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Non-taxable ‘Assessments’

22.74. Each year the Taxation Office receives returns of income upon which no income tax is payable. In relation to these returns the legislation does not require the Commissioner to issue any binding notification of his computation of the taxable income or loss, as it does in respect of returns upon which tax is payable. It has been put to the Committee that any adjustment sheet or other advice issued by the Commissioner should in effect be treated as an ‘assessment’ under the legislation, particularly where losses available for carry-forward are involved. This would mean, among other things, that the provisions of the law relating to the amendment of assessments and to objections and appeals against assessments would apply in relation to non-taxable ‘assessments’.

22.75. The argument for treating advices of losses as assessments is mainly that it would enable the taxpayer promptly to challenge, by the procedure for objection and appeal under the law, any adjustment made by the Commissioner with which the taxpayer did not agree. The present position, of course, is that the taxpayer is in no way deprived of the right of objection and appeal against adjustments in determining losses that become effective as a deduction from subsequent income. In the year of effective set-off, the taxpayer can object and appeal against the quantum of loss so brought forward and thus challenge any adjustment by the Commissioner.

22.76. If advices of losses were to be regarded as assessments, consequences other than rights of objection and appeal would follow. The provisions of the law relating to amendment of assessments would apply so that taxpayers would be subject to the time restrictions on adjustments that now apply to taxable assessments. If a taxpayer did not object within sixty days of service of a notice, he could find that a required adjustment to a loss involving a question of interpretation of a law was not possible


  ― 399 ―
under the legislation or that the time to correct an error in calculation or mistake of fact had run out. Further, a taxpayer in reaching a decision whether to challenge, by objection and appeal, an adjustment in a non-taxable assessment would need to weigh up the time and cost involved against the possible tax effect in the future.

22.77. It would be difficult to confine any provisions granting assessment status only to cases involving losses. Instances where adjustments to claimed losses create a taxable income but no tax liability would have to be included; also those cases involving a taxable income but no tax payable, where the year concerned could be taken into account in determining an average income, would have claim to similar treatment. In the result, the Taxation Office might be faced with the task of issuing a great number of non-taxable assessments to taxpayers who did not require the information.

22.78. The Committee does not favour provisions requiring the Commissioner to issue a non-taxable assessment in every non-taxable case or provisions treating all advices issued by the Commissioner in relation to non-taxable returns as assessments. It recommends that a taxpayer be entitled to request the Commissioner to issue a formal non-taxable assessment which, on issue, would for all purposes be regarded as an assessment. At the same time opportunity might be taken to clarify the intended purpose of section 171 of the Act, which deals with the position where no notice of assessment has been served within the period of twelve months after lodgment of a return.

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