Notice of Rulings, Notice of Withdrawals

Overview

The Australian Taxation Office (ATO) Commissioner, Chris Jordan, has released a new Product Ruling (PR 2018/7) to provide clarity on the tax consequences of investing in a particular financial instrument known as Portfolio Tracking Exchangeable Redeemable Securities (Converting Security) (PTrackERS), which are offered under the Prospectus by PM Capital GO 2025 Limited. This ruling applies from 11 July 2018, providing guidance for investors on the tax treatment of their investments in these securities. Concurrently, the ATO has withdrawn Taxation Ruling TR 92/17, which dealt with income tax and fringe benefits tax exemptions for 'religious institutions', effective from the same date. The withdrawal of TR 92/17 reflects the evolving legislative landscape and administrative focus on other pressing tax matters. These announcements aim to ensure that taxpayers have the necessary information to comply with their obligations under the Australian tax laws.

Scope and Application

The Commissioner of Taxation has issued a Product Ruling under the Income Tax Assessment Act 1997, providing clarity on the tax consequences of investing in a specific financial product. Ruling PR 2018/7 pertains to investments in Portfolio Tracking Exchangeable Redeemable Securities (Converting Security), commonly referred to as PTrackERS, which are offered by PM Capital GO 2025 Limited under its Prospectus. This ruling applies to any individual or entity considering such investments from the effective date of 11 July 2018 onwards. It is pertinent for taxpayers, financial advisors, and institutions involved in the issuance or trading of these securities, as it outlines the tax treatment of these investments under the Act. The ruling provides a prospective application, ensuring that all investments made from the specified date are subject to the tax guidelines provided. Concurrently, a withdrawal notice has been issued for Ruling TR 92/17, which previously exempted certain income tax and fringe benefits tax liabilities for religious institutions. This withdrawal takes effect from the same date, 11 July 2018, indicating a revision in the tax treatment of religious institutions under the Act.

Key Provisions

The Ruling PR 2018/7 outlines the Commissioner of Taxation's stance on the tax implications associated with investing in Portfolio Tracking Exchangeable Redeemable Securities (Converting Security), commonly known as PTrackERS. These securities are offered under the Prospectus by PM Capital GO 2025 Limited, and the Ruling applies from 11 July 2018 onwards. The Ruling provides clarity on how these investments should be treated for income tax purposes, ensuring that investors and financial entities understand their obligations and entitlements. The obligations imposed by the Ruling primarily focus on ensuring that the investments in PTrackERS are accurately reported and taxed according to the Commissioner's guidelines. Investors and financial entities must ensure that the income derived from these investments is correctly classified and taxed as stipulated in the Ruling. This includes adherence to the specific provisions regarding the treatment of income, capital gains, and any deductions that may be applicable. Financial institutions offering these investment products must also ensure that they are providing accurate and compliant advice to their clients. The Act does not explicitly state any offences or penalties for non-compliance with the Ruling. However, general provisions under the Income Tax Assessment Act 1936 may apply. Any failure to correctly report or tax income derived from PTrackERS could lead to penalties under section 284 of the Act, which includes penalties for providing false or misleading statements. The penalties can vary, but for individuals, the maximum penalty can be up to 75% of the unpaid tax, while for companies, it can be up to 300% of the unpaid tax. Additionally, any fraudulent behaviour or deliberate non-compliance may result in criminal charges, with potential imprisonment and/or fines. The Ruling TR 92/17, which provided exemptions for 'religious institutions' under income tax and fringe benefits tax, has been withdrawn with effect from 11 July 2018. This withdrawal means that religious institutions will no longer be exempt from these taxes and will need to comply with the general tax provisions applicable to all other entities. The withdrawal of this Ruling requires religious institutions to reassess their tax obligations and ensure that they are reporting and paying taxes in accordance with the current tax laws. The implications of this withdrawal mean that religious institutions must now account for their income and benefits in the same way as other entities, including paying income tax on their taxable income and fringe benefits tax on the provision of fringe benefits to their employees or associates. This change in status requires these institutions to seek professional advice to ensure they are compliant with their new tax obligations. The failure to comply with these tax obligations can result in penalties under the Income Tax Assessment Act 1936, similar to those mentioned earlier for non-compliance with other tax rulings.