Taxation Laws Amendment (Self Assessment) Act 1992 (101 of 1992)

PART 3   AMENDMENT OF THE INCOME TAX ASSESSMENT ACT 1936

18   Section 160AS

Section 160AS of the Principal Act is repealed and the following sections are inserted:

Penalty tax where franking tax shortfall caused by lack of reasonable care

"160ARZA. Subject to this Division, if:

(a) a company has a franking tax shortfall for a franking year; and

(b) the shortfall or part of it was caused by the failure of the company or of a registered tax agent to take reasonable care to comply with this Act or the regulations;

the company is liable to pay, by way of penalty, additional tax equal to 25% of the amount of the shortfall or part.

Penalty tax where franking tax shortfall caused by recklessness

"160ARZB. Subject to this Division, if:

(a) a company has a franking tax shortfall for a franking year; and

(b) the shortfall or part of it was caused by the recklessness of the company or of a registered tax agent with regard to the correct operation of this Act or the regulations;

the company is liable to pay, by way of penalty, additional tax equal to 50% of the amount of the shortfall or part.

Penalty tax where franking tax shortfall caused by intentional disregard of law

"160ARZC. Subject to this Division, if:

(a) a company has a franking tax shortfall for a franking year; and

(b) the shortfall or part of it was caused by intentional disregard by the company or by a registered tax agent of this Act or the regulations;

the company is liable to pay, by way of penalty, additional tax equal to 75% of the amount of the shortfall or part.

Penalty tax because of position taken

"160ARZD.(1) Subject to this Division, if:

(a) a company has a franking tax shortfall for a franking year; and

(b) the shortfall or part of it was caused by the company, in a taxation statement, treating a franking tax law as applying in relation to a matter or identical matters in a particular way; and

(c) the shortfall or part, as the case may be, so caused exceeded whichever is the higher of:

(i) $10,000; or

(ii) 1% of the company's return franking tax for that year; and

(d) when the statement was made, it was not reasonably arguable that the way in which the application of the law was treated was correct;

the company is liable to pay, by way of penalty, additional tax equal to 25% of the amount of the shortfall or part.

"(2) For the purposes of this section, the correctness of the treatment of the application of a law in relation to a matter is reasonably arguable if, having regard to the relevant authorities and the matter, it would be concluded that what is argued for is about as likely as not correct.

"(3) For the purposes of this section, if the treatment of the application of a law assumed that the Commissioner would exercise a discretion in a particular way, the correctness of the treatment is reasonably arguable, in so far as it consisted of the assumption, if the exercise by the Commissioner of the discretion in that way would be reasonably arguably in accordance with law.

"(4) For the purposes of this section, the exercise, or assumed exercise, by the Commissioner of a discretion is reasonably arguably in accordance with law if, having regard to the relevant authorities and the matter in relation to which the discretion is or would be exercised, it would be concluded that a court would be about as likely as not to hold that the exercise is or would be in accordance with law.

"(5) In this section:

'authority' includes:

(a) a franking tax law; or

(b) material for the purposes of subsection 15AB(1) of the Acts Interpretation Act 1901; or

(c) a decision of a court (whether or not an Australian court), the Tribunal or a Board of Review; or

(d) a public ruling within the meaning of Part IVAAA of the Taxation Administration Act 1953;

'return franking tax', in relation to a company and a franking year, means the franking tax that would have been payable by the company for that year if the tax were assessed on the basis of the company's return under subsection 160ARE(1) or 160ARF(1) in relation to that year.

"(6) For the purposes of this section, the Commissioner exercises a discretion if the Commissioner:

(a) forms an opinion; or

(b) refuses or fails to form an opinion; or

(c) attains a state of mind; or

(d) refuses or fails to attain a state of mind; or

(e) makes a determination; or

(f) refuses or fails to make a determination; or

(g) exercises a power; or

(h) refuses or fails to exercise a power.

Penalty because private ruling disregarded

"160ARZE.(1) Subject to this Division, if:

(a) a company has a franking tax shortfall for a franking year; and

(b) a private ruling was made on the way in which a franking tax law applies to the company in respect of the year in relation to an arrangement; and

(c) the shortfall or part of it was caused by the company, in a taxation statement made after the ruling was made, treating that law as applying to the company in respect of the year in relation to the arrangement in a different way;

the company is liable to pay, by way of penalty, additional tax equal to 25% of the amount of the shortfall or part.

