Auelua and Commissioner of Taxation (Taxation and business)

[2024] ARTA 422

Auelua and Commissioner of Taxation (Taxation and business) [2024] ARTA 422 (15 November 2024)

Applicant/s:  Tauese Auelua

Respondent:  Commissioner of Taxation

Tribunal Number:                2023/0888

Tribunal:General Member C. Willis

Place:Melbourne

Date:15 November 2024  

Decision:The Tribunal affirms the decision under review.

.................................[SGD].......................................

General Member C. Willis

Catchwords

TAXATION – administrative penalties – false or misleading statement - whether applicant liable for administrative penalties on basis of recklessness – applicant provided his mobile phone logged into his myGov account to another person – preparation of BAS by person who was not a registered tax agent – whether penalty should be wholly or partly remitted – objection decision affirmed.

Legislation

Taxation Administration Act 1953 (Cth), section 14ZZK; Schedule 1, sections 284-75, 284-80, 284-85, 284-90, 298-20

Cases

BRK (Bris) Pty Ltd v Federal Commissioner of Taxation [2001] FCA 164
Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation [2008] FCAFC 54
Sanctuary Lakes Pty Ltd v Federal Commissioner of Taxation [2013] FCAFC 50; (2013) 212 FCR 483

Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust [2023] FCAFC 19

Secondary Materials

Australian Taxation Office, Law Administration Practice Statement PSLA 2012/5

Australian Taxation Office, Public Ruling MT 2008/1

Statement of Reasons

INTRODUCTION

1. Mr Tauese Auelua (the ‘Applicant’) came to Australia from Samoa in 1990. He worked for some years as a taxi driver and later in the security industry. He subsequently ceased paid work for health related reasons. 

2. The Applicant sought accounting and tax advice from a person (‘Mr B’) who purported to be a registered tax agent. Unfortunately Mr B was not so registered.

3. The Applicant became registered for Goods and Services Tax (‘GST’) purposes. Multiple Business Activity Statements (‘BAS’) were lodged in his name, together with claims being made for input tax credits and GST refunds across 2020. These lodgements and claims related to tax periods from 2000 to 2020.

4. Following three review and audit processes, the Commissioner of Taxation (the ‘Respondent’) denied the input tax credits claimed and sought repayment of refunded amounts. The Applicant’s Australian Business Number (‘ABN’) and GST registrations were cancelled.

5. The Respondent also imposed an administrative penalty on the Applicant in relation to input tax credits claimed in the final BAS lodgements. The Applicant lodged an objection against the imposition of the penalty, on the basis that he was the victim of fraudulent activity by Mr B. 

6. The objection was disallowed and the Applicant sought review by the Tribunal of that objection decision.

   BACKGROUND

   Registration, lodgement and review processes

7. The following events and activities relating to registrations, lodgements and audit processes are not in contention. Although the decision under review relates to a penalty imposed on a shortfall arising for the period 1 October 2020 to 31 December 2020 only, events across a wider time span form relevant background.

8. The Applicant was registered for GST purposes twice. Although one GST registration commenced with effect from 1 July 2000, and input tax credits were claimed for periods commencing 1 April 2001, the actions to set up these registrations and claim the credits were not undertaken until 2020. That is, some of the lodgements and claims were retrospective.

9. The Applicant had previously registered for an ABN in 2016. To obtain an ABN an applicant must provide information about their current or intended enterprise and confirm that they conduct a business which is entitled to be registered. The ABN application stated that the Applicant was carrying on an enterprise of takeaway food retailing.

10. At some time in early 2020 the Applicant became registered for GST purposes, but with effect from 1 July 2000. On 5 April and 15 April 2020 multiple BAS were lodged via the Applicant’s myGov account for the tax periods between 1 April 2001 to 31 December 2011. 

11. An officer of the Respondent called the Applicant on his mobile number on 17 April 2020 to discuss these BAS. The Applicant answered but as he was in Mr B’s office, he passed the phone to Mr B who he identified as his tax agent. The Applicant recalls, and records of the Respondent confirm, that Mr B provided the officer with his first name and the tax agent number of a firm he claimed to be working for.[1] Unfortunately Mr B was not a registered tax agent and was not employed by the tax practice whose registration number he had provided. 

