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The ATO has provided the following message for circulation to members:

"We have an update in relation to two of the TOFA/Consolidation interaction raised in the former NTLG TOFA Working Group.

The issues are:

These issues have been discussed at number of TOFA Working Group and F&I Subcommittee meetings.

Since these discussions, the ATO has received advice that while both provisions can be interpreted to achieve their clear policy intent, it is by no means certain that a court would arrive at the same conclusion.

The ATO has decided to accept this advice.

For that reason, we will administer our active compliance program on the basis of both asset and liability sides operating as intended (issues 940 and 950 respectively).

Also, as advised in our meeting of 21 December 2013, we think that the operation of both provisions should be tested in the Courts. In that context the ATO is seeking a single test case in which the operation of both provisions is at issue. It is considered desirable to ensure that both provisions are considered by the Court.

To put it simply the ATO considers that while the two provisions are not identically worded they are both aimed at achieving the same policy goal: the appropriate recognition of TOFA assets and liabilities in a joining case, and that their interpretation is at least to some extend 'co-dependant'.

Consequently, in our view both provisions achieve their policy aim. This is not a situation where one provision, say section 701-55(5A) achieves its policy aim but the other, section 715-375, does not.

This approach will inform the arguments put in any litigation.

In conformity with this approach the ATO will take no compliance action on this issue where a taxpayer lodges their returns on the basis that both provisions achieve their policy aim."

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