A2.1 This appendix sets out how interest for underpaid tax and late payment of tax has been imposed during recent years. It also sets out the policy which has underlined the imposition of this interest during this time period.
A2.2 Particular concentration has been given to how these interest charges have been imposed in years of income prior to and including 1999/00 as the majority of the disputes examined during the course of this review relate to these earlier income years.
A2.3 While focusing on interest imposed by the law, at appropriate points the history of how the ATO has imposed penalties for underpaid tax during recent years is also described.
A2.4 This appendix deals with interest and penalties for underpayments and late payments of income tax. However, as some of the disputes referred to in later appendices of this report also concern underpayments and late payments of fringe benefits tax, a brief section is also included on the interest and penalties which apply for underpayment and late payment of this form of tax.
Imposition of interest for underpaid tax and for late payment of tax
A2.5 Interest for underpaid tax (pre-amended assessment interest) is the interest payable from the date when an original assessment is due for payment for a particular income year up to the date upon which the ATO issues an amended assessment for that year.
A2.6 Interest for late payment of tax (post-amended assessment interest) is the interest that is levied from the date when an amended assessment is due for payment until the date it is in fact paid.
A2.7 Since 1992, both interest for underpaid tax and the late payment of tax have been automatically imposed on taxpayers, under specific legislative provisions.
A2.8 The ATO has, however, always had power to remit both these forms of interest. This remission power and how it has been exercised during this period is the subject of the next appendix of this report.
History of interest charges
A2.9 The history of interest charges for underpaid tax and late payment of tax over recent years falls into three main phases — a pre-1992 phase, a 1992-99 phase and a post-1999 phase.
Interest for underpaid tax
A2.10 Prior to 1992, the regime for interest on underpaid tax operated as follows. Generally, an interest charge for underpaid tax was not automatically imposed. Instead, a penalty of up to 200 per cent of the relevant underpaid tax was applied when an assessment was amended.1 The ATO had a general power to remit this penalty in whole or in part.2
A2.11 In Taxation Ruling IT 2517 the ATO indicated that it would normally levy this penalty for underpaid tax on the basis that it consisted of two components — a per annum interest-like charge (which was set at the rate of 14.026 per cent) and a separate flat penalty component.
A2.12 The per annum component was set at the same rate of interest which was paid on overpayments of tax. However, the per annum charge on underpaid tax was not tax deductible, while any interest received on an overpayment of tax was assessable. This meant that, from a taxpayer's perspective, the after tax cost of interest on underpaid tax was greater than the after tax benefit of interest received from the ATO for overpaid tax.
A2.13 The penalty component of the charge for underpaid tax was also not tax deductible.
Interest for late payment of tax
A2.14 For years of income up to and including 1991/92, if an amended assessment was not paid, a late payment penalty was charged (on a simple interest basis) at the rate of 20 per cent per annum.3 This charge was not tax deductible.
Interest for underpaid tax
A2.15 In 1992, after a review by Treasury, the Government decided to split the previous penalty for underpayment of tax into its interest and penalty elements. This split was achieved as follows. Firstly, new sections were introduced into the income tax law to levy penalties for underpaid tax.4 Secondly, an existing provision, which up until 30 June 1992 had only operated to impose interest for underpaid tax in limited circumstances,5 was amended so that it was now the principal section which imposed interest for underpaid tax.6
A2.16 The explanatory memorandum to the Bill which introduced the new separate interest charge described this charge as being 'compensation to the Revenue for the time value of money'.7 The rate of interest was set at the 13 week Treasury note yield plus four percentage points.
A2.17 In the Second Reading Speech to this Bill, the Minister assisting the Treasurer described the extra 4 per cent as reflecting administration costs and the fact that most taxpayers would not be able to borrow at the 13 week Treasury note rate.8 He also stated that the rate set for the new separate interest charge would make most taxpayers indifferent to borrowing from a bank or being liable to the interest at that rate.
A2.18 The new basis for calculating interest was not explained in the explanatory material accompanying the change, although some details of the principles that were applied were provided in an earlier Information Paper.9 In 1994, the reasons for the change in calculation were more clearly explained as follows:
'The old benchmark was the weighted average yield of certain long term Treasury Bonds. However, this rate was not considered to be an accurate reflection of short term market rates of interest. For that reason it was decided to move to a new benchmark that is the 13 Week Treasury Note rate. It was also decided that the rate of interest payable by taxpayers for underpayments should be higher than that paid to taxpayers for overpayments. This reflects the commercial reality that a person has to pay a higher rate of interest to borrow funds than the rate they will receive for investing funds. '10
A2.19 According to the Department of the Treasury, the new basis for calculating pre-amended assessment interest also had the effect of achieving neutrality between taxpayers who met their tax liabilities by the due date and those who did not.11
A2.20 The above reasons were referred to in an Explanatory Statement connected with changes made to the rate of interest payable on overpayments of tax. For the 1992/93 and 1993/94 years of income this rate of interest was set at 10 per cent. From the 1994/95 year onwards, it became equal to the 13 week Treasury Note yield. As a result of these changes, from the 1994/95 year of income the rate of interest for overpayments of tax became 4 per cent less than the rate of interest for underpaid tax.
Penalties for underpayment of tax post 1992
A2.21 In the post 1992 regime, penalties were to be used as the main administrative mechanism under which taxpayers were to be penalised in respect of any culpable behaviour they had exhibited as regards the underpayment of tax. Specifically, in designing the post 1992 penalties regime, the ATO and Treasury worked on the basis that such penalties served two complementary purposes:
- they helped define a 'correct' tax return by setting standards to be met; and
- they punished taxpayers who committed an unexcused breach of the prescribed standards.12
A2.22 The level of penalties payable in various situations was specifically set by statute. Penalties could be increased or decreased according to whether there were specific aggravating or ameliorating circumstances surrounding a particular taxpayer's behaviour. The ATO also had a general power to remit the level of penalty otherwise set by statute.13
A2.23 The manner in which the ATO has exercised its broad remission power in relation to penalties is discussed in the next appendix of this report.
A2.24 The basic levels of penalties which applied for each year of income from 1992/93 until 1999/2000 were as follows:
(a) Reasonable Care or Reasonably Arguable Position
If a taxpayer took reasonable care in preparing their tax return and the tax underpaid was less than $10,000 or 1 per cent of the tax that would have been payable on the basis of the taxpayer's return, no penalty was payable.
If the underpaid tax exceeded $10,000 or the 1 per cent threshold, the taxpayer took reasonable care and also had a reasonable arguable position, no penalty was payable.
(b) Lack of Reasonable Care
If the taxpayer failed to take reasonable care, a 25 per cent penalty of the underpaid tax was levied.
(c) Lack of a Reasonably Arguable Position
If the underpaid tax exceeded $10,000 or the 1 per cent threshold, and the taxpayer took reasonable care, but did not have a reasonably arguable position, a penalty of 25 per cent was payable.
(d) Failure to follow a private ruling
A penalty of 25 per cent of the underpaid tax was automatically imposed if a taxpayer failed to follow a private ruling they had obtained from the ATO.
(e) Recklessness or intentional disregard of the law
Reckless behaviour by the taxpayer, their tax agent or both attracted a 50 per cent penalty, while intentional disregard of the law attracted a 75 per cent penalty.
(f) Tax avoidance schemes
If the taxpayer had entered into a tax avoidance scheme, for example, one which attracted the general anti avoidance provision, Part IVA of the ITAA 1936, a 50 per cent penalty was attracted. This was reduced to a 25 per cent penalty if there was a reasonably arguable position that Part IVA did not apply.
Aggravating and ameliorating circumstances
A2.25 The aggravating circumstances which, under statute, could increase the above penalties were as follows:
- hindrance of the ATO;
- a failure to notify the ATO within a reasonable time after becoming aware of the underpayment; and
- prior year penalties for carelessness, recklessness or intentional disregard of the law.
A2.26 In all the above cases the aggravating circumstance would increase the basic penalty levied by 20 per cent (for example, a 25 per cent penalty became 30 per cent).
A2.27 The ameliorating circumstances which could reduce the level of basic penalty fell into two categories.
