A private ruling legally binds the ATO if it applies to you and you rely on it.
If you rely on a private ruling that benefits you – for example, if your tax liability is less, or your grant or benefit amount is greater than it would otherwise have been – we're bound by the ruling even if it is later proved to be incorrect. If the private ruling is incorrect, we can only apply the law correctly if this would give a more favourable result for you.
The effect of a binding ruling is that it protects you against liability for tax shortfall even if the ruling is incorrect. The false and misleading statement penalty and interest charges are also not applied in these circumstances.
If you choose not to rely on a private ruling and the position you adopt is shown to be incorrect, you'll be required to pay any underpaid tax or repay overpaid grants or benefits. Interest will generally also be payable on that amount. You may also be required to pay a penalty on the underpaid tax or overpaid grant or benefit if you don't have a reasonably arguable position, or have not taken reasonable care.
How a private ruling applies
A private ruling only applies to the particular scheme or circumstance that it describes. If there is a material difference between the scheme described and what actually occurs, the private ruling doesn't apply. We are not legally bound by a ruling when:
- the scheme is not implemented in the way set out in the private ruling
- material facts were omitted from the private ruling application, or were misleadingly or inaccurately stated.
If there’s a change in the law
If we've made a ruling about a provision of the law and the provision is amended, the ruling is taken to be about the amended provision to the extent that it expresses the same ideas as the old law. However, if the law is substantially changed, the part of the ruling dealing with the changed law ceases to apply.A private ruling binds the ATO if it applies to you and you rely on it.