National Tax Liaison Group key messages 22 June 2023

Meeting theme

Current and future challenges of the tax profession

Key highlights

• Treasury provided an update on the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023External Link
• The Tax Practitioners Board (TPB) shared insights on the priorities for the TPB and discussed the 2019 James review.
• The ATO provided an overview of the draft Tax Practitioner 2030 strategy and discussed the joint stewardship role of the tax system involving tax practitioners and the ATO.
• Members discussed the future focus areas facing the tax profession, including:
  • increased focus on compliance work
  • an aging workforce population and the broader skillset required of people moving into the tax profession
  • the impacts of digitalisation on decision-making processes and ensuring appropriate governance and accountability.

Opening comments

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

National Tax Liaison Group (NTLG) Co-chair Kirsten Fish and external Co-chair Peter Godber welcomed members.

Tax barrister Mia Clarebrough was welcomed as the Law Council of Australia representative.

Treasury

Diane Brown, Deputy Secretary, Revenue, Small Business and Housing Group, Treasury

Treasury provided a brief update on the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023External Link which is currently being introduced to Parliament. This is one of the first bills of the new government and includes amendments to thin capitalisation rules and transparency measures.

Members noted the importance of building relationships with new ministers and are keen to offer feedback and insights on important government matters, such as public guidance and advice.

Setting the scene and future direction experience

Michael Morton, Acting Deputy Commissioner, Individuals and Intermediaries, ATO, Kath Anderson, Assistant Commissioner, Individuals and Intermediaries, ATO, Will Day, Deputy Commissioner, Small Business, ATO, Andrew Watson, Assistant Commissioner, Small Business, ATO.

Members outlined some issues and challenges affecting the tax profession, including:

• the increasing complexity of Australian taxation laws means tax professionals are finding it difficult to move from compliance work to advisory activities
• the investment of time and resources required to keep up with the pace of technology
• the move to Payday Super and its proposed 3-year timeframe was noted as an ambitious, but worthy goal
• the administration of trusts has increased exponentially due to the complexity and number of changes in this area of law
• staffing issues, including attracting suitable new talent, and retaining existing staff
• compliance functions being shifted offshore due to cost may result in a less dynamic environment in large corporate tax functions and therefore less engagement with business; the loss of visibility of a business may result in less risks being identified.
• taxpayers sometimes have difficulty understanding that they are the decision-maker. Tax advisors influence and guide, however, ultimately cannot control the taxpayer’s decision.

Members noted that as tax agents are integrated into an increasingly digitised tax system, law professionals are being further removed from the process. This makes it more difficult to obtain a wholistic understanding of the tax realm. Accountants rely on lawyers due to the complexity of tax legislation, and both professions need to remain connected to one another.

The ATO provided an overview of the ATO’s vision for 2030 which includes 6 strategic priorities:

• protect the high levels of engagement and integrity in the tax, super and registry systems
• safeguard the security of the tax, super and registry systems
• improve tax performance for clients of tax practitioners
• increase trust and confidence in the tax, super and registry systems
• empower tax practitioners to add value to their clients through sustainable operations
• improve small business performance and level the playing field.

The ATO noted that during the earlier stages of the COVID-19 pandemic, the ATO’s role was that of a support centre. During that time, the ATO took an increased number of phone calls to deliver direct support to the community. However, the changed economic landscape means that ATO contact centre responsiveness and parameters require adjustment to suit the current environment.

Members discussed possible drivers of the tax gap for individual taxpayers and how it might be possible to proactively use data and digital systems to ensure accuracy in income tax returns, particularly in relation to rental deductions and work-related expenses.

The ATO gave an overview of the work being undertaken to improve small business tax performance, including:

• how to build assurance into the tax digital ecosystem and the role of professional advisors, exploring how to best engage with one another in a timely, collaborative way
• determining how to collect high quality datasets, and when to do so
• leveraging the natural systems for each revenue product, with the right combination of technology and human input, intelligence and support
• protecting the tax digital ecosystem against cyber attacks
• Payday Super.

The ATO further discussed the approaches taken by countries to move towards Publications - Tax Administration 3.0: The Digital Transformation of Tax AdministrationExternal Link for small business. To support this vision at a practical level, the ATO is:

• developing and/or running relevant test pilots, including
  • reviewing behavioural analysis of taxpayers (for example, what are the reasons a taxpayer will pay their tax earlier? What are the factors that may affect timely lodgments, debt levels, and overall behaviour?)
  • considering potential data sources and availability, and their possible future use
• if the test pilots prove successful, considering how the ATO can scale to achieve its 2030 vision, including reviewing the kinds of tax administration systems that can be easily adopted by businesses
• considering how tax guidance or prompts can be built into software.

