From top-hatting to tackling Division 7A changes, the tax and accounting profession is facing significant challenges ahead, says leading Tax Practitioner and Partner at Thomson Geer, Arthur Athanasiou.

A former president of The Tax Institute, Arthur Athanasiou is a senior tax professional who has harnessed over 25 years’ experience as a legal practitioner. Arthur is also an associate professor at La Trobe University, an accredited Tax Law Specialist, and has chaired the Law Institute’s Tax Law Advisory Committee for a decade. He also serves on the Industry Advisory Board of the IPA-Deakin University SME Research Centre.

Arthur’s expertise includes SME tax disputes, Division 7A and high wealth individuals and family groups.

Top trending tax topics in 2020

With significant shifts on the horizon, even the most committed and experienced professionals can find the legal and regulatory changes ahead challenging to master. Arthur lists his top trending topics in tax expected for 2020 to be:

• The implementation of the proposed changes to Division 7A;
• The ATO's debt collection strategies;
• The ATO's continued fight against offshore transactions and tax evasion; and
• The ATO's continued push in the large corporate space to ensure that multinational entities pay their fair share of tax.

With proposed changes to Division 7A to be effective as of the 1st of July 2020, Arthur says there needs to be clear guidance on a number of issues including corrective action, loan transition rules, distributable surplus and amendment periods. He suggests that provisions in the current Division 7A, including sub-division EB, are overly complex and any amendments must be clearly articulated in order to avoid any ambiguity and difficulties in interpretation in the future.

“I am hoping that this might be an opportunity to wipe the slate clean, and perhaps even have a new Division 7B, which looks after all transactions post 1 July 2020 and leaves Division 7A for grandfathering purposes,” Arthur says. “Hopefully we can have new provisions that avoid other difficulties such as interpreting provisions in the current Division 7A including sub-division EB.”

Top hatting, fan or foe?

Top hatting, particularly for tax consolidation, is a necessary part of a ‘thoughtful and sensible’ approach to tax restructuring, Arthur reveals. He suggests practical compliance guidelines provided by the ATO can fill in gaps of uncertainty which could occur from tax restructuring.

“The ATO could provide examples such as practical compliance guidelines to assist those taxpayers where there are grey areas that might arise from any form of tax restructuring,” he adds. “Moving forward, consultation directly with the ATO, such as obtaining a private binding ruling before any transactions are effected is necessary in order to proceed through to action and obtain certainty. With the ATO’s involvement and proactivity in recent years, this is not far-fetched to achieve.”

Work-life balance, taxpayer stress and ‘audit fatigue’

As the complexity in tax becomes greater, the challenges in keeping up, while trying to manage a healthy work-life balance can become difficult to maintain. Arthur considers the emerging challenges facing tax practitioners:

1. Maintaining mental health and a balanced personal life against an increasingly challenging work environment;
2. Dealing with substantial legislative change and the volume of material emanating from the ATO on a daily basis;
3. Dealing with the ATO disputes in representing clients.

As these challenges and changes continue to evolve, the ATO also has the challenge of securing relevant resources from government to effectively and efficiently administer the tax system. According to Arthur, an ongoing tax challenge within SMEs, which is necessary to address, is the time and resources it takes to resolve dispute resolutions with the ATO.

“If not attended to, this can lead to serious health concerns such as stress, and personal and mental health issues for the taxpayer and tax practitioners,” Arthur suggests.

Taxpayers with complex business structures, also face the risk of protracted, intrusive and extensive audits in different areas such as FBT, income tax and GST, which can span over a number of years.

“This gives rise to "audit fatigue" on the part of the taxpayers involved, leading to high costs, inconvenience, stress and personal and mental health issues,” he adds.

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An exciting digital future

The move forward towards globalisation and technology has greatly impacted how we conduct business. Arthur suggests a positive effect of technology on the tax system is the ATO's vision to incorporate artificial intelligence into their administration of tax law.

“It will be interesting to see how digital changes positively affect the efficiency of the tax system, the ATO's digital-first strategy and the push to incorporating artificial intelligence into the ATO's administration of the tax law,” Arthur says.

SME streams to look out for at the Tax Summit