Late filing penalty (WITHDRAWN)

Introduction

1. This Standard Practice Statement (SPS) sets out the Commissioner's practice for imposing late filing penalties under section 139A of the Tax Administration Act 1994 (TAA).
2. In this SPS all legislative references are to the Tax Administration Act 1994 unless otherwise stated.

Application

3. This SPS applies from 9 May 2012 and replaces Standard Practice Statement 05/01 Late filing penalty, published in Tax Information Bulletin Volume 17, No 1 (February 2005).

Background

4. The New Zealand tax system is based on voluntary compliance. It relies on taxpayers voluntarily meeting the IR obligations under the tax laws, for example, by filing tax returns by the due date. Sections 139A and 139AAA impose a penalty on a taxpayer for not filing certain returns by the due date. The purpose of the penalty is to promote voluntary compliance and to ensure penalties for breaches are imposed impartially and consistently.
5. Late filing penalties for not filing GST returns by due date came into force on 1 April 2008. A late filing penalty may be imposed when GST returns for taxable periods, special returns or other returns due on or after 1 April 2008 are not filed on time. The Inland Revenue, may, however, issue default assessments when GST returns are not filed by the due date.

Legislation

Tax Administration Act 1994

139A Late filing penalties

1. This section applies to tax returns required to be furnished under sections 33, 41 to 44, and 79 (in this Part, “annual tax returns”), the annual ICA return required to be furnished under section 69(1) and (2)(a) by an Australian ICA company that is not required to furnish a return of income for a tax year, the reconciliation statement required to be provided under regulation 3 of the Accident Rehabilitation and Compensation Insurance (Earnings Definitions) Regulations 1992 or regulation 15 of the Accident Insurance (Premium Payment Procedures) Regulations 1999 or any successor to that regulation made under the Injury Prevention, Rehabilitation, and Compensation Act 2001, and the employer monthly schedule required to be provided under section RD 22(1) to (5) of the Income Tax Act 2007.
2. A taxpayer is liable to pay a late filing penalty if-
   1. The taxpayer does not complete and provide on time –
      • i. an annual tax return:
      • ii. an annual ICA return required to be furnished under section 69(1) and (2)(a):
      • iii. a reconciliation statement:
      • iiib. a return required to be furnished under section 57B
      • iv. an employer monthly schedule; and
   2. The Commissioner notifies the taxpayer that the penalty is payable.
3. The late filing penalty for an annual tax return for a taxpayer with net income-
   1. Below $100,000, is $50;
   2. Between $100,000 and $1,000,000 (both figures inclusive), is $250;
   3. Above $1,000,000, is $500.
4. The late filing penalty for an ICA return or reconciliation statement, or employer monthly schedule is $250.
5. Except in the case of a late filing penalty resulting from an employer monthly schedule or from a tax return required under sections 16 to 18 of the Goods and Services Tax Act 1985, the Commissioner must, not less than 30 days before imposing a late filing penalty, –
   1. Send notice to a taxpayer that a late filing penalty may be imposed if a return specified in the notice is not filed; or
   2. Publicly notify that a late filing penalty may be imposed on taxpayers who omit to file the required return.
6. In the case of a late filing penalty for failing to file an employer monthly schedule by the due date, the Commissioner must -
   1. give notice to the taxpayer that a late filing penalty will be payable for a further failure to file an employer monthly schedule on time, if the taxpayer has filed on time all employer monthly schedules due for filing in the period -
      1. beginning with the later of 1 April 1999 and the day 12 months before the due date; and
      2. ending before the due date; or
   2. give notice to the taxpayer that the penalty is payable, if the taxpayer has not filed on time all employer monthly schedules due for filing in the period referred to in paragraph (a).

139AAA Late filing penalty for GST returns

1. This section applies to a tax return (a GST return) required to be furnished by a registered person under sections 16 to 18 of the Goods and Services Tax Act 1985.
2. A registered person is liable to pay a late filing penalty if-
   1. the registered person does not complete and provide a GST return by the due date for filing the GST return; and
   2. the GST registered person has failed to file on time a GST return due in the period-
      1. beginning with the later of 1 April 2008 and the day 12 months before the due date; and
      2. ending before the due date; and
   3. the Commissioner notifies the registered person that the penalty is payable.

