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Commissioner's acceptance of a taxpayer's notice of proposed adjustment

2007 amendment clarifies the CIR cannot issue another NOPA after accepting a taxpayer's NOPA, except where the taxpayer is fraudulent or wilfully misleading.

Section 89J of the Tax Administration Act 1994

An amendment has been made to the Tax Administration Act 1994 to clarify when the Commissioner of Inland Revenue can begin a new tax dispute. The change makes it clear that the Commissioner cannot issue a notice of proposed adjustment (NOPA) on the same issue after accepting (or being treated as having accepted) a taxpayer NOPA except when the taxpayer, in relation to the adjustment:

  • was fraudulent; or
  • wilfully misled the Commissioner.


A NOPA is the document that begins the disputes resolution process. The Commissioner may issue a NOPA to alter a return as filed or amend an existing assessment. A taxpayer can also issue a NOPA.

Taxpayer NOPAs play an important role in the disputes process. They disclose taxpayers' positions while allowing them to minimise their exposure to shortfall penalties. They also require the Commissioner to focus on an issue and explicitly decide on the correct position. This provides certainty for taxpayers.

Section 89H(2) states that if the Commissioner does not, within the two-month response period, reject an adjustment contained in a taxpayer NOPA, the Commissioner is considered to have accepted the proposed adjustment and section 89J applies.

Under section 89J, if the Commissioner accepts or is treated as having accepted the proposed adjustment/s in the taxpayer's NOPA, the Commissioner must include or take account of the adjustment/s in a notice of assessment issued to the taxpayer. This is intended to be the end of the disputes process for issues included in that NOPA.

While the intention behind the disputes procedures was for all parties to be bound by the time limits incorporated in the rules, the law was uncertain (and had been challenged in at least two recent cases) on whether the Commissioner could begin a new dispute on the same issue once a time limit has been exceeded.

Key feature

The disputes procedures were introduced in the Tax Administration Act 1994 (Part IVA) from 1 October 1996. The disputes procedures involve various steps that are undertaken when the Commissioner and a taxpayer cannot agree on a matter. A key feature of the disputes rules is the timeframe allocated to parties to lodge notices and respond to notices received from the other party.

Underpinning the response time limits is a deemed acceptance rule that applies when a party fails to respond within the specified period. However, the law was uncertain about whether the Commissioner could issue a new NOPA to replace a taxpayer's NOPA when the Commissioner had accepted an earlier taxpayer NOPA in relation to the same issue or had failed to respond within the statutory time period.

A change has therefore been made to clarify that the Commissioner cannot generally issue a NOPA on the same matter after accepting (or being treated as having accepted) a taxpayer NOPA. This change ensures that the disputes procedures have their intended effect. Revenue concerns have been addressed by still allowing this timeframe to be overridden in cases where the taxpayer, in relation to the adjustment in question, wilfully misleads the Commissioner, or there is fraud.

Application date

The amendment applies from 19 December 2007.