Law Administration Practice Statement PS LA 2017/2
Diverted profits tax assessments
Date of issue: 18 December 2017
Date of effect: 18 December 2017
Draft: False
Withdrawn: False

What this Practice Statement is about: 1. This Practice Statement provides guidance to ATO staff on the administrative process for making a diverted profits tax (DPT) assessment under section 155-5 of Schedule 1 to the Taxation Administration Act 1953 through ATO-initiated action, and the processes that follow after such an assessment is made. 2. This Practice Statement and the processes outlined in it have been developed in recognition of the seriousness of making a DPT assessment. 3. All further legislative references in this Practice Statement are to Schedule 1 to the Taxation Administration Act 1953, unless otherwise indicated. | What you should do if you consider that the diverted profits tax may apply: 4. If you consider the DPT may apply, you should inform the taxpayer that the DPT is a risk being considered during the audit process. | Consideration of the diverted profits tax: 5. With the assistance of Tax Counsel Network (TCN), you should engage with the taxpayer to obtain information and discuss issues as appropriate. In conjunction with TCN, you should then form a view as to whether the DPT applies based on the information available to you. 6. Where you form the view that the DPT applies, you must ensure that TCN's engagement is formalised in accordance with the usual procedures regarding the application of the rules in Part IVA of the Income Tax Assessment Act 1936. [1] 7. There are 2 steps which must be taken prior to making a DPT assessment (unless it is an exceptional case). You must: • seek advice from the General Anti-Avoidance Rules (GAAR) Panel at an initial hearing [2] , and • obtain Deputy Commissioner endorsement on the decision to make a DPT assessment. • seek advice from the General Anti-Avoidance Rules (GAAR) Panel at an initial hearing [2] , and • obtain Deputy Commissioner endorsement on the decision to make a DPT assessment. 8. Each of these 2 steps is discussed further in this Practice Statement. 9. It is not a requirement to provide the taxpayer with a position paper at any time prior to issuing DPT assessments. At the discretion of the case team, a position paper may be provided and the taxpayer invited to respond. A failure to respond or delay in responding will not prevent the matter progressing under this administrative process. | Initial General Anti-Avoidance Rules Panel hearing: 10. The GAAR Panel provides advice to decision-makers in order to ensure that decisions made on the application of the DPT are objectively based and there is a consistency in approach to the various issues that arise in relation to the application of the DPT. [3] 11. The GAAR Panel may consider any aspect of the application of the DPT. 12. However, the GAAR Panel may be practically limited to the extent to which it can advise on issues involving complex or extensive evidentiary material. These limitations will be dealt with by the GAAR Panel Chair on a case-by-case basis, in line with normal practice. 13. The GAAR Panel will ordinarily include at least one non-ATO member, in line with normal practice. 14. Consistent with the preliminary GAAR Panel process, the taxpayer (or a representative of the taxpayer) will not be invited to attend the initial GAAR Panel hearing. [4] 15. The GAAR Panel Chair can decide not to have a referred matter considered by the GAAR Panel. However, they would usually consult the GAAR Panel before making that decision. [5] | Deputy Commissioner endorsement: 16. Based on advice from the GAAR Panel, you must, in consultation with TCN, decide whether to make a DPT assessment. 17. If you decide to make a DPT assessment contrary to the advice of the GAAR Panel, you must first escalate the matter to the GAAR Panel Chair or the Chief Tax Counsel (CTC), in accordance with usual procedure. [6] 18. The decision to make a DPT assessment is subject to endorsement by a Deputy Commissioner in your business line. 19. Once your Deputy Commissioner has provided endorsement, you must arrange for the notice of assessment to be issued to the taxpayer and also ensure that the liability is recorded on the appropriate system. | Streamlined process in exceptional cases: 20. You and your Deputy Commissioner may consider that exceptional circumstances exist such that a DPT assessment should be made without requiring all or some of the steps in this Practice Statement. This may be the case where delay could frustrate the application of the DPT to a particular taxpayer or could result in a DPT assessment being unenforceable. For example, if there is a risk that a taxpayer will move assets offshore or liquidate an entity with the purpose of frustrating the DPT collection and recovery process, it may be necessary to act expeditiously. 