    [1] ST5. References to the T-Documents and Supplementary T-Documents are to documents that were lodged by the Respondent with the Tribunal under section 37 of the former Administrative Appeals Tribunal Act 1975 (Cth).

12. Records of the Respondent indicate further telephone calls between the Applicant and officers of the Respondent in April and May 2020, where review and audit activity on his lodgements was raised.[2] 

    [2] ST7 and ST9.

13. On 1 May 2020 the Respondent reduced to nil the amount of input tax credits claimed by the Applicant and denied a refund for the tax periods between 1 April 2001 to 31 December 2011 (‘First Audit’).[3] Refunds for input tax credits generally cannot be claimed for a tax period that ended more than four years before the claim. As the Applicant did not claim credits (or notify the Respondent of an intention to do so) until 2020, refunds were not payable.

    [3] T4 (Audit finalisation letter for period 1 April 2001 – 31 December 2011).

14. The Applicant called the Respondent on 27 June 2020 and became registered for GST purposes again,[4] this time commencing on 1 July 2019. On 27 June 2020 the Applicant’s myGov account was accessed and bank details belonging to the Applicant were added to the Applicant’s GST role. 

    [4] ST11.

15. Multiple BAS were lodged via the Applicant’s myGov account on 27 June 2020 and 21 July 2020 for tax periods between 1 July 2019 to 30 September 2020. Revised BAS were also lodged on 21 July 2020 and 30 July 2020, increasing the credits previously claimed for some periods. Refunds of GST were claimed, some amounts being paid directly into the Applicant’s bank account and other amounts being paid to the Child Support Agency on behalf of the Applicant. 

16. The Applicant also lodged his 2020 Income Tax Return on 21 July 2020. However, there was no business income disclosed in this income tax return.

17. During August and September 2020, officers of the Respondent attempted to call the Applicant. The Applicant also called the Respondent to check on the progress of his tax refund and was advised that the Respondent was reviewing his BAS.[5] 

    [5] See case notes and transcriptions of phone calls in T5, T6, T8 and ST13.

18. On 15 September 2020 the Respondent wrote to the Applicant to advise that his BAS were being audited and the refund claimed was being held. The Respondent requested documentary evidence to substantiate claims made in the BAS.[6]

    [6] T10.

19. The Respondent did not receive any response to this correspondence, and after attempting further telephone contact with the Applicant in October 2020 sent further letters to the Applicant on 19 October 2020 and 25 November 2020, again requesting the documents.[7]  These letters were sent to an address that the Applicant believed to be Mr B’s office in Parramatta.

    [7] T11 and T12.

20. On 13 November 2020, a revised BAS was lodged via the Applicant’s myGov account for the period 1 July 2020 to 30 September 2020.

21. On 3 December 2020 the Respondent reduced to nil the amount of input tax credits claimed by the Applicant for the tax periods between 1 July 2019 to 30 September 2020 (‘Second Audit’).[8] In the audit finalisation letter the Respondent stated that as the Applicant had not provided any documentation or information to substantiate his claims for input tax credits, the Respondent had determined that no relevant tax invoices existed and therefore the Applicant had no entitlement to input tax credits.

    [8] T14 (Audit finalisation letter for period 1 July 2019 – 30 September 2020).

22. Nevertheless, on 9 December 2020, a BAS reporting GST input tax credits was lodged in the Applicant’s name for the period 1 October 2020 to 31 December 2020. An amended BAS was also lodged on that day, increasing credits claimed.

23. During December 2020 and February 2021, the Respondent again sought to contact the Applicant by phone and mail.[9]

    [9] See case note and correspondence in T15 and T17.

24. On 17 March 2021 the Respondent reduced to nil the amount of input tax credits claimed by the Applicant for the tax periods between 1 October 2020 to 31 December 2020 (‘Third Audit’).[10] This was for the same reasons as the Second Audit.

    [10] T19 (Audit finalisation letter for period 1 October 2020 – 31 December 2020).

25. After finalisation of the Third Audit, a ‘Notice of amended assessment of net amount’ was issued on 23 March 2021 with a net amount owing by the Applicant of $18,790.[11] A ‘Notice of assessment for a shortfall penalty’ was also issued on 25 March 2021, with a shortfall penalty of $9,395 relating to the period 1 October 2020 to 31 December 2020.[12]

    [11] T20.

