Joint submission on TD 2011/D11 – shortfall interest charge

The Institute, together with the other professional bodies, lodged a joint submission on Draft Taxation Determination TD 2011/D11 on 23 December 2011. 

TD 2011/D11 (the draft TD) asks ‘when is the shortfall interest charge incurred for the purposes of paragraph 25-5(1)(c) of the Income Tax Assessment Act 1997?’

The draft TD takes the view that the shortfall interest charge (SIC) is incurred for the purposes of paragraph 25-5(1)(c) in the year of income the Commissioner gives a taxpayer a notice of amended assessment.

The submission begins by stating that the professional bodies agree with the general reasoning that underlines the Commissioner’s preliminary view, before going on to make a number of specific comments. These include:

• The draft TD takes it as a given that SIC is deductible as s 25-5(1) allows taxpayers a deduction for expenditure they incur for SIC or GIC. The only exception would relate to STS taxpayers using the cash basis. A footnote alerting such taxpayers that this ruling has no application while they remain under the STS system is recommended
• The conclusion given in the draft TD is the case even if the SIC liability is notified separately from the notice of amended assessment, or if the SIC is unpaid at the end of that year of income (for example, because the due date for payment of the SIC falls in the next year of income).

Article last Updated 13 January 2012