141BUnacceptable tax position

1. A taxpayer takes an unacceptable tax position if, viewed objectively, the tax position fails to meet the standard of being about as likely as not to be correct.

2. A taxpayer does not take an unacceptable tax position merely by making a mistake in the calculation or recording of numbers used in, or for use in preparing, a return.

3. A taxpayer does not take an unacceptable tax position if—

4. the taxpayer adopts IFRSs for the purposes of financial reporting before the 2007–08 income year; and
5. the taxpayer's tax position relates to a period—
   1. starting on and including the first day of the first income year for which a person adopts IFRSs for the purposes of financial reporting; and
   2. finishing on and including the last day of the 2006–07 income year; and
6. a tax shortfall for a return period in the period described in paragraph (b) arises from actual or potential accounting under IFRSs; and
7. the tax shortfall is due to an application of IFRSs which, if viewed objectively, passes the standard of being about as likely as not to represent acceptable accounting practice under IFRSs; and
8. the taxpayer has fully disclosed the IFRS-related tax position.

9. A taxpayer does not take an unacceptable tax position to the extent to which they have taken their position because they have relied on a Commissioner's official opinion.

10. A taxpayer does not take an unacceptable tax position merely by using the AIM method and an approved AIM provider’s AIM-capable accounting system.

11. Subsection (1E) does not apply for a taxpayer that—

12. is approved under section 124ZE:
13. uses a large business AIM-capable system.

14. A taxpayer is liable to pay a shortfall penalty if the taxpayer takes an unacceptable tax position in relation to income tax as defined in section YA 1 of the Income Tax Act 2007, but ignoring the effect of section RA 2 of that Act, and the tax shortfall arising from the taxpayer's tax position is more than both—

15. $50,000:
16. 1% of the taxpayer's total tax figure for the relevant return period.

17. For the purposes of this section, a taxpayer's total tax figure is—

18. the amount of tax paid or payable by the taxpayer in respect of the return period for which the taxpayer takes the taxpayer's tax position before, in the case of income tax, any group offset election or subvention payment; or
19. where the taxpayer has no tax to pay in respect of the return period, an amount equal to the product of—
    1. the net loss of the taxpayer in respect of the return period, ascertained in accordance with the provisions of the Income Tax Act 2007 and treated as having a positive value; and
    2. the basic rate of income tax for companies in the relevant return period,—
that is shown as tax paid or payable, or as net losses of the taxpayer, or as a refund to which the taxpayer is entitled, in a tax return provided by the taxpayer for the return period.

20. Where subsection (2) applies, the shortfall penalty payable is 20% of the resulting tax shortfall.

21. For the purposes of this section, the question whether any tax position is acceptable or unacceptable shall be determined as at the time at which the taxpayer takes the taxpayer's tax position.

22. The time at which a taxpayer takes a tax position for a return period is—

23. the time at which the taxpayer provides the return containing the taxpayer's tax position, if the taxpayer provides a tax return for the return period:
24. the due date for providing the tax return for the return period, if the taxpayer does not provide a tax return for the return period.

25. The matters that must be considered in determining whether the taxpayer has taken an unacceptable tax position include—

26. the actual or potential application to the tax position of all the tax laws that are relevant (including specific or general anti-avoidance provisions); and
27. decisions of a court or a Taxation Review Authority on the interpretation of tax laws that are relevant (unless the decision was issued up to 1 month before the taxpayer takes the taxpayer's tax position).

28. For the purpose of determining whether the resulting tax shortfall is in excess of the amounts specified in subsection (2),—

29. a tax return provided by—is to be treated as if it were a tax return of every taxpayer who is a partner in the partnership, effective look-through interest holder for the look-through company, or person in such group; and
    1. a partnership; or
    2. a look-through company; or
    3. any other group of persons that derive or incur amounts jointly or that are assessed together,—
30. the tax rate in a return period applying to a partnership or a look-through company is deemed to be the same as the basic rate of income tax for companies for the relevant period.

31. The amounts or the percentage specified in subsection (2) may be varied from time to time by the Governor-General by Order in Council.

32. An order under subsection (9) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).