NTLG minutes, March 2011

^[H1]Meeting details

Venue:	McKay Board Room Level 10, Amungula Building 26 Narellan Street Canberra
Date:	30 March 2011
Start:	9.30am	Finish:	3.00pm
Chair:	Michael D'Ascenzo
Contact and Secretariat:	Brianne Casey Kylie Clark	Contact phone:	(07) 3149 5711 (07) 3149 5712

Members

Susan Cantamessa (guest)	Tax Consultant, Institute of Chartered Accountants in Australia (ICAA)
Ray Conwell	Director, Deloitte Lawyers Pty Ltd, Law Council of Australia (LCA)
Lance Cunningham	National Director of Taxation, PKF Australia Ltd, National Institute of Accountants (NIA)
Michael D'Ascenzo	Commissioner, Australian Taxation Office (ATO)
Frank Drenth	Executive Director, Corporate Tax Association (CTA)
Paul Drum (guest)	General Manager, Policy and Research, CPA Australia (CPA Australia)
Bob Duncan	President, Association of Taxation and Management Accountants (ATMA)
Teresa Dyson	Partner Blake Dawson, Law Council of Australia (LCA)
Andrew England	Chief Tax Counsel, Australian Taxation Office (ATO)
Cheryl-Lea Field	Deputy Commissioner, Australian Taxation Office (ATO)
Kevin Fitzpatrick	Special Tax Adviser, Australian Taxation Office (ATO)
Jennie Granger	Second Commissioner, Australian Taxation Office (ATO)
Tony Greco	Senior Tax Advisor, National Institute of Accountants (NIA)
Michael Hay	Partner, Pitcher Partners, CPA Australia (CPA Australia)
Martin Jacobs	General Manager of Tax System Division, Treasury
Robert Jeremenko	Senior Tax Counsel, The Tax Institute (TI)
Alexis Kokkinos	Partner, Pitcher Partners, Institute of Chartered Accountants in Australia (ICAA)
Peter Murray	President, The Tax Institute (TI)
Michelle de Niese	Assistant Director, Corporate Tax Association (CTA)
Louis Phan (guest)	Taxation Manager, National Tax and Accountants Association (NTAA)
Bruce Quigley	Second Commissioner, Australian Taxation Office (ATO)
Ken Schurgott	Vice President, The Tax Institute (TI)
Paul Southwell	Assistant Commissioner, Australian Taxation Office (ATO)
Tony Stolarek	Partner, Ernst & Young, Institute of Chartered Accountants in Australia (ICAA)
Roger Timms	National Technical Manager, Taxpayers Australia Incorporated (TA)

Apologies

Steve Cane	General Manager, National Tax and Accountants Association (NTAA)
Yasser El-Ansary	Tax Counsel, Institute of Chartered Accountants in Australia (ICAA)
Andrew O'Bryan	Partner, Hall & Wilcox, CPA Australia (CPA Australia)
Mark Morris	Senior Tax Counsel, CPA Australia (CPA Australia)

Guests

Leo Bator (Item 23)	Deputy Commissioner, Australian Taxation Office (ATO)
Josephine Beard (Item 23)	Director, Australian Taxation Office (ATO)
Lee Beaver (Item 23)	FBT Technical Leader, Australia Taxation Office (ATO)
Daniel Clode (Item 23)	Acting Assistant Commissioner, Australian Taxation Office (ATO)
Bruce Collins (Item 19)	Assistant Commissioner, Australian Taxation Office (ATO)
Mark Konza (Items 12, 21 and 27.2)	Deputy Commissioner, Australian Taxation Office (ATO)

Professional bodies represented at the NTLG

Association of Taxation and Management Accountants	ATMA
Corporate Tax Association	CTA
CPA Australia	CPA Australia
Institute of Chartered Accountants in Australia	ICAA
Law Council of Australia	LCA
National Institute of Accountants	NIA
National Tax and Accountants Association	NTAA
The Tax Institute	TTI
Taxpayers Australia Incorporated	TA

^[H2]Agenda items

Disclaimer

National Tax Liaison Group (NTLG) agendas, minutes and related papers are not binding on the Australian Taxation Office (ATO) or any of the other bodies referred to in these papers. While every effort is made to accurately record views expressed, the wording necessarily represents a summary of statements of general position only, and care should be taken in interpreting those statements. These papers reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change. These minutes have been formally endorsed by the members.

1.1 Introductions, apologies, confirmation of minutes of 14 December 2010 meeting

Chair's opening comments

The Commissioner, Michael D'Ascenzo opened the meeting at 9.30am and welcomed participants.

Apologies were accepted from

¦ Steve Cane (NTAA)

¦ Yasser El-Ansary (ICAA)

¦ Andrew O'Bryan (CPA Australia)

¦ Mark Morris (CPA Australia)

Acknowledgement of alternative members

¦ Susan Cantamessa (ICAA)

¦ Louis Phan (NTAA)

¦ Paul Drum (CPA Australia)

The three alternative members represented at the forum on the day were welcomed. Louis Phan has attended the NTLG on a prior occasion, and Paul Drum has had a long standing relationship with the ATO.

Members stepping down from forum

¦ Christine Barron (Treasury)

¦ Gerry Bean (LCA)

¦ Kevin Fitzpatrick (ATO)

¦ James O'Halloran (ATO)

The chair acknowledged all outgoing members. Special thanks were given to Special Tax Adviser Kevin Fitzpatrick for his many years of service to the ATO Community. Kevin was congratulated on his calibre and integrity as well as recognised for his vast experience and insights to the many issues he has dealt with over the years. This is likely to be one of Kevin's last NTLG meetings and he will be missed by his ATO colleagues.

The chair also thanked Deputy Commissioner James O'Halloran for his work with the NTLG. James has done a fantastic job in making personal contact with the Professional Bodies, especially with those firms who have been finding it tough. James has done a lot of work behind the scenes and this is especially recognised by the Commissioner. James has now moved on to a new role as Deputy Commissioner, Indirect Tax.

Requests to step down from the NTLG were accepted.

Welcome new members

¦ Ray Conwell (LCA) sharing joint LCA representation with Chris Branson.

¦ Teresa Dyson (LCA) replacing Gerry Bean as the LCA representative.

¦ Andrew England (ATO) soon to replace Kevin Fitzpatrick as the ATO representative.

¦ Cheryl-Lea Field (ATO) replacing James O'Halloran as the ATO representative.

¦ Martin Jacobs (Treasury) replacing Christine Barron as the Treasury representative.

¦ Ken Schurgott (TI) replacing David Williams as the TI representative.

The chair welcomed new members Ray Conwell, Teresa Dyson and Ken Schurgott. Both Ray and Ken have had long standing relationships with the ATO and this was recognised. Andrew England was introduced as the new Chief Tax Counsel, replacing Kevin Fitzpatrick.

Cheryl-Lea Field was welcomed as the new Deputy Commissioner, TPALS. Cheryl-Lea has taken over the role from James O'Halloran.

Martin Jacobs was also welcomed to the NTLG as the new Treasury representative. The chair spoke of Martin's experience and being well credentialed as a Treasury Officer.

Confirmation of the draft minutes for the 14 December 2011 meeting

¦ Post meeting summary issued to members for comment on 21 December 2010.

¦ Draft minutes forwarded to members for comment on 18 February 2011. Nil changes advised.

¦ Draft minutes published to www.ato.gov.au

Members accepted the draft minutes of the 14 December 2010 meeting without amendments. Final minutes for that meeting will now be published to www.ato.gov.au

1.2 ERROR: numbering value not found! Treasury consultation

The Professional Bodies note that Treasury has already released 18 separate exposure drafts or papers for consultation during the 2011 calendar year as at the date of writing (11 February 2011). Many of these consultations relate to tax laws which will ultimately be administrated by the ATO.

A list of these consultations, respective release dates and closing dates for submissions are set out in the table below.

Consultation	Released	Submissions due
Exposure Draft - Exempting Australian taxes, fees and charges from the GST	11 January 2011	11 February 2011
Exposure Draft - Tax Laws Amendment (2011 Measures No. 2) Bill 2011: Reportable employer superannuation contributions	17 January 2011	11 February 2011
Exposure Draft - Assessment of indirect taxes	18 January 2011	15 February 2011
Exposure Draft - GST Administration - Grouping	20 January 2011	16 February 2011
Consultation Paper - Tax breaks for green buildings	20 January 2011	18 February 2011
Consultation Paper - Scoping study for a national not-for-profit regulator	21 January 2011	25 February 2011
Discussion Paper - Designing a Tax System Advisory Board	21 January 2011	11 March 2011
Exposure Draft - Alternative fuels taxation	24 January 2011	18 February 2011
Consultation Paper - GST treatment of new residential premises	27 January 2011	25 February 2011
Explanatory Memorandum - The Australia-Chile Convention	28 January 2011	23 February 2011
Exposure Draft - Minor amendments to tax laws	28 January 2011	18 February 2011
Exposure Draft - Corporations and Other Legislation Amendment (Trustee Companies and Other Measures) Bill 2011	31 January 2011	10 February 2011
Exposure Draft - GST-free export of boats	1 February 2011	18 February 2011
Exposure Draft - SMSF Investment in collectables and personal use assets	1 February 2011	15 February 2011
Exposure Draft - Amendments to the Tax Law Provisions related to the National Rental Affordability Scheme	3 February 2011	4 March 2011
Exposure Draft - Using tax file numbers as an identifier and to facilitate account consolidation	3 February 2011	17 February 2011
Progressing Australia's Tax Treaty Program - Discussions with Switzerland	9 February 2011	28 February 2011
Exposure Draft - Corporations Amendment Regulations 2011 (No.)	10 February 2011	18 February 2011

Professional Bodies welcome the ATO's view on the speed in which the exposure drafts and papers are being accelerated through the consultation stage.

Response

Following the release of the Tax Design Review Panel Report in 2008, the government stated that public consultation should be the default position for post-announcement consultation to ensure that all stakeholders have the opportunity to contribute to the process.

Treasury aims to give as much time as possible for consultation and aims for a four week period for stakeholders to submit their ideas, whenever this is possible.

Papers are uploaded to the Treasury website once they have government approval as they form part of the government's legislative program.

The time allowed for each consultation is subject to deadlines for legislation to be ready for introduction.

These factors, along with the capacity for all issues to be canvassed prior to submitting issues for drafting, sometime truncate the time Treasury might wish to allow for consultation.

Meeting discussion

Treasury recognised that the period of consultation is not always optimal, but members understood that this is driven by government timeframes.

The Tripartite conversations between Treasury, the ATO and Professional Bodies are seen to benefit all parties.

Members appreciated the opportunity to discuss this agenda item with the Treasury representative and accepted the response provided

1.3 Change in Treasury approach to TIES

The Professional Bodies note that the ATO has, through the NTLG network, been requesting that members at each meeting consider whether any of the issues that arise at that meeting are suitable for submission to the Tax Issues Entry System (TIES).

The Professional Bodies are of the view that an increase in the number of issues that are successfully resolved through TIES is beneficial for all the parties involved, that is, Treasury, the ATO, tax professionals and taxpayers.

As only 'care and maintenance' issues may be resolved through TIES, that is, issues which are technical or drafting defects, anomalies and/or unintended outcomes, the issues that may be successfully resolved through TIES are usually uncomplicated and have little revenue impact.

The Professional Bodies understand that Treasury is now required to cost all issues submitted to TIES and put any issues that have a discernible cost through the full budget process before the law may be amended to address the issue raised.

The Professional Bodies welcome the ATO's views on this change, including details of the impact that any TIES issues that remain unresolved for a significant period of time as a result of this change will have on the ATO's ability to effectively implement the current laws.

Response

There has been no change to Treasury processes for TIES.

TIES issues are assessed against the criteria of care and maintenance.

Issues that have a significant revenue cost cannot be addressed through TIES.

Generally, it will be clear whether an issue involves a revenue cost. However, in some cases, it may not be apparent when assessing the issue whether it has a significant revenue cost. In these cases, a revenue costing may be required to determine whether the issue is suitable for TIES.

If an issue is assessed as a TIES issue and a legislative amendment is required, a costing will be provided to government as a matter of course.

Treasury provides government with revenue costings on all measures requiring legislative change regardless of the size or source of the amendment.

All measures are subject to approval through the government's approval processes.

The timing of the implementation of changes arising from TIES issues that involve a minor revenue cost will be subject to the government's approval processes.

Issues that are outside the scope of TIES because they involve a significant revenue cost may be assessed and dealt with by Treasury as government priorities allow.

Meeting discussion

Members were advised that there has been no change to the TIES process and that there are no differences in process for issues raised within TIES or by any other means. Revenue costings are required for any measures that the government decides upon.

There was acknowledgement from non-ATO members that there was a misunderstanding in relation to the costings of measures, and they appreciated the confirmation within the agenda response.

Members appreciated the opportunity to discuss this agenda item with the Treasury representative and accepted the response provided.

1.4 Implications of the AAT decision in Sinclair and Commissioner of Taxation

In the case of Sinclair and Commissioner of Taxation [2010] AATA 902 (16 November 2010), Deputy President Forgie, Administrative Appeals Tribunal (AAT), in determining whether Mr Sinclair had acted with reasonable care with respect to his tax obligations, made the following comments:

92. On the basis of the evidence, and particularly that of his solicitors, I find that Mr Sinclair did not approach them for formal legal advice regarding the taxation consequences of the contractual arrangements he had made with Towerlake. He did approach Mr Jasper who worked with him and the solicitors on the arrangements. Mr Jasper said that the three of them, Mr Sinclair, the solicitor and he himself, worked on the matter. I accept his evidence that they all felt that an amount paid as pre-paid interest in respect of an activity that produced income would be deductible. As I have found, though, the solicitors did not put that in writing and do not admit to giving specific legal advice about the particular arrangement entered by Mr Sinclair. Mr Jasper is a Fellow of the Tax Institute of Australia but he could not give legal advice regarding the taxation implications of the arrangements.

93. I am satisfied that a reasonable person with Mr Sinclair's attributes would have sought legal advice before he lodged his taxation return in August 2006.That person would have checked whether rental income had actually been received from the property and would have given thought to how he or she would generate that income in the future or, if he went the development route, how he or she would achieve that outcome and so assessable income. A reasonable person would have done that in deciding whether or not to claim the sum of $99,000 as a deduction. That person would also have sought advice regarding Mr Sinclair's view that he could claim as a deduction an amount he has paid on behalf of another when that other owes a debt. He appears to have taken none of these courses of action when he came to claim the deduction. I am satisfied that a reasonable person would have sought legal advice from a tax lawyer before claiming the deduction. That means that I am not satisfied that Mr Sinclair acted with reasonable care within the meaning of item 3 of s 284-90 of the TA Act . Therefore, I affirm the Commissioner's objection decision imposing a base penalty amount of 25% of Mr Sinclair's shortfall amount.

(emphasis added)

The Professional Bodies recognise that this decision was handed down outside the context of the new Tax Agent Services Regime. Nonetheless, the Professional Bodies are concerned by Deputy President Forgie's views as expressed in the paragraphs extracted above.

In particular, the Professional Bodies are concerned by Deputy President Forgie's comments that seeking advice from an accountant was not sufficient to discharge the reasonable care requirement.

¦ Can the ATO please confirm that Deputy President Forgie's comments represent her own views and were not made in response to an argument put by the ATO in this case?

¦ Can the ATO please reconfirm that in the ATO's view, a taxpayer that seeks advice from a competent and qualified tax adviser (regardless of whether that adviser is a lawyer) may nevertheless be considered to have taken reasonable care for the purposes of the penalty provisions in Division 284 of the Taxation Administration Act 1953 (TAA)?

Professional Bodies note that in the NTLG minutes of June 2008, the ATO provided the following comments in response to a similar view espoused by a Tribunal member in the decision of Rebmik Contractors Pty Ltd v. Commissioner of Taxation (2008) AATA 335:

'…..It follows that the Tax Office does not and would not seek to interpret the decision as authority for the proposition that legal advice must be sought when taking an interpretative position in order to discharge the standard of reasonable care.'

Response

1. Can the ATO please confirm that Deputy President Forgie's comments represent her own views and were not made in response to an argument put by the ATO in this case?

The ATO has a policy of arguing its cases in taxation disputes consistently with its published view of the tax law (see paragraphs 6 and 8(h) of Law Administration Practice Statement PS LA 2009/9 Conduct of Tax Office Litigation). As outlined at paragraph 60 of MT 2008/1: Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard, 'reasonable care requires the entity to make appropriate enquiries to arrive at the correct taxation treatment …The type of enquiry or request for advice that is appropriate will depend on the circumstances.' The key issue in Sinclair related to the characterisation of amounts paid for the purchase of real property and thus concerned the interpretation of the contract of sale. The Tribunal accepted the meaning of reasonable care as adopted by the Commissioner in MT 2008/1. In the context of those facts, and on its view of them, the Tribunal held that the taxpayer's personal attributes and circumstances would have led a reasonable person in that position to seek legal advice about the taxation implications of his claim for deductibility.

2. Can the ATO please reconfirm that in the ATO's view, a taxpayer that seeks advice from a competent and qualified tax adviser (regardless of whether that adviser is a lawyer) may nevertheless be considered to have taken reasonable care for the purposes of the penalty provisions in Division 284 of the TAA?

Whether there has been a failure to take reasonable care turns on an evaluation of all the circumstances surrounding the making of the false or misleading statement (see MT 2008/1 in particular paragraphs 28 and 29). The Commissioner does not take the remarks made by the Tribunal in Sinclair as imposing a requirement in every case for a taxpayer to obtain legal advice, nor that the taking of reasonable care in every case requires obtaining legal advice. Although the Commissioner considers that not obtaining legal advice may be, in the particular circumstances of a matter, a relevant consideration, the mere fact that legal advice was not obtained does not necessarily lead to a conclusion that reasonable care was not taken. Conversely, the mere fact that a taxpayer obtained advice from a tax adviser does not necessarily lead to a conclusion that reasonable care was taken. The response to agenda item 5 provides more detail on the relevance of the use of tax agents in applying the reasonable care test.

Meeting discussion

Agenda items 4, 5 and 6 were rolled up into the one discussion related to the issue of 'reasonable care'.

A member commented that the ATO response to the first question of agenda item 4 was not as clear as they would like. However, the ATO response to the second question of agenda item 4 was commended by members. Regarding the first question of the Agenda Item, members were advised that the Administrative Appeals Tribunal formed its own approach in relation to whether legal advice was needed for reasonable care to be shown on the specific facts of this case.

1.5 ATO's approach to imposing penalties for failure to take reasonable care

Professional Bodies understand that in the past, the imposition of penalties on taxpayers for tax shortfalls was determined by a separate ATO division from the ATO officers involved in determining the tax shortfall.

¦ Could the ATO provide information on the ATO's current internal decision processes in relation to the imposition of administrative penalties on taxpayers?

Professional Bodies request this information because we are concerned about the approach to the imposition of penalties that the ATO is currently taking for alleged failures by taxpayers to take reasonable care. In particular, we refer to the following AAT decisions which involved the taxpayer relying on the advice of their tax agent and the ATO sought to impose penalties for failure to take reasonable care:

¦ Sinclair and FCT [2010] AATA 902 - the AAT found that the taxpayer failed to take reasonable care as he did not seek legal advice from a tax lawyer.

¦ Cases [2010] AATA 1012 and 1013 involving Jungim and in Shin - the AAT found that the penalty should not be imposed as the Shins acted on advice from their tax agent and had adopted a position in their returns that conformed with a Federal Court judge (that is, reasonably arguable position).

¦ Taneja v. FCT [2009] AATA 773 - the AAT found the taxpayer did take reasonable care by asking his agent for advice.

Without appropriate decision-making processes behind determining whether to impose a penalty for failure to take reasonable care, we are concerned that this could lead to unnecessary costs for the taxpayer in disputing the imposition of the penalty or requesting the remission of the penalty in circumstances where it would be inappropriate to impose the penalty in the first place.

Could the ATO please:

¦ Explain the internal decision processes and reasoning behind the decision to impose lack of reasonable care penalties where taxpayers rely on the advice of tax agents?

¦ Advise whether this approach will continue notwithstanding the introduction of the Tax Agent Services Act 2009, which provides a safe harbour to taxpayers in some cases where they rely on the services of a tax agent and have made full disclosure of all relevant facts and circumstances? (Subdivision 284-B of Schedule 1 of the TAA).

Response

1. Could the ATO please explain the internal decision processes and reasoning behind the decision to impose lack of reasonable care penalties where taxpayers rely on the advice of tax agents?

General

Whether there has been a failure to take reasonable care depends on the facts and circumstances of a case. There is no automatic imposition of a false or misleading statement penalty based simply on whether the taxpayer has relied on the advice of an agent or has not relied on the advice of an agent.

Where a taxpayer relies on advice of a tax or BAS agent the imposition of a false or misleading statement penalty can occur if the agent fails to take reasonable care. In the context of giving and receiving advice, if either the taxpayer or the agent fails to take reasonable care, the taxpayer may be liable for a penalty for a false or misleading statement. Both the taxpayer and the tax or BAS agent are required to take care commensurate with the level expected of a similar person. This is set out in the ATO's view on behaviours in miscellaneous taxation ruling MT 2008/1. In the context of a statement made by an agent, a taxpayer may not have a liability pursuant to the safe harbour rules. This is explained further in the response to (2) below.

Additionally, for reasonable care to have been taken, a taxpayer must meet their responsibility to properly manage their tax affairs, regardless of any consultation with a tax or BAS agent. Some of these responsibilities continue to be personal to the taxpayer and do not cease because a taxpayer uses an agent. Generally speaking, taking reasonable care means giving appropriately serious attention to complying with the obligations imposed under a taxation law.

ATO processes

The imposition of penalties on taxpayers for shortfall amounts usually is determined by the area that undertakes the tax audit. Generally, a recommendation is made on the assessment of the penalty by a compliance officer who did the tax audit. A decision is made by another person in the same area, who may be a technical officer, team leader or a more senior officer.

Some years ago, a limited range of penalty decisions were reviewed, prior to issue, by an independent group within the ATO. Currently our quality assurance processes review and provide feedback on a sample of penalty decisions prior to issue. Some quality reviews are done by staff not within the audit area, and others are done by the team leader.

Cases

The background to the question refers to three cases: Sinclair and the Commissioner of Taxation [2010] AATA 902; Shin and Commissioner of Taxation [2010] AATA 1012, 1013; and Taneja v. Commissioner of Taxation [2009] AATA 773.

In relation to Sinclair, the key issue related to the characterisation of amounts paid for the purchase of real property and thus concerned the interpretation of the contract of sale. The Tribunal accepted the meaning of reasonable care as adopted by the Commissioner in MT 2008/1. In the context of those facts, and on its view of them, the Tribunal held that the taxpayer's personal attributes and circumstances would have led a reasonable person in that position to seek legal advice about the taxation implications of his claim for deductibility. The response to agenda item 4 provides more detail on the ATO's view of the issues raised in that case.

In relation to Shin, the ATO considers that the AAT erred in automatically assuming that a reasonably arguable position on the law means that a taxpayer and/or the taxpayer's tax agent has taken reasonable care, and should have correctly found that issues in relation to the taking of reasonable care need to be determined separately from issues about whether a taxpayer has a reasonably arguable position. Further detail on the ATO's view of that decision is in the response to agenda item 6.

The ATO has published a Decision Impact Statement (DIS) in relation to Taneja. The decision of the AAT to remit the shortfall penalty in that matter was based on its view of the particular facts of the case.

2. Could the ATO please advise whether this approach will continue notwithstanding the introduction of the Tax Agent Services Act 2009 , which provides a safe harbour to taxpayers in some cases where they rely on the services of a tax agent and have made full disclosure of all relevant facts and circumstances?

Where taxpayers provide all relevant taxation information to a registered tax or BAS agent, and the agent who makes the statement fails to take reasonable care, there will be no liability to penalty in relation to that statement.

Whether this safe harbour exception applies is dependent on the particular facts and circumstances of a case. The safe harbour only applies if the registered tax agent or BAS agent has made the statement. Relying on advice from an agent is not within the scope of the safe harbour.

It also applies only where the taxpayer supplies all relevant taxation information.

The behaviour of the tax or BAS agent may lead to the safe harbour not applying - where the agent is reckless or intentionally disregards the law - regardless of whether the taxpayer has supplied all relevant taxation information.

Further information on the safe harbour is available from www.ato.gov.au

Meeting discussion

Agenda Items 4, 5 and 6 were rolled up into the one discussion related to the issue of 'reasonable care'.

Specifically regarding agenda item 5, non-ATO members wanted to draw out the ATO view on reasonable care and have it on public record.

Members suggested a need to reinforce the requirement for taxpayers to be more forthcoming in their obligations. Education is seen as a community issue. Examples of possible communication products include: TaxPack, Commissioner speeches, fact sheets, letters to agents for use with clients, articles in the  TAX AGENT magazine and eLink bulletin. The new safe harbour mechanism was suggested as a possible element for consideration.

The ATO was requested to work with Professional Bodies to support their members and registered agents to meet their obligations, especially in the lead up to tax time.

