House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Refunds

Outline of chapter

Schedule 7 to this Bill amends the Taxation Administration Act 1953 (TAA 1953) to provide the Commissioner of Taxation (Commissioner) with a discretion to delay refunding an amount to a taxpayer pending integrity checks of their claim.

Context of amendments

A taxpayer's entitlement to be paid an amount is generally provided for in the relevant taxation law. These credits may be offset against other taxation debts of the taxpayer, or refunded. For example, section 35-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that the Commissioner is required to refund a negative net amount. Section 35-10 of the GST Act provides that the taxpayer's entitlement to be paid that refund arises when he or she lodges their goods and services tax (GST) return with the Commissioner.

Section 8AAZLF of the TAA 1953 requires the Commissioner to refund a running balance account surplus or other credit.

Prior to the Full Federal Court's decision in Commissioner of Taxation v Multiflex Pty Ltd [2011] FCAFC 142 ( Multiflex ), the Commissioner's administrative practice with respect to negative net amounts was to retain certain refunds in exceptional circumstances pending verification checks on the basis that the ability to do so was implied by the TAA 1953 and the GST Act, and within the Commissioner's general powers of administration.

This practice was also considered to be consistent with the Commissioner's obligations under the Financial Management and Accountability Act 1997 and the legislative obligation on the Commissioner to pay interest to the taxpayer under the Taxation (Interest on Overpayments and Early Payments) Act 1983 on refunds paid or credited following the expiry of a period set out in that Act.

In Multiflex , the Full Federal Court considered whether, under section 35-5 of the GST Act and section 8AAZLF of the TAA 1953, the Commissioner had an implied reasonable time in which to refund a negative net amount, including such time as is reasonably necessary to determine whether the amount was truly payable.

On 11 November 2011, in handing down its decision, the Full Federal Court found that the Commissioner is required to pay a GST refund within the time it takes to undertake the necessary administrative steps to process the taxpayer's return and make the payment, and that the law provides no additional time for checking the validity of the claim, even if the Commissioner suspects it might be incorrect.

On 9 December 2011, the High Court of Australia dismissed the Commissioner's application for special leave to appeal against the decision. As a result, in the absence of a legislative amendment, the Commissioner is required to pay out GST refunds claimed by a taxpayer on their return once it had been processed, and then seek to recover the amounts if subsequent checks show the amounts claimed to be excessive.

Based on experience in a number of jurisdictions, this gives rise to an identifiable risk that in some cases, recovery of these amounts will not be possible, particularly in cases of organised fraud or evasion.

These amendments are intended to address the outcome in Multiflex , and ensure that the Commissioner has the ability to verify refund claims before paying them to a taxpayer.

In coming to its decision, the Full Federal Court considered a legislative provision contained in New Zealand's Goods and Services Tax Act 1985 . Elements of that provision, and the judicial approach to this issue in the United Kingdom, have been adopted in developing the new provision.

In a full self assessment environment such as that which applies to companies and superannuation funds (but not individuals) for income tax purposes, and proposed to be introduced for indirect taxes, taxpayers self assess their tax-related liabilities and tax-related entitlements through the lodgment of the relevant return. On lodgment of the return, there is a deemed assessment and the return is deemed to be a notice of that assessment.

Returns and notifications in a self assessment environment are generally accepted at face value; however they may be subject to post-assessment audits or verification activities by the Commissioner.

In conducting their tax affairs, taxpayers are presumed by the Commissioner to be acting honestly, unless the Commissioner has reason to believe otherwise. This presumption is set out in the Taxpayer's Charter.

As there will be circumstances where the amount claimed in a return or other notification is incorrect, including due to carelessness, recklessness or fraud, it is a necessary integrity requirement that the Commissioner has the ability to delay refunding amounts in certain circumstances.

These amendments seek to restore the Commissioner's previous administrative practice of retaining certain refunds for verification prior to payment to protect the integrity of the tax system. At the same time, the provision seeks to strike a balance between this need to preserve the integrity of the tax system and curtailing the opportunities for refund fraud on the one hand; and the principles of self assessment and like systems and a taxpayer's expectation of a prompt refund on the other.

Consistent with the rest of Divisions 3 and 3A of the TAA 1953, the new provision will potentially apply to all running balance account surpluses (which arise when payments and credits allocated to a taxpayer's running balance account exceed primary tax debts allocated to that account) and other entitlements to credits under the taxation law.

