Treasury Laws Amendment (Tax Incentive and Integrity) Bill 2024
The Tax Institute welcomes the opportunity to make a submission to the Senate Economics Legislation Committee (Committee) in respect of its inquiry and report on the Treasury Laws Amendment (Tax Incentive and Integrity) Bill 2024 (Bill) and accompanying explanatory memorandum (EM).
Our comments in this submission are limited to Schedule 2 to the Bill. Schedule 2 amends the Income Tax Assessment Act 1997 (Cth) to deny deductions in respect of general interest charges (GIC) and shortfall interest charges (SIC) incurred by taxpayers. The proposed amendments apply to SIC and GIC incurred in income years starting on or after 1 July 2025.
The Tax Institute supports the government’s intention to improve self-assessment accuracy and encourage timely tax payments. However, given that the availability of a deduction for the GIC and SIC has been integral to the tax system for an extended period, we recognise that this is a significant change for taxpayers to navigate. We are of the view that unintended consequences may be minimised by implementing legislative amendments to ensure equity and transparency. Doing so will assist taxpayers to adapt to this change and enhance the administration of our tax system.
Our recommendations to support taxpayers through this transition may be summarised as follows:
- clarify whether the proposed measure applies to amended assessments issued on or after 1 July 2025 that are referable to income years beginning before 1 July 2025;
- reduce the fixed percentage point uplift for both GIC (7%) and SIC (3%) if deductions are denied for the charges, as the proposed measure will exacerbate the already onerous burden of these uplifts by up to 88%. This recommendation is of particular importance as the proposed measure is due to apply in an economic environment that is likely to continue to be challenging for taxpayers;
- alternatively, if the uplifts are not reduced, restrict the denial of the deduction to the relevant uplift component of both the GIC and SIC so that only the base interest component remains deductible. However, we acknowledge that implementing such an approach would be administratively more challenging;
- promote fairness in the remission process by ensuring that remission decisions for both GIC and SIC are unconditionally reviewable. Where this is not possible, we recommend that, as a base line, remission decisions pertaining to the GIC should be open to challenge on the same basis as those pertaining to the SIC; and
- while we recognise that the assessability of interest incurred by taxpayers on overpayments, early tax payments or delayed refund of tax is a separate issue, in considering the proposed measures, we recommend that consideration also be given to the measures in place to encourage accuracy and accountability of the Australian Taxation Office (ATO), in issuing amended assessments. This may help to create a more level playing field in the context of both over- and under-payments of tax.
Our detailed submission is contained in Appendix A.
The Tax Institute is the leading forum for the tax community in Australia. We are committed to shaping the future of the tax profession and the continuous improvement of the tax system for the benefit of all. In this regard, The Tax Institute seeks to influence tax and revenue policy at the highest level with a view to achieving a better Australian tax system for all.