Oxby and Commissioner of Taxation (Taxation)

Oxby and Commissioner of Taxation (Taxation) [2022] AATA 3239 (7 October 2022)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2021/5352
Re:Steven Russell Oxby
APPLICANT

AndCommissioner of Taxation
RESPONDENT

Decision
Tribunal:Senior Member Dr M Evans-Bonner
Date:7 October 2022
Place:Perth

The Reviewable Decision is affirmed.
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Senior Member Dr M Evans-Bonner
CATCHWORDS
TAXATION – application for review of an objection decision – Applicant attended a seminar run by an organisation that presented misinformation and conspiracy-type theories about the Australian legal and taxation systems – Applicant was advised at the seminar that the payment of taxation was voluntary and that he could claim all his living expenses as a tax deduction – Applicant acted on that advice when submitting his income tax return for the 2019 income year – administrative shortfall penalty imposed on the basis Applicant made a false or misleading statement to the Commissioner – Applicant seeking remission of part of penalty – whether the Applicant was reckless or lacked reasonable care – Applicant found to have made a false or misleading statement to the Commissioner that was reckless –Applicant has not discharged onus under s 14ZZK(b) of the Taxation Administration Act 1953 (Cth) – Reviewable Decision affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) – s 29(7)
Taxation Administration Act 1953 (Cth) – s 14ZZK(b), sch 1 s 284-75(1), sch 1 s 284-75(5), sch 1 s 284-75(6), sch 1 s 284-90 item 2, sch 1 s 284-90 item 3, sch 1 s 298-20, sch 1 s 298-20(1)
SECONDARY MATERIALS
Australian Taxation Office, Miscellaneous Taxation Ruling 2008/1: Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard
Australian Taxation Office, Practice Statement Law Administration 2012/5: Administration of the false or misleading statement penalty – where there is a shortfall amount
REASONS FOR DECISION
Senior Member Dr M Evans-Bonner
7 October 2022
overview

