INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART VII - PENALTY TAX  

SECTION 222AA   222AA   PART TO STOP APPLYING  
This Part does not apply to statements made, or schemes entered into, in relation to the 2000-01 year of income or a later year of income.

Note:

See instead Division 284 in Schedule 1 to the Taxation Administration Act 1953 .

SECTION 222A   INTERPRETATION  

222A(1)   [Definitions]  

In this Part:

"credit"
means:


(a) a credit within the meaning of Division 19 of Part III ; or


(b) an offset within the meaning of Division 1 of Part IIIAA ;

"estate shortfall excess"
, in relation to a taxpayer who is or has been a beneficiary of a trust estate, a year and an estate taxation statement, means:


(a) If:


(i) the taxpayer would have had a tax shortfall for the year if the taxpayer's statement tax for the year at all times had taken into account the net income of the estate calculated on the basis of that statement, but otherwise on the same basis as the correct net income of the estate would be calculated ( ``statement shortfall'' ); and

(ii) the taxpayer would have had a tax shortfall for the year if the taxpayer's statement tax for the year at all times had taken into account the correct net income of the estate ( ``non-statement shortfall'' ); and

(iii) the statement shortfall is higher than the non-statement shortfall;
the amount equal to the difference between those shortfalls; or


(b) if:


(i) the taxpayer would have had the statement shortfall; and

(ii) would not have had the non-statement shortfall;
the statement shortfall;

"estate taxation statement"
, in relation to a trust estate, means a taxation statement relating to the net income of the estate;

"income tax law"
means a law under which the extent of liability for income taxis worked out;

"law"
means:


(a) a section or other provision of an Act; or


(b) a regulation under an Act;

"partnership shortfall excess"
, in relation to a taxpayer who is a partner in a partnership, a year and a partnership taxation statement, means:


(a) if:


(i) the taxpayer would have had a tax shortfall for the year if the taxpayer's statement tax for the year at all times had taken into account the net income, and partnership loss, of the partnership calculated on the basis of that statement, but otherwise on the same basis as the correct net income, and partnership loss, of the partnership would be calculated ( ``statement shortfall'' ); and

(ii) the taxpayer would have had a tax shortfall for the year if the taxpayer's statement tax for the year at all times had taken into account the correct net income, and correct partnership loss, of the partnership ( ``non-statement shortfall'' ); and

(iii) the statement shortfall is higher than the non-statement shortfall;
the amount equal to the difference between those shortfalls; or


(b) if:


(i) the taxpayer would have had the statement shortfall; and

(ii) would not have had the non-statement shortfall;
the statement shortfall;

"partnership taxation statement"
, in relation to a partnership, means a taxation statement relating to the net income, or partnership loss, of the partnership;

"proper tax"
, in relation to a taxpayer and a year, means the tax properly payable by the taxpayer in respect of that year on the taxpayer's taxable income after allowing credits properly allowable to the taxpayer;

"return tax"
, in relation to a taxpayer and a year of income, means the tax that would have been payable by the taxpayer in respect of that year if it were assessed on the basis of the taxpayer's return of income in respect of that year after allowing the credits claimed by the taxpayer in that return;

"scheme section"
means section 224 , 225 , 226 or 226AA ;

"shortfall section"
means section 226G , 226H , 226J , 226K , 226L or 226M ;

"statement tax"
, in relation to a taxpayer, a year and a time, means the tax that would have been payable by the taxpayer in respect of that year if it were assessed at that time on the basis of taxation statements by the taxpayer after allowing the credits claimed by the taxpayer;

"taxation officer"
means a person exercising powers or performing functions under, or in relation to, this Act or the regulations;

"taxation officer statement"
means a statement made to a taxation officer orally, in a document or in any other way (including by way of electronic transmission), and includes a statement:


(a) made in an application, certificate, declaration, notification, objection, return or other document made, prepared or given, or purporting to be made, prepared, or given, under this Act or the regulations; or


(b) made in answer to a question asked under this Act or the regulations; or


(c) made in any information given, or purporting to be given, under this Act or the regulations; or


(d) made in a document given to a taxation officer otherwise than under this Act or the regulations;

but does not include a statement made in:


(e) a document produced under paragraph 264(1)(b) or 264A (1)(d) or (e) (other than a document containing particulars of the basis of the calculation of taxable income of a year of income and the tax payable in respect of that taxable income that were specified in a return in accordance with section 161AA , 221AZD or 221AZS ); or


(f) a document produced under subparagraph 451(2)(c)(ii) or paragraph 453(1)(e) ;

"taxation purpose statement"
means a statement made to a person, other than a taxation officer, for a purpose relating to the operation of this Act or the regulations orally, in a document or in any other way (including by way of electronic transmission), and includes a statement:


(a) made in an application, certificate, declaration, notification or other document made, prepared or given to the person; or


(b) made in answer to a question asked by the person; or


(c) made in any information given to the person;

"taxation statement"
, in relation to a person, means:


(a) a taxation officer statement made by the person; or


(b) a taxation purpose statement made by the person;

but does not include a statement:


(c) in which an income tax law is treated as applying to a taxpayer in respect of a year of income in relation to a matter; and


(d) that is made:


(i) in an objection under this Act against an assessment or determination; or

(ii) in relation to the Commissioner's consideration of such an objection;

"tax shortfall"
, in relation to a taxpayer and a year, means the amount, if any, by which the taxpayer's statement tax for that year at the time at which it was lowest is less than the taxpayer's proper tax for that year;

"wrongful behaviour provision"
means:


(a) in relation to section 224 , subparagraph 224(1)(d)(i) or (ii); or


(b)in relation to section 225 , sub-subparagraph 225(1)(c)(i)(B) or 225(1)(c)(ii)(B); or


(c) in relation to section 226 , subparagraph 226(1)(c)(i) or (ii); or


(d) in relation to section 226AA , paragraph 226AA(1)(c) or (2)(c).