A2.28 The first category was where these ameliorating circumstances would operate to reduce the level of penalty to nil. These circumstances were:
- where the taxpayer's approach was consistent with advice they had received from a taxation officer; or
- where the taxpayer's approach was consistent with a general administrative practice of the ATO; or
- where the taxpayer was at the time of lodging their return awaiting a response to a private ruling request on the matter.
A2.29 The second category of ameliorating circumstances was where the circumstances would lead to some reduction in the level of the penalty. The two circumstances which fall into this category both relate to the situation where the taxpayer made a voluntary disclosure of the underpayment to the ATO. If the voluntary disclosure was made after a tax audit had commenced, the basic penalty was reduced by 20 per cent (for example, a 25 per cent penalty became 20 per cent), while if the disclosure occurred before any audit activity had commenced the penalty was reduced by 80 per cent (for example, a 25 per cent penalty became 5 per cent) or by 100 per cent (if the tax shortfall was less than $1000).
Late payment interest
A2.30 For the 1992/93 to 1998/99 income years, the interest charge for late payment of tax was made up of two elements.
A2.31 The first element was an interest charge levied at the same rate as interest for underpaid tax.14 This interest charge was tax deductible.
A2.32 The second element was an 8 per cent per annum penalty on the amount of tax paid late.15 This penalty was not tax deductible.
Rates of interest charged for underpaid and late paid tax from 1992/93 to 1998/99
A2.33 Appendix 7 shows the rates of interest for underpaid and late paid tax for each of the periods from 1992/93 to 1998/99.
Post 1999 phase for imposition of interest
A2.34 On 1 July 1999, the General Interest Charge (GIC) regime was introduced. The GIC created a single common rate of interest payable to the ATO where a correct payment was not received by the due date. It applied to most tax types administered by the ATO.16
A2.35 The new GIC system resulted in a number of major changes to the previous regime for underpaid tax and late payment of tax.
Increase in uplift factor for interest on underpaid tax to 8 per cent
A2.36 The first change introduced by the new GIC regime was that the rate of interest for underpaid tax was increased by four percentage points. This was achieved by raising the relevant uplift factor applied to the Treasury note rate from 4 per cent to 8 per cent. This increase was set out in the explanatory memorandum to the Bill which introduced the GIC.17 However, no justification was provided for the increase in this explanatory memorandum, nor in any of the announcements accompanying the introduction of the Bill.
A2.37 At least one commentator has suggested that this change was not subject to any prior consultation with professional bodies which form part of the National Tax Liaison Group.18
A2.38 The ATO did release a consultative paper 'Review of Late Payment and Late Lodgement Penalties' in June 1997 to members of this group. However, this consultation paper makes no specific mention of interest on underpaid tax.19
A2.39 The absence of any consultation on this matter with members of the National Tax Liaison Group would appear to be confirmed by the minutes of the National Tax Liaison Group meeting of 3 December 1998, where the change in the rate of pre-amended assessment interest is described as a 'surprising inclusion' in the Bill which introduced the GIC.
Change in rate of interest on late paid tax
A2.40 The second major change introduced by the new GIC regime resulted in an approximate 3.3 per cent reduction in the previous nominal rate of interest applied for late payment interest.20
Change from simple to compounding calculation
A2.41 The third major change was that the interest rate for both underpaid tax interest and late payment interest was changed from a simple interest rate to a compounding interest rate. For administrative purposes, the simple rate was, however, maintained for the 1999/2000 year only.
A2.42 The fourth major set of changes made by the new GIC regime related to the transitional provisions that were to apply for interest relating to prior year assessments.
A2.43 Firstly, under these transitional provisions, the new GIC regime replaced the previous charge for interest on underpaid tax where this interest was levied in relation to amended assessments for years of income prior to and including 1998/99. This meant that interest at GIC rates would be applied where a 1998/99 or earlier assessment was amended, but only to the extent that the period of the relevant underpayment occurred after 1 July 1999.21
A2.44 Secondly, again under transitional rules, where a 1998/99 or prior year amended assessment had not been paid by 1 July 1999, interest at GIC rates, rather than late payment interest under the previous regime, was payable on that amount from 1 July 1999.
