TOFA compliance

The taxation of financial arrangements (TOFA) rules generally apply to all financial arrangements that a TOFA taxpayer starts to have on or after 1 July 2010.

Some TOFA taxpayers also elected to have the TOFA rules apply to the financial arrangements they start to have on or after 1 July 2009.

Now that most TOFA taxpayers have applied the TOFA rules for at least one income year, our focus is increasingly on targeted compliance assurance activities to assess risk. This allows us to ensure taxpayers are correctly applying the TOFA rules, and to assess whether the objectives of TOFA are being met.

Compliance program

Our Compliance program 2011-12 identifies the key TOFA risks concerning us and flags targeted implementation reviews that look at:

• identifying taxpayers who meet the TOFA thresholds to ensure they are applying the TOFA rules
• restructuring of financial arrangements prior to entry to TOFA
• calculating the balancing adjustment for TOFA taxpayers who have made the transitional election to apply the TOFA rules to their existing financial arrangements
• the validity of elections made under the TOFA rules
• the appropriate application of the TOFA tax-timing methods, including compliance with the hedging method recording requirements.