Question: Can you please explain the following question? It is based on New Zealand Tax compliance and penalties. Can you please show the calculation steps? In

Can you please explain the following question? It is based on New Zealand Tax compliance and penalties. Can you please show the calculation steps?

In the 2020 tax year Fowler Limited returned assessable income of $1.0 million. Fowler Limited claimed a deduction for a loss on disposal of a building of $500,000. Following an audit, Inland Revenue reassessed the return to disallow the loss on disposal of the building. Inland Revenue have also stated that they see this as an unacceptable tax position.

1. Calculate both the tax shortfall and the shortfall penalties imposed.

2. What would be the impact on the penalty calculation if Fowler made a voluntary disclosure for the incorrect tax position prior to the commencement of the audit?

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