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Commissioner's remedial power

How the Commissioner can resolve unforeseen or unintended outcomes in the law to create certainty.

Last updated 26 August 2020

How the Commissioner can resolve unforeseen or unintended outcomes in the law to create certainty.

What the CRP is

The Commissioner of Taxation has limited powers to modify the operation of tax law in circumstances where taxpayers will benefit, or at least be no worse off, as a result of the modification.

The Commissioner's remedial power (CRP) is a discretionary power. The Commissioner can use this power in limited circumstances where law change would otherwise be required to address instances where the law is not operating as intended by parliament. The CRP is used as a last resort when other options, such as administrative or interpretive approaches, are not adequate to resolve an issue.

The CRP may only be used to resolve general issues that arise for all taxpayers, or issues that impact a particular class of taxpayers. It can't be used to resolve specific issues affecting a particular individual. The CRP is not an alternative to objecting to a decision made by the Commissioner.

The CRP provides a streamlined process to create certainty for taxpayers. This facilitates the timelier resolution of unforeseen or unintended outcomes in tax and superannuation law than primary law change. It also allows legislative resources to be prioritised towards more significant changes.

The CRP may be applicable where the current law is producing unintended, negative impacts for taxpayers, or is creating excessive compliance costs. The CRP has legal limitations and any modifications made using the power must:

  • not be inconsistent with the intended purpose or object of the law
  • be reasonable, having regard to  
    • the intended purpose or object of the law
    • whether the cost of compliance is disproportionate to that intended purpose or object
  • have a negligible budget impact.

Limitations on exercising the CRP

The Commissioner can only exercise the power where the following legislative criteria have been satisfied.

The modification must not be inconsistent with the intended purpose or object of the law

It is unavoidable that there will be a range of circumstances, arrangements or transactions that were not known to exist, or did not exist at the time of drafting the law. However, had the circumstances, arrangement or transaction been considered at the time of drafting, the law would have been different. In these circumstances, exercising the CRP to apply the law in a modified way would not be inconsistent with the intended purpose or object of the law.

This criterion allows the Commissioner to consider the broader context of the particular taxation law being examined. The Commissioner is able to focus beyond interpreting only the words of the law. To determine the intended purpose or object of the provision, the Commissioner may consider a variety of materials, such as the explanatory memorandum for the Bill, the second reading speech and relevant government announcements.


In 2005, amendments were made to reduce the periods during which the Commissioner may amend income tax assessments in a range of circumstances from a four-year amendment period to a two-year amendment period. As a consequence, the record-keeping retention period requirements were changed for:

  • payment summaries
  • Medicare levy family payments
  • returns lodged by agents.

An applicant requested the Commissioner to exercise the CRP to exempt some taxpayers from the record-keeping retention period requirement who would otherwise not already be exempt under the listed circumstances in the law. The Explanatory Memorandum to the Tax laws Amendment (Improvements to Self-Assessment) Bill (No. 2) 2005) made it clear that it was not intended to exempt individuals outside of the listed circumstances. Therefore, the suggested modification was inconsistent with the intended purpose or object of the provision and the CRP could not be utilised.

End of example

The Commissioner must be satisfied the modification is reasonable

The Commissioner must be satisfied that the modification would be reasonable, having regard to the:

  • intended purpose or object of the provision
  • whether the cost of complying with the provision is disproportionate to achieving that intended purpose or object.

Both factors should be considered. However, in some cases, one may be a more relevant consideration than the other. For example, whether compliance costs are disproportionate may not be relevant if the provision being considered does not impose compliance costs on a taxpayer.

The Commissioner, in considering whether a modification is reasonable, may consider, for example, the:

  • extent to which the modification is favourable to taxpayers
  • extent to which the modification has any adverse direct impact on the tax liability of a third party
  • impact on any current judicial interpretation of the relevant law.


Under the foreign resident capital gains withholding (FRCGW) provisions, for contracts entered on or after 1 July 2016, purchasers of certain Australian assets are required to pay 10% of the purchase price to the Commissioner where they believe the vendor is a foreign resident. The vendor will claim a credit for the amount withheld when they lodge their income tax return.

However, certain tax crediting provisions prevent the vendor from claiming that credit where the capital gains tax (CGT) event occurs in one income year and settlement occurs in a later income year. This is because the vendor is only entitled to the credit when the amount withheld is paid to the Commissioner, which normally occurs at settlement.

An applicant requested the Commissioner to exercise the CRP to change the operation of the applicable tax crediting provisions so that the entitlement to the credit arises in the same income year the CGT event occurs in. The modification operates in a similar manner to other tax law provisions that treat a credit entitlement arising in a preceding income year where payment and withholding takes place in a later income year. The crediting mismatch results in unintended compliance costs and adverse cash flow impacts for affected entities.

The Commissioner considers the modification to be reasonable to ensure the FRCGW provisions do not create unintended outcomes. The modification also meets the other legislated CRP criteria and therefore the CRP was utilised.

End of example

The proposed modification has negligible impact on the Commonwealth budget

The CRP is only intended to operate in situations where any impact on the Commonwealth budget would be negligible. This is to ensure the power is used to resolve smaller issues that would be less likely to warrant resolution by way of primary law change. The Commissioner must receive advice from the Treasury, or the Department of Finance, that the impact on the Commonwealth budget would be negligible. Impacts on the Commonwealth budget will be determined through the ordinary processes and budget rules.

The guidelines issued under the Charter of Budget Honesty Act 1998 by the Secretaries to the Treasury and the Department of Finance provide further information on the considerations used when undertaking costings.

Any CRP costing has to focus on the financial impact on the Australian Government’s key budget aggregates. These costings measure the difference in expected budgetary financial impacts under the proposed modification and the expected impacts already included in the ‘forward estimates’.

CRP costings will consider the direct behavioural impacts (where practical to do so) and direct budgetary consequences of the modification.

A variety of information sources, modelling and data analysis is used to estimate the budget impact of a CRP issue.

Application of legislative instruments made under the CRP

The CRP cannot be used to modify the operation of the law for a particular taxpayer. This includes exercising the power in relation to a class that is so narrowly defined that it could practically only cover one taxpayer.

To ensure that particular taxpayers are not adversely impacted by the Commissioner exercising the power; the modification will only apply when outcomes for a taxpayer will be no less favourable than under the existing law.

The taxpayer will need to self-assess whether a modification is less favourable to it. If a taxpayer is required to treat a modification as not applying, then the Commissioner must also treat the modification as not affecting that particular taxpayer. This ensures that a modification which is less favourable to a taxpayer can still be valid and apply to taxpayers who do not have a less favourable outcome from the modification.

Consultation on CRP legislative instruments

The Commissioner will consult publicly as part of exercising the power. In addition, targeted consultation on a prospective CRP candidate is undertaken with the CRP Advisory Panel, a body comprised of private sector specialists, Treasury and ATO representatives. The Board of Taxation is also informed of relevant issues that are before the CRP Advisory Panel.

CRP legislative instruments are subject to parliamentary oversight and do not apply until the 15 sitting day disallowance period has concluded.

To participate in consultation being undertaken by the Commissioner, go to the Consultation Hub.

See also  

Where the Commissioner's remedial power has been used, with links to legislative instruments and explanatory material.

Where we have considered but not applied the Commissioner's remedial power.

A step-by-step version of the Commissioner of Taxation's remedial power (CRP) process.