QHVV and Commissioner of Taxation
[2014] AATA 104
[2014] AATA 104
Division TAXATION APPEALS DIVISION File Number
2013/4661
Re
QHVV
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Dr P McDermott RFD, Senior Member
Date 27 February 2014 Place Brisbane This matter is remitted to the Commissioner with the direction that the applicant should be assessed for the year ended 30 June 2008 as having a taxable income of $126,301.00 and being liable to tax of $37,620.40, together with any necessary adjustment to penalty and interest. The objection decision is otherwise affirmed as to the levying of a 75% administrative penalty.
.......................[Sgd].................................................
Dr P McDermott RFD, Senior Member
CATCHWORDS
TAXATION AND REVENUE – failure to lodge tax return –default notice of assessment – whether 75% penalty should be remitted – decision under review remitted to enable assessment to be varied as to income – decision under review affirmed as to the rate of penalty
LEGISLATION
Tax Administration Act 1953 (Cth) Sch 1 ss 284-75(3), 284-85, 284-90, 298-20(1), (2)
CASES
Sanctuary Lakes Pty Ltd v Commissioner of Taxation [2013] FCAFC 50, [193].
REASONS FOR DECISION
Dr P McDermott RFD, Senior Member
27 February 2014
INTRODUCTION
The applicant seeks the review of a decision of the Commissioner of Taxation (the Commissioner) to issue a default notice of assessment for the applicant’s failure to give the Commissioner an income tax return for the year ended 30 June 2008.
BACKGROUND
The applicant had not lodged his income tax return for the year ended 30 June 2008 by the due date of 31 October 2008.
On two occasions the Commissioner has made requests to the applicant to file an income tax return for the year ended 30 June 2008. On 13 January 2012 the Commissioner wrote to the applicant to ask him to lodge the tax return for the year ended 30 June 2008 within 28 days of the date of the letter. On 9 May 2012 the Commissioner again wrote to the applicant to advise him that he needed to lodge his overdue income tax return by
9 June 2012 or he would be issued with a default assessment. That letter contained particulars of the estimated capital gain on the sale of a property (“the property”) which had been sold in the year ended 30 June 2008. The applicant has quite properly acknowledged that he received both of these letters from the Commissioner and did not comply with the requests.
On 12 September 2012 the Commissioner issued a default notice of assessment for the year ended 30 June 2008. That assessment was based upon the estimated taxable income of the applicant together with a 75% penalty. Since the issue of the default assessment, which has been amended, the applicant has lodged two income tax returns for the year ended 30 June 2008. The Commissioner issued an amended assessment on
16 April 2013 to reflect the fact that, for some time, the property was the principal place of residence of the applicant. On 5 June 2013 the applicant’s previous tax agent lodged a notice of objection as to penalty.
The new tax agent of the applicant disputes the amount of tax payable for the year ended 30 June 2008. Although the latest notice of objection has raised only the issue of the assessment of penalty, I informed the parties that leave could be granted to the applicant (which is given) to also object to the assessment of tax. The applicant had lodged a previous objection on the 26 March 2013 as to income as well as to penalty. Since the amended assessment of 16 April 2013 the Commissioner has recalculated a different amount of tax that is payable. The parties now agree that for the year ended 30 June 2008 the applicant has a taxable income of $126,301.00 and is liable to tax of $37,620.40.
The applicant now is in agreement with the Commissioner on the proper approach for the calculation of the HELP repayment amount. I accordingly consider that the amended assessment should be amended so that the applicant is assessed on the correct amount of tax which is payable by him.
ASSESSMENT OF ADMINISTRATIVE PENALTY
I am satisfied that the Commissioner was correct in having levied an administrative penalty of 75%. There is no dispute that the applicant has failed on two occasions to give a return to the Commissioner by the day that it is required to be given. Certainly, at least, the letter of 9 May 2012 nominates a “day”. The applicant is therefore liable to an administrative penalty which is imposed by s 284-75(3) in Schedule 1 of the
Tax Administration Act 1953(Cth) (“Schedule 1”) which provides:
3)You are liable to an administrative penalty if:
(a)you fail to give a return, notice or other document to the Commissioner by the day it is required to be given; and
(b)that document is necessary for the Commissioner to determine a tax-related liability of yours accurately; and
(c)the Commissioner determines the tax-related liability without the assistance of that document”.
