New external co-chair arrangements
From 2022, the appointment as co-chair for non-ATO members will be for a period of 12 months, replacing the existing rotational co-chair arrangements where a different non-ATO member co-chairs each meeting. This new arrangement is consistent with other ATO Stewardship Groups.
Action item |
1511-01 |
Due date |
As soon as possible |
Responsibility |
John Fanning |
Action item details |
Selection of external co-chair
Non-ATO members to meet out of session to select the Private Groups Stewardship Group (PGSG) co-chair for the next 12 months with agreement from ATO Chair |
Action item |
1511-02 |
Due date |
December 2021 |
Responsibility |
PGSG Secretariat |
Action item details |
Update PGSG Charter
Update the PGSG Charter to reflect appointment of a co-chair for a period of 12 months and circulate to all members. |
Action items from previous meeting
The ATO is not considering any further updates to its guidance on Change of tax residency due to COVID-19.
The ATO has not made any changes to the COVID-19 and permanent establishments guidance. Following feedback from targeted consultation and with travel restrictions easing, it is expected that this compliance approach will end on 31 December as planned.
As announced in the 2021–22 Federal Budget, new tax rules for determining individual tax residency are proposed to apply from 1 July 2022 following the enactment of the legislation. Treasury is planning to release a consultation paper.
The ATO is considering the recent High Court decision in the matter of Addy v Commissioner of Taxation and will be providing further guidance soon.
Insights from private groups
Members shared insights about the impact the evolving environment is having on the private groups market.
Members’ comments
- Victoria introduced the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 021 on 12 October 2021. The Bill proposes value capture property tax on uplifts of more than $100,000 in the value of Victorian land that results from rezoning of the land. Guidance on the interaction of this new State tax with Commonwealth taxes (including capital gains tax) may be required.
- Members asked for an update on the Senate order for the ATO to publish JobKeeper information as this impacts large and unlisted groups. The ATO confirmed that the matter is being considered by relevant Parliamentary processes and there have been no further developments at this time.
- Due to the impacts of COVID-19, businesses are experiencing challenges with supplies, inventory, staffing and cashflow that may affect their ability to meet their obligations.
- Businesses are experiencing ongoing supply chain issues and many taxpayers are ordering and holding additional inventory in anticipation of shortages. This has resulted in additional costs and cash flow impacts for businesses who are holding larger than usual inventory on hand. For example, one business struggled to meet their Wine Equalisation Tax obligations because they were waiting on payments from three months prior.
- Some smaller businesses in the private groups market are maintaining cash reserves and holding on to their stimulus grants due to market uncertainty to ensure they have sufficient future liquidity.
- Advisory firms are currently experiencing a skills shortage leading to increased pressure to provide timely client services and respond to ATO requests. Smaller practices are enduring extremely long working hours to manage increasingly heavy workloads. The ATO may see an increase in lodgment deferral requests as January lodgment dates approach.
- Clients are increasingly engaging with advisers about restructuring and succession planning, including the transferring of business activities to the next generation.
- Some businesses have stood down or retrenched staff which may impact pay as you go withholding collections. The ATO has not observed any significant impacts to date.
ATO tax performance programs for private groups
The ATO is seeking to make communications about its tax performance programs for private groups more effective to ensure the private groups market more broadly has an understanding of the programs.
Members’ comments
- Advisory firms have a range of communication channels to share and discuss key messages from the ATO on their tax performance programs. ATO meetings, webinars, and presentations at conferences about the programs in the private wealth market are well received and are a good source of information and insights.
- ATO correspondence to advisers and taxpayers should clearly identify the program of work that the correspondence relates to.
Single Touch Payroll Phase 2 implementation
Single Touch Payroll (STP), also known as STP Phase 2, is expanding from 1 January 2022.
Digital service providers (DSPs) who need more time to make the changes and update their solutions to support STP Phase 2 can apply for a deferral for their customers. The Top 15 DSPs that cover 90% of employers have been granted deferrals.
Taxpayers are encouraged to work with their DSP and prepare to start reporting based on when their package will be ready. Where a package is ready and clients can start STP Phase 2 reporting by 1 March, there is no need to apply for more time.
Clients will need time to transition and learn how to use the products. DSPs are holding information sessions for their clients and many employers are already reporting under STP Phase 2. The ATO also has a series of digital events (webinars) about STP Phase 2 to assist clients with implementation.
Members’ comments
A member enquired whether fringe benefits will be integrated into STP reporting. The ATO advised that this was not being contemplated.
Income Tax: Public Advice and Guidance update
Guidance for allocation of professional firm profit and income
The final Practical Compliance Guideline (PCG) is planned to be published before the end of this calendar year. In response to feedback received during the consultation period, the prospective date of effect for the PCG has been extended until 1 July 2022, meaning the transitional period will now end on 30 June 2024 (two years after implementation).
Draft guidance on section 100A
The ATO is progressing draft advice and guidance on the application of section 100A and reimbursement agreements, and about Division 7A and trust entitlements (sub-trusts and unpaid present entitlements).
Publication of proposed guidance has been postponed in recognition of the current challenges faced by the community resulting from the COVID-19 pandemic.
The ATO is closely monitoring the impacts of the COVID-19 pandemic and the guidance package will be released after the most significant impacts have subsided. This is anticipated to be in early 2022.
Targeted consultation for proposed ATO guidance about the application of section 100A concluded in September 2021.
Any changes to the application of Division 7A as a result of the proposed guidance will be on a prospective basis and will apply to present entitlements created on, or after 1 July 2022. Existing guidance will continue to apply to current arrangements.
