Remission of penalties and interest
In response to the outbreak of COVID-19, we acknowledge that many customers will be coming under increasing financial pressure to pay their taxes in full and on time.
This might mean that to maintain a business’s long-term viability, arrangements might need to be made in respect of a business’s ability to pay its tax. We've been asked to clarify what support is available to customers.
To assist customers, we already have financial relief and remission provisions in the Tax Administration Act 1994 (TAA). The Government has also introduced a new section 183ABAB into the TAA 1994 giving us the ability to remit use of money interest (UOMI) charged if the customer's ability to pay tax on time has been significantly adversely affected by the COVID-19 outbreak.
This new provision includes both when a customer is physically unable to make a tax payment on time and also when a customer is financially unable to make a tax payment on time because of the economic effects of the COVID-19 outbreak. Our ability to remit interest under s 183ABAB applies to tax payments due on or after 14 February 2020, and ends on 25 March 2022.
For consistency, we intend to use the same dates in considering relief more generally for customers adversely affected by COVID-19. The principles below that apply to considering the new section 183ABAB, will also be applied when considering other forms of relief from penalties for customers who have been significantly adversely affected by COVID-19.
It is important that customers who can pay their taxes on time continue to do so. The following special provisions will apply only to customers who have been significantly adversely affected by the COVID-19 outbreak.
While this sets out the Commissioner’s approach to remitting penalties and UOMI, we understand that each customer’s situation is unique.
When the Commissioner will remit penalties and UOMI
The following is the eligibility criteria customers must meet for remittance of penalties and UOMI.
- The customer has tax that is due on or after 14 February 2020.
- The customer’s ability to pay by the due date, either physically or financially, has been significantly affected by COVID-19.
- The customer contacts the Commissioner as soon as practicable to request relief and will be required to pay the outstanding tax as soon as practicable.
It is the Commissioner’s view that the customer has been significantly affected by COVID-19 financially where the customer’s income or revenue has reduced because of COVID-19 and that because of that income or revenue reduction cannot pay their taxes in full and on time.
As soon as practicable
“As soon as practicable” will be determined on the facts of each case. For guidance, the Commissioner considers the term will be satisfied so long as the customer applies for the relief at the earliest opportunity and agrees to an arrangement that will see the outstanding tax paid at the earliest opportunity, or will be paid over the most reasonable period given the customer’s specific circumstances.
Those customers who require further assistance at a later date, such as having to renegotiate the terms of an arrangement, should contact us at the earliest opportunity after they know they will have difficulty in paying the tax as agreed.
So long as the customer completes an arrangement (which may have been amended at the customer's request during the period of the arrangement), the Commissioner will accept that by entering into and completing that arrangement, the test for “as soon as practicable” in respect of paying the tax will have been met.
Interest and penalties will continue to accrue for those customers entering into arrangements. However, when the arrangement is completed, and we have already established the customer meets the criteria for remission, that interest will be automatically cancelled without the need for the customer to apply for remission.
If the customer defaults on the arrangement, penalties and interest will be charged from the original due date.
If you have already paid tax late that included interest and penalties, you can request remission of the interest and penalties if your income has been affected by COVID-19.
Information to be provided when requesting relief
We will be trying to minimise the information we ask for during these unusual times. By continuing to file GST and other returns we will have a lot of the information we would normally ask for. However, customers should be able to provide, if asked:
- at least three months banks statements and credit card statement
- any management accounting information
- a list of aged creditors and debtors.
We will not ask for that information in every case, but the information should be available if we do ask for it.
For businesses, we'll be looking to understand the customer’s plan to sustain their business. We understand you might not be able to get all this information at this time given the COVID-19 lockdown. We will work with you based on what you know and are able to access at this time and will continue to do so as more information becomes available.
Types of relief available
New debt due to COVID-19
- An Instalment arrangement.
- An Instalment arrangement - deferred payment start date.
- Partial write-off due to serious hardship and payment of the remaining tax by instalment or a lump sum.
- Partial payment and write-off the balance under maximising recovery of outstanding tax.
- Write-off due to serious hardship.
Pre-existing debt before COVID-19
Customers who may already be in an arrangement but believe they may not be able to continue with the current terms due to being significantly affected by COVID-19 may ask to renegotiate the instalment arrangement.
Any of the above options may be appropriate and each case will be considered on its own facts. We encourage customers to contact us as soon as they believe they will have difficulty in meeting their current arrangement.
Customers who do not have their debt under an arrangement should contact us as soon as possible to discuss what options may best suit their circumstances.