3. The late filing penalty for a GST return for a registered person is-
   1. $250, if on the due date for filing the GST return the registered person accounts for tax payable on an invoice basis or hybrid basis; or
   2. $50, if on the due date for filing the GST return the registered person accounts for tax payable on a payment basis.
4. The Commissioner must-
   1. give notice to the registered person that a late filing penalty will be payable for a further failure to file a GST return on time, if the registered person has filed on time all GST returns due for filing in the period-
      1. beginning with the later of 1 April 2008 and the day 12 months before the due date; and
      2. ending before the due date; or
   2. give notice to the registered person that the penalty is payable, if the registered person has not filed on time all GST returns due for filing in the period referred to in paragraph (a).

Due date for payment of late filing penalty

6. The following sections set out the due dates for payment of late filing penalties:
   • Section 142 (1) - due date in respect of returns and reconciliation statements;
   • Section 142(1A) - due date in respect of employer monthly schedules;
   • Section 142(1B) - due date in respect of GST returns required by sections 16 to 18 of the Goods and Services Tax Act 1985.

Discussion

7. Under section 139A, a late filing penalty applies to:
   • annual tax returns;
   • ACC reconciliation statements;
   • employer monthly schedules;
   • annual ICA returns required to be filed under section 69(1) and (2)(a) by an Australian ICA company that is not required to file a return of income.
8. Although section 139A provides for late filing penalties to be imposed in respect of outstanding ACC reconciliation statements, Inland Revenue no longer collects these statements on behalf of the Accident Compensation Corporation. Therefore, Inland Revenue will not impose late filing penalties in respect of these statements.
9. The Commissioner must give at least 30 days notice to the taxpayer of the intention to impose a late filing penalty for an annual tax return or ICA return required to be filed by an Australian ICA company. The Commissioner must provide such a notice either in writing or by public notification to a taxpayer or group of taxpayers. If the outstanding return is filed within the 30-day period, or an extension of time is granted to file the outstanding return, the penalty will not be imposed.
10. For employer monthly schedules, the Commissioner must notify the taxpayer that the late filing penalty is payable where a taxpayer fails to file an employer monthly schedule on time. If the taxpayer has filed on time all monthly schedules due in the past 12 months, the taxpayer will be notified that a late filing penalty will be payable on any further failure to file on time.
11. The amount of the late filing penalty for annual tax returns is based on the amount of net income. If the net income is:

12. The amount of the late filing penalty for an employer monthly schedule and an annual ICA return required to be filed by an Australian ICA company is $250.
13. Under section 139AAA a late filing penalty is imposed when GST returns for taxable periods, special returns or other returns (sections 16, 17 and 18 of the Goods and Services Tax Act 1985) are not filed on time. If the registered person has filed on time all GST returns in the past 12 months, the Commissioner must notify the registered person that the late filing penalty will be payable on any further failure to file a return on time.
14. The amount of the late filing penalty for a GST return is:
    • $250 for registered persons who account for GST using the invoice or hybrid basis;
    • $50 for registered persons who account for GST using the payment basis.

Standard Practice

Imposing the late filing penalty

15. The Commissioner's practice is that a late filing penalty is imposed on the following:
    • income tax returns for individuals (IR3)
    • income tax returns for companies (IR4)
    • employer monthly schedules (IR348 and IR349)
    • annual ICA returns required to be filed under section 69(1) and 69(2)(a) by an Australian ICA company that is not required to file a return of income for an income year that corresponds to an imputation year (IR4J);and
    • GST returns.
16. A late filing penalty will be imposed in the following circumstances.

