Taxpayers with unpaid tax liabilities due to Revenue NSW may face penalty tax and interest on the outstanding debts. The Chief Commissioner has outlined in a new Practice Note the authority's approach to imposing penalties and the circumstances in which the power to remit interest may be exercised.
If a taxpayer can prove they have taken reasonable care to ensure the tax is paid, remission of the 8% premium component of interest is also possible, if there are special circumstances.
Where a penalty tax is imposed, it generally applies at either 25% or 50% of the unpaid tax, and is on top of the interest charged. The Practice Note outlines in detail the various lower or higher penalty rates that can be imposed depending on whether a taxpayer makes a voluntary disclosure, and at which point in time of an investigation it is made (if made at all). Penalty tax can be imposed as high as 90% of the unpaid tax if there is clear evidence of both intentional disregard to the law by the taxpayer or their representative and steps to hinder a Revenue NSW investigation.
The new guidance follows changes to the state tax administration laws that introduced new penalty provisions for tax avoidance schemes covering all NSW taxes including duties, land tax and payroll tax, penalties to deter the promotion of tax avoidance schemes, and new penalty tax provisions that increased the base penalty rate to 50% for large multinationals. It is effective from June 2022.
Source: Commissioner's Practice Note CPN 024 Interest and Penalty tax guidelines, Revenue NSW website, 28 June 2022, accessed 1 July 2022.
