The Tax Institute welcomes the opportunity to make a submission to the Australian Taxation Office (ATO) in relation to the Decision Impact Statement – Addy v Commissioner of Taxation (the DIS).
In the preparation of this submission, we have consulted with our national Large Business and International and Taxation of Individuals Technical Committees to prepare a considered response that represents the views of the broader membership of The Tax Institute.
The High Court's decision in Addy v Commissioner of Taxation1 (Addy) is of interest to taxpayers because it explains the operation and application of the anti-discrimination clauses of certain double tax agreements in the context of a working holiday maker (WHM). The operation and application of Australia's double tax agreements is a complex area for taxpayers and usually requires advice from an experienced and specialised tax adviser. This is compounded by the complexity of Australia's individual tax residency rules that require both an understanding of the legal principles and a comprehensive review of a broad factual matrix to apply the law correctly.
The Tax Institute's view is that the Addy case provides an opportunity for the ATO to provide greater clarity on these matters in the DIS. We consider that ATO advice or guidance that focuses solely on the issues addressed by the High Court's judgment will assist taxpayers in understanding how the decision affects their circumstances. Advice or guidance set out in the DIS should not go beyond those issues specifically considered by the court.
We are concerned about statements made by the ATO in the DIS for three reasons.
- Whether the ATO's position is technically correct, based on the operation of the tax treaty with the United Kingdom and having proper regard to the decision of the High Court.
- Whether the statements made by the ATO in the guidance materials are properly explained such that taxpayers can fully understand the different outcomes, based on the ATO's interpretation of the High Court's decision.
- Whether the interpretive statements made in the DIS should be published in the form of legally binding guidance, such as a Taxation Ruling or Determination, rather than by way of a DIS.