Refunds

(Clauses 36 and 52)

Summary of proposed amendments

The bill proposes that the Commissioner must refund overpaid amounts of provisional tax paid through AIM to the taxpayer upon their request before year-end.

Application date

The proposed amendments will apply for the 2018–19 and later income years.

Key features

Section RM 6B of the Income Tax Act 2007 provides that upon receiving the required information from the taxpayer, the Commissioner can refund amounts of overpaid AIM provisional tax throughout the income year where the AIM payments to date are greater than the AIM calculation of tax liability year-to-date. An AIM taxpayer can only request a refund of actual provisional tax paid in the current year.

Proposed section 120VB of the Tax Administration Act 1994 provides that no use-of-money interest is payable by the Commissioner on overpaid AIM provisional tax.

Background

As overpaid provisional tax represents working capital of a business held by Inland Revenue, it is important this is returned to the taxpayer in a timely manner. This is one of the major benefits to taxpayers using AIM. An imputation credit account return will not be required to access a refund mid-year.

A taxpayer would need to contact Inland Revenue in the prescribed manner to demonstrate overpaid provisional tax – likely to be through the software itself. It is proposed that an overpayment of AIM provisional tax can be refunded directly to the taxpayer, be transferred across to another tax type or remain as overpaid provisional tax to be offset against a future liability.

The Commissioner cannot refuse to refund amounts owing under AIM due to an outstanding tax liability in another area such as PAYE or GST.