Summary of new law

This Schedule provides the Commissioner with a legislative discretion to retain an amount for verification purposes, consistent with the Commissioner's administrative practice prior to the decision in Multiflex . These amendments operate in conjunction with section 8AAZLF which provides that the Commissioner has an upfront obligation to pay a running balance account surplus or credit.

In circumstances where it would be reasonable to require verification of information provided by the taxpayer relating to an amount that the Commissioner would otherwise have to refund, the Commissioner may retain the refund for the purposes of verifying the information.

The Commissioner may also retain an amount if the taxpayer requests that the Commissioner retain the amount for verification purposes.

In deciding whether to retain the amount, the Commissioner must have regard to a number of factors, including, but not limited to, the impact on the entity's financial position, the impact on the revenue and the likelihood that there is fraud or evasion, intentional disregard or recklessness as to the operation of a taxation law.

If the Commissioner wishes to retain the amount beyond an initial period of time (generally 14 or 30 days), the Commissioner must inform the taxpayer before that period ends. The continued retention of the amount after this period is also subject to the same objective test of reasonableness.

Taxpayers may object to the Commissioner's decision to retain a refund, if the Commissioner has not refunded the amount, made an assessment under Division 105 in Schedule 1 to the TAA 1953 or otherwise amended the assessment giving rise to the refund entitlement after a set period of time.

Comparison of key features of new law and current law

Detailed explanation of new law

Commissioner's discretion to retain an amount

Upfront obligation on the Commissioner to pay a refund

Section 8AAZLF of the TAA 1953 provides that the Commissioner generally has an upfront obligation to refund, to a taxpayer, a running balance account surplus or credit if the amount has not been otherwise allocated or applied under Division 3 of the TAA 1953.

Threshold test

Section 8AAZLGA is inserted into the TAA 1953 to allow the Commissioner to retain an amount he or she would otherwise have to refund to a taxpayer under section 8AAZLF in certain circumstances.

Firstly, the taxpayer must have given the Commissioner a notification that affects, or may affect, the amount that the Commissioner is required to refund to the taxpayer. [ Schedule 7, item 1, subsection 8AAZLGA(1) of the TAA 1953 ]

This could be a GST return, or another document which has resulted in a running balance account surplus or credit that the Commissioner must refund under section 8AAZLF.

Secondly, the Commissioner can only retain the amount if either:

•

it would be reasonable to require verification of information contained in the taxpayer's notification and relating to the amount that the Commissioner would have to refund [ Schedule 7, item 1, paragraph 8AAZLGA(1)(a) of the TAA 1953 ]; or

•

the taxpayer has requested that the Commissioner retain the amount for verification purposes, and the request has not been withdrawn [ Schedule 7, item 1, paragraph 8AAZLGA(1)(b) of the TAA 1953 ].

Verification of information

7.28 As the term verification is not defined, it (and the terms verify and verifying ) is intended to take on its ordinary meaning. In the context of the provision, this could refer to actions or enquiries that may need to be taken to prove or establish the correctness or accuracy of the information provided.

The discretion is intended to allow the Commissioner to consider the correctness of the information provided by the taxpayer before refunding an amount the Commissioner would otherwise have to refund. It is not intended that the Commissioner use this discretion to withhold a refund merely where the Commissioner and the taxpayer disagree about how the law applies to the facts. The appropriate course of action for the Commissioner in these circumstances is to issue an assessment to reflect his or her view of the law.

Example 7.18

Joel is registered for GST. In May 2012, Joel makes a number of supplies and acquisitions. On 21 June 2012, Joel lodges his GST return for the monthly tax period ending 31 May 2012. Joel's net amount is an amount less than zero and gives rise to a refund.

The Commissioner and Joel have different views about the GST treatment of a number of acquisitions that Joel claims that he has made during the tax period. The Commissioner has an established view as to the treatment, and Joel does not agree. This alone is insufficient for the Commissioner to retain the refund. As the Commissioner has an established view, the Commissioner may make an assessment, and Joel can challenge the Commissioner's view by objecting to that assessment.

However, the Commissioner may retain the amount if it would be reasonable to do so after consideration of the factors in subsection 8AAZLGA(2). This may be the case if on the information available to the Commissioner it would be reasonable to verify that the acquisitions in fact took place. If, after further enquiries, it is no longer reasonable to verify that the acquisitions did in fact take place, the refund should no longer be retained under section 8AAZLGA, but instead the Commissioner should issue an assessment to Joel to reflect the Commissioner's view of the law.

Amount retained

The Commissioner might decide to only retain some of the amount claimed and where it is reasonably practical to do so.

