Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Hansard source

The Treasurer has provided the following answer to the honourable senator's question:

Taxation Determination 2010/D8 is not a proposed measure. Taxation determinations do not alter the existing tax law, but rather set out the Commissioner of Taxation's interpretation of how the existing law works. In a determination, the Commissioner is simply expressing his view of the law enacted by Parliament and he applies accepted principles of statutory interpretation in doing so.

Determinations are not legally binding on taxpayers (that is, they do not create legal obligations under the tax law for them). Once finalised, they are only binding on the Commissioner. Their legal effect is to protect taxpayers who choose to follow the Commissioner's views expressed in them. Taxation determinations have no policy intent, and the government has no involvement in the issuing of taxation determinations. The Commissioner releases draft taxation determinations for public comment before finalising them.

Many taxation determinations are considered by the ATO's Public Rulings Panel. The Panel advises the Commissioner on the issues proposed to be dealt with in taxation rulings and determinations and is made up of senior ATO officers and external experts.

Taxation determinations do not have a revenue impact on the forward estimates because, as far as the law allows, the Commissioner interprets the law consistent with policy intent on which revenue estimates were based. However, they may have a compliance leverage impact by protecting the forward estimates to the extent that revenue is at risk from taxpayers not applying the law properly.

The ATO is therefore unable to provide an answer to questions (1), (2), (3), (5) (c), (6), (7), (8), (9), (10) and (11).

(4) Yes. Some taxpayers currently operate on the basis that profits on the sale of private equity investments will invariably constitute non-Australian sourced capital gains and be exempt from tax in Australia. Such taxpayers will need to re-examine their own circumstances. However, where the gains are Australian sourced business profits they will be exempt from Australian tax if derived by a limited liability partnership whose partners are resident of a country with which we have a double tax treaty unless a source country taxing right (eg for permanent establishment income) is provided under the treaty.

(5) (a) The private equity industry and non-resident investors will be affected if the partners of the limited liability partnership are not resident in a country with which we have a double tax agreement.

(5) (b) The normal consultation process for determinations is being followed and the draft Determination was discussed at National Tax Liaison Group meetings in 2010. The draft Determination was published on www.ato.gov.au on 1 December 2010 and public consultation closed on 28 January 2011.

In addition, meetings were held with private equity firms and their professional advisors.

(5) (d) No, apart from the consultation process mentioned in the answer to (5) (b).