21. A Deputy Commissioner will only authorise departure from the normal procedure after consultation with the GAAR Panel Chair or the CTC, in accordance with existing GAAR Panel practice. [7] 22. If you believe a streamlined process is appropriate in your case, you should speak to TCN in the first instance. | Recovering the tax payable to us: 23. The DPT is due and payable 21 days after you have given the taxpayer the relevant DPT notice of assessment. [8] 24. You should refer the matter to Frontline Operations to instigate the commencement of debt collection procedures for any amounts that remain owing after the due date. | Issuing a diverted profits tax statement: 25. You should issue a written statement outlining the basis upon which you have applied the DPT to the taxpayer no later than 7 days after you have given the taxpayer the relevant DPT notice of assessment. | Period of review of diverted profits tax assessments: 26. The period of review for a DPT assessment is 12 months from the day after the day the notice of the DPT assessment is given to the taxpayer, unless shortened or extended. [9] 27. The period of review gives the taxpayer a further opportunity to provide information to you relevant to their DPT assessment. 28. If you have not already done so, you should consider whether it is appropriate to refer your case to an officer from Litigation and Legal Services (LLS), who may provide support on evidence and appeals processes, particularly if your case is likely to result in litigation. | General Anti-Avoidance Rules Panel: 29. During the period of review, you must refer your matter to the GAAR Panel for further hearing. [10] This must be done, whether or not you referred the matter to the GAAR Panel for an initial hearing before making the DPT assessment. 30. In accordance with normal GAAR Panel procedure, the taxpayer will usually be invited to attend the hearing and address the GAAR Panel. However, an invitation to attend the hearing may not be extended if the taxpayer has not cooperated and given us the requisite information. 31. In extending an invitation to the taxpayer, the GAAR Panel Chair will request that the taxpayer provide a written submission (unless the taxpayer chooses to rely upon a written submission already made to us). 32. Usually, the GAAR Panel hearing will take place towards the end of the 12-month review period when you have sufficiently considered all information provided by the taxpayer. You should contact the GAAR Panel Secretariat after issuing a DPT assessment to schedule a suitable time and notify the taxpayer accordingly. 33. Where a taxpayer notifies us of a shorter period of review that ends before the date of any scheduled GAAR Panel hearing for the matter, you must reschedule the GAAR Panel hearing unless it is not possible to do so. | Amending a diverted profits tax assessment: 34. Based on the information available to you and any advice provided by the GAAR Panel, you must decide, in consultation with TCN, whether or not to amend the taxpayer's DPT assessment. [11] 35. If the matter is not able to be considered by the GAAR Panel because of a shortened period of review, you must seek advice from the GAAR Panel Chair prior to amending the DPT assessment. 36. If you decide that an amendment is appropriate, you have until the end of the period of review to amend the DPT assessment. You must obtain your Deputy Commissioner's approval before you amend a DPT assessment. 37. If you decide not to amend a DPT assessment, you should notify the taxpayer in writing of your decision. You must obtain your Deputy Commissioner's endorsement to issue this notification. 38. Where a taxpayer has appealed a DPT assessment to the Federal Court, you may amend the DPT assessment at any time pending the appeal. [12] | Extending the period of review: 39. If you do not consider you can complete your examination of the taxpayer's circumstances within the period of review, you can seek an extension by: • requesting the taxpayer's consent to extend the period of review [13] , or • applying to the Federal Court for an order to extend the period of review. [14] • requesting the taxpayer's consent to extend the period of review [13] , or • applying to the Federal Court for an order to extend the period of review. [14] 40. You must seek the extension before the period of review has ended. 41. Refer your case to an LLS officer for assistance in applying for the order. 