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On 16 March 2020, the Premier of Victoria declared a State of Emergency in response to coronavirus (COVID-19), with a State of Disaster declared on 2 August 2020. 

The Commissioner of State Revenue recognises that since the State of Emergency and the State of Disaster were declared, coronavirus and the physical distancing measures introduced in Victoria to control the pandemic have affected taxpayers’ capacity to meet their obligations as they fall due.  

The Taxation Administration Act 1997 (TAA) contains various discretionary powers that enable the Commissioner to:

  • Extend the time-frame for payment of tax, with or without conditions (section 49, TAA).
  • Remit penalty, wholly or in part (sections 30 and 35, TAA).
  • Remit market and/or premium interest, wholly or in part (section 28, TAA). 

Subject to the overarching duty to protect the revenue, the Commissioner considers legislated considerations and any other relevant mitigating factors when exercising this discretion. The Commissioner publishes guidance as to the factors that are taken into account when considering requests for the remission of penalty and interest

This Guideline sets out changes to the Commissioner’s current practice on the remission of penalty and interest that will apply during the State of Emergency and the State of Disaster to support taxpayers’ efforts to continue to meet their tax obligations and prevent defaults.  

This Guideline does not apply to penalty or interest imposed under a compromise assessment issued under section 12 of the TAA. 

Penalty

The penalty imposed in respect of a default is intended to reflect the degree of the taxpayer’s culpability. This is important because the taxation laws frequently place an onus on taxpayers to self-assess or to notify the Commissioner of circumstances relevant to the calculation of their tax liabilities.

The TAA provides a fixed penalty scale. The starting point is that penalty tax of 25% is payable on a tax default or notification default (section 29, TAA). However, the TAA allows the Commissioner to adjust the penalty rate up or down the scale to reflect the level of culpability. The Commissioner may:

  • Increase the rate of penalty tax where there has been intentional disregard of a taxation law (sections 30(2) and 30(2A), TAA) or concealment/hindrance to an investigation (section 32, TAA).
  • Reduce the rate of penalty tax where there has been a voluntary disclosure (section 31, TAA).
  • Determine that no penalty tax applies, and remit penalty in full if satisfied that reasonable care was taken (section 30(3)(a), TAA) or that the default occurred for reasons beyond the taxpayer’s control (section 30(3)(b), TAA).
  • Remit penalty wholly or in part in such circumstances as the Commissioner considers appropriate (section 35, TAA). 

In deciding whether to impose or remit penalty tax in a particular matter, the Commissioner will be guided by the principles outlined in Revenue Rulings TAA-007.v4 and PTA-036.v4 for payroll tax, applying them as appropriate and taking into account all the circumstances of the case.

Changes to the exercise of discretion during the State of Emergency and the State of Disaster

This Guideline does not apply where a taxpayer has committed intentional disregard or hindered an investigation and penalty is imposed under sections 30(2), 30(2A), or 32 of the TAA. 

During the State of Emergency and the State of Disaster, in determining whether it is appropriate to remit penalty applicable for a tax default or notification default under sections 30(1), 30(1A) or 31 of the TAA, the Commissioner will have regard to whether the default:

  • Occurred and was assessed during the State of Emergency (i.e. 16 March 2020 to the end of the State of Emergency) and the State of Disaster (i.e. 2 August 2020 to the end of the State of Disaster).
  • Is on a 2020 land tax assessment issued between 17 January 2020 and the end of the State of Emergency and the State of Disaster.
  • Occurred between 1 January 2020 and 15 March 2020 but was assessed between 1 January 2020 and the end of the State of Emergency and the State of Disaster.   

This distinction is made to differentiate between a default that can be directly attributed to coronavirus and its consequences, and a default that occurred before the State of Emergency and the State of Disaster was declared. 

When penalties and interest will be remitted

Date of default Date assessed Penalty Interest What does the taxpayer need to do?
16 March 2020 to the end of the State of Emergency and State of Disaster

Assessed between 16 March 2020 and the end of the State of Emergency and the State of Disaster or, for 2020 land tax assessments, between 17 January 2020 and the end of the State of Emergency and the State of Disaster.

From 1 October 2021, any outstanding taxation debts that have not been paid will once again be subject to late payment interest calculated from the date of the tax default.

