LQNN and Commissioner of Taxation (Taxation)

This matter concerned an application for review of decisions made by the Commissioner of Taxation regarding the assessment of income tax and shortfall penalties. The applicant sought to challenge the Commissioner's determination that certain payments received from companies, LC1 and LC2, constituted assessable ordinary income and that penalties should be imposed due to the applicant's failure to declare these amounts. The applicant also sought remission of these penalties. The case was heard by Deputy President McDermott.

The primary legal issues before the Tribunal were whether the payments received by the applicant from LC1 and LC2 were properly assessable as ordinary income, and whether the Commissioner's imposition of shortfall penalties, calculated on the basis of recklessness, was justified. A further issue was whether the circumstances warranted the remission of these penalties under section 298-20 of Schedule 1 to the TAA.

The Tribunal found the applicant to be an uncredible witness, noting inconsistencies in his evidence regarding the nature and amount of payments received and his role as a director. The Tribunal accepted the Commissioner's position that the regular payments, used for personal expenses, were assessable income, referencing *Federal Commissioner of Taxation v Dixon*. The Tribunal found that the applicant had failed to take reasonable care and had acted recklessly in not declaring these amounts, particularly given his long history of lodging tax returns and engaging a tax agent. The Tribunal concluded that the imposition of the administrative penalty was not unreasonable or unjust.

The Tribunal affirmed the Commissioner's objection decisions, meaning the amended assessments and shortfall penalties were upheld. The applicant's review of the objection decision in relation to the income year ending 30 June 2012 was no longer pursued.