On 16 March 2016, the ATO announced a new product being the Practical Compliance Guideline, by way of a draft of the first of these: PCG 2016/D1.
These Guides will provide taxpayers with “broad law administration guidance”. The ATO says that a PCG may set out the Commissioner’s view on relative levels of tax compliance risk, so that taxpayers can safely “swim between the flags”. A PCG may also provide practical compliance solutions where a tax law is uncertain or creates unsustainable administrative or compliance burdens (eg due to evolving commercial practices). Previously, the ATO provided compliance guidance through practice statements or other advice published on its website. The ATO says that, going forward, practice statements will align more closely with their main purpose of instructing ATO staff, while PCGs will be the appropriate product for giving taxpayers administration guidance.
Relevant topics or issues for PCGs may be identified by the ATO or raised by taxpayers or industry groups. The ATO does not plan to routinely issue draft PCGs for public comment, unless there has been insufficient opportunity for consultation or the PCG could potentially affect a wide range of taxpayers.
A PCG will not generally have the status of a public ruling, so it will not be legally binding on the Commissioner. However, the ATO says that if a PCG outlines an approach (eg a safe harbour) with clear consequences for determining the tax liabilities of taxpayers who rely on that approach in good faith, and the ATO later changes its position or withdraws the PCG, the ATO will not take action to apply its changed view retrospectively.
When Draft PCG 2016/D1 is finalised, it is proposed to apply from its date of issue.
COMMENTS on the draft are due by 17 April 2016.
The function of this new product is announced in the Draft Guideline as follows.
4. The ATO is committed to providing clear and practical public advice and guidance on which taxpayers can rely to manage their tax affairs. Public Rulings are a key form of public advice, enabling the ATO to express views on how tax laws apply to entities, or classes of entity, in relation to classes of scheme or particular schemes.
5. In addition to Public Rulings, taxpayers may also benefit from broader law administration guidance that conveys the ATO’s assessment of relative levels of tax compliance risk across a spectrum of behaviours or arrangements. Such guidance may, for example, enable taxpayers to position themselves within a range of behaviours, activities or transaction structures that the ATO describes as low risk and unlikely to require scrutiny – to safely ‘swim between the flags’.
6. Broader guidance can also enable the ATO to communicate how it will sensibly apply its audit resources or provide practical compliance solutions where tax laws are uncertain in their application or are found to be creating unsustainable administrative or compliance burdens in light of, for example, evolving commercial practices.
7. Guidance of the kind described in paragraphs 5 and 6 of this draft Guideline (compliance guidance) can provide useful insights into the practical implications of tax laws and ATO administrative approaches, going beyond views on how particular provisions apply and the matters ancillary to that interpretation.
8. The provision of compliance guidance can be seen as consistent with the duty of good management stemming from the Commissioner’s general powers of administration of the taxation laws. Balanced against the duty to assess and collect the revenue properly payable under the law, the duty of good management involves efficient resource allocation decisions to achieve optimal, though not necessarily maximum, revenue collection. Practical Compliance Guidelines will transparently communicate the ATO’s assessment of risk in relation to tax law compliance issues and consequential resource allocation intentions.
9. From the date of effect of this Guideline, it has been determined that Practical Compliance Guidelines will be the identifiable, coherent, principal source of the type of broad compliance guidance described above in respect of significant law administration issues.
[LTN 51, 16/3/16]