ATO guidance on Principal Purpose Test

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ATO guidance on Principal Purpose Test – 17 December 2019

Tax insights

The ATO has recently released a draft Law Administration Practice Statement PSLA 2019/D2 dealing with the Principal Purpose Test in the Multilateral Instrument, and similar provisions in a number of our existing treaties.

This PSLA provides guidance to ATO staff on the administrative process of applying the test and as a result, is principally focussed on internal ATO processes rather than technical matters. However, the draft guidance is still of interest as it provides direction on how the ATO will deal with taxpayer engagement (eg, documents to be requested, framing questions, etc) and also provides a few insights into technical views of the ATO on certain matters. Submission comments are due by 14 February 2020.

The ATO has also advised that the related PCG which was previously expected to be developed on this issue is now considered to be no longer required.

ATO guidance on Principal Purpose Test
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