SME Communicator - December 2011

Taxation of Financial Arrangements implementation reviews

In the Compliance program 2011-12 we undertook to commence Taxation of Financial Arrangements (TOFA) implementation reviews, in addition to continuing our education and assistance activities. These reviews will look at:

• identifying taxpayers who meet the TOFA thresholds to ensure they are applying the TOFA rules
• restructuring financial arrangements prior to entry into TOFA
• calculating the balancing adjustment for TOFA taxpayers who have made the transitional election to bring in 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.

To facilitate these reviews we have developed a TOFA implementation questionnaire in consultation with industry representatives. The questionnaire is currently being piloted with a select number of taxpayers.

It is timely, now that the first TOFA year has finished for most TOFA taxpayers, that you review your TOFA implementation to ensure you are applying the TOFA rules correctly.

For more information, refer to: Compliance program 2011-12 TOFA compliance.