ATO admin of penalties for false or misleading statements Print E-mail

The Tax Office has released the following two Practice Statements dealing with the administration of penalties for making false or misleading statements.

 


 

PS LA 2012/4: Administration of penalties for making false or misleading statements that do not result in shortfall amounts

This Practice Statement explains how the Commissioner administers the penalty for making a false or misleading statement on or after 4 June 2010, where the statement does not result in a shortfall amount. The purpose of the Statement is to explain: (a) the circumstances in which an entity becomes liable to a penalty for making a false or misleading statement which does not result in a shortfall amount; and (b) how the penalty is assessed, including determining remission.

The Statement provides that there are three main steps involved in the administration of the penalties by the Tax Office in these circumstances:

Firstly, determine if a penalty is imposed by law.

Secondly, assess the amount of the penalty - which entails:

  • working out the base penalty amount (BPA);
  • increasing and/or reducing the BPA, and
  • determining if remission is appropriate.

Thirdly, notify the entity of the liability to pay the penalty.

The Statement provides specific guidance on each of these three steps, which must be completed in the order they appear. According to the Statement, this means that a decision about remission of penalty will normally be made in the course of assessing the amount of any penalty. However, a decision about remission of penalty can also be made after an entity has been notified of its liability to pay the penalty. Importantly, the Statement provides that the Commissioner has adopted a practical approach to administering the penalty - which means a penalty will not be assessed for every statement encountered which may be false or misleading in a material particular.

PS LA 2012/5: Administration of penalties for making false or misleading statements that result in shortfall amounts

This Practice Statement replaces Law Administration Practice Statement PS LA 2006/2 effective from 23 August 2012, and explains how the Commissioner administers the penalty for making a false or misleading statement made on or after 1 April 2004 where the statement results in a shortfall amount.

The purpose of the Statement is to explain: (a) the circumstances in which an entity becomes liable to a penalty for making a false or misleading statement which results in a shortfall amount; and (b) how the penalty is assessed, including determining remission.

In this regard, the Statement emphasises that it provides guidelines on how the Commissioner's discretion in s 298-20(1) of the Taxation Administration Act 1953 to remit the penalty may be exercised, but that there is no intention to lay down conditions that may restrict the exercise of the discretion. Furthermore, it states that the guidelines are provided to help: (a) tax officers in the exercise of the discretion; and (b) ensure that entities in like situations receive like treatment.

Importantly, the Statement states that the administration of Subdiv 284-B penalties involves three main steps, as follows:

Firstly, determine if a penalty is imposed by law - in this case, an entity is liable to an administrative penalty if:

  • the entity or their agent makes a statement to the Commissioner or another entity exercising powers or performing functions under a taxation law; and
  • the statement is false or misleading in a material particular, whether because of things in it or omitted from it.

In this regard, note that the Statement provides that from 4 June 2010, an entity is also liable to an administrative penalty if: (a) the entity or their agent makes a statement to an entity other than the Commissioner and an entity exercising powers or performing functions under a taxation law; and (b) the statement is, or purports to be, one required or permitted by a tax law; and (c) the statement is false or misleading in a material particular, whether because of things in it or omitted from it.

Secondly, assess the amount of the penalty - which involves: (a) determining the shortfall amount; (b) determining the base penalty amount (BPA); (c) increasing and/or reducing the BPA; and (d) determining if remission is appropriate.

Thirdly, notify the entity of the liability to pay the penalty.

The Statement provides specific guidance on each of these three steps in the order they occur in the administrative process, which must be completed in the order they appear above. According to the Statement, this means that a decision about remission of penalty will normally be made in the course of assessing the amount of any penalty. However, a decision about remission of penalty can also be made after an entity has been notified of its liability to pay the penalty.

 

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