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.