"year"
means year of income.

222A(2)   [``arrangement'', ``private ruling'', ``tax audit'']  

In this Part, ``arrangement'' , ``private ruling'' and ``tax audit'' have the same meanings as in Part IVAA of the Taxation Administration Act 1953 .

222A(3)   [Electronic transmission etc]  

If a document is given on a data processing device, or by way of electronic transmission, by a registered tax agent on behalf of a taxpayer, then, for the purposes of this Part, each statement in the document is taken to have been made by the taxpayer unless the taxpayer can show that the taxpayer did not authorise the statement.

SECTION 222B   TAXATION STATEMENTS  

222B(1)   [Interpretation]  

For the purposes of this section:


(a) subject to paragraph (b), expressions in this section have the same meanings as in Division 16E of Part III ; and


(b) paragraph (a) applies as if paragraph (c) of the definition of ``qualifying security'' in subsection 159GP(1) were omitted; and


(c) sections 159GV (other than subsection 159GV(2) ) and 159GZ apply as if references in them to ``this Division'' were references to this section.

222B(2)   [Notice or advice re transfer of qualifying security]  

Where:


(a) a person to whom a notice is given under section 265B gives the notice to another person in connection with the transfer of a qualifying security to the other person; or


(b) a person gives advice in writing to another person, in connection with the transfer of a qualifying security, of a variation or partial redemption of the qualifying security;

any statement in the notice when so given, or in the advice when so given, to the other person is taken, for the purposes of this Part, to have been made by the person giving the noticeor advice, as the case may be, to the other person for a purpose in connection with the operation of this Act.

222B(3)   [No advice that security varied or partially redeemed]  

Where:


(a) the holder of a qualifying security transfers the security to another person; and


(b) because of the application of section 128AA , the holder is liable to pay withholding tax in relation to the transfer of the qualifying security; and


(c) before the security was transferred, the holder gave to the transferee, in connection with the transfer, a notice issued to the holder under section 265B identifying the security; and


(d) after the notice was issued to the holder, the security was varied or partially redeemed; and


(e) the holder did not advise the transferee in writing of the variation or partial redemption;

the holder is taken, for the purposes of this Part, to have made for a purpose in connection with the operation of this Act a statement that the qualifying security was not so varied or partially redeemed.

222B(4)   [Certificate identifying security]  

Where:


(a) the holder of a qualifying security who acquired the security on transfer ( ``current acquisition transfer'' ) transfers the security to another person; and


(b) because of the application of section 128AA , the holder is liable to pay withholding tax in relation to the transfer of the security; and


(c) before the security was transferred, the holder gave to the transferee, in connection with the transfer, a certificate issued to the holder under section 128AB identifying the security; and


(d) the holder had acquired the security on transfer on any occasion before the current acquisition transfer;

the holder is taken, for the purposes of this Part, to have made for a purpose in connection with the operation of this Act a statement that the certificate relates to the current acquisition transfer.

222B(5)   [Certificate given to issuer]  

Where:


(a) a qualifying security is redeemed or partially redeemed from the holder; and


(b) the holder acquired the security on transfer ( ``current acquisition transfer'' ); and


(c) the holder is liable to pay withholding tax in relation to the redemption or partial redemption of the security; and


(d) before the security was redeemed or partially redeemed, the holder gave to the issuer, in connection with the redemption or partial redemption, a certificate issued to the holder under section 128AB identifying the security; and


(e) the holder had acquired the security on transfer on any occasion before the current acquisition transfer;

the holder is taken, for the purposes of this Part, to have made for a purpose in connection with the operation of this Act a statement that the certificate relates to the current acquisition transfer.

SECTION 222C   REASONABLY ARGUABLE  

222C(1)   [Regard to relevant authorities]  

For the purposes of this Part:


(a) the correctness of the treatment of the application of a law; or


(b) another matter;

is reasonably arguable if, having regard to the relevant authorities and the matter in relation to which the law is applied or the other matter, it would be concluded that what is argued for is about as likely as not correct.

222C(2)   [Assumption re Commissioner's discretion]  

For the purposes of this Part, if the treatment of the application of a law assumed that the Commissioner would exercise a discretion in a particular way, the correctness of the treatment is reasonably arguable, in so far as it consisted of the assumption, if the exercise by the Commissioner of the discretion in that way would be reasonably arguably in accordance with law.

222C(3)   [Court's decision]  

For the purposes of this Part, the exercise, or assumed exercise, by the Commissioner of a discretion is reasonably arguably in accordance with law if, having regard to the relevant authorities and the matter in relation to which the discretion is or would be exercised, it would be concluded that a court would be about as likely as not to hold that the exercise is or would be in accordance with law.

222C(4)   [``authority'']  

In this section:

"authority"
includes:


(a) an income tax law; or


(b) material for the purposes of subsection 15AB(1) of the Acts Interpretation Act 1901 ; or


(c) a decision of a court (whether or not an Australian court), the Tribunal or a Board of Review; or


(d) a public ruling within the meaning of Part IVAAA of the Taxation Administration Act 1953 .

222C(5)   [Commissioner's exercise of discretion]  

For the purposes of this section, the Commissioner exercises a discretion if the Commissioner:


(a) forms an opinion; or


(b) refuses or fails to form an opinion; or


(c) attains a state of mind; or


(d) refuses or fails to attain a state of mind; or


(e) makes a determination; or


(f) refuses or fails to make a determination; or


(g) exercises a power; or


(h) refuses or fails to exercise a power.

SECTION 222D   222D   TREATING A LAW AS NOT APPLYING  
For the purposes of this Part, a taxpayer who treats an income tax law as not applying in relation to a matter is taken to treat that law as applying in relation to that matter in a particular way.

