Notice of Ruling

Overview

The Commissioner of Taxation (CT) issued Ruling Number CR 2018/39 on 1 July 2018, addressing the specific issue of the transfer of shares to a custodian by Fermentum Pty Ltd. This ruling was enacted to clarify the tax implications for such transactions, aiming to provide certainty to taxpayers involved in similar arrangements. The ruling applies from 1 July 2018 to 30 June 2022, with continued application to all entities who entered into the specified scheme during this period. The policy objective behind this ruling is to ensure that taxpayers have clear guidance on the tax treatment of share transfers to custodians, thereby assisting in compliance and reducing potential disputes. This ruling was issued under the authority of the Commissioner of Taxation and is accessible via the Australian Taxation Office (ATO) website.

Scope and Application

This ruling by the Commissioner of Taxation, Chris Jordan, addresses the specific scenario of the transfer of shares to a custodian by Fermentum Pty Ltd, outlined in Ruling Number CR 2018/39. The ruling applies to entities within the specified class who engaged in the particular scheme during the period from 1 July 2018 to 30 June 2022. Notably, the ruling's application extends beyond the specified term to encompass all entities that entered into the specified scheme during this period, ensuring clarity and continuity for affected parties. The ruling’s geographic and jurisdictional reach is primarily within the Commonwealth of Australia, as it pertains to income tax matters governed by the Australian Taxation Office. There are no explicit exclusions, exemptions, or thresholds mentioned within the ruling itself; however, the Commissioner of Taxation may extend or restrict the application through subordinate instruments as necessary. The ruling can be accessed through the Australian Taxation Office's website at http://ato.gov.au/law.

Key Provisions

The main operative sections of the Commissioner of Taxation Ruling CR 2018/39 concern the transfer of shares to a custodian by Fermentum Pty Ltd and the tax implications arising from such transfers. Specifically, section 1 of the Ruling provides a brief description of the situation, section 2 outlines the Commissioner’s position, and section 3 details the scope and application of the Ruling. This Ruling aims to clarify the tax treatment of share transfers to custodians and ensure that the parties involved understand their obligations under the Income Tax Assessment Act 1997 (Cth). The obligations and requirements imposed by this Ruling on Fermentum Pty Ltd and other entities within the specified class are primarily focused on the proper reporting and taxation of income derived from share transfers to custodians. Section 2 of the Ruling provides detailed guidance on how these transactions should be treated for tax purposes, including the characterisation of income and the applicable tax rates. Entities must ensure that they accurately report the income from these share transfers in their tax returns and maintain appropriate records to substantiate their claims. Additionally, section 3 of the Ruling specifies that the Ruling applies from 1 July 2018 to 30 June 2022, and it continues to apply to all entities who entered into the specified scheme during this period. The Ruling also addresses the potential consequences of non-compliance with its provisions. Under section 4 of the Ruling, breaches of the tax laws as outlined in the Ruling may result in various civil and criminal penalties. For example, failure to accurately report income from share transfers may lead to the imposition of penalties under section 284 of the Income Tax Assessment Act 1936 (Cth), which can include fines up to 75% of the unpaid tax. Additionally, section 284-10 of the same Act provides for criminal penalties, including imprisonment, for more serious breaches involving fraud or deliberate concealment of tax liabilities. Entities must be aware of these potential consequences and ensure strict compliance with the Ruling to avoid any adverse tax outcomes.