ATO compliance program briefing

CPA Australia representatives participated in a confidential briefing on key aspects of the ATO's compliance program for 2009 - 10. The program largely follows the format of previous years.

Some key points made to the media on the latest program included:

• we are very supportive of the release of the compliance program, as transparency helps ensure taxpayers and advisers can readily identify hotspots and ensure they are compliant and up to date - no 'gotcha' approach
• with falling government revenues from tax in recent times as a consequence of the global financial crisis and subsequent economic fallout, and the large government budget deficit, there will be arguably even more pressure than usual on the ATO to ensure collections are maintained / maximised
• taxpayers need to ensure they pay the correct amount of tax - no more, no less
• there is a need to ensure the balance between service and enforcement is appropriate
• if they are on the ATO's 2009 - 10 hit list, or unsure, it is time to see a CPA who is a registered tax agent

Details of the 2009 - 10 program are available in Tax News section below.

Inspector-General of Taxation - recent reports

The Assistant Treasurer, Senator Nick Sherry, has released two reports by the Inspector-General of Taxation on the following topics:

• underlying causes and management of objections to ATO decisions
• ATO's administration of public binding advice

In relation to the first topic, the Inspector-General of Taxation has suggested that consideration be given to confining the objection system to genuine disputes; the Assistant Treasurer is seeking further advice from Treasury on this matter.

Further details on these reports are available in Tax News section below.

Exposure draft - superannuation funds loss roll-over

On 23 December 2008, the then minister for superannuation and corporate law announced that the Australian Government would provide an optional capital gains tax (CGT) roll-over for capital losses arising from a complying superannuation fund's merger with an Australian Prudential Regulatory Authority (APRA)-regulated superannuation fund with at least five members.

Following public consultation on the policy design of this measure, the minister announced further changes to expand the scope of this measure on 29 April 2009.

On Friday 31 July 2009, Treasury released an exposure draft of the proposed legislation. Although not yet available, a draft explanatory memorandum will also be released for public consultation within the next couple of weeks to provide further guidance on how the draft legislation may operate.

As the closing date for submissions is Friday 28 August 2009, any member comments on the draft legislation would be appreciated by 21 August.

Board of Taxation discussion paper - GST and cross-border transactions

The Board of Taxation has released a discussion paper that explores various options to improve the application of the goods and services tax (GST) to cross-border transactions.

As the closing date for submissions is 4 September, comments for inclusion in a CPA Australia submission should be emailed to tax@cpaaustralia.com.au by 28 August.

Recent submissions

CPA Australia has lodged submissions to Treasury on recent consultation papers on reviews of the GST property margin scheme and the GST financial supply provisions.

The submissions are available from our website. Further details can be obtained by email to tax@cpaaustralia.com.au

Treasury Tax Treaties Advisory Panel

CPA Australia representatives participated in a confidential meting of the Treasury Tax Treaties Advisory Panel on 3 August. Treasury provided an update on recent OECD developments, with a particular focus on various tax treaty issues.

Upcoming consultations and meetings

• NTLG FBT Subcommittee meeting (13 August 2009)

• ATO Bookkeeper Advisory Group meeting (14 August 2009)

• ATO consultation on earnouts (14 August 2009)

• Taxation Board Employee Share Scheme Consultation meeting (19 August 2009)

• Treasury meeting on proposed tax consolidation amendments (20 August 2009)

• NTLG Finance & Investment Group meeting (25 August 2009)

• ATPF Accounting Working Group meeting (28 August 2009)

• ATPF Lodgment Working Group meeting (4 September 2009)

• Superannuation Consultative Committee meeting (8 September 2009)

• NTLG GST Subcommittee meeting (16 September 2009)

• NTLG meeting (17 September 2009)

Member enquiries or issues for these meetings should be sent to tax@cpaaustralia.com.au

ATO compliance program for 2009 - 10

The Commissioner of Taxation has launched the ATO compliance program for 2009 - 10. In releasing the program, the Commissioner of Taxation said the ATO will continue to assist businesses and individuals facing genuine hardship during the economic downturn. Highlights from the program include:

• Tax abuse: Project Wickenby will continue. Issues include improper use of tax havens and bank secrecy to conceal ownership or control of assets and income
  

• Large businesses: the ATO aims to conduct compliance activities with around one-third of the large business market; issues include complex arrangements, tax avoidance and deliberate non-compliance
  

• SMEs: issues include identifying potential high-risk taxpayers, wealthy individuals, FBT treatment of motor vehicles, superannuation guarantee obligations, loans and debt forgiveness, and a range of income tax and GST compliance issues
  

• Micro businesses: focus areas include PAYG withholding, superannuation guarantee obligations, cash economy participants, GST treatment of property transactions, trading stock reporting and company losses, and distributions from partnerships and trusts
  

• Non-profit organisations: includes eligibility for concessions, integrity of business systems and misclassifying supplies as GST-free
  

• Individuals: priorities will include executives and director remuneration, refund fraud, information matching, work-related expense claims, claims relating to investments, and superannuation regarding concessional contributions caps and illegal early access schemes

Call to improve ATO decisions objection system

The Assistant Treasurer, Senator Nick Sherry, has released the Inspector-General of Taxation's report on his review into the underlying causes and the management of objections to ATO decisions.

A key finding of the review is that, for a significant proportion of objections, there is no genuine dispute with the ATO. Rather, the objections process is frequently used by taxpayers to seek an amendment to their self-assessed returns where they are out of time to do so under the current amendment provisions.

Accordingly, the review suggests the Australian Government consider improving the objection system to confine objections to cases of genuine dispute with the ATO. In response, Senator Sherry said he has asked Treasury to closely examine the issue and to provide him with further advice.

The report made 12 key recommendations. The ATO agreed fully with most of the recommendations but disagreed with one.

ATO administration of public binding advice

The Assistant Treasurer, Senator Nick Sherry, has released the Inspector-General of Taxation's report on his review into the ATO's administration of public binding advice. The report made four key recommendations, which were mostly accepted by the ATO. Senator Sherry said the key recommendations agreed to were that:

• further publicly available guidance should be provided to ATO staff on the full powers of the ATO to issue public, binding advice on any matter involved in the application of the tax law, including on particular specified areas such as safe harbours
  

• systems should be established to allow more immediate communication from the ATO to the wider community of any changes to practice statements
  

• the ATO seek independent legal advice on the meaning of 'general administrative practice'

Business tax break: ATO warns on penalties and interest

The ATO has warned taxpayers against incorrectly claiming tax deductions under Div 41 of the Income Tax Assessment Act 1997.

Many taxpayers will have made investment decisions prior to Royal Assent to purchase certain assets with the expectation of coming within the scope of the Australian Government's small business and general business tax break. The ATO said there may be circumstances where taxpayers may not have satisfied one or more of the eligibility criteria but still claim the deduction in their tax returns on the understanding that their claim was legitimate.

Tax-time doorknock scam warning

The Assistant Treasurer, Senator Nick Sherry, has warned taxpayers of a door-to-door scam operated by people claiming to be consultants from the ATO. Senator Sherry said the bogus consultants ask people to sign up to a supposed Australian Government program promising financial incentives, including a reduction in taxes. Senator Sherry said the offer is a fraud and that, under no circumstances should anyone give personal information, including credit card, banking or super fund details, to these people.

Deductible donations to Victoria bushfire appeal

In a recent radio interview, the Assistant Treasurer, Senator Nick Sherry, said the Australian Government will soon make an announcement to provide charities with certainty on how they can spend funds raised through tax-deductible donations, for example, funds raised in the Victorian bushfires appeal. The law sets conditions on how charities can spend money raised through tax-deductible donations and it was claimed that these conditions were inhibiting the distribution of moneys. Senator Sherry said the Australian Government intends to change the law and will soon announce details.

ATO decision impact statements

The ATO has released the following decision impact statements:

• Dixon ATF the Dixon Holdsworth Superannuation Fund v FCT (2008) 69 ATR 627 - this case involved a consideration of factors relevant to the exercise of a discretion to remit penalty. The ATO said the Administrative Appeals Tribunal's (AAT) decision was consistent with the Commissioner of Taxation's view and with the manner in which the exercise of the remission discretion is currently administered. The ATO said Practice Statement Law Administration PS LA 2006/2, dealing with the administration of shortfall penalty for false and misleading statements, is presently being reviewed.
  

