INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART VII - PENALTY TAX  

SECTION 225   PENALTY TAX WHERE DIVISION 13 OF PART III APPLIES  

225(1)   [Where prescribed provision applies]  

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) in calculating the tax assessable to the taxpayer, a prescribed provision was, or prescribed provisions were, applied; and

(c) either of the following subparagraphs apply:

(i) no tax would have been assessable to the taxpayer in relation to the year of income if:

(A) the prescribed provision or prescribed provisions, as the case may be, had not been applied; and

(B) the tax had been assessed on the basis that the particulars contained in the return of the taxpayer for the year of income or in the objection, as the case may be, were correct in so far as they were relevant to the operation of the prescribed provision or prescribed provisions, as the case may be;

(ii) the amount of tax (in this subsection referred to as the ``amount of claimed tax'' ) that would have been assessable to the taxpayer in relation to the year of income if:

(A) the prescribed provision or prescribed provisions, as the case may be, had not been applied; and

(B) the tax had been assessed on the basis that the particulars contained in the return of the taxpayer for the year of income or the objection, as the case may be, were correct in so far as they were relevant to the operation of the prescribed provision or prescribed provisions, as the case may be;

is less than the amount of tax referred to in paragraph (a);

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

(d) in a case where:

(i) the prescribed provision or prescribed provisions, as the case may be, were applied in relation to a scheme within the meaning of Part IVA ; and

(ii) the scheme was entered into or carried out for the sole or dominant purpose of enabling a person to pay no tax or less tax:

additional tax equal to:

(iii) in a case to which subparagraph (c)(i) applies - the first penalty percentage of the amount of the tax referred to in paragraph (a); or

(iv) in a case to which subparagraph (c)(ii) applies - the first penalty percentage of the amount by which the amount of the tax referred to in paragraph (a) exceeds the amount of claimed tax; or

(e) in any other case - additional tax, the second penalty percentage of:

(i) in a case to which subparagraph (c)(i) applies - the amount of the tax referred to in paragraph (a); or

(ii) in a case to which subparagraph (c)(ii) applies - the amount by which the amount of the tax referred to in paragraph (a) exceeds the amount of claimed tax.

225(1A)   [Definitions]  

In subsection (1):

"first penalty percentage"
means:

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

(b) if it is reasonably arguable that the prescribed provision or provisions do not apply - 25%;

"second penalty percentage"
means:

(a) subject to paragraph (b) - 25%; or

(b) if it is reasonably arguable that the prescribed provision or provisions do not apply - 10%.

225(2)   [Where prescribed provision not applicable]  

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; and

(b) in calculating the tax assessable to the taxpayer, a prescribed provision was not applied in a particular case by reason of the International Tax Agreements Act 1953 ;

the Commissioner shall determine the following amounts:

(c) the amount (if any) of additional tax that, but for subsection (3) and the International Tax Agreements Act 1953 , the taxpayer would have been liable to pay in relation to the year of income under subsection (1);

(d) the amount (if any) of additional tax that the taxpayer would have been liable to pay in relation to the year of income under subsection (1) if that subsection were applied on the basis that a reference in that subsection to the application of a prescribed provision included a reference to the application of a provision of the International Tax Agreements Act 1953 by reason of the application of which a prescribed provision was not applied in a particular case.

225(3)   [No additional tax under subsec (1) payable]  

Where the Commissioner has determined an amount or amounts under subsection (2) in relation to a taxpayer in relation to a year of income, the taxpayer is liable to pay, by way of penalty, additional tax in relation to the year of income equal to that amount or the lesser of those amounts, as the case may be, and, where the taxpayer is liable to pay additional tax under this subsection in relation to the year of income, the taxpayer is not liable to pay additional tax under subsection (1) in relation to the year of income.

225(4)   [``prescribed provision'']  

In subsections (1) and (2), ``prescribed provision'' means section 136AD or 136AE .

225(5)   [Provisions disregarded]  

In the application of subsections (1) and (2), the possibility that Subdivision C of Division 2 of Part III or Part IVA of this Act or section 70-20 of the Income Tax Assessment Act 1997 would have applied in a particular case in which it did not apply shall be disregarded.