ATO Interpretative Decision

ATO ID 2001/251 (Withdrawn)

Income Tax

• This ATOID does not contain an interpretative decision because the exercise of the discretion to remit penalty and the general interest charge in particular circumstances is not an interpretative issue.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

1. Whether the penalty tax imposed under section 226G of the Income Tax Assessment Act 1936 (ITAA 1936) should be remitted when the taxpayer makes a voluntary disclosure within 21 days of the issue date of their notice of assessment.

2. Whether the General Interest Charge (GIC) imposed under section 170AA (ITAA 1936) should be remitted under section 8AAG of the Taxation Administration Act 1953 (TAA 1953).

Decision

1. The penalty tax imposed should be remitted under subsection 227(3) (ITAA 1936).

2. The GIC imposed under section 170AA (ITAA 1936) should be remitted under section 8AAG (TAA 1953).

Facts

The tax agent's secretarial staff inadvertently lodges the taxpayer's tax return when it is still only partially complete. A week after receiving the notice of assessment, the tax agent contacts the Australian Taxation Office (ATO) and explains the situation. The tax agent is advised to hold the refund cheque until the tax agent lodges a request for an amended return. The tax agent subsequently lodges an amendment request less than two weeks later. The amended assessment includes an amount of penalty tax imposed under section 226G (ITAA 1936) equal to 25% of the tax shortfall that was caused by the failure of the tax agent to take reasonable care when they lodged the partially complete tax return. The penalty tax is reduced by 80% under section 226Z (ITAA 1936) because of the voluntary disclosure. The taxpayer is also liable to pay the GIC under section 170AA (ITAA 1936).

Reasons for Decision

Subsection 227(3) (ITAA 1936) allows the Commissioner to remit all or part of any penalty tax payable.

Section 8AAG (TAA 1953) allows the Commissioner to remit all or part of the GIC payable.

TaxPack states that if a taxpayer makes a voluntary disclosure to the ATO that a mistake has been made which will result in an increase in tax payable when the mistake is corrected, then no penalty or interest will be imposed if the notification is given by the later of:

•

21 days of the date of issue shown on the notice of assessment; or

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the due date for payment of the tax shown on the notice of assessment.

In this case, the tax agent lodged an amendment request within 21 days of the issue date shown on the notice of assessment. Therefore, it is considered that reasonable action was taken by the taxpayer to correct the mistake and mitigate the circumstances giving rise to the delay in payment. Accordingly, the penalty tax will be remitted under subsection 227(3) (ITAA 1936) and the GIC will be remitted under section 8AAG (TAA 1953).

Year of income:  Year ended 30 June 2000

Legislative References:
Income Tax Assessment Act 1936
   section 226G
   section 226Z
   subsection 227(3)

Other References:
TaxPack

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

Business Line:  Small Business/Individual Taxpayers

Date of publication:  27 August 2001

ISSN: 1445-2782