To avoid simple mistakes by taxpayers, the ATO is continuing to search for ways to understand how verifiable data can be used to facilitate timely, purposeful conversations between tax professionals and taxpayers to improve the quality of reporting outcomes.

Members provided the following reflections:

• Small businesses do not vary their tax instalments each quarter. It was suggested it could be useful to gain insight to understand this behaviour. For example, are taxpayers not aware of their option to vary or are they concerned about penalties?
• It was agreed that readily available, verifiable data can be leveraged by tax professionals to move from compliance to assurance activities, whilst adding value to the taxpayer.
• When considering the delivery of new initiatives, providing options tailored to taxpayer needs where possible will encourage up-take and make schemes accessible.
• The ATO should provide clear messaging to explain delays, so agents and taxpayers do not need to call for reassurance.

Commissioner’s update

Chris Jordan AO, Commissioner of Taxation, ATO

The Commissioner confirmed that the NTLG is an important stewardship group for the ATO. It was noted that consultation between the ATO and external stakeholders is of key importance to arrive at quality outcomes. Emphasis was placed on the importance of the joint stewardship role tax practitioners play in working with the ATO to ensure that strict integrity standards are upheld and maintained.

Modernising ATO systems is a large part of the ATO’s future investment focus, however the complexity of the work that needs to be undertaken still requires active management. The ATO has undertaken a range of measures to support this, including

• identifying items that cause processing needs, then ceasing that operation where possible (for example, ceasing the use of cheques)
• changing the leadership cohort in Service Delivery
• improving the staff experience to provide quality service to the Australian public.

Members reiterated the importance of maintaining open, direct channels of communication and escalation to achieve optimal outcomes.

Exploring the impacts

All members

Members shared insights from the Corporate Tax Association benchmarking analysis. Observations regarding key trends and challenges included:

• the outsourcing of compliance work has reduced the cost to investment in tax functions
• a disproportionate amount of time is spent on work related to fringe benefits tax (FBT) which is not commensurate with the amount of FBT-related revenue (in comparison to all tax revenue the ATO collects)
• Artificial Intelligence (AI) is used quite extensively in goods and services tax and FBT, with increasing use of off-the-shelf products
• a significant proportion of corporate heads of tax will be moving towards retirement.

Members discussed the key challenges facing the tax profession, including:

• the increased focus on compliance rather than risk strategies due to the complexity of existing tax laws
• the broader skillset required of people moving into the profession, for example, data, analytics, and technology.

Members also recognised the importance of building capability and encouraging retention in the industry and noted that the format of education has changed with online micro-credentials the preference for younger professionals.

The group discussed the impacts of digitalisation on decision making processes and ensuring appropriate governance and accountability. Members recognised that with the move to more automation, transparency in the underlying code of a digital service may be needed to give tax professionals certainty.

Tax Practitioners Board

Michael O’Neill, CEO Secretary, TPB

The TPB shared insights on the priorities for TPB, including:

• its ongoing role focusing on the regulation of Australian registered tax practitioners
• its work to instil community trust and confidence in the tax system to develop and maintain long-term relationships, while recognising the broader role of digital service providers and automation of some processes
• reflecting on how to improve integrity processes surrounding consultation.

The Review of the Tax Practitioners BoardExternal Link, the ‘James review’ was discussed. The James review was undertaken to ensure that tax agent services provided to the public are done so in accordance with appropriate professional and ethical standards. A number of the recommendations from the review have already been implemented and others are before parliament. Members questioned whether the review’s priorities have shifted since it was originally undertaken in 2019, and whether other issues should be raised for discussion in relevant forums for government consideration.

• Members questioned the lack of regulation in relation to unregistered agents in the tax ecosystem.
• Members noted there is uncertainty surrounding the level of assurance that professional associations and member representatives can provide to the government that consultation processes are being managed appropriately. There are concerns that some external parties may withdraw from consultation to mitigate risk. The TPB expects reasonable care is taken by tax professionals involved in such matters, for instance, to disclose conflicts of interest and other relevant matters and manage relationships appropriately. Whilst the TPB is considering how it can improve consultation integrity, the best outcomes are ultimately based on the exercise of sound professional judgment and taking reasonable care. The TPB has worked through a number of scenarios and proposed practical solutions to issues that may arise.
• Members questioned how far a tax professional should trust a client and any assertions made by them. It was noted that the Anti-Money Laundering and Counter-Terrorism Financing Act 2006External Link excludes activities undertaken by accountants and real estate agents.
• Members noted in situations involving a person not registered as tax agent, but employed by a tax firm, who does something wrong, the TPB has limited ability to intervene. The TPB can penalise the firm involved, but not the individual.
• Members discussed scenarios involving digital service providers (DSPs) providing advice, where decision-making technologies are relied upon by tax agents. DSPs build intelligence into their systems; however, it is ultimately the individual or tax provider that bears the risk.

