Whether section 183ABAB can provide relief from use-of-money interest (UOMI) for provisional taxpayers depends on factors including the following.
- The date by which the tax was due to be paid (it must be on or after 14 February 2020).
- The balance date (this determines the due dates for provisional tax and terminal tax).
- The provisional tax method chosen or applied for the tax year (this determines the date UOMI will be charged from).
The scenarios in the blue boxes below are intended to provide guidance for the most common situations that we have identified. The scenarios have been drafted based on current law and may change as a result of any additional legislation changes.
UOMI relief for provisional taxpayers for the 2021 and 2022 tax years
Further legislative changes made on 6 August 2020 provide UOMI relief for provisional taxpayers for the 2021 tax year in certain circumstances under section 183ABAC. This has now been extended to the 2022 tax year. This relief is in addition to any relief that may be available under section 183ABAB.
Please note that the COVID-19 remission rules remit UOMI that arises as a result of a late payment due to COVID-19. They do not enable the remission of UOMI that arises as a result of a taxpayer paying less provisional tax than their end of year residual income tax (RIT) liability.
The COVID-19 remission rules were amended to enable such remission and this is targeted at smaller businesses (such as those with an RIT of $ 1million or less) who have not paid sufficient provisional tax due to the business being unable to accurately forecast their provisional tax due to COVID-19 impacts.
COVID-19 UOMI remission for provisional taxpayers – Section 183ABAC
Remission for most taxpayers with 2020 RIT of less than $60,000
We have identified taxpayers who have 2020 RIT of less than $60,000 and have incurred UOMI on their RIT from their last instalment date which they would not have incurred but for the late payment of a 2020 provisional tax instalment that fell due on or after 14 February 2020 due to COVID-19. For most of these under $60,000 RIT provisional taxpayers we will remit the UOMI under the general remission rules. The criteria for remission are:
- Used the standard method for 2020 provisional tax; and
- RIT of less than $60,000; and
- Paid all instalments due before 14 February 2020
- on time and in full (including allowing for the $20 tolerance on underpaid amounts), or
- were nil; and
- Paid one or more instalments that fell due after 14 February 2020 late; and
- Incurred UOMI from 8 May 2020 up to 7 April 2021 (or equivalent dates for non-standard balance dates).
For taxpayers who have less than $60,000 RIT and qualify for remission of UOMI incurred between their last instalment date and their terminal tax date, we will manually update the remissions (these taxpayers have been identified so there is no longer a need to contact us to ask for remission). This work is expected to take several weeks and will commence in July 2021.
Taxpayers with 2020 RIT of less than $60,000 who do not meet the above criteria and all taxpayers with 2020 RIT of $60,000 or more who paid insufficient provisional tax (that is, have a 2020 terminal tax liability) are expected to pay the UOMI incurred in relation to that amount unless they qualify for relief as set out in our standard practice statement.
SPS 18/04 Options for relief from tax debt
Section 183ABAB will be applied to provisional tax and terminal tax obligations for the 2020, 2021, 2022 tax years, and some provisional instalments for the 2023 tax year provided they are due on or before 8 April 2024. Information is also provided on provisional tax and UOMI which may be useful in considering provisional tax payment methods and UOMI consequences.
- Scenarios 1 and 2 explain how section 183ABAB applies to provisional tax instalments.
- Scenarios 3 to 8 explain how section 183ABAB applies to UOMI charged on terminal tax and how this is affected by the method used to calculate provisional tax.
Where further scenarios and other information are identified these will be added as and when they are identified.
A provisional taxpayer has 3 instalments of provisional tax for the 2019 tax year and has a standard balance date of 31 March. These instalments are due to be paid on 28 August 2018, 15 January 2019 and 7 May 2019.
If any of these instalments are paid late, section 183ABAB will not provide any relief as none of the instalments are due on or after 14 February 2020. UOMI will be charged, from the day after the due date of each unpaid instalment until the tax, late payment penalties and UOMI are paid.
