SPS 09/02
Issued
26 Mar 2009

Voluntary disclosures (WITHDRAWN)

SPS 09/02 sets out guidelines for making a voluntary disclosure, the timing of notification and what constitutes a voluntary disclosure.

Withdrawn

This statement has been withdrawn and is provided for historical purposes only.

Introduction

  1. This Standard Practice Statement (SPS) applies to a voluntary disclosure that is made under section 141G or section 141J of the Tax Administration Act 1994 ("TAA") on or after 17 May 2007 and for the purpose of entitlement to a reduction in shortfall penalty. It provides guidelines in respect of:
    1. how to make a voluntary disclosure;
    2. when a taxpayer is treated as having been notified of a pending audit;
    3. what constitutes a full voluntary disclosure;
    4. what rate of reduction will apply if a taxpayer is liable for a shortfall penalty.
  2. Unless specified otherwise, all legislative references in this SPS refer to the TAA.
  3. This SPS should be read in conjunction with SPS 07/02 Notification of a pending audit or investigation (or any subsequent replacement).

Application

  1. This SPS replaces SPS INV-251 Voluntary Disclosures and applies to taxpayers who have made voluntary disclosures on or after 17 May 2007.

Summary

  1. A taxpayer can make a full voluntary disclosure for the purpose of a shortfall penalty reduction, either:
    1. before the taxpayer is first notified that a tax audit is pending ("pre-notification disclosure"), or
    2. after the taxpayer is first notified of a pending audit but before the audit starts ("post-notification disclosure").
  2. See SPS 07/02 Notification of pending audit or investigation published in Tax Information Bulletin Vol.19, No.3 (April 2007) which provides details regarding when notification that an audit is pending will occur and the form in which that notification must be provided.
  3. Section 141G(1) does not apply unless the taxpayer makes a full voluntary disclosure. Section 141G(2) allows the Commissioner to specify what information must be provided by the taxpayer to be a full disclosure and the form in which the disclosure must be provided (see the discussion in paragraphs 38 - 49).
  4. Where a taxpayer makes a full voluntary disclosure a reduction will be allowed in the shortfall penalty rate as follows:
    1. by 100% under section 141G(3)(a)(i) if the taxpayer makes a pre-notification disclosure, and:
      • the shortfall penalty is for not taking reasonable care (section 141A); or
      • the shortfall penalty is for taking an unacceptable tax position or is an unacceptable interpretation (section 141B); or
    2. by 100% under section 141J(2)(a)(i) if:
      • a taxpayer makes a pre-notification disclosure, and
      • the shortfall penalty is imposed under either section 141A or 141B and relates to a temporary tax shortfall, or
    3. by 75% under section 141G(3)(a)(ii) if:
      • the taxpayer makes a pre-notification disclosure, and
      • the shortfall penalty is for gross carelessness (section 141C), an abusive tax position (section 141D), evasion or similar act (section 141E) or a promoter penalty (section 141EB), or
    4. by 75% under section 141J(2)(b) if:
      • the taxpayer makes a pre-notification disclosure and the shortfall penalty is imposed under any of sections 141C to 141EB and relates to a temporary tax shortfall, or
      • makes a post-notification disclosure and the shortfall penalty is imposed under any of sections 141A to 141EB and relates to a temporary tax shortfall, or
    5. by 40% under section 141G(3)(b) if the taxpayer makes a post notification disclosure.
  5. When a taxpayer makes a pre-notification disclosure, the Commissioner's practice is not to consider subsequent prosecution action against them in respect of the tax shortfall that they have voluntarily disclosed. However, Inland Revenue may consider prosecution action when a taxpayer makes a post-notification disclosure that involves evasion or similar offending.

Background

  1. The New Zealand tax system is based on voluntary compliance and most taxpayers voluntarily meet their obligations under the tax laws, for example, by filing tax returns on time and returning all income.
  2. The voluntary disclosure rules provide an incentive to taxpayers to determine their correct tax liability. The rules also reflect the savings to Inland Revenue from voluntary admissions of irregularities and other benefits of co-operation by taxpayers. By making a full voluntary disclosure, a taxpayer will attain the advantage of either a full or partial reduction of any shortfall penalty for which they are liable and may also avoid prosecution action.
  3. Section 141G(3)(a) has been amended to increase the reduction rate of certain shortfall penalties when a pre-notification disclosure is made. The amended section 141G applies to voluntary disclosures that are made on or after 17 May 2007.
  4. Section 141J has been amended to increase the reduction rate of certain shortfall penalties when a disclosure is made in respect of a temporary tax shortfall.