Benjamin Franklin is reported to have written that “in this world, nothing can be said to be certain, except death and taxes”. Mr Oxby, the Applicant, who attended a seminar run by an organisation that promoted misinformation about the Australian legal and taxation system (including that the payment of income tax is voluntary), sought to question the certainty of income tax when lodging his income tax return for the 2019 income year.
Unfortunately for Mr Oxby, he accepted the misinformation he was given at the seminar as being accurate without verification from his accountant or the Australian Tax Office (ATO). As a result, his income tax return contained a statement that he was entitled to deductions amounting to $74,501.72 in work related expenses which was assessed by the ATO as being a false or misleading statement. This resulted in the Commissioner imposing a shortfall penalty assessment of 50 percent (amounting to $14,354) on the basis that the statement was reckless.
Mr Oxby accepts that he should have to pay a penalty. However, he submitted that it should be for a lesser amount because he was careless, but not reckless.
After considering the evidence and the relevant taxation legislation, tax ruling and practice statement, I have found that Mr Oxby was reckless. He made the decision to depart from his usual practice of using his accountant to prepare his income tax return. Instead, he sought assistance from a person at the organisation who ran the seminar (whom he knew was not qualified in accounting or law), to prepare his tax return in a manner based on the fringe-theories espoused at the seminar.
Consequently, Mr Oxby has been unsuccessful in this application and is liable for the penalty assessed by the Deputy Commissioner of Taxation.
My reasons for this conclusion are set out in more specific detail below.
BACKGROUND
Mr Oxby is a man in his fifties who has had a successful professional career. At the time of the hearing, he was not working and was trying to set up a gardening business. He previously had a successful career working as an equipment manager for an ophthalmic company over 24 years. He has no qualifications in law or accounting (transcript/17-18).
Mr Oxby has a history of being compliant with his tax obligations. He lodged his tax returns through an accountant until the 2019 income year (transcript/18).
After he attended a two-day seminar in August 2019, Mr Oxby lodged an income tax return for the 2019 income year on 6 February 2020 (T4/20-29), with an accompanying affidavit dated 4 February 2020, where he claimed a total deduction for “Other Work Related Expenses” in the amount of $74,501.72. These expenses were for rent, house and health insurance, clothing, recreational activities, home and car maintenance, food, phone bills, dependent costs, and utility bills such as gas, electricity and water (T3/18-19).
Mr Oxby’s 2019 income tax return and the accompanying affidavit were not prepared by Mr Oxby’s accountant. Instead, he obtained assistance from a person at the organisation that ran the seminar to help prepare these documents. At the hearing Mr Oxby agreed that he knew that the person assisting him was not a qualified tax agent (transcript/24).
The affidavit contained some unusual phrasing and wording. For example, Mr Oxby attested that (T3/18):
6.        I am a living breathing man.
7.I have not seen or been presented with any evidence that I am not a man, and I believe sincerely that no such evidence exists.
8.I am not an entity, legal person, person, citizen, resident, name, trust, estate, government entity or employee, “other”, “you”, “everyone” or any form or creature of statute.
9.        I am not dead.
10.      I answer to many names.
The affidavit then continues to state that Mr Oxby “act[s] in the office of executor and beneficiary” of an estate in his full name.
With respect to the deductions that he was claiming, Mr Oxby stated (T3/18-19):
15.The amount of $74,501.72 disclosed at “Other work-related expenses” within page 4 of the Tax return is an amount spent as living costs in sustaining the life of the principal creditor and living soul answering to the name “Steven Russell Oxby”.
16.The sum of $72,710.00 with held was derived from the productivity of the labour of the living soul answering to the name “Steven Russell Oxby”, being property of the living soul and is to be immediately remitted to the living soul.
17.Productivity of labour is not taxable and is omitted from the Tax Acts definition of the word “Income”.
18.All the facts and circumstances herein deposed to, in this my Declaration, I within my own knowledge true, correct, complete, certain and not misleading and with first-hand personal knowledge and made under penalty of perjury.
