A Category A reportable tax position is one where, given relevant authorities, you consider the material position taken is either:
- about as likely to be correct as incorrect, even if it is reasonably arguable
- is less likely to be correct than incorrect.
You must disclose a material position, even if it is based on administrative or industry practice, that:
- doesn't have regard to relevant authorities, or there are none
- isn't based on a well-reasoned construction of the applicable statutory provision.
You must have regard to all matters relevant to the position including:
- anti-avoidance rules
- integrity provisions
- transfer pricing
- market valuations.
A position will be material where the potential adjustment, should the position not be sustained, is equal to or exceeds your entity's materiality amount.
See also:
- MT 2008/2 Shortfall penalties: administrative penalty for taking a position that is not reasonably arguable – for the meaning of ‘about as likely to be correct as incorrect’, ‘more likely to be correct than incorrect’, and ‘relevant authorities’
- Disclosing reportable tax positions on the schedule – examples 1 and 2
- When a transfer pricing position is a Category A RTP
Relevant authorities
The relevant authorities are:
- a taxation law
- material for the purposes of subsection 15AB(1) of the Acts Interpretation Act 1901
- a decision of a court (whether or not an Australian court), the Administrative Appeals Tribunal or a Taxation Board of Review
- a public ruling, as defined in section 358–5 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
Relevant authorities don't include:
- announced but unenacted law changes
- our general administrative practices
- industry practices.
Positions based on anticipated legislation
If you rely on announced but unenacted legislation, you must determine whether the position your entity has taken is a material reportable tax position that must be disclosed.
Positions contrary to a public ruling
You must disclose a material position contrary to a public ruling where it meets the criteria for a Category A reportable tax position.
Positions relating to the exercise of a Commissioner’s discretion
In determining if a position involving an assumption about the way the Commissioner of Taxation will exercise a discretion is a Category A reportable tax position, you should consider:
- PS LA 2005/24 Application of General Anti-Avoidance Rules
- subsection 284-15(2) of Schedule 1 to the Taxation Administration Act 1953
- the Revised Explanatory Memorandum to A New Tax System (Tax Administration) Bill (No 2) 2000 at paragraph 1.29.
Where an assumption about the exercise of the Commissioner's discretion forms part of a material Category A reportable tax position, you must disclose the relevant legislative provision that relates to the discretion in the Basis for position field on the schedule.
Positions covered by a general administrative practice
You are required to include any industry or administrative practices your entity relied on to reach its position in the Basis for position field on the schedule.
Positions where the law is clear but the facts are uncertain (relating to valuation issues)
In determining whether a material position involving market values is a Category A reportable tax position, you should consider the guidance provided in Market valuation for tax purposes. This includes guidance in determining such things as the appropriate valuation methodology, documentation and allocations among assets.