There are a range of documents published by the Tax Office. Many of them are very useful in helping us understand how to comply with all the various laws.
The ATO first began publishing these documents in December 1982. It began by issuing public rulings to provide “a method of publishing and disseminating decisions on interpretation of the laws administered by” the ATO. In other words, these rulings are meant to tell taxpayers how to satisfy certain parts of the tax laws in order to avoid facing various penalties.
The tax administration laws allow the ATO to release rulings in relation to a wide range of tax matters. These laws give specific protection to taxpayers who rely on the final version of these rulings, as long as the taxpayer is using a ruling that relates to current tax law. This specific protection says that if the ATO’s interpretation in a ruling document is found to be wrong, the ATO cannot go back and claim tax and other penalties from taxpayers who have relied on a faulty ruling.
Helpful information
Since 1982, the ATO has created a wide range of other publications to inform its “clients” about their statutory obligations. Some of these are formal documents and others are merely newsletters. Most of these new publications don’t have any specific protection for taxpayers, which means that if the ATO is found to be wrong or changes its interpretation, taxpayers remain exposed. The ATO always reserves the right to claim unpaid taxes from anyone who has relied on a particular document but it tends to say that if a publication is incorrect it won’t apply penalties or seek interest on the late payment of taxes – but it will want any unpaid tax.
Are these documents worth anything if they don’t stop the ATO from claiming unpaid taxes? In my view, you should know what the status of that document is.
A summary of the ATO documents that affect SMSFs includes:
- Taxation rulings and determinations;
- SMSF rulings and determinations;
- Interpretative decisions;
- Product rulings;
- Private binding rulings;
- Practice law statements;
- Minutes of the meetings of the National Tax Liaison Group and its various sub-committees especially the Superannuation Technical Committee; and
- General newsletters.
Many SMSF trustees expect their advisers to keep up-to-date with all the ATO’s pronouncements. You can delegate your responsibilities but this doesn’t absolve you from the obligation to make sure your fund is administered correctly. Theoretically, therefore, you should be familiar with all these various ATO publications.
Product rulings
The ATO issues Product Rulings that say how a product or transaction will be treated for tax purposes. The ATO must stand by the tax information provided in these rulings, as long as the organisation seeking the ruling implements the scheme, project or transaction in the way they have told the ATO it would be implemented. The ATO regularly audits product providers to ensure they have been true to their word. The ATO must abide by these rulings, even if it later decides that the law should be interpreted in a different way or a court decides that the ATO was wrong in its initial interpretation. The only way the ATO can’t stand by these rulings is if Parliament decides to amend the relevant laws retrospectively.
These Product Rulings can examine all income tax matters including capital gains tax and offsets, such as franking credits and access to tax deductions. They can also address GST matters.
Anyone thinking of relying on a Product Ruling needs to carefully analyse the questions that have been asked, because the ATO only answers those questions and provides no further information or guidance.
You can’t assume Product Rulings are only granted over good investments. All of these rulings begin by saying that the ATO “does not sanction or guarantee this product. Further, we give no assurance that the product is commercially viable, that charges are reasonable, appropriate or represent industry norms, or that projected returns will be achieved or are reasonably based.”
Where would you go to find out if a proposed transaction was legal from a superannuation law perspective? An obvious place to turn is legal or other sources of advice. This can be very helpful but the advice is only as good as the questions being asked and only as good as the knowledge of the person providing the advice.
SMSF rulings and determinations
There are specific rulings that relate to the operation of self managed superannuation funds and many of these are around tricky issues like borrowing to invest and investing in collectables in your fund. The following are the five most recent SMSFRs that could impact you.
SMSFR 2012/1 [1]
Self Managed Superannuation Funds: limited recourse borrowing arrangements – application of key concepts (As at 23 May 2012).
SMSFR 2010/2 [2]
Self Managed Superannuation Funds: the scope and operation of subparagraph 17A(3)(b)(ii) of the Superannuation Industry (Supervision) Act 1993 (As at 21 April 2010) as it relates to the appointment of a legal personal representative.
SMSFR 2010/1 [3]
Self Managed Superannuation Funds: the application of subsection 66(1) of the Superannuation Industry (Supervision) Act 1993 to the acquisition of an asset by a self managed superannuation fund from a related party (As at 25 February 2010).
SMSFR 2009/4A2 – Addendum [4]
Self Managed Superannuation Funds: the meaning of ‘asset’, ‘loan’, ‘investment in’, ‘lease’ and ‘lease arrangement’ in the definition of an ‘in-house asset’ in the Superannuation Industry (Supervision) Act 1993 (As at 13 June 2012).
SMSFR 2009/4 [5]
Self Managed Superannuation Funds: the meaning of ‘asset’, ‘loan’, ‘investment in’, ‘lease’ and ‘lease arrangement’ in the definition of an ‘in-house asset’ in the Superannuation Industry (Supervision) Act 1993 (As at 13 June 2012).
Interpretative decisions
You need to be careful about automatically relying on Interpretative Decisions (IDs) because as the ATO itself says, these documents “are an edited and summarised version of a decision on an interpretative issue on [the] law” administered by the ATO. However, “IDs … may have been complex legal argument applied to complex facts, a general similarity to the circumstances in an ATO ID will not necessarily lead to the same tax result.”
Therefore if you rely on a particular ID in circumstances that are materially the same as those described in the ID, and the ID is subsequently found to be incorrect, penalties won’t apply on the outstanding tax. However, the ATO might impose penalty interest. It is often necessary to check that there has been no amendment in the law after an ID has been published.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report
- Peter Switzer: I’m not afraid of the big bad May [6]
- Paul Rickard: Bank dividends – buy three for the price of two? [7]
- Penny Pryor: Weekly auction data – Interest rates could fall further [8]
- Rudi Filapek-Vandyck: Weekly broker wrap – EVN and OZL upgraded to Buy [9]