and is a useful marker of the roles of Treasury and the ATO.

Members noted the Protocol requires joint assurance by the Treasury and the ATO to provide confidence to government that a draft law can be administered and interpreted in accordance with the underlying policy intent. Members commented that historically, administrative issues are better understood by the ATO, however:

it can be difficult to consult with the ATO during the drafting period
it is often unclear whether the ATO raises the relevant issues with Treasury.

The ATO works closely with Treasury throughout the drafting process and may raise issues regarding the operation of a draft law in accordance with policy intent with Treasury directly. Members commented that knowing the ATO has raised an issue is helpful as it enables members to lend support to the conversation.

Treasury

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

Treasury provided the following updates:

Personal income tax amendments are before parliament. This has resulted in a need to re-prioritise the legislative agenda and several bills are still making their way through parliament.
Several publications have been released including the
Work on OECD Pillar One and Two is continuing. Negotiations on Amount B are ongoing. Treasury anticipate an exposure draft will be released in early 2024.
Work is underway to implement the 'Deny deductions for ATO interest charges' measure announced in MYEFO. The measure broadly means taxpayers will no longer be able to claim a deduction for general interest charges (GIC) and shortfall interest charges (SIC) incurred on or after 1 July 2025.
The group discussed tax transparency. Members queried the timing of the release of a Treasury paper and interactions with the Board of Taxation in relation to transparency. Members questioned whether there is a protocol between the Board of Taxation and Treasury that is like the ATO Treasury Protocol. Treasury took the question on notice.

Action item	NTLG 2402/1 – Treasury and Board of Tax MoU
Status	In progress
Responsibility	Laura Berger-Thomson, Treasury
Description	Treasury to advise whether there is an MoU or protocol between Treasury and the Board of Taxation by 10 April2024.

Confidentiality agreements

Kirsten Fish, Second Commissioner, Law Design and Practice Group, ATO; Nicholas Shizas, Assistant Commissioner, ATO Corporate, ATO; Ivy Wu, Senior Lawyer, ATO Corporate, ATO; Julie Abdalla, The Tax Institute

The ATO presented the latest draft confidentiality deeds and sought member feedback.

We have taken on board internal and external feedback, including from (NTLG) members at the August 2023 meeting. The deeds use Treasury’s confidentiality deed as an anchor point; however, there are substantial differences.

A key point taken from feedback is the need for the deeds to be as flexible as possible, whilst also providing certainty. We are aware of the need for certainty of confidential information, including how long it is confidential for, and whether the fact of consultation is itself confidential. It is intended there will be as little change to the deed as possible on a case-by-case basis and a schedule will be used to set out key details.

There are 2 versions of the deed – one for individuals and one for organisations. An organisation must have a legal personality in order to sign the deed.

Members noted that organisations and professional bodies often send a subject matter expert to participate in confidential consultation and queried whether that person can report back on confidential matters. The ATO intends for the new organisational deed to facilitate the sharing of information between an organisation and the person receiving the confidential information (the ‘Receiving Person’). However, it was acknowledged this approach will not apply to unincorporated bodies and may not apply where the existence of consultation is confidential.

Members raised the possibility of an individual or organisation signing an enduring confidentiality deed, rather than signing a new deed for each consultation. The ATO will consider this approach but noted feedback has emphasised the importance of knowing precisely what information is confidential. This is difficult under an enduring deed.

The group discussed the development of ATO guidance on confidential consultation. Members noted it would be beneficial to:

include more guidance on the ATO website – similar to the consultation framework but for confidential consultation. Members emphasised the importance of guidance focused on being clear on when confidential consultation will be used and how the ATO will advise those subject to confidential consultation that they can engage with each other.
have more internal guidance for consultation leads and participants, to help consultation leads clearly explain the parameters of confidential consultation to participants.

The group reflected on whether confidential consultation should be limited as much as possible. The ATO expects ‘double confidential’ consultation (where the existence of consultation is confidential) will be rare. For other types of confidential consultation, the period of confidentiality should be limited. The ATO noted that limiting confidential consultation means there will be times where drafts may be made public without members having advance notice.

Members will provide feedback on the draft confidentiality deeds within 2 weeks, then arrange for 2 to 4 representatives to meet with Nick Shizas.

Action item	NTLG 2402/2 – Confidentiality deeds
Status	In progress
Responsibility	Jerome Tse, Tax Institute of Australia
Description	Members to provide feedback on the draft confidentiality deeds.

Post meeting update – Members provided their initial feedback on 12 March, with an out of session meeting with Assistant Commissioner Nick Shizas scheduled for 12 April.