Legislation

  1. The relevant legislative provisions are sections 141G and 141J.
  2. Section 141G reads as follows:
  • 141G Reduction in penalty for voluntary disclosure of tax shortfall -

    1. A shortfall penalty payable by a taxpayer under any of sections 141A to 141EB may be reduced if, in the Commissioner's opinion, the taxpayer makes a full voluntary disclosure to the Commissioner of all the details of the tax shortfall, either -
      1. Before the taxpayer is first notified of a pending tax audit or investigation (referred to in this section as "pre-notification disclosure"); or
      2. After the taxpayer is notified of a pending tax audit or investigation, but before the Commissioner starts the audit or investigation (referred to in this section as "post-notification disclosure").
    2. The Commissioner may from time to time -
      1. Specify the information required for a full voluntary disclosure; and
      2. The form in which it must be provided.
    3. The level by which the shortfall penalty is reduced -
      1. For pre-notification disclosure is -
        1. 100%, if the shortfall penalty is for not taking reasonable care, for taking an unacceptable tax position, or for an unacceptable interpretation; or
        2. 75%, if subparagraph (i) does not apply,
      2. For post-notification disclosure is 40%.
    4. A taxpayer is deemed to have been notified of a pending tax audit or investigation, or that the tax audit or investigation has started, if -
      1. The taxpayer; or
      2. An officer of the taxpayer; or
      3. A shareholder of the taxpayer, if the taxpayer is a close company; or
      4. A tax adviser acting for the taxpayer; or
      5. A partner in partnership with the taxpayer; or
      6. A person acting for or on behalf of or as a fiduciary of the taxpayer, -
      is notified of the pending tax audit or investigation, or that the tax audit or investigation has started.
    5. An audit or investigation starts at the earlier of -
      1. The end of the first interview an officer of the Department has with the taxpayer or the taxpayer's representative after the taxpayer receives the notice referred to in subsection (4); and
      2. The time when -
        1. An officer of the Department inspects information (including books or records) of the taxpayer after the taxpayer receives the notice referred to in subsection (4); and
        2. The taxpayer is notified of the inspection.
  1. Section 141J reads as follows:
  • 141J Limitation on reduction of shortfall penalty -

    1. This section applies to a shortfall penalty payable by a taxpayer if -
      1. the taxpayer makes a voluntary disclosure; and
      2. the shortfall penalty is payable in respect of a temporary tax shortfall; and
      3. the shortfall penalty would be reduced under section 141G or 141H in the absence of this section.
    2. The shortfall penalty is reduced by -
      1. 100%, if -
        1. the shortfall penalty is for not taking reasonable care, for taking an unacceptable position, or for taking a tax position involving an unacceptable interpretation of a tax law; and
        2. the tax shortfall is voluntarily disclosed under section 141G before notification of a pending tax audit or investigation; or
      2. 75%, if paragraph (a) does not apply.
    3. A shortfall penalty to which this section applies is not reduced under any other section.

Discussion

Voluntary disclosure methods

  1. A taxpayer can make a voluntary disclosure:
    1. in person at an Inland Revenue office, or
    2. by telephone, or
    3. in writing, or
    4. during the first interview that forms part of the audit.

Making a voluntary disclosure in person

  1. A taxpayer can make a voluntary disclosure in person at an Inland Revenue office during the normal business hours. If the taxpayer cannot make the voluntary disclosure in writing, an Inland Revenue officer will record the voluntary disclosure details on an Inland Revenue form (IR281 Voluntary disclosure) and ask that the taxpayer sign it.

Making a voluntary disclosure by telephone

  1. A taxpayer can make a voluntary disclosure by telephoning Inland Revenue. The taxpayer should provide as much information as possible when making the disclosure including the types of information that are required by the Commissioner (see paragraphs 46 to 49).
  2. If the tax shortfall and the facts are straightforward, Inland Revenue will accept the taxpayer's verbal disclosure without asking them to make the voluntary disclosure in writing. Inland Revenue will make a record of the matters disclosed.
  3. However, if the tax shortfall and the facts are complex, an Inland Revenue officer will endeavour to record all the details of the tax shortfall and ascertain whether there has been a full voluntary disclosure.
  4. If the information is unclear, the taxpayer may be asked to make the full voluntary disclosure in writing. This may include completing an Inland Revenue form (IR281 Voluntary disclosure).

