Australia: More Certainty Following Tax Rulings System Overhaul

Last Updated: 28 February 2006
Article by Allan Blaikie and Stephen Gates

Most Read Contributor in Australia, November 2016

Key Points

  • Standardised rules will now apply to ATO public rulings, private rulings and oral rulings.

After years of criticism, the regimes for obtaining ATO tax rulings are being significantly expanded and clarified. Standardised rules will apply to ATO public rulings, private rulings and oral rulings, dealing with:

  • exactly when such rulings are binding on the Commissioner, and on taxpayers
  • a decision by a taxpayer to stop relying on ruling by not acting in accordance with the ruling
  • application by the Commissioner of the law if it turns out to be more favourable than a ruling relied on by the taxpayer
  • resolution of inconsistencies between different kinds of rulings
  • common rules to deal with practical issues about the commencement of arrangements, re-enactment of legislation and communication by e-mail.

The changes will bring more areas into the rulings process, and provide more certainty for those seeking rulings. Business should benefit from a more streamlined process, without some of the bottlenecks previously encountered.

Information used by the Commissioner in making a ruling

The new rules clarify requests by the Commissioner for further information, any assumptions that the Commissioner may make when issuing a ruling, and reliance by the Commissioner on additional information provided by the taxpayer.

The Commissioner will no longer be able to decline to rule solely on the ground that the information provided is inadequate. A request for further information must be made first and then the issue of a ruling may be declined only if that is not provided, within stipulated time periods. Taxpayers must be given a similar opportunity to respond to proposed assumptions.

As for the sensitive question of third party information, the rules now expressly entitle the Commissioner to rely on information obtained from sources other than the taxpayer, provided the Commissioner informs the taxpayer what the information is and the taxpayer has a reasonable opportunity to respond before the ruling is made.

Information that the Commissioner considers cannot be disclosed because of possible breaches of the tax secrecy provisions, privacy legislation or confidentiality cannot be relied upon by the Commissioner. The Commissioner may decline to rule where this type of information is considered to be material to the ruling, but those cases will be rare.

Public rulings

New rules clarify the exact nature and status of public rulings, as distinct from the other forms of ATO rulings. There have been problems in the past about the status of booklets and informative material issued by the ATO. In the future the Commissioner will be able to issue electronic and other material containing general statements on a range of matters, and clarify by declaration exactly what elements constitute public rulings.

Withdrawal of public rulings is another area of uncertainty that will be cleaned up. New rules deal with the procedures for the withdrawal of public rulings, and how the withdrawal affects arrangements in place.

Private rulings

The new measures address some - but not all - of the major problems with private rulings.

More types of tax laws will be within the scope of applications for private rulings, for example, provisions relating to withholding tax, franking tax, FBT, and the administration and collection procedures of those taxes as well as income tax (but Goods and Services Tax and related indirect taxes will continue to be subject to their separate rulings regime).

Clearer rules for the application process will remedy the procedural traps in the making of applications. This applies particularly to questions concerning trusts and beneficiaries, and partnerships. One oddity concerning changes in the trustee of a trust and the ability of later trustees to rely on a private ruling has been fixed.

It will be easier to know when private rulings effectively commence, how long they will apply, and when they cease to apply.

Significant aspects of the application procedure have also been overhauled, including the grounds on which the Commissioner may decline to rule. These are now more limited and have been expressed in a manner having greater procedural fairness. Unfortunately, the legislation uses the general ground of "prejudicial or undue restriction of the administration of a tax law" and it is necessary to refer to the Treasury Explanatory Memorandum for a more informative indication of what is intended

Importantly, the vexed question of valuations relevant to a ruling is now expressly dealt with. Applicants may provide a valuation or ask the Commissioner to obtain a valuation. Where a request is made for the Commissioner to obtain a valuation, a specific provision sets out the procedure for obtaining of the valuations, together with a requirement to inform the applicant when the valuation process is complete (but not to provide a copy to the applicant). In this case the Commissioner can pass the cost of the valuation to the taxpayer, and regulations are contemplated concerning the charges. Failure to pay will mean no private ruling. It would be expected that copies would be provided to the applicant but it is unsatisfactory that this has not been expressly stated.

Another difficult issue has been the entitlement of the Commissioner to go beyond the private ruling application and make private rulings on related matters not actually covered in the application. An express authority will entitle the Commissioner to make such additional private rulings. However, it is intended that the Commissioner should not prolong the process by embarking on analysis of matters not covered in an application. Instead, the explanatory material indicates that, if considered appropriate, the Commissioner should add a caution to the ruling issued, noting that related questions exist.

Another attempt has been made to deal with the problem of delays in the private ruling process. An opportunity will now exist for applicants to initiate action if no private ruling has been issued within 60 days from the date of application. However, grounds for extending the 60 day period are set out. If, after the 60 day period (or any extension), the Commissioner does not respond to a request by the applicant for a ruling within a further 30 days, applicants will be entitled to lodge an objection and commence proceedings for review. This is an important addition to the review procedures. In addition, the general rules concerning objections against private rulings and avenues for review are further areas where the rules have been revamped.

Finally, a specific provision now deals with the ways in which a private ruling may be revised, how revisions are communicated and when the revisions take effect.

Oral rulings

In the same way, the exact nature, status and operation of the regime for oral rulings for individuals has also been overhauled. New rules deal with applications for an oral ruling, the matters that may not be the subject of an oral ruling and registration identification of oral rulings. Their consistency with other rulings is governed by the new rules referred to above.

General advice and administrative practice

A new provision expressly protects taxpayers from both the shortfall interest charge and the general interest charge (GIC) where they reasonably rely in good faith on ATO advice and practice information that does not have the status of a ruling. However, an exception applies where the non-ruling advice, information or statement in a publication is labelled as "non-binding". A further exception applies to GIC protection 21 days after notice to the taxpayer of the "correct" position.

The explanatory material deals in some detail with what does, and does not, amount to "general administrative practice", particularly in the context of the mere issue of similar private rulings on a particular matter. Comment is also provided concerning changes in general administrative practice. Regrettably, no comment is provided concerning the exact status of material "labelled as non-binding". All that can be said is that such material will offer no protection against GIC or the shortfall interest charge, though it may be possible to rely on the existing general protections against shortfall penalties based on advice received, general administrative practice or approved publications.

The new laws

The overhaul of the rulings system is in the Tax Laws Amendment (Improvements to Self Assessment) Bill (No 2) 2005, introduced in response to the August 2004 Report on Aspects of Income Tax Self Assessment. The new rules will apply from whichever is the later of Royal Assent and 1 January 2006.

The changes to the rulings procedures are part of a wider set of amendments that seek to ameliorate some of the harsh edges of the self assessment system. Although the changes are an attempt to strike a better balance between the competing interests involved, not all recommendations of the 2004 Review Report have been implemented. The new protections for taxpayers, although welcome, are unlikely to be considered to be excessive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.