Allboat Transport Pty Ltd And Commissioner of Taxation
[2013] AATA 808
•14 November 2013
[2013] AATA 808
Division TAXATION APPEALS DIVISION File Number
2013/1899
Re
Allboat Transport Pty Ltd
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Dr P McDermott RFD, Senior Member
Date 14 November 2013 Place Brisbane The objection decision under review is affirmed.
.............................[Sgd]...........................................
Dr P McDermott RFD, Senior Member
CATCHWORDS
TAXATION – Withholding tax – Incorrect reporting – Administrative penalty – Not appropriate to remit penalty in part or in full – Objection decision affirmed
LEGISLATION
Taxation Administration Act 1953 (Cth) ss 284-75, 284-85, 284-90, 284-220, 284-225, 298-20 of Sch 1
CASES
Howard v Federal Commissioner of Taxation (2012) 206 FCR 329
McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284
REASONS FOR DECISION
Dr P McDermott RFD, Senior Member
14 November 2013
I have to determine whether an administrative penalty under s 284-75(1) of Sch 1 of the Taxation Administration Act 1953 (Cth) (“the Act”) should be remitted in part or in full pursuant to s 298-20 of Sch 1 of the Act.
BACKGROUND
The business of the applicant commenced as a sole trader in 1989. Since 1994 the business of the applicant has been conducted using a company structure, with the company being a trustee of a family trust. Since 1 July 2000 the applicant has been registered for Pay As You Go (“PAYG”) withholding, reporting on a quarterly basis. This application relates to eight Business Activity Statements which were lodged for the quarters ended 30 September 2007, 31 December 2007, 31 March 2008, 30 September 2008, 31 December 2008, 31 March 2009, 30 June 2009 and 30 September 2010. The first Business Activity Statement (“BAS”) initially reported that an amount of -$213 was withheld;[1] this amount was later amended by the Australian Taxation Office (“ATO”) to $0 after receiving information from the applicant. Each of the other BASs contained the statement that an amount of $0 PAYG tax was withheld or no entry was made. On 15 August 2012 an audit was completed which determined that the applicant had in each BAS failed to report the PAYG withholdings made or had understated these amounts, disclosing a liability to the ATO of $43,908.
[1] Exhibit A, pp. 35-36.
On 7 September 2012 a notice of assessment for a penalty of $10,997 was issued on the grounds that the applicant had failed to take reasonable care. On 4 February 2013 the applicant requested an extension of time to make an objection against the penalty.
On 11 February 2013 the Commissioner whilst allowing the extension of time to object to the penalty, disallowed the objection.
I have to determine whether the incorrect statements by the applicant in each BAS warranted the imposition of a penalty of 25 per cent of the shortfall amount on the grounds that it demonstrated a lack of reasonable care to comply with a taxation law. There was evidence before me that prior to the lodgement of the BAS for the quarter ended 30 September 2007 the applicant had correctly reported the amounts that had to be reported in each BAS.
The applicant tendered a statement by Victoria Mutton,[2] one of the directors of the applicant which explained that for many years the applicant had the practice of paying “PAYG tax and employee superannuation on a weekly or fortnightly basis, at the same time we pay employee wages”. When she printed the BAS form for the quarter ended 30 September 2007 she was surprised to find a negative amount of -$213 at W2 (PAYG tax withheld) and at Label 4 (Summary). Ms Mutton stated that she was informed by the ATO that she could not enter negative amounts on the BAS form. In her statement she remarked: “At no time did they inform me that I should have put the total PAYG for the quarter at W2 and Label 4”. The applicant tendered a letter dated 9 January 2008 from the ATO that related to the BAS for the period 1 July 2007 to 30 September 2007.[3] That letter contains the comment: “The amount at Label 4 (PAYG tax withheld) was adjusted to $0 as a result of information supplied”.
[2] Exhibit C.
[3] Exhibit B.
RELEVANT LEGISLATION
Section 284-75(1) of Sch 1 of the Act provided for all periods excluding the quarter ended 30 September 2010:
You are liable to an administrative penalty if:
(a) you or your agent makes a statement to the Commissioner or to an entity that is exercising powers or performing functions under a taxation law; and
(b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it; and
(c) you have a shortfall amount as a result of the statement.
The term “shortfall amount” is defined in Item 1 of the Table in s 284-80(1), which reads relevantly:
A tax-related liability of yours for an accounting period, or for a taxable importation… worked out on the basis of the statement is less than it would be if the statement were not false or misleading.
Section 284-75(1) of Sch 1 of the Act has been amended and it provides that for the quarter ended 30 September 2010:
You are liable to an administrative penalty if:
(a) you make a statement to the Commissioner or to an entity that is exercising powers or performing functions under a taxation law (other than the Excise Acts); and
(b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it.
Section 284-85(1) of Sch 1 of the Act provides that the base penalty amount is to be determined by reference to the table in s284-90. That provision enables that amount to be increased under s 284-220 of Sch 1 of the Act or reduced under s 284-225 of Sch 1 of the Act.
Item 3 of the table in s 284-90 of Sch 1 of the Act provides that the base penalty amount is 25 per cent in the case of a failure to take reasonable care to comply with a taxation law.