Making a voluntary disclosure in writing

  1. A taxpayer can make a voluntary disclosure in writing by:
    1. completing an Inland Revenue form (IR281 Voluntary disclosure), or
    2. by sending:
      1. a letter, or
      2. a facsimile, or
      3. an email to Inland Revenue's Secure Online Correspondence Service.
  2. Inland Revenue will accept written disclosures that are not made on the relevant form provided that they meet the information requirements specified in this SPS and any other statutory requirements under section 141G(2).
  3. A voluntary disclosure can be made at any time but in order to get the benefit of the reduction in any applicable penalty it will need to be made by or on the date that the tax audit starts.
  4. Inland Revenue will acknowledge in writing that it has received the taxpayer's voluntary disclosure.

Making a voluntary disclosure during the first tax audit or investigation interview

  1. A taxpayer can make a post-notification voluntary disclosure during or before the first interview that forms part of the audit. At the interview the Inland Revenue officer will consider whether the disclosure is complete and contains all the information necessary to determine the correct tax position and shortfall and will clarify any matters which are unclear. The officer will advise the outcome as soon as practicable and preferably at the interview.

Notification of a tax audit

Note:

This section should be read in conjunction with SPS 07/02 Notification of a pending audit or investigation.

  1. Under section 141G(4), a taxpayer is treated as having been notified that a tax audit is pending or has started, if any of the following persons has received the notification:
    1. the taxpayer, or
    2. an officer of the taxpayer, or
    3. a shareholder of the taxpayer (for close companies), or
    4. a tax adviser acting for the taxpayer, or
    5. a partner in a partnership, or
    6. a person acting for, on behalf of, or as a fiduciary of the taxpayer.
  2. Pursuant to the definition of "officer" under section 3(1), an officer of the taxpayer includes:
    1. a director, secretary and other statutory officer of a company, and
    2. a receiver or manager of any company property and a person who has similar powers or responsibilities to a receiver or manager, and
    3. a company liquidator.
  3. An employee is not generally an "officer" for the purposes of section 141G, unless they are also a person who satisfies any of the criteria in paragraph 29.

Time of notification

  1. Notification will be treated as occurring at the earlier of the date that the taxpayer or their agent receives written notice advising them of a pending audit, or a telephone call advising of a pending audit, or when an Inland Revenue officer makes an unannounced visit (see paragraph 33).
  2. If the exact time that the written notice was received becomes critical, it will be determined from the time that the notice is expected to reach its destination as specified by section 14B(8). Any telephone call advising that a tax audit or investigation is pending will be followed up in writing as soon as possible.

Unannounced visits

  1. In respect of unannounced visits, notification will be treated as occurring on the date that Inland Revenue first makes contact with the taxpayer. This means that taxpayers will not be able to make a pre-notification disclosure, but may still be able to make a post-notification disclosure (see paragraph 27 on making a voluntary disclosure during the first audit interview).

Disclosure by a company's subsidiary

  1. A tax audit of a parent company or one of its subsidiaries may necessitate the audit of other subsidiaries within the same group of companies. In such cases, whether there is a pre-notification or post-notification disclosure depends on which entity in the group has been notified of the audit and whether that notification related to one or more companies in the group or to the entire group.
  2. For example, a group of companies consists of a parent company and two subsidiaries. If only the parent company has been notified that a tax audit of the parent company is pending, any voluntary disclosure that a subsidiary of the group subsequently makes must be treated as a pre-notification disclosure (provided that it meets the requirements for full disclosure).
  3. However, if the subsidiaries have also been notified that a tax audit is pending, any voluntary disclosure that a subsidiary makes before the tax audit starts will be treated as a post-notification disclosure.
  4. When a company has a branch, the branch and company are considered to have been notified that a tax audit or investigation is pending at the same time. This is because the branch is not a separate legal entity from the company.

