Explanatory Memorandum(Circulated by the authority of the Treasurer, the Hon John Dawkins, M.P.)
Chapter 2 Objections
This chapter deals with the rights of taxpayers to object against assessments and Private Rulings. The key features are:
- the period for lodging most objections will be extended to 4 years from the date of service of the notice of assessment, or determination of an offset or foreign tax credit;
- a taxpayer will be able to object to a Private Ruling up until the later of 60 days after receipt of the ruling or 4 years from the last day allowed for lodging the relevant return;
- where a taxpayer has objected to a Private Ruling the taxpayer cannot later object to an assessment on the same matter.
The Bill gives effect to changes announced in section 9 of the August 1991 information paper entitled 'Improvements to Self Assessment - Priority Tasks'.
At present, taxpayers dissatisfied with their assessment, or determination, may object in the manner set out in Part IVC of the Administration Act. Section 14ZW of the Administration Act permits a person making a taxation objection to lodge it within 60 days of service of the notice of the taxation decision(ie., assessment or determination - section 14ZQ) or 60 days after the granting of probate.
For most assessments and certain specified determinations, the Bill enables taxpayers to lodge an objection within 4 years from the date of service or publication of the notice of assessment, or determination, or the granting of probate. This only applies to assessments and determinations specified in section 14ZW. Other objection rights will retain the current 60 day objection period.
A rulee will be able to lodge an objection against a Private Ruling except where there is an assessment dealing with the matter covered by the ruling or where the ruling relates to withholding tax that has become due and payable. The rulee has until the later of 60 days after receipt of the ruling or 4 years from the last day allowed for lodging the relevant return to lodge the objection.
Where a taxpayer has objected against a Private Ruling the taxpayer cannot later object to an assessment in respect of the same matter.
In the case of amended assessments and determinations a minimum of 60 days is available to lodge an objection.
Section 14ZW of the Administration Act lists which objections to assessments and determinations have a 4 year objection period. These are:
- determinations of foreign tax credits; (section 160AL)
- determinations of offsets on account of franking deficit tax; (section 160AQQ)
- franking assessments; (section 160ART)
- assessments and amended assessments; (section 175A)
- assessments due to delayed administration (beneficiary and trustee); (subsections 220(3) and (7))
- assessments; (section 78A)
- assessments due to delayed administration (beneficiary and trustee). (subsection 98(3) or (7)) [amended paragraphs 14ZW(1)(aa), (ab) and (ac) - Subclause 8(c)]
Other objections to taxation decisions, such as those to Wool Tax assessments etc., or to other delayed administration objections, must be lodged within 60 days after service of the notice of the decision, or the granting of probate. [amended paragraphs 14ZW(1)(a), (b) and (c) - Subclauses 8(d) to (f)]
Objections against a Private Ruling
A rulee who is dissatisfied with a Private Ruling can object against it in the manner set out in Part IVC of the Administration Act (ie., by making a written taxation objection which states the grounds that the person relies on) within the period set out in section 14ZW except where:
- an assessment has been made which deals with the same matter covered by the ruling [paragraph 14ZAZA(2)(a) - Clause 4]; or
- the ruling relates to withholding tax that has become due and payable [paragraph 14ZAZA(2)(b)]. See Chapter 1.
The period within which the objection must be lodged is the later of:
- 60 days after receipt of the Private Ruling; or
- 4 years after the last day allowed for lodging the return for the year to which the ruling relates [subsection 14ZW(1A) - Subclause 8(g)]. See Chapter 1.
Where a rulee has objected to a Private Ruling and there is a subsequent assessment for the year of income, the year of tax or franking year, which covers the same arrangement, or part of the same arrangement, the taxpayer cannot object to that part of the assessment which relates to the matter already objected to. Where an assessment relates to facts that are materially different to those dealt with in the Private Ruling, or deals with the application of provisions not dealt with in the Private Ruling, the taxpayer's right to object against the assessment is not restricted by this rule [section 14ZVA - Clause 7]. See Chapter 1.
Objections to amended assessments and determinations
If an assessment or determination has been amended, section 14ZV applies to restrict the objection to the particular which was amended. The time period for lodging an objection to the amended assessment, or determination, is specified in new subsection 14ZW(1B) as the later of 60 days from the date of service of the notice of amended assessment or determination, or 4 years after the service of the original notice of assessment or determination. [subsection 14ZW(1B) - Subclause 8(g)]
Where an assessment or determination has been amended more than once, the notice for the purpose of determining the objection period is the notice of the first assessment or determination in relation to the year of income, franking year or year of tax. [subsection 14ZW(1C) - Subclause 8(g)]
Therefore, if a notice of amended assessment was served on the last day of the 4 year objection period for the assessment for the year of income that was amended, the taxpayer would still have 60 days in which to object. If the notice of amended assessment was served more than 60 days before the end of the 4 year period, the taxpayer could object to either the amended assessment or the original assessment, for the remainder of the 4 year objection period applying to the original assessment.
Assessments amended under new subsection 170(1A) of the ITAA, (ie., self amendments) have the same objection period as other amended assessments, ie., the later of 60 days from the date of service of the notice of amended assessment or 4 years from the date of service of the original notice of assessment. See Chapter 3.
Section 14ZX, which permits the Commissioner to consider applications for extension of time to lodge an objection, and section 14ZY, which requires the Commissioner to make an objection decision where the objection is duly lodged, are amended to change references to '60 days' to read '4 years or 60 days'. [amended sections 14ZX and 14ZY - Clauses 9 and 10]
The new objection periods apply to objections to taxation decisions for the years of income, franking year or year of tax, as appropriate, in which the later of 1 July 1992 or the commencement date occurs, and all later years. [Subclause 14(2)]
As applications for Private Rulings can only be made in respect of arrangements commenced on or after 1 July 1992, of if later, the commencement date [Clause 13], the new objection periods will apply to all Private Rulings.