Monday, 19 December 2016

Tax policy - the year in review

by Stephanie Caredes, CTA *

2016 was a year that, at the beginning, still held some hope for significant reforms to be made to the Australian tax system. While the momentum had waned, there still seemed to be some possibility that the promised tax reform white paper may come to fruition.

While we are all acutely aware that this did not occur, it is worth reflecting on the milestones that did occur in tax policy in 2016.

Budget focus – significant reforms

The Tax Institute welcomed the 2016-17 Budget as a good step in the evolution of the Australian tax system, though by no means was it a revolution. We felt that the changes promoted fairness in the aspects of the tax system that were impacted.

The Budget included three significant packages:

  • the Ten Year Enterprise Tax Plan: containing, among other things, a cut to the company tax rate over the span of the next decade;
  • the Tax Integrity Package: containing, among other things, a diverted profits tax, proposed protection for whistle blowers, and a new ATO Tax Avoidance Taskforce; and
  • the Superannuation Reform Package: containing a number of proposals to make the taxation of the superannuation system more equitable without compromising stability.

Federal Election 2016

The 2 July Federal Election was the first test of the government’s Budget tax reforms, and whether they would survive in their original proposed form following the election.

That, of course, also depended on who ended up winning. Most of the policies survived intact, and once the government had reformed, it was down to business consulting on the proposed measures, at least the ones that had not already been put out for consultation on the night of the Budget (which included the proposed diverted profits tax).

The first cab of the rank was superannuation.

Super, super and more super

A key focus of the Institute over the last few months has been to heavily engage in consultation with the government on the superannuation package of reforms. We did see some change to the proposals with the scrapping of the contentious $500,000 lifetime non-concessional contributions cap, which was replaced with a new measure to reduce the existing annual non-concessional contributions cap from $180,000 to $100,000 per annum and individuals with a balance of more than $1.6m will no longer be able to make non-concessional contributions from 1 July 2017.

So far, we have seen three tranches of the superannuation package of reforms put out for short bursts of consultation and subsequently tabled in parliament in November. The Bills were promptly referred to a Senate Committee for inquiry.

At the time of writing, the outcome of the Senate inquiry is not known, so it is unclear what impact the inquiry will have on the progress of the Bills. What is clear is where these matters stand with the government — they are a matter of high priority.

Still to come, changes to the regulations associated with the superannuation reform package.

Other priority measures

The last quarter of 2016 has seen consultation on the following policy measures:

  • the application of GST to low value imported goods;
  • withholding taxes applicable to Australian collective investment vehicles; and
  • improvements to the debt and equity rules.

What’s in store for 2017

The focus is likely to remain on multinational tax avoidance and the taxation of superannuation. We have already seen hints that the change to the company tax rate is starting to fall down the priority list, and other matters of great significance to The Tax Institute membership, namely, changes to Div 7A of the Income Tax Assessment Act 1936 (Cth), are even further down that list.

Plus, the remainder of the 2016-17 Budget measures that have not yet been consulted on are likely to appear on our desks, if not before we all break for the festive season, then certainly soon after.

I look forward to working with our members on whatever new tax policy measures come our way next year to ensure that The Tax Institute has its say on making sure that the measures are in the best interests of Australia’s tax system.


* Stephanie Caredes is The Tax Institute's Tax Counsel.

Thursday, 15 December 2016

Tax agent portal and ATO online systems - a joint message to members of The Tax Institute by the President and the CEO

Dear Members,

We are making every effort on your behalf to obtain more information from the ATO about their progress in fixing the present problems with the ATO portal and online systems, and when those fixes are likely to allow you to resume your normal work using the ATO portal system.

We have been in touch with Senior ATO Officers and have been advised that they are working frantically towards effecting a fix as soon as possible. We have been assured that the ATO regards the tax agent portal as a high priority system, and hence is treating this matter with the highest priority. We have also been assured that there has been no loss of data.

