Commissioner for Act Revenue v Butt & Carey (Appeal) - [2016] ACAT 109

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

COMMISSIONER FOR ACT REVENUE v BUTT & CAREY (Appeal) [2016] ACAT 109

AA 1/2016; (AT 51/2015; AT 52/2015)
Catchwords: APPEAL – land tax – remittal of penalty tax – statutory interpretation – meanings of ‘failure to take reasonable care’, ‘reasonable excuse for the failure’ and ‘exceptional circumstances’ in statutory context

Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 79, 82
Taxation Administration Act 1999 ss 31, 37
Land Tax Act 2004
Rates and Land Tax Act 1926 s 22EC (repealed)

Cases cited:A Plus Plumbing and Building Services Pty Ltd v Commissioner for ACT Revenue [2012] ACAT 76
B & T Constructions (ACT) Pty Ltd v Construction Occupations Registrar and Anor [2013] ACTSC 219
Carey & Butt v Commissioner for ACT Revenue [2015] ACAT 85
Chakravarty & Commissioner for ACT Revenue [2013] ACAT 11
Hay v Commissioner for ACT Revenue [2014] ACAT 23
Lukatela v Birch [2008] ACTSC 99
In an Application for Bail by Massey [2008] ACTSC 145
ISPT Pty Ltd v Commissioner for ACT Revenue (Appeal) [2013] ACAT 43
Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15
RVO Enterprises Pty Ltd as trustee for the RM O’Mara Family Trust v Chief Commissioner of State Revenue [2004] NSWADT 64
Scott and Anor v Commissioner of ACT Revenue [2013] ACAT 73
Steele v Commissioner for ACT Revenue [2010] ACAT 15
Stott v The Queen [2016] ACTCA 36
Theron v Commissioner for ACT Revenue [2013] ACAT 73
Wade & Tan v Commissioner for ACT Revenue [2014] ACAT 79

Texts and papers Macquarie Dictionary, 5^th edition

Tribunal: Presidential Member G C McCarthy

Date of Orders:  23 September 2016
Date of Reasons for Decision:         23 September 2016
AUSTRALIAN CAPITAL TERRITORY           )
CIVIL & ADMINISTRATIVE TRIBUNAL                 )          AA 1/2016
BETWEEN:
COMMISSIONER FOR ACT REVENUE
Appellant

AND:
ERIC BUTT
First Respondent

JAN CAREY
Second Respondent

APPEAL TRIBUNAL: Presidential Member G C McCarthy

DATE:23 September 2016
ORDER

The Tribunal orders that:

