Section 352: tax on accreted income

When accreted income tax applies

Sub-section (1): every specified person is liable, in addition to the regular income-tax on total income, to pay additional income-tax on accreted income at the maximum marginal rate, in the cases set out in the Table in sub-section (4). Those trigger events include the cancellation of registration (and the outcome of any appeal against cancellation), adoption of objects that no longer conform to the registration conditions, failure to apply for fresh or renewed registration within the allowed time, conversion into a form ineligible for registration, merger with an entity that is not an eligible registered non-profit organisation with the same or similar objects, and failure to transfer assets to another registered non-profit organisation within twelve months of dissolution.

How accreted income is computed

Sub-section (2) gives the formula: Accreted income = aggregate fair market value of the specified person's total assets, as on the specified date, minus the total liability of the specified person as on that date - both computed using the prescribed valuation method.

Sub-section (3): this accreted income is then reduced by the amount attributable to specified assets, and any liabilities related to those assets.

When the tax must be paid

Sub-section (4): the specified person, and its principal officer or trustee, must pay the tax on accreted income within fourteen days from the due date fixed for each trigger case in the Table - for example, the due date after a registration-cancellation order is confirmed on appeal (or after the appeal period expires without an appeal being filed), the date of adoption of non-conforming objects, the last date for filing a fresh registration application if that deadline is missed, the date of conversion into an ineligible form, the date of merger, or the date the twelve-month window to transfer assets on dissolution expires.

Final payment, interest, and recovery

Sub-section (5): payment of the tax on accreted income is treated as the final payment of tax on that income - no further credit or deduction can be claimed by the specified person, or anyone else, for the amount so paid, under any other provision of the Act.

Sub-section (6): if the tax on accreted income is not paid in full within the allowed time, simple interest is payable, computed as 1% of the tax on accreted income for every month (or part of a month) from the day after the last date the tax was payable, until the date it is actually paid.

Sub-section (7): all provisions of the Act for collection and recovery of income-tax apply, and the following are deemed assessees in default: the specified person and its principal officer or trustee; and, where the tax is payable because of a failure to transfer assets on dissolution, the person to whom an asset forming part of the accreted-income computation was transferred.

Sub-section (8): the liability of that asset-transferee is limited to the extent the asset received by them is capable of meeting the liability.

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