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Getting an ATO Private Ruling: What you need to know
An ATO private ruling is binding advice that sets out how a tax law applies to you in relation to a specific scheme or circumstance, providing a level of certainty that is vitally important before making subsequent decisions and moving forward.
If information regarding certain tax rulings and determinations for your specific situation is ambiguous or simply not available on the ATO’s publicly available channels, then applying for a private ruling by the ATO is an option well worth considering. An ATO private ruling can cover anything involved in the application of a relevant provision of a tax law, including issues relating to liability, administration, procedure and collection, and conclusions of fact (e.g., residency status). See what else is covered here.
The major advantage of a private ruling issued by the ATO — as opposed to relying on the information you may receive when phoning the ATO or in person at an ATO location — is that the private ruling is a written formalized record that legally binds the ATO on how a tax law applies to a given scenario. For example, if you rely on a private ruling that benefits you (e.g. if your fringe benefits tax liability is less, or your grant or benefit amount is greater than it would otherwise have been), the ATO is bound by the ruling, even if it is later proven to be incorrect. In this situation the ATO can only apply the law correctly if this would give a more favourable result for the person/entity who requested the private ruling.
A private ruling only applies to the particular scheme or circumstance that it describes. If there is a material difference between the scheme described and what actually occurs, the private ruling will not subsequently apply. For example, the ATO is not legally bound by a ruling when the scheme is not implemented in the way set out in the private ruling, or if material facts were omitted from the private ruling application or were misleadingly or inaccurately stated.
The ATO will acknowledge your private ruling application upon receiving it, review the application and let you know if additional information is required. The ATO aims to provide private rulings within 28 calendar days of receiving all the necessary information, but this can be longer if the request raises particularly complex matters.
Despite being referred to as a “private ruling”, the ATO publishes an edited version (i.e. with all identifying details removed) of each private ruling in its Legal Database (available online). A copy of the edited version is included with your ruling, so if you are concerned that your edited version could still identify you, you can contact the ATO with your concerns within 28 days of the date of your ruling.
One area in which ATO private rulings are often sought is to determine if a start-up qualifies as an Early Stage Innovation Company (ESIC), which is important because of the tax incentives that this qualification provides to investors when they purchase new shares during the equity capital raising stage. The ATO has provided many private rulings for these requests about ESIC qualification, and although it is not necessary to have an ATO private ruling for ESIC eligibility, having it can certainly provide your investors some more confidence around the ATO’s perspective. A major drawback with an ATO private ruling is that it only applies to the facts that the individual/company has provided, so one minor omission in the application or shift in the situation of the individual/company would mean that the ruling cannot be relied upon.
Similar findings can also be obtained from other Government bodies. An example of where a ruling may be sought from someone other than the ATO, is an Advance / Overseas Finding on R&D activities that are conducted overseas. In this instance, a positive ruling must be obtained from Innovation Australia before a company can claim expenditure on R&D activities conducted in a country other than Australia.
The private ruling process is often used to determine if tax exemptions will be met, clarify the application of legislation to specific circumstances or to test unusual tax arrangements.
The experienced tax professionals at Fullstack will ensure an appropriate private ruling application on your behalf, with any necessary interpretations of the legislation (e.g., reference to any similar previous schemes or rulings etc.) provided within the application documents so that you have the best chance of receiving a favourable outcome.
If you’re a taxpayer you know you need the best people around you to optimise your tax situation whereever possible. Fullstack has the knowledge and expertise to keep you on the right path by ensuring you receive the right advice and all the grants, incentives, and rebates you’re entitled to.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, crypto and entrepreneurs.