>Relevant factors

The conditions that must be satisfied to exercise the discretion are objectively tested, and as such, in deciding whether to retain an amount, the Commissioner must consider a number of factors based on the information available to him or her at the time of making the decision. These factors are:

•

the likely accuracy of the information [ Schedule 7, item 1, paragraph 8AAZLGA(2)(a) of the TAA 1953 ];

•

the likelihood that the information was affected by fraud or evasion, intentional disregard of a taxation law or recklessness as to the operation of a taxation law [ Schedule 7, item 1, paragraph 8AAZLGA(2)(b) of the TAA 1953 ];

•

the impact of retaining the amount on the entity's financial position [ Schedule 7, item 1, paragraph 8AAZLGA(2)(c) of the TAA 1953 ];

•

the possible impact on the revenue [ Schedule 7, item 1, paragraph 8AAZLGA(2)(d) of the TAA 1953 ];

•

the complexity that would be involved in verifying the information [ Schedule 7, item 1, paragraph 8AAZLGA(2)(e) of the TAA 1953 ];

•

the time for which the Commissioner has already retained the amount [ Schedule 7, item 1, paragraph 8AAZLGA(2)(f) of the TAA 1953 ];

•

what the Commissioner has already done to verify the information [ Schedule 7, item 1, paragraph 8AAZLGA(2)(g) of the TAA 1953 ];

•

whether the Commissioner has sufficient information on which to make an assessment relating to the amount [ Schedule 7, item 1, paragraph 8AAZLGA(2)(h) of the TAA 1953 ];

•

whether the information provided by the taxpayer is consistent with information previously provided by the taxpayer [ Schedule 7, item 1, paragraph 8AAZLGA(2)(i) of the TAA 1953 ]; and

•

any other relevant matter [ Schedule 7, item 1, paragraph 8AAZLGA(2)(j) of the TAA 1953 ].

7.31 A balance is required between risks to the revenue and the taxpayer's entitlement to be paid the amount, and the Commissioner must take into account all the circumstances of the case. In any particular case, some factors may be more relevant than others.

7.32 It should be noted that no single factor is determinative and the applicability of each factor will depend on the specific circumstances of each case. Each factor may weigh towards or against retaining an amount.

7.33 In addition, the test is an ongoing one and the degree of certainty that there may be about each factor will be guided by the information that the Commissioner has available at the time of making the decision. This may change over the period. In some cases, it may be impossible for the Commissioner to consider a factor due to the absence of certain information. For example, the Commissioner may have sought information from a taxpayer but has not yet received it. The Commissioner's knowledge on the first day of the period, for example, might be much less than at a later stage.

Likely accuracy of information

7.34 In assessing the likely accuracy of the information, considerations could include the potential that, and possible extent to which, the information is inaccurate. This might include things such as the current amount being claimed appearing to be quite different to claims over several previous periods and the possibility of an error having been made.

Likelihood that information is affected by fraud or evasion, intentional disregard or recklessness

7.35 Consideration of this factor would include the degree to which it is likely that the information was affected by fraud or evasion, intentional disregard of a taxation law or recklessness as to the operation of a taxation law.

7.36 Intentional disregard and recklessness take on their ordinary meanings. A taxpayer will be taken to have intentionally disregarded a taxation law if the taxpayer has consciously decided to disregard clear obligations under a taxation law. This could include producing false records, such as a false tax invoice.

7.37 A taxpayer will have been reckless as to the operation of a taxation law if the taxpayer's conduct clearly shows disregard of, or indifference to, consequences or risks that are reasonably foreseeable to result from the taxpayer's actions. This could include providing information in a return where the taxpayer knows there is a real risk that the information may be incorrect, or is indifferent to whether the information is incorrect.

7.38 In assessing the likelihood of there being fraud or evasion, intentional disregard or recklessness, the compliance history of the entity may be relevant. Where there has been a good compliance history, this would be an indicator that fraud or evasion, intentional disregard or recklessness is unlikely. On the other hand, where there has been a history of non-compliance with the tax laws, this could indicate that there is a higher likelihood of intentional disregard or recklessness (if not fraud or evasion).

Impact of retaining a refund on a taxpayer's financial position

7.39 Relevant considerations would be whether retaining the refund will cause financial hardship for the taxpayer, such that it would compromise the taxpayer's business viability. This may include an assessment of the impact on the taxpayer's immediate cash flow, solvency and borrowing needs.

7.40 The size of the potential refund is a relevant consideration, but must be considered with regard to the particular taxpayer's specific circumstances.