We'll be keeping a close watch on the progress of developments and have asked to be kept up to date. We have also emphasised the importance of frequently keeping agents up to date on any progress.

The Tax Institute is acutely aware of the significant impact of this outage on our members’ practices and that members would have already suffered significant financial losses because of this outage. Lack of access to critical ATO systems is totally disruptive to agents being able to provide their usual client services, which translates to a loss of income. We have expressed to the ATO our disappointment on behalf of members that this has occurred and stressed to the ATO the adverse impact of the outage on tax agent practices.

The ATO is fully aware of the adverse impact this outage has caused and has assured us they are working to resolve this as soon as possible.

We will also look to continue this dialogue with the ATO to ensure that no tax agent or taxpayer is penalised as a result of the disruption.

We shouldn't rush to judgement without knowledge of all the facts, but there must be accountability. A full and thorough investigation of what happened needs to occur to ensure that this episode is never repeated.

Arthur Athanasiou

Noel Rowland

Friday, 9 December 2016

Predicting the unpredictable – The 2017 Financial Services Taxation Conference

2016 taught us to expect the unexpected. Donald Trump was elected President, the Panama Papers were leaked, Brexit actually happened, changing the GST did not… technology upped its disruption ante, the OECD shone the spotlight on its BEPS project and the crackdown on multinational tax avoidance got even more real. These events have changed the face of the financial services industry and given the Australian corporate tax system a shake-up. If 2017 is anything like the year gone by, we’re in for an interesting ride.

Australia’s financial services sector is the largest contributor to the national economy, contributing around $140 billion to GDP over the last year. It has been a major driver of economic growth and with 450,000 people employed in this sector, it will continue to be a core sector of Australia’s economy into the future.*

Yet, as dominant and resilient as the industry may be, it is in no way immune to global and domestic pressures. Almost a decade ago, the Global Financial Crisis rocked the economy and the industry has been rebuilding trust and confidence since. Now the growing onslaught of the OECD’s Base Erosion and Profit Shifting (BEPS) project, FinTech, blockchain and robotics threaten to disrupt the industry again. For those practising in the industry, the key is to understand the changing players, influencers, instruments and markets – and more importantly, how they all impact the future of corporate tax in Australia. 2017’s Financial Services Taxation Conference will help practitioners do just that, and here we take a look at some of the key sessions and speakers from this year’s event.

The current state of play

In a post-BEPS world, international tax issues will only continue to crop up more and more. The sessions at the conference will focus on hybrid mismatch arrangements, branch/permanent establishment attribution issues, CFC rules, thin capitalisation, transfer pricing and Division 6C – core topics that will change the financial services industry and the way regulators operate.

There is already so much going on in the financial services sector right now.

The OECD continues work on its BEPS project, the Senate was due to issue its report on its Inquiry into Corporate Tax Avoidance and a number of companies signed up to the Board of Taxation’s Voluntary Tax Transparency Code. In addition, the 2016-17 Budget proposed corporate tax cuts, the Government ruled out changing the GST and an exposure draft for implementation of the Diverted Profits Tax (DPT) was released to address multinational tax avoidance.

The Panama Papers leak, the Chevron transfer pricing case, the introduction of the Multinational Anti-Avoidance Law (MAAL) and DPT have all roused public interest in the taxation of multinationals. Last year’s election campaign might have shied away from the topic altogether, but the Government has since turned its plan to tackle tax avoidance up a few notches with the implementation of the MAAL and DPT. More than ever, large corporates are under the microscope with their tax activities.

In his session, Tony Cooper (EY) will compare and contrast the MAAL and DPT, considering whether they apply and where they intersect. The UK experience of its DPT will also be considered. From a regulator’s point of view, Jonathan Woodger (ATO) will provide comments on the ATO’s guidance in relation to MAAL and how it proposes to apply the two new regimes.

New laws, new flaws

Will new laws be effective in combating tax avoidance? In the wake of these major changes, the financial services industry is once again grappling with uncertainty, gaps in the law and legislative reforms. In their keynote presentation, two speakers from different perspectives – Michelle de Niese (Corporate Tax Association) and Professor Miranda Stewart (Crawford School of Public Policy) – will consider where the Australian corporate tax system is heading, whether it needs reform, and what that reform should look like.

This new world of transparency extends also to the new common reporting standard (CRS) which commences on 1 July 2017. With only four months to go to implementation, Fred Law, CTA (NAB) and Anthony Siouclis (ATO) will discuss the effect of the 16 choices available to Australian financial institutions, the impact of the US position on CRS and the interactions between CRS, the Foreign Account Tax Compliance Act and Anti-Money Laundering.

Speakers Steele Broderick, CTA (Treasury) and Natalie Raju (KPMG) will also delve into the proposed rewrite of the Taxation of Financial Arrangements (TOFA) as announced in the Budget, and provide insights around key legacy issues and the extent to which the proposed reforms should address some of these issues.

The technology-enabled tax function

For many, technology was initially regarded a disabler to the financial services and tax industries. The rise of FinTech threatened the stability of its incumbents and rocked the status quo. However, technology is now a major player in the corporate tax system and has forced tax functions to adapt and respond to the digital era.

The tax function is certainly evolving and broadening – and at exponential speed. What exactly are the key trends and how do these apply to the financial services sector?

Kelum Kumarasinghe (EY) and Simon Jenner, CTA (EY) will shed light on the digital era and provide a summary of the internal and external factors impacting the tax function. Their session will also cover the current tax technology trends being seen in the market, with a particular focus on data-driven tax audits, analytics, robotics, tax portals and blockchain.

With so many emerging disruptors and new laws affecting the financial services industry, it is no surprise that key players, influencers, issues and perceptions have changed. This year’s sessions have been developed to dig deeper into current issues as well as shed light on new trends that will change the industry going into the future. 2017 is gearing up to be an incredibly interesting year for financial services and tax!

Join us

Join us and all the high calibre speakers at The Tax Institute’s Financial Services Taxation Conference 2017 to find out more, 8-10 February 2017 at the Palazzo Versace on the Gold Coast.

Tuesday, 6 December 2016

Challenges and opportunities for tomorrow's tax professionals

by Noel Rowland *

At The Tax Institute, from the National Council down, we’ve committed time and focus to imagining who the tax professional of the future will be and what they will do.

With many factors driving change — including technology, demographics, social trends, economic fluctuations, political shifts and enhancements to legislation and regulations — we continuously ask how the tax function might evolve over the next decade.

Tax 2025

I recently attended an event that featured KPMG’s Grant Wardell-Johnson, who co-authored a discussion paper released in August, titled Tax 2025.

Chapter VII of this paper addresses the tax function of the future and outlines the trends and outcomes that may emerge over the next decade. For example, the tax function will likely require multiple new skills, including deep expertise in technology, data analytics, economic analysis, communication and negotiation, as well as proficiency in managing disputes across a wider variety of jurisdictions and cultures.

The tax function will be affected by the rise of artificial intelligence and automation for compliance.

It will face a greater number of dilemmas involving a larger number of stakeholders and more substantial technical complexities. A higher level of tax transparency will require the tax function to provide clear, simple answers to complex issues. Multinational enterprises are also likely to experience a proliferation of presences in different jurisdictions.

To help manage these issues, relatively sophisticated methods of data analysis will be available to the tax function, offering profound insights. These analytical capabilities will, in turn, enable the tax function to provide a clearer, more nuanced understanding of non-tax business arrangements, including the operational and financial areas of businesses.

The ‘hollowing out effect’

Wardell-Johnson also spoke about a ‘hollowing out effect’, where technology contributes to a decrease in the number of traditional, middle-skilled jobs available within the tax function. This follows a reduction in the number of lower-level compliance jobs that once provided an invaluable learning experience for entry-level tax professionals.