Income tax returns

17. A late filing penalty will be imposed in respect of an outstanding IR3 or IR4 income tax return in the following circumstances:
    1. the return is not filed by the due date, and is not subject to an extension of time arrangement; or
    2. the return is subject to an extension of time arrangement, and is not filed by the date agreed to in that arrangement; or
    3. an extension of time arrangement is withdrawn from a client/all clients of a tax agent, and the return(s) are not filed by the date specified when the extension of time was withdrawn; or
    4. the return is for a client of a tax agent with an extension of time arrangement and is not filed by the 31st of March in the year immediately following the income year to which the return applies.
18. Before imposing a late filing penalty the Commissioner will provide written notification of at least 30 days, either by public notification or directly to the taxpayer.
19. The amount of the penalty for outstanding income tax returns is determined from the taxpayer's previous year's net income based on the return filed. Once the return is received the amount of the penalty is checked and if the net income is in a different bracket to the previous year's return, the penalty is amended.
20. If Inland Revenue has no information on which to base the late filing penalty, or the previous year's return has not been filed, the minimum penalty of $50 is imposed. When the return is received the amount of the penalty is checked and increased where appropriate. If the amount of the late filing penalty is increased, time will be given to pay any additional penalty. The minimum penalty remains payable if the return is subsequently filed and shows a loss.
21. The due date for payment of a late filing penalty is the later of a date specified by the Commissioner, not being less than 30 days after the date of the notice informing of the imposition of the penalty, and the terminal tax date for the tax year to which the return relates.

Employer monthly schedules

22. The first time an employer fails to file an employer monthly schedule by the due date, the Commissioner will issue a warning notice to the employer advising a late filing penalty will not be imposed this time, but in future if schedules are not filed on time a late filing penalty will be imposed. However Inland Revenue will take a liberal approach in regard to imposing late filing penalty in respect of an employer monthly schedule.
23. If, within 12 months of the warning notice being issued, a further default in filing a schedule occurs, a late filing penalty will be imposed in respect of that schedule.
24. If following the warning notice the employer files all employer monthly schedules on time for 12 months and then defaults a further warning notice will be issued.
25. The due date for payment of a late filing penalty is the 5th or 20th of the month following the month in which the schedule was due to be filed, depending on whether the employer pays PAYE deductions monthly or twice monthly.

Annual ICA returns

26. A late filing penalty will be imposed when the ICA return has not been filed by the due date and at least 30 days written notification of the intention to impose the penalty has been given, either directly to the taxpayer or by public notification.
27. The due date for payment of a late filing penalty is the later of a date specified by the Commissioner, not being less than 30 days after the date of the notice informing of the imposition of the penalty, or the date by which the company is required to file the annual ICA return.

GST returns 

28. The first time a registered person files the IR GST return late, they will be advised that if they are late in filing another of the IR GST returns within the next 12 months a late filing penalty will be imposed on that second late return. If the registered person files all the IR GST returns on time for the 12 months following a warning notice and then defaults again, a further warning notice will be issued.
29. The amount of the late filing penalty for GST returns is:
    • $250 if the invoice or hybrid basis is used at the time the return is due; or
    • $50 if the payments basis is used at the time the return is due.
30. The penalty is due by the 28th of the second month following the end of the relevant taxable period (or 15 February if the return was due 15 January or 7 June if the return was due 7 May).

Reversal or remission of late filing penalty

31. The Commissioner's practice is that the late filing penalty may be reversed if:
    • the return was filed before the date the late filing penalty was imposed, but had not been "lodged" by Inland Revenue; or
    • the return or employer monthly schedule was not required to be filed; or
    • In respect of an employer monthly schedule, the taxpayer did not pay any salary or wages even though a registered employer.
32. The Commissioner's practice is that the late filing penalty may be remitted if the legislative criteria in regards to the remission of penalties and interest contained in sections 183A or 183D are met. Remission of penalties and interest is discussed in Standard Practice Statement 05/10.
33. The Commissioner's practice is that the late filing penalty will not be remitted if:
    • The taxpayer has an extension of time arrangement as a client of a tax agent, but the agent had not notified the Commissioner that the taxpayer was the IR client before the late filing penalty was imposed.
    • The taxpayer was granted an extension of time arrangement (either as a client of a tax agent or individually), after the late filing penalty was imposed.

This Standard Practice Statement is signed on 9th May 2012.

Rob Wells
LTS Manager, Technical Standards
Legal & Technical Services