Introduction
Commissioner’s remedial power (CRP) was introduced to give the Commissioner of Taxation limited flexibility to modify the operation of tax law in certain circumstances. The intent is to ensure the law can apply more fairly and consistently without requiring constant legislative amendments. However, the CRP cannot always be exercised especially where modifications would contradict the intended purpose of the law or when budgetary impacts aren’t eligible.
In this blog, we’ll explore situations where the CRP was considered but not applied to assist individuals. These examples highlight limitations in the tax system that taxpayers may face when dealing with capital gain tax, rental property tax return obligations, or PAYG pay as you go installments.
Why the CRP Has Boundaries
The Commissioner’s remedial power comes with strict conditions:
- It must only be used where taxpayers are better off, or at least no worse off.
- It cannot be exercised contrary to the intent of the law or policy.
- It cannot be applied to benefit just one individual; changes must apply broadly.
- It must not create a non-negligible impact on the Commonwealth Budget.
These boundaries mean that while the CRP helps address some technical issues, individual taxpayers often cannot use it to remedy personal disputes with the tax system.
Situations Where CRP Could Not Be Used
- Record-Keeping Rules:
An exemption was sought for individuals required to keep records for five years, even though their period of review had been shortened to two years. However, Parliament clearly intended these rules in legislation, so the CRP could not override them. - Pre-CGT Asset Classification:
Some taxpayers sought discretion to treat assets as pre-capital gains tax assets where contracts were delayed beyond the introduction of CGT in 1985. Because legislation explicitly defines acquisition dates, the CRP could not reclassify these properties. - Inheritance Complications (CGT Event E7):
Where a second deceased passed away before the first deceased’s estate had been finalized, beneficiaries faced a CGT liability. The CRP could not be applied because rollover provisions were clearly restricted by law.
Rental Property and Capital Gain Tax
Many taxpayers sought CRP intervention in rental property tax return cases. For example:
- A taxpayer wanted their CGT liability waived on a jointly owned rental property because they did not receive rental income.
- Another sought to extend the CGT main residence exemption where a property was intentionally demolished during renovations.
Both requests were denied because the tax law was operating as intended. The CRP cannot rewrite policy to provide relief in such individual cases. Taxpayers in these scenarios must plan carefully for the capital gain tax implications on sale.
PAYG Pay As You Go Installments
Some individuals encountered high PAYG pay as you go installment rates that were greater than their top marginal tax rate. While many taxpayers ended up overpaying and later receiving refunds, requests to reduce these excessive rates via CRP were denied. The ATO reasoned that:
- Budget impacts would be significant if rates were formally capped.
- Taxpayers already have the option to vary their installment rates manually.
This shows how the CRP cannot always address fairness issues if government revenue could be negatively impacted.
Compensation and Taxation
Another case involved a taxpayer who received Centrelink and WorkCover payments and later had to repay them after receiving a compensation settlement. Even though the repayments created unfair outcomes, CRP could not be applied. The law’s policy intent was clear, and any relief would only benefit that specific taxpayer, which falls outside CRP’s powers.
Veterans and Superannuation Payouts
Veterans were similarly affected when lump sum superannuation payments required repayment of Department of Veterans’ Affairs pensions. Requests to broaden the definition of “repay” via CRP were rejected, as the law clearly required full repayment first. Instead, the ATO provided administrative solutions outside of CRP usage.
Medicare Levy Exemption and Job-seeker
Job-seeker payment recipients were not granted an exemption from the Medicare levy, even though the former Sickness Allowance recipients had one. The CRP was not applicable because the change reflected clear government policy intent, making the law operate exactly as intended.
Key Lessons for Taxpayers
From these examples, it’s clear that the Commissioner’s remedial power has limitations:
- It cannot override clear policy outcomes.
- It cannot address isolated, individual tax disputes.
- It cannot make large budgetary changes.
For individuals managing tax events like capital gain tax on rental properties, PAYG pay as you go installments, or complex inheritance scenarios, professional tax advice is crucial. Firms such as Tax NextGen can provide personalised strategies to navigate these challenges without relying on CRP.
Conclusion
While the remedial power of the Commissioner (CRP) aims to correct minor inconsistencies in taxation law, it does not always provide an answer for individual or intricate matters. When you have issues like rental property tax returns, PAYG installments, or capital gains tax, it’s a good idea to become proactive, tailored advice – instead of relying on the system to correct it for you.
Knowing what CRP does and doesn’t do puts you in charge of your tax responsibilities and provides the opportunity to search for smarter, more strategic means of remaining compliant and maximizing your tax planning.