Action item

[NTLG1103/01] NTLG1103/01 Communication material on reasonable care to be reviewed with further material developed as required.

1.6 Shin and Commissioner of Taxation [2010] AATA 1012

ATO approach to cases decided against ATO position

In Shin and Commissioner of Taxation [2010] AATA 1012, released by the AAT on 13 December 2010, Senior Member O'Loughlin held that, as the taxpayer had a reasonably arguable case, the shortfall penalty of 25% imposed for failure to take reasonable care could not apply. Shortly stated, the reason for this was that the test of 'reasonably arguable position' is a test of a higher standard than 'reasonable care'. Accordingly, a taxpayer who satisfies the reasonably arguable position standard must be taken to have satisfied the reasonable care standard. Alternatively, Senior Member O'Loughlin held that a penalty of 25% would be harsh in all the circumstances and should in any event be remitted in full.

This decision is contrary to the ATO's known practice and the ATO's argument in Shin. Public rulings on shortfall penalties (MT 2008/1 and MT 2008/2) also do not discount the possibility of a taxpayer being penalised for not taking reasonable care notwithstanding that a reasonably arguable position has been established.

¦ Does the ATO intend to appeal this decision of the AAT?

¦ If not, will the ATO now acknowledge that the law on this matter has been determined and instruct officers (principally auditors) that a lack of reasonable care (or higher) shortfall penalty cannot be imposed where the taxpayer demonstrates a position of reasonably arguable position?

Response

In Shin and Commissioner of Taxation [2010] AATA 1012, 1013, a husband and wife invested in a retirement village syndicate in the 1999 year of income, each outlaying $100,000 on entering into the syndicate. Each applicant claimed deductions of $400,000 in their returns for that year, based on the total amounts committed to the syndicate in that year and future years. The evidence before the AAT was that the applicants relied on their tax agent in making the claims for their deductions. However, there was no evidence before the AAT as to any analysis undertaken by the agent of the applicants' entitlements to the deductions claimed.

The AAT found that the applicants had a position on the deductions claimed that was reasonably arguable, based on the facts concerning their investment being materially no different from those dealt with by Allsop J in Malouf v. FCT (2008) 250 ALR 253 (the decision was reversed on appeal by the Full Court in (2009) 174 FCR 581). The AAT then found that, as the Minister's Second Reading Speech to the Bill introducing the former Part VII into the Income Tax Assessment Act 1936 (ITAA 1936) indicated that the reasonably arguable position test in Part VII was a 'higher standard' than the reasonable care standard, if a taxpayer has adopted a reasonably arguable position on the law, the reasonable care standard in the former section 226G should be accepted as having been met. If that approach was wrong, with penalty under section 226G being otherwise payable because there was no evidence of the care taken by the applicants' tax agent, the AAT decided to fully remit the penalty.

The ATO considers that the view of the AAT, that a taxpayer who has a reasonably arguable position on an income tax law must be taken to have met the reasonable care standard, is inconsistent with both the key features of Part VII identified in the Explanatory Memorandum to the Taxation Laws Amendment (Self Assessment) Bill 1992 and with the comments of Hill J in Walstern v. FCT (2003) 138 FCR 1, 25-27 and of Finn J in R&D Holdings P/L v. DFCT [2006] FCA 981, at [182]. The key features recognise that all taxpayers are required to exercise reasonable care in conducting their tax affairs, and that taxpayers with large claims are required, in addition, to ensure that the positions they adopt are reasonably arguable. The ATO considers that the AAT erred in automatically assuming that a reasonably arguable position on the law means that a taxpayer and/or the taxpayer's tax agent has taken reasonable care, and should have correctly found that issues in relation to the taking of reasonable care need to be determined separately from issues about whether a taxpayer has a reasonably arguable position.

The ATO did not appeal the decision in Shin to the Federal Court because, on the assumption that the AAT was wrong about the threshold issue of reasonable care, there were no clear errors of law in the AAT's discretion to remit the 5% penalty to nil. The ATO will continue to apply the principles in Miscellaneous Taxation Rulings MT 2008/1 and MT 2008/2 that assume that issues in relation to the taking of reasonable care are determined separately from issues about whether a taxpayer has a reasonably arguable position, always recognising that the usual position is that those who have a reasonably arguable position on the law will also be found to have taken reasonable care. On the facts, the Shin cases were unusual because there was no evidence presented of the care taken by the applicants' tax agent.

The ATO will publish these views in a DIS during the week ending 25 March 2011.

Meeting discussion

Agenda items 4, 5 and 6 were rolled up into the one discussion related to the issue of 'reasonable care'.

Specifically regarding agenda item 6, a member suggested that MT 2008/1 needs to be reviewed due to concerns that it doesn't distinguish adequately between the reasonable care and reasonably arguable position tests.

A member commented that the DIS helps, but there are still concerns with the AAT decision on the Shin case and that it disagrees with the ATO view. The ATO agreed to undertake a review of the aspect of the ruling mentioned above, however, members need to consider that 'reasonable care' is a normal requirement of tax law. Representatives from the Law Council of Australia were invited to provide specific examples that will demonstrate that the ruling needs to be reviewed, and thereby assist the ATO in the review.

A member asked whether the reasonable care test and the reasonably arguable position test are parallel tests or hierarchical. The ATO responded that the tests are parallel, not hierarchical. This matter is to be dealt with as part of considering the review of the ruling.

Action item

NTLG1103/02 The aspect of the ruling distinguishing between reasonable care and reasonably arguable position is to be considered for review by the ATO.

1.7 Commissioner of Taxation v. Clark [2011] FCAFC 5

ATO approach to cases decided against ATO position

On 21 January 2011 the Full Federal Court (Edmonds and Gordon JJ., Dowsett J, dissenting) held in Commissioner of Taxation v. Clark [2011] FCAFC 5 that there was no discontinuity in the trust entity in question such as to prevent past capital losses offsetting a capital gain. In short, the majority held that although there had been substantial changes in the identity of the trustee, the trust property and the beneficiaries over a long period of time, there remained a 'continuum' in the essential indicia of the existence of the trust over this period. Therefore, in the absence of statutory tests for continuity of the trust estate, there was sufficient identity between the trust that incurred the capital losses and the trust that derived the capital gain.

¦ Does the Commissioner intend to seek special leave to appeal the decision of the Full Court?

¦ If not, will the Commissioner now acknowledge that his practices, as set out in the document Creation of a new trust - Statement of Principles August 2001 no longer represent the settled law and will withdraw this statement.

¦ Will the Commissioner prepare and release a binding public ruling setting out his position on the law in this regard as now established by a decision of the Full Federal Court?

¦ If the Commissioner does intend to seek special leave to appeal, will he ensure that, in the meantime, pending the grant or refusal of special leave or a decision of the High Court, taxpayers who follow the Full Federal Court decision in lodging returns are not subject to penalties or ongoing audit activity?

Response

Yes, the Commissioner has applied to the High Court for special leave to appeal the decision. The ATO has not yet been notified of a date for the special leave hearing.

Pending resolution of the appeal, it is accepted that taxpayers who prepare their returns on the basis of the views expressed by the majority of the Full Federal Court have, for the purposes of Division 284 of Schedule 1 to the TAA, a 'reasonably arguable' position to the extent that they adopt the reasoning of the majority in that case.

Staff will also be instructed, pending resolution of the appeal, not to select cases for active compliance solely with a view to applying the Commissioner's view as to whether there has been continuity of a particular trust estate. Such cases naturally will not include cases of tax avoidance. The Commissioner will continue to vigorously pursue arrangements that seek to traffic in losses.

Finally, the ATO Statement of Principles on trust resettlements will need to be reviewed on resolution of the appeal (regardless of the outcome of the appeal).

Meeting discussion

It was confirmed that the Commissioner has applied to the High Court for special leave to appeal the decision on this case and that the ATO has not yet been notified of a date for the special leave hearing.

Members asked the ATO whether they regard this case as a test case. It was noted that this case might end up providing useful guidance on the trust resettlements issue.

Members accepted the response provided to agenda item 6. However, one member asked for clarification of the comment in the ATO response that the ATO will continue to pursue tax avoidance cases. It was clarified that that part of the response was there principally to make it clear that the trust loss provisions and the general anti-avoidance rule (Part IVA) are not impacted by the decision of the Full Federal Court in Clark.

1.8 Confirming that custodians to managed funds are not trustees of trusts

Taxation of trusts

The Professional Bodies note that the ATO raised the argument in the Colonial First State Investments Limited case that the use of a custodian for a managed fund meant that the client of the custodian 'is not a beneficiary of the Wholesale Fund' and the 'units in the Wholesale Fund are vested in ... (the) custodian of the Retail Fund and are held on a sub-trust for the applicant.' (paragraph 17). This argument was summarily rejected by Gordon, J. ('The Commissioner's conclusion that the applicant is not a beneficiary of the Wholesale Fund because of the interposition of the custodian ignores equity's concern with substance rather than form ' at paragraph 19 ff.) but raises a concern about whether the ATO is likely to run this argument again in any future controversies involving managed funds which use custodians to hold assets.

The Commissioner is requested to confirm:

¦ That, where managed funds use custodians to hold their investments for reasons of administrative convenience, the Commissioner will accept that the role of the custodian does not constitute a sub-trust requiring lodgment of returns and application of Division 6 and other trust legislation to the commercial relationship?

¦ Does the Commissioner plan to issue a DIS to confirm this issue? and

¦ That this argument will not be argued again in any appeal from the Federal Court decision?

Response

Background

The Colonial First State case concerned the tax treatment of payments made by the trustee of a unit trust, (the Commonwealth Property Fund 6, or the Wholesale fund) to a redeeming unit holder. The court (Stone J) addressed whether the Commissioner's private ruling (answering a total of 26 questions posed in various parts) in respect of the arrangement was correct.

The court (Stone J) found for the Commissioner in respect of all material questions answered in that ruling. In particular, the court rejected the taxpayer's argument that the selective appointment of particular trust capital gains by the trustee of the unit trust to particular redeeming unit holders could influence the tax outcome for those unit holders in the manner contemplated by the taxpayer.

In the course of finding for the Commissioner, the court accepted that units in the unit trust were vested in a Custodian and held on sub-trust for the unit holder (at paragraph 17). However, as the question notes, the court went on to find (at paragraph 19) that a conclusion that the unit holder was not a beneficiary of the unit trust would ignore 'equity's concern with substance rather than form'. Therefore, the court conducted its analysis of the trustee's actions on the basis that the unit holder (and not the Custodian in whom the units were said to be vested) was the beneficiary of the unit trust.

Decision impact statement

The taxpayer has not appealed the decision. Accordingly, the Commissioner will prepare a DIS canvassing the various issues considered by the court, including the Commissioner's response to the manner in which the court dealt with the Custodian issue raised in this question. We will be consulting with the Trust Consultation Sub-group on what ought be included in the DIS at a meeting of that group scheduled for 5 April 2011. A draft DIS will be published for public comment as soon as possible thereafter.

On a broader level, the Commissioner notes that the Board of Taxation, as part of its review of the taxation arrangements applying to managed investment trusts, recommended that Investor Directed Portfolio Services (IDPS) and similar so-called bare trust arrangements be excluded from taxation under Division 6. However, the government has deferred consideration of that recommendation. See Press release No. 86 of 2010 by the then Assistant Treasurer.

Meeting discussion

Agenda items 8, 9 and 10 were rolled up into the one discussion related to the taxation of trusts. Specific items of interest such as the Colonial decision (including the custodian and fixed entitlement issues) are to be discussed at the Trust Consultation Sub-group meeting of 5 April 2011.

It was also noted that trust issues will continue to be strategic issues for future NTLG meetings. There is an expectation that NTLG members within the sub-group will act as sponsors of issues before the NTLG.

Specifically in relation to agenda item 8, after consultation with the sub-group the DIS will be made available for public comment before being finalised.

Post meeting update

The Trust Consultation Sub-group has been advised of the discussion on this agenda item.

The issues that were considered by the court in the Colonial decision were discussed at the meeting of the sub-group on 5 April. The ATO is in the process of preparing a DIS which takes account of feedback provided by members at that meeting. The DIS will be circulated to sub-group members for further comment prior to publication for public comment.

1.9 ATO practices in relation to managed funds and whether they constitute fixed trusts

Taxation of trusts

The Professional Bodies are concerned that the ATO argument, in the Colonial First State Investments Limited case, that the relevant fund was not a fixed trust, will affect the capacity of managed funds to pass franking credits to their investors.

The ATO argument that the relevant fund was not a fixed trust was accepted by the Federal Court (paragraph 105, 106). This potentially affects that any unit trust or managed fund would have risks in flowing through franking credits to its investors.

The Commissioner has a discretion under section 272-5(3) ITAA 1936 to consider

'that the beneficiary should be treated as having the fixed entitlement, having regard to:

(i) the circumstances in which the entitlement is capable of not vesting or the defeasance can happen; and

(ii) the likelihood of the entitlement not vesting or the defeasance happening; and

(iii) the nature of the trust'.

and has exercised this discretion in many cases in private binding rulings and other actions.

The Professional Bodies ask if this issue will require any further action or communication by the ATO to ensure that all managed funds with losses or franked dividends are aware of this risk management issue, if they have not obtained a formal ATO exercise of discretion, before 30 June 2011.

Response

The Colonial First State Investments Ltd case has not changed the ATO's current administrative practices in respect of this discretion. Whilst each request is treated on its merits, the ATO's current practice acknowledges that the fact that a unit trust is registered as a managed investment scheme with a single class of unit holder that deals with its responsible entity on an arm's length basis would weigh in favour of the exercise of the Commissioner's discretion. (Reference 7 December 2006 Minutes of the NTLG and the Issues Register for the NTLG Trust Consultation Sub-group.)

The ATO is happy to hear suggestions from the Professional Bodies if they feel that anything further is required.

Meeting discussion

As noted, agenda items 8, 9 and 10 were rolled up into the one discussion related to the taxation of trusts. Specific items of interest are to be discussed at the Trust Consultation Sub-group meeting of 5 April 2011.

It was also noted that trust issues will continue to be strategic issues for future NTLG meetings. There is an expectation that NTLG members within the sub-group will act as sponsors of issues before the NTLG.

Specifically in relation to agenda item 9, it was discussed that communications might be useful to remind trustees that requirements have always been in place.

Post meeting update

The Trust Consultation Sub-group has been advised of the discussion on this agenda item.

1.10 ATO approach to the decision of the Qld Supreme Court in Thomas Nominees v. Thomas & Others [2010] QSC 417

Taxation of trusts

In this case, Applegarth J held that franking credits were assets of the trust that could be distributed by the trustee and that they could be distributed differentially between beneficiaries. The Professional Bodies understand that the ATO was invited to join the action but chose not to.

Given the significance of the issue (that is, the streaming of franking credits between beneficiaries of a trust), why did the ATO choose not to join this action?

¦ Does the Commissioner plan to issue a DIS in relation to this case?

Response

Background

Thomas Nominees Pty Ltd v. Thomas and Ors [2010] QSC 417 (Thomas Nominees) addressed an application brought pursuant to the Trustee Act (Qld) for a declaration as to the construction of various trustee resolutions (including resolutions purporting solely to deal with franking credits). In the course of disposing of this application, Justice Applegarth of the Supreme Court of Queensland made various observations regarding the operation of Subdivision 207-B of the ITAA 1997.

While his Honour appears to suggest in parts of his judgment that Subdivision 207-B permits the trustee to distribute the benefits of franking credits to beneficiaries independent of the manner in which the relevant dividends are distributed, that Subdivision requires that a share of the franked distribution in fact be taken into account in working out the amount included in the beneficiary's assessable income under Division 6 of Part III of the ITAA 1936 before that beneficiary can be entitled to an offset in respect of that franking credit. It then quantifies that offset entitlement also by reference to the share so taken into account.

Applegarth J also indicated that, in his view, franking credits were 'income' of the trust under consideration.

While the Commissioner accepts that an entitlement to a franking credit offset represents some value, it does not represent an accretion to the trust estate nor an accounting asset of the trust (that is, it is not a future economic benefit of the trust) that can itself be dealt with by the trustee. It is for this reason that the tax benefit of the franking credit typically remains out of the accounts and off the financial statements.

Rather, the entitlement is a feature of the income tax law, and the benefit is conferred at the time of assessment by the law. This is so even though the trustee's distribution decision can affect who may, subject to the integrity rules in Subdivision 207-F of the ITAA 1997, be entitled to that benefit in accordance with the rules in Subdivision 207-B of the ITAA 1997.

In the Colonial First State Investments Limited case Stone J endorsed the Commissioner's view that notional amounts (such as franking credits) are not capable of funding an entitlement to income. Her Honour explained

The respondent's written submissions explain its position convincingly. Among the many sources of uncertainty to which the Commissioner refers is 'a range of amounts' that may be included in section 95 income but which 'are not capable of being recognized for accounting purposes, let alone founding an entitlement, for example, franking credits, attributed foreign investment income, amounts included by operation of Part IVA of the 1936 Act or deemed capital gains included by operation of the market substitution rule.

(i) ATO joining action

The application in Thomas was made pursuant to subsection 96(1) of the Trusts Act 1973(Qld) which gives the trustee the power to approach the court to seek directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.

Subsection 96(2) provides that every application made under section 96 'shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the court thinks expedient'.

The Commissioner was not at any stage invited by the court to either join the proceedings or to otherwise provide assistance to the court.

Nonetheless, the Commissioner gave careful consideration as to whether he should seek to become a party to the proceedings.

The Commissioner understood the taxpayer's application to be a request to the court to construe the resolutions made by the trustee and, to the extent they did not properly reflect the trustee's intent, to have the court rectify the resolutions. The Commissioner did not understand the application to be seeking the court's direction as to the tax effect of those resolutions (or of any rectified resolutions) - that being properly a question for the assessment, objection and review processes under the relevant Commonwealth Income Tax Acts.

Accordingly, the Commissioner formed the view that it was neither necessary nor appropriate for him to be a party to the proceedings. In advising the taxpayer of this view, in the interests of open administration the Commissioner nonetheless also noted that:

¦ it was his view that there is some uncertainty as to whether franking credits can ever form part of the income of a trust estate for trust law purposes and referred in this context to the Bamford DIS

¦ uncertainty arises because franking credits are merely a tax concept which do not represent an accretion to the trust fund over and above the distributions to which they attach - they being merely a concept of the income tax regime, taken into account in determining the tax position of the trustee and/or relevant beneficiaries

¦ in any event, the Commissioner would not regard a resolution that proceeds on the assumption that franking credits are included in trust income, or that purports to distribute franking credits (were such a resolution to be sanctioned by the court), as determining the tax treatment of those franking credits. This is because the tax effect of a trust distribution, including who is entitled to the benefits of franking credits attached to the distribution, is governed by the relevant tax legislation (including Subdivision 207-B of the ITAA 1997 and Division 6 of Part III of the ITAA 1936, and by the mechanisms set out in that legislation for resolving disputes between taxpayers and the Commissioner.

The Commissioner invited the taxpayer to provide a copy of his correspondence to the court which we understand the taxpayer to have done (refer paragraphs 48 and 49 of the judgment).

In summary, the Commissioner did not seek to join the Supreme Court proceedings because those proceedings concerned the relevant beneficial entitlements of a beneficiary of a trust as against its trustee. The Commissioner considers that the tax effect of any such trust entitlement is properly a matter for the assessment, objection and review processes under the relevant Commonwealth Income Tax Acts.

(ii) Decision impact statement

The Commissioner's views in respect of the decision are set out in the Background above. The Commissioner does not plan to issue a DIS in respect of the decision.

It is noted that the Assistant Treasurer announced on 4 March that the government would be amending the law to address two areas of uncertainty for trusts, including in respect of the tax effect of the 'streaming' of franked distribution. As the changes are intended to operate in respect of the 2010-11 and later income years, the need for the ATO to provide guidance (including in the form of ATO view products) in respect of these areas will be reassessed following Treasury's consultation on, and development of, these amendments.

Meeting discussion

As noted, agenda items 8, 9 and 10 were rolled up into the one discussion related to the taxation of trusts. Specific items of interest are to be discussed at the Trust Consultation Sub-group meeting of 5 April 2011.

It was also noted that trust issues will continue to be strategic issues for future NTLG meetings. There is an expectation that NTLG members within the sub-group will act as sponsors of issues before the NTLG.

Specifically in relation to agenda item 10, members were encouraged to review the draft legislation that is expected to be released shortly. It is anticipated that legislation to give effect to the government's announced changes to the taxation of trusts will be introduced as a 'T' Bill in May or June 2011 for passage in the winter sittings of parliament.

Members suggested that a lot of work may be required to help taxpayers and practitioners understand the effect of the changes, particularly as those changes are intended to operate retrospectively.

Post meeting update

The Trust Consultation Sub-group has been advised of the discussion on this agenda item.

Exposure draft legislation relating to the streaming of franked dividends and capital gains was released for public consultation on 13 April 2011. It can be obtained at www.treasury.gov.au

1.11 ATO implementation of recommendations in the Inspector General of Taxation's report on 'Review of aspects of the ATO's administration of private binding rulings'

The Inspector General of Taxation's report on his 'Review of aspects of the ATO's administration of private binding rulings' was publicly released on 24 November 2010. In this report, the Inspector General of Taxation made five key recommendations.

Of these recommendations, the ATO agreed with key recommendations 1, 2 and 3 and agreed in part with key recommendations 4 and 6.

¦ The Professional Bodies request further details on how the ATO intends to implement the accepted key recommendations.

¦ Can the ATO also provide details on how it intends to communicate its implementation of these key recommendations to those persons that may need to understand the changes?

¦ The Professional Bodies request that the ATO further explain its reasons for partly rejecting key recommendations 4 and 6, in particular (though not exclusively) key recommendations 6.2, 6.3 and 6.4 in relation to improving the functionality of the private binding rulings register.

Response

1. The Professional Bodies have requested further details on how the ATO intends to implement the accepted key recommendations

a. Progress on implementation of recommendations which are the responsibility of the ATO including key strategies to achieve

¦ Recommendation 1 (in course) - improve systems to identify, track and report on the most frequently requested private rulings topics and publish the top five or ten or whatever number is appropriate (ATO agreed in full with this recommendation). We are exploring a range of possibilities relating to reporting, systems, analytics and text-mining to provide the appropriate granularity of data for both internal and external purposes. In the meantime, we consider existing data should be able to provide a broad indication of the topics that are the subject of the most frequently requested private rulings and we expect to be able to make information for the 2010-2011 year available at the earliest opportunity in the ensuing financial year, via our website. Further enhancements to the data will follow as we refine our systems.

¦ Recommendation 2 (completed) - to address perceptions that the ATO is not willing to rule on some issues, the ATO should keep applicants informed of delays that may be caused by escalation arrangements, etc. (ATO agreed in full with this recommendation). The ATO has improved instructions to staff via the Online Resource Centre for Law Administration (ORCLA), the key practice tool for staff, to ensure that applicants (and, where appropriate, the public) are kept informed.

¦ Recommendation 3 (in course) - to address delays and productivity issues with private rulings (ATO agreed in principle with this recommendation). The ATO has implemented the early engagement model (EEM) for large market private rulings. This model is used to ensure the right staff and ultimate decision maker are engaged early and that discussions with taxpayers occur early in the process. Having conducted a review of the first three months of operation (1 July 2010 to 30 September 2010) the indications are that the EEM is having a positive impact on the ATO's ability to deliver advice in shorter timeframes to the large market when compared to previous year performances. Planning is underway for a further review of the implementation of the model covering the additional period 1 October 2010 to 31 March 2011. It is intended to undertake this further review in April 2011. This will give us a view of the impacts/outcomes, etc., and place us in a better position to make an assessment regarding the merits/implications of implementing it more widely. To address the issue of benchmarking the ATO is pursuing a number of angles including the possible use of analytics to understand the drivers for private rulings and to predict demand. In addition, the work which has been done in implementing recommendation 4 (see below) should have a beneficial effect.

¦ Recommendation 4 (in course) - to address concerns that the introduction of the new case management system (Siebel) may have resulted in a drop in quality including timeliness, of private rulings (The ATO agreed in part with this recommendation). A number of changes have been made to streamline the operation of the new system and supporting processes and procedures. Planning has commenced to assess the performance of the new system in the new financial year once the delivered improvements have taken effect. While the ATO disagrees with that part of the recommendation dealing with Siebel's search engine, it nevertheless has made improvements to the existing Siebel search functionality, and has commenced the Siebel upgrade project in which a new search engine will be deployed.

¦ Recommendation 6 (in course) - to ensure the transparency of the private rulings system and the timeliness of publication via the register of edited private binding rulings. (The ATO agreed in part with this recommendation). The ATO continues to publish a register containing edited versions of all private rulings issued. The ATO has improved its ability to monitor its publishing performance in relation to edited versions of private rulings issued, with the aim of publishing an edited version within 49 days after providing a private ruling to a taxpayer. In addition, we continue to work through issues to enable more timely progression of this work through our systems. For instance, we have automated some elements of the edited version creation process. The ATO disagrees with that part of the recommendation that suggested 'enhancements'; concerned that they significantly increase the risk of users misunderstanding the intent and purpose of the register, being integrity and transparency of the private ruling system.

