On 24 November 2011 the Commissioner issued the following draft Law Administration Practice Statements:
- PSLA 3550 ‘Administration of penalties for making false or misleading statements that do not result in shortfall amounts’
- PSLA 3551 ‘Administration of penalties for false or misleading statements that result in shortfall amounts’
The essential difference between the two practice statements appears to be that where there is a shortfall amount, the penalty is imposed by reference to a percentage of the shortfall (i.e., 75% for intentional disregard, 50% for reckless and 25% for failure to take reasonable care); and where there is no shortfall amount, the penalty is imposed by reference to “penalty units” (currently $110 to 1 penalty unit) – being 60 units for intentional disregard, 40 units for reckless and 20 units for failure to take reasonable care.
A more detailed analysis of these statements will follow in the next few days, but my initial concern is that the scope to apply penalties where there is no shortfall is very wide and, in the GST space, could apply to things such as:
- BAS statements
- “stop the clock” notifications pursuant to s 105-55 of Schedule 1 to the Taxation Administration Act
Indeed, the writer is aware of the ATO imposing penalties on taxpayers who lodged “stop the clock notices” to protect their rights to claim GST refunds – those penalties were subsequently remitted on the basis that the taxpayers took reasonable care, but it does illustrate the potential scope for the application of this penalty regime.
The potential broad scope of these penalties appears to be accepted in the draft Practice Statement, when regard is had to statements such as:
- “The penalty law, on its face, has a broad application to written and verbal statements made relating to all taxes, and could apply to compliance, objection, advice, debt, lodgement and registration activities” [at 14]
- “Statements which do not result in a shortfall amount will be examined (including for the purposes of assessing penalty) where ATO action is required to investigate or mitigate a risk.” [at 17]
Where a misstatement leads to a GST shortfall, one can understand the risk of penalties being imposed by reference to the amount of that shortfall. However, where one forms the view that GST has been overpaid, it is another thing to be potentially exposed to a financial penalty where steps are taken to claim that refund from the ATO or to initiate the review procedure in Part IVC of the Taxation Administration Act.
Comments on the draft Practice Statements are due by 27 January 2012.