Binding rulings

Amendments have been made to binding rulings.

Questions of fact

Amendments have been made replacing the current general prohibition on determinations of fact with a provision that the Commissioner can rule only on the basis of the facts as provided by the applicant. The amendment clarifies that the Commissioner can rule on questions of tax avoidance and in doing so retain certainty for taxpayers.

Ability to rule when the matter is subject to a case before the courts

The Commissioner’s discretion not to rule on matters before the courts has been clarified by limiting its application to cases involving substantially similar arrangements. The amendment has clarified when the Commissioner will exercise the discretion.

Mass marketed and publicly promoted scheme rulings

An amendment has been made to allow promoters of arrangements, or those with an interest similar to that of a promoter, to apply for a product ruling for prospective arrangements. Previously a promoter could not request a binding ruling on an arrangement if the promoter was not a party to the arrangement. Allowing promoters of schemes to apply for product rulings could enhance overall tax compliance if such applications become standard practice.

Declining to rule when an arrangement is the subject of a dispute

Section 91E(4)(ga) has been clarified to allow the Commissioner to make a binding ruling if the arrangement is the subject of a dispute by way of notice of proposed adjustment (NOPA) but the application for the ruling relates to a different tax type from that in the NOPA. Previously the Commissioner could not make a ruling if the application related to an arrangement that was the subject of a NOPA. Allowing the Commissioner to make a ruling that relates to a different tax type to that being disputed enhances the usefulness of the rulings process.

A ruling which fails in part

Amendments have been made to sections 91EB and 91FB so that a ruling can be made invalid in part rather than in full only. This is so that not all tax types are affected by the invalidity. The amendment is aimed at providing greater flexibility in the rulings process.

Publication of notification of binding rulings in the Gazette

The requirement to publish the making and withdrawal of public and product rulings in the Gazette has been replaced with a requirement that the Commissioner publish the making and withdrawal of public and product rulings in a publication chosen by the Commissioner, such as the Tax Information Bulletin (TIB).

Unacceptable tax position penalties and use-of-money interest

New sections 120W and 141B(1D) have been added to ensure that taxpayers who rely on the Commissioner’s official opinion will not be subject to use-of-money interest or to the unacceptable tax position penalty.

Fee waivers for binding rulings and GST on non-resident applications

The bill introduces a more flexible fee waiver provision and a reduction of the tax fraction for zero-rated supplies of binding rulings by amending the Tax Administration (Binding Rulings) Regulations 1999. The amendments allow such factors as the nature of the issue and the skill and experience applied by Inland Revenue staff in providing the rulings to be taken into account in charging for binding rulings. They also clarify the GST position on fees for non-resident applications.

Date published: 05 Nov 2010

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