Full disclosure

  1. Inland Revenue will consider all valid voluntary disclosures. Subject to the applicable time bar and other relevant limitations the Commissioner can exercise the discretion under section 113 to amend an assessment to reflect the taxpayer's voluntary disclosure. See SPS 07/03 Requests to amend assessments, in Tax Information Bulletin, Vol.19, No.5 (June 2007) for details.
  2. Section 141G requires that the voluntary disclosure be full. It is not the Commissioner's role where a penalty reduction is sought to elicit the required information from the taxpayer.This does not necessarily mean disclosing discrepancies to the last dollar but does require that the taxpayer provides sufficient information to enable the Commissioner to make a correct assessment. Each case must be considered on its own merits however if any subsequent investigation reveals a further shortfall that should have been included in the disclosure then the taxpayer will not be entitled to the reduction in respect to the voluntary disclosure.
  3. For example, a taxpayer makes a voluntary disclosure in respect of previously unreturned interest income from money on fixed term deposit. On investigation it is revealed that the taxpayer also has other interest income that was not included in the voluntary disclosure. The voluntary disclosure was not a full disclosure in that other income was not included. The taxpayer will not be entitled to any reduction in respect of the disclosure.
  4. If the taxpayer provides information relating to a tax shortfall pursuant to a legal requirement, for example a request made under section 17, the taxpayer cannot be said to have made a voluntary disclosure.
  5. Similarly, if Inland Revenue has already identified and verified that there has been a tax shortfall, the taxpayer cannot make a voluntary disclosure.Any subsequent verification of the tax shortfall by the taxpayer would merely confirm the Commissioner's prior knowledge of that tax shortfall.
  6. However, if the taxpayer makes a disclosure of another tax shortfall that is not already known to the Commissioner (even if the disclosure arises as a result of a statutory request for information) the taxpayer's additional disclosure will be treated as a voluntary disclosure provided the other requirements of section 141G(2) are satisfied.
  7. If the disclosure is not fully detailed, and the taxpayer cannot provide full details at their first point of contact with Inland Revenue, the Commissioner will allow the taxpayer reasonable time to obtain more information. The time period for obtaining this information will be negotiated between the taxpayer and the Inland Revenue officer.
  8. If the taxpayer provides the clarifying information within the agreed period, and provided the information then constitutes a full disclosure, the taxpayer will be treated as having made a full disclosure on that initial date.

Minimum details required

  1. To satisfy the requirement for full disclosure a taxpayer should provide the following minimum details:
    1. the taxpayer's details (name, trade name, IRD number, address, contact telephone number), and
    2. the nature of the errors or omissions, and
    3. an explanation as to why the errors or omissions occurred, and
    4. adequate information to enable a correct assessment of the tax shortfall to be made, and
    5. any further information that is necessary to make an assessment.
  2. Where all this information is not provided, the Commissioner will consider on a case-by-case basis whether the information provided is sufficient to satisfy the full disclosure requirements.
  3. In doing so, the Commissioner will have regard to the taxpayer's reasons for not providing all of the information listed in paragraph 46. (See the discussion regarding when the taxpayer cannot provide full details of the tax shortfall at the first point of contact in paragraph 44.)
  4. In addition to the minimum details stated in paragraph 46, taxpayers should consider the following situations to ensure that a full voluntary disclosure is made.

More than one tax shortfall

  1. Where a taxpayer has more than one tax shortfall each shortfall will be considered separately. For the purpose of section 141G, a distinction is drawn between a tax shortfall that is voluntarily disclosed and one that has been detected by an Inland Revenue tax audit. The latter cannot qualify for a shortfall penalty reduction under section 141G(3).
  2. A taxpayer can sometimes discover two matters that are relevant to the same tax position and shortfall. The taxpayer should disclose both matters when making the voluntary disclosure to Inland Revenue.
  3. If one of the matters is not disclosed until after the tax audit starts (for example, after the first audit interview has ended), the taxpayer cannot qualify for a shortfall penalty reduction under section 141G(3). This is because the taxpayer has not provided "all the details of the tax shortfall" necessary for full disclosure under section 141G(1).

Disclosure of another tax type

  1. If a taxpayer:
    1. is subject to a tax audit on one tax type, and
    2. makes a voluntary disclosure that satisfies the information requirements under section 141G(1) and (2) in respect of another tax type, and
    3. has not been notified that a tax audit or investigation is pending in respect of that other tax type,
    the taxpayer's voluntary disclosure will qualify as a pre-notification disclosure.
  2. For example, a taxpayer is subject to an audit regarding PAYE because they paid wages without deducting tax pursuant to the PAYE rules. The taxpayer makes a full voluntary disclosure in respect of income tax for the 2007 year because they have omitted some sales in their income tax return. The taxpayer has not been notified that an audit is pending in respect of the income tax shortfall. The taxpayer's voluntary disclosure is a pre-notification disclosure for the purposes of section 141G(1)(a).