SECTION 222E   222E   TAXATION STATEMENT CAN APPLY TO DIFFERENT YEARS  
A particular taxation statement can be taken into account in working out the tax shortfalls of a taxpayer for 2 or more years.

SECTION 222F   222F   OMISSION OF ASSESSABLE INCOME FROM RETURN  
If a person omits from a return given under this Act or the regulations, being a return of income derived by the person, a partnership or a trust estate during a period, any assessable income derived by the person, the partnership or the trust estate during the period, the person is taken, for the purposes of this Part, to have made a statement in the return to the effect that the person, the partnership or the trust estate did not derive the assessable income during that period.

SECTION 222   PENALTY FOR FAILURE TO KEEP OR FURNISH DOCUMENTS OR INFORMATION  

222(1)   [Additional tax: return or information]  

Where a taxpayer refuses or fails to furnish, when and as required under or pursuant to this Act or the regulations to do so, a return, or any information, relating to a year of income, being a return relating to or information relating to, or to the affairs of, the taxpayer, the taxpayer is liable to pay, by way of penalty, additional tax equal to double the amount of tax payable by the taxpayer in respect of the year of income.

222(1A)   [Relevant entities]  

If a taxpayer that is a relevant entity within the meaning of Division 1B of Part VI :


(a) fails to keep a record containing particulars of the basis of the calculation of its taxable income of a year of income and the tax payable in respect of that taxable income that were specified in a return in accordance with section 221AZD ; or


(b) refuses or fails to produce to the Commissioner, when and as required by the Commissioner under this Act, a document containing particulars of the basis of the calculation of its taxable income of a year of income and the tax payable in respect of that taxable income that were specified in a return in accordance with section 221AZD ;

the taxpayer is liable to pay, by way of penalty, additional tax equal to double the amount of tax payable by the taxpayer in respect of that year of income.

222(1B)   [Additional tax: record or document]  

A taxpayer is liable to pay additional tax by way of penalty under this subsection if the taxpayer:


(a) fails to keep a record containing particulars of the basis of the calculation of the amounts that the taxpayer specified under section 161AA or 221AZS in a return for a year of income; or


(b) refuses or fails to produce to the Commissioner, when and as required by the Commissioner under this Act, a document containing particulars of the basis of the calculation of the amounts that the taxpayer specified under section 161AA or 221AZS in a return for a year of income.

The penalty is double the amount of tax payable by the taxpayer for that year of income.

222(2)   [Minimum amount]  

Where, but for this subsection, an amount of additional tax, being an amount less than $20, is payable by a taxpayer under this section in respect of an act or omission, then, by force of this subsection, the amount of the additional tax shall be taken to be $20.

222(3)   [Refusal or failure to furnish returns]  

This section does not apply to a refusal or failure to furnish a return under section 161 , 162 or 163 .

SECTION 223   223   PENALTY FOR FALSE OR MISLEADING STATEMENTS  

SECTION 223A   223A   PENALTY TAX FOR OVER-ESTIMATING BUSINESS PERCENTAGE APPLICABLE TO CAR HELD BY TAXPAYER  

SECTION 224   PENALTY TAX WHERE CERTAIN ANTI-AVOIDANCE PROVISIONS APPLY  

224(1)   [Additional tax]  

Where:


(a) for the purpose of making an assessment or arising out of the consideration of an objection, the Commissioner has calculated the tax that is assessable to a taxpayer in relation to a year of income;


(b) a step (in this subsection referred to as the ``relevant step'' ) in the calculation of the tax consisted of:


(i) an amount being included in the assessable income of the taxpayer; or

(ii) a deduction or rebate not being allowable, in whole or in part, to the taxpayer;


(c) the relevant step was dependent on, or involved, any one or more of the following, namely:


(i) the formation by the Commissioner of, or the refusal or failure of the Commissioner to form, an opinion that relates to a tax avoidance scheme;

(ii) the attainment by the Commissioner of, or the refusal or failure by the Commissioner to attain, a state of mind that relates to a tax avoidance scheme;

(iii) the making by the Commissioner of, or the refusal or failure by the Commissioner to make, a determination that relates to a tax avoidance scheme;

(iv) the exercise by the Commissioner of, or the refusal or failure by the Commissioner to exercise, a power to treat a matter or thing that relates to a tax avoidance scheme in a particular way;
being an opinion, state of mind, determination or power under, or referred to in, a provision of this Act (other than a provision of Division 13 of Part III or Part IVA ); and


(d) either of the following subparagraphs apply:


(i) in a case to which subparagraph (b)(i) applies - the taxpayer did not include in the taxpayer's return for the year of income or the objection, as the case may be, the amount referred to in that subparagraph as part of the taxpayer's assessable income; or

(ii) in a case to which subparagraph (b)(ii) applies - the taxpayer claimed or included in the taxpayer's return for the year of income or the objection, as the case may be, the deduction or rebate or the part of the deduction or rebate, as the case may be, referred to in that subparagraph as, or as part of, an allowable deduction or rebate, as the case may be;

the taxpayer is liable to pay, by way of penalty, additional tax equal to:


(e) in a case to which subparagraph (b)(i) applies - the penalty percentage of the difference between the tax properly payable by the taxpayer and the tax that would have been payable by the taxpayer if it were assessed on the basis that the taxpayer's assessable income were reduced by the amount referred to in subparagraph (b)(i) or the part of that amount that the taxpayer did not include in the taxpayer's return for the year of income or the taxpayer's objection, as the case may be, as part of the taxpayer's assessable income, as the case may be; or


(f) in a case to which subparagraph (b)(ii) applies - the penalty percentage of the difference between the tax properly payable by the taxpayer and the tax that would have been payable by the taxpayer if it were assessed on the basis that the taxpayer's allowable deductions or rebates, as the case may be, were increased by the amount of the deduction or rebate or the part of the deduction or rebate, as the case may be, referred to in subparagraph (b)(ii) that the taxpayer claimed or included in the taxpayer's return for the year of income or the taxpayer's objection, as the case may be, as, or as part of, an allowable deduction or rebate, as the case may be.

224(2)   [``tax avoidance scheme'']  

In subsection (1), ``tax avoidance scheme'' means a scheme within the meaning of Part IVA that was entered into or carried out for the sole or dominant purpose of enabling a person to pay no tax or less tax.

224(3)   [``penalty percentage'']  

In subsection (1):

"penalty percentage"
means:


(a) subject to paragraph (b) - 50%; or


(b) if it is reasonably arguable that the provision or provisions under which the step described in paragraph (1)(b) or the action described in paragraph (1)(c) was taken do not apply to include the amount or disallow the deduction or rebate - 25%.

SECTION 225   PENALTY TAX WHERE DIVISION 13 OF PART III APPLIES  

225(1)   [Where prescribed provision applies]  

Where:


(a) for the purpose of making an assessment or arising out of the consideration of an objection, the Commissioner has calculated the tax that is assessable to a taxpayer in relation to a year of income;


(b) in calculating the tax assessable to the taxpayer, a prescribed provision was, or prescribed provisions were, applied; and


(c) either of the following subparagraphs apply:


(i) no tax would have been assessable to the taxpayer in relation to the year of income if:

(A) the prescribed provision or prescribed provisions, as the case may be, had not been applied; and

(B) the tax had been assessed on the basis that the particulars contained in the return of the taxpayer for the year of income or in the objection, as the case may be, were correct in so far as they were relevant to the operation of the prescribed provision or prescribed provisions, as the case may be;

(ii) the amount of tax (in this subsection referred to as the ``amount of claimed tax'' ) that would have been assessable to the taxpayer in relation to the year of income if:

(A) the prescribed provision or prescribed provisions, as the case may be, had not been applied; and

(B) the tax had been assessed on the basis that the particulars contained in the return of the taxpayer for the year of income or the objection, as the case may be, were correct in so far as they were relevant to the operation of the prescribed provision or prescribed provisions, as the case may be;
is less than the amount of tax referred to in paragraph (a);

the taxpayer is liable to pay, by way of penalty:


(d) in a case where:


(i) the prescribed provision or prescribed provisions, as the case may be, were applied in relation to a scheme within the meaning of Part IVA ; and

(ii) the scheme was entered into or carried out for the sole or dominant purpose of enabling a person to pay no tax or less tax:
additional tax equal to:

(iii) in a case to which subparagraph (c)(i) applies - the first penalty percentage of the amount of the tax referred to in paragraph (a); or

(iv) in a case to which subparagraph (c)(ii) applies - the first penalty percentage of the amount by which the amount of the tax referred to in paragraph (a) exceeds the amount of claimed tax; or


(e) in any other case - additional tax, the second penalty percentage of:


(i) in a case to which subparagraph (c)(i) applies - the amount of the tax referred to in paragraph (a); or

(ii) in a case to which subparagraph (c)(ii) applies - the amount by which the amount of the tax referred to in paragraph (a) exceeds the amount of claimed tax.

225(1A)   [Definitions]  

In subsection (1):

"first penalty percentage"
means:


(a) subject to paragraph (b) - 50%; or


(b) if it is reasonably arguable that the prescribed provision or provisions do not apply - 25%;

"second penalty percentage"
means:


(a) subject to paragraph (b) - 25%; or


(b) if it is reasonably arguable that the prescribed provision or provisions do not apply - 10%.

225(2)   [Where prescribed provision not applicable]  

Where:


(a) for the purpose of making an assessment or arising out of the consideration of an objection, the Commissioner has calculated the tax that is assessable to a taxpayer in relation to a year of income; and


(b) in calculating the tax assessable to the taxpayer, a prescribed provision was not applied in a particular case by reason of the International Tax Agreements Act 1953 ;

the Commissioner shall determine the following amounts:


(c) the amount (if any) of additional tax that, but for subsection (3) and the International Tax Agreements Act 1953 , the taxpayer would have been liable to pay in relation to the year of income under subsection (1);


(d) the amount (if any) of additional tax that the taxpayer would have been liable to pay in relation to the year of income under subsection (1) if that subsection were applied on the basis that a reference in that subsection to the application of a prescribed provision included a reference to the application of a provision of the International Tax Agreements Act 1953 by reason of the application of which a prescribed provision was not applied in a particular case.

225(3)   [No additional tax under subsec (1) payable]  

Where the Commissioner has determined an amount or amounts under subsection (2) in relation to a taxpayer in relation to a year of income, the taxpayer is liable to pay, by way of penalty, additional tax in relation to the year of income equal to that amount or the lesser of those amounts, as the case may be, and, where the taxpayer is liable to pay additional tax under this subsection in relation to the year of income, the taxpayer is not liable to pay additional tax under subsection (1) in relation to the year of income.

225(4)   [``prescribed provision'']  

In subsections (1) and (2), ``prescribed provision'' means section 136AD or 136AE .

225(5)   [Provisions disregarded]  

In the application of subsections (1) and (2), the possibility that Subdivision C of Division 2 of Part III or Part IVA of this Act or section 70-20 of the Income Tax Assessment Act 1997 would have applied in a particular case in which it did not apply shall be disregarded.

