National Tax Liaison Group key messages 3 August 2022

Information about the key topics discussed at the National Tax Liaison Group meeting 3 August 2022.

Last updated 13 October 2022

Key highlights

Members acknowledged the draft consultation principles proposed by the ATO constitute a strong foundation on which to base the refresh of the framework.
The ATO discussed specific consultation matters with members, who appreciated the complexities underlying these processes. Both the ATO and members acknowledged that there were opportunities to improve the experience of external stakeholders involved in future consultation matters, primarily through clear and regular communications and managing expectations at the outset of consultation.
The Board of Taxation outlined its role and objectives and invited members to make contact with further questions or ideas for improvement.
The ATO outlined the planned consultation for the Taxpayer’s Charter review and invited members to provide feedback on the proposed plan.
An update of Tax Time 2022 was discussed, with the ATO providing members some context surrounding the differences observed in comparison to the prior year.
The ATO provided an update on the progress of the Operation Protego initiative. Members provided some ideas for the ATO to consider when dealing with offenders who are involved with this type of fraud.

Opening comments

Kirsten Fish, Second Commissioner, Law Design and Practice, ATO; Michelle de Niese, Corporate Tax Association

National Tax Liaison Group (NTLG) co-chair Kirsten Fish welcomed members and advised that Diane Brown has been appointed Deputy Secretary of Revenue, Small Business and Housing Group and will join the next NTLG meeting. Kirsten thanked the former Deputy Secretary of Revenue Group Maryanne Mrakovcic for her significant contribution to the NTLG and her candour and willingness to engage with the profession.

NTLG co-chair Michelle de Niese noted the members’ interest in discussing proposed improvements in the ATO’s consultation process, and hearing from the Board of Taxation.

ATO consultation refresh

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

Following on from prior discussions, the ATO will be updating its consultation framework. This includes establishing clear consultation principles and a suite of good practice guides. Members were provided with a high-level summary of the proposed objectives and elements of the ATO consultation framework, as well as draft consultation principles. The ATO sought input from the members on these, asking if:

the proposed structure of the framework sufficiently demonstrates the ATO’s commitment to consultation
the framework and elements make logical sense, and place emphasis on appropriate areas
any additions or changes are necessary to the proposed consultation principles.

Members were generally supportive of the proposed framework, noting some suggestions for the principles. It was acknowledged by the ATO that there is an inherent tension between certain principles (that is, targeted, accessible and transparent).

Members made the following observations and comments:

The framework needs to incorporate behaviours expected of ATO staff (not just the actions they should take).
Consideration should be given as to how these principles could assist with making confidential consultation transparent to the broader tax professional community.
Incorporate an ‘obligation’ for the ATO to explain the ATO response to feedback provided and the reasons why a position was taken.
Remove the word 'final' in the principle on providing feedback (this should be occurring throughout the process).
The objective and purpose of consultation should be determined and provided prior to consultation commencing
Consultation participants should be able to put forward their expectations on the objective of consultation. The ATO noted that agreement is not always possible or appropriate.
Include an obligation for the ATO to explain delays.
The principles do not include any obligations of consultation participants who are representing professional associations. Members agreed to develop these expectations and provide them to the ATO.
The good practice guides should provide direction on selection of the appropriate stakeholders.
Information on ato.gov.au should define the breadth of the consultation, and a summary of status and outcomes where possible.
Feedback provided verbally by consultation participants should be accepted (members noted often the ATO will request verbal feedback be provided in written format).
ATO consultation leads should be provided with relevant training.

The ATO will review the principles considering the feedback of members.

Action item	NTLG 2208/1
Due date	12 October 2022
Responsibility	Kate Wilson
Description	ATO Consultation refresh The ATO to provide the updated framework and revised principles to members for feedback

Action item	NTLG 2208/2
Due date	12 October 2022
Responsibility	Michael Croker
Description	ATO Consultation refresh Members noted that the principles do not include any obligations for representatives of professional associations. Members are to develop these expectations and provide feedback to the ATO.

Consultation processes

Rowan Fox, Assistant Commissioner, Lodge and Pay, ATO; Rebecca Bodel, Director, Enterprise Strategy and Design, ATO; Danijela Jablanovic, Director, Individuals and Intermediaries, ATO; Anthony Bach, Assistant Commissioner, Office of the Chief Tax Counsel, ATO; Elizabeth Hardcastle, Assistant Commissioner, Individuals and Intermediaries, ATO

The purpose of this item is to review the recently completed consultation processes to understand what worked well, what didn’t work well and to identify opportunities for improvement.

Working with vulnerable clients

The purpose of this consultation was to assist the ATO to understand the experience of vulnerable people in engaging with the ATO. The ATO explained that it had conducted a workshop with a select small group of clients, including some Tax Practitioner Stewardship Group (TPSG) members.

