The Tax Institute welcomes the opportunity to make a submission to the Australian Taxation Office (ATO) in relation to the draft Practical Compliance Guideline PCG 2022/D1 Section 100A reimbursement agreements – ATO compliance approach (draft PCG). In addition, although the ATO has not established a consultation process for Taxpayer Alert TA 2022/1 Parents benefitting from the trust entitlements of their children over 18 years of age (TA), we would like to take the opportunity to also provide comments on this guidance as the TA raises significant concerns for tax professionals.
In the development of this submission, we have closely consulted with our National Small and Medium Enterprises Technical Committee and National Taxation of Individuals Committee to prepare a considered response that represents the views of the broader membership of The Tax Institute.
We are concerned that, fundamentally, the draft PCG has not achieved its purpose of clarifying how the ATO intends to apply its compliance resources to potential cases that may trigger the application of section 100A of the Income Tax Assessment Act 1936 (ITAA 1936). Although the draft PCG purports to set out different risk zones, we do not consider that taxpayers are provided with enough guidance to clearly identify the features of arrangements that the ATO considers to be high risk or understand the impact of the ATO's compliance approach. We consider that significant clarification is required throughout the draft PCG to ensure that it provides taxpayers with sufficient guidance.
Our members have provided feedback that they have significant concerns that the ATO's proposed approach in the draft PCG will result in oppressive and unfair outcomes for taxpayers and tax professionals. Our members have concerns that that ATO guidance on the application of section 100A to trust arrangements has historically been lacking, resulting in taxpayers and tax professionals being required to self-assess without appropriate guidance and support.