• FCT v Swansea Services Pty Ltd (2009) 72 ATR 120 - the Federal Court affirmed an AAT decision that the acquisition of artworks and antiques by a taxpayer constituted the carrying on of an enterprise for GST purposes. The ATO said the Commissioner of Taxation has decided not to appeal the decision. However, the ATO said the decision in the case does not mean that in every situation involving companies engaged in collection of artworks or other valuable items, a conclusion would be reached that an enterprise was being carried on and that the entity would be entitled to register.
  

• AAT Case [2008] AATA 1167, Re Touram Pty Ltd ATF The GKA Family Trust and FCT (2008) 70 ATR 991 - the AAT found that the acquisition of a vacant block of land by a taxpayer was a taxable supply within the meaning of s 9-5 of the Goods and Services Tax Act. The ATO said it accepts that the conclusion of the tribunal was open to it on the evidence accepted by the tribunal.

One new ATO ID

The ATO has released ATO ID 2009/87 (share capital tainting: option premium for the purposes of s 197-25 of the ITAA 1997).

ATO website updates

From the ATO website:

• Managing your non-lodger clients - the ATO said it will send lodgment alert letters to tax agents with persistent non-lodger clients
  

• Tax practitioner webcast - compliance program 2009 - 10 - broadcast sent on 10 August to inform tax agents of the availability of the latest tax practitioner webcast featuring the compliance program 2009 - 10
  

• Small business and general business tax break - guide to assist taxpayers in understanding the tax break
  

• Claiming losses from the disposal of investments - overview of how to correctly claim losses from the disposal of investments
  

• Guide to depreciating assets 2008 - 09  
  

• GST and the margin scheme - explains using the margin scheme, methods to work out the margin, and working out the margin and GST payable
  

• National Tax Liaison Group (NTLG) FBT sub-committee minutes of 14 May meeting - issues discussed include electronic lodgment of FBT returns, exemption for donations to deductible gift recipients and preparation of payment summaries
  

• Lodgment program 2009 - 10 - additional time to lodge and tax agent lodgment deferral forms - the ATO has advised that it has replaced the single lodgment deferral form with two deferral forms
  

• Lodgment program 2009 - 10 - managing your lodgment program - updated to include further information about due lodgment reports
  

• Lodgment status and return not necessary update - the ATO has advised that, due to some recent system changes, the tax agent portal will now only display income tax returns outstanding from 2001 onwards
  

• Are you a participant in a managed investment scheme (MIS) run by Timbercorp or Great Southern that has gone into administration? - contains FAQs about the tax consequences for participants involved in Timbercorp, Great Southern and similar MIS
  

• Workforce education news: issue 10 - covers a range of topics affecting employers and professional associations, and their employees and members, including tax time information 
  

• With an eye to the future - speaking notes of the Commissioner of Taxation to the Software Developers' Consultative Group, Brisbane, 30 July
  

• Tax in Australia - what you need to know - information for taxpayers new to tax in Australia. Available in 10 different languages

Australian Government's forward work program for tax measures update

Ahead of the commencement of the spring 2009 sittings of parliament, the Assistant Treasurer released the Australian Government's updated forward work program of tax law reforms for the parliamentary session. Examples of important projects detailed on the program include:

• reforming the taxation of employee share schemes in line with the final policy statement released by the Assistant Treasurer on 1 July
  

• reforming the tax secrecy regime to standardise the tax secrecy laws into a single, standard piece of legislation
  

• providing for an optional clearinghouse service to make superannuation compliance cheaper and easier for small business
  

• reforming the administration of the GST
  

• replacing the R&D tax concession with a simplified R&D tax credit

Super administration complaints continue to rise

The Superannuation Complaints Tribunal (SCT) has advised that, during the June 2009 quarter, the number of complaints within jurisdiction relating to fund administration as a percentage of total complaints continued to rise and comprised the largest category (64.7 per cent of all complaints). However, the SCT noted that, during the quarter, the total number of written complaints received by the tribunal decreased by 2.8 per cent compared to the previous quarter. The number of telephone enquiries also fell by 6.7 per cent.

