Laurence Fox and Commissioner of Taxation
[2013] AATA 471
•8 July 2013
[2013] AATA 471
Division SMALL TAXATION CLAIMS TRIBUNAL File Number(s)
2011/4866
2012/2838
Re
Laurence Fox
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Senior Member R W Dunne
Date 8 July 2013 Place Adelaide The Tribunal affirms the income tax objection decision under review, but varies the penalty objection decision under review by remitting the administrative penalty to nil.
.........................[Sgd]...............................................
Senior Member R W Dunne
CATCHWORDS
TAXATION - income tax - claim for work related travel expenses - travel allowance - bona fide travel allowance - substantiation requirements - whether assessment was excessive - administrative penalty - reasonable care - whether penalty was harsh - penalty remitted by the Tribunal and reduced to nil - substantive decision otherwise affirmed.
LEGISLATION
Income Tax Assessment Act 1997 (Cth) ss 8-1, 900-15, 900-30, 900-50
Taxation Administration Act 1953 (Cth) s 14ZZK(b), Schedule 1, s 284-25, 284-75(1), 284-80(1), 284-90(1), 298-20(1)
CASES
Lunney v The Commissioner of Taxation (1958) 100 CLR 478
Federal Commissioner of Taxation v Charlton (1984) 84 ATC 4415
Federal Commissioner of Taxation v Toms (1989) 20 ATR 466
Case K29 (1978) 78 ATC 281
Case U49 (1987) 87 ATC 337
Fardell and Commissioner of Taxation [2011] AATA 725Dixon v Federal Commissioner of Taxation (2008) 167 FCR 287
SECONDARY MATERIALS
Taxation Ruling TR 2004/6
Taxation Determination TD 2009/15
REASONS FOR DECISION
Senior Member R W Dunne
8 July 2013
INTRODUCTION
The applicant in this case is Mr Laurence Fox. There are two objection decisions under review. The first “income tax” objection decision is dated 25 October 2011 in respect of which the respondent disallowed, in part, an objection by the applicant against an amended assessment for the 2009/2010 tax year (“Amended Assessment”). The second “penalty” objection decision is dated 20 April 2012 in respect of which the respondent disallowed an objection by the applicant against an assessment for administrative penalty, arising as a result of the Amended Assessment, for the 2009/2010 tax year (“Administrative Penalty”).
According to a statement made by his employer at the time, Linfox Australia Pty Ltd (“Linfox”), Mr Fox commenced employment on 10 July 2009 as a truck driver. When initially employed, he was working as a grade 8 local driver in Port Augusta on a five day on two day off, five nights on three day off, roster as a “drive in drive out” operator. He drove from Adelaide to Port Augusta before his first shift and returned to Adelaide at the completion of his last shift. For the 2009/2010 tax year, his tax agent filed a taxation return disclosing wages from Linfox of $73,154 and deductions claimed for work related car expenses of $4,710 and other work related expenses of $28,354. On 17 September 2010, the respondent issued a notice of assessment for the 2009/2010 tax year in which the deductions for work related car expenses and other work related expenses were allowed in full.
At the hearing, Mr Fox represented himself, with the assistance of his tax agent, Mrs Burnett. The respondent was represented by Mr S Cole (of counsel). I received into evidence the T documents relating to the Amended Assessment,[1] the T documents relating to the Administrative Penalty,[2] the Supplementary T documents[3] and the Further Supplementary T documents[4], all lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975, together with the applicant’s documents.[5]
[1] Exhibit R1.
[2] Exhibit R2.
[3] Exhibit R3.
[4] Exhibit R4.
[5] Exhibit A1.
ISSUES FOR THE TRIBUNAL
The following are the issues before me:
(a)Is the applicant entitled to a deduction under s 8-1 of the Income Tax Assessment Act 1997 (“ITAA 1997”) for work related travel expenses of $28,000 for the 2009/2010 tax year?
