Practical compliance guidelines (PCGs) have been brought up as a topic for discussion at a number of recent forums, notably at consultation groups the ATO hosts, which can include representatives of tax, accounting and legal professional associations, industry bodies, the Board of Taxation, Treasury and the ATO.
At the table of various consultative meetings is the Executive Director of the Corporate Tax Association (CTA), Michelle de Niese. She says association members and others on the ATO’s consultation panels have expressed a growing concern around the line between public rulings and PCGs, and whether ATO officers are perhaps interpreting PCGs as tax law — where these should be viewed as identifying risk indicators and not be substituted for a view on how the law applies.
“While PCGs have a place in the ATO’s tool kit, the more they are used in different contexts, such as compliance safe harbours, compliance risk guides, or hybrids of the two, the more it is becoming apparent that it is difficult to separate views of how the law applies from what the ATO perceives as risks or parameters associated with those laws,” de Niese says.
The CTA says there are a couple of points worth noting about the interaction between PCGs and public rulings when dealing with the ATO. These include:
- all PCGs should be consistent with tax laws;
- all PCGs should be supported by a binding ATO ruling;
- PCGs do not limit or waive the operation of the law;
- all disputes with the ATO must be on the basis of the law, not a PCG; and
- falling outside the “flags” of a PCG does not of itself mean a taxpayer is not complying with the law.
The CTA says where the ATO reviews an arrangement that falls within a PCG “non-safe” zone and then concludes that the arrangement does not comply with the law, it should be open to the taxpayer to engage constructively with the ATO to resolve the matter through one of its co-operative channels, such as the alternative dispute resolution (ADR) process.
“While the ATO is now well aware of our concerns in this space, we will continue to raise this matter with senior ATO officers with the objective of having some clearer messaging to their staff on the role of PCGs and their related public rulings in determining whether a taxpayer is really outside the ATO’s interpretation of the law,” de Niese says.
In the meantime, advice to tax practitioners and their taxpaying clients is to keep the above points in mind when dealing with the ATO on a PCG and the interpretation, and application, of tax law.
Any feedback on the above points is welcome (firstname.lastname@example.org).
PCGs versus binding advice – it’s the law, not the vibe. PCGs versus binding advice – it’s the law, not the vibe. PCGs versus binding advice – it’s the law, not the vibe. PCGs versus binding advice – it’s the law, not the vibe.