Taxation Law - Changes To Private Rulings

By: Frank Egan - LAC Lawyers
The Commissioner of Taxation does have the power to change a Private Ruling in four situations as follows:

1 Where the taxpayer gives consent to the Ruling being changed;

2 Without the taxpayer’s consent, if the Private Ruling is about an arrangement which has not yet been carried out. This means that if the Private Ruling covered an arrangement which the taxpayer repeatedly carried out over time (for example buying and selling a particular item), the Private Ruling could be changed for any of the arrangements which occurred after the date of the change;

3 Without the taxpayer’s consent where the arrangement had commenced. This is limited, however, to those circumstances where the Private Ruling was causing another taxpayer to be disadvantaged and his or her disadvantage was greater than the disadvantage that the Rulee would suffer if the Ruling were to be changed; and

4 By issuing a Public Ruling which is inconsistent with the Private Ruling. However, this could only occur if the taxpayer’s arrangement has not begun to be carried out or if it has commenced and another taxpayer would be disadvantaged to a much greater extent than the Rulee.

If the taxpayer received the Private Ruling before he or she lodged the return for the year in which the arrangement took place, and then the taxpayer did not follow that Ruling, then the taxpayer may be liable for the extra tax that he or she would have paid under the Ruling. If the taxpayer had received the Private Ruling after he or she lodged the relevant return, then the Commissioner has the power to amend the assessment to take the Private Ruling into account. This may decrease the taxation liability but may also increase that liability.

The way in which a taxpayer can have a Private Ruling reviewed is determined by whether or not an assessment in respect of an income tax return has issued which deals with the arrangement covered by the Private Ruling.

If the assessment has already issued, then the taxpayer should have the assessment reviewed. If no assessment is issued, then the taxpayer should have the Ruling reviewed.

To have an assessment reviewed, the taxpayer needs to lodge an objection. That objection must be in writing in which the taxpayer informs the Commissioner which assessment is to be reviewed and provides details of the years and the relevant tax file number. The objection must also state which matter dealt with within the assessment is disputed and why the taxpayer believes that the assessment should be amended. For most short period of return taxpayers, the objection must be lodged within two years of the date upon which the taxpayer received the original assessment. There are no fees for lodging objections.

To have a Private Ruling reviewed, the taxpayer must also need to lodge an objection. Again, the objection must be in writing. The taxpayer must provide the Authorisation number of the Private Ruling. The taxpayer must also inform the Commissioner which part of the Private Ruling is disputed and why the taxpayer believes the Ruling should be changed.

This objection to the Ruling must be lodged within 60 days of the date of service of the Private Ruling upon the taxpayer or, for short period of return taxpayers, within two years of the last day allowed for lodging the tax return for the particular year that the Private Ruling is about, whichever is the latest. Again, there are no fees for lodging objections to Private Rulings.

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Frank Egan is the Chief Executive Officer of LAC Taxation Lawyers and has over 27 years of experience as a lawyer.