(b)Did the applicant receive a bona fide travel allowance, within the meaning of “travel allowance” in subs 900-30(3) of the ITAA 1997, for the 2009/2010 tax year?
(c)Has the applicant substantiated his claims for work related expenses in accordance with Division 900 of the ITAA 1997 and/or is the applicant entitled to rely on the exception from substantiation in s 900-50 of the ITAA 1997 for the 2009/2010 tax year?
(d)Is the applicant entitled to a deduction under s 8-1 of the ITAA 1997 for mobile phone expenses of $300 for the 2009/2010 tax year?
(e)Is the applicant liable to an administrative penalty for lack of reasonable care under s 284-75(1) of Schedule 1 to the Taxation Administration Act 1953 (“TAA”) for the 2009/2010 tax year?
(f)Are there grounds for remitting the penalty in part or in full under s 298-20(1) of Schedule 1 to the TAA?
LEGISLATION
The provisions of the ITAA 1997 and the TAA that are presently relevant are as follows:
1TAA 1997
“Section 8 – General deductions
(1) You can deduct from your assessable income any loss or outgoing to the extent that:
(a)it is incurred in gaining or producing your assessable income; or
(b)it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.
Note: Division 35 prevents losses from non–commercial business activities that may contribute to a tax loss being offset against other assessable income.
(2) However, you cannot deduct a loss or outgoing under this section to the extent that:
(a)it is a loss or outgoing of capital, or of a capital nature; or
(b)it is a loss or outgoing of a private or domestic nature; or
(c)it is incurred in relation to gaining or producing your exempt income of your non-assessable non-exempt income; or
(d)a provision of this Act prevents you from deducting it.
…”
“Division 900 – Substantiation rules
900-15 Getting written evidence
(1) To deduct a work expense:
(a) it must qualify as a deduction under some provision of this Act outside this Division; and
(b) you need to substantiate it by getting written evidence.
...”
“900-30 Meaning of work expense
(1) A work expense is a loss or outgoing you incur in producing your salary or wages.
Note: This Division also applies to withholding payments that are not salary or wages: see subsection 900-12(3).
Travel allowance expenses included
…
(3) A travel allowance is an allowance your employer pays or is to pay to you to cover losses or outgoings:
(a) that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee; and
(b) that are losses or outgoings for accommodation or for food or drink, or are incidental to the travel.
The travel may be within or outside Australia.
...”
“900-50 Exception for domestic travel allowance expenses
(1)You can deduct a travel allowance expense for travel within Australia without getting written evidence or keeping travel records if the Commissioner considers reasonable the total of the losses or outgoings you claim for travel covered by the allowance.
(2)In deciding whether the total of the losses or outgoings you claim is reasonable, the Commissioner must take into account the total of the losses or outgoings of the following kinds that it would be reasonable for you to incur for the travel:
(a)accommodation;
(b)food or drink;
(c)losses or outgoings incidental to the travel.
…”
TAA
“284-25 Statements by agents
This Division applies to a statement made by your agent as if it had been made by you.”
“284-75 Liability to penalty
(1) You are liable to an administrative penalty if:
(a) you make a statement to the Commissioner or to an entity that is exercising powers or performing functions under a taxation law (other than the Excise Acts); and
(b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it.
Note: This section applies to a statement made by your agent as if it had been made by you: see section 284-25.
…”
“284‑80 Shortfall amounts
(1)You have a shortfall amount if an item in this table applies to you. That amount is the amount by which the relevant liability, or the payment or credit, is less than or more than it would otherwise have been.
Shortfall amounts
Item
You have a shortfall amount in this situation:
A tax‑related liability of yours for an accounting period, or for a taxable importation, or under the Superannuation (Unclaimed Money and Lost Members) Act 1999, worked out on the basis of the statement is less than it would be if the statement were not false or misleading
…”
“284‑90 Base penalty amount
(1) The base penalty amount under this Subdivision is worked out using this table and section 284‑224 if relevant:
Base penalty amount
Item
In this situation:
The base penalty amount is:
1
…
2
…
3
You have a shortfall amount as a result of a statement described in subsection 284‑75(1) or (4) and the amount, or part of the amount, resulted from a failure by you or your agent to take reasonable care to comply with a taxation law
25% of your shortfall amount or part
…”
“298‑20 Remission of penalty
(1) The Commissioner may remit all or a part of the penalty.
