Frangieh and Commissioner of Taxation (Taxation)
[2021] AATA 842
•19 January 2021
Frangieh and Commissioner of Taxation (Taxation) [2021] AATA 842 (19 January 2021)
Division: SMALL BUSINESS TAXATION AND COMMERCIAL DIVISION
File Number(s):
2019/3369-3370
2019/3434-3435
2019/3431-3433
2019/3415-3418
2019/3422-3428
2019/3412-3414
Re:Joseph Frangieh
CJG Property Group Pty Ltd
Frangieh Family Trust
In-Style Developments Pty Ltd
InStyle Homes (NSW) Pty Ltd
Instyle Homes (QLD) Pty Ltd
APPLICANTS
AndCommissioner of Taxation
RESPONDENT
Decision
Tribunal:Senior Member Linda Kirk
Date:19 January 2021
Place:Sydney
The Objection Decisions dated 29 May 2019 are affirmed.
.........................[SGD]...............................................
Senior Member Linda Kirk
Catchwords
TAXATION – failure to lodge penalties – where Applicants allege safe harbour provisions apply – whether Tribunal has jurisdiction to consider whether Applicants are not liable to failure to lodge penalties – where Tribunal has no jurisdiction to consider liability – where Tribunal has no jurisdiction to review failure to lodge penalties if there is less than two penalty units remaining – whether the failure to lodge penalties should be remitted in full or in part – relevant principles – where all Applicants have long history of failure to lodge - where First Applicant aware of issues in accountant’s attendance to lodgment – where Tribunal not satisfied the Applicants have demonstrated it is fair and reasonable to remit the penalties imposed – decisions affirmed
Legislation
Tax Administration Act 1953 (Cth) ss 14ZY, 14ZZ, 14ZZK, Sch 1, 286-25, 286-75, 286-80, 298-5, 298-20
Cases
Dixon as Trustee for Dixon Holdsworth Superannuation Fund v Federal Commissioner of Taxation (2008) 167 FCR 287
Rowntree and Commissioner of Taxation (Taxation) [2016] AATA 420Secondary Materials
Practice Statement Law Administration 2011/19 ‘Administration of the penalty for failure to lodge on time’
REASONS FOR DECISION
Senior Member Linda Kirk
19 January 2021
INTRODUCTION
The Commissioner of Taxation (‘the Respondent’) imposed “failure to lodge” penalties (‘FTL penalties’) on the Applicants pursuant to s 286-75(1) of Sch 1 to the Taxation Administration Act 1953 (Cth) (‘TAA’).[1]
[1] First Applicant, Joseph Frangieh - T8, 50-55 (reasons) and T46, 264 (notice of decision); Second Applicant, CJG Property Group Pty Ltd (CJG): T9, 56-63 (reasons) and T47, 265 (notice of decision); Third Applicant, Frangieh Family Trust (FFT): T10, 64-70 (reasons) and T48, 266 (notice of decision); Fourth Applicant, In-Style Developments Pty Ltd (ID): T11, 71-78 (reasons) and T49, 267-8 (notice of decision); Fifth Applicant, Instyle Homes (NSW) Pty Ltd (IHN): T12, 79-88 (reasons) and T50, 269-270 (notice of decision); and Sixth Applicant, Instyle Homes (QLD) Pty Ltd (IHQ)1: T13, 89-98 (reasons) and T51, 271-2 (notice of decision).
By letter dated 28 September 2018, the Applicants argued they were exempt from the FTL penalties and, in the alternative, Joseph Frangieh (‘the First Applicant’), sought a remission of the FTL penalties (‘the FTL Remission requests’).[2]
[2] T38 at 228-229.
On 13 March 2019, the Respondent notified the Applicants that the Respondent had decided to refuse the FTL Remission requests (‘the FTL Remission Decision’).[3]
[3] T42.
By email dated 13 May 2019, each of the Applicants objected against the FTL Remission Decision.[4]
[4] T43.
On 29 May 2019, pursuant to s 298-20 of Sch 1 to the TAA the Respondent disallowed the objections lodged by the Applicants collectively (‘the Objection Decisions’).[5]
[5] T46-51.
On 10 June 2019 the Applicants sought review of the Objection Decisions with the Tribunal.[6]
[6] T1-T7.
The matter was heard at a hearing of the Tribunal on 10 November and 8 December 2020. The First Applicant appeared by video-conference and was represented. He gave oral evidence at the hearing.
The material before the Tribunal consists of:
·Respondent’s Statement of Facts, Issues and Contentions dated 17 August 2020;
·Respondent’s T Documents filed 22 July 2019, 272 pages) – Exhibit R1;
·Applicant’s Statement of Facts, Issues and Contentions filed 14 February 2020;
·Applicant’s tender bundled filed 10 November 2020 – Exhibit A1;
·Affidavit of Joseph Frangieh filed 14 February 2020 – Exhibit A2;
·Supplementary affidavit of Joseph Frangieh filed 22 September 2020 – Exhibit A3;
·Respondent’s tender bundle filed 6 November 2020 – Exhibit R2;
·Respondent’s submissions for hearing dated 9 November 2020;
·Applicant’s submissions filed 1 December 2020;
·Respondent’s submissions in reply dated 7 December 2020.
The Tribunal has reviewed all the evidence before it and refers to all relevant materials below.
LEGISLATION AND POLICY
Section 286-75 of the TAA is located in Division 286 in Part 4-25 of Sch 1 to the TAA. Section 286-25 of the TAA provides that the object of Div 286 is to provide a uniform administrative penalty regime for all taxation laws to enable administrative penalties to apply for failure to give returns, notices, statements or other documents on time.
Section 286-75 of the TAA relevantly provides:
(1) You are liable to an administrative penalty if:
(a) you are required under a taxation law to give a return, notice, statement or other document to the Commissioner in the approved form by a particular day; and
(b) you do not give the return, notice, statement or document to the Commissioner in the approved form by that day.
Note: You may not be liable to a penalty in relation to a failure to notify an amount referred to in item 1, 2 or 2A of the table in subsection 389-5(1) during the period provided for by subitem 22(2) of Schedule 23 to the Budget Savings (Omnibus) Act 2016 (see also item 16 of Schedule 3 to the Treasury Laws Amendment (2018 Measures No. 4) Act 2019).
(1A) However, you are not liable to an administrative penalty under subsection (1) if:
(a) you engage a registered tax agent or BAS agent; and
(b) you give the registered tax agent or BAS agent all relevant taxation information to enable the agent to give a return, notice, statement or other document to the Commissioner in the approved form by a particular day; and
(c) the registered tax agent or BAS agent does not give the return, notice, statement or other document to the Commissioner in the approved form by that day; and
(d) the failure to give the return, notice, statement or other document to the Commissioner did not result from:
(i)intentional disregard by the registered tax agent or BAS agent of a taxation law; or
(ii)recklessness by the agent as to the operation of a taxation law.