Disclosure of another period

  1. Inland Revenue's notification that a tax audit is pending will generally inform the taxpayer of the tax periods that are subject to the audit (though this period may be subsequently amended). The taxpayer can still make a pre-notification disclosure for another tax period that is not stipulated in the notification.
  2. However, Inland Revenue can extend the tax audit to other tax periods. Inland Revenue will notify the taxpayer promptly if the audit's scope widens during the audit and other tax types and/or periods are to be reviewed.
  3. If the taxpayer does not disclose all the details of a tax shortfall for a tax period until after they are notified that a tax audit is pending for that tax period, the taxpayer's voluntary disclosure cannot be a pre-notification disclosure under section 141G(3)(a). However, the taxpayer's full voluntary disclosure can be a post-notification disclosure if it is made before the tax audit starts (as defined in section 141G(5)).

The taxpayer's disclosure must be voluntary and unconditional

  1. Whether a taxpayer's disclosure is voluntary is a matter to be determined on a case-by-case basis. A taxpayer's disclosure of a tax shortfall is voluntary where the taxpayer has provided the information of their own free will, impulse or choice.
  2. Inland Revenue accepts that a taxpayer's disclosure is still a voluntary one even if it is prompted by the notification that a tax audit is pending. Section 141G(1)(b) provides that a taxpayer can make a post-notification disclosure in these circumstances provided that the requirements for full disclosure are met.
  3. However, sometimes Inland Revenue may advise the taxpayer of a known tax shortfall and request that the taxpayer provides specific information to verify the exact details of the shortfall - perhaps including timing of transactions and exact amounts of money involved - in order to raise the assessment. In this circumstance Inland Revenue has prompted the provision of the specific information and it is clear they already know about the tax shortfall so it cannot be said that a voluntary disclosure has been made.
  4. Inland Revenue occasionally receives information from taxpayers purporting to limit the Commissioner's use of it or containing conditions on how the information may be used. For example, a taxpayer may send a letter regarding an amount of income that had been treated as being non-taxable. The taxpayer's letter also contains a further condition that Inland Revenue should accept the information in full and final settlement of all other taxes and not investigate further (or discontinue an existing investigation). The Commissioner cannot be bound in this way and would be obligated to act on the information provided in the taxpayer's letter. If on further investigation no further shortfalls are found, the taxpayer's letter could still be a full disclosure, and provided it also meets the other criteria in this SPS the taxpayer's letter would still be a voluntary disclosure. However, if on further investigation, additional shortfalls are revealed, then the taxpayer's letter cannot be a voluntary disclosure as the disclosure was not full. In those circumstances the taxpayer would not be entitled to a reduction in respect to the information provided in the letter.

Prosecution

  1. If a taxpayer makes a pre-notification disclosure, Inland Revenue will not consider prosecution action against them in respect of the tax shortfall that has been voluntarily disclosed.
  2. However, Inland Revenue may consider prosecution action where a taxpayer makes a post-notification disclosure that involves evasion or similar offending.


This Standard Practice Statement is signed on 26th May 2009.

 

Rob Wells
LTS Manager, Technical Standards
Legal and Technical Services

 


Examples

The following examples are provided to further explain the Commissioner's view on voluntary disclosures. The example are for purposes of clarification only and do not form part of the SPS.

Example 1

A taxpayer provides information regarding a tax shortfall pursuant to an information demand made by Inland Revenue under section 17. The information that the taxpayer has provided does not amount to a voluntary disclosure.

Example 2

An employer files their Employer Monthly Statement without an accompanying payment. The employer cannot voluntarily disclose the non-payment of the PAYE because Inland Revenue will already know that payment has not been made.

Example 3

An Inland Revenue officer has sufficient information to establish that a taxpayer who is a builder has not returned income tax on the proceeds from the sale of three houses (Houses A, B and C) in the 2008 tax year and the officer has sufficient information to verify the amount of the unreturned income tax.

The officer notifies the taxpayer that a tax audit or investigation is pending in respect of the 2008 tax year. In the letter, the officer sets out the facts and tax shortfalls. The officer also asks the taxpayer to provide specific information about these tax shortfalls.

The taxpayer has not made a voluntary disclosure for the purpose of section 141G. This is because Inland Revenue has prompted the taxpayer to provide the specific information and already knows about this tax shortfall.