The consultation identified there is an increase in clients experiencing vulnerability in the community; the ATO not factoring individual circumstances into account; and a lack of positive client engagement. The ATO has also engaged with other government agencies on the matter.

Members appreciated the explanation of the work undertaken and noted that the consultation matter content on ato.gov.au did not make it clear that this was a discovery piece with limited breadth and depth. Members noted that there had been no feedback or update post the workshop.

The ATO acknowledged the process could have been done differently and will consider learnings from the process and apply it to other similar processes.

Transport expenses

Members advised they would like to discuss consultation activities, including communication, throughout the process and its closure.

The ATO noted the following:

Consultation with the TPSG on the issue of transport expenses in the context of working from home and ‘hybrid working arrangements’ commenced in November last year.
An initial discussion paper was provided to the TPSG in December 2021 with feedback received in February/March 2022.
The feedback highlighted the need for the ATO to provide further clarity on the situation where an individual employee worked at home for only part of the week (described as a ‘hybrid working arrangement’) but was required to travel to the office on their ‘work from home’ days to carry out their employment duties.
A second discussion paper was provided to the TPSG in May 2022. This discussion paper included a proposed addendum to Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? and additional web guidance. Feedback provided on this discussion paper highlighted the significant divergence of views by the associations on the correct application of the law in the circumstances described.
The ATO decided not to amend Taxation Ruling TR 2021/1, and this was communicated to the TPSG on 28 June 2022. The ATO provided a thorough explanation as to why the amendments would not proceed.

Members identified that the timing was an issue, and it would have been preferable if a less polished discussion paper was available in April. Members advised that they have heard nothing further and noted that issues still exist with the capital gains tax (CGT) main residence exemption and working from home.

The ATO noted that the consultation was effective and purposeful as the ATO became aware of the impact and issues. Feedback obtained from the TPSG will be used to improve relevant web content.

Members acknowledged that Anthony Bach was very respectful in managing the feedback and responses from the TPSG.

Review of Extension to dispose of deceased estates dwellings PCG

The review of Practical Compliance Guideline PCG 2019/5 Capital gains tax and deceased estates - the Commissioner's discretion to extend the 2-year period to dispose of dwellings acquired from a deceased estate was in response to the Inspector-General of Taxation and Taxation Ombudsman report Death and Taxes: An investigation into Australian Taxation Office systems and processes for dealing with deceased estates(PDF 4.60MB)This link will download a file released July 2020.

The ATO advised that consultation activity was registered at the end of October 2021, and contact made with potential consultation participants in late November 2021. The ATO acknowledged that this delay created uncertainty amongst consultation stakeholders. The other impact on timing was the Christmas/New Year period. Members agreed that the gap between registering the matter and commencement of consultation did create some concern in the market.

Fourteen submissions were received from 38 consultation participants. The PCG was updated reflecting the feedback received.

Members commented that the consultation process was robust, however, the communication element could be improved. The ATO acknowledged that clear communications, timeframes and understanding stakeholders were important, at the same time noting that members cannot be involved in every single consultation. Members offered to identify the best single contact point to assist the ATO and work together for future consultations.

Proposed consultation

Fiona Dillon, Chief Tax Counsel, ATO; Christina Sayhoun, CEO, Board of Taxation

The ATO noted:

Progress on Draft Taxation Ruling TR 2021/D4 Income tax: royalties - character of receipts in respect of software has been impacted by a lack of resourcing. We are currently reviewing the submissions we have received before undertaking further public consultation.
A Draft Taxation Determination on the use of an individual’s image by related entities is expected in the coming months.
The ATO is considering feedback received on Draft Taxation Ruling TR 2022/D1 Income Tax section 100A reimbursement agreements and Draft Practical Compliance Guideline PCG 2022/D1 Section 100A reimbursement agreements - ATO compliance approach. The ATO will engage further with key stakeholders who have provided submissions.
The ATO has considered feedback received last year on Draft Practical Compliance Guideline PCG 2021/D4 Intangibles Arrangements and is working towards providing an updated draft to stakeholders who have provided written feedback. Members noted that the updated draft of the PCG needed to provide clearer avenues for taxpayers to self-assess their risk ratings.

The Board of Taxation (the Board) advised they are working with the new government on their current and future work program. The Board is finalising its report on CGT rollovers which is planned for delivery to the government in August 2022. It was commissioned by the former government to evaluate opportunities to rationalise and simplify existing CGT rollovers.

On 21 March 2022, the former government released the Terms of Reference for the review of the taxation of digital assets and transactions in Australia. The purpose of this review is to consider the policy framework for taxation of digital assets and if any changes are required to taxation laws and/or their administration. The review did not commence due to caretaker mode with the calling of the Federal election. The Board will commence extensive public consultations following confirmation of the Terms of Reference from the new government.