Possible impact on the revenue

7.41 A consideration of the possible impact on the revenue would include looking at whether retaining the amount is necessary for protection of the revenue. This will generally be guided by whether the Commissioner would be able to recover a refunded amount if the information were subsequently found to be incorrect. In instances of suspected fraud where the taxpayer is likely to be a flight risk, for example, experience shows that it may be less likely that a refund could be recovered once released.

7.42 The size of the refund is a relevant consideration, but must be considered with regard to the particular taxpayer's specific circumstances. Whilst a smaller amount might indicate a lesser risk to the revenue and a larger amount a greater risk, there is no threshold amount which would prevent or require the retention of an amount.

Complexity involved in verifying information

7.43 Complex arrangements, such as those involving multiple supply chains and multiple entities, will generally require more time and resources than a straightforward arrangement where information can be verified more quickly. His Honour Justice Jessup, in considering the Multiflex case in the Federal Court hearing, accepted that the investigation being undertaken was complex and difficult. He acknowledged that if the question in the matter before him 'related only to the length of what should be regarded as reasonable' then he would have had no reason not to accept the period as a reasonable one (see paragraphs 27 and 28 in Multiflex Pty Ltd v Commissioner of Taxation [2011] FCA 1112).

Time for which a refund is already retained

This would involve consideration of the time already elapsed since the Commissioner first started to retain the refund. The length of time for which the Commissioner has already retained an amount would also be relevant to considerations of the impact on the entity's financial position and the complexity of the investigation.

Commissioner's actions to verify the information

This would involve a consideration of what actions the Commissioner has already taken in verifying the information. It would be reasonable to expect the Commissioner to actively seek to resolve any uncertainty there might be about the correctness of a claim, given the underlying purpose of the provision.

Commissioner's ability to make an assessment

Depending on the information available to the Commissioner, the Commissioner may be in a position to make an assessment. Applying the reasonableness test in the context of an assessment system, it would be expected that the Commissioner would make an assessment where he or she is in a position to do so, particularly where he or she is in a position to make an assessment that changes the taxpayer's entitlement to the refund. This will enable the taxpayer to exercise objection and review rights in relation to their underlying claim.

Consistency of information with previously provided information

This could include a consideration of things such as the amount of the refund claimed compared to the refund amounts previously or commonly claimed by the entity. This enables the patterns in lodged information to be taken into account, recognising that in many cases an unusual variation might be readily explicable on the basis of an extraordinary transaction taking place during the tax period.

Any other relevant matter

There may be other matters peculiar to a particular taxpayer's circumstances that the Commissioner should take into account. The Commissioner should not, however, have regard to irrelevant considerations.

Retention periods

Obligation to inform

If the Commissioner decides to retain an amount, he or she is required to inform the taxpayer:

•

in the case of a running balance account surplus, by the running balance account interest day (which will generally be 14 days after giving the Commissioner the notified information) [ Schedule 7, item 1, paragraph 8AAZLGA(3)(a) of the TAA 1953 ]; or

•

for other credits, within 30 days of the taxpayer giving the Commissioner a notice containing the amount claimed [ Schedule 7, item 1, paragraph 8AAZLGA(3)(b) of the TAA 1953 ].

7.50 The Commissioner's obligation to inform may be satisfied in a number of ways, including by telephone, electronic mail or post.

7.51 As a majority of verification checks are able to be resolved through informal conversations between the Commissioner and the taxpayer, it may be more efficient and effective for the Commissioner to inform the taxpayer by telephone rather than by post.

7.52 However, there may be circumstances in which the Commissioner is unable to contact the taxpayer. In these circumstances the Commissioner will be taken to have satisfied the obligation to inform by serving a document to the taxpayer's preferred address for service in accordance with Part 2A of the Taxation Administration Regulations 1976 .

Example 7.19 : Notice by the running balance account interest day (14 days)

Caroline runs a small business and is registered for GST. On 28 October 2013, Caroline lodges her GST return for the tax period ending 30 September 2013 indicating she is entitled to a refund of $50,000. An amount of $50,000 is allocated to the running balance account and she has a running balance account surplus of $50,000. If on an objective assessment of the facts, and having regard to the factors in subsection 8AAZLGA(2), it is reasonable to retain that refund in order to verify the information provided by Caroline, the Commissioner must inform Caroline by 11 November 2013 that he or she is retaining the refund.