42. An extension of the period of review for a DPT assessment, by either obtaining the taxpayer's consent or by applying to the Federal Court for an order, can be made only once. [15] | Shortened period of review: 43. A taxpayer can shorten the period of review for a DPT assessment by giving us written notice specifying a shorter period. [16] The shorter period must end at least 30 days after the day on which the written notice is given to us. [17] 44. If you are given such a notice and you have not yet completed your review of the taxpayer's DPT assessment, you must consider, in consultation with TCN, whether to apply to the Federal Court for an order to maintain the full period of review. 45. The Federal Court will only grant such an order if it is satisfied that it was not reasonably practicable or it was inappropriate for you to complete the examination within the shorter period specified in the taxpayer's notice because of [18] : • any action taken by the taxpayer, or • any failure by the taxpayer to take reasonable action. • any action taken by the taxpayer, or • any failure by the taxpayer to take reasonable action. 46. You must apply for the order within 30 days of receiving written notice from the taxpayer. [19] 47. You should, as a matter of priority, refer your case to an LLS officer for assistance in applying for the order. | Objection and appeal rights: 48. A taxpayer cannot object to a DPT assessment. [20] 49. After the period of review has ended, a taxpayer may appeal a DPT assessment to the Federal Court. [21] An appeal must be lodged with the Federal Court within 60 days after the end of the period of review. [22] 50. Special rules apply regarding what evidence is admissible in a Federal Court appeal in relation to a DPT assessment. For further guidance, refer to paragraphs 1.195 to 1.202 of the revised Explanatory Memorandum to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017. The interaction between a diverted profits tax assessment and an income tax assessment for the same period 51. DPT is a separate tax liability to income tax. A taxpayer may have a DPT assessment and an income tax assessment in respect of the same period. These assessments are not 'alternative assessments' as described in section 1 of Law Administration Practice Statement PS LA 2006/7 Alternative assessments. 52. Before issuing a DPT assessment and during the period of review, you should monitor the progress of any related income tax assessment and, specifically, whether the taxpayer has exercised any review or objection rights in respect of that assessment. If there is a review or objection on foot, coordinate with the relevant case officer to ensure there is a mutual understanding of the taxpayer's overall tax position. | More information: 53. For more information, see: • PS LA 2005/24 • Revised Explanatory Memorandum to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 . • PS LA 2005/24 • Revised Explanatory Memorandum to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 .

Related practice statements: PS 2005/24 PS 2006/7
Legislative references: ITAA 1936 Pt IVA | ITAA 1936 177P(3) | TAA 1953 Sch 1 | TAA 1953 Sch 1 145-15 | TAA 1953 Sch 1 145-15(1)(b) | TAA 1953 Sch 1 145-15(2)(b) | TAA 1953 Sch 1 145-15(3) | TAA 1953 Sch 1 145-15(3)(c) | TAA 1953 Sch 1 145-15(4) | TAA 1953 Sch 1 145-20(1) | TAA 1953 Sch 1 145-20(4)(b) | TAA 1953 Sch 1 145-20(4)(c) | TAA 1953 Sch 1 155-5 | TAA 1953 Sch 1 155-35(3) | TAA 1953 Sch 1 155-35(4) | TAA 1953 Sch 1 155-60
Other references: Revised Explanatory Memorandum to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017

Additional content:
What to do after a diverted profits tax assessment is made | Content checked for technical accuracy and currency. | Updated to align with amended Practice Statement style and formatting requirements. | Updated in line with current ATO style and accessibility requirements. | [1] Paragraphs 14 to 17 of Law Administration Practice Statement PS LA 2005/24 Application of General Anti-Avoidance Rules . | [2] Paragraph 28 of PS LA 2005/24. | [3] Paragraph 24 of PS LA 2005/24. | [4] Paragraph 31 of PS LA 2005/24. Relevantly, paragraph 33 of PS LA 2005/24 makes it clear that the GAAR Panel process does not provide a platform for a hearing as part of a quasi-judicial process of review. | [5] Paragraph 23 of PS LA 2005/24. | [6] Paragraph 26 of PS LA 2005/24. | [7] Paragraph 26 of PS LA 2005/24. | [8] Subsection 177P(3) of the Income Tax Assessment Act 1936 . | [10] Subject to the GAAR Panel Chair's discretion: see paragraph 23 of PS LA 2005/24. | [11] If you wish to amend a DPT assessment contrary to the advice of the GAAR Panel, you must first escalate the matter to the Chair of the GAAR Panel or the CTC, in accordance with usual procedure. | [13] Subsection 155-35(4). | [14] Subsection 155-35(3). | [15] Subsection 145-15(4). | [16] Paragraph 145-15(1)(b). | [17] Paragraph 145-15(2)(b). | [18] Subsection 145-15(3). | [19] Paragraph 145-15(3)(c). | [20] Subsection 145-20(1). | [21] Paragraph 145-20(4)(b). | [22] Paragraph 145-20(4)(c). | File 1-AN371U0; 1-14DAI645