Board of Taxation

Rosheen Garnon, Chair of the Board of Taxation

The Chair of the Board provided members with an insight into the role, objectives and responsibility of the Board of Taxation.

The Board, whose origins were borne from John Ralph’s Review of Business Taxation, is supported by ATO secondees, Treasury officials, private sector secondees, and secondees from other agencies.

Drawing from both tax and business perspectives, the Board provides advice to the Treasurer and Assistant Treasurer on:

quality and effectiveness of tax legislation and the processes for its development
general integrity and function of the tax system
research and other studies
other taxation matters.

At times, the Board will be requested to consider specific topics, however it may present to government areas it considers of importance.

The Board’s approach to a review involves:

terms of reference are developed to provide the scope of the review
a working group is established, which includes Treasury, ATO and industry expertise
round table discussions are conducted with stakeholders
submissions received from stakeholders are considered
a report is developed and presented to the government for consideration.

The Board’s work has resulted in several government announcements, including most recently:

amendments to the corporate tax residency test
reduction to the compliance burden of recording for fringe benefits tax (FBT)
CGT exemptions for granny flat arrangements
adoption of a loss-carry back regime
reforms to individual tax residency
introduction of the Corporate Collective Investment Vehicles regime.

Recent reports have covered:

review of the dual agency administration of the R&D Tax Incentive Model
post implementation review of GST on low value imported goods
Voluntary Tax Transparency Code
small business tax concessions.

The Board is currently working on the review of CGT rollovers and a review of taxation of digital assets and transactions.

Members enquired about the best way to provide feedback and ideas to the Board. The Board encouraged the contribution of ideas and welcomed suggestions on post-implementation reviews or other reviews that could be considered. Suggestions can be made through the Sounding BoardExternal Link on the Board’s website or directly to Board Members or the Board’s Secretariat.

Treasury

Laura Berger-Thomson, First Assistant Secretary, Individuals and Indirect Tax Division, Revenue, Small Business and Housing Group, Treasury

Treasury noted that there have been structural changes to reflect the changed responsibilities of relevant ministers.

There are 4 matters potentially of interest to NTLG members where consultation is presently open to the public:

There are currently several measures in parliament, one of which relates to the discount package for electric vehicles. This has been referred to the Senate Economics Legislation Committee for inquiry.

Treasury is continuing to work with government on the outstanding Announced but unenacted measures.

Tax treaty negotiations continue with Greece, Portugal and Slovenia. Members asked what countries would be considered for the next round of negotiations. Treasury is discussing this with the government.

Review of the Taxpayers' Charter

Kath Philp, Assistant Commissioner, ATO Corporate, ATO; Chris Cook, Director Lodge and Pay, ATO Corporate, ATO; Justin Byrne, Law Council of Australia; Michael Croker, Chartered Accountants Australia and New Zealand

The Taxpayers' Charter (the Charter) was first published in 1997. It helps taxpayers understand their rights and obligations, what they can expect from the ATO, and what to do if they are not satisfied. The last comprehensive review occurred in 2017–2018.

The focus of the review is to ensure the Charter:

meets community expectations about how the ATO engages with taxpayers in its administration of the tax, super and registry systems
accurately reflects what clients can expect from the ATO when dealing with us
assists ATO staff in their interactions with clients
fulfils its purpose of informing the public of their rights when dealing with the ATO.

The ATO provided members with an overview on the proposed consultation process for the review of the Charter. The ATO invited members to provide feedback on the proposed consultation process.

The ATO’s goal is not only to consult with established stakeholder groups, but to widen the approach to engage the broader community (including diverse and at-risk audiences, industry groups, and other peak bodies). The consultation plan includes direct engagement with stakeholder, industry and community groups, as well as broad public involvement which we will promote through social media and other channels.

Members noted the timelines in the information pack with members to provide comments on the proposed consultation questions by 10 August 2022. The ATO anticipates that engagement with other stakeholders through September and October 2022 with the revised Charter to be considered by the ATO Executive in December 2022.

Members felt that the current Charter is too long and repetitive and suggested a more succinct 2-page principle-based version. Members discussed the best way to socialise the review of the Charter suggesting webinars and social media channels. Members recommended that user testing of the proposed product would be a worthwhile undertaking.

The ATO invited members to provide any further idea for consideration and noted that the ATO Annual report provides information on its performance against the Charter. The next Annual report will include expanded information of complaints and their alignment to the elements of the Charter.

Post-meeting update – Members provided some further thoughts on the ATO’s proposed consultation questions and offered to engage a selection of members to participate in user testing of the Charter.