 

b. ATO governance processes. Part of the remit of the ATO Audit Committee is to monitor the progress being achieved in implementing agreed recommendations made by all the ATO scrutineers. The ATO Audit Committee includes external representatives.

2. Can the ATO provide details on how it intends to communicate its implementation of these key recommendations to those persons that may need to understand the changes?

The nature of the recommendation will drive the need for and form of communication.

Recommendation 1

Publication of the topics that are the subject of the most frequently asked private rulings will be via our website.

Recommendation 2

As for keeping taxpayers and the public appropriately informed of delays in finalising private rulings, instructions have been given to staff via the ATO's Online Resource Centre for Law Administration (ORCLA) to ensure this occurs.

Recommendation 3

There has been ongoing communication and consultation in the development of the early engagement model with external stakeholders, including the IGoT and the Large Business Advisory Group (LBAG). We have also spoken to the major accounting firms and industry associations to explain the practical implications of the model.

While it is too early to predict the form of the communication needed for the expansion of the model to other markets, it would be expected that further consultation will be necessary as we continue to explore ways to improve the timeliness of the advice we provide.

Recommendation 4

Published trends in our performance against our service standards for private rulings will be a guide to the effectiveness of our implementation of this recommendation. Service standard data is published in both our Annual report and via www.ato.gov.au

Recommendation 6

The continued existence of and regular additions of edited versions of private rulings to the register of private binding rulings is considered to be the most useful way to advise the community of the outcomes of our implementation of this recommendation. Performance against the ATO's internal timeliness measure for publication to the register is monitored through exception reporting to the relevant ATO executive management committees.

3. The Professional Bodies request that the ATO further explain its reasons for partly rejecting key recommendations 4 and 6, in particular (though not exclusively) key recommendations 6.2, 6.3 and 6.4 in relation to improving the functionality of the private binding rulings register.

There is nothing useful to add to the full explanation of the ATO's reasons for not accepting certain parts of key recommendations 4 and 6 that was provided to the IGoT and included in his report to the Assistant Treasurer.

Meeting discussion

Members accepted the response provided.

1.12 ATO merger and acquisition framework

The Professional Bodies note that the ATO release of its merger and acquisition guide on 8 February 2011, to inform taxpayers about its approach to merger and acquisition transactions, in addition to the merger and acquisition (M&A) framework, which 'shows the different areas we look at when analysing an M&A transaction and is broken down into six areas'.

Given the breadth of issues covered, is the ATO contemplating the development of an ATO standard methodology or package of information, perhaps in a checklist form, to assist entities involved in M&A transactions to more efficiently progress their interaction with the ATO officers who work through their compliance processes?

Response

In developing the mergers and acquisitions guide, we consulted with members of the LBAG in co-designing a suitable product for large business. In a similar vein, the ATO would welcome opportunities to work collaboratively with other stakeholders, including members of the NTLG, in developing a 'best practice documentation package' of materials for those merger and acquisition transactions which have been concluded. This could form part of our continuing consultation with large businesses, business advisors and shareholders to supplement ATO material on mergers and acquisitions. If the NTLG could nominate a contact point to discuss this further, this would be of assistance.

Meeting discussion

Non-ATO members thanked the ATO for a very useful guide. The item was initially raised in support of a checklist for the M&A framework, but in light of consolidation, earnout matters and taxation of financial arrangements (TOFA), the Professional Bodies proposed to come back to the NTLG about a potential checklist in 12 months time. The ATO agreed it would be open to accommodate this suggestion.

Members accepted the response provided.

1.13 ATO processes for law reform on managed investment trusts

The Professional Bodies note that the exposure draft legislation implementing the reform of Australia's tax rules for managed investment trusts (MITs) is expected to be released in the first half of 2011, with an anticipated commencement date of 1 July 2011.

The MIT reforms will affect not only Australia's MITs (numbering, we suggest, several hundred entities) but also the tax affairs of many hundreds of thousand if not millions of taxpayers investing in MITs, including individual, superannuation fund, private trust, MIT, corporate, listed investment company and non-resident investors. The currently-proposed 'unders and overs' and attribution rules raise challenging issues.

These reform processes will involve the systems and procedures of:

¦ MITs themselves and their advisers

¦ Investors and their advisers

¦ The ATO, including returns, payments and related processes

¦ The Professional Bodies' training of many tax and financial advisers.

The Professional Bodies would like to discuss the ATO's processes for the development of systems and procedures around this major new law, and the implications of (for now) a 1 July 2011 start date, and the development of a co-design approach to implementation.

Response

The new tax system for managed investment trusts

In the near future the ATO intends to move to a co-design exercise involving industry that thoroughly scopes the impact of the new tax system for MITs on business income tax and processing systems. This will include discussion of lodgment timeframes, approved form requirements and other administrative issues that involve systems impacts for MITs.

The ATO will be moving very soon into the formal consultation exercise, facilitated by the ATO's Software Industry Liaison Unit. The aim is to involve industry during key stages of designing, prototyping and testing the reporting requirements. The ATO has identified several stakeholders that it intends to approach, including systems developers for the managed funds industry and some MITs that have in-house systems. The ATO welcomes indications of interest from other relevant stakeholders in the consultation process - queries can be directed to Daniel Clode on  (02) 6216 2859 or  daniel.clode@ato.gov.au

Preliminary engagement between ATO and industry commenced with a high level discussion of systems issues at the Software Developers Consultative Group on 7 October 2010.

In relation to start dates, the ATO has given Treasury its advice on this issue in light of our own lead-times for systems development and our understanding of industry lead-times.

Meeting discussion

Members were happy with the response provided.

It was confirmed that the new tax system for MITs is a strategic issue for future NTLG meetings. The Commissioner commented that this is a good area of focus on a variety of levels.

A member suggested that the MIT team engage with a variety of organisations such as the Property Council, Financial Services Council and Australian Custodial Services Association if they have not already done so. Reaching out to other interested parties is seen as a sensible idea.

1.14 Part IVA and the need to update ATO guidance on Part IVA and counterfactuals

The Professional Bodies note that, as discussed in the December 2010 NTLG meeting, the ATO plans to update ATO guidance material dealing with Part IVA, particularly PS LA 2005/24 Application of General Anti-Avoidance Rules, given the strong trend of litigation and judicial consideration in relation to ATO application of Part IVA to commercial restructures and M&A transactions.

The Axa Asia Pacific Holdings Ltd, RCI Pty Ltd, News Australia Holdings Pty Ltd, British American Tobacco Australia Services Ltd and Noza Holdings Pty Ltd cases illustrate the ATO challenging tax elements which are seen to constitute schemes for Part IVA purposes which are extracted from broader commercial transactions, the pursuit of major corporations, and the apparent development of Part IVA into an integral element of ATO responses to tax aspects of significant commercial transactions.

Further, the Professional Bodies note the Part IVA case of Trail Bros Steel & Plastics Pty Ltd, which involved (broadly) the variation of an existing superannuation arrangement involving directors of a private company, converted after changes to the maximum deductions for superannuation contribution, into an arrangement involving payments to an employee welfare fund. The deductions were struck down by the ATO under Part IVA, with penalties imposed. The decisions of the AAT, the Federal Court and Full Federal Court clarify various aspects of Part IVA.

The potential application of Part IVA is a relevant factor in, inter alia, the administration of the Accountants' Concession for communications with clients, the application of promoter penalties legislation and the completeness of advice for purposes of the Tax Agent Services legislation.

There would be benefit in discussing the progress of the update of PS LA 2005/24 and what other actions might be desirable to ensure a common shared understanding of the issues by the tax professionals and taxpayers.

Response

There is a discussion with the General Anti-avoidance Rules Panel (GAAR) panel on 24 March to obtain the panel's advice for the purposes of updating the guidance material in PS LA 2005/24.

The issue will be discussed at the NTLG meeting.

Meeting discussion

Members were advised that the GAAR panel met on Thursday 24 March 2011 and discussed the implications of recent court decisions relating to Part IVA. NTLG members who attended before the panel agreed that the discussions were constructive.

There was some general discussion of the recent court decisions including the apparent inconsistency in the reasons of the Full Federal Court in the Lenzo and Trail Bros decisions in respect of section 177C(1)(b).

The ATO agreed to update PS LA 2005/24 in the light of recent decisions to provide further guidance on its views about the application of Part IVA. This updated guidance will focus on the meaning of 'a tax benefit in connection with a scheme' in section 177C and the importance placed by the court on undertaking a factual enquiry to determine the counterfactual or alternate postulate for the purposes of deciding whether there was a tax benefit. Special Tax Adviser Kevin Fitzpatrick commented that there will need to be a greater emphasis on testing the evidence of what would have happened, or might reasonably be expected to have happened, absent the scheme. This should happen at the audit stage and may involve the need in some cases for the ATO to use its formal information gathering powers.

Apart from the updated practice statement, DIS's will also be issued for the relevant cases.

The ATO commented that there has been no evidence of any increase in the application of Part IVA. The processes remain the same in that all cases have to be escalated to the Tax Counsel Network and then the GAAR panel before a Part IVA determination can be made.

1.15 Interaction of Division 7A and section 100A of the ITAA 1936

In PS LA 2010/4 the ATO expressed its views on the taxation treatment of unpaid present entitlements (UPEs) owing by trustees of trusts to corporate beneficiaries in the context of the application of Division 7A. One of the suggested and acceptable solutions to problems which can be created in this area is for the trustee of the trust and the corporate beneficiary to enter into a complying Division 7A loan agreement.

However the Professional Bodies have been informed that the ATO has issued position papers to some taxpayers in the past six months or so setting out the view that section 100A of the ITAA 1936 applies to a Division 7A loan agreement on the basis that such a loan agreement would fit the description of being a 'reimbursement agreement' for section 100A purposes.

Leaving aside the question of whether section 100A does actually apply in the particular cases, this is, at the very least, a potentially very significant issue for a number of taxpayers and seems to cast doubt over the effectiveness of the suggested solutions by the ATO to the UPE issue under Division 7A. Without dealing with the specific cases where this issue has been raised in position papers, the Professional Bodies request that the ATO provide its views on the operation of section 100A in the context of UPEs owing to corporate beneficiaries as a matter of urgency.

Response

The resolution of this issue, in terms of the operation of section 100A and its interrelationship with Division 7A, requires an understanding of the nature of all of the relevant factors in a case. The mere presence of a complying loan agreement would not ordinarily constitute a reimbursement agreement.

Although a priority technical issue (PTI) was listed on www.ato.gov.au , in reviewing what may constitute a reimbursement agreement for section 100A purposes, it became apparent that the development of a public ruling could not provide meaningful guidance. Accordingly, that PTI has been closed. Instead, it is preferable that affected taxpayers seek to address their concerns by requesting the ATO provide certainty by addressing the issue in the form of a private binding ruling.

Meeting discussion

A member raised a particular case of concern and was asked to provide details to Second Commissioner Bruce Quigley. The ATO commented that without appropriate examples it is unable to act upon particular concerns. There are certainly bigger issues if taxpayers are getting caught up in unintended consequences as a result of following an ATO ruling. The ATO agreed to review the practice statement and identify the features of Division 7A that are likely to give rise to section 100A issues.

Action item

NTLG1103/03 Practice Statement to be reviewed by the ATO. Member to provide details of a particular case as an example. PALU secretariat to be copied into correspondence.

Post meeting update

The ATO is not aware of any particular section 100A issues arising out of the publication of practice statement PS LA 2010/4, but we will review this if specific example(s) are provided.

This agenda item was discussed at the Division 7A Working Group on Monday 18 April 2011. Members were happy with the ATO update on this Item.

They acknowledged the complexity associated with section 100A and requested that (at the very least) we publicly state in a document, such as practice statement PS LA 2010/4, that 'the mere presence of a complying loan agreement would not ordinarily constitute a reimbursement agreement for section 100A purposes'.

Update on UPE test case - provided for the March meeting

Members have enquired about the possibility of running a test case to determine whether or not a UPE can satisfy the extended definition of loan under subsection 109D(3) of the ITAA 1936, that is, on the facts of the case, is there an in-substance loan or financial accommodation?

The ATO has previously advised that it supports the proposal to identify a suitable case for test case funding as a way to provide further certainty to taxpayers.

Since the last update on this issue the ATO has commenced preliminary discussions with a number of stakeholders on how to best develop a test case.

The ATO is meeting with representatives from the professional associations on 28 March 2011 to discuss their proposed way forward with respect to identifying an appropriate case to test the Commissioner's view contained in Taxation Ruling TR 2010/3.

1.16 Division 7A and non-resident private companies

Previously, there were contrary views between the ATO and industry about whether Division 7A applied to disguised distributions made by non-resident private companies to resident Australian shareholders (or their associates) where the company had no Australian source ordinary or statutory income. This was because these companies had no income tax responsibilities in Australia and the concepts (which are used in Division 7A) of income year, franking and lodgment day were not necessarily applicable.

To put the matter beyond doubt, the non-resident private company provisions were inserted by Tax Laws Amendment (2010 Measures No.2) Act 2010 into Division 7A to accommodate non-resident private companies with no Australian source ordinary or statutory income.

Accordingly, Division 7A may apply to disguised distributions to the resident shareholders or their resident associates. However, we believe the policy underlying Division 7A and non-resident private companies is not intended to capture non-resident private companies that make disguised distributions to their non-resident shareholders as that is clearly beyond Australia's jurisdiction.

It is possible that Division 7A could apply to a non-resident private company with only non-resident shareholders.

An example is: an individual is a non-resident of Australia (UK) and he has invested some money in Australia ($1-2 million) mainly in unlisted property trusts. The vehicle used for his investments is a discretionary trust. The trust was funded by loans from a non-resident private company. The funds have historically been lent on an interest only basis.

In this case, the shareholders of the private company are all non-residents. The discretionary trust, however, is an associate of a shareholder and is a resident of Australia. There are no Australian resident beneficiaries of the trust. Also, the private company does not lodge Australian company tax returns and it receives Australian interest income from which withholding tax has been withheld. There is no deferral of profits or other issues of tax avoidance in respect of the non-resident private company.

¦ What is the ATO's view of the application of Division 7A to non-resident private companies with only non-resident shareholders?

¦ Does Division 7A apply to the non-resident private company in the example?

Response

Whether or not Division 7A will apply in a specific situation is dependent upon the facts of each case. There is no specific exclusion from the operation of Division 7A for non-resident private companies with only non-resident shareholders.

In the example given, a private company has made a loan to an Australian resident, who is an associate of one of its shareholders (the Australian resident associate). Without more, Division 7A would apply on its face to treat that loan as a dividend paid to the Australian resident associate.

Section 109Z of the ITAA 1936 will treat that dividend as having being paid out of the private company's profits. However, it is silent on the source of those profits.

Nonetheless, as Division 7A is a self-executing provision the ATO cannot see a basis for saying that Division 7A does not apply to the Australian resident associate in the example provided.

Specifically, the amount treated as being a dividend under Division 7A is an item of statutory income and as such would be (subject to any applicable international tax agreement) assessable to the Australian resident associate regardless of source.

We believe this view is consistent with the policy intent of Division 7A in terms of both the amendments made by the Tax Laws Amendment (2010 Measures No.2) Act 2010 and with Division 7A more generally.

We encourage people who are concerned about these types of issues to request a private ruling so that the unique facts of their case can be fully considered.

Meeting discussion

A discussion ensued around further examples, with notation that the examples may not actually happen in reality. The ATO reiterated that requests for private rulings are encouraged where there are concerns about specific cases.

It was further suggested that any specific concerns, especially in relation to dividends and source income be referred to the Division 7A Working Party for attention.

Post meeting update

This item was discussed at the Division 7A Working Group on Monday 18 April 2011. Members noted the discussion that occurred at the NTLG and were comforted that the source of a dividend is determined under section 44 and that Division 7A does not alter this position.

1.17 Impact of the floods on taxpayers

The Professional Bodies acknowledge and appreciate the ATO's work and resources devoted towards assisting taxpayers and tax agents impacted by the recent floods.

Given the significant impact of the floods on many individuals and businesses, many taxpayers will not be able to comply with their tax obligations and may seek to apply for the Commissioner's discretion in various areas, for example, non-commercial losses and Division 7A.

¦ Would the impact of the floods be a persuasive factor that the Commissioner would consider towards exercising his discretion favourably?

¦ It would be useful if the ATO could inform tax agents and taxpayers, in the dedicated ATO website area dealing with natural disasters (and other ATO communications to tax agents and taxpayers), of the various Commissioner's discretions that may assist taxpayers in meeting their tax obligations while they are coping with the impact of the floods.

Response

1. Would the impact of the floods be a persuasive factor that the Commissioner would consider towards exercising his discretion favourably?

The impact of the floods is a factor that the Commissioner would consider in exercising his discretions. In every request for the exercise of the Commissioner's discretion, the individual's circumstances are considered.

2. It would be useful if the ATO could inform tax agents and taxpayers, in the dedicated ATO website area dealing with natural disasters (and other ATO communications to tax agents and taxpayers), of the various Commissioner's discretions that may assist taxpayers in meeting their tax obligations while they are coping with the impact of the floods.

The Commissioner has released specific information to assist agents and taxpayers impacted by the natural disasters - Help through difficult times. This information can be accessed via www.ato.gov.au

For individual taxpayers, the range of help offered includes:

¦ fast tracking refunds

¦ giving people extra time to pay debts - without interest charges

¦ giving more time to meet BAS and other lodgment obligations - without penalties

¦ helping reconstruct tax records where documents have been destroyed, and make reasonable estimates where necessary

¦ offering visits from field officers to help reconcile lost records, and

¦ helping them claim tax hardship concessions.

Business taxpayers may choose to attend free one-on-one support sessions to help them stay on track with their tax and superannuation obligations.

Experienced tax officers will be available at nominated venues to answer questions and provide advice on various business tax related topics. Businesses may check whether a deferral has been received through the Business Portal or by contacting the ATO's dedicated emergency support information line on 1800 806 218 .

Registered tax and BAS agents may check whether a deferral is in place through the Tax Agent Portal or by contacting the ATO on 13 72 86 .

Meeting discussion

One member stated they were particularly happy with the response especially in relation to the Commissioner's discretion being dealt with on a case by case basis.

Members were provided with a handout titled 'ATO response to the 2011 natural disasters - March 2011'.

Members accepted the response provided.

Post meeting update

An electronic copy of the handout 'ATO response to the 2011 natural disasters - March 2011' issued to NTLG members in April.

1.18 For Australians working overseas and paying foreign taxes, whether a foreign income tax offset can offset the Medicare levy

This issue relates to the treatment of Australian resident taxpayers working overseas and paying foreign tax who are required to rely on the foreign income tax offset (FITO) provisions to reduce the double tax otherwise payable on their overseas employment income, in particular the application of that FITO to their Medicare levy and surcharge liabilities. Where taxpayers have lodged returns showing the FITO as sufficient to offset wholly the Australian income tax and Medicare levy, the ATO has issued Notices of Assessment allowing the FITO to offset the Australian income tax liability, but denying the FITO in relation to the Medicare levy.

The result is that the taxpayer must still pay the Medicare levy (and surcharge, if applicable), despite the fact that their FITO offset limit is more than enough to cover both the income tax and Medicare liabilities. Objections raised against these assessments have been disallowed.

This appears inconsistent with the legislative scheme. Briefly, section 770-5 of ITAA 1997 states the object of the FITO provisions is to relieve double taxation where a taxpayer has paid foreign income tax on amounts included in their Australian assessable income and is prima facie liable to pay Australian income tax on the same amounts. Section 770-10(1) sets out when a FITO will be allowed, reducing the Australian tax otherwise payable on the double taxed amount.

Tax Laws Amendment (2010 Measures No. 1) Act 2010 amended Schedule 1 of the TAA to clarify that the income tax provisions apply to Medicare levy and Medicare levy surcharge in the same way they apply to income tax. The Explanatory Memorandum states the intention of the amendment is to ensure Medicare levy is taken into account in determining a taxpayer's FITO.

Under section 4-10 of the ITAA 1997, a tax offset, including a FITO is able to be offset against income tax in determining the amount of tax payable. Section 90-1 of the TAA states that the TAA and the ITAA 1997 apply in relation to the Medicare levy and Medicare levy surcharge as they apply to income tax. On this basis, section 90-1 of the TAA should allow the FITO to also be applied against the Medicare levy.

The ATO actions not to apply the FITO against the Medicare levy result in taxpayers being subject to double taxation on the income subject to the Medicare levy. These actions are inconsistent with the broad object of the FITO provisions to relieve double taxation, for example, the Tax Laws Amendment (2007 Measure No 4) Act 2007 (see paragraph 1.18 of the Explanatory Memorandum) and Tax Laws Amendment (2010 Measures No. 1) Act 2010 (see table 6.18 of the Explanatory Memorandum).

This issue can be progressed further through the appeals processes which are time-consuming and costly. Alternatively, the taxpayer may progress via TIES and through the public ruling processes which take time.

The issue raises the question of the extent to which ATO officers recognise the policy underpinnings of the law in carrying out their core analysis and administration of the tax legislation in particular taxpayer scenarios.

Response

The ATO view is that the amendments contained in Tax Laws Amendment (2010 Measures No. 1) Act 2010 enable the Medicare levy and Medicare levy surcharge to be included in the foreign income tax offset limit calculation under section 770-75 of the ITAA 1997. However, the foreign tax offset amount calculated under section 770-75 of the ITAA 1997 cannot reduce an individual's liability for the Medicare levy or Medicare levy surcharge.

There is no indication that the policy is not working as intended. The previous foreign tax credit system was in the 1936 Act. It was replaced with the foreign income tax offset provisions contained in Division 770 of the ITAA 1997. This was not a rewrite of the former provisions into the 1997 Act but a new policy that was intended to operate differently. The foreign income tax offset was specifically included as a non-refundable tax offset.

A taxpayer's basic income tax liability is calculated under section 4-10 of the ITAA 1997 using the income tax rates specified in the Income Tax Rates Act 1986. The Medicare levy and the Medicare levy surcharge are not imposed by the Income Tax Rates Act 1986 and therefore do not form part of the basic income tax liability.

The foreign income tax offset is not a refundable tax offset: see section 63-10 of the ITAA 1997. Accordingly it can only be applied against a taxpayer's basic income tax liability. On the basis that the Medicare levy or Medicare levy surcharge are not part of a taxpayer's basic income tax liability, it follows that when applying the foreign income tax offset amount calculated under section 770-75 of the ITAA 1997, the offset cannot be used to reduce either liability.

There are no other non-refundable tax offsets that can be offset against the Medicare levy and Medicare levy surcharge. It should be noted that there is a Medicare levy surcharge tax offset that is available where, as the result of the receipt of a lump sum payment in arrears, a taxpayer pays more Medicare levy surcharge than they would have if the correct amounts had been received in the appropriate income years rather than as a lump sum. This surcharge tax offset is a non-refundable tax offset. Where the taxpayer has this tax offset and the non-refundable tax offsets fully absorb the tax payable and leave some tax offsets unused, the taxpayer will have to pay the full Medicare levy surcharge. This in effect is the concept of offset wastage where not all of the value of the offsets can be utilised. 

Meeting discussion

The ATO response has generated a lot of interest. Non-ATO members advised there is serious disagreement in relation to this matter. Members are concerned that the intent of the original policy is not achieved. It was agreed that the issues relating to FITO and the Medicare levy are to be taken offline. 

It has been noted in the minutes that the ATO will liaise with the Tax Institute to ensure there are representatives who will work with the ATO on this matter. Treasury representative Martin Jacobs, will be involved. This is expected to be a tripartite item to be co-ordinated by Treasury, ATO and NTLG members offline.

The ATO representative for this issue, Assistant Commissioner Mark O'Connor, will be advised of the discussion, and the ATO agree to discuss any pertinent issues.

Action item

NTLG1103/04 FITO and Medicare Levy issues to be co-ordinated offline by a Tripartite process between Treasury, the ATO and NTLG members.

Post meeting update

An initial meeting occurred on 28 April 2011. It was agreed at the meeting that the ATO will be provided with a more detailed paper regarding the issues and concerns of members.

1.19 Support for tax intermediaries regarding promoter penalty risks

The ATO to discuss with Professional Bodies a range of planned activities to improve tax intermediaries' management of tax avoidance and promoter penalty risks.

This item is for discussion at the meeting.

The ATO will report on:

¦ the work of the NTLG Promoter Penalty Sub-committee and provide details of the release for the Tax advisers - Good governance and promoter penalty laws guide

¦ details of other communication activities regarding tax avoidance and promoter penalty risks, including the Commissioner's speech to the Institute of Chartered Accountants on 7 April 2011 and a proposed letter to key intermediaries about these issues

¦ the new focus upon helping taxpayers and tax intermediaries to recognise the features of potential tax avoidance schemes, to reject involvement with them and to report the arrangement and those involved with it to the ATO.

Meeting discussion

Assistant Commissioner Bruce Collins attended for this agenda item, and thanked NTLG members for their input and co-design of the Tax advisers - Good governance and promoter penalty laws guide, especially members who raised issues within the sub-committee.

