General Manager, Tax Policy and Advocacy’s Report 

In this week’s TaxVine, our General Manager of Tax Policy and Advocacy (TPA), Scott Treatt, CTA, reflects on the year that has been and what we can expect in 2023. 

2022 – The year in review 

With the end of the calendar year in our sights, many of you may be left reflecting on ‘where did the year go?’ For a lot of practitioners with whom I have spoken, 2022 was challenging, professionally and personally.  

2022 has certainly been eventful. On the political front, we saw a Federal election that resulted in the Australian Labor Party forming a majority government (the first since 2007), and two fairly predictable Federal budgets. However, if the year is remembered for anything, it will be remembered for the war in Ukraine, rolling natural disasters, the introduction of the Omicron COVID-19 variant and pressure from the rising cost of living. 

From a tax policy perspective, consultation and engagement ramped up from the middle of the year as we saw various government stakeholders take steps to implement the Government’s election priorities and the ATO provide guidance on some key areas of uncertainty. I have summarised some of the key measures introduced (and in some cases enacted) in 2022. 

Multinationals 

The appointment of the new Government saw the large business segment being swamped with numerous tax measures. In the last six months, the following consultations focusing on large business segment have been released for comment: 

• multinational tax integrity and tax transparency consultation paper  
• franked distributions and capital raising exposure draft legislation 
• improving the integrity of off-market share buy-backs exposure draft legislation 
• public beneficial ownership register consultation paper 
• Pillar 1 and Pillar 2 consultation paper. 
  

I anticipate that we will see further consultation on some of these measures early in the new year, particularly the multinational measures that are currently proposed to apply from 1 July 2023. 

Fringe benefits tax 

The fringe benefits tax (FBT) exemption for certain zero or low emission vehicles (ZEVs) was another key tax measure proposed as part of Labor’s 2022 election policies. The bill containing this measure received Royal Assent on 12 December 2022 and applies to eligible ZEVs acquired from 1 July 2022. While this is a welcome measure, complexities arise in determining the associated running costs of a ZEV that have not been addressed and will need further discussion and consultation. At a minimum, and as the 2022–23 FBT and income years come to an end, I look forward to seeing the ATO’s guidance, due in March 2023, on how taxpayers can calculate the cost of charging electric vehicles from home. 

Taxation of digital assets 

In October 2021, the Senate Select Committee on Australia as a Technology and Financial Centre released its final report that examined how cryptocurrencies and other digital assets are treated for tax purposes in Australia. This report provided recommendations on the issues it examined and, since then, the Board of Taxation (Board) has released a consultation paper on the tax treatment of digital assets and transactions in Australia. The Tax Institute and several other professional bodies highlighted in the submission the numerous issues facing taxpayers who hold or transact digital assets. The Board’s final report is due to be provided to Government by 31 December 2022 and we look forward to examining the Board’s recommendations to address these issues. 

Section 100A 

Earlier this month, the ATO released its finalised guidance on section 100A — Taxation Ruling TR 2022/4 Income tax: section 100A reimbursement agreements and Practical Compliance Guideline PCG 2022/2 Section 100A reimbursement agreements — ATO compliance approach. The final guidance provides examples of the ATO’s views on some pertinent aspects, such as the meaning of the term ‘ordinary family or commercial dealing’, in light of recent case law and is an improvement on the draft package. 

However, there are still shortcomings with the underlying legislation. We will continue our discussion with the Government on our remaining policy concerns, especially in respect of the unlimited amendment period and the extent of ‘purpose’ for entering into an arrangement, both of which are inconsistent with the general anti-avoidance principles in Part IVA of the ITAA 1936, and the scope of the term ‘ordinary’. Further examination of the final guidance can be found in our article. 

Employee v contractor 

This week, we have also seen the ATO release draft guidance regarding employee versus contractor, in the form of draft Taxation Ruling TR 2022/D3 Income tax:  pay as you go withholding – who is an employee? and draft Practical Compliance Guideline PCG 2022/D5 Classifying workers as employees or independent contractors – ATO compliance approach. Recent High Court decisions indicate a shift in the characterisation of a worker and it is important that the ATO guidance accurately reflects this. The ATO are consulting on this draft guidance. Please refer to our Advocacy Tracker if you would like to contribute to our submission on this draft guidance. 

Consultation 

The importance of consultation with government bodies was an underlying theme this year. In last week’s TaxVine, we examined some of the forums we have utilised over the past year to engage with government stakeholders. In addition to these forums, we have provided submissions in respect of interactions between practitioners and government stakeholders, which includes our submission in respect of the Taxpayers’ Charter (Charter). 

Recently, we have been involved in a number of discussions with the other professional associations and the Tax Practitioners Board (TPB) in respect of the exposure draft legislation that proposes to implement the Government’s response to the review of the Tax Practitioners Board. We recognise that this is a topic of concern for our members and will continue to work closely with the other professional associations, the TPB, Treasury and the Minister’s office on these proposed changes. 

Administration 

Cyber security was a prominent issue that a large proportion of the community encountered this year as a result of the Optus, Medibank and more recent Telstra security breaches. Digital security was also a key focus of the ATO and the Australian Business Registry Services, with a number of initiatives conducted through the year, namely: 

• director identification numbers 
• client-agent linking in online services  
• Single Touch Payroll Phase 2. 

We envisage that 2023 will continue with this focus on digitalising interactions between government agencies, practitioners and taxpayers. As we increase our reliance on digital interfaces, it is imperative that the cyber security that applies to these interfaces is also strengthened.  

Moving into 2023 

What we saw in the latter part of this year is what I expect to see in 2023; that is, a focus on finalising the measures released for consultation in 2022 and introducing additional measures. The approach the Government will undertake in tackling the long list of announced but unenacted measures remains uncertain. 

However, I hope that 2023 brings further clarification as to the Government’s prioritisation of: 

• addressing the significant and disproportionate outcomes that are inherent in the current legislation for non-arm’s length income for superannuation; 
• progressing legislative change to the corporate tax residency rules; and 
• undertaking further consultation for the previously announced proposed Division 7A amendments. 

Key takeaway 

My key takeaway from 2022 has nothing to do with the legislative or administrative changes that we have seen in the tax and superannuation system this year, but rather the impact that relationships have had on how we have delivered key messages to stakeholders.  

This year, I have had the privilege of working closely with The Tax Institute’s President, Jerome Tse. Jerome has played a significant and inspirational part of advocating for diversity and inclusion, in our workplace, in our committees and for our members. On behalf of the TPA team, I would like to thank you, Jerome, for the significant role you have played in shaping the direction of our submissions and that of The Tax Institute. We hope you and our members have a happy and rejuvenating holiday. 

Closing comments 

Our Tax Policy Assistant, Zoe-Marie Beesley, has posted in Community about this preamble. Join the conversation and share your thoughts and ideas on what tax policies we should expect to be introduced in 2023.  

Kind regards, 

Scott Treatt, CTA