PS LA 2011/27 sets out the matters the ATO should consider when determining whether their view of the law should only be applied prospectively. It notes that 'as part of the duty of good management' the ATO will not take action to apply its view of the law retrospectively where it is considered appropriate not to do so having regard to the extent to which the ATO has facilitated or contributed to taxpayers adopting a different view of the law (which may result from an industry practice or position).
The Court has made it clear that this Practice Statement does not fetter the Commissioner’s power of assessment where the law operates to impose liability.
Nonetheless, the Commissioner’s view is that there remains 'considerable practical scope' to use the Practice Statement. He has confirmed that the ATO remains committed to the principles in it; in 'deciding how to allocate the ATO’s compliance resources' the ATO must take into account public confidence in tax administration.
Accordingly, where in any tax dispute there is evidence of a change of position on the part of the ATO (while if the matter ultimately proceeds to litigation taxpayers may not be able to challenge the assessment on that basis) taxpayers should squarely raise this concern at the earliest opportunity with the relevant officers (or escalate as appropriate). As the Court noted, [this] is not to say that [the Commissioner] may not compromise the amount of any debt to be recovered” on an assessment.