(1B) If you wish to rely on subsection (1A), you bear an evidential burden in relation to paragraph (1A)(b).
Section 286-80 sets out how the amount of a failure to lodge penalty imposed under s 286-75 is to be calculated. The starting point is that a “base penalty amount” is determined, which is defined as being, relevantly, one penalty unit for each period of 28 days or part thereof from the due date of the document and the date that the taxpayer lodges it: see s 286-80(2)(a). Then, ss 286-80(3), 286-80(4) and 286-80(4A) provide for circumstances in which the base penalty amount is to be multiplied by a factor of two, five or 500, depending, essentially, on the size of the taxpayer, the size of its turnover, or the size of its income.[7]
[7] Respondent’s Submissions filed 9 November 2020 at [7].
Section 286-80(5) provides that in working out the base penalty amount, the amount of the penalty unit is the amount applying at the start of the relevant 28 day period.
Division 298 of Part 4-25 of Sch 1 to the TAA sets out “machinery” provisions for penalties imposed under the TAA. Subdivision 298-A deals with administrative penalties, including administrative penalties imposed by another Division in Part 4-25 (such as failure to lodge penalties imposed under Division 286): see s 298-5(a).
Section 298-20 provides as follows:
(1) The Commissioner may remit all or a part of the penalty.
(2)If the Commissioner decides:
(a) not to remit the penalty; or
(b) to remit only part of the penalty;
the Commissioner must give written notice of the decision and the reasons for the decision to the entity.
Note: Section 25D of the Acts Interpretation Act 1901 sets out rules about the contents of a statement of reasons.
(3)If:
(a) the Commissioner refuses to any extent to remit an amount of penalty; and
(b) the amount of penalty payable after the refusal is more than 2 penalty units; and
Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.
(c) the entity is dissatisfied with the decision;
the entity may object against the decision in the manner set out in Part IVC.
The Practice Statement Law Administration 2011/19, Administration of the penalty for failure to lodge on time (‘PSLA 2011/19’) provides guidance as to when failure to lodge penalties are applied (pursuant to s 286-75(1)) and also as to when it is appropriate for such penalties to be remitted pursuant to s 298-20(1) of the TAA.
In relation to remission pursuant to s 298-20(1), PSLA 2011/19 identifies, at [10], the following three circumstances where remission should be considered:
(a)where the failure to lodge was caused by circumstances beyond the taxpayer’s control (being circumstances that could not be predicted and neither the taxpayer nor their agent was in a position to request further time to lodge);
(b)where it is fair and reasonable to remit the penalty in question; or
(c)where the imposition of the failure to lodge penalty does not provide a just result.
Part IVC of the TAA contains provisions dealing with how objections to decisions can be made (in Div 3); how decisions on such objections are reviewed by the Tribunal (Div 4); and how objection decisions can be appealed to the Federal Court (Div 5).
Section 14ZY of the TAA provides that if a taxation objection has been lodged, the Commissioner must decide whether to allow the objection, wholly or in part, or to disallow it. Such a decision is an “objection decision”. Section 14ZZ provides that if a person is dissatisfied with the Commissioner’s objection decision, the person may, relevantly, apply to the Tribunal for review of the decision, provided the decision is a “reviewable objection decision”. An objection decision is a “reviewable objection decision” unless it is an “ineligible income tax remission decision” (as defined in s 14ZQ and s 14ZS). The Objection Decisions are reviewable objection decisions under the TAA.
In respect of reviews of objection decisions in the Tribunal, s 14ZZK(b)(ii) provides that the applicant has the burden of proving that the taxation decision concerned ‘should not have been made or should have been made differently’.
ISSUES FOR DETERMINATION
The issues for determination are as follows:
1)Does the Tribunal have jurisdiction under Part IVC of the TAA to determine whether the Applicants are not liable to FTL penalties imposed pursuant to s 286-75(1) of Sch 1 to the TAA.
2)Does the Tribunal have jurisdiction to review FTL penalties imposed pursuant to s 286-75(1) of Sch 1 to the TAA if there is less than two penalty units remaining.
3)Should the FTL penalties, imposed pursuant to s 286-75(1) of Sch 1 to the TAA, be remitted in full or in part pursuant to s 298-20 of Sch 1 to the TAA.
EVIDENCE BEFORE THE TRIBUNAL
The details of each FTL penalty that was the subject of the Objections Decisions is set out in the notices of decision relating to each of the Applicants.[8]
[8] T46 to T51.
The First Applicant is the public officer for each of the Second to Sixth Applicants. He has also been and/or currently is a director of CJG, ID, IHN and IHQ as follows:
Entity Periods when the First Applicant was a director CJG[9] · 19 April 2007 to 14 March 2008
· 1 May 2008 to 30 June 2013
· 10 February 2015 to present
ID[10] · 21 October 1998 to 13 March 2013
· 1 December 2007 to 30 September 2012
· 11 February 2013 to 22 April 2015
· 6 July 2015 to present
IHN[11] · 6 July 2015 to present IHQ[12] · 2 October 2006 to 26 November 2013
· 6 July 2015 to present
[9] See T44 at 244-246.
[10] See T44 at 247-250.
[11] See T44 at 251-354.
[12] See T44 at 255-258.
On 26 September 2018, the solicitor for the Applicants, Small Myers Hughes (‘SMH’) wrote to the Australian Taxation Office, apparently in response to queries raised about the Applicants’ reasons for late lodgment.[13] In that letter, SMH stated that the First Applicant and the other Applicants relied on accountants to meet their tax reporting obligations, and that a firm called Presidio Partners (‘Presidio’) had been engaged since 2013 for that purpose.
[13] See T37 at 202-203
The letter stated that throughout the time Presidio had been engaged, the First Applicant had had his owns concerns about ‘delays in his accountants’ attendance to reporting …’ as well as concerns about figures in drafts that the accountants presented to him. It further stated that the First Applicant was ‘regularly’ chasing up and prompting his accountants to attend to his matters, and that he was regularly reviewing and correcting drafts.
Included with the letter were some email chains which were said to constitute ‘numerous examples’ of correspondence between the First Applicant and his accountants referring to delays in lodging and draft figures requiring amendment.[14]
[14] See T37 at p204-277.
The Applicants formally applied for remittal of the failure to lodge penalties imposed on them by way of a letter from SMH to the ATO dated 28 September 2018.[15] In that letter, SMH repeated the explanation for the delays in lodgments contained in their letter dated 26 September 2018, namely that the delays were due to the inaction of the Applicants’ accountants, which occurred ‘despite being prompted and chased by [the First Applicant] on his own behalf and on behalf of all associated entities’.
[15] See T38 at 228-229.
On 13 March 2019, the Respondent decided not to remit the FTL penalties imposed on the Applicants.[16]
[16] T42 at 236-239 (the FTL Remission Decision).
