ATO Interpretative Decision

ATO ID 2003/763 (Withdrawn)

Income Tax

• This ATO ID is withdrawn as Part IVAA (including sections 14ZAN, 14ZAL and 14ZAM) of the Tax Administration Act 1953 (TAA) was repealed by the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005 with effect from 1 January 2006. Despite its withdrawal, this ATOID continues to be a precedential view in respect of things done before 1 January 2006. See paragraphs 39 and 40 of TR 2006/11 for situations where the Commissioner may decline to rule on applications for a private ruling in respect of things done on or after 1 January 2006.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Will the Commissioner choose to apply subparagraph 14ZAN(j)(ii) of the Taxation Administration Act 1953 (TAA) to not comply with an application for private ruling, where the applicant seeks a ruling on an aggressive tax planning arrangement at a time when other participants in that arrangement are currently the subject of an audit?

Decision

Yes. The Commissioner has formed the opinion, consistent with subparagraph 14ZAN(j)(ii) of the TAA, that it would be unreasonable to comply with the application having regards to matters that the Commissioner considers are relevant.

Facts

The taxpayer is a participant in an arrangement which the Commissioner considers to be an aggressive tax planning arrangement.

A major audit is in progress on other participants in this same aggressive tax planning arrangement. The audit activities are progressing, and the Commissioner's access powers are being utilized to gather the necessary information.

The outcome of the audit will determine the answers to the questions being put before the Commissioner by this taxpayer in the application under consideration.

The Commissioner considers that the taxpayer's application does not disclose all the relevant facts which would enable him to make a ruling, particularly in relation to the 'eight matters' listed in paragraph 177D(b) of the Income Tax Assessment Act 1936 (ITAA 1936).

Information relevant to the eight matters is likely to be held by parties other than the applicant

Reasons for Decision

Section 14ZAN of the TAA lists those circumstances in which the Commissioner is not required to comply with a taxpayer's request for a private ruling:

14ZAN The Commissioner will not be required to comply with an application for a private ruling if:

(a)

..........

(j)

in the opinion of the Commissioner, it would be unreasonable to comply, or continue to attempt to comply, having regard to:

(i)

......

(ii)

any other matters that the Commissioner considers relevant

In the present case, the Commissioner does not believe that he has all the facts necessary to make a ruling on the arrangement which is the subject of the application for private ruling.

Section 14ZAM of the TAA provides for the Commissioner to request further information from an applicant if he considers that

(a)

a private ruling cannot be made without further information; and

(b)

if that information were given, there would be no reason for the Commissioner not to comply with the application for the ruling....

However, the Commissioner considers that information required to make the ruling is likely to be held not by the applicant, but by third parties.

Given the activities that are ongoing as part of the audit, requesting the applicant to obtain the facts to make the ruling may involve making inquiries from these third parties twice, and would also involve other inefficiencies, both for the applicant taxpayer and the Commissioner.

Accordingly, it is considered unreasonable that the Commissioner be required to attempt to obtain this information from the applicant in addition to seeking to obtain it in the course of the audit.

On the basis of the above findings, it is considered that these matters are other matters that the Commissioner considers to be relevant. Consequently, the application of paragraph 14ZAN(j)(ii)of the TAA is warranted, as in the Commissioner's opinion it would be unreasonable to comply with the application.

While 14ZAL(2) of the TAA allows the Commissioner to make a private ruling in circumstances where 14ZAN does not require it, the Commissioner is of the view that it would be inappropriate to exercise this discretion, given the ongoing nature of the relevant tax audit. In particular, regard is had to the fact that the Commissioner's resources are already being utilized to gather the information which will be required to decide the issues which are the subject of the ruling application.

Year of income:  Year ended 30 June 2001

Legislative References:
Taxation Administration Act 1953
   paragraph 14ZAN(j)
   subsection 14ZAL(2)
   Section 14ZAM

Keywords
Income tax
Private rulings
Private rulings applications

Business Line:  Business and Personal Taxes Centre of Expertise

Date of publication:  29 August 2003

ISSN: 1445-2782