The decision of the original tribunal is confirmed and the appeal is dismissed

………………………………..
Presidential Member G. C McCarthy

REASONS FOR DECISION

The appellant, the Commissioner for ACT Revenue, appeals from a decision of the tribunal given on 9 December 2015 to remit 40% of the penalty tax imposed on the respondents, Mr Butt and Ms Carey, arising from their failure to pay land tax.[1]
[1] Carey & Butt v Commissioner for ACT Revenue [2015] ACAT 85
In these reasons, the word ‘tribunal’ is used when referring to the tribunal that conducted the original hearing. The words ‘appeal tribunal’ are used when referring to this appeal tribunal. The word ‘Tribunal’ is used when referring to the Tribunal in other cases.
The issue under appeal arose in the following way.
The respondents are the joint owners of a residential property in the ACT. They had rented the property since 2004, but had not declared to the Commissioner that it was rented and had not paid land tax for which they were liable consequent upon the rental of the property. These facts became known to the Commissioner consequent upon an investigation in 2014.
On 16 January 2015, the Commissioner issued an assessment which included penalty tax at the rate of 50% of the primary land tax payable and statutory interest. The respondents accepted their liability to pay the primary tax for the rental periods from 1 July 2004 to 31 March 2014, but objected to the amounts of penalty tax and interest on the grounds that they were excessive. The Commissioner disallowed the objection. The respondents sought review of the Commissioner’s objection decision in the tribunal.
On review the tribunal dealt with several issues, but relevant for the purposes of this appeal was whether penalty tax of 50% was appropriate.
The tribunal confirmed that the amount of penalty tax payable was 50% pursuant to section 31(2) of the Taxation Administration Act 1999 (the TAA), but determined that 40% of that tax should be remitted under section 37 of the TAA, with the result that the penalty tax imposed was 30% rather than 50% of the land tax payable for the relevant period.
The Commissioner appealed from that decision, contending that the tribunal’s power on review to remit penalty tax under section 37 was not available in circumstances where the tribunal had made findings of fact that the respondents had failed to take reasonable care to fulfil their obligations under a tax law and had no reasonable excuse for the failure.
Relevant for present purposes, sections 31(1) – (3) of the TAA provide:
31Amount of penalty tax
(1)The amount of penalty tax payable in relation to a tax default is 25% of the amount of tax unpaid, subject to this division.
(2)The amount of penalty tax payable in relation to a tax default is 50% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by a failure by the taxpayer (or a person acting on behalf of the taxpayer) to take reasonable care to fulfil the taxpayer’s obligations under a tax law.
(3)Subsection (2) does not apply if the tax payer satisfies the commissioner that the taxpayer (or a person acting on behalf of the taxpayer) had a reasonable excuse for the failure.
Section 37 of the TAA provides:
37Remission of penalty tax
The commissioner may remit all or part of an amount of penalty tax payable by a person if satisfied that—
(a)either—
(i)the person has taken reasonable steps to mitigate, or to mitigate the effects of, the circumstances that resulted in the liability for penalty tax; or
(ii)the circumstances that resulted in the liability for penalty tax were exceptional; and
(b)it would be fair and reasonable to remit all or part of the penalty tax.
For the purpose of determining that the appropriate rate of penalty tax was 50% under section 31(2) of the TAA, and that section 31(3) of the TAA did not apply, the tribunal said:[2]
[2] Carey & Butt v Commissioner for ACT Revenue [2015] ACAT 85
38.The Tribunal finds that the applicants did not take reasonable care. The Tribunal accepts the respondent’s submissions that there is a positive obligation on the taxpayer to make enquiries about their tax liabilities and there is no positive obligation on the Commissioner to do so (in the absence of notification pursuant to section 14 of the LTA) about the renting of the property. The cases of Theron and Steele held that there is an onus on landlords to enquire about tax obligations. The principle that the onus is on the taxpayer was set out in relation to payroll tax in the Photo Corporation case, and confirmed by the Tribunal in Belconnen Premier Inn.
39.The onus falls on the applicants even though they engaged various professionals. Any duty or liability of a professional person engaged by the taxpayer does not necessarily relieve the taxpayer of their duty or liability regarding land tax or any associated penalty tax or interest. There is consistent authority for this finding. It may be that the system which is employed by the Commissioner to administer the land tax laws can be improved for example, it may be able to be more effective in identifying situations earlier where taxpayers or professionals engaged by landowners overlook land tax requirements. Despite this, it remains the responsibility of the taxpayer to make sure that the professionals they engage are discharging their obligations properly, and landowners are at liberty to take action against professionals who fail in their duties.
40.The Tribunal finds that the applicants have no reasonable excuse.
The tribunal then determined that 50% of that penalty tax should be remitted under section 37 of the TAA. The tribunal’s reasons were as follows:
45.When considering whether the remission of penalty tax is fair and reasonable previous cases must be considered. Fairness and reasonableness requires some level of consistency in decision making, although it does not extend so far as to bind future decision makers.
46.The applicants in the Steele case were granted a remission. It is difficult to distinguish the circumstances in Steele from the present applicants – all of them were ignorant of the land tax liabilities for the property, had employed agents upon whom they relied to manage their properties, and acted honestly and without intent to deceive. An additional significant factor in this case is that the Commissioner received an email from one of the applicants before any investigation began, albeit an email that was incomplete in its disclosure and only mentioned a date being when the property was most recently rented to a group of students. Nonetheless it was this email from Ms Carey that first alerted the Commissioner to possible unpaid land tax for the property. An additional factor in favour of a remission for the applicants is that one of the applicants held genuine but unfortunately incorrect views about land tax laws, which he had arrived at due to his professional experience with the construction industry.
47.The Tribunal finds that given the circumstances of the case and the Steele case, it would not be unfair or unreasonable to allow the present applicant a remission. Both the Theron and Scott cases can be distinguished from the circumstances here; in the latter two cases the applicants’ reasons for non-compliance were largely about the busyness of their lives. Whereas in this case there are exceptional circumstances including the misunderstanding held by one applicant about the land tax liabilities for land being developed and the incomplete disclosure prior to the investigation by the other applicant. The Jokhan case is distinguishable because it is a case where intentional disregard by the taxpayer was found to be proved, which is not the case here.
48.The Tribunal accepts that it would be unfair if the taxpayers in this case had a full remission since this would mean they gained the benefit of the money for the period for which it was unpaid and subsequently paid no penalty tax. Even a 50% remission would be excessive, as that would put them in the position of someone with a reasonable excuse, which the Tribunal has found not to be the case here. Therefore, the Tribunal remits 40% of the penalty tax imposed. To remove doubt, the result of the Tribunal’s finding is that a penalty tax will be imposed at 30% (instead of 50%) of land tax payable for the relevant period.
On appeal, the Commissioner submitted that these findings and conclusions regarding section 31 and section 37, respectively, are contradictory. The Commissioner submitted that once the tribunal had determined that the tax default arose from the respondents’ failure to take reasonable care, per section 31(2) of the TAA, and that there was no reasonable excuse for that failure, per section 31(3) of the TAA, it was not then open for the tribunal to be satisfied that “there are exceptional circumstances” that resulted in the liability for penalty tax, referring to section 37(a)(ii); or that it would “not be unfair or unreasonable” to remit part of the penalty tax, referring to section 37(b).
The Commissioner also submitted that the tribunal wrongly distinguished the matter before it from the previous decisions in Theron[3], Jokhan[4] and Scott[5] and misunderstood the Tribunal’s previous decision in Steele.[6]
[3] Theron v Commissioner for ACT Revenue [2013] ACAT 73
[4] Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15
[5] Scott and Anor v Commissioner of ACT Revenue [2013] ACAT 73
[6] Steele v Commissioner for ACT Revenue [2010] ACAT 15
The Commissioner also submitted that the tribunal failed to properly consider, if at all, the underlying deterrence associated with penalty tax when deciding to remit part of the penalty tax under section 37 of the TAA. The Commissioner relied upon the decision in Jokhan at [28] where the Tribunal said:
Remission of penalty tax or interest must be an exceptional event since otherwise the scheme in the LTA [Land Tax Act] and TAA for automatic penalties and interest as general deterrence of tax default would be undermined.
The Commissioner also submitted that the tribunal’s decision ‘falls foul’ of the decision in A Plus Plumbing[7] at [84] where the Tribunal said:
[7] A Plus Plumbing and Building Services Pty Ltd v Commissioner for ACT Revenue [2012] ACAT 76
The Tribunal is mindful that in order to promote the scheme of taxation legislation and the TAA, taxpayers who comply with their obligations should be in a better position than those who do not. Other than in exceptional circumstances, the exercise of discretion such as that authorised by section 37 of the TAA, should not operate to place taxpayers who fail to comply with taxation laws, by failing to pay their tax liability in a timely fashion or otherwise, in the same position as taxpayers who fully comply with their obligations under taxation laws. Taxpayers who fully comply should be in a better position than those who do not. This outcome reflects the intention of the legislature and promotes compliance. It is also fair.
The respondents submitted that their circumstances fit within the statutory discretion to remit under section 37 of the TAA, and that it is for the appellant to satisfy the Tribunal that the decision should be overturned.
The respondents also submitted that there were “exceptional circumstances” for the purposes of section 37(a)(ii) of the TAA because ‘there was no intention to deceive or mislead, only a misunderstanding of the unclear communication from the Commissioner ... regarding what was to be disclosed about land tax obligations’; they were ‘not allowed to fully disclose further information about [their] land tax liability after [they] were informed about the nature of land tax; that “genuine but incorrect view about land tax laws” created exceptional circumstances; and that there ‘lives were not similar to Scott’, as the Commissioner contended, because the respondents were ‘stressed to the limit’, not just “normal busy functioning people”.
In response to the Commissioner’s submission that taxpayers who comply with their obligations should be better off than those who do not, the respondents submitted that this was met because the tribunal only partly remitted the penalty tax and did not remit any of the punitive interest that was imposed.
In reply, the Commissioner submitted that interest payable on the primary tax consequent upon a tax default is not relevant to the question whether penalty tax should be remitted.

