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The Tax Office has revised its practice statement on the application of the promoter penalty laws following the passage of legislation in May.
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ATO expands guidance on promoter penalty laws after new legislation
22 August 2024
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The ATO has expanded its guidance on how it applies the promoter penalty laws in PS LA 2021/1 after the Tax Accountability and Fairness Act 2024 was passed back in May this year.
The Treasury Laws Amendment (Tax accountability and fairness) Bill was introduced into Parliament as part of the government’s reform response to the PwC matter.
The legislation increases the amount of time the ATO has to bring an application for civil penalty proceedings to the Federal Court and also expands the application of the promoter penalty laws.
The explanatory materials said the amendments would improve the ability of the ATO to target promoters of tax exploitation schemes and seek the application of civil penalties.
In its revised practice statement, the ATO has updated section 2 of the PS LA 2021/1 that sets out the types of factors that may indicate promoter behaviour.
The ATO has warned that where tax agents, consultants, or other advisers who promote or implement a scheme that they claim conforms with a public, private, or oral ruling made by the ATO where there is a material difference between the scheme and the ruling, this may be considered to be promoter behaviour.
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It has also clarified that offering early access to superannuation in return for a percentage of the amount of superannuation accessed may also be considered a promoter behaviour.
Section 4 has also been extended to explain that a scheme will be considered a tax exploitation scheme “if it has been implemented and Part IVA of the ITAA 1936 applies to the scheme because of section 177DA[11] or 177J[12] of that Act, and it is reasonable to conclude the scheme was entered with a principal purpose of an entity obtaining a scheme benefit and it is not reasonably arguable the benefit is available at law”.
If the scheme has not been implemented, the ATO said a tax exploitation scheme may also arise “where it is reasonable to conclude that had the scheme been implemented, Part IVA of ITAA 1936 would apply to the scheme because of section 177DA or 177J of that Act, there would have been a principal purpose for an entity obtaining a scheme benefit and it is not reasonably arguable the benefit is available at law”.
The practice statement has also been updated to reflect the new extended time frames that apply under the new laws.
An application for a civil penalty under Division 290 must now be made within six years of an entity engaging in the prohibited conduct unless the scheme involved tax evasion.
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