John Salvaris, Financial Services Specialist, notes the value of a tax strategy to prepare for the unknown, as highlighted with the insurance industry consultation with the ATO.
Over the Christmas break, I decided to do something quite out of the ordinary for me. I'm usually a guy who plans everything. When I head away I have to know every last detail to ensure nothing goes wrong with arriving at my destination.
However, in the last hours of 2015, I decided to do a mystery holiday. I rang my favourite airline and asked for options as to where I could go in less than 15 hours' travel and I wanted to leave in less than 48 hours. I ended up in Santiago. No guidebook (all the shops in Melbourne were shut) and no idea what to expect.
When I arrived at my hotel I was warned of the matters to be careful about e.g. no phone, wallet, headphones etc. in public. Where had I travelled to? I was told to be very careful. For a couple of days I was quite fearful of the unknown.
On reflection, my take away message is it's okay to fear the unknown, but have a strategy to deal with matters as they arise.
Tax is no different. Recently the insurance industry has been in consultation with the Australian Taxation Office (ATO) over an ATO initiative to have the boards of large insurers sign a declaration in relation to the level of provisioning for outstanding claims.
Having a board of a large corporate sign a declaration (for which there is no statutory requirement) to the ATO is unheard of, especially where the ATO identified that the industry is not a high tax risk. Through open, transparent, and strategic consultation, the requirements of the declaration have been made more practical to comply with and the undertakings sought from a board have eased.
Your business may not be insurance but how certain can you be there is no particular area where the ATO will ask your organisation to do something similar?
As you outline the tax landscape for your board it is important to highlight that goal posts are moving rapidly as to the ATO's expectations of boards. If this example is anything to go by, have you considered what the response might be from your board if it was asked to sign a declaration for something in the future?
The mystery is 'what' a board may need to consider as an undertaking to the ATO in the future. Boards should now be prepared to engage on a very different (and sometimes unstructured) basis with the ATO.
For those of you wondering, yes, I will do a mystery trip like this again. Santiago is a fantastic city and I highly recommend it. The food is exceptional.