The way Mr Oxby approached his 2019 income tax return, and the content of the affidavit he submitted with his tax return were based on content taught at the seminar. Mr Oxby summarised the content of the seminar in a letter dated 4 August 2020 sent to the ATO with his objection (T/14/144):
This seminar explained historic and Constitutional law. The seminar explained that Taxation is not compulsory and is supposed to be voluntary.
One key point raised in the seminar is that in order for the living man to perform work to generate an income, he must first be sustained. If a man does not sustain himself he cannot generate an income. Therefore the costs associated with sustaining the man are not taxable. In other words these costs are Tax deductible as “Other work-related expenses”. Tax is then paid on the “net profit” a man has gained after sustenance and other related expenses are paid.
This made sense to me and is the key reason for completing my Tax return the way I did.
I asked for assistance to lodge my Tax return in accordance with this new information. As part of that process I was asked to compile a comprehensive, accurate and truthful list of all my sustenance and direct work-related expenses for that financial year, which I did. …
At the hearing, Mr Oxby explained the “theory” behind claiming all his living expenses as a work-related tax deduction (transcript/9):
The theory, if you like, Senior Member, is that in order for someone to raise an income or gain proceeds of their labour, they must first be sustained themselves. In a similar fashion to a business. A business is able to claim all operating expenses as business expenses in order for the business to be viable. And in a similar manner, as a natural-born man, we first must sustain ourselves in order to produce labour from which we can gain an income. So, therefore, the expenses required to sustain an individual are not taxable. …
The basis for the belief that the payment of taxation was voluntary appears to be based on the view, espoused at the seminar, that every person has “two personas”. There is a “commercial persona”, who can enter into contracts with the government, such as to pay tax, and a “natural born” persona, who, as Mr Oxby explained it, appears to be exempt, or partly exempt, from governmental regulation (transcript/5-6).
Mr Oxby explained at the hearing (transcript/6):
So when a child is born into the world, that child is unencumbered, that child does not have a commercial entity, that child is not legally able to enter into any contractual arrangements with anyone. And then that child must obtain a registered birth certificate. So when the child’s born there is a registration of birth – which is in lowercase – and it gives the child a name, basically. Once you get your registered copy or extract of birth – you know, you get a Registered Birth Certificate – that’s all in uppercase – and that then gives that person a commercial entity. And for various aspects – such as gaining a passport, a driver’s licence, opening a bank account – any commercial dealings require us to have a commercial entity, otherwise we wouldn’t be able to do that. But what we forget is that we still have the original natural-born, sovereign state, which is not a commercial entity.
So my understanding with the taxation is that taxation is in fact voluntary and when we complete the documentation as prescribed by the ATO we then contract to be obliged and conform to those rulings from the ATO. I did not do that in that tax return; I did it differently. So I didn’t do it as a contract with the ATO.
I pause here to observe that this “theory” amounts to no more than a groundless and illogical fringe-theory that has no foundation in Australian law. Unfortunately, Mr Oxby was persuaded by this theory during the seminar, which I infer from his evidence, was presented in a persuasive and charismatic manner.
Upon receiving Mr Oxby’s 2019 income tax return and affidavit, the Commissioner conducted an audit of the “Other Work Related Expenses” claimed by Mr Oxby. In an SMS message sent on 17 June 2020, the ATO advised Mr Oxby to contact them because more information was required to finalise his audit (T6/74).
The Deputy Commissioner then wrote to Mr Oxby on 18 June 2020 requesting more information to confirm the deductions he had claimed in his 2019 income tax return (T7/75-76). The letter enclosed a “Response form 2019 Schedule” and a “Voluntary disclosure form” (T7/78-83) to be completed and returned to the ATO by 10 July 2020.