…”
BACKGROUND
The material facts in this case are not in dispute and, for brevity, are largely extracted from the respondent’s statement of facts, issues and contentions. When travelling to Port Augusta, Mr Fox used his own vehicle and was not reimbursed for fuel to commute from Adelaide. He needed to carry enough supplies for five days work, as well as his work bag. Whilst in Port Augusta, he stayed at a local motel (Acacia Ridge Motor Inn), where he paid for the full stay. On pay day along with his wage, Mr Fox was reimbursed by Linfox for 72% ($40 out of $55 per night) of his accommodation costs.
The respondent selected the applicant for an income tax integrity audit in relation to his 2009/2010 taxation return. The respondent requested documentation from the applicant to support his claims for work related car expenses and other work related expenses. The applicant provided tax invoices in respect of his stay at the Acacia Ridge Motor Inn amounting to $6,545. Upon the completion of the audit, the applicant was advised that the claim for work related car expenses would be reduced from $4,710 to $3,750, and the claim for other work related expenses would be reduced from $28,354 to $6,603.
On 17 August 2011, the respondent issued a notice of Amended Assessment for the 2009/2010 tax year. A notice of assessment of shortfall penalty also issued, with an Administrative Penalty of $1,990.95 imposed on the applicant for failing to take reasonable care when lodging the 2009/2010 taxation return. On 22 August 2011, the applicant lodged an objection against the notice of Amended Assessment. Subsequently, the applicant’s tax agent advised the respondent that the objection related to the disallowance of motor vehicle expenses, mobile phone expenses and travel expenses. Upon receiving this information, the respondent disallowed the objection in relation to the mobile telephone expenses and allowed, in part, work related car expenses and travel expenses.
On 24 January 2012, the applicant advised the respondent that he was not pursuing the remainder of his claim for work related car expenses. On 14 February 2012, Linfox wrote to the respondent [6] advising that there had been an error in the PAYG Payment Summary issued to the applicant for the 2009/2010 tax year. The error was that the “Gross payments” of $73,154 previously reported should be reduced by $4,960 to $68,194, and the allowance box should show a rental allowance of $4,960 paid under an “agreed local agreement” to cover, in part, the motel accommodation costs. On 8 March 2012, the applicant lodged an objection against the imposition of the Administrative Penalty. On 14 March 2012, Linfox advised the respondent that the “allowance” was an incentive provided to attract drivers to Port Augusta.[7] Linfox subsequently advised the respondent that the “rental” allowance paid to the applicant was $40 of the $55 per night accommodation rate.[8] On 20 April 2012, the respondent disallowed the applicant’s objection in relation to the Administrative Penalty.
[6] Exhibit R3, ST4, page 35.
[7] Exhibit R4, ST6, page 87.
[8] Exhibit R4, ST7, page 88.
EVIDENCE OF MR FOX
It was Mr Fox’s evidence that he worked at Port Augusta for Linfox for 127 days from 13 July 2009 until 19 February 2010. He agreed that his claim for other work related expenses of $28,354 was arrived at by multiplying the daily rate of $264 against the 127 days he worked at Port Augusta. This gave the figure of $33,000, less the allowance of $5,000, which resulted in the sum of $28,000. He said the remaining $354 represented the claim for his mobile phone ($300) and a claim for work diaries ($54). He said that when he was at Port Augusta, he stayed at a motel and kept all the receipts in respect of the costs of the motel room. He paid $55 per night for the room cost and Linfox paid him the sum of $40 per night, which he received in his wages for the following week. He said the allowance should have been shown separately in the “box” in his PAYG statement.
