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Tax Administration Act 1994

Remission, relief, and refunds

177C: Write-off of tax by Commissioner

You could also call this:

"When you can't pay tax, the Commissioner can write it off"

Illustration for Tax Administration Act 1994

The Commissioner can write off tax you cannot pay. You might not be able to pay tax due to serious hardship. The Commissioner decides whether to write off the tax. The Commissioner can write off tax from the 2008-09 tax year if it is under section MF 5(2) or section MF 6(2) of the Income Tax Act 2007. The Commissioner must write off tax if you are bankrupt or your company is liquidated. If the Commissioner writes off your tax, they might reduce your tax loss. This is calculated by dividing the written-off amount by 0.33 if you are not a company, or 0.28 if you are a company. The Commissioner can also reverse a write-off if you provided false information or if you become bankrupt within a year of the write-off. However, if you have an instalment arrangement, the Commissioner cannot reverse the write-off even if you do not meet the arrangement's terms. If you have a tax credit carried forward under section LE 3 of the Income Tax Act 2007, the Commissioner will extinguish the tax credit on a one-for-one basis. The Commissioner can write off an amount of tax, not exceeding $100, from the 2008-09 tax year if it is under section MF 5(2) or section MF 6(2) of the Income Tax Act 2007. You can have an excess amount under section EL 4 of the Income Tax Act 2007 written off. The Commissioner will reduce the excess amount by the written-off amount divided by 0.33 if you are not a company, or 0.28 if you are a company. The Commissioner must write off an amount of tax, not exceeding $30, from the 2010-11 tax year if it is under section MF 5(2) or section MF 6(2) of the Income Tax Act 2007.

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Topics:
Money and consumer rights > Taxes
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177B: Instalment arrangements, or

"Paying tax in smaller amounts to avoid serious hardship"

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"What to do about tax debt when you're bankrupt"

Part 11Remission, relief, and refunds

177CWrite-off of tax by Commissioner

  1. The Commissioner may write off outstanding tax that cannot be recovered.

  2. The Commissioner may use, as a ground for deciding whether or not to write off the outstanding tax of a taxpayer or of a relief company, the basis that recovery of the outstanding tax would place the taxpayer, being a natural person, in serious hardship. The Commissioner is not required to write off the outstanding tax if the ground exists.

  3. The Commissioner may write off an amount of outstanding tax to the extent to which the amount—

  4. is outstanding from the 2008–09 tax year; and
    1. is tax payable under section MF 5(2) or MF 6(2) of the Income Tax Act 2007, or is otherwise the result of WFF tax credit overpayment or overcrediting; and
      1. is outstanding due to amendments to the family scheme made by the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008.

        1. The Commissioner must write off an amount, not exceeding $100, of outstanding tax to the extent to which the amount—

        2. is outstanding from the 2008–09 tax year; and
          1. is tax payable under section MF 5(2) or MF 6(2) of the Income Tax Act 2007, or is otherwise the result of WFF tax credit overpayment or overcrediting.

            1. The Commissioner must write off an amount, not exceeding $30, of outstanding tax to the extent to which the amount—

            2. is outstanding from the 2010–11 tax year; and
              1. is tax payable under section MF 5(2) or MF 6(2) of the Income Tax Act 2007, or is otherwise the result of WFF tax credit overpayment or overcrediting.

                1. The Commissioner must write off outstanding tax that cannot be recovered in the following situations:

                2. bankruptcy:
                  1. liquidation:
                    1. a taxpayer's estate has been distributed.

                      1. Despite subsection (1), the Commissioner must not write off outstanding tax (inclusive of any shortfall penalties), if a taxpayer is liable to pay, in relation to the outstanding tax, a shortfall penalty for an abusive tax position or evasion or a similar act.

                      2. Despite subsection (2), the Commissioner may reinstate all or part of the outstanding tax written off if the Commissioner receives, by operation of law, additional funds in respect of a taxpayer after the taxpayer becomes bankrupt, is liquidated or if additional funds due to the taxpayer's estate are discovered after the taxpayer's estate has been distributed.