Consultation framework

Kate Wilson, Assistant Commissioner, Enterprise Strategy and Design, ATO

The ATO provided an update on the implementation of the ATO Consultation framework (framework).

The process to develop the framework began in 2022 and was finalised in early 2023. The framework sets out the roles and responsibilities of people involved in ATO consultation and is underpinned by 6 consultation principles: that consultation is purposeful, targeted, timely, transparent, accessible, and that we evaluate and review.

We have developed internal consultation guidance, including an updated consultation plan and other templates; guides for consultation leads to support their planning, conducting and finalising a consultation; and guides for group chairs and secretariats. Training courses on improving external engagement have also been offered to staff.

Additionally, we have implemented improved and more centralised record keeping around consultation, ensuring there are records of who, what, when, where and why of a consultation.

Members have observed improvements in ATO consultation since the implementation of the framework, particularly in relation to communication and follow up by consultation leads. Members agreed the framework assists those involved in consultation to understand expectations.

Members noted the low response rate for some consultation feedback surveys recorded in the Feedback on consultation activities August 2023 to January 2024 paper and suggested leads could close consultation with a call to participants to advise them of outcomes and collect feedback on the consultation process at that time.

The ATO reflected that the framework may apply with varying degrees of intensity depending on the circumstances of a consultation (for example, whether it is targeted, public, sensitive); however, the consultation principles will apply to all consultations.

Consultation performance measures

Kate Wilson, Assistant Commissioner, Enterprise Strategy and Design, ATO; Simon Staples, Corporate Tax Association

The ATO sought member input on proposed performance measures and associated risks, issues and opportunities.

We are exploring the different ways to measure consultation effectiveness, and specific areas that would be useful to measure. Successful measurement relies on having the necessary data.

Currently the ATO uses surveys, post-implementation review-type discussions, and bi-annual NTLG meetings focused on consultation, to evaluate and review consultation activities. While these provide valuable data and insights, they are focused on individual consultation matters and are limited in supporting the measurement of whole-of-system effectiveness.

Measures being considered are:

efficiency
quality
success in meeting outcomes.

The ATO confirmed the performance measures are not required under the ATO corporate plan.

The group discussed the resource investment required to implement performance measures and noted the need to carefully assess what should and shouldn’t be evaluated. It was agreed that evaluation and review should be proportionate to the consultation.

Members noted debriefing (or the absence of) was a common theme in feedback from their professional bodies and emphasised the value of receiving a personal debrief from the consultation lead.

Evaluation of past consultation matters

TD 2023/D3 Income tax: trustee risk reserves – deductibility of payments made by a superannuation fund to its trustee

Laurren Pamenter, Assistant Commissioner, Office of the Chief Tax Counsel, ATO

The context for this consultation was changes to the Superannuation Industry (Supervision) Act 1993.

Reflecting on the consultation principles, the ATO noted the consultation was purposeful, targeted, transparent and accessible. The timeliness of the consultation could be improved and evaluation and review process is still underway.

We took a 3-phase approach to consultation – we initially engaged with an existing stakeholder group; we undertook targeted consultation on the proposed draft determination; and published the draft for public consultation.

When initial consultation was undertaken with industry the ATO did not have a firm view on specific taxation issues and did not outline a timeline. This meant delays impacted the timeframe for targeted consultation.

There was a compressed period of just one week for targeted consultation on the proposed draft taxation determination to ensure the final draft was published before the end of the calendar year, prior to the lodgment of tax returns for superannuation funds in January 2024 for the 2023 income year. As it was not feasible to consult with a wide range of stakeholders in this timeframe, we engaged with 2 entities believed to give the broadest possible coverage – The Tax Institute and the Association of Superannuation Funds of Australia (ASFA).

To mitigate the short timeframe, The Tax Institute and ASFA were given advance notice of the planned consultation period to allow them to open up capacity.

The Tax Institute acknowledged the tight timeframe for the consultation and noted the advance notice was helpful to ensure the right people were able to participate. Members would have appreciated more dialogue on their feedback, including an explanation of why some comments on the proposed draft weren’t taken on, as the reasoning was not entirely clear from the compendium they received from the ATO. This feedback would have assisted The Tax Institute to further develop their public submission on the draft taxation determination.

The ATO confirmed the feedback received from The Tax Institute and ASFA was invaluable in refining the draft taxation determination before publication.

