The statement provides a comprehensive interpretation of the shortfall penalty for not taking reasonable care under section 141A of the Tax Administration Act 1994. The statement:

• Explains the meaning of “reasonable care” as an objective standard, focusing on what a reasonable person in the taxpayer’s circumstances would do.
• Outlines the circumstances in which a taxpayer is treated as having taken reasonable care, including reliance on a tax advisor or taking an acceptable tax position.
• Details the factors Inland Revenue will consider in assessing reasonable care, such as the size and nature of the shortfall, the taxpayer’s knowledge and experience, and the adequacy of systems and controls.
• Provides practical examples and a flowchart to illustrate the application of the penalty.
• References relevant case law and legislative provisions, and cross-references companion statements on penalty reductions and unacceptable tax positions.

CA ANZ supports the overall clarity and direction of the statement but recommends improving its structure and headings to enhance readability.

Further recommendations are also made to strengthen the accompanying draft Fact Sheet.