Mr Oxby did not provide the evidence by 10 July 2020. Consequently, on 14 July 2020, the Commissioner issued an audit decision on his 2019 income tax return, which disallowed the full amount of the $74,501 expenses he had claimed (T8/84-87).
The Deputy Commissioner issued a notice of assessment correcting the amount of Mr Oxby’s taxable income (T9/88-89). The Deputy Commissioner also issued a notice of assessment for a shortfall penalty of $15,153 on the basis that Mr Oxby had made a false or misleading statement in his tax return for 2019 income year which resulted in a shortfall amount (T10/90).
Mr Oxby’s accountant, Mr Webb, lodged an objection on his behalf (T13-T15). He submitted that the penalty should be reduced, and that Mr Oxby had not been intentionally reckless because he had followed the advice he received at the seminar. Instead, Mr Webb submitted that Mr Oxby had not taken reasonable care which warranted a lesser shortfall penalty. Mr Webb also attached a revised 2019 income tax return that voluntarily increased Mr Oxby’s gross income and claimed for car expenses (T16).
On 11 November 2020, the Deputy Commissioner made an objection decision and issued a notice of amended assessment (T12). The objection decision dated 11 November 2020 is the Reviewable Decision currently before me.
The Reviewable Decision (T2) allowed the:
(a)increase in gross income;
(b)car expenses in part; and
(c)objection to penalty assessment in part by adjusting it to reflect the increase in gross income. This meant that the penalty was reduced from $15,153 to $14,354.
The Commissioner also remitted shortfall interest charges because of the voluntary disclosure by Mr Oxby of his additional income.
On 7 August 2021, Mr Oxby lodged an application to the Tribunal seeking review of the Reviewable Decision (T1). On 10 August 2021, the Tribunal made an order pursuant to s 29(7) of the Administrative Appeals Tribunal Act 1975 (Cth) extending the time for the making of the application for review of the Reviewable Decision to 7 August 2021.
Issue
The issue before me is whether I should exercise discretion, under s 298-20 of Schedule 1 of the Taxation Administration Act 1953 (Cth) (TAA), to remit the whole or part of Mr Oxby’s penalty assessment.
This involves a consideration of firstly, whether Mr Oxby was liable for an administrative penalty; secondly, the amount of the penalty, which depends upon whether, in making the statement to the Commissioner, Mr Oxby was reckless or careless; and thirdly, whether there is any other basis upon which the penalty could be remitted.
Pursuant to s 14ZZK(b) of the TAA, Mr Oxby has the burden of proving that the assessment of the administrative penalty is excessive or otherwise incorrect, and what it should have been.
consideration
Liability for an administrative penalty
Mr Oxby’s administrative penalty was imposed pursuant to s 284-75(1) of Schedule 1 of the TAA. The subsection imposes liability for an administrative penalty if a statement that is false or misleading in a material particular, is made to the Commissioner:
(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.
Did Mr Oxby make a false or misleading statement?
Practice Statement Law Administration 2012/5: Administration of the false or misleading statement penalty – where there is a shortfall amount (PSLA 2012/5), provides some guidance concerning false or misleading statements. The PSLA 2012/5 explains:
4A.A false or misleading statement penalty is imposed where an entity or their agent:
•    makes a statement to the Commissioner or another entity exercising powers or performing functions under a taxation law
•    the statement is false or misleading in a material particular, whether because of things in it or omitted from it, and
•    the statement results in a shortfall amount.
The PSLA 2012/5 provides further guidance as to when a statement is “false”:
7A. A statement is false if it is contrary to fact or wrong.
7B.It may be false because of something contained in the statement or because something is omitted from the statement.
…
7D.It does not matter if the person who made the statement did not know that it was false.
The PSLA 2012/5 also provides guidance as to when a statement is “misleading”:
7E.A statement is misleading if it creates a false impression, even if it is literally true.
7F. It may be misleading because of something contained in the statement or because of something omitted from the statement.
7G.The reason it is misleading may be because it is uninformative, unclear or deceptive.
As to whether a statement is false or misleading in a “material particular”, the PSLA 2012/5 explains:
7H.A material particular is something that is likely to affect a decision regarding the calculation of an entity’s tax related liability or entitlement to a payment or credit.
