Explanatory Memorandum
(Circulated by the authority of the Treasurer,the Hon. John Dawkins M.P.)CHAPTER 6
THE CHILD SUPPORT ASSESSMENT ACT 1989
PENALTY FOR UNDERESTIMATION OF TAXABLE INCOME
Imposes a penalty for underestimation of taxable income
THE CHILD SUPPORT (ASSESSMENT) ACT 1989
DIVISION 3 - CHILD SUPPORT INCOME AMOUNT
Penalty for underestimation of taxable income
Summary of proposed amendments
6.1 The amendment proposes to impose a penalty on the amount that is payable by a person as a result of the reconciliation of the estimate of taxable income with the actual taxable income returned. The penalty will be a single up front flat rate of 10% of the additional amount payable on the reassessment and apply only to assessments that are subject to estimate that start on and after 1 July 1993.
6.2 The additional child support payable (but not the flat rate penalty), if registered for collection, will be subject to late payment penalty under section 67 of the Child Support (Registration and Collection) Act 1988 until paid.
6.3 There is no deterrent in the present law to minimise the incorrect use of the estimate facility which can delay the payment of child support to the custodian.
6.4 The estimate facility is a necessary one and must remain an integral part of the law but without a sanction to penalise when used incorrectly it is open to abuse by some people.
6.5 The income tax law contains a penalty provision for cases where a taxpayer lodges an estimate of income for provisional tax purposes which later is found to be incorrect. In tax terms a short term benefit is gained as it is in child support cases but the difference is taxpayers can be penalised for underestimation whereas child support clients are not and they inflict unnecessary distress on the custodian and the children.
Explanation of the proposed amendments
6.6 A new section 64A is inserted to impose a penalty in cases where an estimate of income has been in force in a child support year beginning after 30 June 1993 and section 64 applies to the case, ie, a reassessment has been made based upon the actual taxable income . The amount of penalty is to be a flat 10% of the amount payable on the section 64 assessment, ie, the difference between the annual rate payable on the actual taxable income and the annual rate payable on the last estimate. That amount is to be due and payable immediately upon the issue of the assessment and the Registrar may remit all or part of the penalty because of a change in the income tax law, the issue of a Ruling during the year which applied to the person's taxable income or because there are other circumstances and it is fair and reasonable to remit [Clause 19].
6.7 The amendment will apply to all assessments based on estimates that commence on and after 1 July 1993.
Clauses involved in the proposed amendments
Clause 2 proposes the amendment will apply to all assessments that commence on and after 1 July 1993.
Clauses 19(1) and (2) establishes that a penalty is payable, specifies the rate of the penalty and the amount on which it is imposed
Clauses 19(3) and (4) specify the amount is due and payable to the Commonwealth immediately and allows the Registrar to remit depending upon circumstances.