GST Income tax 2018

The Commissioner's obligation to make compensating adjustments for income tax and GST in Australia and New Zealand

Source: Australian Tax Forum Journal Article

Published Date: 1 Sep 2018


Both Australia and New Zealand (NZ) have enacted general anti-avoidance rules (GAARs) for income tax and goods and services tax (GST) and the Commissioner may, if he/she believes the GAAR has been breached, issue a determination to negate the benefit the avoider or another taxpayer obtains from the transaction.

The Commissioner in Australia may, if he believes it is fair and reasonable to do so, make a compensating adjustment in favour of a party adversely affected by a GAAR determination to ensure income tax or GST is not levied twice on the same income or transaction. In NZ, the Commissioner is directed to ensure there is no double taxation for income tax purposes. With GST the legislation is silent.

It is the differences in approach between Australia and NZ that is the subject matter of this article. The authors conclude that the Australian regime although not free of difficulties does not present the same problems as does the NZ regime. In Australia the Commissioner must consider making a compensating adjustment and in exercising his discretion, may not use this discretion to impose a penalty on the disadvantaged taxpayer. In NZ, even though the legislation imposes an obligation of the Commissioner to make a compensating adjustment to avoid double taxation, it seems the courts have been reluctant to enforce this obligation. The authors suggest that even though the NZ GST legislation is silent on this point, the obligations of the Commissioner are the same as for income tax. In reaching these conclusions the authors consider the many problems arising in both countries with the right of taxpayers not to be double taxed after GAAR.

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GST Income tax 2018

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