No new due date for default assessments
2009 amendment means the requirement to set a new due date does not apply when the Commissioner makes a default assessment.
Section 142A of the Tax Administration Act 1994
The requirement to set a new due date has been amended so that it does not apply when the Commissioner makes a default assessment.
The Taxation (Business Taxation and Remedial Matters) Act 2007 amended section 142A to allow a new due date to be set by the Commissioner, regardless of whether a return has been filed. The amendment ensures that late payment penalties and shortfall penalties are not both imposed if the taxpayer has not filed a return. For example, before the amendment to section 142A, if a return had not been filed and some time later Inland Revenue determined that there was income and a return was necessary, late payment penalties would apply from the original due date for payment with a possible shortfall penalty also imposed.
The amendment also applied if the Commissioner made a default assessment. A default assessment is an estimation of tax liability and remains in place until the taxpayer files a return. A default assessment is likely to present a slightly larger debt than a self-assessment, and thereby encourage taxpayers to file returns.
Given that a default assessment is made when there is a concern about non-compliance and a taxpayer has not filed a return, and that the assessment is reversed when the return is filed, a new due date is no longer set when a default assessment is made. When the return is filed, a new due date will be set.
The amendment applies from the date of Royal assent, being 6 October 2009.