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16 Sep 11 Update on TOFA compliance

Tax Counsel Tamera Lang ATIA and Tony Frost FTIA (Greenwoods & Freehills) attended a meeting of selected members of the TOFA Working Group on 15 September 2011 to discuss the ATO’s TOFA compliance plan. The group specifically discussed a draft “TOFA implementation” questionnaire that the ATO intends to use as part of their compliance activities. The objective of the questionnaire is to review taxpayers’ compliance with the TOFA rules in the implementation phase, and to monitor the extent to which the objectives of the TOFA rules are being met.

The ATO’s draft questionnaire currently covers the choices made under TOFA, the types of arrangements that the taxpayer holds, any unusual or unexpected arrangements/outcomes from the implementation process, and governance issues. The generic questionnaire will be tailored to taxpayers’ circumstances. It may be used as part of a general compliance activity (such as a client risk review) or may be issued by the TOFA project team as part of a specific review. The ATO’s immediate compliance focus will be on taxpayers that made transitional elections to enter TOFA early and/or “ungrandfathered” existing financial arrangements.

The private sector members expressed concern that the draft questionnaire requires very detailed information on a multitude of financial arrangements, and would be too onerous for taxpayers and their advisers to complete. We have recommended that the ATO direct their concerns towards understanding the type of financial arrangements a taxpayer holds, and how they transitioned to TOFA. The group agreed that it is reasonable for the ATO to ask questions about the process/governance of implementation, particularly whether TOFA was an influence on entering into new or extending/terminating existing financial arrangements immediately prior to the commencement of Div.230. The private sector asked that the ATO give careful thought as to how information collected would be used before imposing the obligation on taxpayers to compile it.

The ATO took on board the private sector’s feedback and will be producing another draft of the questionnaire for comment. If members would like to be involved in this process, please contact us for more information.


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