Reportable tax position schedule

Example 3: Category A and B RTPs

On 1 June 2011, new income tax legislation took effect that allowed taxpayers to claim a deduction in certain circumstances. Due to uncertainty about the application of the new law, the ATO started consultation with taxpayers following the enactment of the new provisions. A number of issues were raised by taxpayers during this consultation, including issues surrounding the requirements for claiming the deduction. These were noted for consideration by the ATO.

FCo is the head company of a tax consolidated group. At the time of preparation and lodgment of its 2012 income tax return, issues surrounding the requirements for claiming the deduction remain unresolved and consultation with the ATO was still underway. FCo prepares and lodges its 2012 income tax return on the basis that the deduction is available to the company in that year. FCo's audited consolidated financial statements for the period ended 30 June 2012 recognise (whether as a provision, contingent liability or otherwise) the additional amount of tax payable in the event that FCo's deduction is subsequently disallowed by the ATO.

If this treatment is not sustained, the potential adjustment would equal or exceed FCo's materiality amount. Exercising reasonable care, FCo concludes that this treatment is about as likely to be correct as incorrect. So, FCo must disclose the position as a category A RTP.

As the difference between the treatment of the position in FCo's income tax return and in FCo's financial statements is equal to or exceeds FCo's materiality amount, FCo must disclose the position as a category B RTP.

The information in the schedule or early disclosure form could be completed for this RTP as follows:

RTP number

2012-1

Related party involved

No

RTP category

A,B

Concise description

On 1 June 2011, [insert details of legislative change] took effect. The policy intent of this legislation as outlined in the [insert details] is to allow taxpayers such as FCo to claim a deduction in certain circumstances [insert details] under sections [insert details of relevant sections].

There is uncertainty regarding the interpretation of this provision and consultation is still ongoing with the ATO. At the time of lodgment of this schedule, the issue of how sub-section [insert details] applies to [insert specific details] is unresolved and is the subject of on-going consultation with the ATO through a NTLG working group.

FCo comes within the class of taxpayers entitled to claim a deduction under [insert details] because [insert details]. Accordingly, FCo claimed a deduction under [insert details] and is lodging this tax return on this basis.

FCo's audited consolidated financial statements for the period ended 30 June 2012 recognise a contingent liability representing the additional amount of tax payable in the event that the outcome of the current consultative process with the ATO is that FCo is not entitled to claim a deduction under [insert details] in which case FCo will request an amendment to its income tax return.

Basis for position

The position taken by FCo in its 2011-12 income tax return is that [insert details] is deductible under subsection [insert details] of the Income Tax Assessment Act 1997.

In adopting this treatment, regard was had to the following relevant authorities, industry and administrative practices:

[Insert details of the amending legislation]

[Insert details of the Explanatory Memorandum]

[Insert details of the consultative process / ATO published guidance]

Sections within Examples - disclosing RTPs in the schedule or early disclosure form

Last Modified: Thursday, 30 August 2012