    [12] T21.

26. On 17 May 2021 the Applicant called the Respondent to raise concerns about Mr B, suggesting that fraudulent activities had taken place. The Applicant was not clear as to whether he had authorised the GST registration applications and BAS lodgements.[13]

    [13] See case notes and transcription of phone call in ST1, ST2 and ST15.

27. On 22 October 2021 the Applicant cancelled his ABN with effect from 19 July 2016. The Applicant’s GST registration was cancelled.[14]

    [14] T22. The Applicant’s GST registration had been previously cancelled with effect from 15 November 2011, but was cancelled again on 26 October 2021, effective 31 December 2020, as it appeared to have been registered or reregistered in error.

28. On 9 June 2022 a different accountant contacted the ATO on behalf of the Applicant requesting that the administrative penalty be remitted, on the basis that Mr B had not been a registered tax agent and had not acted on the audit correspondence.[15] This request was treated by the Respondent as an invalid objection.

    [15] T24.

29. The new accountant subsequently lodged a valid objection on 14 July 2022, again requesting remission of the tax shortfall penalty arising from the Third Audit.[16] The basis for the objection was the failure of Mr B, who was not registered as a tax agent, to engage with the Respondent on the audit activities thus resulting in the penalty. The Respondent disallowed the objection in full on 25 August 2022.

    [16] T25.

    Applicant’s circumstances

30. The Applicant provided the following explanation of the background to these events:

    ·In early 2020, the Applicant received correspondence from the Respondent relating to BAS and sought a tax adviser. However his previous accountant was unavailable, and neighbours or members of the Applicant’s church referred him to Mr B. 

    ·The Applicant retained Mr B around April 2020. He believed Mr B was an appropriately qualified tax agent based on statements made by Mr B to him and other friends. He had also seen or been shown photographs of what appeared to be registration certificates in Mr B’s office.

    ·BAS were prepared and lodged by Mr B for periods between June 2020 and December 2020. The Applicant would log into his myGov account on his mobile phone, then hand his phone to Mr B to complete the lodgements. He did not provide his myGov password to Mr B.

    ·On at least one occasion when the Applicant spoke to the Respondent by phone, Mr B was beside him telling him what to say. This included the phone call on 27 June 2020 where he registered for GST. His state of mind was that he trusted Mr B and whatever Mr B told him to say to the Respondent should be okay. 

    ·Mr B had told him that GST registration was required to access a Government COVID-19 stimulus package benefit to which he might be entitled, relating to his previous work in the taxi industry.

    ·The Applicant received calls from the Respondent, some of which he tried to return.  However he believed that Mr B as his agent would be communicating with the Respondent about the audits on his behalf.

    ·The Applicant contacted Mr B in April 2021 to discuss the audit processes. The Applicant provided the Tribunal with screen shots of text message exchanges with Mr B in which the Applicant complained of problems contacting Mr B, and Mr B claimed he had had surgery which was making it difficult for him to schedule appointments with clients.[17] The text exchanges became tense and by May 2021 it appears that Mr B was no longer responding.

    ·Subsequently the Applicant continued to try to contact Mr B to obtain information to provide to the Respondent. Mr B’s physical office appeared to be closed. The Applicant spoke by phone to someone he believed to be Mr B’s wife but was told she did not hold any client records. 

    ·No further information about Mr B’s whereabouts could be uncovered and by the time the Applicant applied to the Tribunal it was not clear whether Mr B was even still alive. The Applicant sought assistance from the Respondent and the Tribunal in locating Mr B but no information was available. The Applicant also approached the police but absent any address details for Mr B they were unable to help.

    ·The Applicant believes records held by Mr B, or at least evidence from Mr B about his activities in relation to the Applicant’s tax affairs, would support his case against the Respondent.

    [17] See Annexure A to the Applicant’s Statement of Facts, Issues and Contentions.

    Issues

31. The Applicant’s (valid) objection was contained in a brief email and only mentioned ‘asking for a remission of penalty’.[18] The Respondent provided an objection decision upholding the audit decision regarding the imposition of the shortfall penalty including the finding of recklessness, as well as considering the discretion to remit. This allowed the Applicant to state a more complete argument against the penalty imposed on him, and before the Tribunal it was clear that the Applicant disputed the wider imposition of the penalty.