Ensuring readiness for the future

All members, Gail Hopley, Assistant Commissioner, Client Account Services; ATO, Michael Morton, Acting Deputy Commissioner, Individuals and Intermediaries, ATO

Members made the following observations on how some of the current challenges facing the tax profession can be overcome:

• Digital decision-making ‘black boxes’. Members raised the importance of understanding the totality of automated decision-making processes to ensure quality outcomes and transparency. Members also questioned the evidence the ATO would require should a dispute arise involving (an) automated decision(s). The ATO acknowledged that any automated models must be explainable and reasonable, and confirmed the existence of a whole of government Data and Digital Government StrategyExternal Link, which includes automation and AI. The ATO is of the view that automation is useful, however, this needs to be tempered with human intervention where necessary to ensure accountability is maintained.
• There is limited interest in accounting as a profession, but a continued need to attract resourcing at various skillsets and entry levels. This was further noted as a difficulty in the law profession. Members also observed the need for new entrants to the law and tax professions to possess an expanded skillset to include data and digital awareness and knowledge. It may be that new talent needs to be imported from other countries.
• New ways of learning and studying are appearing post-COVID-19, with a generational shift in mindset. The preference now is to undertake tailored learning (such as micro-credentials) which does not involve extensive contact hours.
• Tax clinics are proving to be a potential source of students interested in the tax profession, and clinics have produced some high-quality candidates who are job ready.
• The ATO could consider inviting external professionals to attend its offices to speak with the ATO graduate intake about potential future career pathways.

The ATO discussed the issue of the high numbers of phone calls by tax professionals and explained the impact this is having on servicing the broader community and processing backlogs. Approximately a quarter of calls from tax agents are regarding a progress enquiry, with a reasonable proportion associated with activities that can be completed using ATO online services. Tax practitioners continue to receive priority service which ties up resources. Members were encouraged to reflect on how professional organisations could assist, and if there was any intelligence that could be provided to explain the drivers behind these actions.

Members requested any relevant information or data the ATO has that could assist further understanding of the issues and questioned:

• whether there are particular agents making these phone calls
• if there is an age demographic associated with such enquiries
• whether teaching the agents who call how to source the answer on the website, could partially reduce future calls.

Members suggested that to avoid encouraging such enquiries, the ATO could:

• retain (where possible) historical versions of documents
• make clear decisions on which kinds of services it should invest in and offer, and those it should not
• provide clear messaging where relevant, for instance, explanation of delays to avoid progress enquiries.

Members agreed to assist with communicating messages to attempt to resolve these issues.

Action item	NTLG 2306/1 – Strategies to improve tax agent interactions with the ATO
Due date	In progress
Responsibility	Julie Abdalla, The Tax Institute
Description	Members are encouraged to provide strategies on how to improve and support purposeful tax agent interactions with the ATO

Action items update

NTLG 2304/1 – Consultation

Members will continue to provide feedback and discuss with Treasury.

NTLG 2302/1 – Revision of the integrity declaration

The ATO is continuing to review the integrity declaration.

NTLG 2302/2 – NTLG membership nomination process

Item closed

Other business

The next meeting is on Thursday, 24 August. The theme of the meeting is Consultation.

Attendees

Attendees list

Organisation	Member
ATO	Kirsten Fish (Co-chair), Law Design and Practice
ATO	Dominic Gilbert, Office of the Chief Tax Counsel
ATO	Jeremy Hirschhorn, Client Engagement
ATO	Jodi Williams (Secretariat), Enterprise Strategy and Design
Chartered Accountants Australia and New Zealand	David Watkins
Chartered Accountants Australia and New Zealand	Michael Croker
Corporate Tax Association	Michelle de Niese
CPA Australia	Alexis Kokkinos
CPA Australia	Elinor Kasapidis
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 Professional Bodies Coordinator	Julie Abdalla
Treasury	Diane Brown

Apologies

Apologies list

Organisation	Member
Treasury	Laura Berger-Thomson

Key topics discussed at the National Tax Liaison Group meeting 22 June 2023.