When cross-examined by Mr Cole, Mr Fox said that he had lived at Morphett Vale for about 23 years, which was his usual place of residence. Between July 2009 and February 2010, he would drive from Morphett Vale to Port Augusta in the morning to commence work. He agreed that he would drive to and from Morphett Vale and Port Augusta during this period and was doing local work at Port Augusta, loading up tanks that he would take to Roxby Downs. He would then return to Port Augusta for another round of work. When that work finished, he would come back to Morphett Vale. When he was questioned about his residence at Morphett Vale, he said he had his son living there while he was away, for security reasons. He would not sell his residence just to move up to Port Augusta. At the Acacia Ridge Motel, he said there was a fridge, a toilet and a bathroom. He did not keep records of his expenditures in relation to meals and incidentals whilst he was in Port Augusta. He said he had some, but threw them away because he did not think he needed them because of the substantiation Tax Ruling.
Mr Fox said he made his claim for work related expenses in his 2009/2010 taxation return because he presumed he was able to do this. He formed that view from what his tax agent had told him. When asked about his claim for mobile phone expenses, he said he understood this claim was not to be proceeded with. He said he had records of the phone account, but he could not tell which of the telephone calls were work related. When asked by Mr Cole to confirm that he was abandoning his claim for mobile phone expenses, he again said that he would be doing so because he thought the claim was not being proceeded with.
CONSIDERATION
Is the applicant entitled to a deduction under s 8-1 of the ITAA 1997 for work related travel expenses of $28,000 for the 2009/2010 tax year?
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying out a business for the purpose of gaining or producing such income. No deduction is allowed under s 8-1 for expenses to the extent to which they are of a capital, private or domestic nature, or are incurred in gaining or producing exempt or non-assessable non-exempt income, or are otherwise prevented from being deductible by a specific provision of the ITAA 1997. For a taxpayer to deduct a “work expense” (i.e. a loss or outgoing incurred in producing the taxpayer’s salary or wages) the expense must qualify as a deduction under a provision of the ITAA 1997 outside Division 900, and the taxpayer needs to substantiate the expense by getting written evidence.
In his 2009/2010 taxation return, Mr Fox sought to claim a deduction for work related car expenses of $4,710 and other work related expenses of $28,354. This latter figure is made up of mobile phone costs of $300, work diaries of $54 and work related expenses of $28,000. In a letter Ms Burnett sent to the respondent,[9] she described as follows how the claim for $28,000 had been calculated:
“Days away from home as per TD 2009/15 REASONABLE AMOUNTS FOR DAILY TRAVEL ALLOWANCE 2010 ADELAIDE TOTAL INCLUDING ACCOMODATION $263.80 PER DAY ADELAIDE-CALCULATION 125 DAYS AT $264.00 PER DAY LESS $5000 REIMBURSED BY THE EMPLOYER TOTAL CLAIM 28,000”
[9] Exhibit R1, T6, page 36.
In relation to the work related car expenses, in the Amended Assessment the claim of $4,710 was allowed to the extent of $3,750. The respondent has asserted that this amount was wrongly allowed. In explaining, Mr Cole said it was thought initially that Mr Fox was driving for his employment, but it was later found that he was driving to his employment and then returning to his residence at Morphett Vale. What remained of the claim for work related car expenses was an amount of $960 and the applicant acknowledged, at a preliminary conference of the Tribunal and before me, that he did not intend to proceed with this remaining claim.
In relation to the claim for other work related expenses of $28,354, the respondent has acknowledged that the sum of $6,545 for accommodation costs was allowed in error, together with a further sum of $58 which appears to be for work diaries. The end result is that a sum of $21,751 work related expenses remains in dispute. This sum appears to include mobile phone costs of $300.