SECTION 226   PENALTY TAX WHERE PART IVA APPLIES - GENERAL  

226(1)   [Additional tax]  

Where:


(a) for the purpose of making an assessment or arising out of the consideration of an objection, the Commissioner has calculated the tax that is assessable to a taxpayer in relation to a year of income;


(b) in calculating the tax assessable to the taxpayer, a determination or determinations made by the Commissioner under subsection 177F(1) was or were taken into account; and


(c) either of the following subparagraphs apply:


(i) no tax would have been assessable to the taxpayer in relation to the year of income if no determination had been made under subsection 177F(1) in relation to the taxpayer in relation to the year of income;

(ii) the amount of tax (in this section referred to as the ``amount of claimed tax'' ) that would, but for this section, have been assessable to the taxpayer in relation to the year of income if no determination had been made under subsection 177F(1) in relation to the taxpayer in relation to the year of income is less than the amount of tax referred to in paragraph (a);

the taxpayer is liable to pay, by way of penalty, additional tax equal to:


(d) in a case to which subparagraph (c)(i) applies - the penalty percentage of the amount of the tax referred to in paragraph (a); or


(e) in a case to which subparagraph (c)(ii) applies - the penalty percentage of the amount by which the amount of the tax referred to in paragraph (a) exceeds the amount of claimed tax.

226(1A)   [Additional tax where withholding tax liability exists]  

Where:


(a) the Commissioner has calculated the withholding tax that a taxpayer is liable to pay in relation to an amount; and


(b) in calculating the withholding tax, a determination or determinations made by the Commissioner under subsection 177F(2A) was or were taken into account; and


(c) either:


(i) the taxpayer would have been liable to no withholding tax in relation to the amount if no determination had been made under subsection 177F(2A) in relation to the amount; or

(ii) the amount of withholding tax (the amount of claimed tax ) for which the taxpayer would, but for this section, have been liable if no determination had been made under subsection 177F(2A) in relation to the amount is less than the amount of tax referred to in paragraph (a);

the taxpayer is liable to pay, by way of penalty, additional tax equal to:


(d) in a case to which subparagraph (c)(i) applies - the penalty percentage of the amount of the tax referred to in paragraph (a); or


(e) in a case to which subparagraph (c)(ii) applies - the penalty percentage of the amount by which the amount of the tax referred to in paragraph (a) exceeds the amount of claimed tax.

226(2)   [``penalty percentage'']  

In this section:

"penalty percentage"
means:


(a) subject to paragraph (b) - 50%; or


(b) if it is reasonably arguable that Part IVA does not apply - 25%.

SECTION 226AA   PENALTY TAX WHERE PART IVA APPLIES - FOREIGN TAX CREDITS  

226AA(1)   [Additional tax]  

If:


(a) for the purpose of making a foreign tax credit determination, the Commissioner has calculated the amount of a foreign tax credit that is allowable to a taxpayer; and


(b) in calculating the amount of the foreign tax credit allowable to the taxpayer, one or more determinations made by the Commissioner under subsection 177F(1) were taken into account; and


(c) the amount of the foreign tax credit that would have been allowable if those subsection 177F(1) determinations had not been made exceeds the amount of the foreign tax credit referred to in paragraph (a);

the taxpayer is liable to pay, by way of penalty, additional tax equal to the penalty percentage of the excess.

226AA(2)   [Tax equal to penalty percentage]  

If:


(a) the Commissioner makes a foreign tax credit determination to the effect that a foreign tax credit is not allowable to a taxpayer; and


(b) in determining that the foreign tax credit is not allowable to the taxpayer, one or more determinations made by the Commissioner under subsection 177F(1) were taken into account; and


(c) a foreign tax credit would have been allowable to the taxpayer if those subsection 177F(1) determinations had not been made;

the taxpayer is liable to pay, by way of penalty, additional tax equal to the penalty percentage of the amount of the foreign tax credit referred to in paragraph (c).

226AA(3)   [Year of income]  

For the purposes of this Part, additional tax payable by a taxpayer under subsection (1) or (2) is in respect of a year of income if:


(a) the additional tax is payable by the taxpayer in relation to an amount of a foreign tax credit that would have been allowable to the taxpayer if the subsection 177F(1) determinations referred to in paragraph (1)(c) or (2)(c) had not been made; and


(b) the foreign tax credit relates to assessable income, or another amount, derived by the taxpayer during the year of income.

226AA(4)   [Definitions]  

In this section:

foreign tax credit
means a credit within the meaning of Division 19 of Part III .

foreign tax credit determination
means a determination under Division 19 of Part III .

penalty percentage
means:


(a) subject to paragraph (b) - 50%; or


(b) if it is reasonably arguable that Part IVA does not apply - 25%.

SECTION 226A   226A   CERTAIN PENALTY TAX UNDER SCHEME SECTIONS NOT PAYABLE BECAUSE OF APPLICATION FOR PRIVATE RULING  

SECTION 226B   226B   CERTAIN PENALTY TAX UNDER SCHEME SECTIONS NOT PAYABLE BECAUSE OF ADVICE ETC.  
If:


(a) apart from this section, a taxpayer would be liable to pay additional tax under a scheme section in respect of a year of income; and


(b) the wrongful behaviour provision applied only because the taxpayer treated an income tax law as applying in a particular way; and


(c) that way agrees with:


(i) advice given to the taxpayer by a taxation officer; or

(ii) a general administrative practice under this Act;

the taxpayer is not liable to pay the additional tax.

SECTION 226C   226C   FURTHER PENALTY TAX - SCHEME SECTIONS  
If:


(a) a taxpayer is liable to pay additional tax under a scheme section; and


(b) one or both of the following applies:


(i) the taxpayer took steps to prevent or hinder the Commissioner from becoming aware that the wrongful behaviour provision applied;

(ii) the taxpayer was liable to pay additional tax under any of those sections in respect of an earlier year of income;

the taxpayer is liable to pay, by way of penalty, further additional tax equal to 20% of the amount of the additional tax.

