Abusive tax position shortfall penalty threshold

Section 141D(4) of the Tax Administration Act 1994

The threshold for imposing the abusive tax position shortfall penalty has been repealed.

Background

An abusive tax position shortfall penalty of 100 percent of the tax shortfall applies when the tax position taken is an unacceptable tax position that has a dominant purpose of reducing or removing a tax liability or giving tax benefits.

Before this amendment, for an abusive tax position shortfall penalty to be imposed the tax shortfall had to be greater than $20,000. Although an abusive tax position is an unacceptable tax position, it is also at the more aggressive end of the non-compliance scale. While it is appropriate that the unacceptable tax position shortfall penalty has a threshold, as it would be overly onerous to apply the standard to all tax positions, this does not hold true for abusive tax positions.

Key features

The $20,000 threshold for the imposition of the shortfall penalty for having an abusive tax position has been repealed.

Application date

The amendment applies to tax positions taken on or after 1 April 2008.