It is Mr Fox’s contention that he received a travel allowance of $4,960 (rounded up to $5,000) and, in the circumstances, he is entitled to a deduction for the remaining work related expenses totalling $21,751. The respondent contends that the remaining work related expenses comprise private and domestic expenditure which was not incurred by Mr Fox in gaining or producing his assessable income. On the evidence, the claim for $4,960 that the applicant says was a “travel allowance” cannot, in my view, be sustained. Linfox has indicated that the sum of $4,960 was paid either as a “rental allowance” or as an incentive to attract drivers to Port Augusta to engage in work for Linfox. So characterised, the sum of $4,960, whether paid as a separate sum or as part of Mr Fox’s wages, is not a “travel allowance”, and I am not satisfied that, during the 2009/2010 tax year, it can be described as such. Mrs Burnett referred to Taxation Determination TD 2009/15[10] which sets out reasonable amounts for domestic travel allowance expenses for the 2009/2010 tax year. However, TD 2009/15 is only relevant in circumstances where a travel allowance is provided, and as I have found that no travel allowance was provided by Linfox to Mr Fox during the 2009/2010 tax year that Taxation Determination does not apply.
[10] Exhibit R3, ST2, pages 22-33.
In considering the deductibility of the remaining work related travel expenses of $21,751, Mr Cole referred to the respondent’s “Reasons for decision”.[11] In those Reasons, the respondent states:
“The cost of meals is normally considered to be a private expense and is not an allowable deduction under section 8-1 of the ITAA 1997. However, where you are required to sleep away from home in the performance of your duties, expenditure on food and drink is considered to have been necessarily incurred in the performance of your duties and a deduction is allowable.”
[11] Exhibit R1, T2, page 21.
In addition to the deductibility of the cost of meals when considered normally, a similar consideration can arise in the case of the cost of travel to and from work. In Lunney v The Commissioner of Taxation,[12] the High Court held that expenses incurred by taxpayers in travelling day by day from their homes to their places of employment and back again are generally not deductible. The question then arises, in the case of an employee, whether the expenses are incurred in travelling to work or in travelling on work. Mr Cole submitted that Mr Fox’s case was an example of someone travelling to work at a considerable distance away from his home. Mr Fox chose to work in Port Augusta and to take motel accommodation for the times he worked there. It was a choice that he made, but he is not entitled to a deduction for the expenses involved. The expenses are incurred in the same way as the costs in travelling to and from work.
To consider further the deductibility of the remaining work related travel expenses, the decisions in Federal Commissioner of Taxation v Charlton[13] and Federal Commissioner of Taxation v Toms[14] are relevant and apply in Mr Fox’s case.
[12] (1958) 100 CLR 478.
[13] (1984) 84 ATC 4415.
[14] (1989) 20 ATR 466.
In Charlton, the taxpayer was a medical practitioner whose family home was in an inner Melbourne suburb. He was employed as a pathologist in the Bendigo Hospital, renting a small flat in Bendigo, staying there from Monday to Friday, and returning to Melbourne at the weekends whenever he could. He sought a deduction for the rent paid for the Bendigo flat for the four months from January to April 1978 on the basis that the flat rental was incurred in gaining or producing his assessable income under the predecessor to s 8-1 of the ITAA 1997. Crockett J in the Supreme Court of Victoria held that the expenditure on rent for the period from January to April 1978 was dictated by private considerations, namely, the taxpayer’s election to live in Melbourne and not in Bendigo where all his income-earning activities were carried out. In these circumstances, a deduction for the rental expenditure was not allowable.
In Toms, the taxpayer was a logging contractor whose home was some 108 kilometres from the forest base. It was necessary for him to camp at the base. To do this, he installed at the base a caravan previously bought by him for family use. He claimed deductions for expenses associated with the caravan and camp site. Burchett J in the Federal Court found that, where the expense incurred by the taxpayer is in the provision of accommodation transitory or discontinuous in its use and secondary or temporarily supplemental to the taxpayer’s actual home, the expense is non-deductible.
