A private ruling is a written expression of opinion by the Commissioner of Taxation (the Commissioner) about the way in which tax laws and other specified laws administered by the Commissioner would apply to, or be administered in relation to, an entity in relation to a specified scheme.
An application for a private ruling must be made in the approved form and in accordance with Divisions 357 and 359 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
The required information and documentation that accompany a private ruling request must be sufficient for the Commissioner to make a private ruling and include:
- the entity to whom the ruling is to apply
- the facts describing the relevant scheme or circumstance
- relevant supporting documents such as transaction documents
- issues and questions raised relate to the relevant provision to which the ruling relates
- your arguments and references on such questions.
The Commissioner may request additional information to make a ruling. The Commissioner will then consider the request and either issue or, in certain limited circumstances, refuse to issue a private ruling.
Publication
To improve the administration of the private rulings system, we publish all notices of private rulings for public record on the Legal database.
Private rulings are published in an edited form to safeguard taxpayer privacy.
Private ruling applicants are invited to provide a statement detailing any information they believe should be removed from the published version of their private ruling.
If the information the applicant wants removed is more than simply names and addresses, reasons why publication of this information will breach the applicant’s privacy should be provided.
Before publication, applicants can comment on the edited version of their private ruling.
Review rights
Generally, taxpayers can object to adverse private rulings or a failure to make a private ruling in much the same way that they can object to assessments. They can refer to a review of adverse objection decisions on a private ruling by the Administrative Appeals Tribunal (AAT) or a court. An explanation of review rights and how to exercise them is issued with the private ruling.
A taxpayer cannot object to a private ruling if there is an assessment for the taxpayer for the same income year to which the ruling relates. If this is the case, the taxpayer can only object to the assessment.
Where a taxpayer has objected to a private ruling, the taxpayer cannot object to a later assessment about the same matter ruled on, unless the assessment relates to facts that are materially different from those dealt with in the private ruling, or deals with the application of tax law provisions not dealt with in the private ruling (for example, the application of Part IVA of the ITAA 1936).
Private rulings dealing with the ITAA 1936 continue to apply to the ITAA 1997, to the extent that the old law to which the ruling applies expresses the same ideas as the new law in the ITAA 1997.
For more information on how to object to private rulings and assessments, including the time limits within which those objections have to be made, go to Dispute or object to an ATO decision.
When rulings are binding
A private ruling is binding on the Commissioner where it applies to an entity and the entity has relied on the ruling by acting (or omitting to act) in accordance with the private ruling. 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 does not apply.
An entity can stop relying on a private ruling at any time (unless prevented by a time limit imposed by a taxation law) by acting (or omitting to act) in a way that is not in accordance with the private ruling, and can subsequently resume relying on the private ruling by acting accordingly. The Commissioner cannot withdraw a private ruling. However, where the scheme to which a private ruling relates has not begun to be carried out and where the private ruling relates to an income year or other accounting period, and that period has not begun, the Commissioner can make a revised private ruling.
Penalties and interest charges
The law imposes penalties on trustees for:
- failing to lodge a tax return on time and in the approved form, which includes all applicable schedules
- having a shortfall amount by understating a tax-related liability or over-claiming a credit that is caused by
- making a false or misleading statement
- taking a position that is not reasonably arguable
- making a false or misleading statement in a material particular that does not result in a shortfall amount
- failing to provide a tax return from which the Commissioner can determine a liability
- obtaining a scheme benefit
- failing to keep and produce proper records
- preventing access to premises and documents
- failing to retain or produce declarations.
Penalties
Penalties may be applied to any false or misleading statement in a material particular, whether the error results in a liability or not. This penalty will not apply where the trustee and their agent, if applicable, has taken reasonable care in making the statement.
For shortfall amounts over $20,000 or 2% of the net income, the taxpayer also needs to have a reasonably arguable position for the statements made in the tax return.
The law makes it clear that, when considering whether a penalty should be imposed, we will consider a taxpayer’s position to be reasonably arguable if it would be concluded in the circumstances that what is argued for is about as likely to be correct as incorrect, or is more likely to be correct than incorrect.
The Commissioner must explain, in writing, the reasons for a penalty and, if remission of a penalty has been considered but not fully granted, the reasons for the decision.
General interest charge
Trustees are liable for the general interest charge (GIC) where they have:
- not paid a tax, penalty or certain other amounts by the due date
- varied their pay as you go (PAYG) instalment amount or rate to less than 85% of the amount or rate that would have covered the trustee's actual liability on business and investment income for the year.
Shortfall interest charge
Where an assessment is amended because the tax payable has increased, the due date for payment of the amended assessment is 21 days after the Commissioner gives the notice increasing the liability. Generally, trustees are liable to pay a shortfall interest charge (SIC), which accrues from the due date for payment of the original assessment to the day before the issue date of the amended notice of assessment on the increase. Trustees will be notified of the amount of SIC and it will be due 21 days after the notice is given. The GIC will apply automatically to any unpaid amount of the amended assessment and the SIC once the due date has passed.
The SIC is calculated at a rate 4% lower than the GIC.
See also: