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Ruling

Subject: Electronic Tax File Number Declarations

Question 1

Can the storage of Tax File Number (TFN) Declarations in paper form be waived and an electronic version of the form stored instead?

Advice/Answers

Yes. Under the TFN guidelines in the Privacy Act 1988, you must use secure methods when storing and disposing of TFN information. You may store electronic files of scanned forms as an alternative to storing paper forms. Scanned forms must be clear and not altered in any way.

Question 2

Can approval be granted to develop and design an electronic version of the TFN Declaration to be used by employees? This will replace the paper documents which candidates will complete electronically. Candidates will then have to acknowledge or declare electronically on the accuracy and truthfulness of the information provided by clicking certain keys.

Advice/Answers

No. A TFN declaration, to be effective, must be in the approved form. A TFN Declaration is only in the approved form if it is the form approved in writing by the Commissioner and contains a declaration signed by the persons required by the form. As a declaration signed by the payee is required for the form, an electronic version cannot be created.

This ruling applies for the following period

1 July 2009 to 30 June 2010

Relevant facts

As part of your streamlining process gearing towards a paperless and therefore more sustainable environment and efficient front office systems, you are in the midst of converting your payee's registration process from paper documents to electronic versions.

You are currently facing two issues;

Logistic issues of storage for the signed Tax File Number (TFN) Declarations and their subsequent disposal

Increased risk of transposition errors when information is manually keyed from the paper form onto the system.

Relevant legislative provisions

Privacy Act 1988, section 17

Income Tax Assessment Act 1997, section 995-1

Income Tax Assessment Act 1936, section 202C

Taxation Administration Act 1953, Schedule 1, subsection 388-50(1)

Taxation Administration Act 1953, Schedule 1, subsection 388-75(1)

Reasons for decision

Question 1

Summary

Yes. Under the TFN guidelines in the Privacy Act 1988, you must use secure methods when storing and disposing of TFN information. You may store electronic files of scanned forms as an alternative to storing paper forms. Scanned forms must be clear and not altered in any way.

Detailed reasoning

Tax File Number Guidelines are issued under section 17 of the Privacy Act 1988. They are intended to protect the privacy of individual by restricting the use of tax file number information. As stated at Guideline 6;

6. STORAGE, SECURITY AND DISPOSAL OF TAX FILE NUMBER INFORMATION

6.1 Tax file number recipients shall ensure:

that tax file number information is protected, by such security safeguards as it is reasonable in the circumstances to take, to prevent loss, unauthorised access, use, modification or disclosure, and other misuse; and

that access to records that contain tax file number information is restricted, where practicable, to persons undertaking duties related to responsibilities arising under taxation, assistance agency or superannuation law which necessitate the use of tax file numbers.

6.2 Tax file number recipients may dispose of tax file number information when it is no longer required by law nor administratively necessary to be retained. Any disposal of tax file number information shall be by appropriately secure means.

Taxation Ruling TR 2005/9 "Income Tax: record keeping - electronic records" explains the principles associated with the retention of electronic records created from business transactions. It sets out the Tax Office view on what are sufficient electronic records to be retained including those created by internet electronic commerce so as to record and explain all transactions and other acts engaged in by such persons for the purposes of the ITAA 1936.

Paragraphs 57 and 58 explain;

57. The Tax Office considers that where it is intended to convert original paper records onto an electronic storage medium by way of an imaging process that this represents a true and clear reproduction of the original documentation. The Tax Office accepts the imaging of paper records provided the conversion process produces electronic copies that are a complete, true and clear reproduction of the original paper records. For instance, Optical Character Recognition conversion processes that do not produce a 100% accurate reproduction of original documents are not acceptable to the Tax Office.

58. Scanned copies of paper records must:

· not be altered or manipulated once stored;

· be retained for the statutory period of 5 years; and

· be capable of being retrieved and read by Tax Office staff.

For TFN Declarations the retention period for storing is

If a payee submits a new TFN Declaration you must retain a copy of the earlier declaration for the current and following financial year

If a payee leaves your employment you must retain a copy of the last completed declaration for the current and following financial year.

Paragraph 51 explains that the scanned electronic documents should be readily accessible;

51. Electronic records should be readily accessible. To that end, a taxpayer should ensure the conversion of electronic records to a compatible format when upgrading or changing data-processing capabilities.

You are therefore able to retain a scanned copy of a TFN Declaration as a substitute of a paper declaration provided it meets the above guidelines as set out in TR 2005/9.

If you lodge a TFN Declaration Report with the Commissioner electronically via the electronic commerce interface (ECI), then you are not required to complete the payer details of each individual TFN Declaration (including the payer signature).

Question 2

Summary

No. A TFN declaration, to be effective, must be in the approved form. A TFN Declaration is only in the approved form if it is the form approved in writing by the Commissioner and contains a declaration signed by the persons required by the form. As a declaration signed by the payee is required for the form, an electronic version cannot be created.

Detailed reasoning

Section 995-1 ITAA 1997 defines a TFN Declaration to be a declaration made for the purposes of section 202C of the Income Tax Assessment Act 1936 (ITAA 1936) on or after 1 July 2000. Subsection 202C(1) of the ITAA 1936 provides that

A person who is a recipient of a payer, or expects to become a recipient of a payer, may make a TFN declaration in relation to the payer.

Subsection 202C(2) provides that to be effective, the declaration must be made in the approved form.

Subsection 388-50(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) provides that

A return, notice, statement, application or other document under a taxation law is in the approved form if, and only if:

(a) it is in the form approved in writing by the Commissioner for that kind of return, notice, statement, application or other document; and

(b) it contains a declaration signed by a person or persons as the form requires (see section388-75); and

(c) it contains the information that the form requires, and any further information, statement or document as the Commissioner requires, whether in the form or otherwise; and

for a return, notice, statement, application or document that is required to be given to the Commissioner - it is given in the manner that the Commissioner requires (which may include electronically).

A TFN Declaration is in an approved form if it is the form issued by the Commissioner. The TFN Declaration issued by the Commissioner requires a signature of the payee. Subsection 388-75(1) to Schedule 1 of the TAA 1953 provides that;

You must sign a declaration in a return, notice, statement, application or other document you give to the Commissioner in paper form.

As each individual payee is required to provide a signature on the TFN Declaration form for it to be considered an approved form, an electronic version of the form cannot be created.

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