7I.An inconsequential statement which does not affect an entity’s tax position will not be a material particular for penalties for false or misleading statements that result in shortfall amounts.
7J.Most of the information provided in a label in a tax return or activity statement will be a material particular. It will be used to calculate a tax-related liability.
Mr Oxby made a statement to the Commissioner by way of his 2019 income tax return and affidavit that he was entitled to “Other Work Related Expenses” in the amount of $74,501.72. That statement was made to claim a shortfall amount in the form of a tax deduction.
That statement was “false” because it was wrong. Indeed, the ambit of what was claimed was so broad that, if allowed, it would amount to a very significant tax deduction that would be significantly higher than if legally permissible deductions were pursued. It does not matter that Mr Oxby believed that it was correct because of the information provided to him at the seminar. The statement could, in the alternative, be regarded as “misleading” because it included non-work-related expenses as claimed work-related deductions.
Mr Oxby had the opportunity to correct the statement that he had $74,501.72 work-related expenses when the ATO sent him an SMS on 17 June 2020 asking for more information about his claimed expenses, and when the Deputy Commissioner wrote to him on 18 June 2020, giving him until 10 July 2020 to provide further information and clarification. Mr Oxby did not avail himself of this opportunity, and I note that an omission can also be misleading.
The statement was false or misleading in a “material particular” because it was information used to calculate Mr Oxby’s income tax liability.
He is therefore liable to an administrative penalty under s 284-75(1) of Schedule 1 of the TAA.
Did Mr Oxby take reasonable care when making the statement?
There is, however, an exception whereby a person will not be liable for an administrative penalty under s 284-75(1) of Schedule 1 of the TAA if they took reasonable care. The relevant provision is s 284-75(5) of Schedule 1 of the TAA which states:
You are not liable to an administrative penalty under subsection (1) or (4) for a statement that is false or misleading in a material particular if you, and your *agent (if relevant), took reasonable care in connection with the making of the statement.
The PSLA 2012/5 explains the concept of “reasonable care”:
10A.The concept of reasonable care is explained in Miscellaneous Taxation Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard.
10B. The ‘reasonable care test’ requires an entity to make a reasonable and genuine attempt to comply with obligations imposed under a taxation law. This means taking into account all actions leading up to the making of the statement.
Miscellaneous Taxation Ruling 2008/1: Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard (MTR 2008/1) provides guidance as to the “meaning of reasonable care”, which states:
27.The expression ‘reasonable care’ is not a defined term and accordingly takes its ordinary meaning. The Australian Oxford Dictionary, 1999, Oxford University Press Melbourne, defines ‘care’ as ‘…3 serious attention; heed, caution, pains’ and ‘reasonable’ as ‘3a within the limits of reason; not greatly less or more than might be expected’. Taking ‘reasonable care’ in the context of making a statement to the Commissioner or to an entity within the meaning of subsection 284-75(4) means giving appropriately serious attention to complying with the obligations imposed under a taxation law.
28.The reasonable care test requires an entity to take the same care in fulfilling their tax obligations that could be expected of a reasonable ordinary person in their position. This means that even though the standard of care is measured objectively, it takes into account the circumstances of the taxpayer. This aspect of the test is addressed in the Revised Explanatory Memorandum to the A New Tax System (Tax Administration) Bill (No. 2) 2000 where it states at paragraph 1.69:
Reasonable care requires a taxpayer to make a reasonable attempt to comply with the provisions of the ITAA [Income Tax Assessment Act 1997 (Cth)] and regulations. The effort required is one commensurate with all the taxpayer’s circumstances, including the taxpayer’s knowledge, education, experience and skill.
29.Judging whether there has been a failure to take reasonable care turns on an evaluation of all the circumstances surrounding the making of the false or misleading statement to determine whether a reasonable person of ordinary prudence in the same circumstances would have exercised greater care.