Members were provided with a handout to supplement the presentation.

Members were interested in the number of cases that are under investigation. The ATO advised that there are currently 80 cases that are expected to be solved with voluntary compliance. Another 20 cases are under serious investigation. At this stage it is unclear how many of these 20 cases will go through to court proceedings.

The ATO approach is to manage identified risks through voluntary self-correction where appropriate, including voluntary undertakings for more significant cases. However, for the most serious circumstances court action will be considered, via potential applications for civil penalties and/or injunctions on suitable cases.

Post meeting update

An electronic copy of the presentation was provided to members on 12 April 2011 with the post meeting summary.

The official launch was held on 7 April 2011, as part of the Commissioner's speech to the ICAA National Conference .

1.20 Timing of the tax deductibility of the shortfall interest charge

At the last meeting of the NTLG (on 14 December 2010), the ATO noted in response to agenda item 13 (on the impact of the decision of the Full Federal Court in FCT v. H (2010)) that the ATO will finalise and issue a DIS on this case and the ATO has yet to consider the issue of general interest charge (GIC) deductibility.

¦ Can the ATO please confirm that it now accepts that GIC/shortfall interest charge (SIC) is deductible on an incurred basis and, assuming it does, secondly advise what actions it proposes to take in relation to giving effect to this?

Response

SIC is incurred and deductible in the income year in which a taxpayer is notified of the liability to pay it (by receipt of a notice, for example a notice of amended assessment), including where it remains unpaid at the end of that income year and the due date for payment is in the next income year. [ 1 ]

¦ Section 25-5(1)(c) provides that you can deduct expenditure you incur for the SIC and the GIC.

¦ Where an outgoing has not been made, expenditure will be incurred when a presently existing pecuniary liability exists at the end of the relevant income year. [ 2 ] In the case of an amended assessment not made until a subsequent income year, it cannot be said that the SIC that will become payable under the amended assessment is even 'impending, threatened or expected' at the end of the income year to which the SIC relates.

¦ The decision in FCT v. H concerned a different statutory context to incurrence under section 25-5 and section 8-1, namely the nature of a 'present legal obligation' under section 109Y. The interpretation of the phrase 'present legal obligation' in the context of section 109Y is not relevant to the substantial body of jurisprudence on incurrence under section 8-1 which is directly applicable to section 25-5.

¦ If SIC was deductible in the income year to which it related rather than the year in which it was notified, the deduction allowable for SIC would give rise to an entitlement to interest on overpayments, which would undermine the purpose of SIC stated in section 280-50 of the TAA.

¦ If SIC was deductible in the income year to which it related rather than the year in which it was notified, in cases where an amendment was made to an earlier income year and a particular which was subject to an unlimited amendment period, [ 3 ] some intervening years would be out of time to be amended, and the taxpayer would not obtain a deduction for SIC in any year, contrary to section 25-1(1)(c).

Note: that this answer is consistent with previous ATO responses to the NTLG in August 2001 and March 2008.

Note: the DIS for Commissioner of Taxation v. H was published on 21 February 2011. Members were provided with the link and contact details on 22 February 2011. Comments are to be provided to jonathan.todd@ato.gov.au by 18 April 2011.

Meeting discussion

One member queried whether the view expressed in the ATO's response is widely known or understood within the ATO. The member also does not necessarily agree with the ATO view. Members would like a ruling, or some other product, published so that ATO staff and members are clear about the ATO view.

The ATO agreed to consider publishing an appropriate product such as a Tax Determination (TD).

Action item

NTLG1103/05 ATO to consider publishing a TD on the timing of deductibility of the shortfall interest and general interest charges.

Footnotes

[F1] See ATO ID 2002/280 in respect of GIC notified but unpaid at the end of the income year, which is equally applicable to SIC.

[F2] See TR 94/26 Income tax: section 8-1 - meaning of incurred - implications of the High Court decision in Coles Myer Finance Ltd v. FCT; and New Zealand Flax Investments Ltd v. FCT (1938) 61 CLR 179 at 207 per Dixon J, Coles Myer Finance Pty Ltd v. FCT (1993) 176 CLR 640 at 662, and Nilsen Development Laboratories Pty Ltd & Ors v. FCT (1981)144 CLR 616 at.

[F3] For example a 'transfer pricing' amendment pursuant to Division 13 of Part III of the ITAA 1936.

1.21 ATO's project on uncertain tax positions

The Professional Bodies would like an update on the progress of this project and the ATO's plans for NTLG involvement in the development of the uncertain tax positions initiative (which was discussed in the December 2010 NTLG meeting). As agreed at that meeting the ATO will consult with the NTLG in development of its policies.

The Professional Bodies understand that this matter is being progressed through some consultation processes involving the LBAG but this is a major issue if it is to apply across all taxpayers classified within the ATO's Large Business and International (LB&I) segment and potentially the ATO Small and Medium Enterprises (S&ME) segment and perhaps others, and would be significant for all tax agents and advisers serving potentially affected taxpayers. Such an initiative raises issues such as:

What would be the definition of an uncertain tax position if disclosure is to be required?

¦ What if the ATO disagrees with the taxpayer's assessment of uncertainty? (The Professional Bodies have raised elsewhere in this agenda the tax controversies and claimed penalties concerning whether taxpayers have reasonably arguable positions and whether taxpayers have taken take reasonable care).

¦ What and how much disclosure might be required?

¦ The potential penalty implications in the event of such a regime, mindful of penalties applicable in many cases.

¦ Would the ATO undertake any initiatives to resolve uncertain tax positions for the benefit of the entire taxpayer community or merely use the disclosures to work through its compliance processes?

Response

As advised in the post meeting update following the last NTLG meeting on 14 December 2010, the ATO is developing a new schedule to the company tax return that will focus on the collection of information about a large business taxpayer's most contentious material tax positions. The new schedule is part of an information disclosure package designed to provide assurance and help us to better understand tax risk for the large business community.

The schedule will be co-designed with the representatives from the LBAG and the NTLG member organisations, and working parties have been established. The ATO will also communicate more broadly through its on-line Large Business Bulletin. Feedback from large businesses, their advisers and representative associations can be provided to ReportableTaxPosition@ato.gov.au

As part of the co-design process, the ATO will explore legal and accounting approaches to define tax risk and will develop guidance materials outlining the reporting requirements, definitions, impact of non-disclosure, potential penalty implications and other key issues. The approaches being developed support our differentiated approach based on the ATO's Risk Differentiation Framework, and are expected to lead to greater certainty for taxpayers as well as expediting relevant matters for development of legislative and administrative change, and ATO guidance materials.

Meeting discussion

The ATO advised that a draft of the new Reportable Tax Position (RTP) schedule to the 2011-12 company tax return will be shortly released for consultation.

Members queried the difference between the LBAG and the NTLG Uncertain Tax Positions Working Party (now called the NTLG Reportable Tax Positions Working Party).

The ATO advised that the two working groups each have a different membership focus.

Any concerns regarding membership will be addressed with the NTLG Reportable Tax Positions Working Party, out of session.

Members were keen to be kept informed of relevant developments. It was agreed that reportable tax positions is a strategic issue for future NTLG meetings.

Post meeting update

Concepts underpinning the new RTP schedule for 'higher consequence' large market corporate taxpayers were outlined to the LBAG on 8 April 2011.

Separate working group meetings were held on 12 April 2011 with LBAG and NTLG members. The working groups are scheduled to meet again on 18 May 2011 to discuss the draft schedule and key definitions. Further meetings will be held as required.

1.22 General Anti-Avoidance Rule Panel report

This is a standing agenda item and is included in the agenda twice yearly, at the March and September NTLG meetings.

Action item number NTLG0609/10 refers.

Response

1 July 2010 to 31 December 2010

Membership of the GAAR panel at 31 December 2010 was:

¦ Des Maloney, Deputy Chief Tax Counsel, chair

¦ Nick Oliver, Assistant Commissioner

¦ Tim Dyce, Deputy Commissioner

¦ Alan Goldberg QC (consultant)

¦ Tony Pane (consultant)

¦ Ray Conwell (consultant), and

¦ David Williams (consultant).

The panel met three times during the period July to December 2010 considering a total of seven issues, five of the issues were for preliminary guidance and two issues were for full guidance even though they had not previously been heard by the panel. The chair of the panel also considered one issue out of session in November.

The December meeting was held for two days and all other meetings were for one day. In accordance with the processes set out in Practice Statement PS LA 2005/24 Application of General Anti-Avoidance Rules , taxpayers were not invited to matters requiring preliminary guidance. However, if these matters return to the panel for guidance, taxpayers will be invited to attend the panel meetings. In the two arrangements that were considered by the panel for final guidance, taxpayers were invited to attend the panel meeting. All taxpayers accepted the invitation to the panel. In all instances the taxpayers concerned chose to be represented by their solicitors or accountants and also by Counsel.

Examples of the types of arrangements considered by the panel during the relevant period included:

¦ section 45B demerger arrangement (refer to PS LA 2008/10 and PS LA 2005/21 )

¦ mortgage management plan (deductibility of interest) arrangement

¦ cross border structured finance arrangement

¦ avoidance of capital gains tax (CGT) on sale of bonus shares

¦ cost base uplift arrangement (refer to Tax Ruling TR 2005/19 and Tax Determination TD 2003/13 ).

In the two matters considered by the panel for final guidance, the panel advised that the relevant GAAR would most likely not apply in the first matter. In the other matter, the panel advised the team to pursue the matter under the substantive CGT provisions.

In the five matters the panel considered for preliminary guidance, the panel noted that should the relevant GAAR be pursued, the taxpayer would be invited to make a submission to the panel under the normal procedures. The panel also:

¦ noted that it seemed reasonable to continue the Part IVA audit and requested the team to gather further specific information regarding offshore activities in Switzerland by issuing section 264A notices and to undertake further work on testing the counterfactuals (one matter)

¦ noted that it seemed reasonable to continue to pursue the relevant GAAR argument (three matters)

¦ advised the team that Part IVA could be used as an alternative argument to section 8-1 of the ITAA 1997 (one matter).

Meeting discussion

Members had raised some concerns about Part IVA within the discussion of agenda item 14 . No other matters were raised for discussion on this agenda item.

Members accepted the response provided.

1.23 NTLG Sub-forum governance report - Fringe Benefits Tax Sub-committee

This is a standing agenda item which enables the NTLG Sub-forums to provide governance reports and discussions associated with the NTLG Sub-groups and committees.

The Fringe Benefits Tax (FBT) Sub-committee has been nominated to provide its governance report at the 30 March 2011 meeting.

As current chair of the FBT Sub-committee Lee Beaver, Specialisation Manager FBT, Admin Business and Personal Tax, Centre of Expertise will attend the meeting to discuss this report.

Daniel Clode, Acting Assistant Commissioner, S&ME will also be attending.

Response

Chair

Lee Beaver, Specialisation Manager FBT, Admin Business and Personal Tax Centre of Expertise.

Secretariat

Annette Wiggins, Admin Business and Personal Tax Centre of Expertise.

History and background

The FBT Sub-committee was established following the NTLG meeting of 3 December 1986 for the purposes of addressing issues following the introduction of FBT.

In 1993, following a brief period when it did not meet, the FBT Sub-committee was reconvened due to the number of FBT issues that were again causing concern to employers, tax professionals and the ATO. It has continued to the present day.

The most recent meeting of the forum was held on 17 February 2011. The next meeting is scheduled to be held on 12 May 2011.

FBT Sub-committee meetings are held four times each year typically in February, May, August and November.

Minutes from each meeting, inclusive of action items, an issues log and register of aged open action items is published on www.ato.gov.au

Purpose of the FBT Sub-committee

The FBT Sub-committee provides an opportunity for the ATO and members of the representative Bodies to:

¦ deal with issues in relation to the administration, interpretation and application of the Fringe Benefits Tax Assessment Act (FBTAA)

¦ work together in a transparent and open manner

¦ identify significant FBT issues, resolve FBT issues and implement administrative solutions that facilitate practical compliance with the tax law

¦ consideration of whether matters raised at the meetings may be suitable for inclusion on the TIES

¦ consult, collaborate and/or co-design on new and revised FBT guidance material and interpretative products, and

¦ gain an understanding about FBT issues that affect business and identify emerging issues.

A main focus of the FBT Sub-committee is the discussion and/or resolution of FBT issues - inclusive of tax technical, compliance and administrative.

As the peak ATO consultative body that deals with FBT issues, the FBT Sub-committee also provides an opportunity for Treasury and the ATO to consult with the tax professions.

A standing agenda item is an update from the ATO on FBT Risk and compliance activities being undertaken and/or being considered.

Compliance with Corporate Management Practice Statement PS CM 2006/6

The FBT Sub-committee complies with the requirements set out in the Corporate Management Practice Statement PS CM 2006/06 on committee management. In particular:

¦ The FBT Sub-committee has a published charter .

¦ Minutes are prepared for all meetings of the FBT Sub-committee and these are published on www.ato.gov.au on the Community consultation forums: Tax Professionals: NTLG page.

¦ Reports on the FBT Sub-committee's ongoing work are provided to the NTLG at its quarterly meetings.

¦ The FBT Sub-committee has continued to conduct annual reviews (December each year) since the last governance report (May 2008).

The most recent review was undertaken in December 2010. It is clear from the responses provided by members that there continues to be strong ongoing support for the forum and satisfaction with the way the forum operates and works through issues.

Membership of the FBT Sub-committee

External members

The external members of the FBT Sub-committee are nominated by their professional association and have an understanding of the legal, practical and administrative issues relating to FBT.

The current membership is made up of representatives of major tax, law, accounting, corporate professional associations and other peak bodies.

Changes to the external membership have once again occurred, at the discretion of the Professional Bodies represented on the forum, since the last governance report. The mix of members includes those who have a number of years experience on the forum and a number who are new.

Treasury

Commencing from the May 2010 meeting, a Treasury representative attends the meetings of the FBT Sub-committee. The Treasury representative attends as an observer and also provides an update at the meetings on relevant FBT matters within Treasury's responsibilities.

ATO

The ATO is represented by the FBT Specialisation Manager from the Administration Business and Personal Taxes Centre of Expertise (FBT) who has continued in the role of chair, as well as senior S&ME business line representatives.

With effect from February 2011, a representative from the ATO's Tax Counsel Network will also be attending the meetings of this forum.

The membership list is kept up to date and is published on www.ato.gov.au

FBT Sub-committee Operations

Meetings

FBT Sub-committee meetings are scheduled to be held four times each year. The schedule of meetings is agreed upon at the last meeting of the previous year.

The meetings are held on a rotating basis in Sydney and Melbourne. The hosting of meetings is shared between the ATO (typically the February meeting each year) and the external members.

Actioning and progress of issues raised

The FBT Sub-committee covers technical, compliance and administrative issues.

Agenda items are generally submitted by members of the representative bodies and include the view of the representative body submitting them. The ATO and Treasury also put forward issues for discussion.

Agenda items and issues put forward are discussed at the meeting in an open and collaborative manner. The ATO considers the external members views in resolving issues raised.

Although the goal of the FBT Sub-committee is to address and resolve issues raised at the meeting, an issues register is maintained to record and track those issues that remain unresolved following a meeting. Matters arising from agenda items and other business at the FBT Sub-committee's meetings that are not resolved at the meeting are recorded in the minutes as action items for the ATO or the relevant members.

The chair will, as appropriate, escalate issues to other business lines or forums. This may include issues as diverse as compliance, lodgments, processing and other administrative issues.

Issues/topics addressed by the FBT Sub-committee since May 2008

The following are the more significant achievements and topics that have been discussed since the last governance report:

Section 23AG and consequential FBT issues

¦ Numerous consequential FBT issues were discussed at meetings due to changes to section 23AG of the Income Tax Assessment Act. These issues were a significant topic for the NTLG FBT Sub-committee at each meeting in 2010. The matters were raised for discussion as issues were identified by members following the changes to section 23AG with effect from 1 July 2009

Apart from ongoing deliberations and discussions with members where an administrative solution was possible, discussions continued with Treasury with input from the members of this forum.

¦ Two significant issues that that have been raised concerned the FBT treatment of fly-in fly-out (FIFO) arrangements involving overseas remote work sites and the taxation treatment of non-cash benefits that are outside the FBT regime.

¦ On 18 November 2010 the Assistant Treasurer issued a press release, Providing certainty for the taxation of fly-in/fly-out employees working overseas , which set out the government's position on both these issues.

¦ Subsequently, on 18 February 2011, Treasury released for public consultation an exposure draft of legislation that will extend the fringe benefits tax exemption for Australian residents working in remote locations on a fly-in fly-out basis to Australian residents working in similar remote locations overseas.

¦ The following TD was also issued to clarify particular issues regarding non-resident employer obligations Taxation Determination TD 2011/1 - Income tax and fringe benefits tax: can a non-resident employer be:
(a) required to withhold amounts from salary and wages paid to an Australian resident employee for work performed overseas under section 12-35 of Schedule 1 to the Taxation Administration Act 1953?
(b) subject to obligations under the Fringe Benefits Tax Assessment Act 1986 in relation to benefits provided to an Australian resident employee in relation to work performed overseas?

Other matters

¦ Salary sacrifice of donations to disaster relief appeals; issues arose following Victorian bushfires and Queensland floods in 2009. Members raised issues and assisted the ATO and Treasury understand the practicalities involved. Legislative amendment resulted in section 148(2A) which ensured such arrangements would not be subject to FBT. Discussions continued with forum members as to other consequences over a number of meetings.

¦ Entertainment facility leasing expenses (EFLE); numerous issues and concerns raised by members in relation to the exemption available in the not-for-profit sector, particularly involving salary sacrifice arrangements.
Following discussions and as a result of the requirement to establish the ATO view, ATO IDs 2009/45 and 2009/141 have been issued. This matter was also referred by the TIA to the ATO Public Ruling Steering Committee following discussions at this forum.

¦ A concern was raised in relation to the interaction of the Non Commercial Loss (NCL) rules and the FBT Otherwise Deductible Rule given recent changes to the NCL rules.
The matter has been referred within the ATO to the appropriate risk areas for consideration of the risk with an expectation that a formal ATO view, for example by way of a taxation determination, will be required. This will provide a considered ATO view on this matter.

¦ Members were provided the opportunity to discuss the issues that were set out in Taxpayer Alerts TA 2008/13 and Taxpayer Alert TA 2008/14.
ATO clarification was provided by way of; Taxation Ruling TR 2010/6 ; Income tax, Pay As You Go Withholding and Fringe benefits tax: tax consequences on issue, holding and redemption of bonus units as part of an employee benefits trust arrangement.

¦ Joint benefits and 'otherwise deductible rule'; legislative amendment introduced to correct anomaly. ATO clarified the application of the transitional rules up to 1 April 2009 and the record keeping requirements.

¦ An issue raised at the forum relating to a technical correction (section 58S of the FBTAA). This has been registered as TIES issue number 0021/2010.

¦ The TIA referred a submission regarding FBT return lodgment deferral and payment dates to the NTLG FBT Sub-committee for consideration. This has been referred to Tax Practitioner and Lodgment Strategy (TPALS) for consideration by the ATO Tax Practitioner Forum's Lodgment Working Group.

Members were provided the opportunity to review and provide comments on the following new and/or updated ATO publications:

¦ Members reviewed and provided comments on the section 23 AG - Frequently Asked Questions (FAQ) documents. These were released as Foreign employment income and section 23AG - employers and Foreign employment income and section 23AG - employees

¦ Reporting exclusion for pooled or shared cars

¦ Administration of the Fringe Benefits Better Practice Guide

¦ FBT - exempt car benefits

¦ FBT car calculator

¦ Ad hoc feedback from members re FBT products on www.ato.gov.au

Conclusion

The FBT Sub-committee has continued to achieve its goal of providing an opportunity for candid exchange of views between the ATO and the tax profession, allowing all parties to gain a mutual understanding of respective situations.

The FBT Sub-committee has successfully worked through issues raised for consideration and has continued to provide a valuable contribution to the delivery of successful ATO outcomes in relation to the administration of FBT while supporting the taxation industry in meeting their obligations.

Meeting discussion

The chair of the FBT Sub-committee, Lee Beaver, provided the Governance Report as tabled above.

The ATO took the opportunity to reiterate the future style of agenda for the NTLG, and that members would be expected to be sponsors of issues within the sub-groups.

NTLG members who are also members of the FBT Sub-committee commented that the FBT Sub-committee is working very well, and that they appreciate the ability to raise issues 'off the record' and be given appropriate timely assistance. There is a level of trust and confidence built in to the basis of the relationship of the FBT Sub-committee.

There were three issues of specific interest raised at the meeting:

¦ the administrative approach to the FBT exemption for 'emergency assistance' in circumstances of a natural disaster

¦ the sampling methodology undertaken by the ATO relating to the current review of living-away-from-home allowances (LAFHA), and

¦ the ATOs decision on FBT consolidated returns, as set out in the draft FBT NTLG minutes of meeting 17 February 2011.

Given the recent natural disasters and the severe impacts on some individuals, members queried whether there were still people operating under severe circumstances post the Victorian bushfires of 2009. It was felt that there would be, however, the ATO had previously indicated that an employer could only rely on the FBT emergency assistance exemption for a period up to six months. If emergency assistance was ongoing after six months, the ATO had indicated an employer could consider lodging a request for a private binding ruling (PBR). Was the ATO aware of how many employers may still be impacted in these circumstances and/or how many PBRs have been lodged in this regard?

The ATO acknowledged that following the Victorian bushfires in 2009 that it had indicated (FBT NTLG Sub-committee meeting 14 May 2009) that in the absence of a specific time limit set out in the emergency assistance exemption, it was reasonable in those circumstances to expect that emergency assistance would be provided to employees for a period of at least six months. The ATO also advised at that time that where the period exceeded six months an employer could consider lodging a request for a PBR.

The ATO stated that numerous issues were raised at the February meeting of the FBT NTLG Sub-committee in relation to FBT and natural disasters. The minutes of the February 2011 meeting are intended to provide some practical FBT assistance and advice to employers impacted by natural disasters.

In relation to the current review of LAFHA, the ATO advised that it has been concerned about the rate of growth of LAFHA benefits, particularly the growth in the value of reductions over recent years. The concern is the extent to which payments of LAFHA are 'reasonable'. The ATO also mentioned that this concern extends to arrangements within the peak accounting firms. These issues may be of potential strategic significance for future NTLG meetings.

A concern was raised regarding the way consolidated FBT returns are treated. The LCA indicated a level of disappointment with the ATOs recent decision not to allow consolidated FBT returns. The ATO provided the background to the decision set out in the draft minutes of the meeting of the February FBT Sub-committee meeting. This confirmed an earlier view expressed at the FBT Sub-committee in May 2008. The ATOs position has not changed. The LCA accepted the law does not allow for consolidated FBT returns but was looking for a practical outcome. It was also noted that the issue of consolidated FBT returns had previously been raised with Treasury. Members were advised that the minutes of the February FBT Sub-committee meeting will cover this issue.

In closing, Lee Beaver was especially commended for his leadership and work with FBT generally and specifically the role on the FBT Sub-committee. The ATO was especially pleased to hear such positive feedback on Lee's work by a number of NTLG members at the meeting. It was also noted that the ATO was looking to ensure FBT specialised skills were being developed and this is ongoing.

Action item

NTLG1103/06 ATO to investigate whether employers are still impacted by the Victorian bushfires from 2009 and how many PBRs have been lodged seeking confirmation that the FBT emergency assistance exemption was available after six months.

1.24 Public Ruling Steering Committee

This agenda item is to provide an update on the recent activities of the Public Ruling Steering Committee.

Chair

Jennie Granger, Second Commissioner Corporate Services and Law

Secretariat

Bill Lolis, Corporate Services and Law

Last meeting held

The last meeting was held on 18 March 2011.

Next meeting

The next meeting will be held on 10 June 2011.

Minutes

The minutes for the meeting held on 25 November 2010 are published to www.ato.gov.au

Summary of main issues discussed, 18 March 2011

Log of potential ruling topics previously identified by NTLG Sub-committees

¦ Item number 1 - Hedging/subsection 230-310(4) of the ITAA 1997
The issue was finalised in the minutes of the NTLG TOFA WG meeting held on 25 November 2010. Members recommended an ATO Guidance product on this issue for clarification. The issue maybe considered later for a ruling (subject to other priorities).

¦ Item number 2 - GST legislative changes and public rulings - Loyalty programs
Consultation with stakeholders is continuing. A ruling on this topic is likely to be the preferred resolution of this issue.

¦ Item number 3 - TOFA gains and loses and non-assessable non-exempt income
The issue has been approved as a Priority Technical Issue, ATO officers are allocated and likely to be resolved by issue of a Taxation Ruling (TR).

New potential rulings topics identified by NTLG Sub-committee

¦ Item number 1 - Buy-Sell Agreements and Draft Taxation Ruling TR 2004/D25
This item is an extract from the post meeting summary from the main NTLG meeting of 14 December 2010. Mark Morris provided a coordinated response to the NTLG secretariat and ATO is now considering the submission.
A ruling is sought on buy-sell agreements particularly those involving put-call options. Private rulings on this topic have been obtained on a case by case basis.
It is suggested that TR 2004/D25 which remains in abeyance be withdrawn. ATO to advise how this matter will be progressed.

¦ Item number 2 - Application of the share capital tainting rules in the case of employee share schemes
Guidance by way of a public ruling or practice statement is required to put this issue beyond doubt. This poses a significant risk for a number of large companies and is regraded as a substantial issue.

¦ Item number 3 - Creation of a new trust
The Commissioner has applied for special leave to appeal the recent Full Federal Court decision in Commissioner of Taxation v. Clark [2011] FCAFC 5 (21 January 2011). This matter will be carried forward to the next meeting.

Other issues

New version of the PTI Advice Program

PTIs requiring internal advice available at Provision of internal advice on priority technical issues.

What are the legal and tax issues flowing from the amendments to section 254T of the Corporations Act 2001?

The following tax issues were identified as the highest priority for resolution:

¦ definition of dividend in subsection 6(1) of the ITAA 1936 and what is a dividend for tax purposes

¦ franking and ability to frank - application of the integrity provisions, and

¦ section 45B: how will, if at all, these changes impact on the ATO's view to the operation of section 45B of the ITAA 1936.

Meeting discussion

Members are keen to have an understanding of what rulings are coming up. Members are keen to know whether their items of interest are covered. There were concerns about a hiatus between the time of discussions and information appearing on www.ato.gov.au The ATO noted that the rulings program is published monthly.

The Commissioner made the point the NTLG needs to have co-ownership of what's on the rulings program. The sooner the priorities are known, the better. Further, the Commissioner is happy for the NTLG to provide information regarding the priorities for rulings. It is important to have the right people on the committee and then be able to report back to the NTLG on specific items of interest.

1.25 ERROR: numbering value not found! Matters referred to sub-forums, NTLG work program and management of issues

Meeting discussion

Members raised the following items for attention.

Temporary residence rules for New Zealand (NZ) citizens

The ATO advised members that examples provided by the Professional Bodies are being considered and the ATO will be talking with Treasury regarding the intent. Members will be advised of decisions and be asked for comment.

Action item

NTLG 1012/03: Temporary residence rules for NZ citizens

This action item needs to be re-classified as 'ongoing' rather than 'closed'. Members asked to be included in any discussions around the decisions on this action item.

Corporations Law Working Party

Concerns were raised about some issues with franking and dividends, with one member suggesting there was at least one issue identified that could be a problem by June 2011. It was further suggested that some remedial legislation may be required.

TOFA Working Group

A member commented that this is the year when TOFA is mandatory and Professional Bodies will see much more of this in practice. It was suggested that a discussion is required on TOFA interaction, and a need to highlight that TOFA without legislative attention may get into a 'fuzzy and less than perfect situation'. It was further suggested that some effort may be required in working with the ATO and Treasury to get the TOFA situation manageable by June 2011.

The TOFA Working Group is the appropriate channel to address the TOFA issues raised at the NTLG. TOFA will remain a strategic watching brief of the NTLG.

Post meeting updates

All chairs and secretariats were provided with a copy of the NTLG post meeting summary on 12 April 2011. Issues raised above have been escalated to the appropriate sub-forum for attention.

A decision has been made to provide the test case litigation report on a six-monthly basis, commencing from the June meeting, together with the report on significant litigation matters.

Long-standing action items

Members are concerned with the length of time that some action items have been in progress.

Action item

NTLG1103/07 ATO to review the action Item registers with a view to finalising items that have been in progress for a lengthy period. This will be managed out of session.

1.25.1 Report on action items arising from 14 December 2010 NTLG meeting

Action item reference	NTLG1012/01
Issue	Mark Morris (CPA Australia) to coordinate what should be covered in a public ruling, on behalf of the Professional Associations, by 28 February 2011. Examples are to be sent to the NTLG secretariat. Refer agenda item 9 - 14 December 2010 Buy-Sell Agreement and Draft Taxation Ruling TR 2004/D25
Status	Ongoing
Outcome	CPA Australia on behalf of the Professional Bodies provided to the NTLG secretariat a submission requesting a public ruling. The ATO is now considering the issues raised within the Professional Bodies' submission.
Action item reference	NTLG1012/02
Issue	Robert Jeremenko (TTI) to coordinate regarding temporary residence rules for NZ citizens, on behalf of the Professional Associations by 28 February 2011. Refer agenda item 10 - 14 December 2010 Temporary residence rules for NZ citizens
Status	Ongoing
Outcome	The Taxation Institute provided examples and issues regarding temporary resident rules for NZ citizens, on behalf of the Professional Bodies to the NTLG secretariat. The ATO is now considering the examples and submission and will provide advice back to the NTLG Professional Bodies before publishing its view.
Action item reference	NTLG1012/03
Issue	Christine Barron, as Treasury representative, is to discuss issues with relevant Treasury areas and advise the NTLG secretariat of outcome. Refer agenda item 10 - 14 December 2010 Temporary residence rules for NZ citizens
Status	Finalised
Outcome	Treasury agrees with, what it understands is, the approach of the International Centre of Expertise on how the temporary resident rules apply in respect of New Zealand citizens who have been issued with a special category (subclass 444) visa. Treasury considers that this approach is consistent with the underlying policy and consequently, legislative amendment is not recommended.
Action item reference	NTLG1012/04
Issue	Chief Tax Counsel Kevin Fitzpatrick to follow-up with Senior Tax Counsel Andrew Orme regarding a discrete ruling or determination in relation to the loyalty issues - refer section on GST public rulings - legislative changes and issues registers and other GST publications within the agenda (item 20) regarding a potential topic initially proposed to be converted into a public ruling. Refer agenda item 20 - 14 December 2010 Public Ruling Steering Committee
Status	Ongoing
Outcome	Proposed scope for the ruling on loyalty programs At the NTLG GST Sub-group meeting on 30 November 2010, there was a discussion about how to progress a proposed public ruling on loyalty programs. The ATO has given consideration to the scope of the proposed ruling. Our intention is to prepare a single public ruling on the topic which will focus on the core GST issues associated with loyalty programs. The ruling will be published in draft for public comment. The proposed scope will broadly align with a recommendation of the Taxation Institute of Australia. In a submission to the NTLG GST Sub-group in June 2010 the Taxation Institute recommended that the following issues should be addressed: ¦ Whether the allocation of points by the operator to members is a supply made for consideration. The ruling would cover two scenarios: ¦   – Scenario 1 - where the points are awarded in response to purchase by a member of the goods and services supplied by the program operator, and – Scenario 2 - where points are awarded in response to the purchase by a member of good and services of a third party ¦ If there is a supply in scenario 1, is that supply ancillary and incidental, or is there a mixed and composite supply?; ¦ If there is a supply, what is that supply?  Is it a supply of rights, a supply of a right to receive rewards, or a supply of goods and services?  ¦ Does subsections 38-190(3) and (4) of A New tax System (Good and Services) Act 1999 apply in respect of scenario 2? ¦ In scenario 2, does the third party make a creditable acquisition where it makes a payment to the loyalty operator in connection with the allocation of the points? ¦ Is the provision of a reward a supply made for consideration/is the redemption or surrender of points consideration for the supply of rewards? There were some additional matters that CPA Australia had raised as potential issues to be addressed in a public ruling on loyalty programs (refer papers for item 9 of the agenda for the 24 June 2010 meeting), which at this stage are not included in the scope of the proposed public ruling. These include issues regarding Division 100 vouchers, and concerning creditable purpose of acquisitions of goods/services by a financial institution to provide to loyalty program members. If, on closer investigation, it appears that any other matters associated with loyalty programs are appropriate for a further binding product, consideration can be given to preparing a separate ruling or determination. However, the ATO has a preference for focussing more specifically on the core issues identified above in the first instance.
Action item reference	NTLG1012/05
Issue	NTLG secretariat to investigate the registration process with the relevant ATO area prior to the March NTLG meeting. Refer agenda item 22 - 14 December 2010 Tax Issues Entry System Issues Register
Status	Finalised
Outcome	On 10 March 2011 NTLG members were provided with information covering processes for managing the issues received by the TIES.
Action item reference	NTLG1012/06
Issue	The ATO to clarify the expectation of the word 'review' (that has appeared in the ATO letters requesting tax agents review their clients' eligibility to utilise carried forward losses), and include in the minutes of the December meeting. Refer agenda item 23.3 - 14 December 2010 ATO letters requesting tax agents review their clients' eligibility to utilise carried forward losses.
Status	Finalised
Outcome	Advice provided to NTLG members through the Draft NTLG minutes of the 14 December 2010 meeting. Post meeting update On 21 December 2010 a new letter titled Eligibility to utilise carried forward losses was issued to all tax agents who received the initial request to 'review' their clients eligibility for losses carried forward. The new letter makes it clear for agents to ignore the previous 'review' letter. For a copy of the new letter, contact the NTLG secretariat via palu@ato.gov.au

1.25.2 NTLG action item log

A copy of the NTLG ongoing action item register, updated as at 21 March 2011 has been forwarded to members as part of the agenda papers.

The action item register is structured into three parts:

Part A	contains responses to action items for consideration for finalisation at the 30 March 2011 meeting. There are four items put forward for consideration as completed. That item has been included below.
Part B	contains the ongoing action items.
Part C	contains the standing agenda items.

***To obtain a copy of the ongoing and completed action item registers email PALU@ato.gov.au

Action items for consideration as addressed and completed at this meeting are:

Action item reference	NTLG1012/03
Issue	Christine Barron, as Treasury representative, is to discuss issues with relevant Treasury areas and advise the NTLG secretariat of outcome. Refer agenda item 10 - 14 December 2010 Temporary residence rules for NZ citizens
Status	Finalised
Outcome	Treasury agrees with, what it understands is, the approach of the International Centre of Expertise on how the temporary resident rules apply in respect of New Zealand citizens who have been issued with a special category (subclass 444) visa. Treasury considers that this approach is consistent with the underlying policy and consequently, legislative amendment is not recommended.
Action item reference	NTLG1012/05
Issue	NTLG secretariat to investigate the registration process with the relevant ATO area prior to the March NTLG meeting. Refer agenda item 22 - 14 December 2010 Tax Issues Entry System Issues Register
Status	Finalised
Outcome	On 10 March 2011 NTLG members were provided with information covering processes for managing the issues received by the TIES.
Action item reference	NTLG1012/06
Issue	The ATO to clarify the expectation of the word 'review' (that has appeared in the ATO letters requesting tax agents review their clients' eligibility to utilise carried forward losses), and include in the minutes of the December meeting. Refer agenda item 23.3 - 14 December 2010 ATO letters requesting tax agents review their clients' eligibility to utilise carried forward losses.
Status	Finalised
Outcome	Advice provided to NTLG members through the Draft NTLG minutes of the 14 December 2010 meeting. Post meeting update On 21 December 2010 a new letter titled 'Eligibility to utilise carried forward losses' was issued to all tax agents who received the initial request to 'review' their clients eligibility for losses carried forward. The new letter makes it clear for agents to ignore the previous 'review' letter. For a copy of the new letter, contact the NTLG secretariat via palu@ato.gov.au
Action item reference	NTLG0706/05
Issue	Information on the Indofood matter to be provided to members. Refer agenda item 7 - 28 June 2007 Members are seeking ATO view on the Indofood matter.
Status	Finalised
Outcome	The ATO has considered whether the analysis applied in Indofood International Finance Ltd v. JP Morgan Chase Bank N.A. London Branch [2006] BTC 8003; [2006] EWCA (Civ) 158; [2006] Simon's Tax Cases 1195; [2006] STI 582 (Indofood) can be extended to the Australian context. In Indofood, the United Kingdom Court of Appeal held that beneficial ownership as used in the treaty provisions has an international tax meaning based on the Organisation for Economic Co-operation and Development (OECD) Model Commentaries since 1977. The Court of Appeal in Indofood decided that direct economic enjoyment is a necessary condition for establishing the quality of entitlement that is beneficial ownership. However, Indofood is the only judicial decision that has fully embraced an international fiscal meaning founded on a notion of economic ownership. To date, litigated cases in a tax treaty context do not point in one consistent direction and the issues are untested in Australia. While Indofood might be considered persuasive authority in Australian courts, the case is not binding authority. The OECD Working Party 1 is currently discussing the meaning of beneficial ownership in the OECD Model and may provide further guidance as to the interpretation of the term in the tax treaty context. The ATO has therefore decided to withdraw from the Public Rulings Program a draft taxation ruling (Ruling ID 2912) - 'Income Tax: the meaning of 'beneficially owned' and 'beneficially entitled' in the Dividend, Interest and Royalties Articles of Australia's Tax Treaties' pending further guidance from Working Party 1.

1.25.3 ATO Tax Practitioner Forum

Chair

James O'Halloran, Deputy Commissioner, TPALS

Secretariat

Heather Watson, TPALS

Last meeting held

The last meeting was held on 25 February 2011.

Next meeting

The next meeting will be held on 20 May 2011.

Minutes

The minutes of the ATPF meeting held on the 5 November 2010 have been published to www.ato.gov.au

The draft minutes of the ATPF meeting held on 25 February 2011 are in progress.

New significant topics

Agenda no.	3
Agenda topic	Small business benchmark letters
Significant	Yes
Issue/application	The discussion focussed on: ¦ ATO is funded to increase activity in the cash economy market. Taxpayers and their agents will be given a number of opportunities to provide supporting evidence if they fall outside the benchmarks prior to a default assessment being issued. ¦ It was noted that our processes are overt and the benchmarks are designed to provide both the agent and businesses with an understanding of the parameters for most businesses within an industry. Those businesses that fall outside the benchmarks will attract attention but will be given the opportunity to substantiate their position. Members questioned whether the ATO policy regarding contact with clients had changed. Members were advised that the policy is unchanged and the agent remains the first point of contact. Members were invited to provide examples of cases that appear to contradict our contact guidelines in line with the ATO Receivables Policy.
Status	Ongoing
Outcome	Possible agenda item - Members to supply the ATPF secretariat example cases that appear to contradict ATO contact policy.
Agenda no.	4
Agenda topic	Assistance for tax agents and taxpayers affected by floods.
Significant	Yes
Issue/application	Main points: ¦ Introduction of the handout called 'ATO response to the 2011 natural disasters' which James covered prior to opening up general discussion. ¦ General discussion and questions raised around deferral of payments in areas impacted by the natural disasters such as the floods and bushfires, automatic deferral by Commissioner in the postcode affected areas.
Status	Completed
Outcome	ATPF members provided with handout at ATPF meeting 25 February 2011.
Agenda no.	5
Agenda topic	TFN withholding for closely held trusts.
Significant	Yes
Issue/application	An update on the consultative workshop held 19 October 2010. ¦ New products are being developed and will be progressively released up until 30 June 2011. ¦ Minutes of the workshop are expected to be distributed in March pending comments on the draft from attendees. ¦ There was a clarification that trustee's must disclose TFN's to the ATO to avoid the need to withhold.
Status	Finalised
Outcome	This is an update on the reported outcome in the previous NTLG sub-committee report.
Agenda no.	6
Agenda topic	Amendments to selected income tax returns following the Commissioner of Taxation v. Anstis [2010] HCA (further known as the Anstis case)
Significant	Yes
Issue/application	A summary was provided of the Anstis case and the steps the ATO will take to implement the High Court decision. The ATO will auto amend: ¦ Letters will be issued in March to clients directly, giving them the opportunity to opt out of the auto amend strategy and seek an amendments themselves. ¦ Agents will receive a list of their impacted clients plus a copy of the letter issued. ¦ Notices of assessment (NOA), statements of account and cheque refunds will be issued to the address for service of notice. ¦ EFT refunds will issue to nominated bank accounts. ¦ Auto amendments will begin in early April. ¦ These amendments relate to Youth Allowance recipients only as per the High Court decision. ¦ Clients can amend up to four years. ¦ Timeframe for completion of auto amendments is prior to 30 June 2011. ¦ Interest will be paid by the ATO and should be declared in the appropriate income tax return for clients. Members were advised that 90% of agents will have fewer than 20 affected clients. A question was taken on notice regarding impacts of the deduction on taxable income and the subsequent effect on HECS repayment.
Status	Ongoing
Outcome	Question on notice from the ATPF meeting regarding the impacts of refunds on HECS debt. Information about the Anstis decision can be found by accessing: ¦ Full-time students on youth allowance can now claim a deduction for their study expenses . ¦ Claiming deductions for education expenses against youth allowance .

 

Agenda no.	12
Agenda topic	Other business
Significant	No
Issue/application	Sinclair case A member raised the definition of reasonable care as a result of the finding in the Sinclair case. A similar matter has been raised and will be addressed through at the NTLG meeting on 30 March 2011.
Status	Finalised
Outcome	Member invited to forward their question on this issue to the secretariat who will liaise with the NTLG secretariat.

Issues identified for the TIES register

TIES issues identified by the forum

None identified and reported

1.25.4 Consolidation Sub-group

Chair

Brett Tyers, Assistant Commissioner, Centre of Expertise - Consolidation

Secretariat

Jasmine Deftereos, Centre of Expertise - Consolidation

Last meeting held

The last meeting was held on 15 October 2010.

Next meeting

The next meeting will be held on 13 April 2011.

Minutes

The draft minutes of the NTLG Consolidation Sub-group meeting held on 15 October 2010 are published on www.ato.gov.au

Note: Legislative references are to the ITAA 1997 unless otherwise specified.

Ongoing significant topics

Agenda no.	5.1/15Oct10, NTLG Sub-group issue 18.01.
Agenda topic	The interaction of the tax cost setting provisions and Division 775, where an asset is subject to Forex Realisation Event 3, 4, or 5.
Significant	Yes, but only for forex derivatives not covered by Division 230.
Issue/application	Where a forex forward contract held by a joining entity receives a tax cost setting amount (TCSA) at the joining time, whether section 715-370 will apply on settlement of the forex forward contract to modify the operation of paragraph 715-105(1)(b) such that the exchange rate applying at joining time is substituted for the actual agreed contract rate.
Status	Ongoing
Outcome	A preliminary ATO position was expressed at the NTLG Consolidation Sub-group meeting held on 15 October 2010 that section 715-370 will not apply on settlement of the forex forward contract in the manner suggested. It was also noted by the ATO that there may be no need for section 715-370 to apply (in the manner suggested) because the TCSA allocated to an in-the-money forex derivative contract may be dealt with by other provisions of the ITAA 1997. The issue of how the ITAA 1997 is to apply to the TCSA of a non-forex derivative (interest rate swap) outside of Division 230 is being examined by the ATO at the moment. This analysis will be relevant to determining the tax treatment of the TCSA of a forex derivative contract (where not dealt with by Division 230). The ATO are continuing to consider the issue.
Agenda no.	5.2 and 5.3/15Oct10, NTLG Sub-group issues 18.02a and b.
Agenda topic	Application of CGT event L6 in the context of Tax Laws Amendment (2010 Measures No. 1) Act 2010 (TLAA (No.1) 2010).
Significant	Yes
Issue/application	Clarification is being sought regarding the application of CGT event L6 in the context of numerous retrospective adjustments that may be required to the allocable cost amounts (ACA) as a consequence of the application of amendments outlined in TLAA (No.1) 2010.
Status	Ongoing
Outcome	External members submitted four sub-issues with respect to this item. At a 29 July 2010 teleconference the ATO agreed to look into two of the sub-issues: ¦ issues raised in relation to the application of section 701-5 (NTLG issue 18.02a), and ¦ issues arising where certain assets are retrospectively reclassified as retained cost base assets (NTLG issue 18.02b). A preliminary ATO position with regards to these issues was expressed at the NTLG Consolidation Sub-group meeting held on 15 October 2010. The ATO intends to confirm a final view at the next sub-group meeting on 13 April 2010.
Agenda no.	5.4/15Oct10, NTLG sub-group issue 18.04
Agenda topic	Franking deficits tax (FDT) offset in the context of TLAA (No.1) 2010.
Significant	Yes
Issue/application	Whether the ATO could exercise its discretion not to reduce the FDT offset by 30% where the FDT arises from tax consolidated amendments, as a consequence of TLAA (No.1) 2010, without the need for the head companies of consolidated groups to lodge written requests in the approved form pursuant to subsection 205-70(6).
Status	Ongoing
Outcome	At the 29 July 2010 teleconference the ATO agreed to look into this issue in consultation with external members as a matter of urgency. A draft fact sheet was provided and feedback was sought at the NTLG Consolidation Sub-group meeting held on 15 October 2010. The ATO is currently incorporating comments and intends to table a final version at the next sub-group meeting on 13 April 2011.
Agenda no.	5.5/15Oct10, NTLG Sub-group issue 18.06
Agenda topic	Mine site assets and subsection 701-56(3)
Significant	Yes
Issue/application	Whether mine site improvements (for example, as described in ATO ID 2007/12 and overburden) are recognised as assets for consolidation tax cost setting purposes and, if so, how the tax cost setting amount set in respect of these assets is dealt with under section 701-55 (noting the exception for project pool assets in paragraph 701-56(3)(d)).
Status	Ongoing
Outcome	A preliminary ATO position was expressed at the 15 October 2010 NTLG Consolidation Sub-group meeting that mine site improvements do not have separate asset recognition for any income tax purpose. Some members expressed a strong view that mine site improvements can be separately identifiable assets for consolidation cost setting purposes. The ATO invited those members to provide a submission outlining why such earthworks would be assets recognised in the cost setting process. This request was noted in the draft minutes. As yet, no submissions have been received.
Agenda no.	3/Aug09
Agenda topic	Administrative impact of the decision handed down in MWMcIntosh Pty Ltd & Anor v. FC of T [2009] FCAFC 88.
Significant	Yes
Issue/application	Issue of a practice statement on the period for notifying of a choice to consolidate.
Status	Ongoing
Outcome	On 3 September 2010, the High Court considered the taxpayer's special leave application in the McIntosh matter. The court declined to grant special leave to appeal. The finalisation of this matter means that the decision of the Full Federal Court, which concluded that section 388-55 of Schedule 1 to the TAA is not available to extend the time within which a consolidatable group can choose to consolidate under Part 3-90 stands. As a result of TLAA (No. 1) 2010, the consolidation choice provisions in Part 3-90 have in the meantime been the subject of legislative amendment. A choice to consolidate is now made by the head company making a 'choice in writing'. There is also a requirement that the head company advises the ATO of the details of the group once this written choice is made and this information must be given on the appropriate approved form. A draft DIS is currently being prepared by the ATO. New material for inclusion within the Consolidation Reference Manual, regarding the TLAA (No. 1) 2010 amendments, is also close to being finalised.

Outstanding issues summary

Agenda no.	6/12Jun08
Agenda topic	The implications for consolidations of the view expressed in Draft Taxation Ruling TR2007/D10, Capital gains tax consequences of earnout arrangements.
Significant	Yes
Issue/application	Potential interaction issue between the capital gains tax treatment of earnout arrangements as outlined in TR 2007/D10 and Part 3-90 of the ITAA 1997.
Status	Ongoing.
Outcome	The ATO is considering the impact of the government's announcement re earnouts on TR 2007/D10. The draft will be finalised after the proposed legislative changes including transitional provisions are enacted. The interaction issues with the consolidation measures will be considered during this process. The adequacy of the proposed transitional arrangements will be considered through the consultation process on the new measure. The date of commencement of the law change will be a matter for the government. The ATO does not propose to undertake specific compliance action pending enactment of the law change.
Agenda no.	3/26Feb09
Agenda topic	Deferred tax liabilities (DTL) - Deferred taxes in the ACA and the tax cost setting process.
Significant	Yes
Issue/application	Interaction issues arising from deferred taxes and their inclusion in the ACA and the Tax Cost Setting Process.
Status	Ongoing
Outcome	At the 26 February 2009 sub-group meeting it was decided that a small sub-committee would be established to develop this issue. The sub-committee met and the external sub-group members decided that the constraint upon the ATO of not entering into policy recommendations places an unacceptable limit on the ability of the committee to deal with this issue and they have withdrawn from the discussion. The ATO will continue to consider this issue through the monitoring of issues emerging through compliance activities. External members have raised DTL interaction issues within the context of the current Board of Tax post implementation review of consolidation (BOT review). At the 29 July 2010 teleconference it was decided that this issue should remain on the NTLG Consolidation Issues 'Part A' register and that the BOT review should be monitored with respect to progress on this issue.

A summary of work program undertaken since last NTLG

At the NTLG Consolidation Sub-group meeting on 15 October 2010 general discussion took place about the law relating to the use of tax cost setting amounts (subsection 701-55(6)) and rights to future income (section 716-405) as provided for in TLAA (No.1) 2010. The chair requested that members formally raise any issues by completing an Issues escalation proforma which would allow for a shared understanding of the issues involved and assist in their prioritisation.

On 27 October 2010, the ATO received six forms outlining issues in this area.

A workshop was held, with representatives of professional associations and industry bodies, on 2 December 2010 to consider these issues.