The following rulings were released by the ATO on 12 August:

• SMSFPR 2009/1: The self-managed superannuation funds product ruling system
  

• CR 2009/41: Scrip-for-scrip: merger of MyState Financial Credit Union of Tasmania Limited and Tasmanian Perpetual Trustees Limited
  

• Draft addendum to GSTR 2002/5: GST: when is a 'supply of a going concern' GST-free?

GST: bonus payment found to be GST inclusive

In Diakyne Pty Ltd v Ralph, the Federal Court held that in a case where a contract provided for the making of a bonus payment, without specifying that it was 'GST exclusive', then the payment was 'GST inclusive'.

Commissioner entitled to sue in debt for amount owed under s 260-5 notice

In FCT v Barnes Development Pty Ltd, the Federal Court held that the Commissioner of Taxation was entitled to sue, in an action for debt, the amount of money required to be paid under a notice served on a company under s 260-5 of the Taxation Administration Act 1953.

Queensland: payroll tax lodgment changes; land rich compliance campaign

The Queensland Office of State Revenue (OSR) has advised that the method of lodging payroll tax periodic returns for the 2009 - 10 financial year has changed. If taxpayers lodge their payroll tax returns monthly, their lodgment and payment for the July 2009 period is due by 7 August. Their return should be lodged through the OSRconnect online lodgment system.

The OSR also has announced that it will be reviewing taxpayers' compliance with the land rich duty provisions of the Duties Act 2001 (Qld). It will soon send letters to companies with significant Queensland land-holdings requesting information about share transactions in, and asset holdings of, those companies.

SMSF programs

Taxation, legislation and regulations (claim up to 12 CPD hours upon completion)

Understand the processes involved in establishing and managing a self-managed superannuation fund (SMSF), ensuring your processes and systems are fully compliant, and avoiding common traps and pitfalls.

Program information - Learning manual

Investment and trustee issues (claim up to 6 CPD hours upon completion)

Know how to formulate an SMSF investment strategy, comply with investment reporting requirements, and select and monitor service providers.

Program information - Learning manual

Purchase both SMSF learning manuals and save over 15 per cent.

Taxation programs

Payroll intensive (claim up to 8 CPD hours)

Cover payroll issues from employing staff and ongoing duties to ending employment.

Program information - New South Wales, Queensland, Victoria, Western Australia

Quarterly tax summary (claim 1 CPD hour upon completion)

Download the latest quarter of tax news with this on-demand audio commentary. It covers recent key changes in legislation in one concise hour, including changes to the small business and general business tax break. You'll also receive the transcript as an ongoing reference.

Program information - Online audio download

Salary packaging intensive (claim up to 8 CPD hours)

Attract and retain quality employees with effective methods of salary packaging and understand how to reduce your taxable income.

Program information - New South Wales, Victoria

More training and events

For information on other CPA CPD activities being held throughout Australia please visit the training and events section on our website and use the search facility. To register click onto the activity you wish to attend and follow the prompts.

Estate planning CD July edition

Family offices, actual and virtual, are discussed in this latest CD. Other sessions include trusts in tax planning and what happens when the perpetuity period runs out, and self-managed superannuation and estate planning: managing fund control after the member's death.

Reserve this edition from CPA Library.