The amount of that administrative penalty is assessed under s 284-85 in Schedule 1 as being the base penalty amount under s 284-90 in Schedule 1. Item 7 of s 284-90 in Schedule 1 provides that where a taxpayer is liable to an administrative penalty under s 284-75(3) in Schedule 1, the base penalty amount is 75% of the tax-related liability concerned.
REMISSION OF ADMINISTRATIVE PENALTY
The applicant has submitted that the penalty of 75% that has been levied by the Commissioner is excessive and he seeks the remission of the whole penalty.
The administrative penalty can be remitted under s 298-20 in Schedule 1 which provides:
Remission of Penalty
1)The Commissioner may remit all or a part of the penalty.
2)If the Commissioner decides:
(a)not to remit the penalty; or
(b)to remit only part of the penalty
the Commissioner must give written notice of the decision and the reasons for the decision to the entity.
This provision has been recently considered in Sanctuary Lakes Pty Ltd v Commissioner of Taxation.[1] Greenwood J remarked that the discretion conferred by s 298-20(1) in Schedule 1 is “unconstrained” but must “be exercised for a proper purpose”.
[1] [2013] FCAFC 50, [193].
The evidence before me (with which the applicant has agreed) is he had made income tax returns for the years ended 30 June 2006, 30 June 2007, 30 June 2009, 30 June 2010 and 30 June 2011 on time and had received a refund in respect of each of those years. However, the applicant has agreed that he had received the two requests from the Commissioner to file an income tax return for the year ended 30 June 2008 and had failed to comply with those requests.
The case of the applicant is that there was a moral dilemma which faced him in filing an income tax return for the year ended 30 June 2008. The applicant stated that his wife told him not to declare the sale of the property in his income tax return for the year ended
30 June 2008. The applicant had been advised that his wife had not declared the sale of the property in her income tax return for the year ended 30 June 2008. The applicant thought that he would be denied access to his child if he had declared the sale of the property. However, the applicant conceded in cross-examination that his wife had not made any actual threats to him. This is why the applicant did not file an income tax return for the year ended 30 June 2008 in which he would have to disclose particulars of the sale of the property.
There is no medical evidence before me that the applicant was unable to file an income tax return for the year ended 30 June 2008. In any event, the applicant has been able to file income tax returns for later years. The applicant confirmed that he was not severely depressed.
It is true that the administrative penalty of 75% is a severe penalty. However, that is the penalty that has been prescribed by Parliament for a tax payer who has intentionally disregarded a taxation law and failed to comply with a request from the Commissioner to give an income tax return.[2] I am also conscious that the applicant, in not filing an income tax return, for the year ended 30 June 2008 had himself avoided the liability for the payment of capital gains tax resulting from the sale of the property. This has subsequently impeded the Commissioner who has the responsibility to accurately assess tax payers. I have also borne in mind that tax payers in like circumstances should be treated consistently.
[2] Taxation Administration Act 1953 (Cth) Sch1 ss 284-75(3), 284-90 (Item 7).
After a review of the circumstances of the applicant I have decided not to remit the 75% administrative penalty that has been levied upon the taxpayer. I should add that before the default assessment was issued in the letter of 9 May 2012, the Commissioner had acted fairly in informing the applicant that he may have to pay an administrative penalty of 75% of any tax-related activity if he was issued with a default assessment.
The applicant, who has postgraduate business qualifications, was fairly apprised of the consequences of his not complying with a request of the Commissioner.
I have decided to make an order to prevent the name of the applicant being disclosed in view of the fact that the applicant in giving evidence has mentioned that he has a child.
DECISION
This matter is remitted to the Commissioner with the direction that the applicant should be assessed for the year ended 30 June 2008 as having a taxable income of $126,301.00 and being liable to tax of $37,620.40, together with any necessary adjustment to penalty and interest. The objection decision is otherwise affirmed as to the levying of a 75% administrative penalty.
I certify that the preceding 16 (sixteen) paragraphs are a true copy of the reasons for the decision herein of Dr P McDermott RFD, Senior Member .........................[Sgd]...............................................
Associate
Dated 27 February 2014
Date of hearing 11 February 2014 Advocate for the Applicant
Solicitors for the Respondent
Boyd Hain, Hain Accounting
Allison Roberson, Departmental Advocate
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