ATO Interpretative Decision

ATO ID 2001/220

Income Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Whether the General Interest Charge (GIC) imposed under section 170AA of the Income Tax Assessment Act 1936 (ITAA 1936) should be remitted when the taxpayer makes a voluntary disclosure.

Decision

The GIC imposed under section 170AA (ITAA 1936) should not be remitted.

Facts

On a date after 1 July 1999, the taxpayer realises that they have omitted a capital gain from a previous year's tax return. The taxpayer had originally assumed that the capital gain related to the later year of income. When the taxpayer discovers the mistake, the taxpayer requests an amendment to the prior year's tax assessment.

The taxpayer's assessment is amended and the taxpayer is liable to pay an additional amount of tax. GIC is payable on this amount. As the taxpayer voluntarily tells the Commissioner of the omission and the tax shortfall is less than $1000, section 226Z (ITAA 1936) applies and no penalty tax is applied. However, the taxpayer is still liable to pay the GIC. The taxpayer requests that the GIC be remitted in view of the voluntary disclosure.

Reasons For Decision

Where an assessment is amended to increase the amount of tax payable, a taxpayer is liable to pay the GIC under section 170AA (ITAA 1936). However, section 8AAG of the Taxation Administration Act 1953 (TAA 1953) allows the Commissioner to remit all or part of the GIC payable in appropriate circumstances.

Under section 8AAG (TAA 1953), the Commissioner may remit all or a part of the charge if satisfied that:

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the circumstances that contributed to the delay in payment were not due to an act or omission of the person, and the person has taken reasonable action to mitigate those circumstances, or the effects of those circumstances;

•

the circumstances that contributed to the delay in payment were due to or caused by (whether directly or indirectly) an act or omission of the person, and the person has taken reasonable action to mitigate those circumstances, or the effects of those circumstances, and having regard to the nature of those circumstances, it would be fair and reasonable to remit all or a part of the charge; or

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there are special circumstances because of which it would be fair and reasonable to remit all or a part of the charge, or it is otherwise appropriate to do so.

Taxation Ruling IT 2444 and the ATO Receivables Policy provide guidelines for determining when the Commissioner will remit the GIC. It is clear from these guidelines that the GIC will be payable in most situations and remission will only be granted in limited circumstances. Paragraph 13 of Taxation Ruling IT 2444 states that the interest charge on underpayments of tax is designed to compensate the revenue for the full amount of tax not having been paid by the due date.

The taxpayer in this case has made a voluntary disclosure and penalty tax otherwise applicable has been reduced accordingly. However, applying the legislation and the guidelines, there is nothing further in the taxpayer's circumstances to also warrant remission of the GIC.

Legislative References:
Income Tax Assessment Act 1936
   section 170AA
   section 226Z

Related Public Rulings (including Determinations)
IT 2444

Other References:
ATO Receivables Policy

Keywords
Taxation administration
Income tax penalties
Income tax shortfall
Remission of section 170AA interest
General interest charge

Business Line:  Small Business/Individual Taxpayers

Date of publication:  21 August 2001

ISSN: 1445-2782