In addition to the decisions in Charlton and Toms, the decision of the Board of Review in Case K29,[15] and the decision of the Tribunal in Case U49,[16] are relevant. In Case K29, the taxpayer was a clerk employed by a public authority at its head office in Sydney. He was subsequently promoted to a position in a country town and for the period he was there lived in a cottage which he rented from the authority. Throughout the whole of that period, the taxpayer maintained his residence in Sydney, where his wife and children continued to reside. While employed in the country town, it was the taxpayer’s normal practice to drive to it from his family home in Sydney each Monday morning and return to his family home each Friday evening. The taxpayer did not receive any allowance from his employer while he was in the country town. He claimed a deduction under the predecessor to s 8-1 of the ITAA 1997 for expenses incurred in travelling between the country town and his Sydney residence and for rent and electricity paid in respect of the country cottage. The Board held that the expenditure on travel, rent and electricity was private and domestic in character. It was not incurred by the taxpayer in the course of gaining or producing assessable income and was therefore not deductable.
[15] (1978) 78 ATC 281.
[16] (1987) 87 ATC 337.
In case U49, the taxpayer was employed by the New South Wales Department of Agriculture. Following a reorganisation of his branch, his position was abolished and a similar position was created to which he was assigned. The duties relating to his new position were to be carried out in the field, but his headquarters were to be located at Newcastle. As the taxpayer then lived with his family in a far northern suburb of Sydney, he decided that the travel to Newcastle every weekday was impractical. He therefore took up board and lodging on weekdays in a suburb of Newcastle. He paid a total of $2,535 for such accommodation and claimed the amount as a deduction under the predecessor to s 8-1 of the ITAA 1997. The Tribunal held that the cost of the taxpayer’s board and lodging was a private and domestic expense and was not in any relevant sense incurred for the purposes of earning assessable income. It was not, therefore, deductible. In reaching its decision, the Tribunal said[17]:
“…
As a matter of legal logic, there is no difference in principle between the rent paid for the taxpayer’s dwelling house and the amount paid for his board and lodging. The fact that he maintained his principal establishment for the housing of his family does not change the character of the moneys paid for his accommodation and sustenance elsewhere. They continue to be private and domestic. Furthermore in this case they are not relevant to the earning of assessable income.
…”
[17] (1987) 87 ATC 339.
In my opinion, the above decisions apply in Mr Fox’s case and support the proposition that the remaining work related expenses of $21,751 are not deductible under s 8-1 of the ITAA 1997.
Whether the applicant received a bona fide travel allowance, within the meaning of “travel allowance” in subs 900-30(3) of the ITAA 1997, for the 2009/2010 tax year?
In paragraph 36 of the respondent’s statement of facts, issues and contentions the respondent contends that the applicant did not receive a bona fide travel allowance. This phrase is referred to in paragraph 18 of Taxation Ruling TR 2004/6. Although the term “travel allowance” is defined or referred to in s 900-30(3) of the ITAA 1997, it appears that the phrase “bona fide travel allowance” is not defined and the words “bona fide” are simply added by the respondent to the term “travel allowance” in s 900-30(3). In any event, as I have found in paragraph 17 above that the applicant was not in receipt of a travel allowance, it follows that he did not receive a bona fide travel allowance, within the meaning of paragraph 18 of TR 2004/6 and within the meaning of “travel allowance” in subs 900-30(3) of the ITAA 1997, for the 2009/2010 tax year.
Has the applicant substantiated his claims for work related expenses in accordance with Division 900 of the ITAA 1997 and is the applicant entitled to rely on the exception from substantiation in s 900-50 of the ITAA 1997 for the 2009/2010 tax year?
On the evidence, it is clear that the applicant has not substantiated all of his work related travel expenses in accordance with Division 900 of the ITAA 1997. As I have found that he did not receive a bona fide travel allowance in terms of subs 900-30(3), it follows that the applicant is not entitled to rely on the exception from substantiation in s 900-50 of the ITAA 1997 for the 2009/2010 tax year.
Is the applicant entitled to a deduction under s 8-1 of the ITAA 1997 for mobile phone expenses of $300 for the 2009/2010 tax year?
During the course of the hearing, the applicant indicated that he did not intend to pursue his claim for mobile phone expenses for the 2009/2010 tax year. In these circumstances, I accept that no deduction (or further deduction) is allowable to the applicant for mobile phone expenses for the 2009/2010 tax year.
Is the applicant liable to an administrative penalty for lack of reasonable care under s 284-75(1) of Schedule 1 of the Taxation Administration Act 1953 (“TAA”) for the 2009/2010 tax year?
In this case, an administrative penalty was imposed at 25% of the tax shortfall. That 25% rate applies to a case where the shortfall results from a failure on the part of the taxpayer (or the taxpayer’s agent) to take reasonable care to comply with a taxation law: see Schedule 1 to TAA, s 284-25, 284-75(1) and Item 3 in the table in s 284-90. Did the shortfall here result from a failure on the part of the applicant himself to take reasonable care to comply with a taxation law? In Fardell and Commissioner of Taxation,[18] Deputy President Block and Senior Member Frost (as he then was) had to consider a similar question. The Tribunal was satisfied that Mr Fardell had not failed to take reasonable care to comply with a taxation law, and that his approach to his taxation obligations seemed to be entirely acceptable. He had provided information to his tax agent and relied on that agent to prepare his taxation returns for him. It could not reasonably be expected that Mr Fardell, a long distance truck driver (who had engaged a registered tax agent to prepare his taxation returns), should undertake a detailed analysis of the taxation law to determine whether his return(s) had been correctly prepared for him by his agent. The Tribunal found that there was no shortcoming in the level of care taken by Mr Fardell. Given the similar circumstances that I believe existed in Mr Fox’s case, I am of the opinion that there was no shortcoming in the level of care taken by him in, or in relation to, the preparation of, his 2009/2010 taxation return.
[18] [2011] AATA 725.
Did the shortfall in Mr Fox’s case result from a failure on the part of the tax agent, Mrs Burnett, to take reasonable care to comply with the taxation law? In answering that question, it is clear that the deductions claimed by the applicant were significant and amounted to roughly three times the level of the “travel allowance” against which they were claimed. This factor should, in my opinion, have caused the agent to undertake further enquiries about the true nature of the travel allowance, having regard to the information given by Linfox. Mrs Burnett told me that she had been in practice for 35 years and inferred that she was an experienced and knowledgeable practitioner. In these circumstances, it is clear to me that the level of care taken by the agent cannot be regarded as “reasonable”. For that reason, the imposition of administrative penalty at the rate of 25% is correct.
Are there grounds for remitting the penalty in part or in full under s 298‑20(1) of Schedule 1 to the TAA?
In Dixon v Federal Commissioner of Taxation,[19] the Full Federal Court stated[20] that the relevant question to be determined when exercising the discretion to remit is:
“… whether any part of the penalty should be remitted on the basis that the outcome is harsh, having regard to the particular circumstances of the Taxpayer.”
[19] (2008) 167 FCR 287.
[20] (2008) 167 FCR 292.
In my view, the penalty of 25% in this case is harsh. The applicant in giving his oral evidence was “laid back”, open and candid. He did not embellish his answers and adopted a straightforward approach to giving his evidence. I am inclined to the view that the approach he displayed before me was reflective of his general approach to meeting his taxation obligations and I do not consider, in those circumstances, that he should be required to pay an administrative penalty.
DECISION
For the reasons outlined above, the Tribunal affirms the objection decision as it applies to the substantive tax liability, but the administrative penalty is remitted to nil.
I certify that the preceding 32 (thirty -two) paragraphs are a true copy of the reasons for the decision herein of ..........................[Sgd]..............................................
Administrative Assistant
Dated 8 July 2013
Date(s) of hearing 31 January 2013 Applicant In person Advocate for the Applicant Mrs I Burnett Counsel for the Respondent Mr S Cole Advocate for the Respondent Ms S Loveband Solicitors for the Respondent ATO Legal Practice
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