Section 284-225(1) of Sch 1 of the Act provided at the relevant time that the base penalty amount is to be reduced by 20 per cent for an accounting period if:
(a) the Commissioner tells you that an examination is to be made of your affairs relating to a taxation law for a relevant period; and
(b) after that time, you voluntarily tell the Commissioner, in the approved form, about the shortfall, the part of it or the false or misleading nature of the statement; and
(c) telling the Commissioner can reasonably be estimated to have saved the Commissioner a significant amount of time or significant resources in the examination.
Section 298-20(1) of Sch 1 of the Act provides:
(1) The Commissioner may remit all or a part of the penalty.
CONSIDERATION
The objection that was lodged by the tax agent of the applicant does not challenge the imposition of the penalties. The objection seeks the remission of the penalty. I must then consider whether the applicant is entitled to a remission pursuant to s 298-20(1) of Sch 1 of the Act.
The applicant has been put to proof to show that the assessment of the Commissioner is excessive: see s 14ZZK of the Act. See also McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284. In my opinion the applicant has failed to discharge its onus of proving that the assessment is excessive.
Section 284-75(1) of Sch 1 to the Act provides for the imposition of an administrative penalty where the taxpayer makes a statement to the Commissioner which is false or misleading in a material particular. There can be no dispute in this instance that the BASs that have been lodged by the applicant on eight separate occasions were false or misleading in a material respect in not correctly stating the amounts of PAYG tax that were withheld .
The base penalty for any shortfall amount resulting from the failure of a taxpayer to take reasonable care is 25 per cent under item 3 of s 284-90(1) of Sch 1 of the Act. In Howard v Federal Commissioner of Taxation (2012) 206 FCR 329, the Full Federal Court (at 345) remarked that “the standard of reasonable care is an objective one and turns on a reflection upon the circumstances as known”. The applicant has contended that there is an ambiguity in the BAS form as the part in the panel form which refers to “PAYG tax withheld” refers to the amount that the applicant had to pay the ATO. As the applicant in a letter dated 18 April 2013 explained:[4]
Victoria’s reasoning in filling out the BAS forms was that, in the Summary section of the BAS form under ‘Amounts you owe the Tax Office – PAYG tax withheld 4”, we did not owe any PAYG tax, as it was already paid in advance (usually weekly).
[4] Exhibit A, p. 7.
However, this explanation is inconsistent with the previous practice of the applicant in completing the BAS documentation. The expression “PAYG tax withheld” is an expression that is easily understood and which refers to what amount of PAYG tax was withheld by the applicant. The person who completed the BASs on behalf of the applicant was not present to give any evidence about the precautions that she took to ensure that the BAS forms were correctly competed.
One of the main submissions of the applicant was that the BAS documentation was difficult to complete but this explanation is difficult to sustain having regard to the previous history of the applicant in correctly reporting the amounts of PAYG tax that were withheld. During the hearing the Commissioner referred to one example of the applicant correctly reporting amounts of PAYG tax withheld and remitted to the ATO was the BAS for the January to March 2004 quarter which was declared by Victoria Mutton on 10 March 2005, that document discloses that an amount of $3,257 PAYG tax was withheld.[5] The Integrated Client Account Reconciliation that was tendered in evidence shows that the applicant had on 28 April 2004 remitted the correct amount of $3,257 to the ATO (item 87).[6]
[5] Exhibit H.
[6] Exhibit G.
The applicant also contended that the ATO has a “moral responsibility” to supervise the actions of taxpayers for some time to ensure that the applicant had correctly completed the BAS documentation. However, this contention is inconsistent with the self-assessment regime with administrative penalties for non-compliance that Parliament has decided should be implemented.
There is also evidence that the person who completed the BAS documentation was ill.[7] However, the completion of false and misleading BAS documentation was not an isolated instance.
[7] See Exhibit A, p. 8 and Exhibit F.
The assessed penalty can be remitted in part or in full at the discretion of the respondent pursuant to s 298-20(1) of Sch 1 of the Act. However, I do not consider that there are grounds which would justify a remission. The person who completed each relevant BAS did not give evidence in support of the application. I have also borne in mind that the applicant had prior to the relevant events correctly completed the BAS documentation. I am satisfied that there was a failure by the applicant to take reasonable care in completing the BAS documentation. There is no evidence of any intentional conduct on the part of the applicant which would warrant the imposition of a higher level of penalty.
For the sake of completeness I should record that I asked the applicant whether there was any contention that there was voluntary disclosure of the shortfall in the course of a tax audit, the applicant confirmed that there was no such voluntary disclosure. This has the consequence that there is no entitlement to a reduction of 20 per cent on the administrative penalty under s 284-225(1) of Sch 1 of the Act.
DECISION
I affirm the objection decision.
I certify that the preceding 23 (twenty-three) paragraphs are a true copy of the reasons for the decision herein of Dr P McDermott RFD, Senior Member ...........................[Sgd].............................................
Associate
Dated 14 November 2013
Date of hearing 21 October 2013 Advocate for the Applicant Mr Gregory Mutton Solicitor for the Respondent Mr Scott Reeve
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