    [18] T26, 63.

32. Therefore, three questions arise for the Tribunal:

    ·Should the Applicant be liable to a penalty on the basis of making a false or misleading statement?

    ·If so, was there recklessness demonstrated by the Applicant, such that the amount of the penalty is calculated on this basis?

    ·If it was appropriate for a penalty to be imposed on this basis, should all or part of it be remitted?

    Relevant law

33. A person who is carrying on a business and registered for GST may claim input tax credits for the GST that is included in the price of things they purchase for use in that business.  The credits are claimed through lodgement of BAS for the relevant tax period for the purchases. A refund may be due where the amount of credits exceeds the amount of GST collected from the sales income of the business.

34. The GST legislation requires a person who claims an input tax credit for a purchase to have a tax invoice for that purchase, at the time they lodge the relevant BAS.[19] This is in addition to other record keeping obligations under taxation laws.

    [19] Section 29-10 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

35. Division 4 of Part IVC of the Taxation Administration Act 1953 (‘TAA 1953’) contains provisions about applications to the Tribunal for review of decisions made by the Respondent on taxation objections.

36. Where the Tribunal is reviewing an objection decision relating to an assessment, the applicant has the burden of providing that the assessment is excessive or incorrect, and what the assessment should have been.[20]

    [20] Paragraph 14ZZK(b) of the Tax Administration Act 1953 (‘TAA 1953’).

37. Division 284 of Schedule 1 to the TAA 1953 contains provisions about the imposition of penalties for false or misleading statements and the amounts of those penalties.

38. A person will be liable to an administrative penalty if they make a statement to the Commissioner of Taxation that is false or misleading in a material particular because of things in it or omitted from it.[21] However the person will not be liable for a penalty if they took reasonable care in connection with the making of the statement.[22]

    [21] Ibid, subsection 284-75(1) of Schedule 1.

    [22] Ibid, subsection 284-75(5) of Schedule 1.

39. The amount of the penalty is based on the ‘base penalty amount’. This is worked out by applying a percentage to a ‘shortfall amount’. A shortfall amount arises if an amount that the Commissioner of Taxation must pay or credit to a taxpayer, worked out on the basis of the false or misleading statement, is more than the Commissioner would have to pay or credit if the statement were not false or misleading.[23]

    [23] Ibid, sections 284-80 and 284-85 of Schedule 1.

40. The percentage applied depends on the type of behaviour that resulted in the shortfall amount:

    ·75% of the shortfall amount if it resulted from an intentional disregard of a taxation law by the taxpayer or their agent;

    ·50% of the shortfall amount if it resulted from recklessness by the taxpayer or their agent as to the operation of a taxation law; or

    ·25% of the shortfall amount if it resulted from a failure of the taxpayer or their agent to take reasonable care to comply with a taxation law.[24]

    [24] Subsection 284-90(1) of Schedule 1 to the TAA 1953 (n 20).

41. Case law has described the meaning of the word ‘recklessness’ as used in taxation legislation:[25]

    Recklessness in this context means to include in a tax statement material upon which the Act or regulations are to operate, knowing that there is a real, as opposed to fanciful, risk that the material may be incorrect, or be grossly indifferent as to whether or not the material is true and correct, and that a reasonable person in the position of the statement-maker would see there was a real risk that the Act and regulations may not operate correctly to lead to the assessment of the proper tax payable because of the content of the tax statement. So understood, the proscribed conduct is more than mere negligence and must amount to a gross carelessness.

    [25] BRK (Bris) Pty Ltd v Commissioner of Taxation [2001] FCA 164 at [77] per Cooper J.

42. Recklessness is not the same as dishonesty, and a person may be liable to a penalty even where there is no finding of dishonesty.[26]

    [26] See Hart v Commissioner of Taxation [2003] FCAFC 105.

43. There is an exception,[27] which provides that a person is not liable to an administrative penalty if:

    ·They engaged a registered tax agent or BAS agent and gave the agent all relevant taxation information;

    ·The registered tax agent or BAS agent made the false or misleading statement; and

    ·The false or misleading nature of the statement did not result from intentional disregard by the agent of a taxation law or recklessness by the agent as to the operation of a taxation law.

