Explanatory Memorandum
(Circulated by authority of the Minister for Finance, the Hon. J.S. Dawkins, M.P.)Main features
This Bill will introduce into the law authority for the Commissioner of Taxation to pay interest on certain refunds of tax made as a result of a successful objection or appeal by a taxpayer against an assessment or other decision of the Commissioner. The taxes to which these provisions will apply are ones that are, under the existing law, exposed to a penalty tax of 20% per annum if they are not paid by the due date for payment. They are: income tax determined by assessment or similar procedure (including provisional tax), recoupment tax payable under the Taxation (Unpaid Company Tax) Assessment Act 1982 and bank account debits tax.
Interest will also be payable in circumstances where the amount of tax involved is, instead of being refunded to the taxpayer, applied by the Commissioner of Taxation against any other tax liability of the taxpayer.
The rate at which interest is to be calculated is initially to be set in the Bill at 14.026% per annum. The rate of 14.026% per annum is the rate determined as the weighted average of yields of the longest term Treasury Bonds contracted for in the most recent bond tender, the results of which were announced on 19 April 1983. Subsequent variations in the rate of interest will be able to be made by regulation.
Entitlement to interest will accrue in respect of refunds (or applications) of tax made on or after 14 February 1983, which is the date on which the increased rate of 20% per annum for late payment of tax commenced to apply.
The Bill specifically provides that there will be no entitlement to interest where the Commissioner of Taxation and the taxpayer concerned have, before 13 December 1982, arranged that, pending the outcome of the objection or appeal and provided the taxpayer pays a specified proportion (usually one-half) of the tax involved in the objection or appeal, the balance of the tax may remain outstanding and the Commissioner will remit the additional (penalty) tax imposed in respect of the late payment of that balance in the event that the taxpayer is unsuccessful in his or her objection or appeal. Arrangements of this kind ceased to be open to the Commissioner by virtue of amendments to the income tax law made by the Income Tax Assessment Amendment Act (No. 6) 1982 which came into operation on 13 December 1982. This Act restricted the power of remission previously vested in the Commissioner to a limited range of cases involving specified or special circumstances.
Detailed explanations of the Bill follow.