Private ruling: General interest charge
Published: November 2012
Ruling period: Year ended 30 June 2006 to year ended 30 June 2011
Date scheme commenced: 1 July 2005

Ruling: Q1: To the extent that supplies made by X are treated as input taxed supplies, does the adjustment to assessable income need to be reported in the taxpayer's income tax return for the income year/s relating to when the transaction occurred, or the income year when the amended legislation received Royal Assent? | A1: The income year/s relating to the transactions. | Q2: Will the interest charges that accrue in relation to any underpaid tax be either remitted in full or in part? | A2: Yes. In full.

Relevant facts and circumstances: During the construction phase of a development, X acted in accordance with the prevailing Australian Taxation Office view at the time as outlined in Goods and Services Tax Ruling GSTR 2003/3 and GSTR 2008/2 and treated the acquisitions as creditable and therefore claimed input tax credits on all relevant acquisitions. Following a Court decision, GSTR 2008/2 was withdrawn. On 21 March 2012 the Tax Law Amendment (2011 measures No 9) Act 2011 (TLAA) received Royal Assent. X applied for a private ruling in respect of GST and the supply of residential premises by way of long term lease. X was notified in this private ruling that supplies of residential premises are considered to be input tax supplies and X could only revise the error in any BAS by amending the original BAS's.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 170 | Income Tax Assessment Act 1936 Section 166A

Reasons for decision: Summary: To the extent that supplies made are treated as input taxed supplies the adjustment to assessable income needs to be reported in X's income tax return for the income year/s relating to when the transaction occurred. | Detailed Reasoning - Detailed reasoning: Companies are subject to a full self assessment system under which they self assess the amount of tax they have to pay. The Commissioner does not issue a formal notice of assessment after the company has lodged its return. Instead the Commissioner is taken to have made an assessment and the return itself is deemed to be a notice of assessment of the entity's taxable or net income. Section 166A of the Income Tax Assessment Act 1936 (ITAA 1936) deems the assessment to be made on the day the return is lodged. Under self assessment the responsibility is on the taxpayer to ensure the accuracy of the information supplied in a return of income. However Taxpayers can request an amendment to correct a mistake or omission. The request for an amendment can be made to either increase or decrease their tax liability. Section 170 of the ITAA 1936 provides the legislative basis for the amendment of an assessment. Law Administration Practice Statement PS LA 2007/11 in paragraphs 20 to 23 explains that where a law is in enacted that has a retrospective effect and a taxpayer has lodged a return based on existing law then an amendment to that return will be required where a taxpayer is found to have underpaid (or overpaid) their tax. X had lodged activity statements in accordance with existing law. Due to changes in legislation concerning GST, X has been notified in a separate private ruling that any over claimed input tax credit will need to be revised in the original BAS to which the error related. As a consequence X may need to adjust its assessable income in respect of income tax. If, as a result of amendments to X's activity statements, there is a change in assessable income for income tax, X will need to amend the income tax returns for the years relating to when the transaction occurred, not the year the amended GST legislation received Royal Assent. | Summary: The interest charges that accrue in relation to any underpaid tax will be remitted in full. | Detailed Reasoning - Detailed reasoning: Where you seek a remission of general interest charge (GIC), your request should be considered having regard to the facts of the particular case, including the debtor's own situation and individual circumstances the guidelines contained in the following practice statements Law Administration Practice Statement PS LA 2007/11 sets out the ATO policy on penalties and interest in the cases where taxpayers anticipate a change to the law in meeting their obligations and as a result are later found to have underpaid their tax. Law Administration Practice Statement PS LA 2008/3, amongst other things, also explains the level of protection available to taxpayers who rely on each form of advice and guidance. Attachment A contains a quick reference summary of the level of protection provided for each form of advice and guidance. The relevant GSTR 2008/2 was withdrawn as from 11 May 2011 which meant that the ATO view outlined in that ruling was now incorrect under the current law. The Assistant Treasurer announced in the Media Release No 20 on 27 January 2011 that the Government will amend the GST law to ensure that new residential premises constructed under a development leases arrangement since 3 October 2007 are treated as taxable supplies rather than input taxed supplies where the premise are sold by developers to home buyers or investors. In the Media Release No 135 on 23 September 2009 the Assistant Treasurer confirmed that the new legislation would not apply to sales of residential premises constructed under an eligible arrangement entered into prior to 27 January 2011. X's remission request is considered under the light of all information provided, including the announcement in the two Press Releases and in accordance with the fact sheets 'Goods and services tax treatment of new residential premises' and 'The ATO's approach to dealing with retrospective law changes' and paragraph 31 of the PS LA 2007/11 and Attachment A of PS LA 2008/3. It is considered appropriate for the Commissioner to exercise his discretion in respect to the ATO view as X has acted in good faith and exercised reasonable care in relation to the circumstances surrounding this case. Accordingly X will not be liable for any interest on the shortfall that may result from an amendment to an income tax return following the amendment of any activity statement/s.

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