Compliance
Private ruling
A private ruling is the ATO's written opinion on how a tax law applies to your specific circumstances, and it is binding on the ATO if you rely on it correctly.
A private ruling is a written statement from the ATO about how it considers the tax law applies to a particular person and a particular arrangement. Unlike general guidance, it deals with your own facts. A business might ask, for example, whether a planned transaction will be a taxable supply, or whether a particular type of payment includes GST. The answer is a ruling that is personal to the applicant.
The main advantage is certainty. If you apply for a ruling, receive it, and then carry out the arrangement exactly as described in your application, the ATO is generally bound to apply the ruling to you. If the ruling later turns out to be wrong, you are protected from additional tax, penalties and interest for the period covered by the ruling, as long as you followed it. This is a powerful protection for large or uncertain transactions.
To obtain a ruling, you submit an application to the ATO with a full description of the arrangement, the facts, the relevant law and the question you want answered. Accuracy and completeness are critical. If the facts you give are incomplete or incorrect, or if the arrangement you carry out differs from the one you described, the ruling may not protect you. Many applicants use a registered tax agent or adviser to prepare the application.
Private rulings are issued in relation to a range of taxes, including GST, income tax and others. The ATO publishes timeframes for dealing with applications, and complex matters may take longer. There is generally no fee for a private ruling, although the cost of professional help in preparing the application may be significant. Some rulings relate to events that have not yet occurred, while others relate to arrangements already in place.
A private ruling only binds the ATO in relation to the person who applied. Another taxpayer cannot rely on your ruling, although it may give a hint of how the ATO sees similar circumstances. For arrangements that apply to many people, such as an employer scheme that covers a large group, the ATO may issue a class ruling instead, which applies to the defined class.
If you disagree with a private ruling, you can generally object, and then seek external review, in the same way as for other decisions, subject to time limits. A ruling also does not stop the law changing, so a ruling may cease to apply if the law is amended. Reading the period covered by the ruling is important.
This page is general information only, so confirm your position with the ATO or a registered tax professional.
Worked example
A registered property business plans to sell a building and is unsure whether the sale will be GST-free as a going concern. It applies for a private ruling, describing the arrangement in full. The ATO confirms in writing that the sale qualifies. When the business later sells the property for $4,000,000 exactly as described, it relies on the ruling and does not charge GST of $400,000, and the ruling protects it.
Practical tips
- Describe your arrangement fully and accurately, because a ruling only protects you if the facts match what you actually do.
- Apply before you carry out a large or uncertain transaction, not after.
- Remember a private ruling protects only the person who applied for it.