Remission of use-of-money interest

Sections CX 48, EW 46, RC 7(7), RC 36 and YA 1 of the Income Tax Act 2007; sections 177D(3) and 183ABA of the Tax Administration Act 1994

Amendments have been made to update the provisions relating to disasters. The amendments were part of a Supplementary Order Paper, which, among other measures, extended and simplified the range of circumstances under which Inland Revenue can offer relief from use-of-money interest when taxpayers are physically impeded by a disaster or similar event, from paying their tax on time.

Background

Under previous legislation, Inland Revenue could relieve use-of-money interest when a taxpayer was significantly affected by a “qualifying event”. A qualifying event was a naturally occurring event for which a civil defence emergency was declared and an Order in Council made. Amendments to section YA 1 of the Income Tax Act 2007 and section 183ABA of the Tax Administration Act 1994 extend the range of events for which Inland Revenue can remit use-of-money interest. This has been achieved by removing the requirements for the event to be “naturally occurring”, and for a civil defence emergency to be declared. The term “qualifying event” has been replaced by the term “emergency event”.

Key features

• Section 183ABA of the Tax Administration Act 1994 clarifies that “significantly affected” means that the person’s physical ability to pay tax has been significantly affected by the emergency event.
• Consequential amendments have been made to replace the term “qualifying event” with the term “emergency event” in sections CX 48 and EW 46 of the Income Tax Act 2007 and section 177D(3) of the Tax Administration Act 1994.
• Sections RC 7(7) and RC 36 of the Income Tax Act 2007 have been repealed. These provisions allowed taxpayers to make a late re-estimation of provisional tax. As a result of amendments contained in the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006, it is no longer necessary to have a specific provision allowing taxpayers to make a late re-estimation of provisional tax.
• An amendment has been made to the list of defined terms in section GC 1, to correct a minor drafting error.

Application date

The amendments apply from the date of Royal assent, being 6 October 2009.