Decisions you can’t dispute via an objection

There are some decisions ATO make that the tax laws don’t allow you to dispute by lodging an objection (though generally there are other ways of having these decisions reviewed).

You can’t use the objection process to dispute:

  • a general interest charge (but you can ask us to remit it – reduce or cancel)
  • a decision not to remit a general interest charge
  • a shortfall interest charge (but you can ask us to remit it)
  • a decision not to remit a shortfall interest charge (unless the amount of interest to be paid after the decision has been made is more than 20% of the shortfall amount – see example)
  • a late payment penalty (but you can ask us to remit it)
  • a decision not to remit some penalties (unless what you owe after the decision has been made is $340 or more)
  • a private ruling if an assessment has issued covering the period (you may object to the assessment instead)
  • an excise private ruling where there is another reviewable decision about the excise duty (or other amount payable) in relation to the same goods (you may object to the other decision)
  • administratively binding advice or advice about proposed changes to tax laws
  • a super co-contribution determination (you have to request a review).

Example – shortfall interest charge

You can object to our decision not to remit a shortfall interest charge if the interest you are left to pay is more than 20% of the shortfall amount. If your tax shortfall is $2,000, 20% is $400. If, after ATO have made a decision on remission, the shortfall interest charge (SIC) is $401 or more, you could object to that decision. Conversely, if it were $400 or less you could not object to it.

For more information on Etax, Mytax and online tax return, please contact us at 1300768284 or you can email us at enquiry@taxrefundonspot.com.au

 

Demutualisation of insurance companies

If you hold a policy in a life insurance company or a general insurance company that demutualises, you may be subject to capital gains tax (CGT) either at the time of the demutualisation or when you sell your shares (or another CGT event happens).

A company demutualises when it changes its membership interests to shares (for example, AMP, IOOF and NRMA). There are similar rules if you are a member of a non-insurance organisation that demutualises.

The insurance company may give you an option either to keep your share entitlement or to take cash by selling the shares under contract through an entity set up by the company.

If it is an Australian insurance company and you choose to keep the shares, you will not be subject to CGT until you eventually sell them or another CGT event happens. However, if you elect to sell your share entitlement to the company and take cash, you need to include any capital gain on your tax return in the income year in which you entered into the contract to sell the shares, even though you may not receive the cash until a later income year.

The demutualising company will write to all potential ‘shareholders’ and advise them of the acquisition cost in each instance. The acquisition cost is sometimes referred to as the ‘embedded value’. Even though you did not pay anything to acquire the shares, they have a value that is used as the cost base and reduced cost base for CGT purposes.

If you sell your shares before the insurance company is listed on the stock exchange and you make a capital loss, you disregard the loss.

If you hold a policy in an overseas insurance company that demutualises, you may be subject to CGT at the time of the demutualisation. Phone us for advice (on 13 28 61) if this applies to you.

For more information on Etax, Mytax and online tax return, please contact us at 1300768284 or you can email us at enquiry@taxrefundonspot.com.au

 

Remission of interest charges

ATO charge interest on unpaid tax debts and shortfall amounts – the latter being the difference between the amount of tax you were originally assessed for (or refunds you claimed) and the amount of tax you were eventually assessed for (or credits you were entitled to).

If you are dissatisfied with an interest charge you can ask us to remit it. ATO can generally remit (reduce or cancel) interest charges where it is fair and reasonable in the circumstances.

ATO can also initiate a reduction of interest charges for shortfall periods where, for example, you’ve made a voluntary disclosure or ATO or third parties have been responsible for delays that increase the shortfall period.

Why ATO charge interest

The purpose of charging interest is to ensure that:

  • taxpayers who complete their tax returns correctly and pay their tax on time are not worse off than taxpayers who lodge incorrect returns and pay less tax than they should, even if this is by mistake
  • government revenue is not disadvantaged by taxpayers who don’t pay their tax on time.

General interest charge

ATO may apply the general interest charge (GIC) if an amount of tax or some other liability remains unpaid after the date on which it should have been paid, including where:

  • a tax shortfall arises as a result of an amendment of an assessment or other correction
  • an instalment of tax is underestimated
  • a return is lodged late.

Shortfall interest charge

The shortfall interest charge (SIC) has a lower rate than the GIC. This is because taxpayers are usually unaware of a shortfall amount until ATO advise them of it. When ATO tell you of a shortfall in your tax ATO also include an interest charge on the shortfall amount.

The due date for payment of the additional tax and for the SIC is 21 days after the day ATO give you the notice of the additional tax. Once the due date has passed, the higher GIC applies to any unpaid tax and SIC.

For more information on Etax, Mytax and online tax return, please contact us at 1300768284 or you can email us at enquiry@taxrefundonspot.com.au