AIM providers approval and revocation

(Clauses 40 and 44)

Summary of proposed amendments

The bill proposes a process of self-certification through statutory declaration before a software provider can offer a product that is deemed AIM-capable.

Application date

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

Key features

Proposed new section 15U of the Tax Administration Act 1994 states that AIM providers should apply to the Commissioner of Inland Revenue for approval for their AIM-capable accounting systems. The term approved “AIM provider” is proposed as a new defined term in section YA 1 of the Income Tax Act 2007. The Commissioner will approve the AIM provider, taking into consideration the integrity of the tax system, and the AIM provider will supply the Commissioner with a statutory declaration outlining the product, a commitment to regular updating and any other information the Commissioner has set out as required.

Providers can apply with a product that would either deliver AIM to businesses with gross income below $5 million a year or for a defined class of taxpayers who have gross income over $5 million a year.

New sections 15V and 15W of the Tax Administration Act 1994 state the Commissioner may revoke the above approval, after consultation with the AIM provider. It is proposed this would happen when the statutory declaration is held to be untrue and revoking the approval would positively affect the integrity of the tax system. The revocation would not take effect until the following tax year. An AIM provider may also notify the Commissioner of its choice to revoke. This would take effect in the following tax year and must be immediately communicated to all end-users of the AIM provider’s products.

New section 15X of the Tax Administration Act 1994 states the Commissioner may publish a notice regarding approvals or revocation if she chooses.

Detailed analysis

Self-certification is considered to be the most effective method of approving AIM providers. There are likely to be a large number of parties interested in providing AIM capacity, and consideration has been given to whether Inland Revenue would audit each software provider that applied. Possible issues with resourcing constraints and the negative business implications of delays in receiving Inland Revenue approval have resulted in self-certification being a more effective choice. It also reflects a long-term view of how Inland Revenue will engage and work with third parties in the future.

New section 15U of the Tax Administration Act 1994 states that AIM providers would need to apply to the Commissioner for approval for their AIM-capable accounting systems.

The Commissioner would approve the AIM provider with consideration to the integrity of the tax system, and the AIM provider themselves. Once the Commissioner was satisfied on these grounds, the AIM provider must supply the Commissioner with a written statutory declaration.

The statutory declaration would include an outline of the product itself, a commitment to keeping it updated, and any other information the Commissioner sets out as required. This information would be likely to relate to the technical aspects of AIM both in terms of tax policy and software requirements. The details of the declaration would be clearly outlined in the Technical Determination proposed in clause 46 (discussed later) and proposed to be released by Inland Revenue in early 2017.

A statutory declaration is a legal document which allows a person to declare something to be true for the purposes of satisfying a legal requirement. In this way statutory declarations are similar to affidavits. It is a crime under the Crimes Act 1961 (punishable by a term of imprisonment not exceeding three years) for a person to make a statutory declaration that is misleading or false. The specific procedure for making statutory declarations, coupled with the fact that false declarations can lead to imprisonment, give statutory declarations a special status.

New sections 15V and 15W of the Tax Administration Act 1994 state that the Commissioner may revoke an approval. It is proposed this would happen when the statutory declaration is held to be untrue and revocation would protect the integrity of the tax system.

The Commissioner would consult with a software provider before a revocation took effect, to give both parties a chance to work through any concerns and, where possible, remedy them. A revocation could be reversed by the Commissioner before it takes effect if the circumstances that gave rise to the revocation were remedied. This might occur when a provider accidently fails in one of its obligations (if, for example, it missed a minor tax update).

The revocation would not take effect until the following tax year, to allow taxpayers using the software to finish the income year, and not disadvantage them in any way.

If an AIM provider no longer wished to provide AIM capability through their software, they must notify the Commissioner. Revocation would take effect in the following tax year and must be immediately communicated to all users of the AIM provider’s products.

If a software provider had to cease business suddenly, the Commissioner would work with the affected taxpayers to ensure the integrity of the tax system was maintained.

The bill proposes that the Commissioner may publish a notice regarding approvals or revocation.