PCG 2023/D1 – Electric Vehicle Home Charging Rate

Anthony Bach, Assistant Commissioner, Office of the Chief Tax Counsel, ATO; Amber Ibbot, Law Interpretation Director, Superannuation and Employer Obligations, ATO

The practical compliance guideline (PCG) is a point in time product and the ATO will continue to consult with the Fringe Benefits Tax Stakeholder Group (FBTSG) as technology evolves.

Consultation began in late 2022 and the draft and final product were released in 2023. We are also looking at guidance that can be provided outside the PCG.

Regarding transparency, we were clear about how rates were calculated. While we did not publish a compendium, we held a follow up meeting with the FBTSG to go through the final product.

The consultation ran according to the planned timeframes; however, after closing the public consultation there was a lag. This could be improved for future consultations.

Members noted the PCG deals with a difficult area of law and was an interesting project to observe. The ATO demonstrated flexible thinking on the problem in a way that favoured taxpayers. Members suggested the ATO could engage more with the motor vehicle industry on these issues rather than tax technical people.

[202312] Capital management advice and guidance

Sarah Hassen, Assistant Commissioner, Public Groups, ATO; Melissa Spurge, Assistant Commissioner, Public Groups, ATO

Consultation sought feedback on public advice and guidance (PAG) needs on existing PAG for publicly listed and multinational businesses undertaking certain capital management activities.

Reflecting on the consultation principles, the team noted they released a public consultation paper for 6 weeks and granted extensions to allow for additional feedback. As a public consultation, we ensured it was published via our newsletter channels and shared with frequent users of the Public Groups advice and guidance program.

The ATO received 7 written submissions from professional service firms and industry bodies. Following this, we shared more targeted questions and held joint meetings to further understand the issues raised in the written submissions in more detail. Feedback is currently being analysed and we will share a summary with participants for transparency.

Broadly the feedback was that this PAG is well known and understood, however, it is quite dated and it would benefit from more contemporaneous, detailed and worked commercial examples, especially on section 45B returns of capital. It was also consistently noted that because of the nature of the transactions and wide range of stakeholders the ATO may not see a reduction in ruling requests; however, the updated guidance should assist the participants in the rulings process to be more efficient.

While the ATO is not at the point of evaluating the consultation, we believe the process has been constructive.

Members commended the detailed questions and quality of the consultation document which enabled better submissions. They noted the consultation ‘hit the mark’ in terms of alignment with the consultation principles.

Members questioned whether the team approached consultation from the perspective of reducing administrative burden and costs by streamlining outcomes for both participants and the ATO. The ATO confirmed the intention is to draft PAG that provides certainty for both applicants and the ATO to make rulings more efficient and consistent.

Current consultation matters

[202329] Capital raised for the purpose of funding franked distributions

Sarah Hassen, Assistant Commissioner, Public Groups, ATO; Melissa Spurge, Assistant Commissioner, Public Groups, ATO

The ATO has sought feedback on whether there are priority issues where ATO PAG is needed to help apply the new integrity measure addressing franked distributions funded by capital raisings.

In 2015 we issued a Taxpayer Alert outlining what we were observing in the market in relation to certain transactions. As part of the 2016–17 MYEFO, the government announced changes to prevent franking credits attaching to a distribution where capital is raised for the purpose of funding the distribution.

An exposure draft was released in 2022 with around 2,000 submissions received from stakeholders. Further submissions were received in a Senate Inquiry. While these submissions were considered as part of drafting the consultation paper, the subsequent changes to law and the explanatory memorandum as part of the legislative development process.

In December 2023, we issued a consultation paper drawing attention to potential areas where guidance might be required, the changes that had occurred since the exposure draft had been released and seeking specific examples of concerns or difficulties for stakeholders in applying the law to their circumstances. An extended period for making submissions was provided to account for the holiday period but only two submissions had been received to date. Additional extensions of time to make a submission been granted where requested. We expected to organise discussion groups to identify issues that should be prioritised would be required given the diversity of stakeholders.

The group noted the prioritisation process is critical as it allows the ATO to provide early advice and guidance on key issues. Members suggested a workshop would be beneficial and the ATO confirmed discussion groups will follow submissions.

Members noted that identifying scenarios that presented a higher level of risk of being subject to the new measure would be useful in any PAG.

Amendments to the Thin Capitalisation rules – ATO PAG Plan

Harjit Singh, Assistant Commissioner, Office of the Chief Tax Counsel, ATO; Stephen Dodshon, Director, Public Groups, ATO

The ATO is seeking feedback on PAG topics, prioritisation and form for the new thin capitalisation measures. The ATO noted, timeliness is a focus as is priorities to ensure we are allocating resources efficiently, so where possible it is useful for stakeholder to identify their top 3 priorities.

