The AAT has dismissed the application of a taxpayer who sought a review of a deemed decision of the Commissioner to disallow an objection to a deemed decision to deny a private ruling. The taxpayer was also unsuccessful in seeking to have any finding made in its favour to take effect retrospectively to counter the proposed retrospective changes to the consolidation regime announced in November 2011 to deny deduction entitlements in respect of rights to future income.
The subject matter of the private ruling application was the applicability of s 716-405 of the ITAA 1997 to the taxpayer’s purchase of shares in another company (Australian Wealth Management Limited). The underlying issue concerned whether or not rights pursuant to a variety of contracts to which the newly acquired subsidiary members of the taxpayer’s consolidated group were parties were in fact rights to future income in respect of which deductions were allowable over time. Moreover, the issue arose in the context of the announcement by the Government on 25 November 2011 that the legislation creating the deduction entitlement in respect of rights to future income would be amended with retrospective effect from 31 March 2011, but would exclude taxpayers who had the benefit of private rulings issued before that date.
The taxpayer argued that it should have the benefit of a private ruling issued before 31 March 2011 because, among other things, it applied for a private ruling on 30 December 2010 and because the Commissioner indicated that the private ruling would be processed within 28 days. The taxpayer also sought the disclosure of various ATO documentation to support its claim that the failure to make the private ruling was the result of “bad-faith” decisions made within the ATO not to issue private rulings in the knowledge that the topic of deductions for rights to future income was under review and that retrospective legislation was a possible outcome.
In dismissing the taxpayer’s application, the AAT first found that it had the power to order that a decision be varied to take effect from a different date from the original decision where there was good reason, and that an orchestrated delay might be such a legitimate reason. However, it then stated that “whether that is a sufficient foundation for such a decision is a matter for the future”. Further, the AAT found it was relevant that it was uncertain how, at the time of the Government’s announcement, the law would be changed, as change can take place in the course of the legislative process. For example, there could be changes to the scope of the reform or the circumstances in which otherwise affected people could be excluded from the scope of the change (ie the exclusion might change from a private ruling having been issued to a private ruling having been applied for).
In this context, the AAT ruled that its role was not to anticipate what might happen, but to make the correct or preferable decision having regard to the legislation operative at the time of the decision. Accordingly, the AAT refused to allow the taxpayer’s application and its direction for the documents to be provided by the ATO.
(AAT Case [2012] AATA 378, Re IOOF Holdings Limited and FCT, AAT, Ref No 2012/0578, O’Loughlin SM, 22 June 2012.)
[LTN 121, 26/6]