Interest on overpaid tax
A2.45 The final change which the GIC regime introduced was a wider divergence between the rate of interest on overpaid tax and the rate of interest for underpaid or late paid tax. From 1 July 1999, interest on overpaid tax continued to be calculated on the basis of the 13 week Treasury note rate with no uplift. The only major change to this calculation occurred in 2001 when the reference base was changed to the 90 day bank bill rate, owing to the cessation of the Treasury note tender system. This has mean that, in contrast to the 1994 to 1999 position where the divergence between the ATO's interest rates for underpaid and overpaid tax was 4 per cent, the divergence in these rates became 8 per cent.
Policy basis for increasing the rate of pre-amended assessment interest
A2.46 As indicated above, neither the explanatory memorandum to the Bill which introduced the new GIC, nor any of the announcements accompanying the introduction of the Bill provide an explanation of the policy basis for the increased rate of pre-amended assessment interest that was to apply from 1 July 1999.
A2.47 However, an article published in the ATP Weekly Tax Bulletin No 18 and dated 3 May 1999 refers to a letter from the Assistant Treasurer to the author of the article which provides some insight as to the policy basis for increasing the rate of pre-amended assessment interest from 1 July 1999.
A2.48 The letter states that the increase in the rate for pre-amended assessment interest was made so that the rate was now slightly above commercial rates for business and slightly below the rates that apply to personal borrowings. It also states that the new rate was set to discourage taxpayers from using the tax system as an unsecured mechanism for borrowing.
A2.49 These comments suggest that the new rate for underpaid tax was set at least partly to discourage certain behaviour by taxpayers, that is, it contained an element designed to influence taxpayer's behaviour.
Policy basis for the new post 1 July 1999 rate for post-amended assessment interest
A2.50 The explanatory memorandum to the Bill which introduced the new GIC is clearer on the policy basis for the new rate of post-amended assessment interest that was to apply from 1 July 1999. This memorandum indicates that the new interest rates for late payment of tax were to be 'transparent, consistent, commercially based and easy to administer'.22 The memorandum further states that the new interest rate reflects 'market interest rates'.23 It also states that the new rate would be more easily understood by taxpayers.24
A2.51 The term 'market interest rate' is not defined in the explanatory memorandum. This term can give a wide range of different interest rates, according to whether the term means the high alternative borrowing rates (in the form of personal loan or credit card rates) that are available to individuals or, at the other end of the scale, the much lower alternative financing rates that can be obtained by large companies. Judged from the perspective of individual non-business taxpayers, however, the initial new rate of interest, being a tax deductible rate of 12.72 per cent, compared favourably with the rate which individual taxpayers could obtain via a personal loan or credit card.
Alternative views as to the policy basis for the new rate of interest for pre- and post-amended assessment interest
A2.52 The explanatory memorandum to another Bill introduced in 1999, associated with the introduction of GST, provides an alternative view of the manner in which the new GIC interest rate was set.25 This other explanatory memorandum states that the GIC was:
'… based on a commercially realistic rate together with a fixed culpability component [emphasis added].'
A2.53 It is not clear whether this statement in this other Bill explaining the basis for the new GIC applied to GIC generally (that is, to both pre- and post-amended assessment interest) or only to post-amended assessment interest (that is, interest on late paid tax). The context of the statement suggests that it may have applied to post-amended assessment interest only. However, the actual statement only refers to 'GIC' without any reference to whether this term covers either pre- or post-amended assessment interest, or both.
A2.54 This statement suggests that the new interest rate, at least for late paid tax, was set at least partly to discourage certain behaviour by taxpayers, that is, it contained an element designed to influence taxpayer's behaviour.
A2.55 An alternative view is that no weight should be placed on the above statement as the Bill in question did not enact or amend the operative provisions which give effect to the GIC. The statement could be viewed as an attempt to outline some features of the then recently enacted GIC with a view to elaborating on the impact of placing certain indirect tax measures within the scope of the GIC.
A2.56 A further view of the policy basis for the new rates for both pre- and post-amended assessment interest is that these rates were made the same as part of a broad simplification process of the interest regime.
History of imposition of interest post 1 July 1999
A2.57 The history of the imposition of interest for underpaid and late paid tax since 1999 can be divided into two separate time periods: a 1999/2000 phase, and a 2000/01 and beyond phase. Slightly different rules for the imposition of both forms of interest have applied for these time periods.
A2.58 When an assessment for the 1999/2000 year of income was amended, interest for underpaid tax would still be levied,26 but at the GIC rate.
A2.59 If a 1999/2000 year amended assessment was not paid, a separate interest charge for late payment would arise. This was also be levied at the GIC rate.27
A2.60 These rules mean that when a 1999/2000 assessment was amended, the same rate of interest would be charged for both the period prior to that amended assessment being issued and for the period after that assessment was due for payment. However, there would be a 'gap' period when no interest was payable. This was the period between the date of issue of the amended assessment and the due date for payment of this assessment.
A2.61 Appendix 8 shows the rates of GIC payable for each quarter from 1 July 1999 to 30 June 2000.
2000/2001 and beyond phase
A2.62 For the 2000/01 and later income years, interest for underpaid tax and late payment of tax were merged into a single GIC.28 This meant that, when an assessment for the 2000/01 year of income was amended, GIC would be levied for the entire period starting from the due date of the original notice of assessment for the relevant year of income up to the time when the relevant tax was paid.
A2.63 From 1 July 2001, two further changes were made to the GIC rules.
A2.64 Firstly, the uplift factor contained in the GIC rate was reduced from 8 per cent to 7 per cent.
A2.65 Secondly, the reference base for the levy of GIC was changed from the 13 week Treasury note rate to the 90 day bank bill rate.
A2.66 Appendix 8 shows the rates of GIC payable for each quarter from 1 July 2000 to 30 June 2004.
A2.67 From 1 July 2000, the previous penalties regime for underpayment of tax was also changed. The changes mainly represented a rationalisation of the penalties system so that uniform penalties were to be applied across different tax types administered by the ATO. However, the underlying rationale for these penalties, and the basis of their imposition and remission, remained largely the same as prior to 1 July 2000. The ATO has stated that the rulings which were issued on the previous 1992-2000 penalties regime still apply to the post-2000 penalties regime.29
Assessability and deductibility of interest and penalties
A2.68 The net cost to taxpayers of any interest or penalties imposed in connection with an amended assessment will be affected by the extent to which those interest or penalties are tax deductible. The rules in this area have also changed over recent years.
Prior to 1992/93
A2.69 Prior to the 1992/93 year of income, interest for underpaid tax, the penalty for late payment of tax and the penalty for underpaid tax were all non tax deductible. Interest received on overpayments of tax was, however, assessable.
1992/93 to 1998/99
A2.70 For the years of income from 1992/3 to 1998/99 interest on underpaid tax was tax deductible. The interest component of the late payment charge for these years was also tax deductible, but the 8 per cent penalty aspect of this charge was not. Interest on overpaid tax remained assessable.
A2.71 For the 1992/3 to 1998/99 years of income, interest on underpaid tax was deductible in the year when the relevant amended assessment was received, not when it was paid.
A2.72 For these years, interest for late payment of an amended assessment accrued on a daily basis from the date when the amended tax was payable. Accordingly, this interest was deductible on an accruals basis from the date the interest was due for payment, that is, it could be deducted prior to its actual payment.
A2.73 For the 1992/93 to 1998/99 years of income, penalties for tax shortfalls remained non-deductible.
Post 1 July 1999
A2.74 From 1 July 1999, the GIC was fully tax deductible. Penalties for tax shortfalls, however, remained non-deductible.
A2.75 For the 1999/2000 year there were still separate interest charges for underpaid and late paid tax. For this year, interest on underpaid tax was deductible during the year in which the amended assessment was received. Interest on late paid tax was deductible on an accruals basis from the date when the amended tax was due for payment.
A2.76 From the 2000/01 income year onwards, interest for underpaid tax and late payment of tax were merged into a single GIC charge for late payment. From this date, GIC has been deductible on an accruals basis from the date when the original assessment was due for payment. However, penalties for tax shortfalls have remained non deductible.
