Taxpayers to safely swim between the ATO’s new guidance flags

Taxpayers to safely swim between ATO’s guidance flags

Annemarie Wilmore and Emily Pratt from KPMG Law take a look at the ATO’s draft Practical Compliance Guideline PCG 2016/D1.

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The Australian Taxation Office (ATO) has issued draft Practical Compliance Guideline PCG 2016/D1. The draft Guideline outlines the nature and role of Practical Compliance Guidelines (PCGs) within the framework of public guidance already provided by the ATO. It is proposed to be finalised shortly.

What are PCGs?

PCGs will set out the ATO’s position on potential compliance risk areas. The ATO describes the benefit of PCGs as allowing taxpayers to “position themselves within a range of behaviours, activities or transaction structures that the ATO describes as low risk and unlikely to require scrutiny – to safely ‘swim between the flags’”.

Taxpayers should view PCGs as being an administrative product that complements the Public Rulings program, providing insights into the practical implications of tax laws and the ATO’s administrative approach. PCGs will be used by the ATO to communicate directly with taxpayers in relation to administrative and compliance issues, leaving the existing Practice Statements to align more closely with their original purpose of communicating to ATO staff.

When will PCGs be issued?

The ATO will consult with taxpayers, their representative bodies, industry groups and tax professionals in issuing PCGs. Unlike the Public Rulings program, formal drafts of PCGs are not intended to be routinely produced for comment prior to finalisation, in an effort to provide taxpayers with timely and informed guidance. However, the ATO may consider releasing draft PCGs for comment in instances where there has been insufficient opportunity for consultation.

Can taxpayers rely on PCGs?

PCGs are not Public Rulings and will not have legally binding effect upon the ATO. However, PCGs set out the administrative approach to be adopted by the ATO and are intended to guide the behaviour of taxpayers. Where taxpayers rely on that approach in good faith it is suggested that the ATO will not take action to apply any changed view retrospectively.

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