    The taxpayer (Applicant) has the burden of proving that this exception applies.[28]

    [27] Subsection 284-75(6) of Schedule 1 to the TAA 1953 (n 20).

    [28] Subsection 284-75(7) of Schedule 1 to the TAA 1953 (n 20).

44. Where an administrative penalty has been imposed, the Commissioner of Taxation may remit all or part of it.[29] The TAA 1953 does not set out specific matters to be considered in exercising this discretion. However courts and tribunals have said they will look to whether it is appropriate in ‘all the circumstances’ to remit the penalty.[30] The power to remit must be exercised for a proper purpose, in accordance with the objects of the TAA 1953.[31]

    [29] Ibid, section 298-20 of Schedule 1.

    [30] See, eg, Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation [2008] FCAFC 54 at [15] and [17] per Spender, Ryan and Emmett JJ; Sanctuary Lakes Pty Ltd v Commissioner of Taxation (2013) 212 FCR 483 at [157] per Greenwood J (‘Sanctuary Lakes Pty Ltd’).

    [31] Sanctuary Lakes Pty Ltd (n 30) at [193] and [209] per Greenwood J.

    CONSIDERATION

1. In their Statement of Facts, Issues and Contentions, their written submissions and their submissions at the hearing, the Respondent addressed each of the three questions separately. 

2. Over the course of the three audits the Respondent formed the position that the Applicant was not conducting an enterprise, was not eligible to be registered for GST purposes and therefore was not entitled to claim input tax credits. The Respondent was not satisfied that the Applicant had substantiated the business activities and expenses giving rise to the credits claimed.

3. Penalties were not imposed in relation to the First Audit and Second Audit. However as a result of the Third Audit, the Respondent determined that the Applicant:

   ·Was not entitled to $18,790 of GST credits he had claimed for the period 1 October 2020 to 31 December 2020;

   ·Had therefore made a ‘false or misleading statement’ by claiming those GST credits in his BAS whilst not being able to substantiate his entitlement to those GST credits;

   ·Accordingly had a ‘shortfall amount’ of $18,790 for the period, such that he was liable to pay an administrative penalty;

   ·Had shown ‘recklessness’ as to the operation of the relevant tax laws, which resulted in the shortfall amount, such that the Base Penalty Amount should be 50% of the shortfall (or $9,395); and

   ·Had not provided any evidence to support a request for a remission of the penalty, therefore supporting a conclusion that the imposition of a penalty would not provide an unreasonable or unjust result, and there were no exceptional circumstances warranting a remission.

4. The Applicant retained a lawyer to prepare his Statement of Facts, Issues and Contentions.  Unfortunately that Statement contained a series of contentions that were not supported by facts or law. This included an argument that the Respondent had not provided evidence that any credits were claimed or tax liability existed, despite the issue of a notice of amended assessment to the Applicant, together with the provision of audit finalisation letters and an objection decision detailing the evidence upon which the Respondent relied. The Statement also argued that the Respondent’s case was a ‘technical one’, based on sections and rules within the TAA 1953. While the Tribunal is able to control the scope of a review and has discretion in relation to procedure, it is still bound to apply relevant laws. In the present circumstances, this includes the relevant provisions of the TAA 1953 (and GST legislation).

5. By the time of the hearing the Applicant was self-represented, and the narrative he provided in person at the hearing was of much greater relevance to the questions in issue. I understood the Applicant's contentions and submissions as being directed collectively to all three issues, that is the imposition of a tax shortfall penalty, the calculation of the Base Penalty Amount on the basis of recklessness and the remission of the penalty.

   Imposition of penalty – false or misleading statement

6. The Respondent said that a penalty should be imposed for the Third Audit because the Applicant had repeatedly made false or misleading statements that he was entitled to input tax credits (when he was not) across the tax periods from 1 October 2020 to 30 December 2020. 

7. The Respondent argued that the Applicant had not taken ‘reasonable care’ in connection with making those statements because the Applicant:

   ·Knew he was not conducting an enterprise (business) at the time of claiming the input tax credits, as the Applicant had ceased driving a taxi and doing security work during or prior to 2019;

   ·Could not provide invoices, receipts or other supporting documentation to support his claims; and

   ·By that time, had been through two other audits in 2020, where input tax credits had been disallowed, and he had been advised by the Respondent of the requirements for entitlement to credits.

