Declining to rule when an arrangement is the subject of a dispute

2010 amendment provides an exception to the prohibition on ruling on disputed arrangements that are the subject of a NOPA, if it covers a different tax type.

Section 91E(4)(ga) has been clarified to allow the Commissioner to make a binding ruling if the arrangement is the subject of a dispute by way of notice of proposed adjustment (NOPA) but the application for the ruling relates to a different tax type from that in the NOPA. Previously the Commissioner could not make a ruling if the application related to an arrangement that was the subject of a NOPA. Allowing the Commissioner to make a ruling that relates to a different tax type to that being disputed enhances the usefulness of the rulings process.

Background

Before its amendment, section 91E(4)(ga) did not allow the Commissioner to make a private ruling if the application related to an arrangement that was being disputed by way of a NOPA. This criterion was added in 1999 to clarify the policy intent that there should be no overlap between the disputes resolution process and the binding rulings regime.

This meant that if a NOPA related to only one aspect of an arrangement, the Commissioner could not rule on other aspects which might not have been related to the issue being disputed. This could occur, for example, if an arrangement had both income tax consequences and GST consequences. Even if the NOPA related only to the GST aspects of the arrangement, the taxpayer could not obtain a ruling in relation to the income tax aspects of the arrangement.

Key features

Section 91E(4)(ga) has been amended to provide an exception to the prohibition on ruling on disputed arrangements that are the subject of a NOPA. The exception will apply if the application for the ruling relates to a different tax type from that being disputed.

A further requirement is that the matter in dispute, and that for which the ruling is sought, are sufficiently separate.

Application date

The amendment applies from the day of Royal assent, being 7 September 2010. When the bill was introduced, the amendment was to apply from the date of the bill's enactment. Following submissions, the application date was amended to apply to ruling applications which were already lodged but had not been declined or finalised before 7 September 2010.