Review of imposition or remission of interest and penalties
A2.77 For all of the years of income from 1992/93 to date, the ATO's decision to impose or remit interest cannot be reviewed by the Administrative Appeals Tribunal (AAT). Any decision by the ATO to impose or remit interest can only be judicially reviewed in accordance with the terms of the Administrative Decisions (Judicial Review) Act 1977.
A2.76 By contrast, for all of these years of income the ATO's imposition or remission of penalties can be reviewed by the AAT provided the amount of the penalty exceeds a certain minimum threshold. The AAT can also exercise the Commissioner's power of remission. An appeal relating to a remission of a penalty may also be taken to the Federal Court, but the Court is restricted to examining whether the ATO has acted in accordance with correct legal principles.
Fringe Benefits Tax
Interest and penalties for underpaid tax
A2.77 Prior to 1 July 1999, interest for underpaid fringe benefits tax (FBT) was imposed in a similar manner to the pre 1992 regime for income tax. Interest for underpaid FBT was not generally automatically imposed. Instead, a penalty of up to 200 per cent of the relevant underpaid FBT tax could be applied when an assessment was amended. In Taxation Ruling TR 95/4, the ATO indicated that it would levy this penalty for underpaid FBT on the basis that it consisted of two components — a per annum like interest charge (generally levied at the same rate as applied during this time period for interest on underpaid income tax) and a separate flat penalty component.
A2.78 When the GIC regime was introduced from 1 July 1999, the per annum component of this penalty charge was replaced by the GIC.
A2.79 Prior to 1 April 2001, the penalty imposed for underpaid FBT was imposed on a similar basis to that for underpaid income tax, except that penalty levels were set administratively (under Taxation Ruling TR 95/4) rather than by legislation. From 1 April 2001, this administratively based FBT regime for penalties was replaced by the uniform administrative penalty regime which now applies for all taxation laws.
Interest and penalties for late paid tax
A2.80 Prior to 1 July 1999, interest for late paid FBT was imposed under a specific legislative provision.30 From 1 July 1999, this interest continued to be levied by a separate legislative provision,31 but the rate of interest applied was calculated at GIC rates.
Review of imposition of interest for FBT
A2.81 The AAT had the power to review the ATO's decision to impose a per annum charge for underpaid FBT when this was charged by way of a penalty. The AAT has not been able to review the imposition of interest for underpaid FBT since this charge has been imposed as part of the GIC regime. Both before and after 1 July 1999, the AAT has not had the power to review the imposition of interest for late payment of FBT.
Conclusions and observations
A2.82 The main points to arise from this examination of the history of the imposition of GIC and penalties for income tax in recent years are as follows.
A2.83 The first observation is that the imposition of interest for underpaid income tax has undergone significant legislative change throughout the period from before 1 July 1992 to the present. The main changes have been as follows.
A2.84 In 1992, the penalty that applied for underpaid tax was separated into two components: an interest component and a penalty component. The interest component contained a 4 per cent uplift element. From 1 July 1994, the separate interest charge for underpaid tax was four percentage points less than the interest payable on overpayments of tax.
A2.85 The original 4 per cent uplift contained in the calculation for interest on underpaid tax was increased to 8 per cent in 1999. The 8 per cent uplift factor was reduced to 7 per cent in 2001.
A2.86 The separation into interest and penalty components also saw the introduction of income tax deductibility for the interest imposed on underpayments of tax.
A2.87 The second observation is that the imposition of interest for late payment of tax has also undergone significant legislative change throughout the period from before 1 July 1992 to the present. In contrast to the situation involving interest for underpaid tax, the net effect of these changes has been that the nominal rate of interest for the late payment of tax has actually decreased over this period — the major change having occurred on 1 July 1999 when the nominal rate was reduced by 3.3 percentage points.
A2.88 The third observation is that whilst the imposition of penalties has undergone some changes during the period from 1 July 1992 to the present, these changes have not been as extensive as those referred to above which have affected the imposition of interest for underpaid and late paid tax.
A2.89 The fourth observation is that the 1992 separation of interest from penalties in an underpaid tax situation indicates a different policy basis for each component. Interest would be levied to compensate the Revenue for the time value of money. Penalties would be levied to influence taxpayer's behaviour.
