Take a 'no surprises' approach to your return with a Private Binding Ruling Application.
If you’re embarking on a complex restructure or about to make a large GST input tax credit claim, it can be difficult to know exactly how the Australian Taxation Office will apply the legislation.
A Private Binding Ruling or PBR is an application made to the ATO, requesting their interpretation on how they will apply tax laws to a particular transaction. For example, an opinion may be requested on:
- whether a GST input tax credit can be claimed
- whether the margin scheme can be applied to a sale of land
- whether a capital gains tax rollover can be claimed
- if the Small business CGT concessions can be claimed
The list is endless, as a PBR can be requested on almost all transactions where income tax or GST may arise.
The benefit to you is certainty. We suggest our clients lodge these applications where the tax cost of a transaction is the difference between making a profit or a loss.
For example, if a CGT rollover cannot be claimed on a restructure, then the tax payable may be so significant that it will outweigh any commercial benefits. It is no different to performing a due diligence – if the outcome will be negative, you may choose not to proceed, or structure the process differently.
A PBR application can be made either before or after the transaction, however it is best to understand the tax consequences beforehand.
Once issued, the benefit to the taxpayer is that if they prepare their income tax return relying on the PBR, no penalties will arise. Compare this with a taxpayer who simply completes the transaction and lodges their return. If the ATO has a different interpretation, several years later on audit the ATO may raise an amended assessment, with penalties and interest.
It is important to note that the PBR will only apply if you carry out the transactions in the manner you specified in your application. If you change the transactions, the PBR will no longer be relevant and you will need to re-apply.
We can prepare and lodge a PBR application on your behalf. The process is very structured, so we ensure we provide all relevant factual information as well as our detailed analysis of how the taxation legislation will apply. If this occurs, the PBR should issue within 28 days. An objection can be made if we do not consider the ATO’s interpretation to be correct.
The end result is no nasty surprises when you lodge your return, in the form of an unforeseen tax bill.