INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART VII - PENALTY TAX  

SECTION 224   PENALTY TAX WHERE CERTAIN ANTI-AVOIDANCE PROVISIONS APPLY  

224(1)   [Additional tax]  

Where:

(a) for the purpose of making an assessment or arising out of the consideration of an objection, the Commissioner has calculated the tax that is assessable to a taxpayer in relation to a year of income;

(b) a step (in this subsection referred to as the ``relevant step'' ) in the calculation of the tax consisted of:

(i) an amount being included in the assessable income of the taxpayer; or

(ii) a deduction or rebate not being allowable, in whole or in part, to the taxpayer;

(c) the relevant step was dependent on, or involved, any one or more of the following, namely:

(i) the formation by the Commissioner of, or the refusal or failure of the Commissioner to form, an opinion that relates to a tax avoidance scheme;

(ii) the attainment by the Commissioner of, or the refusal or failure by the Commissioner to attain, a state of mind that relates to a tax avoidance scheme;

(iii) the making by the Commissioner of, or the refusal or failure by the Commissioner to make, a determination that relates to a tax avoidance scheme;

(iv) the exercise by the Commissioner of, or the refusal or failure by the Commissioner to exercise, a power to treat a matter or thing that relates to a tax avoidance scheme in a particular way;

being an opinion, state of mind, determination or power under, or referred to in, a provision of this Act (other than a provision of Division 13 of Part III or Part IVA ); and

(d) either of the following subparagraphs apply:

(i) in a case to which subparagraph (b)(i) applies - the taxpayer did not include in the taxpayer's return for the year of income or the objection, as the case may be, the amount referred to in that subparagraph as part of the taxpayer's assessable income; or

(ii) in a case to which subparagraph (b)(ii) applies - the taxpayer claimed or included in the taxpayer's return for the year of income or the objection, as the case may be, the deduction or rebate or the part of the deduction or rebate, as the case may be, referred to in that subparagraph as, or as part of, an allowable deduction or rebate, as the case may be;

the taxpayer is liable to pay, by way of penalty, additional tax equal to:

(e) in a case to which subparagraph (b)(i) applies - the penalty percentage of the difference between the tax properly payable by the taxpayer and the tax that would have been payable by the taxpayer if it were assessed on the basis that the taxpayer's assessable income were reduced by the amount referred to in subparagraph (b)(i) or the part of that amount that the taxpayer did not include in the taxpayer's return for the year of income or the taxpayer's objection, as the case may be, as part of the taxpayer's assessable income, as the case may be; or

(f) in a case to which subparagraph (b)(ii) applies - the penalty percentage of the difference between the tax properly payable by the taxpayer and the tax that would have been payable by the taxpayer if it were assessed on the basis that the taxpayer's allowable deductions or rebates, as the case may be, were increased by the amount of the deduction or rebate or the part of the deduction or rebate, as the case may be, referred to in subparagraph (b)(ii) that the taxpayer claimed or included in the taxpayer's return for the year of income or the taxpayer's objection, as the case may be, as, or as part of, an allowable deduction or rebate, as the case may be.

224(2)   [``tax avoidance scheme'']  

In subsection (1), ``tax avoidance scheme'' means a scheme within the meaning of Part IVA that was entered into or carried out for the sole or dominant purpose of enabling a person to pay no tax or less tax.

224(3)   [``penalty percentage'']  

In subsection (1):

"penalty percentage"
means:

(a) subject to paragraph (b) - 50%; or

(b) if it is reasonably arguable that the provision or provisions under which the step described in paragraph (1)(b) or the action described in paragraph (1)(c) was taken do not apply to include the amount or disallow the deduction or rebate - 25%.