A consultation document has been distributed to the NTLG and other stewardship groups. We have received written submissions and will meet with stakeholders to discuss the prioritisation of issues. The ATO confirmed it is not compulsory for stakeholders to submit written feedback prior to these discussions, but it is helpful.

Members found the consultation document useful and acknowledged the importance of prioritisation. They noted the challenges posed by the drafting of the legislation and the explanatory memorandum and the absence of examples. Members also noted there could be a spectrum of examples (and issues) across markets which needs to be considered.

The ATO emphasised the importance of submissions including real life examples and noted there are key themes emerging around the third-party debt test, the debt deduction creation rules and the interaction of transfer pricing provisions with the thin capitalisation rules.

The ATO noted that the ATO’s consultation is public and it does not anticipate undertaking confidential consultation during the current round of consultation.

GST and Food PAG

Andrea Wood, Assistant Commissioner, International Support and Programs, ATO

Since 2023 the ATO has progressed several PAG products in this space, to modernise our PAG and to support a level playing field for industry. This update covers past and future PAG consultation.

We have engaged with industry to understand priority issues on food classification administration issues generally, including PAG. That engagement has been very valuable and aligned well with 2 court decisions in 2023.

In October 2023, we published the draft GSTD 2023/D1: Supplies of combination food for public consultation following the decision in Chobani Pty Ltd and Commissioner of Taxation [2023] AATA 1664, and we will be publishing the final GSTD at the end of February 2024 (it published on 28 February 2024 as GSTD 2024/1).

The Decision impact statement on Simplot Australia Pty Limited v Commissioner of Taxation [2023] FCA 1115 relating to prepared meals was published in November 2023. This published soon after the decision to address industry concerns regarding the uncertainty of the scope of the decision.

In March 2024, we plan to publish a draft GSTD for public consultation on prepared meals to provide clarity across the range of products in this space.

We have also commenced a phased approach to modernising the Detailed Food List Public Ruling, which we know industry heavily relies on. A first phase of updates published in June 2023. A second phase will publish at the end of February 2024 when the final GSTD on combination foods is published (it published on 28 February 2024).

Members noted they have heard positive things about the work the ATO is doing in this space, including its valuable engagement with industry.

Taxation Ruling TR 2024/D1 Income tax: royalties – character of payments in respect of software and intellectual property

Andrew Werbik, Assistant Commissioner, Office of the Chief Tax Counsel, ATO; Timothy McCarthy Assistant Commissioner, Public Groups, ATO

Consultation on this item first occurred in 2017. This was followed by the ATO preparing draft guidance on software distribution agreements and targeted consultation on that draft guidance in January 2018. Following this consultation, the ATO made the decision to rewrite TR 93/12, resulting in the publication of TR 2021/D4 on 25 June 2021 (and withdrawal of TR 93/12 with effect on 1 July 2021). During the consultation period for TR 2021/D4, 13 formal submissions were received from a range of parties including accounting and legal firms, taxpayers, and industry groups.

We issued TR 2024/D1 in January 2024 to replace TR 2021/D4, given the previous concerns raised by industry stakeholders in respect of TR 2021/D4 and to allow a further opportunity for feedback. We acknowledged the relatively long period between drafts to reflect feedback where possible and consult further with the PAG Panel (which contains experts from the legal profession). Although TR 2024/D1 is a complete re-write of TR 2021/D4, it maintains the substantive view that payments for the grant or use of intellectual property will constitute a royalty. The draft ruling focuses on the position of software distributors. The consultation period for TR 2024/D1 closes on 1 March 2024 and we will take stakeholder feedback into account when finalising the TR 2024/D1 in accordance with our established PAG processes, including preparation of a compendium outlining the ATO’s responses to feedback received.

As part of the consultation process, we reached out to stakeholders who made submissions on TR 2021/D4 to be proactive in the engagement. We are aware this is a contentious issue crossing both tax and copyright law.

Members noted that the process is running very well in line with the Consultation Framework. It was noted it appears the draft is informed with the benefit of expert advice even though there are different views on the technical application between members and the ATO.

Members noted the draft ruling contains fewer examples. The ATO agreed but stated the key scenarios included are based on real examples and go into much greater detail. The ATO will consider including additional examples.

Members and the ATO noted consistent feedback around apportionment and that administrative guidance would be welcomed. The ATO noted it is considering broader guidance on apportionment and how the payment characterisation issue may impact on other PAG, namely, the inbound supply chain PCG.

