ATO Practice Statement Law Administration

PS LA 2003/3

SUBJECT:	Precedential ATO view
PURPOSE:	To advise: • what is a precedential ATO view • when tax officers must identify and apply a precedential ATO view • when tax officers are not required to identify and apply a precedential ATO view • who can create a precedential ATO view • who is responsible for maintaining the currency, accuracy and consistency of precedential ATO view documents

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FOI status: may be released

STATEMENT

What is a precedential ATO view?

1. A precedential ATO view is the ATO's documented view about the application of any of the law administered by the Commissioner in relation to a particular interpretative issue. Law administered by the Commissioner includes law governing income tax, indirect taxes, fringe benefits tax, resource rent taxes, withholding taxes, superannuation and excise.

2. An interpretative issue is one that arises because:

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the meaning of the words of the legislation are not clearly evident from a plain reading of the legislation

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there is more than one possible interpretation of the legislation, or

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an interpretation based on the ordinary meaning of the legislation produces a result that is obviously absurd or unreasonable and does not promote the purpose of the legislation.

3. Resolution of an interpretative issue requires that the meaning of the words of the legislation be determined so that the legislation can be applied to a set of facts. Tax officers should adopt a purposive approach to the interpretation of legislation, to ensure that, to the extent that it is possible to do so, the underlying policy intent of the legislation is achieved.^[1]

4. Precedential ATO views are the linchpins of the ATO's approach to interpretative decision-making. The requirement for tax officers to search for and apply ATO views ensures that ATO decisions on interpretative issues are accurate and consistent. Tax officers must use relevant information technology systems in use in the ATO for research, including searching for precedential ATO views.

5. Precedential ATO views are set out in the following documents:

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public rulings within Division 358 of Schedule 1 to the Taxation Administration Act 1953 (TAA)^[2]

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other publicly issued rulings^[3]

•

draft public rulings and other publicly issued draft rulings

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ATO Interpretative Decisions (ATO IDs)^[4]

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decision impact statements, and

•

documents listed in the Schedule of documents containing precedential ATO views.

A hyperlink to the Schedule of documents containing precedential ATO views is contained in the Other References section at the conclusion of this document.

6. All of these documents are available on ATOlaw. They are also made publicly available on the Legal Database on the ATO website at www.ato.gov.au.

7. While it is central to the decision on an interpretative issue, a legislative provision^[5] itself does not constitute a precedential ATO view. However, a legislative provision should be cited as authority for a decision if it involves a straightforward application of the legislative provision (see paragraph 17 of this practice statement).

When tax officers must identify and apply the precedential ATO view

8. In making decisions about interpretative issues, such as those which arise in requests for private rulings, tax officers must:

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identify the issue, relevant legislative provisions or case law

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search for and identify the relevant precedential ATO view, and

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apply the precedential ATO view if there is no material difference^[6] between the facts of the particular case and the facts outlined in the precedential ATO view document, or

•

seek engagement of appropriate technical officers on the issue if:

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there is no precedential ATO view, or

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the application of the existing precedential ATO view is considered to result in an incorrect decision or unintended outcome, or

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there is a significant alternative view to the precedential ATO view.

9. Before applying the precedential ATO view, tax officers are required to determine whether there are circumstances which would make it appropriate to take action to apply the ATO view of the law only on a prospective basis.^[7]

10. Tax officers who authorise or approve decisions on interpretative issues arising from advice requests, audits or disputes must check that the precedential ATO view cited by the case officer is appropriate. Tax officers must follow the policy and procedures outlined in the Online Resource Centre for Legal Administration (ORCLA) and elsewhere for recording in the relevant case management system the source of the precedential ATO view (or relevant ATO guidelines) that they have applied in making a decision.

11. Where a tax officer is unable to decide whether or not a precedential ATO view applies to the facts associated with the particular issue, assistance must be sought from technical leaders within the business line. If the level of risk warrants it, officers in the Tax Counsel Network may also be engaged.^[8]

When a new precedential ATO view must be created

12. If there is no precedential ATO view for a particular interpretative issue, or a decision has been made that an existing precedential ATO view is incorrect, a precedential ATO view must be created. However, there are some decisions that do not require a precedential ATO view to be identified and applied. This is explained at paragraphs 17 to 31 of this practice statement.

