Part B: Penalties

Salim Habib is a New Zealand tax resident. He works as a salesperson and earns a salary plus bonuses. His other income is made up of rental income he receives from two units he owns in Mount Eden. In addition, he receives dividends from shares he owns in a couple of Australian companies. Salim has recently engaged Accounting Made EZ, an accounting firm based in New Lynn to prepare his 2019/20 income tax return.

Things have been hectic at work so Salim has made little effort to check the completeness of the information that he has on hand and gather the required information and documents. He is aware that his return will be prepared from the information provided by him to Accounting Made EZ. Salim later discovered that he had omitted to provide information on $2,000 of rental income he earned in this period in New Zealand and $500 of dividend income from his Australian shares.

Required: Discuss whether you consider Salim would be subject to a shortfall civil penalty. If he is subject to a penalty, then explain what type of shortfall penalty is likely to be imposed. Suggest to Salim how he can get the amount of penalty reduced if any is imposed. Provide legislative references to support your explanations. (4 marks)