Edited version of private advice

Authorisation Number: 1051596208473

Date of advice: 18 October 2019

Ruling

Subject: Entitlement to interest

Question

Is the Commissioner required to pay to the Trust interest on money that was held by the Commissioner prior to the assessment being issued?

Answer

No

This ruling applies for the following period:

Income year ending 30 June 2017

Income year ending 30 June 2018

The scheme commences on:

01 July 2016

Relevant facts and circumstances

1.    The Trust sent to the Tax Office a paper income tax return. The return was not processed.

2.      At the same time the Trust paid an amount to the Tax Office, to cover the estimated tax (Tax office records show that the amount was received).

3.      After the estate had not received an assessment from the Tax Office, the Trust lodged an electronic return.

4.      The Tax Office assessed the return. The outcome of the assessment was tax payable. The notice of assessment issued.

5.      Payment of the assessment was due the following year.

6.      The Trust made repeated requests to the Tax Office that it pay interest for the period it held the Trust's money. The requests were not actioned.

Relevant legislative provisions

Section 3 of the Taxation (Interest on Overpayments and Early Payments) Act 1983

Section 8A of the Taxation (Interest on Overpayments and Early Payments) Act 1983

Section 8B of the Taxation (Interest on Overpayments and Early Payments) Act 1983

Section 8C of the Taxation (Interest on Overpayments and Early Payments) Act 1983

Section 8E of the Taxation (Interest on Overpayments and Early Payments) Act 1983

Reasons for decision

There are limited circumstances in which the Commissioner of Taxation is required to pay interest to a taxpayer. Interest is payable by the Commissioner under the following Acts:

·         The Taxation (Interest on Overpayments and Early Payments) Act 1983 (T(IOEP)A 1983).

·         Parts 2 and 5 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003.

·         Section 292-425 of the Income Tax Assessment Act 1997 which relates to refunded excess concessional contributions for the financial years commencing 1 July 2011 and 1 July 2012.

·         Section 96-55 of Schedule 1 to the Taxation Administration Act 1953 which relates to excess concessional contributions for financial years commencing 1 July 2013 and later financial years.

·         Sections 44 and 48 of the First Home Savers Account Act 2008.

·         Subsections 17(2AB), 17(2AC), 20H(2B), 20H(2AA), 24G(3A) and 24G(3B) of the Superannuation (Unclaimed Money and Lost Members) Act 1999.

The T(IOEP)A 1983 provides for interest to be paid by the Commissioner in the following circumstances:

·         Early payment of a tax liability.

·         Particular overpayment of taxes. Entitlement for ordinary taxpayers (taxpayers who are not full assessment taxpayers and are not taxed as companies or superannuation funds) arises:

o   where the Commissioner takes more than 30 days after a tax return is lodged to issue the notice of assessment and the notice of assessment gives rise to a refund of income tax (subsection 8E (1) of the T(IOEP)A 1983), or

o   where an income tax credit amount (includes any amount of credit with some exceptions (see section 3 of T(IOEP)A 1983) is not credited, applied or refunded until after the income tax notice of assessment is issued (known as a post-notice crediting). Where there is a post-notice crediting, the income tax crediting amounts must exceed the sum of certain amounts (including income tax payable for the year) (subsection 8E(2) of the T(IOEP)A 1983).

·         Delayed refunds of activity statement amount credits that have been allocated to a running balance account.

·         Certain amounts of tax on no-tax file number contributions income of superannuation providers.

The Trust paid money to the Commissioner to cover its estimated income tax liability.

The relevant payment was not an overpayment of taxes as specified above, did not relate to the refund of activity statement amount credits, and was not a superannuation contribution. As such the only relevant category of interest is the early payment interest.

Early payment interest

Subsection 8A(1) of the T(IOEP)A 1983 provides:

(1)    If:

(a)  a person makes a payment of, or on account of:

(i)         income tax ...

(vb) ...; and

(b)    the payment is made more than 14 days before the day (the appropriate due date) on which the tax, debt, interest, amount or instalment concerned becomes due and payable;

interest is payable by the Commissioner to the person on the payment, calculated in respect of the period applicable under section 8B at the rate specified in 8C.

Section 8B of the T(IOEP)A 1983 states:

(1)  Subject to subsection (2), interest under section 8A is payable to a person for the period:

(a)  If the person is not a full self-assessment taxpayer - from the beginning of the later of the following days:

(i)    the day on which the payment is made;

(ii)    the day on which the notice notifying the tax, debt interest or instalment concerned is issued; and

(b)  if the person is a full assessment taxpayer - from the beginning of the day on which the payment is made;

until the end of the appropriate due day.

(2)  If the payment is to any extent refunded before the appropriate due day, interest is not payable on the payment to that extent in respect of any period after the day on which the refund takes place.

Section 8C of the T(IOEP)A 1983 provides that interest is payable at the base interest rate (see section 8AAD of the Taxation Administration Act 1953).

The meaning of 'full self-assessment taxpayer' is provided in section 6(1) of the Income tax Assessment Act 1936 and includes:

·         a company

·         the trustee of a public trading trust

·         the trustee of an approved deposit fund

·         the trustee of a superannuation fund

·         a pooled superannuation trust

The Trust is not a full self-assessment taxpayer. As such, the relevant period is that specified in paragraph 8B(1)(a) of the T(IOEP)A 1983. Interest is payable from the later of either the day on which the payment was made, or the day on which the notice of assessment issued; the latter day being the day the assessment issued.

As such, interest on the payment made by the Trust is only payable from the day the assessment issued. The Trust is not entitled to early payment interest for the period before the day the assessment issued.