Tax time update

Hoa Wood, Deputy Commissioner, Individuals and Intermediaries, ATO; Adam O’Grady, Assistant Commissioner, Individuals and Intermediaries, ATO

Tax time has been progressing well with the ATO noting:

4.26 million lodgments have been made; a slight increase compared to the same time last year.
Lodgments have been received slightly later than last year. This may indicate that communications to taxpayers recommending they wait until pre-fill data is available may be working effectively
Members commented that recent tax time messaging was consistently high quality and delivered in a timely and visible manner.
109,000 amendments for 2021–22 returns have been received already with many within a few days of the original tax return being lodged.
2.89 million returns have issued as of 31 July resulting in refunds of approximately $8 billion.
The volume of calls has slightly decreased in comparison to last year. However, the average call times are slightly longer with the issues being discussed more complex.
Some of the pre-filled data has been provided a little earlier from third parties.
Overall, the ATO’s online platforms are performing well with only minor outages experienced to date.
Early observations from the lodgments received to date are that the average work-related expenses claim has increased; however, this is somewhat expected due to extensive lockdowns over the start of the year.
There has been a reduction of net rental losses from rental properties which was somewhat expected given record low interest rates for most of the year and increases in rents across the country.
Refund integrity checks remain at the same level as previous years. However, with Operation Protego there has been an increased monitoring of clients involved in that initiative.

Post-meeting update – The ATO provided tax time amendment data to NTLG members on 17 August 2022.

Operation Protego

Will Day, Deputy Commissioner, Small Business; ATO, Michael Morton, Assistant Commissioner, Small Business, ATO

The ATO, through Operation Protego, is investigating potentially fraudulent refund payments made to individuals. The fraud involves offenders inventing false businesses and Australian Business Number (ABN) applications; many in their own names, then submitting business activity statements (BAS) to fraudulently gain a GST refund. While the issue is not new, the difference with this event is the size, scale and rate of proliferation. The ATO noted there has been an increased use of social media to advertise how individuals can participate in such schemes. The ATO acknowledged that some professional associations have issued supportive messages, which has been appreciated.

The ATO has put in place extra controls because of this fraud, and that this may result in some legitimate taxpayers having to take extra steps to receive their legitimate refunds.

There are 3 main objectives to the ATO’s approach:

Disrupt the further proliferation of the issue by making it harder to enter/re-enter the business registration system and fraudulently obtain a GST refund.
Address those involved, with visible consequences for their actions.
Strengthen the tax system, which includes additional controls, review of system integrity and post-issue compliance work.

The ATO has a dedicated debt recovery strategy and a visible messaging campaign which demonstrates the consequences of participating in this type of fraud.

Members noted that they have not seen the messages in social media but have noted the fraudulent use of their client details and the lodgment of false BAS. Members asked to understand the source of the fraud to communicate further with their wider networks. A suggestion was made that the ATO consider implementing a whistleblower protection element in their communications, which could increase engagement. Members suggested that targeted education may be effective.

The ATO will consider if they can provide the profession with examples of the social media content, as there have been a wide variety of behaviours observed.

Action item	NTLG 2208/3
Due date	12 October 2022
Responsibility	Will Day
Description	Operation Protego The ATO to provide members with examples of relevant social media content which can be shared across wider member networks.

Action item 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.

Members stated this was a challenging task and requested additional information so they can focus their efforts to provide a fulsome, meaningful response.

The ATO will redistribute the paper on this topic and provide objectives of the different public advice and guidance products to enable members to relate measures to objectives.

NTLG 2204/2 – Digital assets and Transactions

Members agreed this item would be closed once members provide the requested information and were requested to provide this prior to the October meeting.

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

Members previously met with UNSW Academics on 6 June and will directly engage Assistant Commissioner Andrew Watson to plan the way forward.

Other business

Members suggested a Law Companion Ruling may be appropriate for the proposed legislation for electric vehicles. Members noted that the FBT working group is considering 'on costs', for example, home battery packs.

Members identified the need for consultation on the following:

multinational measures announced by the new government in April and effective on 1 July 2023 (that is, earnings before interest, taxes, depreciation and amortisation interest restriction and denial of deductions for certain royalty payments)
Section 109R and its interaction with Division 7A – the ATO advised that this should be discussed at the Private Groups Stewardship Group.

Members noted that they will provide some feedback on the consultation papers included in the meeting pack.

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
Chartered Accountants Australia and New Zealand	Michael Croker
Corporate Tax Association	Michelle de Niese (Co-chair)
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 Professional Bodies Coordinator	Julie Abdalla
Treasury	Laura Berger-Thomson

Apologies

Apologies list
Organisation	Member
The Tax Institute	Peter Godber

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