If, in the future, these roles are unavailable — if junior tax practitioners no longer learn and do in the same way — important questions arise. For example, are the basic data entry and ‘number crunching’ skills that young practitioners once learned on the job still relevant for the senior tax professional of the future? How will the right people enter the tax profession and progress in their careers? How will we train people for higher-level tax roles?

The ATO’s position

The ATO recently demonstrated its support for the tax profession. It established a ‘Future of the tax profession’ working group. The Commissioner also developed a draft statement that describes how the ATO and tax professionals might work together effectively.

The statement affirms the ATO’s support for the tax profession, specifically stating that, “in Australia, tax professionals have a critical role in the tax and superannuation systems” and that “the ATO and the tax profession depend on each other for success”.

It also outlines likely future changes in the administration of the tax and superannuation systems — due to greater automation and digital business, a reduction in transactional requirements, increased data sharing between taxpayers, third parties and government, and whole of government services.

“As both the ATO and tax profession modernise,” the statement says, “new products and services will need to be co-designed to suit the majority.”

The Institute’s perspective

The Tax Institute welcomes such expressions, which acknowledge that the health and sustainability of the tax system depend on a strong, vibrant, highly-skilled tax profession.

The Institute, especially at National Council level, continuously addresses questions such as: What does the tax professional of the future look like? What support will they need? What will their function look like? Who will be in that function? Will they have different skills? Will the tax function include technologists, data analysts, economists, mathematicians, social scientists, specialist communicators, negotiators and mediators?

We’re also keen to hear our members’ answers to these questions. What do you think? In what ways do you believe the tax profession is evolving?

Your input can help to ensure that The Tax Institute continues developing products and services that are relevant and serve real needs.

Technology transition

Speaking of preparing for the future, the Institute is currently undertaking a major technology project that will involve implementing a new CRM capability.

We appreciate members’ patience as we transition to this system. It will eventually help us to provide better service, more flexible membership offerings and more innovative product packages.


* Noel Rowland is Chief Executive Officer of The Tax Institute.

Tuesday, 15 November 2016

Evolution or revolution - The 32nd National Convention

It is an interesting time to be a tax practitioner. The tax world is at the cusp of something quite revolutionary. With technology, digitalisation, globalisation and artificial intelligence converging to disrupt the entire industry, there is no doubt that we really are at the fulcrum of change. Here we take a closer look at the program and some of the presenters at The Tax Institute’s 32nd National Convention on how to arm yourself with the knowledge to navigate what is still a very uncertain future.

Tax practitioners are no strangers to change. Tax laws, rulings and policies are constantly in flux – we learn, we adapt, we even get creative when there is a lack of guidance. However, what is happening to the tax and accounting industry at the moment is completely unprecedented. When talk of robots and artificial intelligence become a serious topic of conversation [1], that’s when you know some serious change is about to happen.

The digital economy: our new normal

For the future generation of tax practitioners, this brave new world of tax will be their new normal – but what about tax practitioners of the current generation? For those of us who have lived and breathed the old order of things, how do we prepare ourselves for what is to come?

Without diminishing the importance of understanding the ins and outs of our incredibly complex tax system, we can no longer rest solely on our tax technical laurels to be effective advisers. Technology, innovation and globalisation are shaking things up. The digital economy is now becoming the new order of things.

The future of the tax professional

According to PwC’s report, The STEM Imperative: Future Proofing Australia’s Workforce, 44% or 5.1 million current Australian jobs are at risk from digital disruption over the next 20 years
[2]. Tax and accounting roles are up there as high risk roles due to developments in artificial intelligence and automation. Whilst it is anticipated that repetitive tasks and certain compliance work are likely to be taken over by computers and robots in the future, a more interesting question arises. What new issues and new markets should we be looking at as a result of these technological improvements? 