8. Although the Applicant was not entirely certain when he ceased working as a taxi driver or security guard, he accepted after questioning at the hearing that he was not engaged in this work by 2020. In relation to a takeaway food business, the Applicant indicated he had been doing some food preparation activities through his church. There was no evidence that he was carrying on a business of takeaway food retailing during 2019 or 2020 (or at all).

9. In relation to his registration over the phone for GST in June 2020, the Applicant agreed that he had answered in the affirmative questions as to whether he was carrying on a business at the time, whether that business had income above a certain threshold and whether he was collecting GST, even though he accepted that those statements were not correct. He said he did this because he felt pressured to complete the registration process and therefore provided answers to the Respondent which he thought would achieve that.  Mr B was sitting beside him telling him what he should say to the Respondent. 

10. The Applicant also said that Mr B had suggested he was entitled to register to access COVID related benefits, possibly referable to his prior sub-contracting work in the taxi or security industry. Again, he said he trusted Mr B.

11. Noting that we are focussed on the claims made in the BAS lodged on 9 December 2020 for input tax credits and refunds for the period 1 October 2020 to 30 December 2020, I find that the Applicant made a false or misleading statement when he stated in the 9 December 2020 BAS that he was entitled to input tax credits for that period. As a matter of fact, he was not carrying on a business during that time and was therefore not making purchases for a business which could generate GST credits for that period. This was a material particular to the determination of any entitlement to credits and calculation of refund.

12. The standard of ‘reasonable care’ looks to the care that an ordinary person would have exercised in the circumstances of the taxpayer, making a reasonable attempt to comply with taxation laws. The Respondent agrees that this takes account of a range of matters, including the taxpayer’s health, level of education and experience and understanding of tax laws, and does not require ‘perfection’.[32]  

    [32] See the Respondent’s Public Ruling MT 2008/1 at [27]–[29].

13. The Applicant sought advice from Mr B because he was not experienced in accounting or legal matters. He also had financial and health concerns during this time. I accept that the Applicant did not set out to be dishonest, that he may have provided inaccurate information in June 2020 in order to speed up an administrative process and that he followed a script of answers provided by Mr B. 

14. However I agree with the Respondent that the Applicant did not take reasonable care when making the statements in the BAS lodged on 9 December 2020. He knew that he was not carrying on a business at the relevant times. Since he was not carrying on a business, practically there could not have been any supporting documentation (such as invoices or receipts) in existence to support his statement that he was entitled to input tax credits. He had also been made aware that the Respondent did not accept his entitlement to input tax credits based on those statements. Continuing to trust Mr B’s advice at this time did not reflect reasonable care.

15. The ‘safe harbour’ exception to penalties arising from the statement of an agent will not apply here. Mr B was not a registered tax agent or BAS agent. Even if he had been, for the reasons given below, Mr B’s actions demonstrated at least ‘recklessness’. Since the Applicant had not been carrying on any business, he could not have provided Mr B with all relevant tax information, such as invoices or receipts.

16. The Applicant is therefore liable to an administrative penalty for making a false or misleading statement.

    Base penalty amount and recklessness

17. The Respondent applied the 50% base penalty amount calculation for recklessness to the shortfall amount for the period 1 October 2020 to 31 December 2020. The Respondent pointed to a number of matters as demonstrating recklessness on the part of the Applicant including:

    ·By handing his mobile phone, already logged into his myGov account, to Mr B the Applicant compromised the safety of his myGov details.

    ·The Applicant met with Mr B to complete registration and lodgement activities on the Applicant’s phone in his car. This would not be usual practice for a registered tax agent.

    ·Since the Applicant was not carrying on any business in 2019 and 2020, he should have been aware that, as a matter of fact, he was not entitled to input tax credits for that year.

    ·The Applicant was aware that he was giving incorrect responses to the Respondent when applying for GST registration in June 2020.

    ·The Applicant could not have had documentation such as invoices and receipts to support his claims for credits and refunds.

    ·The Applicant did not respond to phone calls or correspondence from the Respondent, including communications making it clear that he was being audited in relation to concerns about his claims for input tax credits. He only called the Respondent when it was to enquire about the progress of his refunds.

