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Emotions are running hot about the ATO’s latest draft rulings – and it is overwhelmingly negative.
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Accountants give ATO 100A draft the thumbs down
07 March 2022
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Accountants are giving the ATO’s section 100A and division 7A draft rulings a firm thumb’s down in responses to a CA ANZ call for feedback on the issues.
The rulings, released last month, are condemned for being “retrospective” and driven by an internal agenda at the ATO, rather than legal or political imperatives.
CA ANZ issued an early taste of responses to its call-out on Monday (7 March) and they suggested most ire is directed at the retrospective application of TR 2022/D1.
“I find it disturbing that the ATO can potentially go back a number of years after it has been common practice for the last 30 or so years I have been in practice,” said one typical response. “If such a change is to occur then it should not be retrospective.”
CA ANZ said some accountants are questioning the ATO’s motives because “some trust arrangements appear to be already on the ATO’s radar and these trustees can presumably expect (or have already received) amended assessments which may or may not lead to litigation, which in turn may or may not support the ATO’s stance”.
It says the “white zone” in the practical compliance guideline, which indicated that the ATO will look back beyond 2014, provided “little certainty for advisers and their clients and may result in unfair outcomes”.
Many responses called for additional examples of how the PCG will apply involving different scenarios.
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Others went further, saying the PCG outlining how the ATO will allocate compliance resources strayed beyond the Tax Commissioner’s administrative powers and into the policymaking arena.
“Parliament, not the ATO, they say, should be involved in determining what is an ordinary family or commercial dealing,” CA ANZ reported.
The organisation said accountants from rural and regional Australia representing small to medium businesses have been especially vocal, saying the ATO fails to understand how family members collaborate in running a business.
“The law revolves around the Trust Deed and who is legally entitled to the income, not who the ATO believe should be paying the most amount of tax,” was one response, while another said: “This war on family trusts is not driven by politicians, but by some within the ATO.”
CA ANZ said the delay in publishing the guidance is another friction point. It summarises the feedback as:
- “The ATO has failed to provide timely guidance on s100A for many years, yet purports to have held the views it now expresses over past years.”
- “ATO was aware of s100A arrangements which it now considers egregious, meaning that advisers and their clients were – over a considerable period of time – lulled into the belief that such arrangements were acceptable.”
It said many respondents interpret as threatening the ATO’s raising the prospect of promoter penalties or referrals to the TPB.
They also accused the ATO of “jumping the gun” by not awaiting the outcome of the appeal in Guardian AIT Pty Ltd ATF Australian Investment Trust v Commissioner of Taxation.
When it comes to division 7A, some members said their clients will find it difficult switching from UPE/sub-trust arrangements to division 7A complying loan agreements. They question whether the ATO appreciates the financial hardship TD 2022/D1 will cause for trust entitlements arising on or after 1 July 2022.
CA ANZ is calling for more feedback on the topics and said it has already shared some of its findings with the ATO.
CA ANZ is holding free knowledge sharing events on the ATO’s s100A and division 7A guidance in all the state capitals on March 17 with ATO deputy commissioner Louise Clarke presenting.
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