Australian Financial Review           

'Don't like your tax bill? Then try again' (Tax Inspector-General releases report on objections to ATO decisions) AFR [p 3], Wed 12.8.2009

'Changes loom on employee shares' (Federal Government foreshadows legislation to be introduced in the current sittings, including the taxation of share scheme changes) AFR [p 9], Wed 12.8.2009

'In-house asset rule an investment consideration' (Ways that DIY super funds can be involved in small businesses) AFR [p 33], Wed 12.8.2009

'NAB to fight tax ruling' (Report that NAB will appeal a New Zealand High Court ruling on the tax treatment of structured finance transactions) AFR [p 54], Wed 12.8.2009

'Swiss bankers: no drama, just safe hands' (Comment on Swiss banks, tax evasion and bank secrecy) AFR [p 61], Wed 12.8.2009

'States demand national tax reform' (Report that the states are increasing their push for major reform of the national tax system) AFR [p 1], Tue 11.8.2009

'Taxi drivers dodge taxes' (Report that research shows many cabbies don't worry about paying their taxes) AFR [p 10], Tue 11.8.2009

'Super firms question $1bn liquidity fund' (Report that super funds are sceptical about ability of credit unions to attract retirement cash) AFR [p 49], Tue 11.8.2009

'Details on new share rules due' (Draft rules on the taxation of employee share schemes expected any time) AFR [p 5], Mon 10.8.2009

'Calls for more binding tax guidance' (Tax Inspector-General recommends ATO makes more of its guidance legally binding) AFR [p 8], Mon 10.8.2009

'Calls rise for more flexible super caps' (New calls emerge for a higher compulsory super contribution) AFR [p 46], Mon 10.8.2009

'Taxman targeting the top end' (More comment on the ATO's 2009 - 10 Compliance Program) AFR [p 6], 8-9 August 2009

'How you can still afford to retire' (Turning retirement plans into reality) AFR [p 37], 8-9 August 2009

'Parental leave ruling not so super for women' (Comment on exempting super from paid maternity leave) AFR [p 40], 8-9 August 2009

'There's no substitute for time in this equation' (Suggestion that making after-tax contributions to super is likely to become more popular) AFR [p 43], 8-9 August 2009

'Eye on tax-break rorts' (ATO warning about rorting the temporary investment allowance) AFR [p 7], Fri 7.8.2009

'Obama hamstrung by campaign tax pledge' (Are tax increases on the table in the US?) AFR [p 17], Fri 7.8.2009

'Tax office widens blitz on executives' (ATO releases its 2009 - 10 Compliance Program - will target work expenses, executives, cross-border transactions) AFR [p 1], Thur 6.8.2009 

'Reliance on foreign debt leaves economy exposed' (Business leaders call for Henry tax review to look at the bias in the tax system towards debt and against savings) AFR [p 1], Thur 6.8.2009

'Tax Office pressure put on bosses and rorters' (More on ATO Compliance Program: ATO to target employers who fail to pay employees' super) AFR [p 12], Thur 6.8.2009

'Fraud on radar in online crackdown' (More on ATO Compliance Program: refund fraud to be targeted) AFR [p 12], Thur 6.8.2009

'Tax Office vows vigilance as crisis bites' (ATO will look closely at businesses that create artificial losses) AFR [p 13], Thur 6.8.2009

'More ways to put the interest back into parking money' (Report that Henry tax review is exploring options to help banks and companies looking for capital from foreign and domestic markets) AFR [p 60], Thur 6.8.2009

The Australian

'NAB to appeal NZ tax ruling' (Report that a bank will appeal a decision of the New Zealand High Court re complex structured finance transactions) Australian [p 19], Wed 12.8.2009

'Many subplots on vacant land' (Article on the rules for super funds acquiring vacant land e.g. business real property) Australian [Wealth, p 9], Wed 12.8.2009

'Taskforce to take up tax fight' (Report that the Law Council of Australia has formed a national taskforce which aims to reduce the tax liability of large law firms incorporating) Australian [p 31], Fri 7.8.2009

'Victimisation" charge in court' (Report that APRA has launched court proceedings against an individual re alleged victimisation of 2 directors of a superannuation company) Australian [p 19], Thur 6.8.2009

'ATO to crack down on executives' (The ATO's compliance program for 2009 - 10 will focus on directors, executives and wealthy taxpayers) Australian [p 20], Thur 6.8.2009

'Responsible approach is no longer a fringe issue' (Article on super funds and evaluating climate change risk) Australian [Recycling & Sustainable Investments, p 2], Thur 6.8.2009

CPA Australia seeks your input on issues it should take up on the members' behalf. If you would like to contact us please email us at tax@cpaaustralia.com.au.

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