    ·The Applicant had not provided any evidence of advice provided by Mr B, or as to why he accepted apparently dubious advice from Mr B.

    ·At least by December 2020 when he lodged the BAS the subject of the Third Audit, the Applicant should have been aware from the outcome of the previous two audits that he was not entitled to input tax credits.

18. The Respondent also submitted that the Applicant authorised and was responsible for the GST registration and BAS lodgements made by Mr B, not only by giving his phone to Mr B, but also by being physically present when Mr B completed those lodgements. 

19. The Respondent’s representative referred me to written reasons for an oral decision of the Tribunal in Salemy v Commissioner of Taxation,[33] which also involved the imposition of a penalty based on recklessness in circumstances where a person provided their phone, logged into their myGov account, to a third party who made tax lodgements. Senior Member Lazanas (as she then was) affirmed the decision of the Respondent imposing an administrative penalty on the basis of recklessness. There are some factual differences between the circumstances of the Applicant and Mr Salemy, in particular the Applicant having stronger grounds for assuming Mr B was a legitimate and qualified tax agent.

    [33] (Administrative Appeals Tribunal, File Number 2023/0312, Senior Member Lazanas, 27 September 2023): ST19.

20. At the hearing in response to questioning, the Applicant:

    ·Agreed that Mr B met him in his car but explained that this was due to the Applicant having an injury which limited his mobility. Mr B offered to come out to the Applicant who had parked near Mr B’s office.

    ·Said that he assumed that Mr B would deal with the Respondent on his behalf in relation to the audits, pointing to the earlier telephone call between Mr B and an officer of the Respondent in his presence, where he heard Mr B providing his purported registration details to the Respondent and discussing his BAS lodgements. 

    ·Stated that he believed that it was appropriate to lodge the BAS on 9 December 2020, despite his awareness of the prior audits, on the basis that he thought Mr B was working through the issues with the Respondent.

    ·Reiterated that he believed Mr B was a proper tax agent and trusted him when he told the Applicant what to do and say.

    ·Noted that officers of the Respondent had advised him to go back to Mr B to clarify issues when he did call the Respondent.

21. Overall the Applicant gave the appearance of trying to speak honestly to the Tribunal, conceding that he had made errors of judgment, particularly in relation to the level of trust he placed in Mr B. I accept that the Applicant was deceived by Mr B as to Mr B’s qualifications. The Applicant also acknowledged confusion around the timing of certain events.

22. The Respondent’s records of phone calls also confirm that on one occasion, when the Applicant had questions and asked for the address of an ATO shopfront so that he could speak to someone in person, he was told the ATO shopfront staff would not be able to assist him and he should speak to his tax agent.[34] On another call the Applicant was again told that his tax agent could handle matters through their portal.[35]

    [34] Call dated 15 May 2020: ST9.

    [35] Call dated 7 August 2020: ST13.

23. At the hearing the Applicant said that the Respondent should have done more to protect people from Mr B, as the Respondent was aware that Mr B had prior convictions for preparing tax returns whilst unregistered as a tax agent. The Applicant had advised the Respondent that Mr B was his agent during a phone conversation in April 2020. If he had been made aware of Mr B’s history then he would not have continued to engage him.

24. Unfortunately, during the April 2020 phone call it appears that Mr B was identified by first name only (and possibly that first name was misspelled). Mr B also gave a valid tax agent registration number, albeit one belonging to a firm of accountants that he was not actually working for. It was not until May 2021 that the Applicant reported the correct name and details of Mr B to the Respondent.

25. The question to be answered here is whether the Applicant was reckless in making the statements underpinning the BAS (and amended BAS) lodged on 9 December 2020. Did the Applicant know that there was a real risk that this material might be incorrect, or was he grossly indifferent as to whether it was correct? Would a reasonable person in his position see there was a real risk that the tax legislation might not operate correctly to assess the proper tax payable because of the content of his statement?

26. Although Mr B may have deceived the Applicant about his qualifications, and possibly the extent of his activities, the Applicant has acknowledged that he provided to the Respondent facts that he knew at the time were incorrect, which resulted in his GST registration. The input tax credits claimed in the December 2020 BAS relied on that GST registration. I also agree with the observations of Senior Member Lazanas in the Salemy matter as to the risks of handing over a device logged into a myGov account to a third person.