Principles that apply to appeals

The Commissioner’s right of appeal lies under section 79(3) of the ACAT Act, which permits a party to appeal on a question of fact or law.
Several cases have described the limitations on appeal and the role or function of the Appeal Tribunal. In Chakravarty & Commissioner for ACT Revenue [2013] ACAT 11[8] at, Presidential Member Symons said:
[8] at [36] [39]
36.An appellant does not have standing to an appeal as of right and is required to identify a question of fact or law (section 79(3)). An appellant cannot merely request the re-exercise of a discretion.
37.In ACT Human Rights Commission v Raytheon Australia Pty Ltd Master Harper stated, in relation to the Administrative Appeals Tribunal:
“A decision of the Tribunal is not intended to be open to appeal generally, as is the case, for example, with a judgment of this Court. It must be accepted that there are sound reasons for public policy for this limitation, notwithstanding some who fail in the Tribunal will have a sense of grievance about it.”
38.Acting President Chenoweth also stated in Das v A & A Airconditioning (Civil Disputes):
“The purpose of the appeal process is not to allow an applicant to try and have a matter reheard because they do not like the previous decision; if that were so there would be no point in the original hearing...”
39. Pursuant to subsection 79(3) of the ACAT Act, there must be a question of law or fact identified on appeal that enables the Appeal Tribunal to consider whether the Original Tribunal made an error as to the law or facts raised in those questions. (footnotes omitted)
Likewise, in ISPT Pty Ltd v Commissioner for ACT Revenue[9] the Appeal Tribunal said:
[9] [2013] ACAT 43 at [13] – [15]
An Appeal Tribunal should not interfere with an order made by an original Tribunal unless there is some manifestly obvious error made by the original Tribunal which, if it was not rectified, will have a substantive adverse bearing, such that it would not be in the interests of justice if the decision of the original Tribunal were allowed to stand.
An Appeal Tribunal may deal with an appeal as a new application or as a review of all part of the original decision.[10] In this case, the appeal was dealt with by way of review and the parties approached it in that way. Neither party sought leave to introduce further evidence on the appeal.
Regarding an appeal by way of a rehearing, in Lukatela v Birch [2008] ACTSC 99[11], Rares J said:
21.And, although the appeal is by way of rehearing, the appellate [sic] does not have a free hand. Only if, after making proper allowance for the advantages of the trial judge, it concludes that an error has been shown, then, the appellate court is authorised and obliged to exercise its appellate duties in accordance with the statute: Fox 214 CLR at 127-128 [27] per Gleeson CJ, Gummow and Kirby JJ.
22.Ordinarily, if there has been no further evidence admitted and no relevant change in the law, a court entertaining an appeal by way of rehearing can exercise its appellate powers only if satisfied that there was error on part of the court below: Coal and Allied Operations Pty Limited v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194 at 203 [14] per Gleeson CJ[2000] HCA 47; 203 CLR 194 at 203 [14] per Gleeson CJ, Gaudron and Hayne JJ. [12]
[10] ACT Civil and Administrative Tribunal Act 2008, section 82
[11] at [21] – [22]
[12] In B & T Constructions (ACT) Pty Ltd v Construction Occupations Registrar and Anor [2013] ACTSC 219 Burns J set out relevant principles concerning the nature of appeal to the appeal tribunal is dealt with by way of review
Applying these principles, in my view the appeal succeeds or fails according to whether it was open to the tribunal to remit part of the penalty tax. The appeal tribunal accepts the respondents’ submission that it is for the Commissioner to establish that the tribunal was in error when remitting part of the penalty tax.

Consideration

I have approached the matter by first considering the meanings of ‘failure to take reasonable care’ and ‘reasonable excuse for the failure’, per sections 31(2) and (3) on the one hand, and ‘exceptional circumstances’ and ‘fair and reasonable’, per sections 37(a)(ii) and (b) on the other.

Section 31(2): failure to take reasonable care

Whether a taxpayer has taken (or failed to take) reasonable care in attending to their tax obligations is a question of fact.[13] In RVO Enterprises Pty Ltd[14] the NSW Administrative Decisions Tribunal, per Judicial Member Verick said:
Factors that would indicate that a taxpayer took reasonable care include reasonable attempts to comply with the tax law, reasonable professional and other inquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate the taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law.
[13] RVO Enterprises Pty Ltd as trustee for the RM O’Mara Family Trust Chief Commissioner of State Revenue [2004] NSWADT 64 at [23]
[14] RVO Enterprises Pty Ltd as trustee for the RM O’Mara Family Trust Chief Commissioner of State Revenue [2004] NSWADT 64 at [23]

Referring to the facts in RVO Enterprises, at [25] Judicial Member Verick continued:
Non-compliance [with] the pay-roll tax obligations in this matter was due to “inadvertent error”, complexity of the PRT wage provisions, fluctuation of wages at the end of financial years for presumably income tax purposes, introduction of GST and lack of advice from professionals employed by the applicant. These are not factors that indicate that the applicant took reasonable care to attend to its pay-roll tax obligations. On the contrary, they are factors, which indicate that the applicant failed to take reasonable care.
Particularly in the context of a self-assessment system, a taxpayer bears the onus of making appropriate enquiries to understand their responsibilities including their liability for land tax. A failure to do so is a failure to take reasonable care.[15]
[15] Theron v Commissioner for ACT Revenue [2013] 33 at [54] – [55]; Wade & Tan v Commissioner for ACT Revenue [2014] ACAT 79 at [100] – [101]
In this case, the respondents do not challenge the Tribunal’s findings that they failed to take reasonable care to fulfil their obligations under the Land Tax Act 2004.

Section 31(3): reasonable excuse

Section 31(3) presupposes that section 31(2) applies, meaning that the taxpayer has failed to take reasonable care to fulfil their tax obligations. Section 31(3) turns on whether there is a reasonable excuse ‘for the failure’.
It follows, in my view, that excuses or explanations that have been considered and rejected in the context of whether a taxpayer has taken reasonable care to fulfil their tax obligations cannot be recast as ‘a reasonable excuse for the failure’. Such a construction would defeat the purpose of sections 31(2) and (3).
In my view, section 31(3) contemplates an independent event or circumstance that has positively led to the failure. For example, a taxpayer may have relied on a tax ruling or professional advice that was later found to be incorrect and that led to the failure; the taxpayer may have relied on independent primary records that were incorrect; the taxpayer may have suffered from illness or injury that led to an inability to comply with their tax obligations.[16]
[16] See for example Hay v Commissioner for ACT Revenue [2014] ACAT 23 at [72] – [73]
Section 31(3) requires the excuse to be ‘reasonable’. Ignorance of the law,[17] oversight,[18] reliance on the taxpayer’s solicitor or agent,[19] and unfamiliarity with ACT tax laws[20] have all been considered and rejected as a ‘reasonable excuse’ for failing to take reasonable care to fulfil the taxpayer’s obligations under the tax law. Rather, these are issues about which the taxpayer had a responsibility to take greater care, hence section 31(2) applying notwithstanding those failings.
[17] Theron v Commissioner for ACT Revenue [2013] 33 at [54] – [55]
[18] Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15 at [26]
[19] Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15 at [19]
[20] Wade & Tan v Commissioner for ACT Revenue [2014] ACAT 79 at [83]; Steele v Commissioner for ACT Revenue [2010] ACAT 15 at [12]
For example, in Jokhan and Jokhan v Commissioner for ACT Revenue[21] the Tribunal rejected a submission that the taxpayer had taken reasonable care to fulfil his tax obligations by referring determination of his tax liability to his solicitor, who then failed to attend to the matter due to ‘other commitments’. Despite an invitation to do so, the taxpayer did not lead any further evidence as to why these other commitments led to the solicitor’s failure and the Tribunal therefore concluded that ‘mere oversight’ on the part of the solicitor is not a reasonable excuse.
[21] [2012] ACAT 15 at [18] – [26]
When distinguishing the operation of section 31(2) from section 31(3), in my view there is an important difference between omissions, oversights, ignorance or misunderstandings that passively led to a failure to comply with a tax obligation, on the one hand, and acts, information, advice or events especially matters beyond the taxpayer’s control that actively led to the failure, on the other. Arising from Judicial Member Verick’s comments in RVO Enterprises, the former are matters about which the taxpayer should have taken great care. The latter may (depending on the facts) establish a reasonable excuse for the failure.
This approach is consistent with the fact that if a reasonable excuse for the purposes of section 31(3) is made out, the taxpayer avoids the rate of penalty tax under section 31(2) altogether.
In this case, the respondents do not challenge the tribunal’s finding that they did not have any reasonable excuse for their failure to take reasonable care to fulfil their obligations under the Land Tax Act 2004.

Section 37(a)(ii): exceptional circumstances

Counsel for the Commissioner did not take me to any rulings or guidelines concerning the Commissioner’s interpretation of section 37(a)(ii), nor did my researches uncover such documents. The words in section 37 therefore need to be understood according to general principles of statutory interpretation.
First, in my view the words cannot be understood as duplicating circumstances addressed elsewhere in Division 5.2 of the TAA concerning penalty tax, and in sections 31(2) and (3) in particular. In RVO Enterprises, Judicial Member Verick commented as follows on the NSW Commissioner’s broad discretionary power to remit part or all of the assessed penalty tax as the Commissioner ‘considers appropriate’:
Because “reasonable care” and “circumstances beyond the control” are matters that are to be taken into account under s 27(3), they are not matters that are relevant for a remission of penalty tax under s33. Remission under s33 would, in my opinion, be only warranted in exceptional and rare circumstances.
Second, section 37 is a general ‘stand-alone’ power. Its exercise is not referenced to the several different ways in which penalty tax is calculated under sections 30 – 35. Rather, its exercise is referenced to the descriptors in section 37. In particular, concerning section 37(a)(ii), the circumstances relied on must be the circumstances ‘that resulted in the liability for penalty tax’, and those circumstances must be exceptional.
‘Exceptional’ means ‘forming an exception or unusual instance; unusual; extraordinary’.[22] ‘Exception’ means relevantly ‘something excepted; an instance or case not conforming to the general rule’.
[22] Macquarie Dictionary, 5^th edition
The phrase ‘exceptional circumstances’ is used in many legislative contexts, but must be construed and understood according to the context. For example, in Stott v The Queen[23] Refshauge J considered the circumstances of family hardship and re-adjustment that arise from a person’s imprisonment. These may be very significant and unintentionally harsh on other persons but they are not special, unusual or exceptional.
[23] [2016] ACTCA 36 at [45]
In Theron v Commissioner for ACT Revenue[24] the Tribunal considered and rejected a submission that social stressors, isolation and a difficult background can be exceptional circumstances. Even if these matters were unusual or exceptional by themselves, there was no explanation for how they ‘resulted in the liability for penalty tax’.
[24] [2013] 33 at [60]
Relevant to this case, circumstances can be exceptional where a combination of events, none of which by themselves might be exceptional, in their totality create an exceptional result. Some might describe it as a ‘perfect storm’. In an Application for Bail by Massey[25] Refshauge J said:
Even if each of the factors referred to by the applicant do not in themselves amount to special or exceptional circumstances, it is also clear that such circumstances may exist as a result of the interaction of a variety of factors, each of which might not be regarded as special or exceptional.
[25] [2008] ACTSC 145 at [45]
In a similar way, in Hay v Commissioner for ACT Revenue[26] when considering removal of a tax, the Tribunal said:
The impact of the totality of the above circumstances on the applicant, who was also working and raising a family, was like an emotional “rollercoaster” and he felt depressed. The circumstances have impacted adversely on his marriage, his finances and his business. The circumstances required the applicant to take on significant extra responsibilities and to deal with very challenging situations on a day to day basis, for reasons beyond his control
[26] [2014] ACAT 23 at [72a]
Likewise, in Wade & Tan v Commissioner for ACT Revenue[27] the Tribunal acknowledged ‘the very clear and settled onus on the taxpayer to find out their tax obligations; but determined that ‘the combined effect of several factors in this case support a finding of exceptional circumstances.’ The Tribunal added:
It is important to clarify that the nature of exceptionality in this case is such that if any of the facts were different or less well evidenced, the applicants’ circumstances would not have been exceptional.
[27] [2014] ACAT 79 at [100] – [101]
The Commissioner submitted that the combination of factors upon which the tribunal relied to conclude that exceptional circumstances existed amounted to ‘no more than ignorance of the law’. This, the Commissioner said, could not amount to exceptional circumstances.
In my view, that argument is in substance to debate the merits of the tribunal’s conclusion. In my view, that the tribunal determined that the respondents failed to take reasonable care to fulfil their tax obligations and had no reasonable excuse for that failure, did not by itself preclude the tribunal from concluding that the respondents’ circumstances, taken together, were exceptional. It is not the point that another tribunal might have reached a different conclusion.

