Complance and Penalty Rules

The compliance and penalties rules in the Tax Administration Act 1994 came into effect on 1 April 1997. They were designed to promote effective and fairer enforcement of the Inland Revenue Acts by providing better incentives for taxpayers to comply voluntarily with their tax obligations.

The discussion document, Tax penalties, tax agents and disclosures, was released in October 2006. The discussion document examined the current compliance and penalty rules, and identified several areas where the rules could be clearer, more consistent and better targeted to encourage voluntary compliance. It discussed options for the relaxation of penalties when taxpayers have genuinely and consistently tried to do the right thing. The discussion document also proposed that, in future, before recognising a person as a "tax agent" the Commissioner must be satisfied that doing so is consistent with the protection of the integrity of the tax system.

The following amendments result from the proposals outlined in the discussion document.

The definition of "Tax Agent"

Late filing penalties

Late filing penalties for GST returns

Late payment penalty notification

Associated persons

Tax advisors and the shrotfall penalty for not taking reasonable care

Refining the scope of the inacceptable tax position shortfall penalty

Abusive tax position shortfall penalty threshhold

Late payment of employer monthly schedule amounts

Penalty reductions for voluntary disclosures

Temporary shortfalls

Due date for payment of tax

Tax compliance initiatives - limited amnesties