Law Companion Ruling LCR 2015/10

What this ruling is about: 1. Under the new regime for attribution managed investment trusts (AMITs [1] ), broadly, mistakes made in calculating 'determined trust components' in one year, may be fixed in the year they are discovered without the need to amend prior year returns. Such discovered mistakes are referred to as 'unders' and 'overs'. 2. The trustee of an AMIT is liable to an administrative penalty if the AMIT has an under or over for a base year resulting from their (or their agent's) recklessness or intentional disregard of the law. This Ruling provides examples of behaviours which do not exhibit recklessness and international disregard of the law under section 288-115 in Schedule 1 to the Taxation Administration Act 1953. [2]


Ruling: 1. Under the new regime for attribution managed investment trusts (AMITs [1] ), broadly, mistakes made in calculating 'determined trust components' in one year, may be fixed in the year they are discovered without the need to amend prior year returns. Such discovered mistakes are referred to as 'unders' and 'overs'. 2. The trustee of an AMIT is liable to an administrative penalty if the AMIT has an under or over for a base year resulting from their (or their agent's) recklessness or intentional disregard of the law. This Ruling provides examples of behaviours which do not exhibit recklessness and international disregard of the law under section 288-115 in Schedule 1 to the Taxation Administration Act 1953. [2]




What this Ruling is about | Meaning of recklessness and intentional disregard of the law | What are the signs that an AMIT trustee has acted in a reckless manner? | Examples of trustee actions not exhibiting recklessness or an intentional disregard of the tax law | This Ruling describes how the Commissioner applies the law as amended by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016. | If you rely on this Ruling in good faith, you will not have to pay any underpaid tax, penalties or interest in respect of matters it covers if it does not correctly state how a relevant provision applies to you. | Date of effect: 3. This Ruling is a public ruling, effective for those who rely on it in good faith in respect of assessments for income years starting on or after: | Meaning of recklessness and intentional disregard of the law: 4. The Commissioner's interpretation of 'recklessness' and 'intentional disregard of the law' as used in Subdivision 284-B and section 286-75 are set out in Miscellaneous Taxation Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard. The interpretations discussed in MT 2008/1 apply equally to these terms as used in section 288-115. | What are the signs that an AMIT trustee has acted in a reckless manner?: 5. In considering whether an AMIT trustee has acted in a reckless manner, the Commissioner will have regard, amongst other things, to whether or not the AMIT trustee has the following governance controls in place. The lack of any one of these controls is not of itself evidence of recklessness. | 7. The Commissioner will have regard to the size and resources of the trustee in considering the level and type of relevant controls. For example, a small trustee with limited resources may rely more on external advisors than a large, highly resourced trustee with an internal tax team. | Examples of trustee actions not exhibiting recklessness or an intentional disregard of the tax law: 8. The Explanatory Memorandum to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015 provides the following examples of circumstances in which a trustee is not considered to have intentionally or recklessly disregarded the law. | 9. A trustee is not considered to have intentionally or recklessly disregarded the law if, in working out estimates of the trust components of particular characters that are attributed to members, the trustee: | 10. Published estimates include estimates included in notices issued pursuant to section 12-395. Historical yield and tax component data would include prior year AMIT member annual statements (AMMA statements) or tax statements. | 11. In addition, the Commissioner does not generally consider that an AMIT has recklessly or intentionally disregarded the law in the following circumstances: | Remission of tax: 12. The Commissioner has the power under section 298-20 to remit all or part of the penalty imposed under section 288-115. | 13. In deciding whether to remit part or all of the penalty, the Commissioner will have regard to offsetting unders and overs within an AMIT, or class of AMIT where each class is treated as a separate AMIT. Offsetting unders and overs arise where the unders and overs are attributable to a single act of recklessness or intentional disregard. For example, a trustee adopts a reckless position on the tax treatment of an amount of income which results in an under of one assessable income character and an over of equal amount in a different assessable income character. | Commissioner of Taxation 5 May 2016


Related rulings: Miscellaneous Taxation Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard
Legislative references: TAA 1953 TAA 1953 Sch 1 Subdiv 284-B TAA 1953 Sch 1 286-75 TAA 1953 Sch 1 288-115 TAA 1953 Sch 1 298-20 ITAA 1997 ITAA 1997 12-395 ITAA 1997 Div 276 Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016
Other references: Explanatory Memorandum to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015