Petersen and Anor and Commissioner of Taxation

[2008] AATA 199

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 199

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          WT200400089          )          &   )          WT2004000206

TAXATION APPEALS DIVISION		)
Re		CHRISTINE PETERSEN and JOHN LEAKE

Applicants

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Mr A Sweidan, Senior Member

Date13 March 2008

PlacePerth

Decision The Tribunal affirms the decision under review insofar as it relates to the imposition of additional tax by way of penalty.

...........[sgd Mr A Sweidan].............

Senior Member

CATCHWORDS

Taxation – income tax – imposition of additional tax by way of penalty – deductions claimed under section 8-1 of ITAA 1997 disallowed – whether penalty properly imposed

LEGISLATION

Income Tax Assessment Act 1936 s 226L

CASES

Starr v Commissioner of Taxation; Hopkins v Commissioner of Taxation 2007 ATC 4080; (2007) 65 ATR 86; [2007] FCA 23 at [47] 

Pridecraft Pty Ltd v Federal Commissioner of Taxation (2004) 213 ALR 450 at 477 [108]

Walstern Pty Ltd v Commissioner of Taxation (2003) 138 FCR 1 at 26 [108]

REASONS FOR DECISION

13 March 2008 Mr A Sweidan, Senior Member    

1.      The Tribunal handed down Reasons for Decision in the above matters on 26 October, 2007 but reserved it’s decision on the question of penalties.

2. In the case of each applicant, the Commissioner imposed penalty by way of additional tax pursuant to section 226L, alternatively pursuant to section 226 of the Income Tax Assessment Act 1936 at the rate of 50% of the amount of the tax shortfall arising from the deductions claimed in respect of his or her participation in the Banalasta Natural Oil Joint Venture Project No. 1.  In the case of the applicant Leake that penalty was reduced, for voluntary disclosure, to 10% of the tax shortfall in accordance with section 226E of the Act.

3.      The Tribunal has afforded the parties an opportunity to make further submissions in regard to the penalties which were imposed by the Commissioner by way of additional tax and such submissions have been considered by the Tribunal.

4. The Tribunal is of the view that the additional tax is not excessive and that the penalty was properly imposed under section 226L having regard to the following:

4.1As set out in its Reasons for Decision dated 26 October 2007, the Tribunal found that the claimed deductions were not allowable under section 8-1 of the Income Tax Assessment Act 1997;

4.2The Tribunal found that the tax savings projected by the project prospectus were what the outgoings were really incurred for.  In particular, the Tribunal did not accept the applicants’ evidence that they were concerned with making income from the JV Project: As noted in the Tribunal’s Reasons: “…they were in the Tribunal’s view not genuinely concerned with making a return at all.  Their assertions to the contrary are not accepted … particularly when the JV Project structure permitted the applicants’ participation without risk of loss”.

4.3The Tribunal finds that it is not reasonably arguable that the applicants’ treatment of the claimed deductions…