Part 5 Interest and penalty tax

Division 1 Interest

21   Interest in respect of tax defaults

(1)  If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division.

(2)  Interest is payable under this section in respect of a tax default that consists of a failure to pay penalty tax under Division 2 but is not payable in respect of any failure to pay interest under this Division.

22   Interest rate

(1)  The interest rate is the sum of:

(a)  the market rate component, and

(b)  the premium component.

(2)  The market rate component is:

(a)  unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or

(b)  the rate specified for the time being by order of the Minister published in the Gazette.

(3)  The premium component is 8% per annum.

(4)  In this section, the Bank Accepted Bill rate in respect of any day within a period specified in Column 1 of the Table to this subsection is the monthly average yield of 90-day Bank Accepted Bills published by the Reserve Bank for the month specified in Column 2 of that Table opposite that period.

Table

Column 1	Column 2
Period	Monthly average yield
1 January to 31 March	the preceding November
1 April to 30 June	the preceding February
1 July to 30 September	the preceding May
1 October to 31 December	the preceding August

(5)  If the monthly average yield of 90-day Bank Accepted Bills for a particular month is not published by the Reserve Bank before the beginning of the relevant period, it is taken to be the same as the last monthly average yield of 90-day Bank Accepted Bills published by the Reserve Bank before that month.

23   Liability to payment of small amounts of interest

There is no liability imposed by a taxation law to pay an amount of interest if the amount is less than $20.

24   Interest rate to prevail over interest otherwise payable on a judgment debt

If judgment is given by or entered in a court for an amount of unpaid tax (or an amount that includes an amount of unpaid tax), the interest rate determined in accordance with this Division continues to apply, to the exclusion of any other interest rate, until the tax is paid.

25   Remission of interest

The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.

Division 2 Penalty tax

26   Penalty tax in respect of certain tax defaults

(1)  If a tax default occurs, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid.

(2)  Penalty tax imposed under this Division is in addition to interest.

(3)  Penalty tax is not payable in respect of a tax default that consists of a failure to pay:

(a)  interest under Division 1, or

(b)  penalty tax previously imposed under this Division.

27   Amount of penalty tax

(1)  The amount of penalty tax payable in respect of a tax default is 25% of the amount of tax unpaid, subject to this Division.

(2)  The Chief Commissioner may increase the amount of penalty tax payable in respect of a tax default to 75% of the amount of tax unpaid if the Chief Commissioner is satisfied that the tax default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a taxation law.

(3)  The Chief Commissioner may determine that no penalty tax is payable in respect of a tax default if the Chief Commissioner is satisfied that:

(a)  the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law, or

(b)  the tax default occurred solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.

28   Reduction in penalty tax for disclosure before investigation

(1)  The amount of penalty tax determined under section 27 is to be reduced by 80% if, before the Chief Commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out, the taxpayer discloses to the Chief Commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined.

(2)  This section does not apply in respect of information disclosed by a taxpayer if the taxpayer is registered under a taxation law and:

(a)  the tax default involved a failure to lodge a return as required under that taxation law, or

(b)  the tax default involved a failure to pay tax by the date required under that taxation law.

29   Reduction in penalty tax for disclosure during investigation

(1)  The amount of penalty tax determined under section 27 is to be reduced by 20% if, after the Chief Commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out and before it is completed, the taxpayer discloses to the Chief Commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined.

(2)  This section does not apply in respect of information disclosed by a taxpayer if the taxpayer is registered under a taxation law and:

(a)  the tax default involved a failure to lodge a return as required under that taxation law, or

(b)  the tax default involved a failure to pay tax by the date required under that taxation law.

30   Increase in penalty tax for concealment

(1)  The amount of penalty tax determined under section 27 is to be increased by 20% if, after the Chief Commissioner has informed the taxpayer that an investigation is to be carried out and before the investigation is completed, the taxpayer took steps to prevent or hinder the Chief Commissioner from becoming aware of the nature and extent of the tax default in whole or part.

(2)  For the purposes of this section, a taxpayer takes steps to prevent or hinder the Chief Commissioner if the taxpayer:

(a)  deliberately damages or destroys records required to be kept under the taxation law to which the investigation relates, or

(b)  refuses or fails (without reasonable excuse) to comply with a requirement made by the Chief Commissioner under Division 2 of Part 9 for the purposes of determining the taxpayer’s tax liability, or

(c)  hinders or obstructs an authorised officer exercising functions under that Division for that purpose.

Note. This Table contains a summary of the provisions of sections 27–30.

Penalty category	Prime rate %	Voluntary disclosure		Concealment or hindrance in establishing underpayment %
		Before investigation %	During investigation %
Failure to take reasonable care but no intentional disregard of the law	25	5	20	30
Intentional disregard of the law	75	15	60	90

31   Minimum amount of penalty tax

Penalty tax is not to be imposed if the amount of the penalty tax is less than $20.

32   Time for payment of penalty tax

Penalty tax must be paid by a taxpayer within the period specified for that purpose in a notice of assessment of the tax liability of the taxpayer, being a period of not less than 14 days.

33   Remission of penalty tax

The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount.