ATO Interpretative Decision

ATO ID 2001/246

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, wholly or in part, where the taxpayer makes a voluntary payment when lodging an amendment request and that payment is inadvertently refunded by the Australian Taxation Office (ATO).

Decision

The interest imposed under section 170AA (ITAA 1936) should be remitted under section 8AAG of the Taxation Administration Act 1953 (TAA 1953) for the period from the date that the payment is made to the date that the amendment issues.

Facts

The taxpayer requests an amendment to include a substantial capital gain omitted from a tax return relating to an earlier year of income. The taxpayer includes a cheque for the expected amount of tax payable under the amended assessment. Before the amendment is processed, the taxpayer's assessment for the current financial year issues and the amount intended as payment of the expected amended assessment for the earlier year of income is refunded.

The taxpayer is made liable to pay the GIC under section 170AA (ITAA 1936) for each day in the period from the date the original assessment became due and payable to the date the amended assessment issued.

The taxpayer requests that the GIC be remitted on the basis that the information leading to the issue of the amended assessment had been provided voluntarily and the payment of the additional tax that the taxpayer had expected to become payable had also been voluntarily made.

Reasons for Decision

Where an assessment is amended to increase the amount of tax payable, a taxpayer is generally liable to pay the GIC under section 170AA (ITAA 1936). However, section 8AAG (TAA 1953) allows the Commissioner to remit all or part of the GIC payable. Taxation Ruling IT 2444 and the ATO Receivables Policy provide guidelines that the Commissioner uses to determine whether remission is warranted. It is clear from these guidelines that although remission will only be granted in limited circumstances, the GIC will be remitted where by reason of the particular circumstances, it is considered fair and reasonable to do so.

In this taxpayer's particular circumstances, it may be accepted that the ATO was responsible for inadvertently refunding the voluntary payment that had been made by the taxpayer. Therefore, it is considered fair and reasonable to remit the GIC imposed for the period between the payment being made and the amended assessment being issued as the inadvertent refund of the payment was the cause of the revenue being deprived of the use of the money for that period. However, the GIC imposed that relates to the period before the voluntary payment was made should not be remitted under section 8AAG (TAA 1953).

Legislative References:
Income Tax Assessment Act 1936
   section 170AA

Related Public Rulings (including Determinations)
IT 2444

Other References:
ATO Receivables Policy

Keywords
Tax administration
Remission of Section 170AA interest
General interest charge
Income tax shortfall

Business Line:  Small Business/Individual Taxpayers

Date of publication:  27 August 2001

ISSN: 1445-2782