SECTION 226D   226D   REDUCTION OF PENALTY TAX UNDER SCHEME SECTIONS - DISCLOSURE AFTER TAX AUDIT NOTIFIED  
If:


(a) a taxpayer is liable to pay additional tax under a scheme section in respect of a year of income; and


(b) after the Commissioner had informed the taxpayer that a tax audit relating to the taxpayer in respect of the year was to be carried out, the taxpayer voluntarily told the Commissioner, in writing, about the matter because of which the wrongful behaviour provision applies;

the amount of the additional tax is reduced by 20%.

SECTION 226E   226E   REDUCTION OF PENALTY TAX UNDER SCHEME SECTIONS - DISCLOSURE BEFORE TAX AUDIT NOTIFIED  
If:


(a) a taxpayer is liable to pay additional tax under a scheme section in respect of a year of income; and


(b) before the Commissioner had informed the taxpayer that a tax audit relating to the taxpayer in respect of the year was to be carried out, the taxpayer voluntarily told the Commissioner, in writing, about the matter because of which the wrongful behaviour provision applies;

the amount of the additional tax is reduced by 80%.

SECTION 226F   226F   WHEN DISCLOSURE ABOUT SCHEME SECTIONS MADE  
If a taxpayer voluntarily tells the Commissioner, in writing, about a matter because of which a wrongful behaviour provision applies for a year after the Commissioner has informed the taxpayer that a tax audit in relation to the taxpayer in respect of that year is to be carried out, the Commissioner may, if the Commissioner considers it appropriate in all the circumstances, determine that, for the purposes of sections 226D and 226E , the taxpayer is taken to have told the Commissioner before being informed.

SECTION 226G   226G   PENALTY TAX WHERE SHORTFALL CAUSED BY LACK OF REASONABLE CARE  
Subject to this Part, if:


(a) a taxpayer has a tax shortfall for a year; and


(b) the shortfall or part of it was caused by the failure of the taxpayer or of a registered tax agent to take reasonable care to comply with this Act or the regulations;

the taxpayer is liable to pay, by way of penalty, additional tax equal to 25% of the amount of the shortfall or part.

SECTION 226H   226H   PENALTY TAX WHERE SHORTFALL CAUSED BY RECKLESSNESS  
Subject to this Part, if:


(a) a taxpayer has a tax shortfall for a year; and


(b) the shortfall or part of it was caused by the recklessness of the taxpayer or of a registered tax agent with regard to the correct operation of this Act or the regulations;

the taxpayer is liable to pay, by way of penalty, additional tax equal to 50% of the amount of the shortfall or part.

SECTION 226J   226J   PENALTY TAX WHERE SHORTFALL CAUSED BY INTENTIONAL DISREGARD OF LAW  
Subject to this Part, if:


(a) a taxpayer has a tax shortfall for a year; and


(b) the shortfall or part of it was caused by the intentional disregard by the taxpayer or by a registered tax agent of this Act or the regulations;

the taxpayer is liable to pay, by way of penalty, additional tax equal to 75% of the amount of the shortfall or part.

SECTION 226K   226K   PENALTY TAX WHERE UNARGUABLE POSITION TAKEN  
Subject to this Part, if:


(a) a taxpayer has a tax shortfall for a year; and


(b) the shortfall or part of it was caused by the taxpayer, in a taxation statement, treating an income tax law as applying in relation to a matter or identical matters in a particular way; and


(c) the shortfall or part, as the case may be, so caused exceeded whichever is the higher of:


(i) $10,000; or

(ii) 1% of the taxpayer's return tax for that year; and


(d) when the statement was made, it was not reasonably arguable that the way in which the application of the law was treated was correct;

the taxpayer is liable to pay, by way of penalty, additional tax equal to 25% of the amount of the shortfall or part.

SECTION 226L   226L   PENALTY TAX WHERE UNARGUABLE POSITION TAKEN ABOUT SCHEME  
Subject to this Part, if:


(a) a taxpayer has a tax shortfall for a year; and


(b) the shortfall or part of it was caused by the taxpayer in a taxation statement treating an income tax law as applying in relation to a scheme in a particular way; and


(c) the scheme was a tax avoidance scheme within the meaning of subsection 224(1) ; and


(d) none of the scheme sections applies in relation to the scheme;

the taxpayer is liable to pay, by way of penalty, additional tax equal to:


(e) if, when the statement was made, it was reasonably arguable that the way in which the application of the law was treated was correct - 25% of the amount of the shortfall or part; or


(f) in any other case - 50% of the amount of the shortfall or part.

SECTION 226M   PENALTY BECAUSE PRIVATE RULING DISREGARDED  

226M(1)   [Additional tax]  

Subject to this Part, if:


(a) a taxpayer has a tax shortfall for a year; and


(b) a private ruling was made on the way in which an income tax law applies to the taxpayer in respect of the year in relation to an arrangement; and


(c) the shortfall or part of it was caused by the taxpayer, in a taxation statement made after the private ruling was made, treating that law as applying to the taxpayer in respect of the year in relation to the arrangement in a different way;

the taxpayer is liable to pay, by way of penalty, additional tax equal to 25% of the amount of the shortfall or part.

226M(2)   [Court order or Tribunal decision]  

Subsection (1) does not apply if there is an order of a court, or a decision of the Tribunal, that applies to the private ruling.

SECTION 226N   226N   SHORTFALL BECAUSE OF STATEMENT BY PARTNER  
If:


(a) a partner in a partnership ( ``defaulting partner'' ) makes a partnership taxation statement; and


(b) a taxpayer who is a partner in the partnership has a partnership shortfall excess for a year in relation to the statement;

then:


(c) the excess is a tax shortfall of the defaulting partner for that year; and


(d) if the statement was caused by behaviour described in section 226G , 226H or 226J, the shortfall is taken to have been caused by that behaviour.