Research and development tax incentive ‘at risk’ rule
The ATO released Draft Taxation Ruling TR 2021/D3 Income tax: research and development tax offsets - the at risk rule which outlines the Commissioner of Taxation’s view on the circumstances in which a company’s research and development (R&D) tax offset will be denied or reduced, because their R&D expenditure is not ‘at risk’.
Members’ comments
- General feedback on the direction of the draft taxation ruling is positive.
- Green energy may increase demand for the R&D tax incentive.
- Members suggested a consultation group be formed to look at issues arising out of any reviews.
- In response the ATO noted that once the guidance is finalised, the same principles should translate across the spectrum.
- The Board of Taxation Report is due to be released at the end of this month. Their focus is on the dual administration model and the reduction of cost of compliance for taxpayers. The final Australian National Audit Office report on the administration of the R&D tax incentive is also due to be released soon.
Disguising undeclared income as gifts or loans
The ATO released Taxpayer Alert TA 2021/2 Disguising undeclared foreign income as gifts or loans from related overseas entities.
TA 2021/2 outlines our concerns about arrangements where Australian resident taxpayers fail to declare foreign income in their tax returns and then conceal the character of the funds upon repatriation to Australia by disguising the funds received as a purported ‘gift’ or ‘loan’ from a related overseas entity, including family members and friends.
In some instances, taxpayers may also inappropriately claim tax deductions for ‘interest’ said to have been incurred on purported ‘loans’ from the related overseas entity.
The ATO is gaining access to more data that helps us identify these types of situations. This issue is currently more typically seen in the smaller end of the private wealth market.
Members’ comments
Members noted that most suburban tax advisers and the smaller end of the private wealth market are generally not as aware of their international tax obligations. The ATO is happy to engage with CPA Australia to provide tailored advice on this topic.
Action item |
1511-03 |
Due date |
November 2021 |
Responsibility |
ATO |
Action item details |
Undeclared foreign income education
ATO to contact CPA Australia about a potential education campaign on undeclared foreign income for CPA Australia members, to be jointly delivered with the ATO. |
Disposal restrictions on employee share schemes
Draft Taxation Determination TD 2021/D5 Income tax: when are you genuinely restricted from immediately disposing of an interest provided under an employee share scheme? has been published. It addresses when you are considered to be genuinely restricted from disposing of your interests in employee shares which gives rise to a deferred taxing point. The Draft Tax Determination provides many examples as this is an area which is very fact dependant.
Fuel tax credits taxpayer alert
Taxpayer Alert TA 2021/3 Fuel tax credit overclaims arising from aggressive marketing and use of GPS telematics technology products has issued.
The alert outlines our concerns with marketers and tax professionals promoting global positioning system (GPS) technology that can result in fuel tax credit overclaims.
A number of problems have been identified with some products, including poor quality or intermittent GPS data that lacks sufficient checks against actual business records.
The ATO is reviewing unusually large refunds that have been claimed using GPS technology. Incorrect claims may be subject to penalties and interest.
The ATO is working with tax professionals and technology providers to develop guidance on how to get more reliable results when using these products for fuel tax credit purposes.
Structured arrangements to avoid luxury car tax
Taxpayer Alert TA 2021/4 Structured arrangements that avoid luxury car tax has issued. It addresses arrangements where car dealers or agents are able to sell luxury cars at a lower price than genuine dealers by setting up structures to avoid paying Luxury Car Tax (LCT) and improperly obtaining LCT refunds. The ATO is reviewing all LCT refunds to help identify such arrangements.
Public advice and guidance program
There was a brief discussion on the joint professional bodies’ submission to the National Tax Liaison Group seeking to have more involvement in the ATO’s public advice and guidance program. Members noted that professional bodies are seeking to be more involved in the development of public advice and guidance products.
Business Reporting
In response to members queries the ATO advised that:
- presently the ATO is not able to provide a list of clients who have outstanding STP finalisation reporting until after the due date. The ATO will investigate whether a functionality could be added to provide such a list to tax agents before the due date.
- it is not possible to obtain data from contribution reporting by superannuation funds to help support reconstruction of clients’ records for superannuation guarantee purposes. Transactions by funds occurs at a member level rather than an employer level. Given the sharing of information is covered by secrecy provisions the level of information that can be disclosed to an employer is very limited.
A member’s question about whether the June business activity statement lodgment date can be extended to 28 August, to take into account the July school holidays, will be referred to the Lodgment Program Review Working Group for consideration.
Attendees
Organisation |
Members |
|---|---|
ATO |
Louise Clarke (Co-chair), Private Wealth |
ATO |
Emma Rosenzweig, Superannuation and Employer Obligations |
ATO |
Karen Price, Private Wealth |
ATO |
Kasey Macfarlane, Private Wealth |
Chartered Accountants Australia and New Zealand |
Michael Croker |
CPA Australia |
Elinor Kasapidis |
Deloitte Private |
Michael Gastevich |
Fox Private Group |
Garry Voigt |
Greenwoods & Herbert Smith Freehills |
Andrew White |
KPMG Australia |
Bernadeene Cangelosi |
Law Council of Australia |
Angela Lee |
Lowy Family Group |
John Fanning (Co-chair) |
Oatley Family Group |
Sharon Clark |
PwC |
Michael Dean |
Tax Bar Association |
Terry Murphy QC |
The Tax Institute |
Chris Wookey |
7-Eleven Group |
Kenny Cheong |
Apologies
Organisation |
Member |
|---|---|
ATO |
Jade Hawkins, Private Wealth |
Arnold Bloch Leibler |
Paul Sokolowski |
Independent Member |
Paul Brassil |
PFD Foods |
Peter Cartsidimas |