Taxation Determination

TD 92/150

Income Tax: can an amount of interest payable to a taxpayer under the Taxation (Interest on Overpayments) Act 1983 be applied by the Commissioner against an amount of tax which is assessed but not yet due and payable by the taxpayer?

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FOI status:

may be releasedFOI number: I 1213202

1. Yes. Under section 13 of the Taxation (Interest on Overpayments) Act 1983 (TIOPA), the Commissioner may apply an amount of interest payable under that Act to a person in total or partial discharge of a Commonwealth tax liability of the person. The decisions in Re Mendonca; ex parte FC of T (1969) 15 FLR 256; at 259; and in Clyne v. DC of T (1981) 150 CLR 1 at 9; 81 ATC 4429 at 4432; (1981) 12 ATR 173 at 177, make it clear that a 'liability' to tax exists once an assessment has been served, notwithstanding that the tax is not yet due and payable.

2. Accordingly, the Commissioner has authority under section 13 of the TIOPA to apply an amount of interest payable to a taxpayer under that Act against an amount of Commonwealth tax which has been assessed to the taxpayer, but which is not yet due and payable.

Example:

A has been issued with an income tax assessment on 7 May 1992. The tax assessed of $10,000 is due and payable on 5 June 1992. On 14 May 1992, A becomes entitled to interest of $5,000 under section 9 of the TIOPA. On 15 May 1992, the Commissioner applies the amount of $5,000 due to A against A's tax liability of $10,000. As from that date, A only has a tax liability of $5,000.

Commissioner of Taxation
27/08/92

References

ATO references:
NO 92/1332-5

Subject References:
interest on overpayments;
application of interest on overpayments against tax liability

Legislative References:
TIOPA 9;
TIOPA 13

Case References:
Re Mendonca; ex parte FC of T
(1969) 15 FLR 256

Clyne v. DC of T
(1981) 150 CLR 1
81 ATC 4429
(1981) 12 ATR 173