Imagine that section 6 of the Tax Return

Act 2024 (Cth) (the ‘TRA’) states:

• “If the taxpayer submits an

  inaccurate tax return, the taxpayer will be penalised with a fine equivalent to

  3 times the tax that they ought to have paid.”

The TRA was passed for the purpose of

preventing tax underpayment.

Homer, a man of high integrity who is

nevertheless sometimes a bit naive, has been charged with submitting an

inaccurate tax return under the TRA and the Australian Taxation

Office is seeking a penalty under section 6. Homer stated a personal tax

liability of $30,000 when it should have been $20,000 (meaning that he actually

should have paid a lower amount of tax).

Which statement or statements is (or are) most

likely to be 

i. Homer’s lawyer will rely on

a literal interpretation of the TRA.

ii.  The ATO will seek to rely

on an interpretation of section 6 of the TRA which follows the purposive

approach.

iii. Homer’s lawyer will likely

argue that if we look at the purpose of the TRA, her client did not breach

section 6. In this sense, this section should only apply to cases

concerning tax underpayment (i.e. the rule does not cover cases about

overpayment).

iv. The ATO, arguing for a

literal interpretation of section 6 of the TRA, will argue that Homer did

breach the provision and, therefore, he must pay the fine. They will insist

that section 6 of the Act does not distinguish between overpayment and

underpayment and, therefore, the penalty applies in either case.