Frangieh and Commissioner of Taxation (Taxation)

The Administrative Appeals Tribunal considered the matter of Frangieh and the Commissioner of Taxation. The applicants sought to challenge penalties imposed for failure to lodge tax returns. The core of the dispute revolved around whether the applicants were eligible for a "safe harbour" provision that would exempt them from the penalties, and whether the penalties should be remitted in full or in part.

The Tribunal was required to determine three key issues. Firstly, whether it possessed jurisdiction under Part IVC of the Taxation Administration Act 1953 (Cth) to consider whether the applicants were not liable for the failure to lodge penalties in the first instance, specifically concerning the application of the safe harbour provisions. Secondly, the Tribunal had to ascertain if it had jurisdiction to review these penalties if the remaining amount payable was less than two penalty units. Thirdly, the Tribunal needed to decide whether, pursuant to section 298-20 of Schedule 1 to the Taxation Administration Act, the imposed failure to lodge penalties should be remitted in full or in part.

The Tribunal reasoned that the statutory scheme establishes two distinct stages: the imposition of a penalty under section 286-75 and a subsequent decision on remission under section 298-20. It held that its jurisdiction under Part IVC was limited to reviewing decisions made under section 298-20, which presupposes liability for the penalty. Consequently, the Tribunal concluded it lacked jurisdiction to determine whether the penalties should have been imposed or whether the safe harbour provisions applied. Furthermore, the Tribunal noted that section 298-20(3)(b) restricts objection rights to cases where the penalty payable after refusal of remission exceeds two penalty units. The Tribunal found that the applicants had a long history of failing to lodge returns, including lodgments made on the day of the hearing, and were aware of issues with their accountants' handling of lodgments. Given this history, the Tribunal was not satisfied that it was fair and reasonable to remit the penalties.

Accordingly, the Tribunal affirmed the Commissioner's Objection Decisions dated 29 May 2019.