Penalties and Interest

This process does not remove the need for taxpayers to take care in preparing tax positions.  The following paragraphs summarise the position proposed by the Commissioner.

In most cases when interpreting a rewritten provision under the ITA 2007, taxpayers will be able to rely on existing interpretations of the corresponding ITA 2004 provision.  If a taxpayer has taken an acceptable tax position, a taxpayer will not be liable to a shortfall penalty.

If the meaning of the ITA 2007 is unambiguous, it should be applied, even if it appears that there has been an unintended change.

However, if a taxpayer has not taken an acceptable tax position then a shortfall penalty will be imposed.

Inland Revenue advises that it will provide more detail on the treatment of penalties and interest in a Standard Practice Statement that will be published in their Tax Information Bulletin.