Australian Taxation Office Tax Risk Management Update

In July 2015, the Australian Taxation Office (ATO) published the Tax Risk Management and Governance Review Guide to assist large taxpayers in understanding what the ATO considered to be better tax risk management and corporate governance practices. 

Since that time, the ATO has been working with relevant stakeholders to develop two documents:

  1. Director’s handbook to the ATO’s Tax Risk Management and Governance Review Guide; and
  2. Tax Risk Management and Governance SelfAssessment Procedures.

From the drafts of these documents released for consultation, it is clear that the ATO intends a significantly more evidence and enterprise based risk management focus on the tax management function of large taxpayers and seeking, through the release of the Director’s handbook, to increase the attention of Boards in this area.

There is a strong link between the ATO’s view of a taxpayer’s tax risk management and governance, and the risk rating it applies to that taxpayer. Funds that have not yet reviewed their policies and procedures in light of the ATO’s guide should note that this is clearly an increasing focus for the ATO.

Ten questions to ask your investment manager and custodian on tax

This PwC publication looks at tax-efficient management of Australian equity portfolios, and what questions Trustees should be asking of their managers and custodians to ensure that members are getting the best possible after tax outcome. Tax efficiency gains have a real and consistent effect on returns for members. Read the full paper here.

Legislation expected for Federal Budget Measures

On 17 August, Prime Minister Malcolm Turnbull indicated that in the upcoming sittings of the new parliament, the Government will introduce an Omnibus Bill that puts together all the Government’s savings measures that it is understood from the election campaign the Labor Party is prepared to support. Labor has expressed support for the Coalition's superannuation policies which target tax concessions. However, this position has not been finalised and is subject to further stakeholder consultation. Labor maintains that it will oppose the $500,000 lifetime non-concessional contributions cap.

Foreign residents CGT withholding

A reminder that the new 10 per cent non-final withholding tax on the acquisition of certain direct or indirect Australian real property interests from foreign residents applies to contracts entered into on or after 1 July 2016. The new rule imposes various obligations on vendors such as certifying their status as an Australian resident in the case of a sale of real property, or providing a declaration that an asset is not an indirect real property interest. Otherwise the purchaser may have a tax withholding obligation on the purchase price. This would require the purchaser to pay an amount of the purchase price to the ATO instead of the vendor.

Funds should note these new rules to ensure compliance with the law when dealing with property assets.

Property Commission Report

The Productivity Commissioner has released its draft report outlining how it proposes to assess the competitiveness and efficiency of Australia’s superannuation system. Whilst the report does not have a specific tax focus, tax is considered an important element in some contexts of assessing the efficiency of the system, eg products available to members in the transition and retirement phases. The report is available here.

Treasury’s new Tax Framework Division

Treasury has announced the establishment of a new policy division which is tasked with cross-tax system issues in the economy, including monitoring international tax developments and the tax simplification agenda. This new division will consult widely, and we expect that it will be concerned with many tax issues important to superannuation funds.