Example 7.20 : Notice within 30 days

FlynnCo is a start-up company and submits its 2012-13 income tax return on 28 February 2014. In the return, FlynnCo claims a large refundable research and development (R & D) tax offset. If on an objective assessment of the facts, and having regard to the factors in subsection 8AAZLGA(2), it is considered reasonable to retain that refund to verify the information provided by FlynnCo, the Commissioner must inform FlynnCo by 30 March 2013 that he or she is retaining the refund.

7.53 At the time of informing the taxpayer of his or her decision to retain an amount, the Commissioner may ask the entity to provide any additional information that he or she requires for the purpose of verifying the information. [ Schedule 7, item 1, subsection 8AAZLGA(4) of the TAA 1953 ]

Initial retention period

If the Commissioner fails to inform the taxpayer that he or she is retaining an amount under section 8AAZLGA by the specified day, then the Commissioner must refund the amount to the taxpayer on the day after that date. [ Schedule 7, item 1, paragraph 8AAZLGA(5)(b) of the TAA 1953 ]

This means that the Commissioner will only be able to retain an amount until:

•

in the case of a running balance account surplus, the running balance account interest day [ Schedule 7, item 1, paragraph 8AAZLGA(3)(a) of the TAA 1953 ]; or

•

for other credits, the 30th day after the taxpayer gives the Commissioner a notice containing the amount claimed [ Schedule 7, item 1, paragraph 8AAZLGA(3)(b) of the TAA 1953 ].

The retention of the refund during this initial period is also subject to the objective tests as set out in subsection 8AAZLGA(1).

When the Commissioner must refund a retained amount

7.57 Once the Commissioner informs the taxpayer of his or her decision to retain a refund in accordance with subsection 8AAZLGA(3), the Commissioner may only retain the amount until:

•

it would no longer be reasonable to require verification of the information (in cases where the taxpayer did not request that the Commissioner retain the refund) [ Schedule 7, item 1, paragraph 8AAZLGA(5)(a) of the TAA 1953 ];

•

the amount that the Commissioner is required to refund changes as a result of the Commissioner amending the taxpayer's assessment [ Schedule 7, item 1, subparagraph 8AAZLGA(5)(c)(i) of the TAA 1953 ]; or

•

the amount that the Commissioner is required to refund changes as a result of the Commissioner making or amending the taxpayer's assessment under Division 105 in Schedule 1 to the TAA 1953 [ Schedule 7, item 1, subparagraph 8AAZLGA(5)(c)(ii) of the TAA 1953 ].

The test provided for in paragraph 8AAZLGA(5)(a) requires the Commissioner to release a refund, if at any time, it is no longer reasonable for a refund to be retained. This may be because of new information that has been provided to the Commissioner.

In assessing whether it would be reasonable to require verification of the information, the Commissioner would need to have regard to the factors in subsection 8AAZLGA(2).

Example 7.21

Tom is registered for GST and lodged his GST return on 28 October 2012. The return gives rise to a net amount less than zero. After an objective assessment of the particular circumstances in Tom's case, and having regard to the factors in subsection 8AAZLGA(2), the Commissioner retains the amount on the basis that it is reasonable to require verification of Tom's refund claim. The Commissioner contacts Tom on 30 October 2012 and informs him of the decision to retain the refund.

On 8 November 2012, the Commissioner concludes his verification activities. As the Commissioner is now satisfied that Tom is entitled to the claimed amount, it would no longer be reasonable for the Commissioner to continue retaining the amount. The Commissioner refunds the amount to Tom on 9 November 2012.

Review rights under Part IVC

7.62 A taxpayer may object under Part IVC of the TAA 1953 to the Commissioner's decision to retain the refund. [ Schedule 7, item 1, subsection 8AAZLGA(6) of the TAA 1953 ]

Time for objection

7.63 The right to object arises 60 days (plus any applicable extensions) after the day on which the Commissioner is required to inform the taxpayer of his or her decision to retain the refund under subsection 8AAZLGA(3). [ Schedule 7, item 2, paragraph 14ZW(1)(aac) of the TAA 1953 ]

7.64 The 60-day period is extended by any periods of time in which the Commissioner has requested further information from the taxpayer and that information has not been provided to the Commissioner. [ Schedule 7, item 3, subsection 14ZW(4) of the TAA 1953 ]

7.65 The extension mechanism in subsection 14ZW(4) operates by testing each day in the 60-day period referred to in subparagraph 14ZW(1)(aac)(i), and checking whether there is an outstanding information request. For each day there is an outstanding information request, an extra day is added to the end of the 60-day period.

