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08 Feb 2019 8 February 2019

Invalid objections to GST private rulings?

It is my pleasure to present this week’s preamble while Bob takes a well-earned break. 

Late last year, The Tax Institute raised an issue with the ATO in relation to objections to GST-related private rulings. The issue concerned the interpretation of subsection 359-60(3) of Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA). Section 359-60 sets out the circumstances in which taxpayers can object to private rulings (for both income tax and GST related issues). 

Some members of the Institute’s GST committee had experiences with some GST-related private rulings where the Commissioner had treated an objection to a private ruling as invalid because an assessment had been issued to the taxpayer for a period covered by the private ruling, notwithstanding that the ruling also applied to future tax periods in respect of which no assessments had issued. Based on members’ experiences, this seemed to be a departure from the Commissioner’s previous practice and arguably inconsistent with how the Commissioner applies paragraph 359-60(3)(a) of the TAA to income tax related private rulings (see TR 2011/5). 

In responding to the Institute’s submission, the ATO claimed that it was their experience that there had been ‘a misunderstanding as to how to avoid the operation of subsection 359-60(3) of Schedule 1 of the TAA which limits objections against private rulings’. Relevantly, the ATO stated: 

The objections that we found were invalid did not specify a tax period nor did they specify an assessment. Rather the objections merely objected to the private ruling. As there was an assessment in respect of the ruling in these cases, subsection 359-60(3) prevented the objection to the private ruling. In such cases the objection should have been made to the relevant assessment(s) being disputed.
If, on the other hand, the objection specified a future tax period for which no assessment had yet issued, it could have been considered in respect of that future tax period.

The cases that members had dealt with were simple run-of-the-mill objections to private rulings that applied in respect of current and future tax periods from the date of issue. It was clear on the face of the private rulings that they applied to future tax periods in respect of which no assessments had issued. The need to state a tax period in respect of GST matters is somewhat counter-intuitive. Unlike income tax where a private ruling would more likely have application to a specific income year or years, a GST matter (eg a classification issue) is more likely to have ongoing application. 

There is no easy way for a taxpayer to challenge the ATO position, so a pragmatic approach may be the best way to go. Question 9 of the ATO’s standard objection form asks taxpayers to ‘state the years or periods to which your objection relates’. Whilst the advice quoted above referred to an objection being considered for ‘a future tax period’, the ATO subsequently confirmed with the Institute that it is not necessary for a taxpayer to ‘object to every tax period until the end of the universe’, it is sufficient to nominate a single tax period where there is no assessment. So if taxpayers and advisers follow this advice then there should be no problem with GST objections being considered invalid by the ATO. 

On a completely different topic, the ATO has lost over 100 years of tax administration experience over the last couple of months with the retirements of Second Commissioner Olesen (on leave pending retirement) and Deputy Commissioners Hastings and Holland. It will be interesting to see how the gaps created by these retirements will be filled on a permanent basis.

We would also like to invite you to participate in a survey we are conducting to to ascertain the extent to which our membership is in agreement or not with the proposals that are being put forward by Labor. The link to the survey can be found here.

Bob Deutsch will be discussing the results of this survey in his address at The Tax Institute's 34th National Convention in Hobart on March 14, 2019, and the results will be publicly available from that day on. Please complete this survey by 22 February 2019. That will give us sufficient time to collate the results and hopefully make some reasonably profound comments at the National Convention.

Kind regards,

Bruce Quigley, CTA