I am not of the opinion that Mr Oxby took reasonable care in making the statement to the ATO. He is an intelligent, professional person who previously held a well-paid, specialist management position for 24 years. He had a good history of compliance with his tax obligations, and like many professional people, he engaged an accountant to complete his income tax returns for each financial year.
He departed from this procedure for the 2019 income year when he engaged a person from the organisation that ran the seminar whom he knew was not an accountant to assist him with his return. At the hearing, the Applicant stated in relation to the person from the organisation who assisted him with his tax return (transcript/24):
He wouldn’t be a qualified tax agent because qualified tax agents wouldn’t understand how this way of presenting a tax return operates. It’s out of the realm of a normal, traditional tax accountant.
Mr Oxby also did not take any steps to check the information provided by the organisation, such as speaking to his accountant or the ATO, or having his accountant check his 2019 income tax return. He did not use his accountant because, “presenting my tax return as a sovereign, natural-born man – as opposed to a commercial entity – he [the accountant] wouldn’t understand that” (transcript/23).
I find that an ordinary person in Mr Oxby’s position would have checked the information provided by the organisation that ran the seminar with a qualified tax practitioner and/or with the ATO, particularly when the information presented by the organisation (concerning Mr Oxby being able to claim all his living expenses as a work-related tax deduction), marked a significant departure from the way Mr Oxby had approached his income tax returns in the past.
Mr Oxby did not make a reasonable and genuine attempt to comply with his tax obligations. He did not take reasonable care. Therefore, Mr Oxby cannot claim the protection offered by s 284-75(5) of Schedule 1 of the TAA and he remains liable for an administrative penalty.
I now turn to the amount of the penalty, which, in Mr Oxby’s situation, depends upon whether he was “reckless” or whether he “failed to take reasonable care”.
Was Mr Oxby reckless, or did he fail to take reasonable care?
The PSLA 2012/5 provides guidance as to the meaning of “recklessness”:
14G.Recklessness is behaviour which falls significantly short of the standard of care expected of a reasonable person in the same circumstances as the entity. It is gross carelessness.
14H. Recklessness assumes that the behaviour in question shows a disregard of the risk or indifference to the consequences that are foreseeable by a reasonable person. However, the entity does not need to actually realise the likelihood of the risk for it to be reckless.
The MTR 2008/1 provides further detail about the “meaning of recklessness as to the operation of a taxation law”:
100.Like the test for determining whether reasonable care has been shown, a finding of recklessness depends on the application of an essentially objective test. There must be the presence of conduct that falls short of the standard of a reasonable person in the position of the entity. Similar to the position with a failure to take reasonable care, dishonesty is not an element of establishing recklessness. The actual intention of the entity is of no relevance.
101.Behaviour will indicate recklessness where it falls significantly short of the standard of care expected of a reasonable person in the same circumstances as the entity. Although the test for determining whether recklessness is shown is the same as that applied for testing a want of reasonable care, it is the extent or degree to which the conduct of the entity falls below that required of a reasonable person that underscores a finding of recklessness.
102.Recklessness assumes that the behaviour in question shows disregard of or indifference to a risk that is foreseeable by a reasonable person. …
With respect to a “failure to take reasonable care”, the PSLA 2012/5, para [14F], explains that “[f]ailure to take reasonable care occurs where reasonable care has not been taken in connection with making the statement, but neither the entity nor their agent has been reckless or intentionally disregarded the law.”
For the 2019 income year, Mr Oxby departed from the normal and reasonable practice he had undertaken for over two decades of his working life of having his accountant prepare his income tax return. He appears to have solely and entirely relied upon the advice he received at the seminar, despite the information being a significant departure from the way he had previously claimed tax deductions, and despite the information being of a fringe-theory or conspiracy-theory in nature.
Despite his 2019 income tax return and affidavit being substantially different to previous income years, and despite the large amount of the deduction ($74,501.72) claimed in contrast to previous income years, Mr Oxby did not make reasonable attempts to verify the information with the ATO or with his accountant. Instead, he apparently sought out “organisations” to advise him. I infer these organisations had similar views to the organisation that ran the seminar. This is because, on Mr Oxby’s evidence, they seem to have confirmed the misinformation from the seminar (transcript/27). Indeed, based on Mr Oxby’s evidence at the hearing, he appears to have deliberately avoided seeking advice from his accountant because the accountant would not understand the “natural-born man” theories espoused at the seminar. This suggests that Mr Oxby was aware of his taxation obligations and made a deliberate choice to act on misinformation that was contrary to taxation law.
Mr Oxby also knew that the person delivering the seminar was not an accountant or a lawyer. As I mentioned above, he knew the person who assisted him with his 2019 income tax return and affidavit was not an accountant and that he was approaching his taxation obligations in a very different manner to previous years. Despite this, Mr Oxby accepted and relied upon that advice without question. In this regard, I note that Mr Oxby submitted in his written submissions that “Safe Harbour is appropriate in this instance” (submission in reply, page 1). However, the safe harbour provision in s 284-75(6) of Schedule 1 of the TAA is not applicable in Mr Oxby’s circumstances. This is because the provision requires the taxpayer to give the information to a registered tax agent or BAS agent who makes the statement.
