Anyone with a concern that their circumstances may put them in an unusual position tax-wise, or that a particular financial arrangement doesn’t fit any known approach for tax purposes, or who simply wants to minimise the risk of an unanticipated tax outcome, can apply for a ‘private ruling’ from the Tax Office.
Asking for a private ruling can be a good way to ‘test-drive’ a tax arrangement you may be considering, especially where the already existing information from the Tax Office doesn’t seem to adequately cover all the bases.
You can apply for a private ruling yourself, and for companies a public officer can apply, or a partner of a partnership or a trustee of a trust estate.
Each ruling is specific to whoever applied for it, and only to the situation considered by the ruling, and can’t be picked up as a standard by any other taxpayer. These are one-off decisions, made only about a certain set of circumstances, and they set out how the Tax Office views that situation.
By the same token, if you read a private ruling (publicly accessible on the Tax Office website) and decide to rely on it because your circumstances sound pretty much the same, you will not get any protection from using that ruling if the Tax Office decides that your situation should have a different outcome. This could happen, for instance, if the Tax Office thinks that your circumstances are not sufficiently similar to those considered in the ruling.
If you get a private ruling, and base your tax affairs on that advice, the Tax Office is bound to administer the tax law as set out in that ruling. But, if in due course, the Tax Office issues a public ruling (which is like a private ruling but applies to any taxpayer if their situation fits the ruling) and the tax outcome conflicts with the one in your private ruling, you generally have the choice of which one to apply.
The other side of that coin however is that if the arrangement you enter into differs materially in any way from the situation spelled out in your application for a ruling, the Tax Office doesn’t have to stand by its ruling (although minor variations that don’t affect the way the law applies are OK).
Private rulings can cover all aspects of income tax law, or decide the value of any item (which can have an influence on someone’s tax liabilities), and can also cover indirect taxes such as the luxury car tax or goods and services tax.
A ruling made in respect of a particular tax law will be changed if that law is altered by legislation or by the result of a court decision. But it’s worthwhile remembering that if you follow a ruling’s advice, and that ruling is later found to have not applied the law correctly, that you’re protected from having to repay any tax that would have otherwise been owed, as well as interest and penalties.
If a private ruling affects one of your earlier tax assessments, the Tax Office will not automatically amend it unless you make a point of submitting a written request for an amendment.
But just because you apply for a private ruling doesn’t mean you are going to get one. The Tax Office can refuse if it thinks a ruling would prejudice or restrict the law, if you are being audited over the same issue, or if it deems your application to be ‘frivolous’ or ‘vexatious’.