SECTION 226P   226P   SHORTFALL BECAUSE OF UNARGUABLE POSITION OF PARTNER  
If:


(a) a partner in a partnership ( ``defaulting partner'' ) makes a partnership taxation statement; and


(b) that statement treated an income tax law as applying in relation to a matter or identical matters in a particular way; and


(c) a taxpayer who is a partner in the partnership has a partnership shortfall excess for a year in relation to the statement; and


(d) the net income of the partnership for a year would have been reduced, or the partnership loss for that year would have been increased, because of the treatment by an amount that exceeds whichever is the higher of:


(i) $20,000; or

(ii) 2% of the net income of the partnership (if any) calculated on the basis of the partnership's return for that year; and


(e) when the statement was made, it was not reasonably arguable that the way in which the application of the law was treated was correct;

then the excess is a tax shortfall of the defaulting partner for that year to which section 226K applies.

SECTION 226Q   226Q   PENALTY TAX BECAUSE OF UNARGUABLE POSITION OF PARTNER ABOUT SCHEME  
If:


(a) a partner in a partnership ( ``defaulting partner'' ) makes a partnership taxation statement; and


(b) that statement treated an income tax law as applying in relation to a scheme in a particular way; and


(c) a taxpayer who is a partner in the partnership has a partnership shortfall excess for a year in relation to the statement; and


(d) the scheme was a tax avoidance scheme within the meaning of section 224 ;

then:


(e) the excess is a tax shortfall of the defaulting partner for that year to which section 226L applies; and


(f) for the purposes of section 226L the statement referred to in paragraph 226L(e) is taken to be the statement referred to in paragraph (a).

SECTION 226R   SHORTFALL BECAUSE OF STATEMENT BY TRUSTEE  

226R(1)   [Trustee's tax shortfall]  

If:


(a) a trustee of a trust estate makes an estate taxation statement; and


(b) a taxpayer who is or has been a beneficiary of the estate has an estate shortfall excess for a year in relation to the statement;

then:


(c) the excess is a tax shortfall of the trustee for that year; and


(d) if the statement was caused by behaviour described in section 226G , 226H or 226J, the shortfall is taken to have been caused by that behaviour.

226R(2)   [Taxpayer in capacity of trustee]  

Subsection (1) does not mean that a reference in this Part to a taxpayer does not include a reference to a taxpayer in the capacity of a trustee.

SECTION 226S   SHORTFALL BECAUSE OF UNARGUABLE POSITION OF TRUSTEE  

226S(1)   [Trustee's tax shortfall]  

If:


(a) a trustee of a trust estate makes an estate taxation statement; and


(b) that statement treated an income tax law as applying in relation to a matter or identical matters in a particular way; and


(c) a taxpayer who is or has been a beneficiary of the estate has an estate shortfall excess for a year in relation to the statement; and


(d) the net income of the estate for a year would have been reduced, or a loss of the estate for that year would have been increased, because of the treatment by an amount that exceeds whichever is the higher of:


(i) $20,000; or

(ii) 2% of the net income of the estate (if any) calculated on the basis of the estate's return for that year; and


(e) when the statement was made, it was not reasonably arguable that the way in which the application of the law was treated was correct;

then the excess is a tax shortfall of the trustee for that year to which section 226K applies.

226S(2)   [Taxpayer in capacity of trustee]  

Subsection (1) does not mean that a reference in this Part to a taxpayer does not include a reference to a taxpayer in the capacity of a trustee.

SECTION 226T   PENALTY TAX BECAUSE OF UNARGUABLE POSITION OF TRUSTEE ABOUT SCHEME  

226T(1)   [Trustee's tax shortfall]  

If:


(a) a trustee of a trust estate makes an estate taxation statement; and


(b) that statement treated an income tax law as applying in relation to a scheme in a particular way; and


(c) a taxpayer who is or has been a beneficiary of the estate has an estate shortfall excess for a year in relation to the statement; and


(d) the scheme was a tax avoidance scheme within the meaning of section 224 ;

then:


(e) the excess is a tax shortfall of the trustee for that year to which section 226L applies; and


(f) for the purposes of section 226L the statement referred to in paragraph 226L(e) is taken to be the statement referred to in paragraph (a).

226T(2)   [Taxpayer in capacity of trustee]  

Subsection (1) does not mean that a reference in this Part to a taxpayer does not include a reference to a taxpayer in the capacity of a trustee.

SECTION 226U   226U   CERTAIN AMOUNTS NOT SHORTFALL BECAUSE OF APPLICATION FOR PRIVATE RULING  
If:


(a) apart from this section, a taxpayer has a tax shortfall for a year of income; and


(b) the shortfall or part of it was caused by the taxpayer, in a taxation statement, treating an income tax law as applying to the taxpayer in respect of the year in relation to an arrangement in a particular way; and


(c) when or before the statement was made, there was an application for a private ruling on the way in which that law would apply to the taxpayer in respect of the year in relation to the arrangement; and


(d) in the opinion of the Commissioner, the application was one that the Commissioner is required to comply with; and


(e) when the statement was made, the private ruling had not been made;

the shortfall is not a tax shortfall, or the part is not part of a tax shortfall, for the purposes of section 226G , 226H , 226J , 226K or 226L .

SECTION 226V   226V   CERTAIN AMOUNTS NOT SHORTFALL BECAUSE OF ADVICE ETC.  
If:


(a) apart from this section, a taxpayer has a tax shortfall for a year of income; and


(b) the shortfall or part of it was caused by the taxpayer, in a taxation statement, treating an income tax law as applying in a particular way; and


(c) that way agrees with:


(i) advice given to the taxpayer by a taxation officer; or

(ii) a general administrative practice under this Act;

the shortfall is not a tax shortfall, or the part is not part of a tax shortfall, for the purposes of section 226G , 226H , 226J , 226K or 226L .