On 13 May 2019, by an email from the First Applicant to the ATO, the Applicants objected to the Respondent’s decisions not to remit the FTL penalties.[17] The Objection Decisions were then made by the Respondent on 29 May 2019.
[17] T43 at 242.
The following are relevant facts specific to each of the Applicants.
First Applicant – Joseph Frangieh
For the period 2013 to 2019 the First Applicant was represented by Satill and Miller in respect of his tax affairs, which became Presidio following a merger/rebranding in 2014.[18]
[18] Exhibit A2 at 2.
The First Applicant’s income tax return (‘ITR’) for the income year ended 30 June 2016 was due on 15 May 2017. He did not lodge his income tax return by this date.
The First Applicant’s ITR for the income year ended 30 June 2017 was due on 31 October 2017. He did not lodge his income tax return by this date.
By letter dated 22 August 2018, the Respondent issued the First Applicant with notices of FTL penalty for failing to lodge ITRs for income years ended 30 June 2016 and 30 June 2017.[19]
[19] T14.
The First Applicant made no contact with the Respondent regarding the outstanding 2016 ITR between 15 May 2017 and 14 September 2018.
The First Applicant made no contact with the Respondent regarding the outstanding 2017 ITR between 31 October 2017 and 14 September 2018.
On 14 September 2018 the First Applicant lodged outstanding ITRs for income years ended 30 June 2016 and 30 June 2017.
FTL penalties were imposed on the First Applicant as listed below on 17 August 2018.[20] These penalties relate to his failure to lodge his ITR by their due dates for the financial years ended 2016 and 2017.
[20] T14.
The Respondent’s records show that since 2004, the First Applicant has lodged eight ITRs late with some lodged more than 300 days after their due date.[21] Of these, only two were subject to failure to lodge penalties.[22] Lodgment details are summarised in the following table:
[21] T42.
[22] T42 at 237.
Income Year Ended Lodgment Due Date Lodgment Date Prior to income years ended 30 June 2016 and 30 June 2017 30 June 2004 15 May 2005 23 September 2005 30 June 2006 15 May 2007 10 September 2007 30 June 2011 5 June 2012 07 November 2012 30 June 2012 31 October 2012 11 April 2014 30 June 2013 31 October 2013 13 October 2014 30 June 2015 16 May 2016 24 August 2016
After income years ended 30 June 2016 and 30 June 2017 30 June 2018 12 June 2019 10 November 2020[23] 30 June 2019 31 October 2019 10 November 2020 [23] Transcript at 38.
Second Applicant – CJG Property Group Pty Ltd
The Second Applicant, CJG Property Group Pty Ltd (‘CJG’) was incorporated on 19 April 2007.[24] It was established for the acquisition of a commercial building in Ipswich in Queensland.[25] This property was ruined by arson and was sold at a loss about two and a half years ago to the Queensland Government.[26]
[24] Ibid.
[25] Transcript at 6.
[26] Transcript at 6, 18.
The First Applicant was a director and a public officer of CJG from:
(i)19 April 2007 to 14 March 2008;
(ii)1 May 2008 to 30 June 2013; and
(iii)10 February 2015 to present.[27]
[27] T44.
From 4 March 2011 to 13 September 2011, CJG was represented by SJS Advisory Group Pty Ltd in respect of its tax affairs.[28]
[28] T44.
From 13 September 2011 to 2 March 2014, CJG was represented by BM Accounting & Taxation Shop in respect of its tax affairs.[29]
[29] T44.
From 3 March 2014 to 25 February 2015, CJG was represented by DBW (NSW) Pty Ltd in respect of its tax affairs.[30]
[30] T44.
From 26 February 2015 to 9 May 2019, CJG was represented by Presidio.[31]
[31] T44.
CJG ceased trading from 20 June 2017 with the exception of the realisation of one asset in the September 2018 quarter.[32]
[32] Exhibit A2 at [40].
The Respondent’s records show that lodgment reminder notices were issued to CJG in respect of Business Activity Statements (‘BAS’) not lodged for the following periods:[33]
[33] T44.
(i)30 April 2007 and 31 May 2007 - issued 2 October 2007
(ii)30 June 2007 - issued 14 August 2007
(iii)30 September 2007 - issued 13 November 2007
(iv)31 March 2009 - issued 2 July 2009
(v)30 September 2009 - issued 20 February 2010 and 25 March 2010
(vi)31 December 2010 and 31 March 2011 - issued 18 June 2011 and 24 September 2011
(vii)30 September 2011 - issued on 9 February 2012, 10 March 2012 and 25 July 2012
(viii)31 December 2011 - issued on 25 July 2012
(ix)30 September 2012 - issued 10 January 2013 and 27 February 2013
(x)30 June 2013 - issued 10 December 2013 and 17 January 2014
(xi)30 September 2017 - issued 25 January 2018.
The Respondent imposed FTL penalties for overdue lodgment of CJG’s BAS as follows:[34]
[34] T20.
The Respondent’s records show that submissions were received from Presidio on 20 May 2015,[35] seeking the remission of FTL penalties for CJG. The submissions referred to the appointment of a new bookkeeper and that reliance was placed on that bookkeeper to ensure lodgment. The Respondent allowed in full these remission requests.
[35] T18.
The Respondent’s records indicated that over the past 12 years, 36 of CJG’s BAS and three ITRs were lodged late. Of the 36 late-lodged BAS, nine were subject to failure to lodge penalties. Of those nine penalties, CJG received full remissions in respect of four of them.[36] In relation to the four remissions, the explanation Presidio provided for the late lodgment was that CJG’s bookkeeper had left, and the replacement bookkeeper was ‘not fulfilling their duties’.[37]
[36] T19 at 138.
[37] See T18 at 137
CJG was sent numerous reminders in respect of BAS which it had failed to lodge. In the case of some of these, more than one reminder notice was sent.[38]
[38] T15, p103-134; T9, 56, 58-59
Third Applicant – Frangieh Family Trust
The Third Applicant, the Frangieh Family Trust (‘FFT’), was registered on 27 January 2000. The First Applicant is the trustee of FFT. Its last transaction was about three or four years ago. Prior to this it was dormant for about six years.[39]
[39] Transcript at 6.
FFT lodged ITRs for the income years ended 30 June 2008, 2009, 2010, 2011, 2012 and 2017.[40]
[40] T10.
The Respondent’s records show that lodgment reminder notices were issued to FFT in respect of outstanding ‘taxation documents’ for the following periods:
(i)30 September 2011 and 31 December 2011 - issued 11 April 2012 and 4 July 2012
(ii)30 June 2013 - issued 5 November 2013 and 7 January 2014.[41]
[41] T21.
The Respondent’s records show that on 5 August 2016 lodgment reminder notices were issued to FFT in respect of the following outstanding ‘taxation documents’:[42]
[42] T22.
Document type Lodgment period Business Activity Statement 1 January 2016 to 31 March 2016 Business Activity Statement
1 October 2015 to 31 December 2015
Business Activity Statement
1 July 2015 to 30 September 2015
Business Activity Statement
1 April 2015 to 30 June 2015
Business Activity Statement
1 January 2015 to 31 March 2015
Business Activity Statement
1 October 2014 to 31 December 2014
Business Activity Statement
1 July 2014 to 30 September 2014
Business Activity Statement
1 April 2014 to 30 June 2014
Business Activity Statement
1 January 2014 to 31 March 2014
Business Activity Statement
1 October 2013 to 31 December 2013
Business Activity Statement
1 July 2013 to 30 September 2013
Business Activity Statement
1 April 2013 to 30 June 2013
Income Tax Return
1 July 2012 to 30 June 2013
Income Tax Return
1 July 2013 to 30 June 2014
Income Tax Return
1–July 2014 to 30 June 2015
The Respondent’s records indicated that over the past 12 years, 17 of FFT’s BAS and three of its ITRs were lodged late. FFT was sent numerous reminders in respect of its overdue BAS which it had failed to lodge.[43] Of the 17 late BAS, only eight were subject to failure to lodge penalties.[44] The FTL penalties imposed on FFT are as follows:[45]
[43] T21 at 141-148; T22 at 149-151; T10 at 64, 66- 67.
[44] T11.
[45] Respondent’s Statement of Facts, Issues and Contentions at 16.
Fourth Applicant – In-Style Developments Pty Ltd
The Fourth Applicant, In-Style Developments Pty Ltd (‘ID’), was incorporated on 20 October 1998.[46] It has traded as a building company throughout the relevant period.[47]
[46] T44.
[47] Transcript at 6, 19.
The First Applicant was the public officer of ID from:
(i)21 October 1998 to 30 September 2012; and
(ii)6 July 2015 to present.[48]
[48] T44.
The First Applicant was the director of ID from:
(i)21 October 1998 to 13 March 2013;
(ii)1 December 2007 to 30 September 2012;
(iii)11 February 2013 to 22 April 2015; and
(iv)6 July 2015 to present.[49]
[49] T44.
From 31 March 2011 to 13 September 2011, ID was represented by SJS Advisory Group Pty Ltd in respect of its tax affairs.[50]
[50] T44.
From 13 September 2011 to 5 May 2015, ID was represented by BM Accounting & Taxation Shop in respect of its tax affairs.[51]
[51] T42.
From 6 May 2015 to 5 August 2014, ID was represented by DBW (NSW) Pty Ltd in respect of its tax affairs.[52]
[52] T42.
From 6 August 2014 to 12 May 2019, ID was represented by Presidio in respect of its tax affairs.[53]
[53] T42.
The Respondent’s records show that lodgment reminder notices were issued to ID in respect of the following periods:
(i)April 2017
(ii)May 2017
(iii)June 2017
(iv)July 2017
(v)August 2017
(vi)September 2017
(vii)October 2017
(viii)November 2017.[54]
[54] T11.
The Respondent’s records show that submissions were received from Presidio on 27 May 2016,[55] seeking the remission of FTL penalties for ID. Similar to the remission request made on 20 May 2015 for CJG and 17 March 2016 for IHQ, the submissions referred to the appointment of a new bookkeeper and that reliance was placed on that bookkeeper to ensure lodgment. The Respondent allowed in full these remission requests. In respect of the remissions granted in respect of six business activity statements, the explanation Presidio provided for the late lodgment was that ID’s new bookkeeper had assumed that because there was ‘minimal’ activity, activity statements were not required to be lodged.[56]
[55] T27.
[56] See T27 at 168.
The Respondent’s records indicated that over the past ten years, 80 of ID’s BAS and four ITRs were lodged late. Of the four late-lodged ITRs, only two were subject to failure to lodge penalties. Of the 80 late-lodged BAS, only 27 were subject to FTL penalties. Of these, ID received full remissions in respect of ten of them.[57] The failure to lodge penalties imposed on ID are as follows:[58]
Income Tax Return
Business Activity Statement
[57] T42 at 236, 237; see also T11 at 56.
[58] Respondent’s Statement of Facts, Issues and Contentions at 17-19.
Fifth Applicant – Instyle Homes (NSW) Pty Ltd
The Fifth Applicant, Instyle Homes (NSW) Pty Ltd (‘IHN’), was incorporated on 26 November 2013.[59] It is a subsidiary of ID and operated as a building company.[60] It is not currently trading.[61]
[59] T44
[60] Transcript at 6, 21.
[61] Transcript at 7.
The First Applicant was the public officer and director of IHN from 6 July 2015 to present.[62]
[62] T44.
From 26 November 2013 to 5 August 2014, IHN was represented by BM Accounting & Taxation Shop in respect of its tax affairs.[63]
[63] T44.
From 6 August 2014 to 12 May 2019, IHN was represented by Presidio in respect of its tax affairs.[64]
[64] T44.
The Respondent’s records show that lodgment reminder notices were issued to IHN in respect of the following:
(i)BAS for period ended 30 June 2015 - issued 24 September 2015
(ii)Payment summary annual report due 14 August 2015 - issued 10 November 2015 and 16 January 2016
(iii)BAS for period ended 30 June 2016 - issued 17 November 2016; and 31 December 2011 - issued on 25 July 2012.[65]
[65] T29.
The FTL penalties imposed on IHN are as follows:[66]
Income Tax Return
Business Activity Statement
Taxable Payments Annual Report
[66] Respondent’s Statement of Facts, Issues and Contentions at 20-21.
The Respondent’s records indicate that over the last 12 years, 15 activity statements and three ITRs were lodged late. Of those 15 activity statements, eight were subject to FTL penalties. [67] Of the three late ITRs, two were subject to FTL penalties and were lodged in excess of 300 – 500 days late.[68] IHN was sent a number of reminders in respect of its overdue BAS which it had failed to lodge.[69]
[67] T42 at 236, 237.
[68] T42.
[69] T29 at 170-177; T12 at 79 and 84.
Sixth Applicant – Instyle Homes (QLD) Pty Ltd (IHQ)
The Sixth Applicant, Instyle Homes (QLD) Pty Ltd (‘IHQ’) was incorporated on 2 October 2006.[70] It has been active since 2009. It has building licenses in the State of Queensland.[71]
[70] T44.
[71] Exhibit A2 at [47], [48].
The First Applicant was the public officer of IHQ from 6 July 2015 to present.[72] The First Applicant was the director of IHQ from:
(i)2 October 2006 to 26 November 2013; and
(ii)6 July 2015 to present.[73]
[72] T44.
[73] T44.
From 6 August 2014 to 12 May 2019, IHQ was represented by Presidio in respect of its tax affairs.[74]
[74] T44.
The FTL penalties imposed on IHQ are as follows:[75]
Income Tax Return
Business Activity Statement
[75] Respondent’s Statement of Facts, Issues and Contentions at 22-23.
The Respondent’s records show that submissions were received from Presidio on 17 March 2016,[76] seeking the remission of FTL penalties for IHQ. The submissions referred to the appointment of a new bookkeeper and that reliance was placed on that bookkeeper to ensure lodgment. The Respondent allowed in full these remission requests.
[76] T34.
The Respondent’s records indicate that over the past ten years, 49 of IHQ’s business activity statements and six of its ITRs were lodged late. Of the six late-lodged ITRs, only two were subject to failure to lodge penalties (and they had been lodged in excess of 170 days late). Of the 49 late-lodged business activity statements, only 20 were subject to failure to lodge penalties. Then, of the 20 failure to lodge penalties imposed, IHQ received full remissions in respect of four of them due to a system issue within the ATO.[77]
[77] T42 at 236, 237; T13 at 89.
IHQ received a full remission in respect of the failure to lodge penalty imposed in respect of one of the late-lodged ITRs, being an ITR for FY2013.[78] The explanation Presidio provided in March 2016 for the late lodgment was that IHQ had recently changed accountants due to work not being completed and lodged on time, and only discovered the problem after the appointment of new accountants.[79]
[78] T35 at 195.
[79] T34 at 194.
First Applicant’s evidence
The First Applicant provided an affidavit dated 14 February 2020.[80] In this he stated that during the relevant period he relied on the advice and work of professional people to ensure that his tax obligations and those of the other Applicants were met.[81] In late 2013 he engaged Satill and Miller to oversee his accounting and taxation affairs.[82] He gave instructions either face to face or by telephone to Ray Loulach and Julia Cheung in relation to his tax affairs and those of the other Applicants.[83] He provided them with details of his bank account and gave them authority to access the account so they had access to relevant source data needed to prepare returns and BAS.[84] For many years they had used this data to prepare BAS and returns ‘without incident or delay’.[85] Satill and Miller was either bought or merged or rebranded to Presidio in 2014.[86]
[80] Exhibit A2.
[81] Exhibit A2 at [9].
[82] Transcript, 12, 25.
[83] Exhibit A2 at [11]; Transcript at 12, 26.
[84] Exhibit A2 at [19]; Transcript at 12-13.
[85] Exhibit A2 at [20].
[86] Exhibit A2 at [4]-[5].
In around 2016 the First Applicant ‘became concerned about the responsiveness of Ray and Julia to [his] inquiries regarding [his] tax affairs and for the entities that were active.’[87]There were ‘ongoing discussions about the trading entities and delays in quantifying their liability, but it was never [his] understanding that the entities that had nil BAS and income tax returns were not being lodged until [he] received notice of the penalties.’[88] He made numerous phone calls and sent text messages to Ray and to Presidio’s office and often he would not get a response for weeks.[89] He received no confirmation from them in relation to the outstanding lodgments, and continued to receive invoices for their work.[90]
[87] Exhibit A2 at [17]; Transcript at 25, 27-28.
[88] Exhibit A2 at [21].
[89] Exhibit A2 at [25]; Transcript at 15-17.
[90] Exhibit A2 at [21], [23]; Transcript at 23.
When the First Applicant received notice of the initial penalties, he contacted Ray. He was ‘unable to provide an explanation regarding the nil returns.’[91] He was told that ‘due to the merger some of the information about late lodgements was not brought to their attention.’[92] Following the receipt of further penalties he sent a text to Ray asking him whether Presidio had insurance that he could claim against.[93]
[91] Exhibit A2 at [28]
[92] Exhibit A2 at [30]
[93] Exhibit A2 at [34]; attachment JF-7.
Once he became aware of the full extent of the penalties, he instructed his lawyers SMH to seek remission of the FTL penalties ‘on the basis that the delays were caused by [his] accountants’ and he ‘would have sorted the issue had [he] known about it.’[94] It is his belief that the reasoning of the Respondent ‘was unfair’ as he ‘had at no time the knowledge that the nil lodgements had not been returned as [he] never received notice from [his] accountant or the [Respondent].’[95]
[94] Exhibit A2 at [57].
[95] Exhibit A2 at [60].
In his oral evidence, the First Applicant confirmed that the Second, Fourth, Fifth and Sixth Applicants were active in the period during which Presidio was their accountant.[96]
[96] Transcript at 34.
He told the Tribunal that he is ‘very pushy’ when it comes to meeting his tax obligations and lodgments and had he known, or had he been made aware, that he had outstanding lodgments he would ‘definitely be on the front door of [his] accountant.’[97] Although he had been concerned about the ‘responsiveness’ of Presidio since 2016, it was not until he was made aware of the imposition of the penalties in mid-2018 that he ‘had enough’ and ‘pulled the plug on Presidio’ and ended their relationship and ‘moved on’.[98]
[97] Transcript at 14.
[98] Transcript at 28.
The First Applicant was asked why, if he found Presidio non-responsive and he had to always chase them up, he did not appoint new accountants. He agreed it was in his control to find new accountants but said it is a ‘horrendous exercise’ to change accountants and he would only do so as ‘the last resort’.[99] Whereas he had to chase Presidio up and ‘yell and scream a few times’ he was unaware that there were any outstanding obligations to the Respondent until mid-2018.[100] He was further asked why he did not contact the Respondent himself to double-check that everything was up-to-date. He said he was unaware that he was able to do so, and he would be ‘very happy to explore that option’.[101]
[99] Transcript at 30-31.
[100] Transcript at 30.
[101] Transcript at 31, 42, 43.
The First Applicant told the Tribunal that he appointed a new accounting firm, Economos, to manage his tax affairs and those of CJG, IHN and IHQ, in May 2019.[102] He had the same problems with this firm as he did with Presidio, so he ceased to engage them.[103]
SUBMISSIONS
[102] Transcript at 39.
[103] Transcript at 40.
Applicants
The Applicants contend that Presidio was provided with the information to allow them to prepare and lodge the necessary taxation documents on a timely basis. This included providing them with the online banking login details of the various entities.[104] The First Applicant followed up with Presidio about financial reporting and lodgments.[105] The emails, phone records, text messages and the First Applicant’s testimony together demonstrate that the First Applicant ‘should be removed from the category of worst offenders that intentionally disregard the law in a blatant fashion.’[106] The Applicants concede that the penalty provisions can operate where a taxpayer is ‘habitually late.’[107]
[104] Applicant’s Statement of Facts, Issues and Contentions at [20].
[105] Transcript at 3.
[106] Transcript at 3-4; Applicant’s Submissions at [35]
[107] Transcript at 4.
The question for the Tribunal is whether the Applicants have done enough to satisfy the Tribunal that reliance on the accountants and bookkeeper to lodge the business activity statements and tax returns on a timely basis was reasonable.[108] Although the compliance history of lodgment is not perfect, this lodgment history should be viewed in the context of the whole history of lodgment over time.[109]
[108] Applicant’s Submissions at [33].
[109] Applicant’s Submissions at [36].
The Applicants are entitled to take advantage of the ‘safe harbour’ provisions afforded to taxpayers who use a registered tax agent to lodge their returns pursuant to section 286-75(1A) of Sch 1 to the TAA.[110] Presidio had the information required to prepare the BAS. It is conceded that the Respondent has a strong argument in relation to the annual tax lodgments. In this regard the Tribunal should consider the financial position of the Applicants in assessing whether to allow the remission.[111]
[110] Applicant’s Statement of Facts, Issues and Contentions at [9].
[111] Transcript at 4.
Whether or not the ‘safe harbour’ provisions are available, the intention of the legislature is to provide them as an exculpatory provision, and it is open to the Tribunal to use the framework from the safe harbour provisions under the broad framework to remit penalties of more than two penalty units under s 298-20 of Sch 1 of the TAA.[112]
[112] Applicant’s Submissions at [17].
There was a ‘breakdown in the relationship’ between the Applicants and Presidio. A Jones v Dunkel inference should not arise for not calling the accountants because their evidence may not have added anything to the evidence having regard to the costs to the Applicants in a Small Business Taxation setting and where there are alternative items of evidence.[113]
[113] Transcript, 4; Applicant’s Submissions at [26].
That many of the BAS were nil or negligible should have been enough to put the Respondent on notice of the commercial issues facing the Applicants, and the prejudice to the revenue of tax forgone, which compulsory timely reporting is meant to overcome, was to involve minimal prejudice to the Respondent.[114]
[114] Applicant’s Submissions at [42].
The Full Court’s reasoning in Dixon as Trustee for Dixon Holdsworth Superannuation Fund v Federal Commissioner of Taxation (2008) 167 FCR 287 supports the view there is nothing in the legislation to suggest that special circumstances must be established before the discretion to remit a penalty can be exercised. PSLA 2011/19 at paragraph 10 takes a more restrictive approach than that set by the Court or extrinsic material, in limiting the circumstances to that ‘which could not be predicted’. This narrows the available circumstances to a greater extent than legally mandated.[115]
[115] Applicant’s Submissions at [9]-[13].
The overly narrow position the Respondent has taken failed to consider the broad ambit and evidence a decision-maker should consider in deciding whether to remit. This includes the commercial reliance of small businesses on licensed tax professionals, with 90% using a tax agent; and the legislature’s guidance in the examples to the extrinsic material on the safe harbour rules about how the safe harbour, penalty remission provisions, and the Code of Professional Conduct under the Tax Agents Services Act 1999 (Cth) are intended to interrelate.[116]
[116] Applicant’s Submissions at [43].
The Applicants say they have done enough to overcome the civil standard. Based on the evidence and testimony, it is correct for the decision-maker to either use the safe harbour provisions or remit under the broad discretion for those items up to two penalty units.[117]
[117] Applicant’s Submissions at [45].
Respondent
The Tribunal’s jurisdiction in these proceedings is limited to reviewing the Objection Decisions made, pursuant to s 298-20, as to whether or not to remit the failure to lodge penalties. The Tribunal does not have jurisdiction to determine whether or not the failure to lodge penalties should have been applied in the first place, pursuant to s 286-75 of the TAA, including whether the exemption for safe harbour provision in s 286-75(1A) applies.[118]
[118] Respondent’s submissions at [19].
The Respondent accepts that, particularly given the terms of the safe harbour provision, some of the considerations relevant to that provision could also be relevant to the question whether penalties should be remitted. A critical element for the application of the safe harbour provision is that the taxpayer has established that he, she or it provided their tax agent with “all relevant taxation information” to enable the agent to lodge the relevant documents.[119] The Applicants have failed to establish this element in these proceedings.[120]
[119] Respondent’s submissions in reply at [8]; Transcript at 7
[120] Respondent’s submissions in reply at [8].
A taxpayer is only entitled to object against a decision refusing to remit all or part of a failure to lodge penalty if the amount of penalty payable after the refusal is more than two penalty units: see s 298-20(3)(b) of the TAA.[121] Applicants are not entitled to object against the Respondent’s decisions not to remit FTL penalties of less than two penalty units, and it follows that the Tribunal also does not have jurisdiction to review the Respondent’s decision not to remit them.[122]
[121] Respondent’s submissions at [21].
[122] Respondent’s submissions at [22], [25].
The Respondent contends that in respect of the FTL penalties which are reviewable by the Tribunal, the Respondent’s decisions not to remit the FTL penalties imposed on the Applicants pursuant to s 286-75(1) (1A) of Sch 1 to the TAA were correctly made for all Applicants having regard to a number of circumstances which include:
(i)The First Applicant is responsible for his tax affairs.[123] As an experienced businessman and director of CJG, ID, IHN and IHQ, he is also aware or ought to be aware of the tax obligations for each of those Applicants.[124] As the Trustee of FFT, the First Applicant would also be aware or ought to be aware of FFT’s tax obligations.[125] His focus on his business activities is not a reason that supports remission of the FTL penalties.[126]
(ii)The Applicants’ failure to lodge taxation documents were not confined to a single tax period but extended to multiple tax periods exceeding 12 months. There was consistent late lodgment of ITR and/or BAS by each of the Applicants.[127] The Respondent issued the First Applicant, FFT, CJG, ID, and IHN with reminders relating to “overdue documents” before FTL lodge penalties were applied.[128]
(iii)The Applicants had the benefit of having numerous FTL penalties remitted.[129] This constitutes the extent of any remission appropriate in the Applicants’ cases. There is nothing that is unfair, unreasonable or unjust in the remaining FTL penalties not being remitted.[130]
(iv)The fact the Applicants engaged a tax agent, Presidio, since around 2013 does not absolve them of responsibility for the late lodgments that are the subject of the FTL penalties imposed on them.[131] The evidence demonstrates that the First Applicant had concerns not only about the responsiveness of Presidio but also about delays in their attendance to reporting matters,[132] but nevertheless chose to continue to use their services.[133]
(v)There are no circumstances beyond the Applicants' control in relation to their failure to comply with their taxation obligations.[134] The Applicants did not take mitigating steps to ensure compliance with their tax obligations, for example by appointing another tax agent or contacting the ATO to request extensions for lodgment dates.[135]
[123] Respondent’s Statement of Facts, Issues and Contentions at [75]; Respondent’s submissions [58]
[124] Respondent’s Statement of Facts, Issues and Contentions at [75].
[125] Respondent’s Statement of Facts, Issues and Contentions at [75]; Transcript at 8.
[126] Respondent’s submissions at [61]
[127] Respondent’s Statement of Facts, Issues and Contentions at [75]; Respondent’s submissions at [62]
[128] Respondent’s Statement of Facts, Issues and Contentions at [75]; Respondent’s submissions at [59]
[129] Respondent’s submissions at [62]; Transcript at 8.
[130] Respondent’s submissions at [64].
[131] Respondent’s submissions at [60]; Transcript at 9
[132] Respondent’s submissions in reply at [12].
[133] Respondent’s submissions at [60]; Transcript at 8
[134] Respondent’s Statement of Facts, Issues and Contentions at [75].
[135] Respondent’s submissions at [63]
The Applicants did not call evidence from any witness from Presidio and no explanation for this failure was provided other than that there was a ‘breakdown in the relationship.’ Given that the Applicants’ case in favour of remittal of the penalties depends upon their claim that the First Applicant had put Presidio in a position to lodge all of the BAS and ITR the subject of the FTL penalties but they nonetheless failed to do so, such witnesses could give direct evidence that would have been centrally relevant to the issues in the case.[136] In accordance with principles enunciated in Jones v Dunkel when weighing the evidence in these proceedings, it is open to the Tribunal to infer that any evidence that witnesses from Presidio might have given would not have assisted the Applicants’ case.[137]
[136] Respondent’s submissions in reply at [13].
[137] Respondent’s submissions in reply at [14].
Having regard to the breadth of the situations and matters that decision-makers are guided in PSLA 2011/19 to consider, there is no substance to the contention that this guidance is overly restrictive such that, if followed, it would lead to decision-makers failing to take into account relevant considerations or otherwise misapplying the law. Nothing in the Full Court’s reasoning in Dixon v Federal Commissioner of Taxation or in extrinsic materials provides support for any contention that PSLA 2011/19 is inconsistent with the scope of the statutory power to remit penalties imposed for failures to lodge.[138]
[138] Respondent’s submissions in reply at [4]-[5].
The argument that many of the Applicants’ BAS were nil or “negligible” and this should have put the Respondent on notice that the Applicants were facing “commercial issues” such that they would not have tax debts should be rejected. The liability to failure to lodge penalties arises by operation of the statute, and the significant majority of the FTL penalties were imposed before the Applicants lodged the outstanding activity statement or return.[139]
[139] Respondent’s submissions in reply at [23]-[24].
The Applicants have not demonstrated that the FTL Remission Decisions should not have been made or should have been made differently. The evidence relied on by them is highly general and largely consists of untestable assertions.[140] The emails the First Applicant provided do not support a conclusion that he regularly chased Presidio regarding the outstanding lodgments which are the subject of the FTL penalties.[141]
[140] Respondent’s submissions at [67].
[141] Respondent’s submissions at [68].
The Respondent contends that there are no grounds warranting the full or partial remission of the FTL Penalty pursuant to s 298-20 of Sch 1 to the TAA.
CONSIDERATION AND REASONS
1) Does the Tribunal have jurisdiction under Part IVC of the TAA to determine whether the Applicants are not liable to FTL penalties imposed pursuant to s 286-75(1) of Sch 1 to the TAA?
The statutory scheme as regards a taxpayer’s liability to a FTL penalty involves two stages, occurring at different points in time. The first is the imposition of a FTL penalty, which occurs by operation of s 286-75 of the TAA. It is at this point that determination is made of whether the exemption, or ‘safe harbour’ provision, in s 286-75(1A) applies. Where a FTL penalty has been imposed under s 286-75(1) of the TAA, the second stage is a decision as to whether the penalty should be remitted in whole or in part pursuant to s 298-20 of the TAA. This may arise in circumstances such as these where the taxpayer requests remission of the FTL penalty. Such a decision necessarily presupposes that the taxpayer is liable to pay the FTL penalty, and the decision is whether or not the taxpayer should be relieved from that liability.[142] Section 298-20(3) of the TAA provides that if the Commissioner refuses to any extent to remit an amount of FTL penalty, the amount of penalty payable is more than two penalty units, and the taxpayer is dissatisfied with ‘the decision’, the taxpayer may object against ‘the decision’. The decision against which a taxpayer is entitled to object is the decision whether or not to remit all or part of the penalty that has been applied.[143]
[142] Respondent’s submissions at [14]-[16].
[143] Respondent’s submissions at [17].
The statutory scheme does not incorporate an equivalent provision giving a taxpayer an entitlement to object against the initial imposition of the FTL penalty pursuant to s 286-75 of the TAA. It thereby follows that the applicability of the ‘safe harbour’ provision in s 286-75(1A) cannot arise in the course of proceedings under Part IVC of the TAA. The Tribunal’s jurisdiction is limited to reviewing the Objection Decisions made pursuant to s 298-20 of the TAA not to remit the FTL penalties. The Tribunal does not have jurisdiction to determine whether or not the FTL penalties should have been imposed pursuant to s 286-75 of the TAA, including whether the exemption or ‘safe harbour’ provision in s 286-75(1A) applied.[144]
Does the Tribunal have jurisdiction to review FTL penalties imposed pursuant to section 286-75(1) of Schedule 1 to the TAA if there is less than two penalty units remaining?
[144] Respondent’s submissions at [18]-[19].
Sub-section 298-20(3)(b) of the TAA provides that a taxpayer is only entitled to object against a decision refusing to remit all or part of a failure to lodge penalty if the amount of penalty payable after the refusal is more than two penalty units.
Section 2B of the Acts Interpretation Act 1901 (Cth) provides that a “penalty unit”, including in relation to a civil penalty unit, has the meaning given by s 4AA of the Crimes Act 1914 (Cth) (‘Crimes Act’). As at 21 January 2010, s 4AA(1) of the Crimes Act provided that a penalty unit means $110. As at both 23 July 2018 and 30 July 2018, s 4AA(1) of the Crimes Act relevantly provided that a penalty unit means $210.
In light of these provisions, none of the FTL penalties imposed on the Applicants listed in the Table below are more than two penalty units. Therefore, they were not entitled to object against the Respondent’s decisions to refuse to remit them, and consequently, the Tribunal also has no jurisdiction to review the Respondent’s decisions as regards these penalties.
Applicant Relevant FTL penalty Amount CJG Failure to lodge BAS for period ended 30 June 2018, which was due on 30 July 2018 $210 ID Failure to lodge BAS for period ended 30 June 2018, which was due on 30 July 2018 $420 IHN Failure to lodge BAS for period ended 30 June 2018, which was due on 30 July 2018 $210 IHQ Failure to lodge BAS for period ended 30 Dec 2009, which was due on 21 January 2010 $110 IHQ Failure to lodge BAS for period ended 30 June 2018, which was due on 23 July 2018 $210 3) Should the FTL penalties, imposed pursuant to s 286-75(1) of Sch 1 to the TAA, be remitted in full or in part pursuant to s 298-20 of Sch 1 to the TAA.
