Edited version of your written advice

Authorisation Number: 1051426743845

Date of advice: 18 October 2018

Ruling

Subject: Liability to GIC, SIC and administrative penalties

Question 1

Is the Corporation exempt from the liability to pay General Interest Charge (GIC) pursuant to subsection 8AAB(3) of the Tax Administration Act 1953 (TAA)?

Answer

Yes.

Question 2

Is the Corporation exempt from the liability to pay Shortfall Interest Charge (SIC) pursuant to subsection 280-103(2) of Schedule 1 to the TAA?

Answer

Yes.

Question 3

Is the Corporation liable to pay administrative penalties set out in Division 284 of Schedule 1 to the TAA?

Answer

Yes.

Question 4

For the purposes of subsection 8AAB(3) of the TAA and subsection 280-103(2) of Schedule 1 to the TAA, are the Subsidiaries of the Corporation considered an ‘authority of the Commonwealth?

Answer

No.

This ruling applies for the following periods:

1 July 20xx to 30 June 20xx

The scheme commences on:

1 July 20xx

Relevant facts and circumstances

1. The Corporation is the head company of the Corporation income tax consolidated group, which was formed on 1 July 20xx.

2. The Corporation was established under its own Act of the Commonwealth (‘Corporation Act’).

3. The Corporation has two key objectives:

(i) To earn profit to pay dividends to the Commonwealth and reinvest in the business; and

(ii) To deliver a community service.

4. Under the terms of the Corporation Act, the Corporation is subject to taxation in Australia and is not entitled to any immunity or privilege of the Commonwealth except so far as express provision is made by the Corporation Act or any other law of the Commonwealth, or by a law of the State or Territory.

5. The subsidiary members of the Corporation income tax consolidated group (the Subsidiaries) have been established under the Corporations Act 2001.

6. The Subsidiaries are not a Department of State; or a Parliamentary Department; or a listed entity; or prescribed by an Act or the rules to be a Commonwealth entity.

Relevant legislative provisions

Taxation Administration Act 1953 Subsection 8AAB(3)

Taxation Administration Act 1953 Subsection 280-103(2) of Schedule 1

Taxation Administration Act 1953 Division 284 of Schedule 1

Reasons for decision

Question 1

Summary

The Corporation is not liable to pay GIC as the exemption in subsection 8AAB(3) of the Taxation Administration Act 1953 (TAA) applies.

Detailed reasoning

Subsection 8AAB(2) of the TAA provides that a person is only liable to pay GIC on an amount if a provision specifies that the person is liable to pay.

Subsection 8AAB(3) of the TAA gives an exemption from the liability to pay GIC. It provides that GIC does not apply to the Commonwealth or an authority of the Commonwealth.

Authority of the Commonwealth

The phrase 'authority of the Commonwealth' is not a defined term and therefore takes on its ordinary meaning within the context in which it appears.

In the absence of a statutory definition, the general law is considered to ascertain whether a body is an ‘authority’ of the Commonwealth under the GIC exemption.

There is no single test to determine whether a body is an ‘authority’. Rather, it is a question of fact and degree requiring an analysis of all the relevant circumstances to determine the character of the body in question.

We consider that the Corporation falls within the ordinary meaning of the term an 'authority of the Commonwealth' for the purposes of subsection 8AAB(3) of the TAA 1953.

Question 2

Summary

The Corporation is not liable to pay SIC as the exemption in subsection 280-103(2) of Schedule 1 to the TAA applies.

Detailed reasoning

Section 280-100 of Schedule 1 to the TAA imposes the liability to SIC.

Subsection 280-103(2) of Schedule 1 to the TAA 1953 provides that neither the Commonwealth nor an authority of the Commonwealth are liable to pay SIC. For the reasons set out at question 1, the Corporation is an authority of the Commonwealth.

Therefore, subsection 280-103(2) of Schedule 1 to the TAA provides the Corporation with an exemption from the liability to pay SIC.

Question 3

Summary

The Corporation is liable to pay administrative penalties under Division 284 as the Corporation is legally liable to Commonwealth taxation and there is no express exemption from Division 284 for an ‘authority of the Commonwealth’.

Detailed reasoning

The Corporation is a ‘Commonwealth body’ as defined in paragraph 7 of Miscellaneous Taxation Ruling MT 2011/1 Miscellaneous taxes: application of penalties and interest charges to the Commonwealth, States, Northern Territory and Australian Capital Territory (MT 2011/1). However, fundamental to the application of MT 2011/1 to Commonwealth bodies and whether such bodies are subject to penalties is the question of whether such bodies are legally liable to Commonwealth taxation laws or notionally liable to Commonwealth taxation laws.

The Corporation is subject to Commonwealth taxation and generally does not share the Commonwealth’s privileges and immunities.

As the Corporation is legally liable to Commonwealth taxation (as opposed to notionally liable), paragraph 39 of MT2011/1 is not applicable to the Corporation. Therefore, the Corporation is liable to pay Division 284 administrative penalties.

Question 4

Summary

The Subsidiaries are not exempt from GIC or SIC as the Subsidiaries are not an ‘authority of the Commonwealth’.

Detailed reasoning

For the reasons set out in Question 1, in order for a body to be an authority, it must have statutory authority, power or command derived or delegated by the Commonwealth, State or Territory. The Subsidiaries derive their power from their own constitution and not delegated power by the Commonwealth.

The Subsidiaries are not an agency or instrument of government set up to exercise control or execute a function in the public interest.

The Subsidiaries are not considered an ‘authority of the Commonwealth’ merely by virtue of being a subsidiary of the Corporation.