The outcomes of this workshop were as follows:

¦ the ATO undertook to provide an early indication of its views in an informal way early in 2011, for instance by way of a speech or a workshop

¦ the NTLG members were asked to advise on the relative priority of the issues raised, and

¦ the ATO said it would consider whether an appropriate way for working through the issues would be by circulating a discussion paper for comment.

The six issues will be formally tabled at the 13 April 2011 NTLG Consolidation Sub-group meeting.

On 10 March 2011, the ATO presented a Taxation Institute of Australia session on 'Rights to future income', during which possible approaches to the rights to future income provisions in section 701-90 were explored.

Rulings and Law Practice Statements under development

Ruling topic/s listed on the Public Rulings Program

Ruling topic	INCOME TAX: consolidation: capital gains: does paragraph 40-880(5)(f) of the Income Tax Assessment Act 1997 prevent the deduction, under section 40-880 of that Act, of incidental costs described in subsection 110-35(2) of that Act that the head company of a consolidated group or MEC group incurs, in acquiring shares in a subsidiary member from a non-group entity, before the member joins the group?
Case ID	1-23ZJK3U
ID no.	3368
PTI reference no.	1206
Planned final date	2 May 2011
Ruling topic	INCOME TAX: consolidation: capital gains: does paragraph 40-880(5)(f) of the Income Tax Assessment Act 1997 prevent the deduction, under section 40-880 of that Act, of incidental costs described in subsection 110-35(2) of that Act that the head company of a consolidated group or MEC group incurs, in acquiring shares in a subsidiary member from a non-group entity, after the member joins the group?
Case ID	1-232JBNP
ID no.	3369
PTI reference no.	1206
Planned final date	2 May 2011
Ruling topic	INCOME TAX: consolidation: capital gains: does paragraph 40-880(5)(f) of the Income Tax Assessment Act 1997 prevent the deduction, under section 40-880 of that Act, of incidental costs described in subsection 110-35(2) of that Act that the head company of a consolidated group or MEC group incurs, in disposing of shares in a subsidiary member to a non-group entity, after the member leaves the group?
Case ID	1-23ZLLAK
ID no.	3370
PTI reference no.	1206
Planned final date	2 May 2011

Issues identified for the TIES register

TIES issues identified by the group

None identified and reported

1.25.5 Corporations Law Working Party

Chair

Judy Morris, Assistant Commissioner - LB&I

Secretariat

Natarshia Stecum - LB&I

Last meeting held

The last meeting was held on 2 September 2010.

Next meeting

No date has been set for the next meeting.

Minutes

The minutes of the 2 September 2010 meeting were sent to the members of Corporations Law Amendments Working Party on 18 October 2010.

Significant topics

The significant topics which are currently being addressed by the Corporations Law Amendments project team are:

¦ the definition of dividend in subsection 6(1) of the ITAA 1936 including what is a dividend for tax purposes in light of the proposed new changes to section 254T

¦ the application of the franking regime in Part 3-6 of the ITAA 1997, and

¦ the application of the integrity provisions including section 45B of the ITAA 1936.

These provisions are currently predicated on dividends being sourced from profits.

A summary of work program undertaken since the last NTLG

On 2 September 2010 the Corporations Law Amendments Working Party group met to identify, discuss and seek resolution arising from amendments to section 254T of the Corporations Act 2001 which has consequential taxation impacts. The working party comprised representatives from the ATO, Treasury, Australian Securities and Investment Commission (ASIC) and business representatives from the LBAG and the NTLG.

Within the ATO, a project team is working to consult and progress the key tax issues and prepare guidance for the wider taxpayer community. Work is currently proceeding in respect of those key issues. The ATO has sought advice from external counsel about aspects of the Corporations Act amendments. Following consideration of that legal advice, the ATO will reconvene with the working party to progress the publication of guidance material on the key tax issues. Against that background, our intention is to update the working party as soon as practicable.

1.25.6 Division 7A Working Party

Chair

Mathew Umina, Assistant Commissioner - S&ME

Secretariat

Dominic Belvedere - S&ME

Last meeting held

The last meeting was held on 9 November 2010.

Next meeting

No date has been set for the next meeting.

Minutes

The draft minutes of the NTLG Division 7A Working Party meeting, held on 9 November 2010 were issued to members of the forum for comment on 7 January 2011. Draft minutes are in the process of being published to www.ato.gov.au

A summary of work program undertaken since the last NTLG

Practice Statement PS LA 2010/4

The ATO intends to make a number of technical corrections to PS LA 2010/4 following feedback received. A further product such as a fact sheet will also be prepared to provide further clarity.

Honest mistake or inadvertent omission

A practice statement has been drafted and is in the final stages of clearance.

Public rulings recently issued

The following guidance material has issued since the last NTLG meeting:

¦ A final Taxation Ruling ( TR 2010/8 ) - dealing with the application of subsection 109RB(1).

¦ A draft Taxation Determination ( TD 2010/D9 ) - unpaid present entitlements - factors the Commissioner will take into account in determining the amount of any deemed entitlement arising under section 109XI.

¦ A draft Taxation Determination ( TD 2010/D10 ) - payments and loans through interposed entities - factors the Commissioner will take into account in determining the amount of any deemed payment or notional loan arising under section 109T.

The ATO is currently reviewing the feedback received with respect to the above draft TDs.

1.25.7 Finance and Investment Sub-group

Chair

John Smith, Assistant Commissioner, Senior Tax Counsel - Tax Counsel Network.

Secretariat

Robin Halls, Centre of Expertise - Finance and Investment.

The Finance and Investment Sub-group also has one currently active Working Group: the TOFA Working Group.

Working group chair

The TOFA Working Group is chaired by Ross Brookes, Assistant Commissioner, LB&I.

Last meetings held

¦ The sub-group met on 25 November 2010.

¦ The TOFA Working Group met on 25 November 2010.

¦ The Division 250 Working Group held its final meeting on 16 September 2010. Residual Division 250 issues will be progressed through the Finance and Investment Sub-group.

Next meetings

¦ The sub-group's next meeting will be determined by the chair in consultation with the members and will likely be on the same day as a future TOFA Working Group meeting.

¦ The next meeting of the TOFA Working Group is scheduled for 8 March 2011.

Minutes

¦ The minutes of the NTLG Finance and Investment Sub-group meeting held on 25 November 2010 have been finalised and are in the process of being published on www.ato.gov.au

¦ The minutes of the NTLG TOFA Working Group meeting held on 25 November 2010 meeting have been published on www.ato.gov.au

¦ The minutes of the NTLG Division 250 Working Group meeting held on 16 September 2010 have been finalised and circulated to the working group's members and are in the process of being published to www.ato.gov.au

Ongoing significant topics

Agenda no.	1
Agenda topic	Debt/equity ITAA 1997 Division 974 Effectively non-contingent obligation (ENCO)
Significant	Yes
Issue/application	The issue is critical to the application of the debt test in Division 974 and concerns whether an issuer of a financing arrangement must repay the amount received on issue.
Status	Substantially finalised [residual matters are being addressed by Taxation Determinations, which are at an advanced stage].
Outcome	Submissions on the ENCO Discussion Paper from professional bodies represented on the sub-group have been considered. Discrete aspects of ENCO have been addressed. Action items were agreed at 16 June, 12 December 2008, 6 March 2009 and 9 December 2009 meetings. ¦ A Taxation Determination issued on 14 January 2009 as TD 2009/1 on whether 'obligation' in ITAA 1997 section 974-135 is confined to a legal obligation. ¦ A TR issued on 22 September 2010 explaining the ATO's views on the extent to which economic compulsion is relevant in finding an ENCO. ¦ Limited recourse in the debt test: A supplementary draft discussion paper on matters relevant to the treatment of some limited recourse financing arrangements under the debt test was discussed at the 9 December 2009 meeting and the following action items agreed: ¦   – Action item 91209-2 ATO to draft a Taxation Determination (TD) on whether there is an ENCO in limited recourse debt. [Note: during the course of drafting this TD, it was decided that a draft TD should also issue to address the application of paragraph 974-20(1)(d) to limited recourse debt. Both draft TDs are scheduled to issue on 23 March 2011.] – Action item 91209-3 ATO to consider addressing [in the Taxation Determination mentioned in 91209-2 above] the distinction between a substantial loan to a $2.00 company with a single asset from formal limited recourse debt.

A summary of work program undertaken since last NTLG

Finance and Investment Sub-group

Action item no.	200710-1
Issue	Clarification on the application of section 98(2A) of the ITAA 1936. ATO to advise.
Status	Finalised at 25 November 2011 sub-group meeting.
Action item no.	160608-5
Issue	ATO to advise on progress of Taxation Determination on revenue capital distinction for managed investment funds.
Status	In course Tax Laws Amendment (2010 Measures No 1) Act 2010 received royal assent on 3 June 2010 and contains amendments relevant to this issue. The publication of the draft TD was held over pending consideration of the capital/revenue distinction in other contexts. This TD was deferred pending the finalisation of the private equity TDs. As those TDs were published on 1 December 2010, the ATO intends publishing a draft TD about the characterisation of gains and losses made by a trustee shortly. The TD may apply to managed investment trusts to the extent that the capital election measure does not. The Draft Tax Determination is scheduled to issue on 9 March 2011.
Action item	200710-3
Description	Uses and practical impact on the finance and investment sector of information exchanged between the ATO and foreign tax administrations under double tax agreements.
Status	Finalised at 25 November 2011 sub-group meeting.
Action item	200710-4
Description	Effect of Article 7 of the OECD model tax convention on income and on capital.
Status	Finalised at 25 November 2011 sub-group meeting.
Action item	251110-1
Description	ATO to note circumstances where product rulings may not be issued and where this conflicts with expectation by ATO that financial product issuers should obtain rulings for their products and ATO's intention to educate retail clients to check for product rulings and to forward AFMA's request for a further meeting between ATP and the industry in the near future to discuss how ATO's expectations in these areas can be managed practically.
Status	Finalised
Action item	251110-2
Description	ATO to report on ITAA 1997 section 974-80 issues which are of concern and are the subject of compliance action.
Status	In course
Action item	251110-3
Description	ATO to consider the need for a working group for managed investment trust law reform issues.
Status	In course

Division 250 Working Group

The final meeting of the Division 250 Working Group was held on Thursday 16 September 2010.

All but one of the working group's issues were addressed. The unresolved issue - concerning a request from external members for ATO approval of a group or project loan approach for all assets in the application of Division 250 - was addressed at the sub-group's 25 November meeting.

TOFA Working Group

Status of TOFA Issues

¦ ATO members of the working group are analysing the remaining 18 current issues (of which eight are new issues; five issues have been analysed but subject to Treasury announced but unenacted legislative changes and five on-going issues requiring in-depth analysis). The majority of new and on-going current issues are scheduled to be discussed in the next NTLG TOFA WG meeting to be held on 8 March 2011.

¦ 93 issues have been finalised.

¦ The four TOFA specialist sub-teams (members from the ATO and representatives from industry and professional associations) have analysed issues relating to hedging, securitisation, swaps and the interaction of trusts and TOFA.

Guidance products

¦ The working group is constantly supplementing ATO website material in two sites (ATO TOFA web pages and the NTLG TOFA WG website in Tax Professionals). Recently added new material

¦  

– several new fact sheets incorporated in the 'Guide to the TOFA rules'

– minutes from the recent NTLG TOFA WG meetings

– NTLG TOFA current and finalised issue lists have been progressed in the publishing queue.

¦ One TOFA TD was published on 20 October 2010 as TD 2010/D3 and comments are being considered. A draft TOFA TR for public comment and another two hedging TDs are nearing completion. These three products are due to be published in the next three months. The ATO is considering nominating a 'NANE and TOFA' TR for the Rulings Program.

Interpretative advice

¦ As was noted in the previous update the ATO has developed and distributed a TOFA checklist to SME and LB&I interpretative advice staff nationally. The TOFA team members continue to offer specialist support on all TOFA private binding requests.

Compliance

¦ The ATO is developing its compliance approach for TOFA (note: Compliance program 2010-11 at pages 20 and 29 of the program). The ATO's main compliance focus at present is to understand the pre-TOFA, transitional and post-TOFA impacts for taxpayers, including impacts on costs of compliance. The ATO is also continuing to work on designing the content and pilot of preliminary TOFA profiling questionnaires to taxpayers identified as early TOFA adopters who have elected to bring in their existing financial arrangements.

New potential ruling topic/s identified by NTLG sub-group/working groups

Potential ruling topic	TOFA gains and losses and non-assessable non-exempt income
Sub-committee priority high/medium/low	High
Action taken or proposed to be taken	Likely to be proposed for a taxation ruling

Rulings and Law Practice Statements under development

Ruling topics listed on the Public Rulings Program

Ruling topic	INCOME TAX: for the purposes of Division 974 of the Income Tax Assessment Act 1997, is an entity which issues limited recourse debt prevented from having an 'effectively non-contingent obligation' to provide a financial benefit merely because the debt is limited recourse?
ID no.	3455
Draft reference no.	TD - Awaiting final approval. Panel consideration not required. Planned draft issue date 23 March 2011.
PTI reference no.	1224
Planned final date	To be advised
Ruling topic	INCOME TAX: can the issuer of a limited recourse loan of the type described in paragraph 7 of Appendix 1 ever satisfy the requirements of paragraph 974-20(1)(d) of the Income Tax Assessment Act 1997?
ID no.	3472
Draft reference no.	TD - Awaiting final approval. Panel consideration not required. Planned draft issue date 23 March 2011.
PTI reference no.	1224
Planned final date	To be advised
Ruling topic	INCOME TAX: does section 230-365 of the Income Tax Assessment Act 1997 require both retrospective and prospective testing for hedge effectiveness for the purposes of the hedging financial arrangement methods?
ID no.	3418
Draft reference no.	TD - Awaiting final approvals. Panel consideration not required. Planned draft issue date 6 April 2011.
PTI reference no.	1218
Planned final date	To be advised
Ruling topic	INCOME TAX: will the disposal of a hedging financial arrangement to which the hedging financial arrangements election applies constitute an event listed in the table in section 230-305 of the Income Tax Assessment Act 1997?
ID no.	3417
Draft reference no.	TD - Awaiting final approvals. Panel consideration not required. Planned draft issue date 6 April 2011.
PTI reference no.	1217
Planned final date	To be advised
Ruling topic	INCOME TAX: what is the 'arrangement', having regard to subsection 230-55(4)?
ID no.	3463
Draft reference no.	TR - Draft being written and reviewed. To be considered at panel in February 2011 - draft issue date 20 April 2011.
PTI reference no.	1215
Planned final date	To be advised
Ruling topic	INCOME TAX: where an equity interest is a financial arrangement which satisfies both subsections 230-45(1) and 230-50(1) of the Income Tax Assessment Act 1997, which provision applies?
ID no.	3462
Draft reference no.	TD 2010/D3 - draft issued 20 October 2010. Considering and incorporating comments received following release of the draft. Panel consideration required.
PTI reference no.	1219
Planned final date	18 May 2011
Ruling topic	INCOME TAX: can section 974-80 of the Income Tax Assessment Act 1997 apply to classify an interest in a company as an equity interest, where the interest is held by the trustee of a unit trust; and the returns paid in respect of the interest are intended to fund returns to holders of units in the trust that are stapled to shares in the company?
ID no.	3471
Draft reference no.	TD - Draft being written and reviewed. To be considered at panel in March 2011. Planned issue date 29 June 2011.
PTI reference no.	Not available
Planned final date	To be advised

Issues identified for the TIES register

TIES issues identified by the group

None identified and reported

1.25.8 Fringe Benefits Tax Sub-committee

Chair

Lee Beaver, Specialisation Manager FBT, Centre of Expertise - Admin Business and Personal Tax

Secretariat

Annette Wiggins, Centre of Expertise - Admin Business and PTax

Last meeting held

The last meeting was held on 17 February 2011.

This report relates to issues discussed at that meeting.

Next meeting

The next meeting will be held on 12 May 2011.

Minutes

The minutes of the NTLG FBT Sub-committee meeting held on 11 November 2010 have been published on www.ato.gov.au

The minutes of the meeting held on 17 February 2011 are in progress.

New significant topics

Agenda no.	7 and 8
Agenda topic	Documentation lost or destroyed - Queensland floods and other natural disasters
Significant	Yes
Issue/application	The ATO was requested to provide guidance regarding the approach that the ATO will take in relation to taxpayers and tax agents who have had FBT-related documentation lost or destroyed as a result of the recent natural disasters, in particular the Queensland floods. The high level information on the ATO website relating to the additional support available on a case by case basis regarding assistance to reconstruct lost records was acknowledged by members however further guidance in relation to the ATO's approach to FBT matters was sought.
Status	Completed
Outcome	Members were advised that there is a dedicated call centre established to support affected people. The ATO website has specific pages for those affected to provide access to material. Further, the ATO, in discussing the matters raised, noted that the ATO can provide one on one assistance to those impacted by natural disasters. Assistance visits can be arranged where one on one advice can be provided. Specifically in relation to FBT records that have been lost or destroyed in a natural disaster, subsections 123(5) and (6) and section 123B may apply to relieve the employer from compliance with the general substantiation requirements of the FBTAA. The ATO also advised that a practice statement is currently being prepared which will provide guidelines for tax officers assisting taxpayers to reconstruct records or make reasonable estimates where the taxpayer has been affected by a natural disaster.
Agenda no.	9
Agenda topic	Calculation of taxable value of fringe benefits - Queensland floods and other natural disasters
Significant	Yes
Issue/application	Confirmation was sought from the ATO regarding whether any concessional treatment can be applied to the calculation of car fringe benefits, housing fringe benefits, residual fringe benefits and emergency assistance in times of natural disasters. Various scenarios were put forward for discussion and ATO comment.
Status	Completed
Outcome	Numerous practical issues were put forward for discussion. The issues ranged from cases where cars and/or houses were destroyed during a natural disaster to emergency assistance provided by employers. The ATO worked through each of the issues raised and provided general guidance on each, for example stating that a vehicle destroyed in the floods (and therefore a wreck that could not be driven) would no longer be 'held' as at the date of being destroyed. It was also noted, and agreed, that there will be different outcomes under the FBTAA depending on the actual circumstances, for example some cars may be destroyed, others badly damaged and while others may have suffered minor damage. The FBTAA also contains a specific provision, section 58N, which provides an exemption from FBT where the employer provides 'immediate emergency assistance' to employees. This clearly applies in times of natural disasters but does not extend to assistance that is not of a temporary nature. For example, it would not exempt long-term benefits such as gifts of property having a long effective life. An employer providing a new house or furniture to an affected employee would not be exempt.
Agenda no.	10
Agenda topic	Car fringe benefits - holding period - Queensland floods and other natural disasters
Significant	Yes
Issue/application	It was submitted that, taking into account the financial hardship caused by the recent floods, that the ATO indicate whether it would agree that the holding period of a car in the following circumstances is reduced accordingly such that: ¦ if a car is written off or not recovered it is deemed to have been disposed of at the date the car was lost or destroyed ¦ where due to the number of cars that are not driveable and awaiting repairs and the lack of car repairers able to continue to operate in the flood affected areas that the period the cars are unable to be driven be excluded from the holding period.
Status	Completed
Outcome	The ATO advised members that a vehicle destroyed in the floods (and therefore a wreck that could not be driven) would no longer be 'held' as at the date of being destroyed. It was also noted, and agreed, that there will be different outcomes under the FBTAA depending on the actual circumstances of a car requiring repairs. For example some cars may be destroyed, others badly damaged and while others may have suffered minor damage. It is accepted that, where a car is in a workshop for extensive repairs, it is not available for private use of the employee.
Agenda no.	11
Agenda topic	Consideration of issues that might arise from Investa Properties Limited v. Federal Commissioner of Taxation
Significant	Yes
Issue/application	The ATO was requested to comment on its concerns regarding the case of Investa Properties Limited v. Federal Commissioner of Taxation [2009] AATA 121; (2009) 2009 ATC 10-080; 75 ATR 140. Alternatively, the ATO was requested to discuss its views arising from the arrangement set out in the AAT decision in the Investa case.
Status	Completed
Outcome	The decision of the AAT, while setting out the factual arrangement, was that the application was dismissed in the hope that the Commissioner would reconsider the actual scheme identified and issue a new ruling on the subject matter of the scheme about which the taxpayer sought a private ruling. The ATO noted it could not comment on the particular outcome or the process that followed the decision in Investa Properties. However, the ATO did acknowledge that the AAT decision in Investa Properties did set out an example of an arrangement that might be entered into between employers and their employees and other related parties (the particular arrangement was detailed at paragraph 8 in the decision). The ATO advised members that arrangements of this nature will necessarily involve a consideration of various types of benefits that might arise for consideration under the FBTAA. The benefits that require consideration in such arrangements can include expense payment benefits, property benefits, residual benefits, in-house property and in-house residual benefits.

Ongoing significant topics

Agenda no.	3.1
Agenda topic	Consolidated FBT returns
Significant	Yes
Issue/application	At the 18 February 2010 meeting a member raised the issue that many corporate groups have several employer companies and it would assist if there was an option to be able to prepare and lodge a consolidated annual FBT return. In many cases this would save time in completion of the annual return form and making of instalment payments. The ATO was requested to provide an update on its review as to whether lodgment of a consolidated FBT return was acceptable. The ATO undertook to advise forum members of the outcome of the current review of the possible application of the Commissioner's general power of administration to allow consolidated FBT returns in certain circumstances.
Status	Finalised
Outcome	At the meeting the ATO advised members that it has again considered the question of consolidated FBT returns. The ATO noted that in May 2008 the matter was addressed at the NTLG FBT Sub-committee by way of the following response: '…The ATO has now looked into that possibility and has concluded that it is clear that the law does not allow FBT consolidation for corporate entities and a FCA is not a vehicle to achieve this outcome for FBT' The issue was subsequently re-raised by a different member in 2010. The ATO advised members that the advice previously provided on this matter has been considered and while there have been a number of reviews that have considered consolidated FBT returns over the last few years, there have been no changes to the law relating to lodgment of FBT returns. As there have been no relevant changes to the legislation since the 2008 advice was developed, it represents the best ATO interpretation of the legislation. The ATO stated it cannot allow consolidated FBT returns.
Agenda no.	6 (update from 11 November 2010 meeting)
Agenda topic	Section 23AG Otherwise deductible rule (ODR) in fly-in-fly-out (FIFO) arrangements
Significant	Yes
Issue/application	The ATO's interpretative position in relation to the availability of the ODR in FIFO arrangements to overseas worksites is finalised given the response provided at the November 2010 meeting.
Status	Finalised
Outcome	Responses on this issue were provided at the February, May, August and 11 November 2010 meetings. The following update was provided in the published minutes of the meeting of 11 November: On 18 November the Assistant Treasurer issued a press release, Providing certainty for the taxation of fly-in/fly-out employees working overseas The following is an extract from the press release: The Assistant Treasurer, the Hon Bill Shorten, said 'The operation of the current FBT exemption for fly-in/fly-out arrangements, which apply for work in Australia, will be extended and applied to Australian workers in similar situations overseas.' This exemption will be backdated to 1 July 2009, when the tax changes to foreign employment income commenced. It is anticipated that an Exposure Draft and draft explanatory memorandum will be released for public consultation in the near future. Treasury will consult with members of this forum in respect of same.

Outstanding issues summary

Action item no.	FBT 260209/31
Issue/application	When will corporates be able to lodge FBT returns electronically? ATO to advise members when the range of forms that will be available on the new portal deployment has been decided.
Status	Ongoing
Outcome	The ATO will continue to monitor and provide updates when there is progress to report on the lodgment of FBT returns via the business portal.

Rulings and Law Practice Statements under development

Ruling topic/s listed on the Public Rulings Program

Ruling topic	Draft Taxation Ruling: Fringe benefits tax: meaning of 'cost price' of a car for the purpose of calculating the taxable value of car fringe benefits.
ID no.	3282
Draft reference no.	TR 2011/D1
PTI reference no.	1194
Planned final date	TR 2011/D1 issued on 23 February 2011. Comments will be accepted up to 8 April 2011. The planned issue date of final ruling is 17 August 2011.
Ruling topic	Taxation Determination TD 2011/1 : Income tax and Fringe benefits tax: can a non-resident employer be: ¦ required to withhold amounts from salary and wages paid to an Australian resident employee for work performed overseas under section 12-35 of Schedule 1 to the Taxation Administration Act 1953? ¦ subject to obligations under the Fringe Benefits Tax Assessment Act 1986 in relation to benefits provided to an Australian resident employee in relation to work performed overseas?
ID no.	3291
Draft reference no.	TD 2010/D1
PTI reference no.	1205
Planned final date	Final issued 19 January 2011

Issues identified for the Tax Issues Entry System (TIES) register

TIES issues identified by the committee

None identified and reported

1.25.9 GST Sub-group

Chair

Paul Tregillis, Senior Assistant Commissioner - Indirect Tax

Secretariat

Donald Lobo - Indirect Tax

Last meeting held

The last meeting was held on 30 November 2010

Next meeting

The next meeting will be held on 29 March 2011.

Minutes

The minutes of the GST Sub-group meeting held on 21 September 2010 have been published on www.ato.gov.au after having received member ratification. Draft minutes for the 30 November 2010 meeting have been distributed to members for comment/feedback.

Regular updates are provided to member and published for all unresolved issued raised by members. The link above is to the November 2010 updates.

New significant topics

Issue no.	11.17
Agenda topic	Contribution amounts under indirect tax sharing agreements (ITSA)
Significant	No
Issue/application	Whether an ITSA that calculates a members 'contribution amount' accounted for under accounting standard UIG 1031 is considered a 'reasonable allocation' under section 444-90 of Schedule 1 to the TAA.
Status	Complete
Outcome	The ATO provided members with three scenarios of a 'reasonable allocation' to illustrate ATO's view in how the ITSA guidelines interact with the accounting principles in each case. Members were requested to provide feedback given that the scenarios were prepared to alleviate members concerns raised at the previous meeting. Members have not provided feedback or raised further issues in relation to ITSA.
Issue no.	13.36
Agenda topic	S105-55 of Sch 1 to the TAA 1953
Significant	No
Issue/application	Whether a notification making a claim for a refund which is subject to the provisions section 105-65 would be considered giving rise to a shortfall and thus a false and misleading statement.
Status	On going
Outcome	At the November 2010 meeting the ATO provided an update on the issue stating that since the recent amendments to the penalty provisions it is no longer necessary for a shortfall amount to arise before penalties are attracted for false or misleading statements. The ATO stated that it is currently in the process of considering the administration of the new penalties for statements that do not give rise to a shortfall amount. The update further stated that the ATO considers that the fact the Commissioner may refuse to pay a refund because of section 106-65 does not in itself mean that there can be no tax shortfall amount where a refund is sought, but is denied by the Commissioner. Members sought further clarification on the implication for penalties when a taxpayer lodges a notification to claim a refund where it is subject to the Commissioner exercising his discretion to pay the refund. Members also sought an update on how non shortfall penalties will be administered. The ATO stated it would provide a response to members at the meeting in March 2011.

Ongoing significant topics

Issue no.	11.5
Agenda topic	Board of Taxation Review of the legal framework for the administration of the GST
Significant	Yes
Issue/application	Concerns have been raised about the status of documents relied on by taxpayers and the level of protection afforded to them.
Status	Complete
Outcome	The ATO provided members were provided with the final version of the document that outlines the protection levels for indirect tax advice products including rulings. The table has been publish on www.ato.gov.au at  Error! Hyperlink reference not valid. .
Issue no.	6.10
Agenda topic	Changes to 'Belvedere' example in financial supplies ruling GSTR 2002/2
Significant	Yes
Issue/application	Apportionment methodology
Status	On going
Outcome	At the November 2010 meeting the ATO provided members with a draft fact sheet setting out its preliminary thinking on claiming input tax credits on acquisitions made in connection with M&A activity. The draft fact sheet was distributed for consultation purposes only and did not express the ATO view on the issue. The ATO has sought members view and comments on the fact sheet as well as their assistance in resolving difficulties being encountered in arriving at practical solutions.

Rulings and Law Practice Statements under development

Ruling topic/s listed on the Public Rulings Program

Ruling topic	GST: residential premises and commercial residential premises (Draft topics)
ID no.	2908
Draft reference no.	GSTR
PTI reference no.	1029
Planned final date	25 May 2011
Ruling topic	GST: grants (Draft topics)
ID no.	2938
Draft reference no.	GSTR
PTI reference no.	1018
Planned final date	TBA
Ruling topic	GST: application of subsection 11-15(5) of the A New Tax System (Goods and Services Tax) Act 1999 to acquisitions relating to the provision of accounts by Australian authorised deposit taking institutions (Final topics)
ID no.	3073
Draft reference no.	GSTR 2009/D1
PTI reference no.	1129
Planned final date	TBA
Ruling topic	GST: interest-free loans received by the developer of a retirement village (Final topics)
ID no.	3219
Draft reference no.	GSTR 2010/D1
PTI reference no.	1080
Planned final date	6 April 2011
Ruling topic	Miscellaneous tax: application of the uniform penalty regime and interest charges to the Commonwealth, States, the Northern Territory and the Australian Capital Territory (Final topics)
ID no.	3464
Draft reference no.	N/A
PTI reference no.	1123
Planned final date	27 April 2011
Ruling topic	GSTR 2006/7 Goods and services tax: how the margin scheme applies to a supply of real property made on or after 1 December 2005 that was acquired or held before 1 July 2000 (Addenda)
ID no.	N/A
Draft reference no.	N/A
PTI reference no.	1208
Planned final date	TBA
Ruling topic	GSTR 2006/8 Goods and services tax: the margin scheme for supplies of real property acquired on or after 1 July 2000 (Addenda)
ID no.	N/A
Draft reference no.	N/A
PTI reference no.	1208
Planned final date	TBA
Ruling topic	GSTR 2006/11 Goods and services tax: appropriations (Addenda)
ID no.	N/A
Draft reference no.	N/A
PTI reference no.	1222
Planned final date	30 March 2011
Ruling topic	GSTR 2009/4 Division 129 as it applies to multi-staged developments of new residential premises (Addenda)
ID no.	N/A
Draft reference no.	N/A
PTI reference no.	1234
Planned final date	17 June 2011
Ruling topic	GSTR 2004/1 Goods and services tax: reduced credit acquisitions (Addenda)
ID no.	N/A
Draft reference no.	N/A
Planned final date	25 May 2011

Law Administration Practice Statements (LAPS) under development

LAPS topic	Administration of the uniform penalty regime and interest charges in relation to the Commonwealth, States, the Northern Territory and the Australian Capital Territory (Technical LAPS)
ID no.	3465
PTI reference no.	1123
Planned final date	27 April 2011
LAPS topic	The priority escalation process for GST other advice (Process LAPS)
ID no.	3432
Planned final date	17 February 2011

Issues identified for the TIES register

TIES issues identified by the group

None identified and reported

1.25.10 Losses and Capital Gains Tax Sub-committee

Chair

Margaret Haly, Assistant Commissioner, Centre of Expertise - Losses and CGT Centre of Expertise

Secretariat

Sean Bielanowski, Centre of Expertise - Losses and CGT Centre of Expertise

Last meeting held

The last meeting was held on 10 November 2010.

Next meeting

The next meeting will be held on 8 June 2011.

Minutes

The draft minutes of the NTLG Losses and CGT Sub-committee meeting held on 10 November 2010 are under development.

Ongoing significant topics

Agenda no.	2010/11 - 4.0
Agenda topic	Application of administrative approach in IT 2540 to incorporations - draft public advice document
Significant	Yes
Issue/application	Incorporation of professional practices
Status	Ongoing
Outcome	A draft ruling was provided through the Law Institute of Victoria (LIV) in July 2010. An informal meeting was held on 23 September 2010 between members of the LIV and the ATO to discuss the issues raised in the LIV draft ruling and to provide an update on the current position and the possible timelines for future consultation. At that meeting - and in subsequent updates to the NTLG and the NTLG Losses and CGT Sub-committee - the ATO advised that it was considering issuing a more targeted product than a TR. The ATO has now decided that a draft Tax Determination will be published by 30 March 2011. At the 10 November 2010 sub-committee meeting, the members were advised that both the Legal Practitioners' Working Party and the sub-committee would be consulted on the draft of any product before a final draft was published for public consultation. This is still the intention of the ATO.
Agenda no.	2010/11 - 3.1
Agenda topic	TR2007/D10 and earnouts
Significant	Yes
Issue/application	Draft Taxation Ruling TR 2007/D10 - CGT consequences of earnout arrangements.
Status	Ongoing
Outcome	The ATO is considering the impact of the government's announcement re earnouts on TR 2007/D10. The draft will be finalised after the proposed legislative changes including transitional provisions are enacted. The interaction issues with the consolidation measure will be considered during this process. The adequacy of the proposed transitional arrangements will be considered through the consultation process on the new measure. The date of commencement of the law change will be a matter for the government. The ATO does not propose to undertake specific compliance action pending enactment of the law change.

Issues identified for the TIES register

TIES issues identified by the committee

None identified and reported

1.25.11 Promoter Penalty Co-design Sub-committee

Chair

Tim Dyce, Deputy Commissioner, Aggressive Tax Planning

Secretariat

Tony Poulakis, Aggressive Tax Planning

Last meeting held

The last meeting was held on 28 February 2011.

Next meeting

The next meeting date is yet to be determined.

Minutes

Minutes of the meeting of 28 February 2011 are yet to be finalised and published.

Ongoing significant topic

Agenda no.	2008-01
Agenda topic	Creation of a Good Governance Guide (guide) for promoter penalties.
Significant	Yes
Issue/application	The proposed guide has been developed in consultation with members of the sub-committee. It aims to help tax advisers and any other intermediaries in the tax system to manage compliance risks with a focus on (but not limited to) promoter penalties. It also gives some guidance on how to manage contraventions or other problems where they occur.
Status	Ongoing - nearing completion
Outcome	A near-final version of the guide was discussed at the sub-committee meeting of 28 February 2011 and adjustments made. We are aiming to release the guide to coincide with the fifth anniversary of the promoter penalty laws. A marketing and communication strategy is being devised for its release.

Outstanding issue summary

Agenda no.	2009-01
Agenda topic	Promoter penalties and consolidated groups
Significant	No
Issue/application	Whether a member of a tax consolidated group can be a promoter of a tax exploitation scheme to another member of that group?
Status	Complete
Outcome	At the meeting of 19 March 2009, the ATO stated a preliminary position that there is nothing in the legislative structure to exclude the promotion within a consolidated group from the promoter penalty regime. However, it is unlikely as a practical matter to arise as all three elements of the test would need to be satisfied, that is, we would need to demonstrate promotion, consideration and a tax exploitation scheme. Nevertheless, some sub-committee members were concerned as it was their view that the regime was never intended to apply to wholly-owned consolidated groups. At the meeting, the ATO agreed to share with sub-committee members our initial written views so that we can explore an appropriate outcome, including an administrative solution. On 26 February 2010, the ATO distributed its written views to sub-committee members for their comment. The paper concludes that the ATO would not seek to apply the promoter penalty laws to an entity that is essentially the same economic and tax entity that has incurred the related administrative penalty. This approach was intended to be added to the promoter penalty practice statements but member responses indicated this may not be required. We will consider adding the matter to the practice statements the next time they are amended.

Issues identified for the TIES register

TIES issues identified by the committee

None identified and reported

1.25.12 Superannuation Technical Sub-group

Chair

Stephen Martin, Assistant Commissioner - Superannuation Centre of Expertise

Secretariat

Cindy Baker - Superannuation Centre of Expertise

Last meeting held

The last meeting was held on 8 December 2010.

Next meeting

The next meeting will be held on 22 March 2011.

Minutes

The minutes of the NTLG Superannuation Technical Sub-group meeting held on 8 December 2010 have been published on www.ato.gov.au

Ongoing significant topics

Agenda topic	Yes
Significant	Yes
Issue/application	S.67(4A) - Limited Recourse Borrowing Arrangements
Status	On-going
Outcome	The ATO is currently in the process of consulting Australian Prudential Regulation Authority (APRA) and Treasury in respect of the issues emerging from our 8 November 2010 workshop with industry members. Due to the complexity of the underlying issues we will progress these within the ATO by way of creation of a Priority Technical Issue. Once the priority for this work been endorsed within the ATO, we will be able to commence the drafting of guidance in the form of determinations or a ruling. The timeframes for these proposed products, once resourcing for them is endorsed, will be published on the ATO's website in its Public Rulings Program. Revisions of ATO IDs 2010/162 and 2010/170, as discussed at the workshop, are also being considered, but will be subject to consultation with APRA. The ATO is also considering whether the Q&As already published on our website regarding drawdowns from existing facilities could be further amended to provide greater clarity in the short term where possible.
Significant	Yes
Issue/application	Excess Contribution Tax (ECT)
Status	On-going
Outcome	Members of the Superannuation Technical Sub-group have asked to have the Commissioner's administration of ECT as a standing agenda item. Members are particularly interested in the Commissioner's administration of the discretion in section 292-465 of the ITAA 1997 to disregard a contribution or to allocate it to another financial year. We anticipate having to explain how the Commissioner proceeded following the decision of the AAT in McMennemin and Commissioner of Taxation [2010] AATA 573. In that case, the Tribunal found that it has no jurisdiction to review the Commissioner's determination under section 292-465. The Tribunal also stated that if it did have jurisdiction, it would have affirmed the Commissioner's assessment. The ATO lodged an appeal in the Federal Court, as a result of the Tribunal's decision that it lacks jurisdiction. The appeal was heard by the Full Court of the Federal Court of Australia on 14 February 2011. We note also that section 292-465 was amended by the Superannuation Legislation Amendment Act 2010 which received royal assent on 16 November 2010. The amendment makes it clear that an objection may be made under section 292-245 against an excess contributions tax assessment. This amendment, which is for avoidance of doubt is intended to ensure that the AAT (and Federal Court) will have jurisdiction to review an objection decision made by the Commissioner where the individual is dissatisfied with a discretion decision. However it should be noted that the amendment applies only to applications for the Commissioner's discretion made on or after 17 November 2010.

Finalised significant topics

Significant	Yes
Issue/application	Water rights - application of Commissioner's discretion under paragraph 71(1)(e) of the Superannuation Industry (Supervision) Act 1993.
Status	Finalised
Outcome	The ATO has published on its website on 21 February 2011 an updated version of Law Administration Practice Statement PS LA 2009/8, which outlines the circumstances in which the Commissioner would exercise his discretion to make a determination under paragraph 71(1)(e) of the Superannuation Industry (Supervision) Act 1993 that an asset is not, or will not be, an in-house asset of a self-managed super fund (SMSF). The practice statement has been amended to include additional examples relating to the leasing of 'water access entitlements' (WAEs) to a related party and the circumstances where the Commissioner would consider exercising his discretion to issue a determination that the WAE is not an in-house asset.

Rulings and Law Practice Statements under development

Ruling topic/s listed on the Public Rulings Program

Ruling topic	Self managed superannuation funds: for the purposes of the Superannuation Industry (Supervision) Regulations 1994, can a benefit payable with a cheque or promissory note be 'cashed' at the time the cheque or note is issued?
ID no.	3160
Draft reference no.	¦ SMSFD 2011/1 : Self Managed Superannuation Funds: for the purposes of the Superannuation Industry (Supervision) Regulations 1994, is a benefit payable with a cheque or promissory note 'cashed' at the time the cheque or note is received by the member or beneficiary? ¦ SMSFD 2011/1EC : Determination Compendium
PTI reference no.	1138
Planned final date	Published 19 January 2011
Ruling topic	Income tax: determining whether a superannuation income stream benefit is payable at a particular time
ID no.	3189
Draft reference no.	On hold pending consultation with APRA and Treasury. Further work and research required. This ruling is to provide the ATO view on when a superannuation income stream starts and how and when it ends.
PTI reference no.	1159
Planned final date	To be advised
Ruling topic	Miscellaneous tax: excess contributions tax: when a contribution can be returned
ID no.	3363
Draft reference no.	On hold. Further consultation being undertaken. To provide the view about the circumstances when trustees can return superannuation contributions.
PTI reference no.	1156
Planned final date	To be determined

Issues identified for the TIES register

Issue	0030-2010
What Act and section does the issue relate to?	Superannuation Industry (Supervision) Act 1993 (SIS Act) ¦ Section 35C(1) SIS Act ¦ Section 35C(6) SIS Act ¦ Section 35C(7) SIS Act ¦ Section 35C(8) SIS Act ¦ Superannuation Industry (Supervision) Regs 1994 ¦ Regulation 8.02A SIS Regs ¦ Regulation 8.03 SIS Regs
Description	An auditor who issues an audit report to an SMSF trustee on or after the due date for lodgment of the fund's annual return is in breach of section 35C(6) of the SIS Act. There is no allowance for the auditor not meeting the prescribed time in circumstances beyond the auditor's control
TIES registration no.	TIES reference: 0030-2010

1.25.13 Transfer Pricing Sub-group

Chair

Michael Jenkins, Assistant Commissioner - LB&I, Transfer Pricing Practice

Secretariat

Amanda Brogan - LB&I, Transfer Pricing Specialist

Last meeting held

The last meeting was held on 15 July 2010.

Next meeting

The next meeting will be held on 29 March 2011.

Minutes

The minutes of the NTLG Transfer Pricing (TP) Sub-group meetings held on 15 July were approved at the 16 November 2010 meeting and are in the process of being published to www.ato.gov.au

Ongoing significant topics

Agenda no.	09/010307
Agenda topic	APA External Review
Significant	Yes
Issue/application	The external review of the Advance Pricing Arrangement (APA) Program recommended that aspects of the APA Program be co-designed with industry. An APA Co-design Committee was established as a sub-committee of the NTLG Transfer Pricing Sub-group (NTLG TP) to carry out the co-design process.
Status	Ongoing
Outcome	The co-design process was completed by 31 December 2009. Reports on the co-design process were provided to the LBAG on 4 March 2010 and the NTLG TP on 16 March 2010. The draft APA Guide has been drafted and was approved by members of the International Steering Committee for release to members of the LBAG and NTLG TP for their comments on content on 7 July 2010. On 17 March 2011 the ATO released new guidance for taxpayers, their advisers and ATO staff on new processes designed to enable its APA Program to cope with increasing demand for APAs and increasing complexity of transactions for which APAs are requested.   The practice statement, Practice Statement Law Administration PS LA 2011/1 is a comprehensive guide to the ATO's renewed APA Program and replaces the ATO's previous guidance, Taxation Ruling TR 95/23.
Agenda no.	04/010307
Agenda topic	Business restructures
Significant	Yes
Issue/application	PTI 1103 - A draft Business Restructures Discussion Paper was agreed in principle in July 2008. A ruling request was registered in December 2009.
Status	Completed
Outcome	The draft ruling was released as TR 2010/D2 on 2 June 2010 and comments were requested by 30 July 2010. Some taxpayers requested additional time to respond. A total of 5 submissions were received. A consultation process took place through the NTLG TP Sub-group and the ruling was expected to be finalised by December 2010. The final ruling was released under TR 2011/1 on 11 February 2011.

Outstanding issues summary

Action item no.	08/01/0307
Issue/application	Employee Share Option Plans (ESOPs)
Significant	No
Outcome	The International Dealings Schedule (IDS) for financial services taxpayers in the large market, which is optional for the 2010-11 year and compulsory from 2011-12 includes a specific question on recharging of ESOPs issued to employees of overseas subsidiaries. An ATO position has not been developed on the methodology to be used by taxpayers and the IDS form instructions refer taxpayers to an OECD paper.
Status	Ongoing The IDS team will review the full instructions prior to finalising them for the 2010-11 year and will include this issue in their review.

Rulings and Law Practice Statements under development

Ruling topic/s listed on the Public Rulings Program

Ruling topic	Interaction between Division 13 (transfer pricing) and Division 820 (thin capitalisation)
Draft reference no.	TR 2009/D6
PTI reference no.	PTI 776
Planned final date	October 2010. Please see comments above under 01/010307 - Intragroup loans and guarantee fees - discussion paper
Ruling topic	Application of the transfer pricing provisions to business restructuring by multinational enterprises
Draft reference no.	TR 2010/D2
PTI reference no.	PTI 1103
Planned final date	December 2010

Law Administration Practice Statements under development:

LAPS topic	ATO's APA Program
ID no.	PS LA 2011/1
PTI reference no.	PTI 1227
Planned final date	Anticipated 10 or 17 March 2011

Issues identified for the TIES register

TIES issues identified by the group

None identified and reported

1.25.14 Trust Consultation Sub-group

Chair

Fiona Dillon, Assistant Commissioner - Tax Counsel Network

Secretariat

Lyn Freshwater, Centre of Expertise - Losses and Capital Gains Tax

Last meeting held

No meeting has been held since the last NTLG meeting.

Next meeting

The next meeting will be held on 5 April 2011.

Minutes

The minutes of the meeting of the Trust Consultation Sub-group held on 23 November 2010 have been published to www.ato.gov.au

Ongoing significant topic

Agenda no.	Application of Division 6 of Part III of the ITAA 1936
Issue/application	Calculating the share of the section 95 net income of a trust estate in respect of which a beneficiary should be assessed
Outcome	The matter was central to the decision in Commissioner of Taxation v. Phillip Bamford & Ors; Phillip Bamford & Anor v. Commissioner of Taxation (Bamford) [2010] HCA 10. The Commissioner has outlined his view of that decision in a Decision Impact Statement. Law Administration Practice Statement PS LA 2009/7 which outlined the approach that the ATO took to the application of Division 6 pending the resolution of the Bamford litigation has been replaced by PS LA 2010/1 . The DIS indicates a range of outstanding issues which the ATO considers should be dealt with by way of a public ruling. The chair of the sub-group also sought input from the NTLG into the prioritisation of these issues. However, on 4 March 201 the Assistant Treasurer announced that the law would be retrospectively amended to clarify the definition of the income of a trust estate for 2010-11 and later income years.

Outstanding issues summary

A register of all of the issues that have been referred to the sub-group is published on the ATO website.

A summary of work program undertaken since the last NTLG

The ATO indicated at the last NTLG meeting that it hoped to publish in early 2011 draft ATO view products such as draft rulings or determinations about:

¦ the meaning of 'income of the trust estate' for the purposes of section 97 of the ITAA 1936, and

¦ the operation of the statutory flow through provisions such as Subdivision 115-C of the ITAA 1997.

Draft products have been considered by the Public Rulings Panel and have been amended to reflect the comments of panel members. The ATO had intended publishing those products in March 2011.

However, on 16 December 2010, the Assistant Treasurer announced a public consultation process as a first step in updating the trust provisions in Division 6 into the ITAA 1997. He also asked the Board of Taxation (the Board) to advise whether there were particular issues relating to the taxation of trusts that need to be addressed by legislative amendment for the current income year.

Following advice from the Board, the Assistant Treasurer announced on 4 March 2011 that the government would adopt the Board's recommendation to make interim changes to address two key areas for the 2010-11 and later income years pending the broader rewrite. These interim amendments are intended to:

¦ better align the concept of 'income of the trust estate' with 'net income of the trust estate', and

¦ enable the streaming of capital gains and franked distributions.

The need for the rulings and their content will be reassessed following Treasury's consultation on, and development of, these interim amendments.

Issues identified for the TIES register

TIES issues identified by the group

None identified and reported

1.25.15 Uncertain Tax Position Working Party

Chair

Judy Morris, Assistant Commissioner - LB&I

Secretariat

Nada Zec, Senior Director - LB&I

Working party established

The working party met informally on 19 October 2010.

Purpose of the working party

The purpose of this working party is to engage the wider business community to identify and prioritise issues arising from specific ATO initiatives aimed at achieving greater transparency by businesses. The working party will provide opportunities to further the consultation and co-design of the initiatives being developed.

Expected duration

The expected duration of the working party is 12 months. After this date, if further consultation is required it would be conducted through standard NTLG meetings, not requiring special working party meetings.

Last meeting held

An informal meeting was held on 19 October 2010 with members of the NTLG or their nominated representatives. It was a preliminary meeting to consider specific ATO initiatives aimed at achieving greater transparency by businesses.

Next meeting

Date to be set.

Working party members

All NTLG representative organisations have been invited to participate. Membership is to be formalised and advised.

Summary of work program

An information disclosure package is being designed to provide assurance about a taxpayer's most contentious and material tax risks and help the ATO better understand tax risk for large businesses.

The working party will provide feedback and assist in the co-design of specific initiatives as part of the development of the information disclosure package.

It is anticipated that there will be regular meetings of the working party during 2011.

1.25.16 Public Rulings Panel

Chair

Kevin Fitzpatrick, Special Tax Advisor - 25 February 2011

Robert Olding, Deputy Chief Tax Counsel - 9 December 2010, 24 February 2011

Des Maloney, Deputy Chief Tax Counsel - 14 and 15 December 2010

Secretariat

Sue Chadwick, Public Rulings Unit, Corporate Services and Law

Last meetings held

¦ 9 December 2010

¦ 14 and 15 December 2010

¦ 24 and 25 February 2011

Next meeting

The next meetings are scheduled for:

4 March 2011

The topics listed for discussion were:

¦ Department of Transport (Vic) - implications of court case on a number of rulings

¦ GST: Tax invoices.

24 and 25 March 2011

¦ GST :Reduced input tax credits

¦ GST: Discussion paper: To clarify the way in which the Goods and Services Tax Act 1999 (specifically Division 11 and Division 129) applies in determining creditable purpose for acquisitions made in the course of merger and acquisition activities.

¦ GST: residential premises and commercial residential premises

¦ Income tax: Application of section 974-80 of the ITAA 1997 as it applies to Stapled Groups

Minutes

The minutes of the Public Rulings Panel meeting held on:

¦ 9, 14 and 15 December 2010 have been finalised.

¦ 24 and 25 February 2011 are being finalised.