7.66 To ensure that taxpayers are not adversely affected by the actions of third parties, the extension mechanism does not apply where it is necessary for the Commissioner to make requests to third parties as part of his or her verification activities.

7.67 If the Commissioner has already refunded the amount, amended the taxpayer's assessment, or made or amended an assessment for the taxpayer relating to the amount under Division 105 in Schedule 1 to the TAA 1953, then the taxpayer may no longer object under subsection 8AAZLGA(6) to the Commissioner's decision to retain the refund. [ Schedule 7, item 2, subparagraph 14ZW(1)(aac)(ii) of the TAA 1953 ]

7.68 Instead, if the Commissioner has made or amended an assessment that changes the entitlement to the refund, the taxpayer, if dissatisfied, must object to the assessment or amended assessment under Part IVC of the TAA 1953.

Notification of an entitlement to object

7.69 The Commissioner has up to seven days after the end of the 60-day period (plus extensions) to inform the taxpayer, in writing, of the taxpayer's right to object. The Commissioner may choose to inform the taxpayer of these objection rights before the end of the period. [ Schedule 7, item 1, subsection 8AAZLGA(7) of the TAA 1953 ]

The taxpayer's right to object does not depend on receipt of the Commissioner's notification. Instead, the notification requirement is to ensure that taxpayers affected by this provision are made aware of their rights.

Example 7.22

Duncan runs a shoe shop and is registered for GST. On 28 July 2012, Duncan lodges his GST return for the tax period ending 30 June 2012. Duncan's net amount for that period is a refund of $15,000. An amount of $15,000 is allocated to the running balance account and he has a running balance account surplus of $15,000. The running balance account interest day would be 11 August 2012.

Duncan's past compliance history has been poor and at times he has been found to have been reckless when lodging his GST returns. On this occasion, his claim for a refund does not correspond with his recent lodgment activity. After considering all the factors in subsection 8AAZLGA(2), including Duncan's past compliance history, which suggests that the information might be affected by recklessness, and Duncan's recent lodgment activity, the Commissioner determines that it would be reasonable to require the amounts in Duncan's GST return to be verified.

On 8 August 2012, the Commissioner informs Duncan that he has decided to retain the refund under section 8AAZLGA. On 20 August 2012, the Commissioner requests additional information from Duncan. Duncan provides this information to the Commissioner on 19 September 2012.

The Commissioner's investigations, including the information provided by Duncan indicate that the acquisitions to which the refund claim relates are part of a complex supply chain.

The Commissioner again considers whether it is reasonable to continue retaining the amount. Having regard to the factors, including the complexity involved and the likelihood that Duncan may again be acting recklessly, the Commissioner determines that it would be reasonable to continue to retain the refund.

If by 10 October 2012 (60 days from the running balance account interest day plus the 30 days Duncan took to provide the requested information to the Commissioner), the Commissioner still has not refunded the amount, made an assessment of Duncan's net amount or informed Duncan of the decision to retain the amount, Duncan may object to the Commissioner's decision to retain the amount under Part IVC of the TAA 1953. The Commissioner is required to notify Duncan of his objection rights by 17 October 2012.

Delayed refund interest

An imperative on the Commissioner to act promptly and not delay refunds unnecessarily is that he or she may be required to pay interest as provided for under the Taxation (Interest on Overpayments and Early Payments) Act 1983 on refunds paid or credited following the expiry of a period set out in that Act. [ Schedule 7, item 1, note in subsection 8AAZLGA(6) of the TAA 1953 ]

For example, under the delayed refund interest rules in Part IIIAA of the Taxation (Interest on Overpayments and Early Payments) Act 1983 , where the conditions for entitlement are met interest will be payable from the running balance account interest day for running balance account surpluses.

RBA interest day is defined in section 12AF of the Taxation (Interest on Overpayments and Early Payments) Act 1983 as being the 14th day after the later of:

•

the day on which the surplus arises;

•

the day on which a notification is given to the Commissioner under section 8AAZLG of the TAA 1953; or

•

the day on which the taxpayer nominates a financial institution account for the purposes of section 8AAZLH of the TAA 1953.

Application and transitional provisions

These amendments commence on the day of Royal Assent.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Refunds

This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

This Schedule amends the TAA 1953 to provide the Commissioner with a discretion to delay refunding an amount to a taxpayer pending integrity checks of their claim.

Human rights implications

This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

This Schedule is compatible with human rights as it does not raise any human rights issues.

Assistant Treasurer, Senator the Hon Mark Arbib