"(2) Subsection (1) does not apply if there is an order of a court, or a decision of the Tribunal, that applies to the private ruling.

Certain amounts not shortfall because of application for private ruling

"160ARZF. If:

(a) apart from this section, a company has a franking tax shortfall for a franking year; and

(b) the shortfall or part of it was caused by the company, in a taxation statement, treating a franking tax law as applying to the company in respect of the year in relation to an arrangement in a particular way; and

(c) when or before the statement was made, there was an application for a private ruling on the way in which that law would apply to the company in respect of the year in relation to the arrangement; and

(d) in the opinion of the Commissioner, the application was one that the Commissioner is required to comply with; and

(e) when the statement was made, the private ruling had not been made;

the shortfall is not a franking tax shortfall, or the part is not part of a franking tax shortfall, for the purposes of section 160ARZA, 160ARZB, 160ARZC or 160ARZD.

Certain amounts not shortfall because of advice etc.

"160ARZG. If:

(a) apart from this section, a company has a franking tax shortfall for a franking year; and

(b) the shortfall or part of it was caused by the company, in a taxation statement, treating a franking tax law as applying in a particular way; and

(c) that way agrees with:

(i) advice given to the company by a taxation officer; or

(ii) a general administrative practice under this Act;

the shortfall is not a franking tax shortfall, or the part is not part of a franking tax shortfall, for the purposes of section 160ARZA, 160ARZB, 160ARZC or 160ARZD.

Where 2 or more shortfall sections apply

"160ARZH. If 2 or more shortfall sections apply to all or a particular part of a company's franking tax shortfall, the company is liable to pay the additional tax under only one of those sections, not being a section the additional tax under which is lower than it would be under another of those sections.

Further penalty tax

"160ARZI. If:

(a) under a shortfall section, a company is liable to pay additional tax because of a franking tax shortfall or part of a franking tax shortfall; and

(b) one or more of the following applies:

(i) the company took steps to prevent or hinder the Commissioner from becoming aware of the shortfall or part;

(ii) if the shortfall or part was caused otherwise than by the company in a taxation statement treating a franking tax law as applying to the company in relation to a matter in a particular way - the company became aware of the shortfall or part after a taxation statement by the company that was taken into account in working out the company's statement franking tax for the franking year and failed to tell the Commissioner about it, in writing, within a reasonable time of becoming so aware;

(iii) if the additional tax is payable under section 160ARZA, 160ARZB or 160ARZC - the company was liable to pay additional tax under any of those sections in respect of an earlier year of income;

(iv) if the additional tax is payable because the company, in a taxation statement, treated a law as applying in relation to a matter in a particular way so that section 160ARZD applied - the company was liable to pay additional tax under that section in respect of an earlier franking year in respect of which the company treated that law as applying in relation to that matter or a similar matter in that way;

the company is liable to pay, by way of penalty, further additional tax equal to 20% of the amount of the additional tax.

Reduction of penalty tax - disclosure after tax audit notified

"160ARZJ. If:

(a) under a shortfall section, a company is liable to pay additional tax in respect of a franking year because of a franking tax shortfall or part of a franking tax shortfall; and

(b) after the Commissioner had informed the company that a tax audit relating to the company in respect of the year was to be carried out, the company voluntarily told the Commissioner, in writing, about the shortfall or part; and

(c) telling the Commissioner could reasonably be estimated to have saved the Commissioner a significant amount of time or significant resources in the audit;

the amount of the additional tax is reduced by 20%.

Reduction of penalty tax - disclosure before tax audit notified

"160ARZK. If:

(a) under a shortfall section, a company is liable to pay additional tax in respect of a franking year because of a franking tax shortfall or part of a franking tax shortfall; and

(b) before the Commissioner had informed the company that a tax audit relating to the company in respect of the year was to be carried out, the company voluntarily told the Commissioner, in writing, about the shortfall or part;

the amount of the additional tax is reduced:

(c) if the shortfall or part is at least $1,000 - by 80%; or

(d) if the shortfall or part is less than $1,000 - to nil.

When disclosure made

"160ARZL. If a company voluntarily tells the Commissioner, in writing, about a franking tax shortfall, or part of a franking tax shortfall, for a year after the Commissioner has informed the company that a tax audit in relation to the company in respect of that year is to be carried out, the Commissioner may, if the Commissioner considers it appropriate in all the circumstances, determine that, for the purposes of sections 160ARZJ and 160ARZK, the company is taken to have told the Commissioner before being informed.".