Publication date: 27 Jun 97 |
Source: THE TAX INSTITUTE
In what must be something of a record, the ATO issued a Taxation Ruling on 25 June which will be formally superseded after just 6 days operation, come 1 July and the commencement of the new Tax Act - The Income Tax Assessment Act 1997.
The new Ruling, TR 97/15 sets out over 22 pages the tax treatment of income derived under conditional contracts, and discusses how deductions may be claimed, and the treatment of trading stock, under such contracts. The Ruling discusses in detail sections 25(1) and 51(1) of the Income Tax Assessment Act 1936 which will no longer have application to taxpayers after 1 July 1997.
"Why has the Tax Office decided to release the Ruling before 1 July knowing that the new Act would take effect from that date, rendering the TR 97/15 in its present form of little legal effect for future applications?" asked Taxation Institute Senior Vice President, Mr Ken Spence.
"It appears that the Tax Office is having just as much trouble coping with the timing of the commencement of the new Tax Act as tax practitioners and the ordinary taxpayer will."
"Now, taxpayers who consult the Ruling after 1 July will find that the Ruling makes no reference to the new law that applies from that time. This will certainly complicate matters for taxpayers rather than simplfy them, which was the purpose of the rewrite of the Act," he said.
The Taxation Institute has previously expressed grave reservations over the wisdom of this phased introduction approach to the new tax law, and has consistently recommended that the rewritten tax law not be brought into operation until the rewriting project is complete. Completion of the rewriting task, without any substantial reform, is now not expected until the end of 1999.
"The decision to release the TR 97/15 at this time is just one illustration of the confusion that will reign for several years as taxpayers struggle to work under the combined weight of the old tax law and the new tax law that is being progressively introduced from 1 July," Mr Spence said.
However, despite this gloom, there is some scope for taxpayers to apply existing public and private rulings such as TR 97/15 to the new law where the reinacted new law expresses the same ideas as the old law. This rule is contained in the Income Tax (Consequential Amendments) Act 1997 which also comes into operation on 1 July.
"Unfortunately there is no mention of it in TR 97/15 and the problem with this rule is that taxpayers will simply not know whether the new law expresses the same ideas as the old law. This puts the taxpayer in a Catch 22 situation," he said.
Mr Spence warned that all Private Tax Rulings issued by the ATO under the old law that are purported to be validated by the rule in the Income Tax (Consequential Amendments) Act after 1 July will need to be closely examined to see whether they can continue to be relied upon after that date. Taxpayers should not simply assume that such Private Rulings will continue to apply.