Class rulings are a form of public binding ruling. They are issued in response to an entity's request for advice about the application of the tax laws to several taxpayers in relation to a defined scheme (other than an investment or financial product for which a product ruling can be issued).
Following a number of concerns raised by industry, tax practitioners and the public with respect to class rulings processes, the IGT announced terms of reference for this review on 25 March 2010.
Overall, the IGT observed through this review, that the class ruling system is a useful element of the tax system, while also acknowledging that there are areas for improvement. In general, class rulings effectively mitigate operational costs and reduce risk by providing greater administrative certainty to relevant taxpayers.
There was also strong stakeholder support for the priority class ruling system approach to be adopted more widely. Broadly, this priority process typically draws in more experienced ATO personnel at an earlier point and these personnel have greater authority to make decisions.
It should be noted that representations to the IGT to undertake this review were made at a time when most class rulings arose from capital markets merger and acquisition transactions. The number of these transactions has reduced dramatically in that market.
Notwithstanding the change in market conditions over the period of this review, the IGT observed that class rulings issued under the priority class rulings process were generally of higher quality and issued on a more timely basis than those issued under the routine processes. However, the number of cases falling within the priority rulings process is relatively small.
In addition to the issues above, the IGT also observed that there is room for improvement in the ATO's administration of class rulings in a number of areas, such as case management, reporting, record keeping, external performance standards, communication, transparency, ATO staff awareness of existing procedures and policies and the Siebel system search functionality.
The IGT made eight recommendations aimed at improving the ATO's class rulings administration and related areas.
The ATO has agreed with all recommendations, commenting that the report provides important insights on administration of the system and has committed to tangible practical action in response to that agreement. This action includes:
- Streamlining and differentiating class ruling processes to improve timeliness;
- Consulting with the community to explore appropriate benchmarks on quality and timely delivery;
- Publishing performance standards to improve transparency; and
- Providing ATO officer support and refresher training to improve service delivery and the user experience.
Once implemented the actions taken as a result of this review should improve the administration of the class rulings system for the benefit of all taxpayers.