Full remission  – section 30(3)(b), TAA  Full remission of interest – section 28, TAA Wait for the SRO to make contact 
1 January 2020 to 15 March 2020  Assessed between 1 January 2020 and the end of the State of Emergency and the State of Disaster. Full remission of penalty – section 35, TAA No remission of interest Lodge an objection to penalty tax only

The Commissioner recognises that the imposition of penalty or interest will not be appropriate or effective in deterring defaults occurring during the State of Emergency and the State of Disaster as a result of coronavirus. 

Default occurred and assessed during the State of Emergency and the State of Disaster

Remission of penalty for circumstances beyond the taxpayer’s control (section 30(3)(b))

The Commissioner takes the view that coronavirus, including the impact of the social isolation measures on families and businesses, is a ‘circumstance beyond the taxpayer’s control’ within the meaning of section 30(3)(b) of the TAA. Coronavirus and the measures introduced to control it may prevent a taxpayer from complying with their obligations through no fault of their own. 

Pursuant to section 30(3)(b) of the TAA, unless penalty has been imposed under sections 30(2), 30(2A) or 32 of the TAA, the Commissioner will remit in full penalty tax otherwise payable under section 29 of the TAA in respect of a notification or tax default that occurred and is assessed during the State of Emergency and the State of Disaster (or where the default is on a 2020 land tax assessment issued between 17 January 2020 and the end of the State of Emergency and the State of Disaster), on the basis that the default occurred through circumstances beyond the taxpayer’s control.

Remission of interest for defaults which have occurred and are assessed during the State of Emergency and the State of Disaster (section 28)

The Commissioner will fully remit interest for a default that has occurred and is assessed during the State of Emergency and the State of Disaster (or where the default is on a 2020 land tax assessment issued between 17 January 2020 and the end of the State of Emergency and the State of Disaster), unless the taxpayer is liable to penalty under sections 30(2), 30(2A) or 32 of the TAA for that default. 

Market and premium interest payable under section 24 of the TAA in respect of a tax or notification default that occurred during the State of Emergency and State of Disaster will be remitted for the period of the State of Emergency and the State of Disaster in accordance with section 28 of the TAA. 

Objection

Where penalty tax and/or interest have already been imposed and an assessment has been issued during the State of Emergency and the State of Disaster, the Commissioner will determine whether a refund can be issued under Part 4 of the TAA (e.g. land tax), or whether an objection needs to be lodged to enable a refund to be provided under Part 10 of the TAA (e.g. payroll tax assessments and duties assessments).

Where more than 60 days have elapsed since the issue of an assessment, the discretion to extend time for lodgement of an objection under section 100 of the TAA will be exercised in favour of the taxpayer to enable an objection to an assessment to be lodged out of time, if the grounds of objection are limited only to penalty and/or interest within the terms of this Guideline. If penalty tax/interest is remitted, this will necessitate the issue of a reassessment and a refund under section 115 of the TAA of any penalty tax or interest paid.

Default occurred between 1 January 2020 and 15 March 2020

Remission of penalty for defaults which have occurred between 1 January 2020 and 15 March 2020 assessed between 1 January 2020 and the end of the State of Emergency and the State of Disaster

Where a tax default or notification default occurred between 1 January 2020 and 15 March 2020 and penalty tax has been assessed in a notice of assessment issued between 1 January 2020 and the end of the State of Emergency and the State of Disaster, unless penalty has been imposed under sections 30(2), 30(2A) or 32 of the TAA, the Commissioner will remit in full penalty tax under section 35 of the TAA. The Commissioner is exercising discretion in keeping with the State of Victoria’s intention to provide relief to businesses and community members and to sustain employment, business and community life during the emergency and disaster.

Any interest assessed during this period will not be remitted under this Guideline. 

Where more than 60 days have elapsed since the issue of an assessment for a default occurring between 1 January 2020 and 15 March 2020, the discretion to extend time for lodgement of an objection under section 100 of the TAA will be exercised in favour of the taxpayer to enable an objection to an assessment to be lodged out of time, only if the grounds of objection are limited to penalty within the terms of this Guideline. If penalty tax is remitted under section 35, this will necessitate the issue of a reassessment under section 115 of the TAA, and a refund of any penalty tax paid. 

Periods falling outside the scope of this Guideline 

This Guideline:

  • Does not apply to penalty tax and/or interest assessed by the Commissioner for a default that occurred prior to 1 January 2020.
  • Will not apply to defaults that occur after the end of the State of Emergency and the State of Disaster. 
  • Will not apply to defaults that occur between 1 January 2020 and the end of the State of Emergency and the State of Disaster where those defaults are assessed after the end of the State of Emergency and the State of Disaster.
Last modified: 28 June 2021
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