The Commissioner of Taxation has limited powers to modify the operation of tax law in circumstances where entities will benefit, or at least be no worse off, as a result of the modification. This power is known as the Commissioner's remedial power (CRP).
To help taxpayers and practitioners, this page describes situations where the Commissioner has used the CRP to modify the operation of the law applying to individuals. Each section has:
- links to legislative instruments
- links to explanatory materials
- information about when it applies to and from.
We will add to this page as the CRP is applied to new situations.
Where the Commissioner amends the rate of withholding tax (WHT) for non-residents after an internal review, there is no ‘decision to which this Act applies’ and therefore no entitlement to interest on overpayment (IOP).
It was suggested that the CRP could be used to modify the law to create an entitlement to IOP.
However, it is clear from clause 3 of the Explanatory Memorandum to the Taxation (Interest on Overpayments) Bill 1983 that it was not intended that IOP be paid in these circumstances.
This is unsuitable as it is inconsistent with the intended purpose or object of the relevant provision.
The Taxation (Interest on Overpayments and Early Payments) Act 1983 (TIOEP Act) provides that interest is payable where early payments are made on specified tax liabilities, and on overpayments of income tax and other specified tax liabilities arising from an assessment or other decision to which the TIOEP Act applies. For an entitlement of interest on an overpayment to arise, it must be in relation to a relevant tax (which includes GST and indirect tax). Decisions to which the TIOEP Act applies include objections and court or tribunal decisions.
Use of the CRP was sought to create an entitlement to interest on overpayments of GST and indirect tax assessments that arise from non-litigious methods, such as alternative dispute resolution, ATO internal review or settlement entered into under a court or tribunal order.
The policy intent of the TIOEP Act is clear from the Act and the Explanatory Memorandum to the TIOEP Bill, which provides ‘authority for the Commissioner of Taxation to pay interest on certain refunds of tax made as a result of a successful objection or appeal by a taxpayer against an assessment or other decision of the Commissioner’.
Since interest on overpayments was only designed to be available in certain, specific circumstances, the modification was deemed unsuitable for the CRP as the law was operating as intended.
This is unsuitable as it is inconsistent with the intended purpose or object of the relevant provision.Where the CRP was considered but not applied to modify the operation of tax law that affects the tax system.