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Facts that Taxpayers Need to Know About Private Rulings

For taxpayers who could be thinking that the ATO’s recent move to improve and streamline private ruling applications translates into “open slather”, here are some sober facts you need to know.

Of course, taxpayers who are worried that their situation may place them in an unfamiliar spot tax-wise can apply for a private ruling. Examples of these situations may be a specific transaction or occasion that does not fit any recognised method for tax purposes, or an individual seeking to minimise the chance of having to pay an exorbitant amount of tax as a result of an unusual financial arrangement.

By applying for a private tax ruling, you can test drive a tax deal that you may be thinking about, particularly if you can’t find any existing information from the ATO that applies to it.

But remember that these decisions are one-off, that is, each ruling is specific to whoever applied for it. This means a ruling cannot be used as a benchmark by other taxpayers.

Similarly, if a taxpayer finds a ruling and decides to use it because their situation seems to be roughly similar, they must know that they will not be protected from using that ruling if the ATO decides that their circumstances should have had another result.

The word “binding” is included in the term used for these rulings. This signifies that if you obtain a private ruling from the ATO, and decides to apply it on your tax situation, the ATO is normally obliged to dispense the tax law as provided in that ruling.

Aside from income tax laws, private rulings can also cover luxury cars, goods and services tax and other indirect taxes. You can also apply for a private ruling if you need a resolution on whether an activity is a business or a hobby, or what the value of an item is.

PJS Accountants can represent you in applying for a private ruling, or you can lodge it yourselves. For businesses, the application can be filed by a public officer, a trustee of a trust or a partner of a partnership.

Lastly, ensure that you are aware that just because they requested you to apply for a private ruling, doesn’t mean you would automatically get one. The ATO can reject the request if it believes a ruling would restrict or prejudice the law. It can also deny the application if an audit is being conducted on your client on the same matter, or if their application is deemed as “frivolous” or “vexatious” by the ATO.

Are you considering filing an application for a private ruling with the ATO? The process has been made easy, but it is recommended that you seek the help of your accountant, or you can contact PJS Accountants. We offer expertise in managing your tax affairs with a full range of compliance, corporate and individual tax services, whether you are a large company, SME, family business or individual. Meet with one of our expert advisers now and ensure you are always compliant with ATO rules.