Pursuant to s 14ZZK(b)(iii) of the TAA, each Applicant has the burden of proving that the Respondent's Objection Decisions in respect of the remission of the FTL penalties should not have been made or should have made differently.
The TAA does not provide any express criteria or preconditions for the exercise of the discretion in s 298-20(1) to remit a failure to lodge penalty. In Rowntree and Commissioner of Taxation (Taxation) [2016] AATA 420 Deputy President Deutsch noted at [86]:
The legislation itself is silent on the matters the Respondent must consider in deciding whether to exercise the discretion to remit an administrative penalty. However, there are a number of important matters raised by the relevant case law and administrative rulings:
·the relevant factors are determined by reference to the subject matter, scope and purpose of s 298–20: BHP Billiton Direct Reduced Iron Pty Ltd v DCT (2007) 67 ATR 578;
·the question which the Tribunal must address itself to in connection with the application for the remission of penalties is whether the outcome arising by reason of the imposition of the penalty is harsh having regard to the particular circumstances of the Applicant: Dixon as Trustee for Dixon Holdsworth Superannuation Fund v Commissioner of Taxation (2008) 167 FCR 287 at [26];
·the Respondent is obliged to treat taxpayers in like circumstances consistently and must exercise the discretion in such a way as to not discriminate between taxpayers: Bellinz Pty Ltd v Federal Commissioner of Taxation (1998) 39 ATR 198;
·the penalty may be remitted if the prescribed penalty rate is blatantly unjust to the taxpayer: Re Johnston and Federal Commissioner of Taxation (2011) 81 ATR 908;
·taxpayers with a good compliance history are likely to be treated more leniently. However, the weight given to compliance history may vary depending on the circumstances of the breach in question: ATO Practice Statement Law Administration 2005/2;
·the penalty imposed for a false or misleading statement is unlikely to be remitted if a taxpayer has been reckless or intentionally disregards the law: ATO Practice Statement Law Administration 2005/2;
·a taxpayer’s personal circumstances are important considerations – circumstances which are outside the taxpayer’s control such as natural disasters or serious illness are taken into account where it would be fair and reasonable to do so: ATO Practice Statement Law Administration 2014/4.
The current policy guidance, PSLA 2011/19, identifies at [10] the following three circumstances where remission should be considered:
(a)where the failure to lodge was caused by circumstances beyond the taxpayer’s control (being circumstances that could not be predicted and neither the taxpayer nor their agent was in a position to request further time to lodge);
(b)where it is fair and reasonable to remit the penalty in question; or
(c)where the imposition of the failure to lodge penalty does not provide a just result.
Following the relevant authorities and having regard to the circumstances identified in the current policy guidance, the Tribunal finds for the reasons that follow that the failure to lodge penalties imposed on the Applicants should not be remitted in part or in full.
The First Applicant is as an experienced businessman who has been a director or public officer of companies since 1998, including the Second to Sixth Applicants during the relevant period. He must have been aware of his own tax obligations, and those of the other Applicants, including obligations to lodge income tax returns and business activity statements. The First Applicant’s evidence as to the steps he took to follow up with Presidio in relation to lodgments demonstrates that he was aware that he and the other Applicants had obligations to lodge their returns and business activity statements in a timely manner.
The fact that the Applicants had engaged accountants to prepare and lodge ITRs and BAS does not relieve the Applicants of responsibility for the late lodgments that are the subject of the FTL penalties. The correspondence written on behalf of the Applicants by their solicitors, SMH, to the Respondent in support of their remission request, acknowledged that the First Applicant had had concerns about delays in Presidio’s attendance to reporting matters throughout the period that it had been engaged by the Applicants. The Applicants chose to continue to use the services of Presidio for a number of years notwithstanding them being aware that Presidio may not have been attending to the lodgment of returns and business activity statements in a timely manner.
SMH’s letter to the Respondent dated 26 September 2018 setting out reasons why the Applicants had been late in lodging documents, states that the First Applicant’s ‘focus’ had been on his building and property development activities, as he sought to ‘reinvigorate’ his business following the finalisation of a dispute with the Respondent in 2016. SMH acknowledged that, as a result, the First Applicant had not focused on tax as much as he had in prior years.
The Tribunal is not satisfied that the First Applicant’s focus on his business is a reason that supports remission in part or in full of the FTL penalties imposed on him or the other Applicants. An integral and important part of any business is taking the steps necessary to ensure compliance with its taxation obligations, including the lodgment of required documentation. This is especially so in circumstances in which the First Applicant was aware there was, or could be, an issue with Presidio’s attendance to these obligations on his and the other Applicants’ behalf.
The evidence before the Tribunal is that each of the Applicants has a long history of failing to lodge by the due date a large number of their tax returns and business activity statements. In the case of many of these late lodgments, failure to lodge penalties were not imposed by the Respondent. In addition, the Applicants benefited from the remission of numerous failure to lodge penalties imposed on them.
Having regard to the evidence before it, the Tribunal finds that the Applicants have failed to demonstrate that the late lodgments that gave rise to the FTL penalties imposed on them were caused by circumstances which were beyond their control. Indeed, the fact that the First Applicant’s evidence is that he was aware that Presidio may not be attending to the Applicants’ lodgment obligations in a timely manner demonstrates that it was within his control to take steps to remedy this, for example by appointing new accountants or by contacting the ATO to request extensions for lodgment dates.
The Tribunal is further satisfied that the Applicants have not demonstrated it is fair and reasonable to remit the FTL penalties imposed on them. They failed to take remedial steps to ensure Presidio was meeting their statutory obligations, in circumstances when they were on notice that these obligations may not be being met by their accountants in a timely manner. In addition, during the relevant period they benefited from not being penalised for late lodgment and the remission of many of the FTL penalties that were imposed on them. In light of this, it is neither unfair, unjust or unreasonable for the failure to lodge penalties the subject of the Objection Decisions not to be remitted.
This conclusion is supported by the evidence before the Tribunal that shows continuing and repeated failures on the part of the Applicants to meet their lodgment obligations, including the late lodgment of their income tax returns for the 2018 and 2019 financial years which were submitted the day of the Tribunal hearing. This is a consideration which further demonstrates that the Applicants’ circumstances are not such as to warrant remission of the failure to lodge penalties that are the subject of the Objection Decisions.
DECISION
The Objection Decisions dated 29 May 2019 are affirmed.
I certify that the preceding 124 (one hundred and twenty -four) paragraphs are a true copy of the reasons for the decision herein of Senior Member Linda Kirk
...............................[SGD].........................................
Associate
Dated: 19 January 2021
Date(s) of hearing: 10 November and 8 December 2020 Counsel for the Applicant: R Wearne Solicitors for the Applicant: Small Myers Hughes Lawyers Counsel for the Respondent: Stephanie Patterson Solicitors for the Respondent: Australian Taxation Office
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