                      3. If the Commissioner writes off outstanding tax for a taxpayer who has a tax loss, other than a write-off under section 22J or 174AA, the Commissioner must extinguish all or part of the taxpayer's tax loss, by—

                      4. dividing the amount written off by 0.33 and reducing the tax loss by that amount, if the taxpayer is not a company; or
                        1. dividing the amount written off by 0.28 and reducing the tax loss by that amount, if the taxpayer is a company.

                          1. If the Commissioner writes off outstanding tax for a taxpayer who has an excess amount under section EL 4 of the Income Tax Act 2007, the Commissioner must extinguish all or part of the taxpayer’s excess amount by—

                          2. dividing the amount written off by 0.33 and reducing the excess amount by that amount, if the taxpayer is not a company; or
                            1. dividing the amount written off by 0.28 and reducing the excess amount by that amount, if the taxpayer is a company.

                              1. If the Commissioner writes off outstanding tax for a taxpayer who has a tax credit carried forward under section LE 3 of the Income Tax Act 2007, the Commissioner must extinguish an amount of the tax credit on a one-for-one basis.

                              2. For a taxpayer for which the Commissioner writes off outstanding tax, subsection (5) applies before subsection (5BA), and subsection (5BA) applies before subsection (5B).

                              3. For the purpose of subsection (5), the tax loss that may be extinguished is the tax loss of the taxpayer at the time at which the outstanding tax is written off and the Commissioner may use a figure for that tax loss based on the most recent return of income furnished by the taxpayer.

                              4. The Commissioner may reverse a write-off if—

                              5. outstanding tax is written off on the grounds of serious hardship, and the taxpayer for whom the debt was written off is a natural person who—
                                1. declares bankruptcy within a year of the outstanding tax being written off; or
                                  1. is subject to bankruptcy proceedings brought by a creditor within a year of the outstanding tax being written off; or
                                  2. outstanding tax is written off on the grounds of serious hardship, and the taxpayer for whom the debt was written off is a relief company which, within a year of the outstanding tax being written off, is, or is in the course of being, liquidated; or
                                    1. the outstanding tax was written off due to false or misleading information provided by the taxpayer.

                                      1. If the Commissioner enters into an instalment arrangement that provides for some outstanding tax to be written off, the Commissioner may not reverse the write-off even if, during the term of the instalment arrangement, the taxpayer does not meet the instalment arrangement's terms.

                                      Notes
                                      • Section 177C: inserted, on , by section 92(1) of the Taxation (Relief, Refunds and Miscellaneous Provisions) Act 2002 (2002 No 32).
                                      • Section 177C(1BA): inserted, on , by section 181(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                      • Section 177C(1B): inserted (with effect on 1 April 2008), on , by section 40 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
                                      • Section 177C(1C): inserted (with effect on 1 April 2008), on , by section 40 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
                                      • Section 177C(1D): inserted (with effect on 1 April 2010), on , by section 100 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
                                      • Section 177C(5): replaced, on , by section 204 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                                      • Section 177C(5): amended (with effect on 1 April 2018), on , by section 208(1) (and see section 208(5) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                      • Section 177C(5BA) inserted, on , by section 208(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                      • Section 177C(5B): replaced, on (effective for 2008–09 income year and later income years, unless the context requires otherwise), by section ZA 2 of the Income Tax Act 2007 (2007 No 97).
                                      • Section 177C(5C) replaced, on , by section 208(4) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                      • Section 177C(6): replaced, on (applying to tax that is written off on and after 21 December 2004), by section 135(1) of the Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).
                                      • Section 177C(6): amended, on (effective for 2008–09 income year and later income years, unless the context requires otherwise), by section ZA 2 of the Income Tax Act 2007 (2007 No 97).
                                      • Section 177C(7)(a): amended, on , by section 181(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                      • Section 177C(7)(b): amended, on , by section 181(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).