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14 Oct 11 New “International Dealings Schedule” consultation

Tax Counsel Tamera Lang ATIA joined a teleconference hosted by the ATO about the new International Dealings Schedule (IDS) on 11 October 2011.

The new IDS will be relevant to a broad range of taxpayers (companies, trusts and superannuation funds) that have international related party dealings over $1 million and/or are subject to the thin capitalisation provisions. It follows on from the “International dealing schedule – financial services” (IDS-FS) pilot which occurred in 2010, and became mandatory for certain financial services entities, foreign banks and general/life insurance entities in 2011. The new IDS will become a general product that will be applicable to all industries, including financial services.

The IDS will replace the current Schedule 25A and thin capitalisation schedule. The ATO is replacing these schedules so they can ask more comprehensive questions that are aligned with risk management, business systems and other projects (such as the Standard Business Reporting project). It follows on from feedback from some taxpayer groups that the Schedule 25A is difficult to complete as it does not reflect their record keeping systems.

The draft IDS currently contains 40 questions. Of these questions:

  • 25 questions are unchanged from the existing schedules;
  • 9 questions have slight changes which should not alter the meaning;
  • 4 questions have changed as to the detail required; and
  • 2 questions are new.

The Professional Bodies have been provided with a copy of the draft schedule, and the consultation centred on the improving the clarity of the questions. Unfortunately, the ATO were unable to provide a draft of the schedule’s accompanying instructions. The accompanying instructions are often vital for understanding the finer detail of the questions, and also give guidance on where certain transactions should be disclosed. The ATO hopes to be able to provide a draft copy of the instructions shortly.

The ATO is planning to complete the consultation on the new IDS by November 2011 (there is a concurrent consultation with software providers, to ensure that their relevant system changes can be accommodated). From December 2011 onwards, the ATO will be finalising their own system specifications and changes, as well as communicating the changes to taxpayers and tax agents.

This consultative process represents an important opportunity for taxpayers and tax agents who have had difficulties with the current Schedule 25A and thin capitalisation schedules to seek improvements and clarity.  Consultation will be continuing throughout October, and if you would like to be involved or have input into the process, please contact us at Tax Policy.

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