Section 37(b): fair and reasonable

The Commissioner submitted that having found that the respondents failed to take reasonable care to comply with their tax obligations and that there was no reasonable excuse for that failure, per sections 31(2) and (3), ‘it was inconsistent’ for the tribunal then to find that remission of penalty tax was fair and reasonable. These findings, it was said, were ‘contradictory’.
With respect, that construction misunderstands the separate roles of section 31 and 37. Questions of ‘reasonable care’ and ‘reasonable excuse’ in section 31 are concerned with whether the penalty tax ought to be the ‘default’ rate of 25% under section 31(1) or 50% under section 31(2). The question of ‘fair and reasonable’ in section 37(b) is concerned with the general discretion to remit all or part of an amount of penalty tax calculated under another provision of Division 5.2. They are quite separate questions.
It also appears that section 37(b) has been carried over from former section 22EC of the Rates and Land Tax Act 1926[28] that gave the Commissioner a general power to remit where the Commissioner was satisfied that it was ‘fair and reasonable’ to do so. The additional requirements under section 37(a) in the alternative have been added, and perhaps have left section 37(b) with limited additional purpose, but it remains a question referenced to remittal not reasonable care or reasonable excuse.
[28] repealed with effect from 1 July 2004
In this respect, the Commissioner submitted that the tribunal ‘misunderstood Steele’ when taking into account that the respondents’ circumstances were ‘difficult to distinguish’ from those of the taxpayers in Steele who were granted a remission of penalty tax. In my view, the tribunal did not misunderstand that decision. Although the Tribunal in Steele commented that it did not agree with the Commissioner’s decision to remit penalty tax, that issue was not for determination. It also remains the fact that the taxpayers in that case were granted a remission of penalty tax by reason of a combination of circumstances that the tribunal found were materially similar to the respondents’ circumstances.
Likewise, I am not satisfied that the tribunal erred when reaching its conclusion that the facts in the case before it were distinguishable from the facts in Scott and Theron. In my view, that conclusion was available on the evidence, and for the reasons set out by the tribunal at paragraph 47 of its decision.

Conclusion

For these reasons, I am not persuaded that the Tribunal erred in fact or law. The tests under sections 31 and 37 are different, and each involves different questions of fact and law. In my view, the tribunal’s conclusion that the penalty tax should be partially remitted was open to it on the evidence and the law, consistent with its conclusion that section 31(2) applied and section 31(3) did not apply.
The decision of the original tribunal is therefore confirmed and the appeal dismissed.

………………………………..

Presidential Member G C McCarthy

HEARING DETAILS

FILE NUMBER:	AA 1/2016
PARTIES, APPELLANT:	Commissioner for ACT Revenue
PARTIES, FIRST RESPONDENT: PARTIES, SECOND RESPONDENT	Eric Butt and Jan Carey
COUNSEL APPEARING, APPELLANT	Ms K Katavic
COUNSEL APPEARING, RESPONDENT	N/A
SOLICITORS FOR APPELLANT	ACT Government Solicitor
SOLICITORS FOR RESPONDENT	N/A
TRIBUNAL MEMBERS:	Presidential Member G C McCarthy
DATE OF HEARING:	13 May 2016