SECTION 226W   226W   WHERE 2 OR MORE SHORTFALL SECTIONS APPLY  
If 2 or more shortfall sections apply to all or a particular part of a taxpayer's tax shortfall, the taxpayer is liable to pay the additional tax under only one of those sections, not being a section the additional tax under which is lower than it would be under another of those sections.

SECTION 226X   226X   FURTHER PENALTY TAX  
If:


(a) under a shortfall section, a taxpayer is liable to pay additional tax because of a tax shortfall or part of a tax shortfall; and


(b) one or more of the following applies:


(i) the taxpayer took steps to prevent or hinder the Commissioner from becoming aware of the shortfall or part;

(ii) if the shortfall or part was caused otherwise than by the taxpayer in a taxation statement treating an income tax law as applying to the taxpayer in relation to a matter or scheme in a particular way - the taxpayer became aware of the shortfall or part after a taxation statement by the taxpayer that was taken into account in working out the taxpayer's statement tax for the year and failed to tell the Commissioner about it, in writing, within a reasonable time of becoming so aware;

(iii) if the additional tax is payable under section 226G , 226H or 226J - the taxpayer was liable to pay additional tax under any of those sections in respect of an earlier year of income;

(iv) if the additional tax is payable because the taxpayer, in a taxation statement, treated a law as applying in relation to a matter or scheme in a particular way so that section 226K or 226L applied - the taxpayer was liable to pay additional tax under that section in respect of an earlier year of income in respect of which the taxpayer treated that law as applying in relation to that matter or a similar matter or that scheme or a similar scheme in that way;

the taxpayer is liable to pay, by way of penalty, further additional tax equal to 20% of the amount of the additional tax.

SECTION 226Y   226Y   REDUCTION OF PENALTY TAX - DISCLOSURE AFTER TAX AUDIT NOTIFIED  
If:


(a) under a shortfall section a taxpayer is liable to pay additional tax in respect of a year of income because of a tax shortfall or part of a tax shortfall; and


(b) after the Commissioner had informed the taxpayer that a tax audit relating to the taxpayer in respect of the year was to be carried out, the taxpayer voluntarily told the Commissioner, in writing, about the shortfall or part; and


(c) telling the Commissioner could reasonably be estimated to have saved the Commissioner a significant amount of time or significant resources in the audit;

the amount of the additional tax is reduced by 20%.

SECTION 226Z   226Z   REDUCTION OF PENALTY TAX - DISCLOSURE BEFORE TAX AUDIT NOTIFIED  
If:


(a) under a shortfall section, a taxpayer is liable to pay additional tax in respect of a year of income because of a tax shortfall or part of a tax shortfall; and


(b) the taxpayer voluntarily tells the Commissioner in writing about the shortfall or part before the earlier of:


(i) the day the Commissioner informs the taxpayer that a tax audit relating to the taxpayer in respect of the year was to be carried out; or

(ii) if the Commissioner has made a public statement requesting taxpayers to make a voluntary disclosure by a particular day about a scheme or transaction that applies to the taxpayer's financial affairs - before that day;

the amount of the additional tax because of the shortfall or part is reduced:


(c) if the shortfall or part is at least $1,000 - by 80%; or


(d) if the shortfall or part is less than $1,000 - to nil.

SECTION 226ZA   226ZA   WHEN DISCLOSURE MADE  
If a taxpayer voluntarily tells the Commissioner, in writing, about a tax shortfall, or part of a tax shortfall, for a year after the Commissioner has informed the taxpayer that a tax audit in relation to the taxpayer in respect of that year is to be carried out, the Commissioner may, if the Commissioner considers it appropriate in all the circumstances, determine that, for the purposes of sections 226Y and 226Z , the taxpayer is taken to have told the Commissioner before being informed.

SECTION 226ZB   226ZB   MINIMUM AMOUNT OF ADDITIONAL TAX  
If, apart from this section, an amount of additional tax, being an amount less than $20, is payable by a person under this Part, then, by force of this section, the amount of the additional tax is $20.

SECTION 227   ASSESSMENT OF ADDITIONAL TAX  

227(1)   [Commissioner to assess]  

The Commissioner shall make an assessment of the additional tax payable by a person under a provision of this Part.

227(2)   [Notice of assessment]  

Nothing in this Act shall be taken to preclude notice of an assessment made in respect of a person under subsection (1) from being incorporated in notice of any other assessment made in respect of the person under this Act.

227(3)   [Commissioner's discretion to remit]  

The Commissioner may, in the Commissioner's discretion, remit the whole or any part of the additional tax payable by a person under a provision of this Part, but, for the purposes of the application of subsection 33(1) of the Acts Interpretation Act 1901 to the power of remission conferred by this subsection, nothing in this Act shall be taken to preclude the exercise of the power at a time before an assessment is made under subsection (1) of the additional tax.

Note:

Section 204 sets out when the additional tax is payable and the consequences of not paying it on time.

SECTION 228   228   RETURN TO BE INCORPORATED IN OBJECTION FOR CERTAIN PURPOSES  
Where:


(a) arising out of the consideration of an objection, the Commissioner has calculated the tax that is assessable to a taxpayer in relation to a year of income; and


(b) the taxpayer furnished a return for the year of income,

then, for the purposes of the application of paragraphs 224(1)(d), (e) and (f) and 225(1)(c) to a calculation of the kind referred to in paragraph (a) of this section:


(c) subject to paragraph (d), the return shall be taken to be incorporated in, and read as one with, the objection; and


(d) if the return is inconsistent with the objection, the objection shall, to the extent of the inconsistency, prevail over the return.

229-251   SECTIONS 229-251 [ Repealed]