Summary of issues discussed

9 December 2010
Issue no.	Addendum to GSTR 2009/4 and PTI 1234
Issue	GST: addendum to GSTR 2009/4: new residential premises and adjustments for changes in extent of creditable purpose The panel considered the following points: ¦ the application of the principles contained within GSTR 2009/4 to partially completed residential premises. The panel considered the implications of those principles to multi-staged developments that are undertaken for the purpose of sale but where residential premises contained within completed stages of the development are applied for the purposes of lease. ¦ the interaction of the reasonable apportionment methodology set out in GSTR 2009/4 to determine extent of creditable purpose for Division 129 and the methodology that is set out in GSTR 2010/D1 as they apply to multi-staged retirement village developments. ¦ the Administrative Appeals Tribunal's decision in GXCX v. Commissioner of Taxation [2009] AAT 569 (GXCX) as set out in the Addendum and discussed the difference between premises held for the purposes of long term investment and premises held for the purpose of sale and whether there is a need for the ruling to make the distinction clearer.
Status	The Addendum has been sent to the NTLG GST Sub-committee with a view to publishing the Addendum as a final Addendum on 6 April 2011 (subject to any significant issues/concerns arising from the NTLG GST Sub-committee members' comments).
14 December 2010
Issue no.	ID 9936
Issue	Income tax: Meaning of 'income of the trust estate' as that expression is used in Division 6 of the Income Tax Assessment Act 1936 The panel considered the following questions: ¦ if a trust instrument contains a definition of income, will this necessarily define what is the income of the trust estate for section 97 purposes or are there some limits on what can be identified as income for the purposes of section 97? If there are some inherent qualities that income of the trust for section 97 purposes must possess, what are those qualities? ¦ must the income of the trust estate for a particular year represent an accretion to the trust estate such that a 'notional tax amount' cannot constitute the income of a trust estate. ¦ where a trust instrument contains an income equalisation clause and there are certain accretions which are not recognised for tax purposes (for example, the CGT discount, income treated as exempt or non-assessable non-exempt income), will the income of the trust for Division 6 purposes (that is, the distributable income) exclude these amounts? Does it make a difference if the accretion not forming part of the section 95 net income is, under ordinary concepts, of a capital rather than an income nature? ¦ does the fact that the trust estate and its income are distinct concepts mean that something which constituted part of the trust estate at the start of an income year cannot be treated as income for that year? ¦ where a trust instrument specifies that 'revenue' type deductions which actually deplete the trust fund are to be capitalised for the purposes of determining the income of the trust, will this result in an increase in the income of the trust for Division 6 purposes? ¦ does the statutory context and the decision in ANZ Savings mean that a provision of a trust instrument (or a trustee acting in accordance with a power conferred by that instrument) which treats an amount that would otherwise be income of the trust estate as capital is not effective for the purposes of Division 6? ¦ can the ruling be limited to a consideration of notional amounts only?
Status	Amend ruling in accordance with the panel discussion and send revised drafts to panel members out of session.
15 December 2010
Issue	Application of the character attribution provisions in Subdivision 115-C and 207B of the Income Tax Assessment Act 1997 The panel considered the following points: ¦ the operation of Subdivision 207-B: can it operate in a manner which permits the trustee to 'stream' franked dividends to particular beneficiaries in a tax effective manner? ¦ that Subdivision 115-C of the ITAA 1997 operates in a manner which does not allow a trustee to selectively stream capital gains in a tax effective manner to particular beneficiaries such that a beneficiary can be taken to share in the section 95 net income of the trust, but have no part of that share being 'attributable to' capital gains made by the trustee. ¦ determining what part of the section 97 amount is attributable to a capital gain, only those deductions which, but for the inclusion of that capital gain in the trust's assessable income would not be allowable, should be taken into account. ¦ that Subdivision 115-C should be broadened to cover beneficiaries whose assessable income includes an amount under subsection 98A(1) and (3) and section 100 of the ITAA 1936.
Status	Amend ruling in accordance with the panel discussion and send revised drafts to panel members out of session.

The panel considered the following rulings out-of-session

January 2011 - Out of session
Issue no.	ID 9994
Issue	GST: invoices
Status	The draft ruling is being amended to take into account the out-of-session comments
January 2011 - Out of session
Issue no.	ID 3218
Issue	Income tax: non- commercial losses
Status	The draft ruling is being amended to take into account further comments from the panel as a result of out-of-session discussion during February 2011.
November 2010 - Out of session
Issue no.	ID 3308
Issue	Income tax: charities
Status	The draft ruling was circulated to panel member's out-of-session in January 2011 and is being amended to take into account comments from panel member's in relation to the Aid/Watch decision.

1.25.17 Superannuation Public Rulings Panel

Chair

Robert Olding, A/g Deputy Chief Tax Counsel

Secretariat

Sue Chadwick, Law and Practice

Last meetings held

The last meeting was held on 31 May 2010 and there have been no meetings since.

Next meeting

No date has been set for the next meeting.

For information on current superannuation rulings, refer to agenda item 25.12 of this agenda.

1.25.18 Test Case Litigation Panel

Chair

Kevin Fitzpatrick, Chief Tax Counsel, Corporate Services and Law

Secretariat

Jill Gatland, Strategic Litigation Unit, Corporate Services and Law

Last meeting held

The last meeting was held on 2 December 2010.

Next meeting

The next meeting will be held on 15 March 2011.

One application for test case funding was considered by the panel at its meeting on 2 December 2010.

The chair accepted the recommendation of the panel in respect of this application.

Case summary	Trim file reference No: 11/1854 The applicant sought funding in respect of proceedings before the Federal Court. Further details of this matter cannot be provided, because that information is reasonably capable of being used to identify the applicant.
Funding decision	Funding declined
Panel reasons	The panel concluded that it was not in the public interest for funding to be provided in this matter. The case turned on its facts, was of limited significance, and it was not clear what area of the law was to be clarified.

1.26 NTLG - TIES issues register

Tax Issues Entry System

Issues below have been identified through NTLG Sub-forums. This agenda item provides the opportunity to provide further input.

The TIES is a single entry point for tax professionals and the community to raise minor policy and administrative issues relating to the care and maintenance of the tax and superannuation systems.

Care and maintenance is about ensuring that the existing tax and superannuation laws operate in the intended manner. Care and maintenance issues can include technical defects, anomalies and unintended outcomes. Care and maintenance issues can also involve minor policy changes, though typically they would not have a revenue impact.

Issues that are not care and maintenance include:

¦ major policy changes;

¦ interpretative questions about individual circumstances; and

¦ problems with ATO systems and forms.

TIES is jointly administered by Treasury and the ATO. TIES has its own website ( www.ties.gov.au ), including a public register of the issues raised and information on their status. The website provides information and examples of issues that are suitable for TIES and outlines the details required to lodge an issue. Issues can be lodged electronically via the website or by mail, phone or email.

Response

Up to March 2011 TIES has received 124 issues, 87 of which have been finalised. Of those 87, 78 have been found to be out of scope while 8 have been resolved by legislative change and one by changes to the ATO's administrative practices.

37 issues are currently being progressed. 8 of those are currently being assessed by the ATO and Treasury, 26 have been assessed as in-scope and are being resolved. A further 3 issues have also been assessed as in-scope but have been deferred pending the resolution of related ligation matters.

Issues identified for the Tax Issues Entry System (TIES) register by the following NTLG Sub-forum/s since the last NTLG meeting held on 14 December 2010:

Superannuation Technical Sub-group

Issue	0030-2010
What Act and section does the issue relate to?	¦ Superannuation Industry (Supervision) Act 1993 (SIS Act) ¦ Section 35C(1) SIS Act ¦ Section 35C(6) SIS Act ¦ Section 35C(7) SIS Act ¦ Section 35C(8) SIS Act ¦ Superannuation Industry (Supervision) Regs 1994 ¦ Regulation 8.02A SIS Regs ¦ Regulation 8.03 SIS Regs
Description	An auditor who issues an audit report to an SMSF trustee on or after the due date for lodgment of the fund's annual return is in breach of section 35C(6) of the SIS Act. There is no allowance for the auditor not meeting the prescribed time in circumstances beyond the auditor's control.
TIES registration no.	Registered as TIES issues number: 0030-2010

Meeting discussion

There were no new issues identified within the sub-forums for inclusion on the TIES register.

1.27 Other business

1.27.1 Board of Tax Review - Post - Implementation review of the Tax Design Review Panel recommendations

On 16 February 2011, the Board of Taxation released its discussion paper on the post-implementation review of recommendations made by the Tax Design Review Panel in its report Better Tax Design and Implementation . The report made 26 recommendations; all were accepted in principle by the government when released.

To assist in the post-implementation review process, the Board will hold consultation meetings in March 2011.

The Board has welcomed submissions on issues raised in the discussion paper. The closing date for submissions is Monday 28 March 2011.

Recommendations made by the Tax Design Review Panel

Recommendation 1	Pre-announcement consultation on policy design
Recommendation 2	Tri-partite design teams
Recommendation 3	Changes should be prospective and introduced within 12 months
Recommendation 4	Retrospective changes should be introduced within six months
Recommendation 5	Announcements should include detail of proposed changes
Recommendation 6	Two-stage public consultation after announcement
Recommendation 7	Post-announcement consultation should be public
Recommendation 8	Post-announcement consultation - four weeks at each stage
Recommendation 9	Drafting priority to allow for consultation
Recommendation 10	Consultation summary on Treasury website
Recommendation 11	Simultaneous approval to consult on draft legislation
Recommendation 12	Engage private sector specialists
Recommendation 13	Treasury's project management approach
Recommendation 14	No change to current drafting arrangements
Recommendation 15	No change to the location of drafting resources
Recommendation 16	Greater priority to care and maintenance
Recommendation 17	Adopt the Board of Taxation's 2007 TIES recommendation
Recommendation 18	Board of Taxation to advise on TIES priorities
Recommendation 19	Publish a forward work program on announced measures
Recommendation 20	Process to deal with unenacted announcements
Recommendation 21	Periodically review unenacted measures
Recommendation 22	Monitor early implementation of new law
Recommendation 23	Board of Taxation to perform more post-implementation reviews
Recommendation 24	Investigate powers to grant extra-statutory concessions
Recommendation 25	A mechanism to implement the recommendations
Recommendation 26	Review implementation of recommendations after two years

The Professional Bodies request a discussion with the ATO about the report and the panel's recommendations.

Response

This item is for discussion at the meeting.

Meeting discussion

Members had suggested this item be included within the NTLG agenda to raise awareness of this particular Board of Tax Review.

The closing date for any submissions on issues raised in the discussion paper was noted as the 28 March 2011. With the NTLG meeting occurring on the 30 March, there was no further information available for discussion.

Special Tax Adviser Kevin Fitzpatrick commented that on a related issue a draft practice statement on the ATO's role in tripartite law design arrangements will issue in the near future.

1.27.2 Access to Professional Accounting Advisors' papers (Chapter 7)

Item 13 of the October 2010 NTLG meeting discussed ATO processes for requiring access to communications between accountants and their clients, and the limited confidentiality set out in Chapter 7 - 'Access to Professional Accounting Advisors' Papers' (Chapter 7) of the ATO Access and information gathering manual pursuant to the overarching guidelines (guidelines). The ATO distributed at the meeting a response which indicated quite a narrow view of the guidelines to restrict normal access to professional accounting advisors' papers. Unfortunately that meant that the Professional Bodies had not considered in detail the response for full discussion at the NTLG.

Professional request further discussion about the scope for a review of the Accountants Concession guidelines to deal at minimum with:

i. A review of the definition of exceptional circumstances to rewrite or eliminate the reference to Part IVA, and to adjust the governance around the application of the exception for Part IVA. It is recognised that fraud or evasion represents exceptional circumstances; however the application of Part IVA, invoked so commonly by the ATO audit teams, is not an exceptional circumstance for LB&I taxpayers and must be excluded from the exceptions listing. As well the corporate community and accountants need better ATO governance around the invoking of the exception.

The lack of protection for client communications to and notes of their discussions with accountants. This lack of protection, in cases which do not involve fraud or evasion such as Project Wickenby, is quite inequitable and there is a need to review the definition of documents protected under the concession.

Response

This item is for discussion at the meeting.

Meeting discussion

The Accountants' Concession has been raised at a number of NTLG meetings in the recent past. Members are interested in the number of times the Accountants' Concession has been applied as there is a perception that increasing numbers being talked about within the tax community.

Members were advised that since 2009 there have been six instances in the large market where the Accountants' Concession has been claimed and the ATO has sought to lift it. In only one instance has the Accountants' Concession actually been lifted.

Of the remaining instances, one had documents supplied prior to submission to the SES officer, another where the Accountants' Concession was not lifted, a dual submission where the Accountants' Concession was not lifted as it was not exceptional circumstances, and the other where documents requested were not covered by the concession. The sixth instance is currently in progress.

The ATO has not seen a great need for the Accountants' Concession, especially within the large market, presumably because companies understand they need to supply source documents. No cases have been identified within the S&ME Market. There is certainly no evidence that lifting of the Accountants' Concession is being applied more often.

The ATO spoke about the processes involved in lifting the Accountants' Concession. For example the source documents should provide evidence, purpose, Part IVA application and counterfactuals. If these areas are not addressed then the ATO may need to see the accountants papers.

Members asked whether the redacted documents could be provided in satisfaction of an information request whether the concession had been lifted.

The Commissioner advised that the process checks are there to concentrate on obtaining the facts. Accounting concession claims can only be made for documents that are for the sole purpose of providing tax advice. Redacting of documents on the basis that only parts of the documents are subject to accounting concession claims is not possible if the documents fail the sole purpose test.

Therefore it is best for a taxpayer to proffer the redacted documents prior to the concession being lifted.

Members are reminded that the ATO Access and Information Gathering Manual is available on www.ato.gov.au

1.27.3 Significant technical issues - new web page

Following a recommendation from the Inspector-General of Taxation's Office concerning the transparency of the ATO's consideration of significant technical issues , the ATO has published a new page on www.ato.gov.au

Advice

The new page consolidates all priority technical issues and strategic litigation into one reference area, providing enhanced transparency and communication.

The new page can be found on ato.gov.au under Law, rulings & policy - Rulings & ATO View - Significant technical issues . It links to the already published public rulings and LAPS programs and minutes of the NTLG which include a list of strategic litigation every six months. It also provides a link to a newly created page covering internal advice.

The list of internal advice will be published every two months. However, issues that would breach privacy or secrecy, and those containing new measures and advice to Treasury will not be included.

Tax practitioners and BAS preparers have been advised of the availability of the new page via eLink and the BAS agent newsletter. An article will also appear in the TAX AGENT magazine and various segment newsletters. Banners have also been placed on www.ato.gov.au to raise awareness of the availability of the new page.

Meeting discussion

Members accepted the response provided.

1.27.4 Late agenda submission: Tax file numbers of beneficiaries of closely held trusts

Professional Bodies would like to discuss reporting compliance obligations associated with providing the tax file numbers (TFN) of beneficiaries of closely held trusts which apply from 1 July 2010.

Members of Professional Bodies are extremely concerned that the proposed extension of the TFN regime to closely held trusts imposes a considerable and ultimately unnecessary compliance burden on practitioners which we believe can be significantly mitigated if the Commissioner of Taxation exercises a discretion under section 202DP of the ITAA 1936 to allow an extension of time to lodge such information.

The Professional Bodies believe such a discretion could be exercised on the basis that all required reporting information can be provided in the income distribution statement of the annual trust income tax return.

The Professional Bodies therefore recommend that the above discretion be exercised on an on-going basis as follows:

¦ the relevant period for reporting should be a 12 month period ending on the last day of the income year

¦ the date for lodgment of the report should be the due date of the trust income tax return relating to the relevant income year covered by the 12 month period, and

¦ the prescribed form should take the form of the trust tax return distribution statement.

Such a practice will ensure that the ATO is in receipt of the required information without imposing an excessive compliance burden on practitioners who will otherwise have difficulty recovering their time given the quarterly reporting obligations otherwise imposed under the amended TFN rules.

Response

This item is for discussion at the meeting.

Meeting discussion

Deputy Commissioner Leo Bator, Acting Assistant Commissioner, Daniel Clode and Director, Jo Beard attended for this agenda item.

For the 2010-11 income year (and subsequent income years) trustees will be required to confirm beneficiary TFN and other relevant details under the new rules prior to any distributions being made to those beneficiaries. The first transition will be a stocktake. On a quarterly basis only new beneficiaries will need to be reported.

The intent of the legislation was discussed and the purpose of the Commissioner's discretion.

Since February 2011, there have been 200,000 trust returns, with 120,000 of these returns having distributions. 15,000 letters have been issued to trustees where TFN details are not present or otherwise could not be identity matched. The ATO will continue to follow up with trustees when details cannot be matched.

It was noted within the forum that there are two elements to transitional arrangements for the reporting of TFNs for existing beneficiaries:

¦ using the 2010 trust tax return by the due date for its lodgment, and

¦ the TFN report at the end of the 2010/2011 financial year that is due 31 July 2011. An extension to 31 August 2011 was suggested for this year only.

The ATO also advised that, as part of the transitional approach, trustees could complete beneficiary information in the 2010 trust return even if the beneficiary did not receive a distribution.

The transitional arrangements for the first year were agreed in recognition of the unique burden in this year to get the required information for the current stock of beneficiaries. If the 2010 trust returns are completed correctly, then the quarterly update will only be required for new beneficiaries. The ATO is continuing to write to trustees to inform them of their particular situation.

There were concerns that the communications around the requirements have not been clear. The ATO agreed to continue to work with practitioners in developing communication products and asked that the members use their networks to assist in ensuring messages are widely disseminated.

Practitioners asked whether a permanent exercise of the extension was possible and how information was put to use if reported quarterly. The ATO view is that the discretions attached to TFN reporting obligations cannot be used to permanently circumvent the requirements that trustees will be alerted early in the cycle if they do not have accurate beneficiary identifiers. The discretion must be read with regard to the statutory scheme of which it forms part. The provisions provide for early corrective action by the ATO and trustees. Where correct quotation does not follow, the deemed date of defect in quotation ensures an early application of withholding tax to subsequent distributions.

The explanatory memorandum to the measure contemplates that the discretions should only be used in 'appropriate circumstances … to facilitate a smooth administrative process'. In the first year we had recognised an appropriate circumstance relating to reporting existing 'stock' of beneficiaries, before the regime regularised into quarterly report of new 'in-flow'.

A member suggested that particular concerns still need to be taken back to Treasury, but stated that they appreciated the advice provided by the ATO. It was confirmed that this issue is not suitable for the TIES register as the law is clear and the question of annual TFN reporting had been specifically considered in the law design process.

Post meeting update

While the 2010 trust tax return approach for the TFN report is welcomed and there is appreciation of the ATO's efforts to provide a transitional year, there is still a low level of awareness of the new rules and the transitional year arrangements. The thrust of the message is not reaching agents and more time is needed. Direct experience with this kind of change is that it takes time for implementation.

This issue was discussed at the Trust Consultation Sub-group meeting on 5 April 2011. Since then further discussions have taken place with a view to arriving at a mutually convenient solution.

Listening to the community

Lodgment and closely held trusts

In June 2010, the government passed law to extend the TFN withholding rules to closely held trusts. The rules sought to improve the integrity of the tax system by taking steps to prevent taxpayers from avoiding paying tax on distributions from closely held trusts.

The new rules require trustees to withhold amounts from distributions made to beneficiaries where they have not quoted their TFN to the trustee. Where TFNs are quoted, trustees are required to provide the ATO with a TFN report.

Under the existing transitional arrangements, trustees who have an obligation to lodge a TFN report for the 2010-11 year have the option of doing so when lodging their 2010 trust tax return or by lodging a new TFN report by 31 July 2011.

However, during this transitional period practical difficulties have been encountered with the lodgment of the TFN report.

The ATO has continued to consult out of session with a small number of members of this forum to better understand these difficulties and work with members to find a practical solution.

To further assist taxpayers and their tax agents during this first year, the ATO will provide additional time for the lodgment of the new TFN report. The due date of the TFN report for the 2010-11 year will now be extended to 31 August 2011.

A further deferral will be available for tax agents who lodge electronically. They will have until the due date of their client's income tax return to lodge the new TFN report.

To be eligible for this concession, tax agents must lodge electronically their client's:

¦ TFN report

¦ 2011 income tax return and all future income tax returns.

The new TFN report will be available from 1 July 2011 and is the only approved form for lodging a TFN report.

This lodgment concession for tax agents will be included in the Lodgment program 2011-12 only.

Normal due dates will apply for all future TFN reports.

If a taxpayer is not required to lodge a 2011 trust tax return, they will need to lodge their TFN report by 31 August 2011.

New trusts established on or after 1 July 2011 are not covered by this concession and will need to lodge a TFN report by the required due date. (note: for these trusts the first possible due date for a TFN report would not be until 31 October 2011).

These arrangements do not constitute any extension to the obligation to withhold if a trustee does not have the required information from beneficiaries at the time of making any payments to a beneficiary.

Action item

NTLG1103/08 Consultation to continue on timing of lodgment of the TFN report and what further transitional arrangements might be appropriate.

1.28 Other business

Strategic direction of the NTLG

Discussions about the ways to manage the strategic issues at the NTLG occurred during the meeting. There was acknowledgment that for the ATO to effectively answer the questions put forward, members need to look and identify the strategic issues that underpin the reasons for bringing them to the NTLG for attention. Some suggestions as to how to do this were discussed, including ways to frame the specific question and related concerns, as well as offering potential outcomes. Identifying the top 10 strategic issues and adopting a template approach is now under consideration.

Some examples of strategic issues raised during the day, included:

¦ Trusts

¦ Managed Investment Trusts (MIT) regime

¦ Part IVA.

The ATO also spoke about the need for NTLG members to be sponsors on key issues, especially with NTLG agenda items and within the sub-forums. Members suggested that a new approach would be very worthwhile.

It was accepted that with questions that are appropriately framed, the ATO will be able to tailor the responses more effectively.

Members also questioned the timeline of the Public Rulings Panel meetings and whether it should be pushed forward, while another member suggested that future NTLG meetings have a half hour session where members can discuss new issues.

Suggestions to improve the NTLG agenda process are currently under consideration. Changes to process will be discussed with members.

Commissioner's comments

The Commissioner thanked members for the interesting discussions on the agenda items, and welcomed thoughts on what members see as the strategic issues.

The Commissioner spoke about the need to deal in facts and that while the instance of 'one case' can be good to work with, a 'one case' example can cast unnecessary uncertainty in the tax system. Often the 'one case' example is used by Professional Bodies as 'Lore' and can cause damage. On the other hand, a 'one case' example can certainly be a catalyst for checking ATO processes and improving them.

The ATO can review its processes and the Professional Bodies should dispel any 'Lore' that's out there in the tax community. Further the Commissioner expects the NTLG to provide such certainty especially as members cover so many different segments of the community and know what is happening. This is even more relevant leading up to Tax Time.

Members were encouraged to contact the ATO with any issues and concerns, so that discussions can take place early in the process.

A thankyou was extended to those companies and advisors who advise on unintended outcomes.

Members were asked to consider whether they believe their roles as the peak bodies on the NTLG are working well.

The Commissioner welcomed the opportunity for the NTLG to undertake a refresh and deal more effectively in the future.

^[H53]Next meeting and close

A research topic is to be considered for the 22 June 2011 NTLG meeting.

The next meeting is scheduled for Wednesday 22 June 2011 commencing at 9.30am.

The meeting closed at 3.00pm.

^[H54]Summary of action items -30 March 2011 meeting

Action item	Details of item
NTLG1103/01	Communication material on reasonable care to be reviewed with further material developed as required. Refer agenda item 5 ATO's approach to imposing penalties for failure to take reasonable care
NTLG1103/02	The aspect of the ruling distinguishing between reasonable care and reasonably arguable position is to be considered for review by the ATO. Refer agenda item 6 Shin and Commissioner of Taxation [2010] AATA 1012
NTLG1103/03	Practice Statement to be reviewed by the ATO. Member to provide details of a particular case as an example. PALU secretariat to be copied into correspondence. Refer agenda item 15 Interaction of Division 7A and section 100A of the ITAA 1936
NTLG1103/04	FITO and Medicare levy issues to be coordinated offline by a Tripartite process between Treasury, the ATO and NTLG members. Refer agenda item 18 For Australians working overseas and paying foreign taxes, whether a Foreign Income Tax Offset (FITO) can offset the Medicare levy
NTLG1103/05	ATO to consider publishing a Tax Determination on the timing of the tax deductibility of the shortfall interest and general interest charges. Refer agenda item 20 Timing of the tax deductibility of the shortfall interest charge (SIC)
NTLG1103/06	ATO to investigate whether employers are still impacted by the Victorian bushfires from 2009 and how many PBRs have been lodged seeking confirmation that the FBT emergency assistance exemption was available after six months. Refer agenda item 23 Governance report - sub forum - FBT
NTLG1103/07	ATO to review the Action Item registers with a view to finalising items that have been in progress for a lengthy period. This will be managed out of session. Refer agenda item 25 NTLG Sub-committee reports and action items
NTLG1103/08	Consultation to continue on timing of lodgment of the TFN report and what further transitional arrangements might be appropriate. Refer agenda item 27.4 TFN beneficiaries of closely held trusts