120F Interest priority and rights of Commissioner

(1)

The Commissioner must apply amounts paid on account of a taxpayer’s liability for unpaid tax and interest for a return period using the following pattern and order:

(a)

apply against interest on the amount of unpaid tax that arises first for the return period (the earliest unpaid tax) until that interest is paid; then

(b)

apply against the earliest unpaid tax, until that tax is paid; then

(c)

apply against the interest on the amount of unpaid tax that arises next for the return period (the next unpaid tax) until that interest is paid; then

(d)

apply against the next unpaid tax, until that tax is paid; then

(e)

apply to each later arising interest and unpaid tax amount, interest first, in time order that relevant unpaid tax amount arises for the return period, until they are paid.

(2)

The Commissioner may apply interest payable by the Commissioner to a taxpayer towards the payment of the taxpayer’s unpaid tax on or after the date the taxpayer furnishes their return of income.

(3)

The Commissioner may apply interest under subsection (2) only if the Commissioner is not prevented, by a tax law, from applying the relevant overpaid tax towards the payment of the tax.

(4)

If, for a period,—

(a)

a taxpayer is liable to pay the Commissioner interest on unpaid tax; and

(b)

the Commissioner is liable to pay the taxpayer interest on overpaid tax,—

the Commissioner may—

(c)

assess the taxpayer for the net amount of interest payable by the taxpayer for the period; or

(d)

pay the taxpayer the net amount of interest payable by the Commissioner for the period.

(5)

In this section, the expressions unpaid tax and overpaid tax include—

(a)

any tax which has not been paid or which has been overpaid; and

(b)

any civil penalty imposed in respect of that tax which has not been paid or which has been overpaid,—

as if the tax and the civil penalty were a single tax type.

Example for section 120F(1) (illustrative only)

On 1 September 2019, an assessment of $100 tax to pay is raised for the 2018–19 tax year. This amount incurs $5 use of money interest. On 1 September 2020 a re-assessment of $120 tax to pay is raised for the 2018–19 tax year along with an additional amount of $3 UOMI. The taxpayer pays the balance of $128. Payments are applied against the $5 use of money interest (i.e. interest on the earliest unpaid amount), then against the $100 tax. Next, payments are applied against the $3 use of money interest on $20 tax to pay, then against the $20 tax.

Section 120F: inserted, on 26 July 1996, by section 36(1) of the Tax Administration Amendment Act (No 2) 1996 (1996 No 56).

Section 120F(1): replaced (with effect on 17 April 2018), on 18 March 2019, by section 78(1) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section 120F(2): replaced, on 27 March 2001 (applying on and after 1 April 1998), by section 48(1) of the Taxation (Beneficiary Income of Minors, Services-Related Payments and Remedial Matters) Act 2001 (2001 No 4).

Section 120F example: inserted (with effect on 17 April 2018), on 18 March 2019, by section 78(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).