When the tax going gets complex, it’s best to seek a ruling from the ATO. That’s not always as simple as it seems, says chartered accountant GAIL FREEMAN.

Recently, I have spoken to clients who have had very complex issues that, at first sight, did not seem to have a clear answer.

These included issues related to taxpayer residency, primary production losses, visa status as it related to tax, Medicare levy surcharge and other areas that involved legislation additional to the Income Tax Assessment Acts. 

The additional legislation is often something that we are not familiar with. So for these clients, I usually recommend that we, as the taxpayer’s agent, apply for a Private Binding Ruling.

Any Private Binding Ruling is binding on the ATO only for the taxpayer who has applied for it. Even if you have checked the register and have found one that seems similar to your circumstances, you do not get the protection of a Private Binding Ruling if you use it. 

So how do you apply for a Private Binding Ruling? You can use the online form Number NAT 74957. There are also some other forms for specific circumstances such as primary production losses. The standard form is easily found via Google.

You have to list clearly the facts and circumstances of your issue and make sure that what you have said is complete and accurate. If your tax agent does the ruling you also need to include any research and analysis relevant to the issue, including legislation, public rulings and case law. It is not something that most people can easily do without professional help.

If you need a ruling and you are applying yourself you can write a letter to the ATO setting out the facts and asking the ATO to rule. If the question is so complex that an easy answer cannot be found, it would be wise to get a tax professional to apply on your behalf.

If, during your research, you find a public ruling or a tax determination on the topic that you are looking for, you can rely on that information. 

In addition the ATO also issues summaries known as ATO IDs. You can rely on an ATO ID assuming that the facts in your situation are not materially different to those in the ATO ID. If the ID is later found to be incorrect you will not be charged a penalty but you will be required to pay any underpaid tax.

It is also possible to get an oral ruling from the ATO as an individual. And if you get an oral ruling, get the name of the tax officer so that if you are challenged and you are forced to rely on the oral ruling you get the protection from an oral ruling, which is that the ATO is bound to assess your tax liability in accordance with that oral ruling. 

I have had people on many occasions tell me they rang the ATO for advice and then tell me the advice they were given and I know that it is incorrect. 

This is usually because the person making the call has not actually provided the ATO with all the facts and the ruling has been given on the basis of the facts provided. 

In addition, the taxpayer does not know the name of the person who gave them the information and as I have found out they frequently haven’t provided their name either. This makes it very difficult to rely on the oral information provided.

As you can see there are many different ways you can get advice from the ATO on these complex issues that may arise in your return. It is best to consult a tax professional to complete the application for you so that you can securely rely on the ATO ruling.

If you need help with a Private Binding Ruling application or any other tax related matter contact the expert team at Gail Freeman and Co-on 02 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.