I accept that Mr Oxby was not intentionally dishonest and that he believed, and continues to believe, the veracity of the information provided to him by the organisation that ran the seminar. However, I find that a reasonable professional person in Mr Oxby’s position would have realised that the information presented by the organisation that ran the seminar had no legal basis and was an illogical fringe-theory. At the very least, a reasonable person would have thought the information highly questionable, likely to be unreliable and to require verification by an appropriately qualified professional, such as an accountant. It therefore cannot be concluded that Mr Oxby was careless. His conduct in making the statement to the Commissioner was, both objectively and subjectively speaking, more accurately characterised as being reckless.
What is the appropriate penalty for making the false or misleading statement?
Section 284-90, item 2 of Schedule 1 of the TAA provides for a base penalty amount of 50 percent for a shortfall amount which resulted from a statement described in subsection 284-75(1) where the amount, or part of the amount, resulted from recklessness as to the operation of a taxation law.
Section 284-90, item 3 of Schedule 1 of the TAA provides for a base penalty amount of 25 percent where the statement resulted from a failure to take reasonable care to comply with a taxation law.
The PSLA 2012/5, para [13A] explains that “a shortfall amount is the amount by which a tax-related liability is less than it would have been if the statement were not false or misleading.”
As I have found Mr Oxby to be reckless, the appropriate penalty is the 50 percent, as assessed by the Commissioner in the Reviewable Decision.
Should the penalty be remitted?
Section 298-20(1) of Schedule 1 of the TAA provides that: “The Commissioner may remit all or a part of the penalty”.
The TAA does not set out any guiding factors or principles that may be relevant in assessing how the direction to remit should be exercised. However, the PSLA 2012/5 provides some guidance to decision-makers when exercising discretion to remit all or part of a penalty for making a false or misleading statement.
The PSLA 2012/5 explains:
16A.We have the discretion to remit all or part of the penalty. This discretion is ‘unfettered’ meaning that there is no legal restriction on when we can and cannot remit. Remission provides the administrative flexibility to ensure the penalty imposed is aligned with the observed behaviour.
16B. However, this Practice statement sets out guidance that must be used in exercising this discretion. Remission is not limited to the reasons listed here, and you should consider remission in any situation where the final penalty is not a just outcome.
16C.You must make a remission decision whenever penalties are imposed. You may decide that there are no grounds for remission or that there are grounds to remit in full or in part. The final penalty you apply must be defensible, proper and have regard to the overall circumstances of the entity, and the purpose of imposition and remission of this penalty.
16D. You need to consider each case on its own merits, looking at all of the relevant facts and circumstances.
(Footnotes omitted.)
The PSLA 2012/5 provides guidance as to the relevant matters that decision-makers should consider when deciding whether to exercise discretion to grant remission:
16.F     Relevant matters to consider in making a remission decision include:
•    that the purpose of the penalty provision is to encourage entities to take reasonable care in complying with their tax obligations
•    that the penalty regime also aims to promote consistent and equitable treatment by reference to specified rates of penalty. This objective would be compromised if the penalties imposed at the rates specified in the law were remitted without just cause, arbitrarily or as a matter of course, and
•    that the amount of the penalty rate alone is not a valid reason for remission, in the absence of specific reasons why it would be unjust in the taxpayer’s particular circumstances.
In my opinion, and for the reasons set out above, Mr Oxby was objectively reckless, and a penalty of 50 percent is aligned with this behaviour. On the evidence before me, I do not have cause to remit the penalty. As stated by the PSLA 2012/5, taxpayers need to take reasonable care to comply with their tax obligations.
There has been a rise in misinformation in recent years, including the advent of “fake news” and conspiracy theories which necessitate vigilance and the checking of information with reputable and authoritative sources. The prospect of income tax being voluntary is certainly an attractive prospect. So too is being able to claim a very significant deduction of one’s entire living expenses as a work-related tax deduction. However, those propositions are simply fanciful and should raise alarm bells for any reasonable person. A reasonable person would either reject such obvious misinformation outright or seek verification of it from reputable sources such as a properly qualified accountant or from the ATO. Taxpayers need to take reasonable care in complying with their taxation obligations, and the imposition of these types of penalties encourages them to do so.
I appreciate that Mr Oxby has started a new business and I accept his evidence that he has taken out a loan to do so. I appreciate that he is concerned about the amount of the penalty, and I note his submission that he will be compliant in the future and that a lesser penalty would have the same effect. However, the PSLA 2012/5 says that the amount of the penalty rate alone is not a valid reason for remission. I cannot reduce the penalty because I do not have sufficient evidence about Mr Oxby’s circumstances, for example his assets and liabilities, to be able to assess whether there would be an unjust result that would warrant remission of the penalty.
Mr Oxby may be able to make a further application for release to the Commissioner with the relevant information about his assets, income, and liability so the Commissioner could assess whether a release would be appropriate.
Conclusion
There is no doubt that Mr Oxby is liable for a penalty for making a false or misleading statement. I am satisfied that the statement was reckless, and that a 50 percent penalty was appropriate. I am not satisfied that I should exercise discretion to remit all or part of Mr Oxby’s penalty assessment.
In other words, I am not satisfied that the Reviewable Decision was excessive or otherwise incorrect.
Decision
For the reasons set out above, the Reviewable Decision is affirmed.

I certify that the preceding 71 (seventy-one) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr M Evans-Bonner

............[Sgd].............................................
Associate
Dated: 7 October 2022
Date of Hearing:             3 May 2022
Representative for the Applicant:                 Self-represented
Representative for the Respondent:             Ms N Dubey, instructed by Ms V Bei of the                Australian Taxation Office

[2022] AATA 3239

7 October 2022

Key Legal Topics

Areas of Law

Tax Law

Administrative Law

Legal Concepts

Remedies

Procedural Fairness

Statutory Construction

Appeal

Penalty

Standing