Draft Practical Compliance Guideline: ATO compliance approach to section 99B of the Income Tax Assessment Act 1936

Chris Ryan, Assistant Commissioner, Private Wealth, ATO

The ATO is in the early stages of developing a draft PCG on the compliance approach to section 99B of the Income Tax Assessment Act 1936.

Consultation with the Private Groups Stewardship Group sought feedback on whether there is a need for guidance on aspects of section 99B. We are looking at arrangements involving a resident beneficiary and a non-resident trust. Consultation is in the very early stages.

Members acknowledged this is a sensitive topic that many practitioners are interested in. Members expressed interest in being part of the consultation process.

Proposed consultation

Fiona Dillon, Chief Tax Counsel, Office of the Chief Tax Counsel, ATO

The ATO gave an update on proposed consultation and invited member input on issues requiring consultation:

The ATO confirmed it will not issue a new taxation determination for Forex Realisation Event 4, contrary to the aged Advice Under Development Program (AUDP) position. While the ATO considers its earlier view is correct, the matter is not sufficiently high priority to progress (noting that while taxpayers may still make functional currency elections, there is a sense these will be less common). The ATO plans to update the notice of withdrawal and remove this from the AUDP. Members will be sent a note and the ATO is interested in any comments members have on the date of effect.
The ATO intends to update several PAG products because of proposed amendments to the non-arm’s length income provisions under the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 and will seek feedback from members on the scope of products requiring an update.
Better Targeted Superannuation Concession measures, the First Home Super Saver Scheme, time limits for claiming input tax credits and third-party fraud were also flagged for proposed consultation.

Action item	NTLG 2402/3 – Proposed consultation
Status	In progress
Responsibility	Martin Pook, Director, Law Design and Practice, ATO
Description	The ATO will issue papers to members seeking member feedback on proposed consultation.

Post meeting update – Director Martin Pook issued relevant papers to members on 22 February 2024. Feedback was provided by members on 15 March and on 4 April 2024, with further commentary expected. Item to remain open.

Action items update

NTLG 2308/4 – Reflection on consultation processes

Responsibility - Kirsten Fish, Second Commissioner, Law Design and Practice, ATO

Members agreed a separate group to reflect on consultation processes is not necessary, given the NTLG’s role in the oversight of consultation. This item to be closed.

NTLG 2308/1 – Multinational Tax Integrity engagement plan

Responsibility - Harjit Singh, Assistant Commissioner, Office of the Chief Tax Counsel, ATO

A copy of the consultation plan was provided to members in December 2023 and was addressed at the February 2024 NTLG meeting. This item is to be closed.

NTLG 2308/2 Potential consultation with the law profession

Responsibility - Jonathan Todd, Deputy Commissioner, Office of the Chief Tax Counsel, ATO

In progress - There has been work to understand limitations, barriers and irritants. To provide the same level of access to the law profession as intermediaries would require wholesale system changes. Regarding the fax authorisation process, no issues were identified. A one-page document outlining avenues for lawyers to contact the ATO was prepared and presented to members but no feedback has been received to date. Members are invited to provide targeted examples of the issues they are facing.

Other business

The group agreed that the next meeting theme should be Rebuilding and maintaining trust. Digital third-party reporting, Artificial Intelligence and Dispute resolution were confirmed as 2024 meeting themes.

The next meeting will be held in-person in Canberra on 10 April 2024. The ATO Commissioner may attend the meeting.

The ATO noted the consultation reports included in the meeting pack which are prepared for NTLG consultation-focused meetings. Members were asked to consider the value-add of the reports; whether changes are required; or whether the reports are no longer necessary.

Action item	NTLG 2402/4 – Consultation reports
Due date	10 April 2024
Responsibility	Jerome Tse, The Tax Institute
Description	Members will consider the value-add of consultation reports included in the meeting pack and provide feedback at the next NTLG meeting.

2024 meeting themes

Members agreed the theme of the April meeting will be Rebuilding and maintaining trust.

Attendees

Attendees list
Organisation	Member
ATO	Kirsten Fish (Co-chair), Law Design and Practice
ATO	Emily Webster, Office of the Chief Tax Counsel
ATO	Jeremy Hirschhorn, Client Engagement
ATO	Lisa Wong (Secretariat), Enterprise Strategy and Design
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	Bill Leung
Institute of Public Accountants	Tony Greco
Law Council of Australia	Justin Byrne
Law Council of Australia	Mia Clarebrough
The Tax Institute	Jerome Tse (Co-chair)
The Tax Institute	Julie Abdalla
The Tax Institute	Sumitha Krishnan
Treasury	Laura Berger-Thomson

Apologies

Apologies list
Organisation	Member
Treasury	Diane Brown