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Inland Revenue

Tax Policy

Chapter 6 - Disputable decisions

This chapter proposes amending the TAA to clarify that the Commissioner’s decision whether or not to agree to a taxpayer’s opt-out request (and certain other matters) are not “disputable decisions”. It also suggests making the exceptional circumstances discretion a disputable one.

6.1 A disputable decision should be one that has a direct bearing on the quantum of tax payable by a taxpayer. An assessment is the most obvious example of this, but other decisions made by the Commissioner have a potentially similar effect. These decisions should be afforded a relatively simple and clear appeal right, such as the challenge proceedings set out in Part VIIIA.

6.2 By contrast, administrative decisions made by the Commissioner should – as with every government agency – be subject to administrative review applications. No special system is required in the tax legislation to achieve this.

6.3 The courts have determined that a taxpayer can use the challenge procedures set out in Part VIIIA to challenge any decision of the Commissioner that is “disputable”. The definition of “disputable decision” covers an assessment and any other decision made by the Commissioner under a tax law, except for decisions specifically excluded by the definition. If a decision made by the Commissioner is excluded from the “disputable decision” definition, the only option available to a taxpayer is to have the decision reviewed through a judicial review application. [22]

6.4 The specific examples raised in this chapter relate to the list of exceptions to the “disputable decision” definition contained in section 138E. [23] However, this review also provides an opportunity to look at the definition more generally. We would be particularly interested in any submissions on whether the current definition imposes undue compliance costs by effectively requiring taxpayers to issue a NOPA in response to a decision made by the Commissioner that does not itself make an amended assessment imminent.

Opting out of the disputes process

6.5 As mentioned in previous chapters, we anticipate that agreements under section 89N(1)(c)(viii) to opt out of the disputes process will become more common in future.

6.6 Under the current drafting of section 138E, a decision of the Commissioner to enter into an opt-out agreement is “disputable”. By their very nature, opt-out agreements are consensual and freely entered into by the parties. We therefore do not consider that the best interests of the disputes process are served by providing taxpayers with the ability to challenge this decision.

6.7 If the Commissioner does not agree to enter into an opt-out agreement, the remaining steps of the disputes process will follow and, generally (assuming neither party accepts the position of the other in the interim), lead to an assessment. That assessment can be challenged by the taxpayer in the normal way, so the taxpayer does not “lose” as a result of the Commissioner’s procedural decision regarding the opt-out.

6.8 As a result, we propose an amendment to section 138E to clarify that the Commissioner’s decision whether or not to enter into an opt-out agreement under section 89N(1)(c)(viii) is not “disputable”.

Validity of NOPA and SOP

6.9 Section 138E(1)(e) lists the decisions that cannot be challenged if the decision “is left to the discretion, judgment, opinion, approval, consent or determination of the Commissioner”. This wording is consistent with the policy intent that discretionary administrative matters should not generally be subject to the challenge provisions.


6.10 Under section 89B, the Commissioner may issue one or more NOPAs in respect of a tax return or assessment. The use of the word “may” is permissive; the Commissioner is not compelled to issue a NOPA (other than possibly under the care and management provisions). The fact that the Commissioner “may” issue a NOPA suggests that this is a matter that is “left to the discretion, judgment [or] opinion” of the Commissioner.

6.11 However, the decision to issue a NOPA is not listed as one of the exceptions to the use of the challenge proceedings under section 138E. The result is that the issuing of a NOPA by the Commissioner is arguably a “disputable decision”. This means that, in theory, a taxpayer could issue a NOPA in response to the Commissioner’s NOPA. Such an outcome is clearly procedurally circular and in substance contrary to the scheme and purpose of the disputes process. The disputes process is designed so that taxpayers do have a right of response to the Commissioner’s NOPA, through their NOR.


6.12 Section 89M(3) states that the Commissioner must, unless the dispute is taxpayer-initiated, provide the taxpayer with a SOP at the same time as the disclosure notice is issued.

6.13 Section 89M is one of the provisions listed in section 138E(1)(e), meaning that discretionary decisions made under it are not “disputable”. However, the use of “must” in section 89M(3) effectively compels the Commissioner to provide the disputant with a SOP. Therefore, issuing a SOP is arguably not discretionary. The result is that the taxpayer can, in theory, respond with a NOPA.

6.14 As with the previous issue, an ability to respond to a SOP with a NOPA is circular and unintentional. The disputes process already provides an avenue for taxpayers to respond to the Commissioner’s SOP.

6.15 We therefore consider that section 138E should be amended to clarify both of these issues.

Definition of “disputable decision”

6.16 An overlap has been identified in the definition of “disputable decision”. Subparagraph (iv) of the definition provides that a decision is not a “disputable decision” if it “is left to the Commissioner’s discretion under sections 89K, 89L, 89M(8) and (10) and 89N(3)”. However, decisions left to the Commissioner’s discretion under sections 89K and 89M are also excluded from being “disputable” by the operation of section 138E.

6.17 The definition of “disputable decision” and section 138E should be amended so that all discretionary-type matters are listed in one place (section 138E) rather than in the definition itself.

Exceptional circumstances

6.18 The Commissioner has the ability under section 89K to determine whether to allow a taxpayer to provide documents out of time. Late submissions will be allowed if the Commissioner is satisfied that the lateness is as a result of “exceptional circumstances”. This decision is not a “disputable decision”. Given the policy rationale for a decision to be “disputable”, and the implications for the taxpayer if the “exceptional circumstances” test is not satisfied, we consider that a decision by the Commissioner that the test has not been satisfied should be disputable. Proposed amendments to the definition of “exceptional circumstances” generally, and its relationship with the disputable decision definition, are discussed in more detail in the following chapter.


22 Westpac Banking Corporation v CIR (2008) 23 NZTC at para. 30-31.

23 One exception from the “disputable decision” definition is decisions that cannot be challenged under Part VIIIA. Section 138E contains the relevant list.