In their session, Kirsten Deards (NSW Bar) and Craig Jackson, CTA (EY) share their insights into the new sharing economy and how it is disrupting traditional industries and challenging current tax laws. The session will cover crowdfunding and other types of sharing economy transactions, compliance issues and the Federal Court’s Uber GST decision. Issues and markets that did not exist less than a decade ago are now becoming key points of concern for tax practitioners.

With the rise of the digital economy and globalisation, traditional tax laws and business models are about to be redefined and reinvented. Cloud-based transactions and technological advancements have meant that firms and regulatory bodies are now making use of innovative strategies to minimise cost, simplify processes and increase efficiency in a globalised world.

In ‘The Future of the Tax Professional’ session, speaker Steve Healey, CTA-Life (Grant Thornton) acknowledges the pressures that the tax profession is coming under with technological changes and will speak on what the ATO’s attitudes are towards compliance simplification. The burning question of what we need to do as advisers to cope with these changes are answered as Steve shares his thoughts on what a good tax adviser needs to be in times of rapid change.

Looking outwardly, speaker John Preston (Deputy President of the Institute of Taxation UK) also taps into this discussion and will speak on what qualities are needed for the future tax professional. His observations will be shared from a global perspective and challenges that tax professionals face in Australia will be highlighted against global tax policy trends.

Creating borders in a borderless tax world

Globalisation has made the tax world smaller, more agile and increasingly more transparent. Transactions across countries are on the rise, which leaves tax practitioners grappling with the multitude of different tax laws in order to best service clients.

Karen Payne, CTA (Board of Taxation) sheds light on the new anti-hybrid rules that have been proposed in Australia. Following the report issued by the OECD as part of the BEPS project, this session considers how the rules would operate and when they could be effective.

The need to draw up borders and boundaries to regulate the increase in global tax activity is high on the agenda for taxpayers, large corporations and SMEs alike. Mark Konza (ATO) and Jerome Tse, CTA (King & Wood Mallesons) explore how, when and why global revenue authorities are increasingly using their information-gathering powers to ensure that taxpayers are paying their fair share of tax in their jurisdiction.

For corporates, Angela Wood, CTA (KPMG) and Jonathan Woodger (ATO) will speak on multinational anti-avoidance law (MAAL) and the diverted profits tax (DPT). The OECD's BEPS action plan is tackling tax avoidance on a global scale and putting companies under the microscope to stay compliant in a stricter regulatory framework.

Smaller enterprises are not excluded from this either. While transfer pricing has been the key focus in the multinational tax debate, the application of transfer pricing to SMEs has created significant compliance and technical issues that have largely gone under the radar. In his session, Chris Bowman, CTA (ConsultTPAustralia) looks at how transfer pricing and related documentation rules apply to SMEs and how to deal with self-assessment, transfer pricing audits and disputes arising from current law.

With globalisation continuing to serve as an enabler for SMEs looking to expand offshore, Denise Honey (Pitcher Partners) discusses foreign investment by successful growing businesses and will cover the challenges faced by SMEs, the impact on ultimate Australian owners, appropriate structures and dividend exemptions.

Are we fighting robots, or just fighting change?

There is no doubt the tax world is changing. The current generation of tax practitioners are facing a pivotal moment where everything old meets everything new. As unnerving as technology, digitalisation, globalisation and artificial intelligence may be, the key to tackling the new order of things is to keep learning, adapting and collaborating.

This year’s sessions have been developed to be both reactive and proactive in nature, to provide you with a holistic view of current and emerging trends. We hope that you find this year’s event insightful, inspiring and thought-provoking.

Join us

Join us to hear from the presenters above and other high calibre speakers at The Tax Institute’s 32nd National Convention in Adelaide, 15-17 March 2017.

Ranked by Lonely Planet's Best of Travel 2017 in the top five regions in the world [3], the Convention's networking and social activity program has also been designed to bring you some of the best South Australia has to offer. Incorporating the gala dinner and Tax Adviser of the Year Awards, make sure you don't miss this opportunity.


[2] PwC report, The STEM Imperative: Future Proofing Australia’s Workforce