A3.1 Private rulings on income tax issues can be worked on by ATO staff in one or more of four major business lines, together with (in some cases) staff in one or more of six separate Centres of Expertise as well as (again, in some cases) staff from the Tax Counsel Network. For 2009/10, the ATO has budgeted for 373 full time equivalent staff (out of a total of 21,530 full time equivalent staff) to work on private rulings, oral rulings and administratively binding advice.

A3.2 Business lines have the primary responsibility for managing private ruling cases. Case officers within business lines who are allocated private rulings are expected to be the primary contact point between the ATO and the applicant for any ruling.

A3.3 A business line can prepare and issue a private ruling without referring the matter to any other area of the ATO where the ruling involves the application of a precedential ATO view, the straightforward application of the law, the exercise of a discretion, making an ultimate conclusion of fact or valuing something. Precedential ATO views are those contained in publicly issued rulings, publicly issued draft rulings, ATO Interpretative decisions (ATO IDs), decision impact statements and other specific documents listed in a schedule of precedential ATO views.

A3.4 Where there is no precedential ATO view for the matter to be addressed in a private ruling, or the application of an existing precedential view is considered to give rise to the wrong outcome, the business line must escalate the issue to a relevant Centre of Expertise whose role is then to either create the relevant precedential ATO view or to reconsider the existing view. A business line may also escalate an issue to a centre in other circumstances. One example is where the issue involves the application of a discretion, the legislation provides for specific factors to be considered in exercising that discretion and there is doubt about the meaning of one or more of those factors.43

A3.5 A business line must refer a private ruling to the ATO's Tax Counsel Network where the ruling involves the application of Part IVA (the general anti-avoidance provision) or section 45B (which involves demergers of corporate groups) of the Income Tax Assessment Act 1936 or a significant technical issue (known as a Priority Technical Issue). From time to time the ATO will also issue a direction that other matters must be referred to this network. For example, from August 2006 to December 2008, there was a direction that all private rulings involving the application of section 40-880 of the Income Tax Assessment Act 1997 were to be referred to a particular member of the Tax Counsel Network.

A3.6 For income tax rulings other than those which involve aggressive tax planning matters there are four major business lines which prepare private rulings. These business lines are for Microenterprises and Individuals (MEI), Small and Medium Enterprises (SME), Large Businesses and International (LBI) and Superannuation (Super).

A3.7 During the course of the review the ATO switched to a new computer system for managing private rulings — the Siebel system. This switch has led to certain changes in the manner in which each business line handles private rulings, particularly as regards the manner in which private rulings are initially streamed to business lines.

A3.8 The cases examined by staff of the IGT for the first and major fieldwork part of this review were prepared or on hand during the 2008/09 year. During this time the ATO employed a computer system known as the Technical Decision-Making System (TDMS) for private rulings work. In this period, each business line adopted the processes for managing private rulings discussed below.

Business line processes

Microenterprises and individuals

A3.9 During 2008/09 this business line, which is responsible for tax matters involving individuals and microenterprises with a turnover of up to $2 million, had approximately 100 staff ( 94 on a full time equivalent basis) working on private rulings. These personnel were located in various offices around Australia, including a number of regional offices. They worked in a provision of advice area which was separate from compliance/audit areas. Staff in this area also worked on objections, general interpretative guidance, internal advice and class rulings as well as private rulings.

A3.10 For private rulings, staff in a Business Operations Unit actually prepared the ruling. Senior technical officers who were in a separate technical business unit would authorise the private rulings. A single officer in this technical business unit acted as a "gatekeeper" for work that the line referred to one or more of the Centres of Expertise.

A3.11 Rulings that came to the business line were classified by a front-end process into four types of rulings. These classifications were: basic, routine, complex and highly complex. Rulings on South Australian workers compensation issues were classified as basic and were streamed to the ATO's Hobart office for processing. The Hobart office was also responsible for carrying out the front-end processing of all private rulings that came to the business line.

A3.12 Under the new Siebel system the business line no longer manually classifies rulings, as the Siebel system automatically classifies incoming rulings.

A3.13 Private rulings can come to the line from taxpayers or their representatives either directly from taxpayers or after the matter has first been raised with an MEI call centre.

A3.14 For the 2008/09 year, around 3 per cent of the 6,766 private rulings on income tax handled by the business line needed to be referred to a Centre of Expertise for an ATO precedent to be created.

A3.15 Around 80 per cent of private ruling requests handled by the line were from tax agents.

A3.16 This line also handles oral rulings for taxpayers. During the 2007/08 year, 82 oral rulings were issued, while in 2008/09 only 13 oral rulings were issued.

Small and medium enterprises

A3.17 During 2008/09 this business line, which is responsible for handling the tax affairs of enterprises with a turnover of between $2 million and $250 million, had approximately 210 staff (38 on a full-time equivalent basis) working on private rulings. These staff also worked on objections, general interpretative guidance, internal advice, litigation, class rulings and advice to Treasury.

