Section 108 Tax Administration Act 1994 (TAA) - commencement of four year statutory period (November 2002)
QB issued 2002 clarifies when the 4 year statutory period in s 108 of the TAA commences for taxpayers with non-standard balance dates and when time bar takes effect.
We have been asked to clarify when the four-year statutory period in section 108 of the TAA commences in respect of taxpayers with non-standard balance dates and consequently when the time bar takes effect.
Section 108 of the TAA provides that the Commissioner may not increase the amount assessed if 4 years have passed from the end of the income year in which the taxpayer provides the tax return.
For the purposes of this item, the section 108 of the TAA four-year statutory period will be referred to as the "statutory period". The end of the statutory period will be referred to as "time bar" or "time barred" as context requires.
Income Year
The definition of "income year" is found in section OB 1 of the Income Tax Act 1994 (ITA). The definition refers to the "year" in which income and loss for which a person is assessed for income tax, is allocated. "Year" is defined in section OB 1 of the ITA as a year commencing on 1 April and ending on 31 March. Both these definitions apply to the TAA by virtue of section 3(2) of the TAA.
For the purposes of section 108 of the TAA, income year is a year ending on 31 March.
In the case of a taxpayer with a non-standard balance date, case law confirms that income year for a non-standard balance date taxpayer is a year ending on 31 March. (F. E. Jackson Co. Ltd. v CIR (NZ) 72 ATC 6052; Case K41 (1988) 10 NZTC 348).
Commencement of statutory period
The commencement of the statutory period is determined by the date the taxpayer furnishes the return and not determined by the taxpayer's balance date. Therefore, for a taxpayer with a non-standard balance date, the statutory period begins on 1 April following the date on which the taxpayer provides their return.
As a practical example, a taxpayer's non-standard balance date of 30 September 1999 is deemed to be in respect of the 1998/1999 income year, ie 1 April 1998 to 31 March 1999. If the taxpayer provides their return on 15 January 2000, the statutory period begins on 1 April 2000 and increases to the assessment generally become time barred after 31 March 2004.