In a recent case, the Full Court of the Federal Court had to consider the validility of an assessment issued by the Commissioner that the taxpayer claimed to be contrary to a private ruling and therefore was infected with jurisdictional error.
The Court noted that a private ruling can only bind the Commissioner in respect of the arrangement ruled upon. Therefore the taxpayer may only rely upon the ruling if the taxpayer acts in accordance with the terms of the ruling. However if the taxpayer enters into different arrangements, or does not act in accordance with the ruling because of changed circumstances, then it is clear that the private ruling does not bind the Commissioner.
The Court held that this meant that without a factual investigation, it could not be said that, the assessment was inconsistent with the private ruling and therefore made by the Commissioner in breach of the relevant provisions of the Tax Acts. The Court determined that the appropriate place to deal with this issue was therefore through the objection and appeal processes under the relevant legislation and not by way of a declaration as to the invalidity of the assessment.