Draft Law Companion Guideline LCG 2015/D1, issued on Thur 10.3.2016, discusses the purpose, nature and role of the Law Companion Guideline, a type of public ruling on newly enacted tax legislation. The ATO began publishing Law Companion Guidelines in 2015 and intends to issue a Guideline whenever a new law introduces a new regime or unfamiliar concept, or encourages or requires “many taxpayers to take additional action to comply with the law, or respond to an inducement”. The ATO also plans to publish another type of Guideline, the Practical Compliance Guideline, with practical compliance solutions and the Commissioner’s view of relative levels of tax compliance risk.

Draft LCG 2015/D1 states that the purpose of a Law Companion Guideline is to provide an insight into the practical implications or detail of a new law. For example, it may identify factors that the ATO will use to assess the risk of certain activities or transactions, give examples of high and low risk scenarios and outline the Commissioner’s approach to a discretion or safe harbour.

A draft Guideline is generally issued when a Bill is still before Parliament and is finalised after the Bill receives Royal Assent, taking into account any amendments and feedback from consultation. As a binding public ruling, a taxpayer who relies on a Guideline in good faith will not have to pay any underpaid tax, penalties or interest in respect of matters covered by the Guideline if it does not correctly state how a relevant provision applies to the taxpayer. However, Draft LCG 2015/D1 also notes that taxpayers applying a Guideline in good faith “will be able to rely upon such material, but with the knowledge that the law is intended to accommodate changing circumstances”.

When Draft LCG 2015/D1 is finalised, it is proposed to apply both before and after its date of issue.

COMMENTS on the draft are due by 8 April 2016.

[LTN 47, 10/3/16]