ATO to issue 100A tax time guide this week
Tax time guidance on how accountants should handle section 100A will be finalised this week.
“The ATO is putting together some information on the basic elements of section 100A and what advisers and trustees need to do when making decisions about beneficiary entitlements at year end 2022,” deputy commissioner Louise Clarke said in a LinkedIn post this week.
The post said the guidance would be finalised “next week” and be published before the start of the next financial year after a brief consultation period.
The post drew scores of thumbs up on LinkedIn and was welcomed by one member of the Tax Practitioner Steering Group, who will be giving the initial feedback.
“It is pleasing to see that the ATO will release some updated guidance ahead of the finalisation of the ruling,” said IPA general manager technical policy Tony Greco.
“A statement of principles will be helpful, given the void that has been created since the draft surfaced.”
The draft ruling on 100A, which deals with the tax treatment of trust distributions, was released in February along with practical compliance guidelines and a taxpayer alert, to immediate and widespread alarm among the tax community.
The reaction ranged from visceral anger to detailed criticism from specialists in tax law, with comments from “heavy-handed” to “unsatisfactory for all concerned”.
Specific issues ranged from fears about the “retrospective” nature of the ruling to alarm over the possibility of promoter penalties, and from practical concerns about a lack of sufficient safe – “green zone” – examples to charges that the ATO was acting beyond its remit and extending the reach of the law.
Mr Greco said the ruling certainly went further than many expected.
“The one thing that is clear is that s100A applies more broadly than just to trust-stripping cases,” he said. “What is not clear, is how far and wide can the ATO apply this provision.
“The taxpayer alert is in final format and unless withdrawn or altered needs to be heeded by practitioners.”
The strength of reaction to the draft ruling forced the ATO to extend its deadline for submissions and Ms Clarke said the final document would include specific responses, but the office needed more time.
“It will all be considered when we finalise the ruling and the practical compliance guideline and we will provide a compendium showing how we have addressed that feedback,” she said in the LinkedIn post.
“We recognise though that we will not have enough time to finalise and publish the guidance before the start of the 2022-2023 income year.
“Therefore, to help with tax time 2022, the ATO is putting together some information on the basic elements of section 100A and what advisers and trustees need to do when making decisions about beneficiary entitlements at year end 2022.
“We are going to share this guidance with the Tax Practitioner Steering Group next week and soon thereafter, pending their feedback, we will publish the document and circulate it amongst the professional bodies so that it can be distributed to their members.”
Mr Greco said it was no surprise that the final version would not be ready before the end of the financial year, in time for trustees or their advisers to take into account distributions.
“This is good news in one respect that the ATO will not rush the process given the number of submissions received,” he said.
“On the negative side D-Day for trust resolutions is fast approaching. This is particularly important for practitioners advising clients on how to manage trust distribution resolutions before 30 June 2022.”