13. If it is proposed to publish a new precedential ATO view that will overturn an existing precedential ATO view or an existing general administrative practice^[9] this matter must be brought to the attention of the relevant Deputy Chief Tax Counsel (DCTC).^[10]

14. Tax officers must seek assistance from technical leaders within the business line to create a new precedential ATO view. If the level of risk warrants it, officers in the Tax Counsel Network may also be engaged.^[11]

Who can create a precedential ATO view

15. Authority to create a particular precedential ATO view is established by the relevant product policy, for example the Public Rulings Manual for public rulings and PS LA 2001/8 ATO Interpretative Decisions for ATO IDs.

When tax officers are not required to identify and apply a precedential ATO view

16. Tax officers do not have to identify and apply a precedential ATO view where the decision involves:

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a straightforward application of the law

•

the exercise of a discretion

•

making an ultimate conclusion of fact, or

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determining the value of something.

Decisions that involve a straightforward application of the law

17. Tax officers do not have to identify and apply a precedential ATO view where the decision involves a straightforward application of the law to a particular set of facts.

18. Example 1

A private ruling request raises the following issue.

Can I claim a tax deduction for a gift of $20 to Amnesty International Australia?

Section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a gift of money to a fund, authority or institution listed in a relevant table is deductible. Amnesty International Australia is listed in the table in subsection 30-45(2) of the ITAA 1997. As the application of the law is straightforward, it is not necessary for the tax officer dealing with the issue to identify a precedential ATO view and the relevant legislative provision can be cited as authority for the decision.

19. Example 2

The following issue arises in the course of an audit.

Is an amount of family tax benefit paid to the taxpayer included in their assessable income?

Under subsection 52-150(1) of the ITAA 1997, 'A payment of ... family tax benefit ... is exempt from income tax.' Section 6-20 and subsection 6-15(2) of the ITAA 1997 then operate to exclude exempt income from assessable income. As the application of the law is straightforward, it is not necessary for the tax officer dealing with the issue to identify a precedential ATO view and the relevant legislative provisions can be cited as authority for the decision.

Exercise of a discretion

20. Tax officers are not required to identify and apply a precedential ATO view for a decision (or that part of a decision) involving the exercise of a discretion. However, tax officers are required to take into account any relevant ATO guidelines.

21. An instance of a decision involving the exercise of a discretion is a decision about whether or not to exercise a power; for example, whether or not to allow an extension of time for the lodgment of an objection (see subsection 14ZX(1) of the TAA). Another example is a decision in response to a private ruling request asking the Commissioner to exercise a particular discretion.

22. Exercising a discretion requires a decision-maker to choose between alternative courses of action. It involves the exercise of the decision-maker's own judgment in coming to an appropriate decision and the decision must not be made at the direction of another person. Generally, it is a decision-making process in which no one consideration and no combination of considerations is necessarily determinative of the result.^[12] It requires the decision-maker to consider the merits of the particular case by:

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taking into account the individual circumstances of the case

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weighing up the relevant evidence, and

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taking into account any relevant guidelines.

23. Guidelines developed for the exercise of a discretion may be contained in publicly issued rulings. For example, Taxation Ruling TR 2001/14 provides guidance on exercising the discretion under section 35-55 of the ITAA 1997 to not defer the deduction of a loss.

24. ATO guidelines for the exercise of a discretion may also be contained in other documents such as law administration practice statements. For example, PS LA 2003/7 Taxation objections - late lodgment provides guidance for tax officers who are required to make decisions in response to requests by taxpayers for the Commissioner to extend the time for the lodgement of an objection.

25. Where tax officers are required to make a decision involving the exercise of a discretion regarding the application of a general anti-avoidance provision such as Part IVA, they should follow the decision-making process outlined in PS LA 2005/24 Application of General Anti-Avoidance Rules.

Ultimate conclusion of fact

26. Under section 359-5 of Schedule 1 to the TAA, the Commissioner may make a private ruling about any matter involved in the application of a relevant provision.^[13] This means that a private ruling can be made about an ultimate conclusion of fact for the purposes of the application of a relevant provision.

27. Tax officers are not required to identify and apply a precedential ATO view for a decision (or that part of a decision) that involves making an ultimate conclusion of fact. However, tax officers are required to take into account any relevant ATO guidelines. These guidelines may be contained in publicly issued rulings or other ATO documents including, for example, law administration practice statements.

28. An ultimate conclusion of fact involves ascertaining the relevant facts and drawing a conclusion from those facts. It may also involve the application of appropriate guidelines or indicators.

29. Example 3

Is a taxpayer carrying on a business of primary production?

An ultimate conclusion of fact that a taxpayer is carrying on a business of primary production involves ascertaining the relevant facts. These facts may include that the taxpayer owns a property of a certain size on which there are a certain number of livestock. It is also necessary to identify and apply any relevant ATO guidelines. The relevant ATO guidelines are in Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? All the relevant facts need to be taken into account having regard to the indicators set out in TR 97/11 that are relevant to making a decision about whether or not a person is carrying on a business of primary production.

