Remission of General Interest Charge

Whether the General Interest Charge (GIC) imposed under section 170AA of the Income Tax Assessment Act 1936 (ITAA 1936) should be remitted where the Commissioner overlooks a letter enclosed with the taxpayer's previous year's tax return which asks for confirmation of the carry forward losses the taxpayer proposes to claim.

The GIC imposed under section 170AA (ITAA 1936) should be remitted under section 8AAG of the Taxation Administration Act 1953 (TAA 1953).

The taxpayer is a TaxPack user. Prior to lodging the taxpayer's tax return for the previous year of income, the taxpayer makes a telephone call to the Australian Taxation Office (ATO) to seek assistance with the calculation of carry forward losses for the current income year. The advice from the ATO is to include a schedule of carry forward losses in the tax return. The taxpayer is led to believe that this schedule will be examined by the ATO. The taxpayer encloses a schedule in the tax return outlining the taxpayer's calculation of the carry forward losses. The taxpayer asks that this calculation be checked, however, no written or verbal advice is ever given to the taxpayer by the ATO.

The taxpayer lodges the current year's tax return on the basis that the calculation of available losses submitted with the previous year's return is correct. Subsequently, the taxpayer's claim for losses is audited and amended assessments are issued for both the current and previous years. In view of what had been asked in the schedule accompanying the previous year return, no penalty tax is imposed. However, the taxpayer is liable to pay the GIC under section 170AA (ITAA 1936).

Where an assessment is amended to increase the amount of tax payable, a taxpayer is generally liable to pay the GIC under section 170AA (ITAA 1936). However, section 8AAG (TAA 1953) allows the Commissioner to remit all or part of the GIC payable. Taxation Ruling IT 2444 and the ATO Receivables Policy provide guidelines that the Commissioner uses to determine whether remission is warranted. It is clear from these guidelines that although remission will only be granted in limited circumstances, the GIC will be remitted where by reason of the particular circumstances, it is considered fair and reasonable to do so.

In this taxpayer's circumstances, it is accepted that the ATO may have given the taxpayer the impression that the taxpayer could claim the carry forward losses despite the absence of any advice in response to the earlier request for information. Therefore, it is considered fair and reasonable to remit the GIC in the circumstances under section 8AAG (TAA 1953).