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GST Penalties Trap - Come clean on shortfalls, and promptly |
The Tax Office appears to be taking a punitive approach to GST shortfall amounts at the same time as placing increasing emphasis on corporate governance and tax risk management. This means more of an onus, particularly on directors and senior management, to have a genuine awareness of their GST compliance. |
A taxpayer is liable to a penalty if they have a GST shortfall as a result of a statement which is "false or misleading in a material particular". A shortfall amount is the amount by which the relevant liability, payment or credit, is less or more than it should be. |
Base penalties extend from 75 per cent of the shortfall amount for intentional disregard of a tax law to 25 per cent of the shortfall for failing to take reasonable care to comply with a tax law. Once a penalty is levied, the burden of proof shifts to the taxpayer. |
There are certain aggravating factors which allow the Commissioner of Taxation to increase the base penalty by 20 per cent. These include taking steps to prevent or obstruct the Commissioner from finding out about the shortfall, and failing to give notice of the shortfall amount within a reasonable time of becoming aware of it. |
Thankfully, legislation also allows for the reduction of penalties. The base penalty may be reduced by 20 per cent - or 80 per cent in certain circumstances - if the taxpayer voluntarily discloses the shortfall to the Commissioner. |
The GST perils of property transactions are high. In terms of risk, the GST challenges posed by property dealings extend from the intricacies of the margin scheme and the GST-free supply of a going concern concession, all the way to the reporting of GST obligations. |
Taxpayers seem to be becoming more combative when faced with penalties, but the Tax Office's very high success rate in GST penalty cases serves as a warning that the area of law is a very complex one and that taxpayers must be on solid legal grounds if they decide to challenge a decision. |
