Reducing tax outcome uncertainty
If you have concerns about the uncertainty of your tax outcome. Don't fret. This is a common concern and we can help.
Taxpayers often seek ways to reduce the uncertainty of a tax outcome. This can be done by way of a tax agent documenting a Reasonably Arguable Position (RAP).
Put simply, a RAP is an interpretation of the tax law where there is no precedent case law or tax ruling to support the argument/uncertainty. By having a RAP documentation in place will eliminate the penalty should there be a tax shortfall arises e.g. if ATO disagrees with the argument during an audit. RAP is available to anyone who seeks to minimise their penalty, whether you are an individual or in business.
“Reasonably arguable” means the advice is more likely to be correct than incorrect. You should say that a RAP is a position that has at least a 50% chance of being correct. Based on the case law, a position cannot be a reasonably arguable if reasonable care has not been taken, a RAP is something more than “reasonable care”.
It is advised to have documentation in place, prepared by the tax agent before a contentious transaction is entered into or at the time the taxpayer made the relevant statement, e.g. lodged the return treating an amount a particular tax way.
Please contact Adrian Ma should you wish to discuss this matter.