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ASIC will commence implementing new expense policies and thresholds after an independent review took aim at its procurement policy that saw chair James Shipton’s tax bill spike from a “reasonable” $11,000 to close to $120,000.
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ASIC failed to question KPMG tax bill despite Shipton’s concerns
02 February 2021
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The investigation by former inspector-general of intelligence Vivienne Thom found that ASIC’s procurement of tax services from KPMG had numerous deficiencies that allowed costs to rise without questioning, ultimately reaching $118,557 — an amount that Mr Shipton has since paid back in full.
Revealed in the 41-page abridged report released by the Treasury, Dr Thom found that, in December 2017, KPMG had initially quoted $1,700 for a joint US and Australian tax briefing, $2,500 for a review of Mr Shipton’s employment contract and recommendations on structuring tax effectively, $1,750 for the preparation and filing of an Australian tax return, and $3,000 to $5,000 for the preparation and filing of a US tax return.
However, by September 2018, KPMG advised Mr Shipton that its fees would rise to $60,000 to $70,000 due to the “considerable amount of work required” to support him with his Australian and US tax affairs.
Mr Shipton expressed his concern with ASIC, asking, “the question (for KPMG) that I am still keen to know about is why the fee estimate increased 6x (from late last year to September this year) when the information passed on to them was exactly the same on both occasions?”
An ASIC staff member then told Mr Shipton that “it is as simple as the original quote was done before [you] were appointed — it was generic. KPMG never came back to update us after speaking to you.”
By August 2019, KPMG issued three invoices — $29,878 for general tax advice, $50,173 for US tax compliance and $36,587 for Australian tax compliance.
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The corporate regulator paid the invoices by September 2019, with Dr Thom finding that “no concerns were raised by [ASIC] about the quantum of the increase, either with KPMG or with Mr Shipton”.
Auditor-General Grant Hehir had earlier revealed that KPMG invoices described its services as “tax advice on personal investments”, “optimisation of the Australian taxation of foreign exchange gain or loss in foreign bank accounts” and “assistance in respect of resolution of Massachusetts State tax notices and penalties due to late filing of 2017 Massachusetts state tax return”.
Additional controls needed
Dr Thom acknowledged that while costs were not specified or capped, there could be no “pre-existing agreement” with the Commonwealth to pay uncapped costs.
“It is the opinion of this review that any increases after that should have been subject to a further detailed and documented consideration as to whether the costs were reasonable and whether a clear ceiling was to be established,” Dr Thom said.
“The review acknowledges that the situation was unusual, and a difficult decision for a subordinate to make, but a more reasonable approach might have been to consult with Treasury or other agencies with statutory officers to seek guidance on the matter before determining a position.”
She has tabled eight recommendations, including calling on ASIC to develop policies for the payment of expenses for commission members, setting threshold amounts, and defining sensitive expenses that require additional controls.
Dr Thom has also recommended that the deputy chair be required to approve the chair’s expenses and for the chair to approve the expenses of commission members.
Mr Shipton has been cleared of any wrongdoing and has since resumed in his role as chair, but he will step down once his successor has been named. The government expects the new appointment to be finalised within three months.
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