A3.18 Most of the private rulings prepared by the SME line (313 of the 753 handled in 2008/09) involved fringe benefit matters. Its next largest number of private rulings were for not for profit entities. For both these types of rulings, this business line handled all private rulings on the issue, regardless of the size of the taxpayer.

A3.19 The line had certain specialist teams which handled particular types of rulings. An example of this was the demerger team which was based in Geelong.

A3.20 A classification team would stream rulings to the appropriate area.

A3.21 The line had five contact officers who interacted with the Centres of Expertise whenever a centre needed to be involved in a private ruling.

Large businesses and international

A3.22 This business line, which is responsible for business taxpayers with a turnover of more than $250 million, had no separate area for handling private rulings work during 2008/09. This work was done by 57 ATO staff (on a full time equivalent basis) who also worked on product and class rulings, interpretative guidance and, in some cases, compliance and audit matters. From 2008/09 this has changed, and the LBI business line now has a separate provision of advice area which consists of 120 staff.

A3.23 During 2008/09, private ruling applications were generally received directly by a particular tax officer who had had previous contact with the relevant applicant. These officers were located in one of four different groups within the business line. These groups consisted of the Energy and Natural resources area, the National Client Group area, the Innovation area and the Financial Services group. There was a classification process to send rulings on particular topics to particular personnel.

A3.24 Case officers in the LBI line, if they needed to contact a Centre of Expertise would do so directly without going through another person in the line. The separate areas within LBI each had their own written procedures for escalating a ruling to either a centre or to TCN.

A3.25 The LBI area has an internal benchmark of finalising all private rulings within 90 days.


A3.26 This business line is responsible for handling superannuation tax issues, other than those involving large superannuation funds who have a turnover exceeding $250 million. Large superannuation funds are handled by the ATO's LBI business line.

A3.27 During 2008/09, private rulings on income tax handled by the Superannuation line were only a small part of the private advice work performed by this line, as most forms of advice provided by the line involve non-tax superannuation issues. There were 20 full-time equivalent staff working on superannuation income tax issues.

A3.28 The income tax private rulings handled by the line during the year fell into two broad categories: undeducted purchase price issues and other matters. Undeducted purchase price issues were handled by a small advice team located in the ATO's Upper Mount Gravatt office, while other income tax private rulings were handled by a team in the ATO's Sydney office. The team in Sydney office also handled class rulings, objections, internal advice, interpretative guidance and administratively binding advice on superannuation matters.

A3.29 For complex matters, this business line had a process under which any application for a private income tax ruling would be first looked at by a senior technical approval officer who would then provide guidance to the case officer who would actually prepare the ruling.

A3.30 The rulings area based in Sydney was responsible for making any escalations of private rulings that needed a precedential ATO view to the relevant Centre of Expertise. These escalations were usually made to the Superannuation Centre of Expertise.

Centres of expertise

A3.31 In 2008/09 there were six Centres of Expertise to whom issues in a private ruling on income tax could be referred. These centres were located in the ATO's Law and Practice area and had a total of 281 staff located in various ATO offices around the country. The centres, and the numbers of staff in each (some of whom are not technicians but provide administrative support), were as follows:

  • Administration, Business and Personal Taxes: 62.7 full-time equivalent (FTE) staff;
  • Finance and Investment: 61.8 FTE staff;
  • International: 31 FTE staff;
  • Losses and capital gains tax: 37.5 FTE staff;
  • Consolidations: 30.44 FTE staff; and
  • Superannuation: 33.8 FTE staff.

A3.32 Each centre had one or more 'gatekeepers' who determined what escalations their centre would accept. Each centre also had its own escalation template which business lines had to complete when sending a private ruling to that centre. This escalation template has now been standardised into a single template.

A3.33 Centres worked, and continue to work, on matters other than private ruling escalations which require the creation of a precedential ATO view. Their work priorities are (in the following order): advice to Treasury on new and existing laws, priority technical issues (which generally also include priority private rulings), creating precedential ATO views, maintaining the ATO's precedential database and providing general technical advice. Only a very small percentage of the work of the centres involves private rulings escalations.

A3.34 In 2008/09 staff of each centre used the TDMS system to record their work on private rulings issues.

Tax Counsel Network

A3.35 The ATO's Tax Counsel Network (TCN) consists of around 91 technical and administrative staff (on a full time equivalent basis) located in various offices around the country. The technical staff of TCN are the ATO's most senior tax technical specialists.

A3.36 In 2008/09 the process for escalating a private ruling issue to this network was as follows. The issue would be escalated to one of three business managers in the TCN area who would then allocate the ruling to a particular TCN member. If the issue involved a priority technical issue (PTI) the relevant business manager would discuss the issue with a Deputy Chief Tax Counsel who would then allocate the ruling to a particular TCN member, together with a nominated priority of between 1 and 3.

A3.37 Business lines had to complete an escalation form to refer a ruling to the Tax Counsel Network. There were separate escalation forms for Priority Technical Issues, Part IVA issues and section 45B issues.

A3.38 Members of the TCN provided monthly reports to the area's business managers on the work (including private rulings issues) which they were performing. They did not use the TDMS system to record their work.

43 PSLA 2004/4 at paragraph 4.