The taxpayer in the above example can make a voluntary disclosure of other tax shortfalls that are not stipulated in the notification or known to Inland Revenue (see examples 4 and 5).

Example 4

Applying the same facts as in example 3, the taxpayer discloses a tax shortfall relating to the sale proceeds of a fourth house (House X) - also in the 2008 tax year. The taxpayer has made a voluntary disclosure in respect of this tax shortfall, notwithstanding that the audit notification may have prompted the taxpayer's disclosure.

This is because Inland Revenue has not specifically requested information regarding the fourth transaction. The taxpayer is entitled to a 40% post-notification disclosure reduction of any shortfall penalty payable in respect of this tax shortfall under section 141G(3)(b) and could be entitled to a further penalty reduction for previous behaviour under section 141FB (see SPS 06/03 Reduction of shortfall penalties for previous behaviour).

Example 5

Applying the same facts as in example 3, the information that the taxpayer has disclosed shows that they have omitted income on three sales (Houses A, B and Y) for the 2008 tax year. The disclosed information also shows that they did not in fact complete one of the sales (that is, in respect of House C) as asserted by the Inland Revenue officer.

In this example, the taxpayer has made a voluntary disclosure of the tax shortfall in respect of the sale of House Y that is unknown to Inland Revenue. The taxpayer is entitled to a 40% post-notification reduction of any shortfall penalty payable in respect of this tax shortfall under section 141G(3)(b) and could be entitled to a further penalty reduction for previous behaviour under section 141FB (see SPS 06/03 Reduction of shortfall penalties for previous behaviour).

The taxpayer is not entitled to any shortfall penalty reduction under section 141G(3) in respect of tax shortfalls that arise from the other two transactions, because they are already known to Inland Revenue.

Example 6

As part of a project to investigate specific concerns regarding the GST consequences where owners of serviced apartments change the way in which those apartments are used (for example, where the owner may have purchased an apartment as an investment property but subsequently moved into the property themselves), Inland Revenue writes to a number of apartments owners. The letter advises the taxpayers that they may need to make adjustments for non-taxable use of the apartment. The taxpayers were selected where Inland Revenue had information showing the property was the same as the address used by the taxpayer for other activities although Inland Revenue had not yet formed an intention to actively investigate all or any of the group. The letter reminds the taxpayer of a need to make appropriate adjustments should the taxpayer occupy the property themselves.

In response to the above letter a taxpayer has made a voluntary disclosure of a tax shortfall in respect of their private use of a property. The letter from Inland Revenue did not contain details of a specific tax shortfall, nor did it advise of a pending audit. That being the case, the taxpayer is entitled to a 100% pre-notification reduction of any shortfall penalty payable, notwithstanding the disclosure may have been prompted by the letter sent to the taxpayers advising of Inland Revenue's interest in this matter.

Note:

The circumstances in Example 6 can be distinguished from that described in paragraph 42 of the SPS. This is because in Example 6 Inland Revenue had not verified that a shortfall existed, nor the amount of any shortfall.

Example 7

Inland Revenue does a preliminary risk review exercise in order to determine which taxpayers ought to be investigated. As part of that risk review an Investigator writes to a taxpayer and requests a copy of their financial statements for the period of the risk review. The taxpayer realises there is an error in the income tax return filed for that period and along with the information requested also makes a voluntary disclosure.

The request for financial statements made as part of the risk review exercise is not notification of an audit. Provided the other criteria for a full disclosure, as set out in paragraphs 38 - 49 of the SPS, are met, the taxpayer would be entitled to a pre-notification deduction. This is despite the fact that the taxpayer may have inferred an audit was likely to eventuate following the "risk review".

Example 8

A taxpayer files a GST return showing a large refund. As part of a refund check conducted by Inland Revenue, an officer contacts the taxpayer to ask about the large refund. The taxpayer advises they have purchased a large property. The officer asks to be shown the documentation relating to that purchase. Before sending the documents the taxpayer notes that they do not have a valid tax invoice in respect of the input tax claimed and so makes a voluntary disclosure.

The request for information relating to the large refund was not notice of a pending audit or investigation. Therefore the taxpayer is entitled to a pre-notification reduction for the voluntary disclosure.

Note:

In respect of Example 7 and Example 8 a request for information in similar circumstances may include notification of an audit or investigation. However, consistent with SPS 07/02 Notification of a pending audit or investigation, this would be clearly brought to the taxpayer's attention by using the words "audit" or "investigation".