The same facts as for Scenario 1, but the tax year is 2020. The provisional tax instalment due dates are 28 August 2019, 15 January 2020 and 7 May 2020. If either or both of the first 2 instalments are paid late, section 183ABAB will not provide any relief. UOMI will then be charged from the day after the due date of each of these instalments.
If the last instalment is paid late section 183ABAB could provide relief if the late payment is due to COVID-19 as that due date is after 14 February 2020. UOMI would be charged from 8 May 2020 but could be remitted under section 183ABAB provided the late payment is due to COVID-19.
A provisional taxpayer has a standard balance date of 31 March, their 2019 terminal tax is due on 7 February 2020 and they met all of the criteria to be a safe harbour provisional taxpayer.
UOMI will be charged from 8 February 2020. If the terminal tax is paid late section 183ABAB will not provide any relief as that due date is not on or after 14 February 2020.
The same facts as for Scenario 3, but the 2019 terminal tax is due on 7 April 2020 as the provisional taxpayer has an extension of time via a tax agent.
UOMI will be charged from 8 April 2020. If the terminal tax is paid late, section 183ABAB could provide relief as that due date was after 14 February 2020.
A provisional taxpayer has a standard balance date of 31 March, their 2019 terminal tax is due on 7 February 2020 and they are an estimator. For the person to have a terminal tax liability their RIT is more than their estimated provisional tax.
Because the RIT of an estimator is spread across their provisional tax instalments UOMI could have started as early as from the day after their first instalment date. If the terminal tax is paid late section 183ABAB will not provide any relief as that due date is not on or after 14 February 2020.
The same facts as for Scenario 5, with the 2019 terminal tax being due on 7 April 2020 as the provisional taxpayer has an extension of time via a tax agent.
If the terminal tax is paid late section 183ABAB can provide relief as that due date is after 14 February 2020. However, the remission of UOMI is only in respect of the late paid terminal tax amount (that is, UOMI charged from 8 April 2020 on the terminal tax amount only), not in respect of either:
- any provisional tax instalment amount that is not paid on time as the due dates for those provisional tax liabilities fall on 28 August 2018, 15 January 2019 and 7 May 2019
- UOMI charged on the terminal tax up to and including 7 April 2020, because that portion of UOMI is not charged due to the late payment of the terminal tax (that is, that portion of the UOMI is always payable whether the terminal tax was paid on the due date or late).
A provisional taxpayer has a standard balance date of 31 March, their 2019 terminal tax is due on 7 February 2020 and they meet all the criteria of the UOMI concession rules in section 120KBB.
The UOMI concession rules apply where a person is not a safe harbour provisional taxpayer or an estimator and none of the other special UOMI rules apply. Under the UOMI concession rules if all provisional tax instalments are paid in full and on time UOMI will apply from the day after the last provisional tax instalment.
The person is deemed to have their RIT apply at their last instalment date (7 May 2019 in this example) for UOMI purposes even though their terminal tax date is 7 February 2020. UOMI will be charged from 8 May 2019. If the terminal tax is paid late, section 183ABAB will not provide any relief as their terminal tax is not due on or after 14 February 2020.
The same facts as for Scenario 7, with the 2019 terminal tax being due on 7 April 2020 as the provisional taxpayer has an extension of time via a tax agent.
The UOMI concession rules apply where a person is not a safe harbour provisional taxpayer or an estimator and none of the other special UOMI rules apply. Under the UOMI concession rules if all provisional tax instalments are paid in full and on time UOMI will apply from the day after the last provisional tax instalment.
The person is deemed to have their RIT apply at their last instalment date (7 May 2019 in this example) for UOMI purposes even though their terminal tax date is 7 April 2020. UOMI will be charged from 8 May 2019.
If the terminal tax is paid late section 183ABAB can provide relief as that due date is after 14 February 2020. However, the remission of UOMI is only in respect of the late paid terminal tax amount (that is, UOMI charged from 8 April 2020 on the terminal tax amount only), not in respect of UOMI charged up to and including 7 April 2020, because that portion of UOMI is not charged due to the late payment of the terminal tax (that is, that portion of the UOMI is always payable whether the terminal tax is paid on the due date or late).