30. No two cases will be exactly the same as different facts and indicators may need to be considered in reaching a conclusion. Accordingly, these are decisions that must be made on the facts of each case, having regard to any relevant ATO guidelines rather than by applying a precedential ATO view.

Valuations

31. When making a decision in a private ruling about the application of a relevant provision^[14] that requires the determination of the value of something, it is not necessary for the tax officer to apply a precedential ATO view for that part of the decision related to the valuation. Tax officers should follow the policy and procedures in ORCLA and elsewhere that deal with valuation matters.

Who is responsible for maintaining the currency, accuracy and consistency of precedential ATO view documents?

32. In accordance with the requirements of paragraphs 8 to 11 of this practice statement, all tax officers involved in the interpretation and application of the law have a responsibility toward maintaining the currency, accuracy and consistency of precedential ATO view documents.

33. Business lines must have in place processes and procedures for ensuring that precedential ATO view documents are reviewed and updated in a timely manner, including cross business line consultation where appropriate.

34. Authors of new precedential ATO view documents must check the currency, accuracy and consistency of related precedential ATO view documents. They must withdraw any of these documents identified as being outdated, specifying the reason for their withdrawal, and link them, where appropriate, to the new precedential ATO view document(s).

35. Tax Counsel Network has responsibility for oversight of the ATO's precedential system as established by this practice statement. This includes ensuring that business lines have processes and procedures in place and operating to ensure that precedential ATO view documents are reviewed and updated in a timely manner, and that the precedential system as a whole is operating effectively.

Maintaining the historical record of precedential ATO view documents

36. Precedential ATO view documents are presented on ATOlaw and the Legal Database using point-in-time functionality. This provides a document amendment history and a link to past versions to enable a historical record to be maintained.^[15]

37. An explanation of all changes made to precedential ATO view documents should be detailed in the amending document, as follows:

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public rulings - via the formal addendum or erratum notice

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ATO interpretative decisions - via a history table inserted at the end of the document^[16]

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decision impact statements - via a history table inserted at the end of the document

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documents on the Schedule of documents containing precedential ATO views - via a 'What's changed' section or similar, as appropriate to the type of document and the type of change being made

Amendment history

Date of Issue: 8 June 2007

Date of Effect: 8 June 2007

File 2001/7447
1-25G6G6Z

Related Rulings/Determinations:
TR 97/11
TR 2001/14
TR 2006/10
TD 2011/19

Related Practice Statements:
PS LA 1998/1
PS LA 2001/8
PS LA 2002/16
PS LA 2003/3
PS LA 2003/7
PS LA 2004/4
PS LA 2004/11
PS LA 2005/24
PS LA 2008/3
PS LA 2011/27
PS LA 2012/1

Other References:
Explanatory Memorandum to the Tax Laws Amendment (Improvements to Self Assessment) Bill (No. 2) 2005
Schedule of documents containing precedential ATO views
ATO ID Guidelines

Subject References:
ATO Interpretative decisions
Commissioner' discretion
precedential ATO views
private rulings
public rulings
Schedule of documents containing precedential ATO views

Legislative References:
TAA 1953 8(1)
TAA 1953 8AAB
TAA 1953 14ZX(1)
TAA 1953 37
TAA 1953 Sch 1 280-100(1)
TAA 1953 Sch 1 Div 284
TAA 1953 Sch 1 284-215(1)(b)(iii)
TAA 1953 Sch 1 357-55
TAA 1953 Sch 1 Div 358
TAA 1953 Sch 1 358-10(2)
TAA 1953 Sch 1 359-5
TAA 1953 Sch 1 361-5(1)
ITAA 1936 177A(1)
ITAA 1997 6-15(2)
ITAA 1997 30-15
ITAA 1997 30-45(2)
ITAA 1997 Div 35
ITAA 1997 35-55
ITAA 1997 52-150(1)
ITAA 1997 995-1(1)
AIA 1901 15AA
Excise Act 1901
Excise Tariff Act 1921
Fuel Tax Act 2006
PGBA Act 2000 8
Superannuation Guarantee (Administration) Act 1992 Pt 7
Superannuation Guarantee (Administration) Act 1992 31

Case References:

Coal and Allied Operations Pty Limited v. Australian Industrial Relations Commission and Others
(2000) 203 CLR 194

Jago v. The District of New South Wales and Others
(1989) 168 CLR 23

Authorised by:
Bruce Quigley
Second Commissioner (Law)