Taxation (new due date for new and increased assessments) commencement order 2018

The Taxation (New Due Date for New and Increased Assessments) Commencement Order 2018 came into force on the 14th of May 2018.  This commencement order sets the date that section 142AB of the Tax Administration Act 1994 comes into force for goods and services tax as the 18th of June 2018.

This new section standardises the due dates for default assessments which are issued by the Commissioner in the absence of a return.

Application date

Section 142AB will come into force for goods and services tax on 18 June 2018.

Background

Section 142A of the Tax Administration Act 1994 sets different due dates for payment of an Electronic Default Assessment (EDA) and Non-electronic Default Assessment (NDA). There are also different treatments for any tax payable from a subsequent amendment to that default assessment. Section 142AB modifies that rule to align the due date for payment of tax for default assessments, whether these are made manually or electronically.

The amended rules will only apply when the default assessment relates to a tax type that has been migrated to Inland Revenue’s new START technology system, and when incremental penalties do not apply to the particular tax type. Consequently, the commencement order only brings section 142AB into force for goods and services tax, which is the only tax type which currently meets those criteria.

The previous treatment

Section 142A sets different due dates for payment of an EDA and NDA.

For an EDA:

• The amount payable from the default assessment is due on the original due date for the tax type and period. This means that if the EDA is made after the original due date, as is always the case for GST, late payment penalties will be immediately applied, back-dated to the original due date.
• When the EDA is amended, a new due date will be set that is at least 30 days following the notice advising the taxpayer of the new amount to pay. Therefore, any late payment penalties applied to the EDA will be reversed, and the taxpayer will not be penalised further unless they do not pay any amount due by the new due date.

For an NDA:

• The amount payable from the default assessment is due at least 30 days from the notice of assessment.
• If the assessment is subsequently amended, then the taxpayer is only given a new due date for any amount payable that is greater than the amount previously payable from the NDA. This new due date will also be at least 30 days after the notice advising the taxpayer of the additional tax to pay.

The new treatment

Section 142AB will apply to set a new due date for certain assessments. Section 142AB will not apply to assessments made in the absence of a return and to which section 106(1) applies. Section 106 deals with the issue of default assessments, both electronic and non-electronic.

Section 142A applies to tax types that proposed section 142AB does not apply to. It also applies to assessments other than EDAs made in the absence of a return and to which section 106(2) applies, which relates to EDAs only. Section 142AB removes this distinction entirely so that no new due date is set for any default assessment, manual or automatic.

In addition, proposed section 142AB does not set a new due date for an increased assessment from a default assessment. This will mean that any subsequent amendments to a default assessment will be due at the original due date. This change reflects the fact that no return was originally filed and removes a benefit to those who do not file compared with those who do file returns and pay tax on time.