House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon John Dawkins, M.P.)

Chapter 3 Self Amendments

Key Features

This chapter deals with self amendments. The key features are:

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the Commissioner will be able to accept statements made by a taxpayer when amending an assessment;

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the Commissioner will be able to review self amendments within 4 years of the amendment.

Summary of Proposed Amendments

The Bill gives effect to changes announced in section 10 of the August 1991 information paper entitled 'Improvements to Self Assessment - Priority Tasks'.

At present, section 170 of the ITAA permits the Commissioner to amend an assessment by making such alterations or additions as he thinks necessary. However, the law does not provide for the Commissioner, when making amended assessments, to rely on statements made by a taxpayer other than statements which were made in a return. This means that neither individual taxpayers nor relevant entities can self amend in the way individual taxpayers self assess.

The Bill will allow the Commissioner, when amending an assessment, to rely on statements made by a taxpayer.

Explanation of Proposed Amendments

Accepted statements

Subsection 169A(1) of the ITAA is amended to allow the Commissioner to accept statements made by taxpayers other than in their return. This means that the Commissioner can rely on statements made by a taxpayer in a request for amendment and can amend without being required to consider whether the amendment is necessary to correct the assessment. [amended subsection 169A(1) - Subclause 19(a)]

The Commissioner may decide not to accept statements made in an amendment request and may make enquiries as to whether the amendment is necessary. Where the Commissioner gives consideration to the amendment request and is satisfied that a particular amendment is necessary, the Commissioner is obliged to make the amendment. This includes correcting an error of law.

The Commissioner may want to examine requests for amendment in certain circumstances, for example, where:

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the assessment is a Commissioner assessment, eg., an assessment resulting from an ATO audit, or a section 167 assessment;

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the Commissioner has commenced an audit in respect of that year;

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the taxpayer has either appealed, or sought a review of an objection decision either in respect of an assessment or a Private Ruling on that matter;

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there is recovery action being undertaken for tax that has been assessed but is unpaid.

Review of amendments

The Commissioner is given an extended time under new subsection 170(1A) to review amendments favourable to taxpayers, where the Commissioner has relied upon a taxpayer's statement. This power to review the amendment and reverse it, wholly or in part, may be exercised within 4 years from the service of the notice of amended assessment which initially reduced liability. However, if the original 4 year objection period has expired, the Commissioner can only amend the particular that was the subject of the earlier amendment. [subsection 170(1A) - Subclause 20(a)]

Taxpayers can object to that further amendment within the later of 4 years after the original assessment or 60 days after the notice of the amended assessment [subsection 14ZW(1C) of Taxation Administration Act - Subclause 8(g)]. See Chapter 2.

Limitation on subsection 170(5) amendment

Subsection 170(5) gives the Commissioner an extra 4 years to reduce a taxpayer's liability in respect of a particular that has been previously amended to increase the taxpayer's liability. This power will not be available in respect of a further amendment made under the new subsection 170(1A). This provides a cap on further amendments, beyond the original 4 years, in relation to a particular which has been amended more than once. [subsection 170(5A) - Subclause 20(b)]

Commencement Date

The amendments apply to assessments and amended assessments made after the date of Royal Assent of the Bill. This means it will apply in cases where:

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the statement being relied upon by the Commissioner may have been made prior to the date of Royal Assent of the Bill; or

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the assessment being amended was not made in reliance upon a statement under section 169A(1); or

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the assessment being amended was deemed to have been made under section 166A.

By virtue of section 173 of the ITAA the reference to assessment in subsection 169A(1) includes an amended assessment.