A2.90 The fifth observation is that from 1992 to the present, the ATO's power to remit interest has been subject to external review only in accordance with the provisions of the Administrative Decisions (Judicial Review) Act 1977. Perhaps reflecting its underlying purpose and the nature of the judgment exercised by the Commissioner, the ATO's power to impose and remit penalties has been, throughout this period, subject to review by both the AAT and the Federal Court.
A2.91 The sixth observation relates to the different rules which apply for the imposition of interest and penalties for FBT and income tax. For interest, different rules operated for each type of tax for the period prior to 1 July 1999. For penalties, different rules operated for the period prior to 1 April 2001.
A2.92 The ATO has indicated that, as a matter of administrative practice, it generally applied the same principles for imposing and remitting interest and penalties for these two types of taxes.
A2.93 Nevertheless, the existence of these different rules means that, where a transaction gives rise to either a disputed income tax liability or a disputed FBT liability (as in the case of employee benefit arrangements discussed in detail in Appendix 5), the interest and penalties calculations may be different.
1 Section 223 of the Income Tax Assessment Act 1936 (ITAA 1936).
2 Section 227 of the ITAA 1936.
3 Section 207 of the ITAA 1936.
4 Sections 222 to 227 of the ITAA 1936.
5 These circumstances largely involved cases involving requests made by taxpayers under section 169A of the ITAA 1936 for the ATO's view of the law to be applied to a particular item shown in a lodged income tax return or other cases where the relevant item in dispute had been disclosed in the taxpayer's return.
6 This was section 170AA of the ITAA 1936.
7 Explanatory Memorandum accompanying the Taxation Laws Amendment (Self Assessment) Bill 1992, Chapter 8.
8 Second Reading Speech to Taxation Laws Amendment (Self Assessment) Bill 1992.
9 Commonwealth of Australia, Improvements to Self Assessment — Priority Tasks — An Information Paper, August 1991, at paragraphs 7.66 to 7.69.
10 Explanatory Statement accompanying the Taxation (Interest on Overpayments) Regulations 1994.
11 Commonwealth Treasury, Review of Aspects of Income Tax Self Assessment, Discussion Paper, March 2004 at page 64.
12 Commonwealth of Australia, Improvements to Self Assessment — Priority Tasks —An Information Paper, August 1991 at page 5.
13 The relevant provisions were contained in sections 222 to 227 of the ITAA 1936.
14 This charge was levied under the newly introduced section 207A of the ITAA 1936.
15 This charge was levied under section 207 of the ITAA 1936.
16 GIC is not applied to excise and diesel fuel rebates.
17 Explanatory Memorandum accompanying the Taxation Laws Amendment Bill (No. 5) 1998, at paragraph 1.46.
18 Van, Den Broek, 'General Interest Charge — a wolf in sheep's clothing', ATP Weekly Tax Bulletin No 18, 3 May 1999.
19 A copy of this paper is available as an Attachment I to the National Tax Liaison Group minutes of June 1997.
20 The nominal interest for late payment of tax for the period from July 1998 to June 1999 was 16.8 per cent (that is, 8.8 per cent interest and 8 per cent penalty). The new GIC interest rate for late payment of tax was 13.5 per cent. As a special transitional measure to the introduction of the new system for interest on late paid tax the ATO in fact exercised its discretion to reduce the interest for late payment for the 1998-99 year to 13.5 per cent.
21 See section 399 of the Taxation Laws Amendment Act (No. 3) 1999, as amended by A New Tax System (Pay as You Go) Act 1999, items 90 and 91.
22 Explanatory Memorandum accompanying the Taxation Laws Amendment Bill (No. 5) 1998, at page 2.
23 ibid, at page 13.
24 ibid, at page 3.
25 A New Tax System (Indirect Tax Administration) Bill 1999.
26 Section 170AA of the ITAA 1936.
27 This interest is levied under subsection 204(3) of the ITAA 1936.
28 This charge is levied under subsection 204(3) of the ITAA 1936.
29 ATO Practice Statement PS LA 2004/5.
30 This was under the former section 93 of the Fringe Benefits Tax Assessment Act 1986 (the 'FBTAct').
31 This was under the new section 93 of the FBT Act which applies from 1 July 1999.