27. By December 2020, the Applicant had information from the Respondent which would have put a reasonable person on notice as to the risks of lodging further BAS on the same basis as those subject to the prior audits. Even if some of the letter correspondence had gone to Mr B’s former premises, the Applicant had confirmed through phone conversations with the Respondent that he was aware of the audits and that his refunds were being withheld.

28. On this basis I agree with the Respondent’s position that the shortfall amount resulted from recklessness by the taxpayer.

29. The Respondent suggested that there might have been a basis for imposing a higher penalty based on 75% for ‘intentional disregard’. It is not necessary to decide this point.

    Remission of penalty

30. In their objection decision, the Respondent refused to remit all or part of the penalty on the basis that the Applicant had not provided any evidence to support a request for remission.  Therefore the Respondent considered that applying a penalty would not provide an unreasonable or unjust result, and there were no special circumstances to warrant a remission.

31. The Respondent also referred to their published guidelines for remission of penalties for false or misleading statements which set out matters that officers of the Respondent should consider when dealing with a penalty remission request.[36] This includes the role of the penalty provisions in encouraging taxpayers to take reasonable care in complying with their tax obligations, and promoting consistent and equitable treatment by reference to specified rates of penalty. The Tribunal is not limited to looking at these matters, and should look more broadly at the circumstances surrounding the conduct that gave rise to the penalty and should be taken into account in determining whether the penalty should be remitted.[37]

    [36] Australian Taxation Office, Administration of the false or misleading statement penalty – where there is a shortfall amount (Practice Statement Law Administration PS LA 2012/5, 4 March 2024).

    [37] Sanctuary Lakes Pty Ltd (n 30) at [209] per Greenwood J; Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust [2023] FCAFC 19 at [54].

32. In this regard the Respondent also reiterated several matters relating to the behaviour of the Applicant, including the Applicant’s awareness that he was not carrying on a business, the risky behaviour in giving the mobile phone to Mr B which facilitated the lodgement of the BAS, the lack of response by the Applicant to calls and correspondence from the Respondent and the failure of the Applicant to notify the Respondent of his concerns about Mr B until two months after the penalty assessment had been issued. 

33. The Applicant said that the administrative penalty should be remitted because he engaged a person he believed to be a registered tax agent to complete his BAS and income tax return, and assumed that person was taking care of matters with the Respondent. He was unaware of Mr B’s history and activities. When he did suspect that something was not right with his lodgements, he could not locate Mr B.  

34. I accept that the Applicant sought the advice of a tax agent because he was not experienced in financial or legal matters, and that ‘advisor’ subsequently deceived him. However it is relevant to note again that the penalty in this matter relates only to the Third Audit and the BAS lodged on 9 December 2020. The Respondent has not sought to impose a penalty for any earlier period or lodgement activities. 

35. By late 2020 there were several indications to the Applicant that there were problems with the BAS that had been lodged. Even if he did not realise that Mr B was unregistered and had a criminal history, he had been made aware of the outcome of the first two audits. He should not have allowed the lodgement of a further BAS and revised BAS repeating the same claims. As observed by Senior Member Lazanas in the Salemy matter, by facilitating access to a myGov account open on a mobile phone, the Applicant ostensibly authorised that lodgement. 

36. The Applicant stated that he is unemployed and Centrelink benefits are his only source of income. Payment of the penalty would be financially difficult for him. He says that remission of the penalty component would better enable him to enter into a payment plan with the Respondent to try to repay the underlying tax shortfall amount. Unfortunately the existence of financial concerns will not outweigh the other circumstances relating to the Third Audit. I am also mindful of the object of the penalty provisions in promoting compliance with taxation laws.

37. Having regard to all of these circumstances, I do not believe it would be appropriate to remit all or part of the penalty. 

    CONCLUSION

38. The objection decision under review is affirmed.

I certify that the preceding 82 (eighty-two) paragraphs are a true copy of the reasons for the decision herein of General Member C. Willis

……………………[SGD]……………………….
Associate

Dated: 15 November 2024

Date(s) of hearing:	9 October 2024
Applicant:	Self-Represented
Solicitors for the Respondent:	Anthony Pagano, Australian Taxation Office