Thomas and Commissioner of Taxation
[2014] AATA 102
•27 February 2014
[2014] AATA 102
Division TAXATION APPEALS DIVISION
File Numbers 2013/2024
Re Simon Thomas
APPLICANT
And Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Deputy President S A Forgie
Date 27 February 2014
Place Melbourne
Decision:The Tribunal decides to affirm the decision of a delegate of the respondent dated 15 February 2013 which itself affirmed a decision dated 30 August 2012 to refuse to release the applicant from his tax liability.
[sgd] S. A. Forgie
Deputy President
CATCHWORDS – TAXATION – taxation liability – release – whether payment of tax liability would cause serious hardship – factors relevant to exercise of discretion – decision affirmed.
LEGISLATION
A New Tax System (Goods and Services Tax) Act 1999; ss 23-5; 23-15; 188-10; 188-15 and 195-1
Taxation Administration Act 1953; ss 14ZZK(b)(iii); 250-5(2); 250-10(2); 255-5(1); 255-10, s 255-15(1), s 255-15(2); 340-20; 340-5(3); 340-25; Part 4.15; Divisions 340 and 342 of Part 4-50
Income Tax Assessment Act 1936; s 265(1)
Income Tax Assessment Act 1997; ss 4-1 and 5-5(2)
CASES
Buckley v Wathen [1973] VicRp 51; [1973] VR 511
Commissioner of Taxation v A Taxpayer [2006] FCA 888; (2006) 91 ALD 335; 63 ATR 450, 91 ALD 335, 2006 ATC 4393
Corlette v Mackenzie (1996) 62 FCR 597; 42 ALD 193
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; 66 ALR 299
R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45; 27 ALR 321
Powell v Evreniades [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4,415
Radio 2UE Sydney Pty Ltd v Chesterton [2009] HCA 16; (2009) 238 CLR 460; 254 ALR 606
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577; 2 ALD 60; 46 FLR 409
Re Rasmussen and Commissioner of Taxation [2013] AATA 746; (2013) 61 AAR 323
Shi v Migration Agents’ Registration Authority [2008] HCA 31; (2008) 235 CLR 286; 248 ALR 390; 48 AAR 345; 103 ALD 467; 82 ALJR 1147
Van Grieken v Veilands [1991] FCA 167; (1991) 21 ATR 1639; 91 ATC 4,423
Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492
POLICY
Practice Statement: PS LA 2011/17 - Debt Relief
REASONS FOR DECISION
On 6 May 2012, Mr Thomas asked the Commissioner of Taxation (Commissioner) to release him from payment of tax amounting to, at the time, $64,047.79. A Deputy Commissioner of Taxation (DCT) refused his application on 30 August 2012. After
Mr Thomas lodged an objection to that decision on 9 October 2012, another DCT considered the decision on 15 February 2013 and disallowed the objection. By this time,
Mr Thomas’s debt had risen to $67,183.03. He applied to the Tribunal for review of the objection decision on 6 May 2013 after a differently constituted Tribunal had extended the time within which he was permitted to do so.
At the date of the hearing, Mr Thomas’s tax-related liabilities amounted to $74,264.93. Of that amount, item 1 of s 340-5(3) of the Taxation Administration Act 1953 (TAA) gives the Commissioner power to release Mr Thomas from only $40,368.22 of that debt. The Commissioner has power to release Mr Thomas from the whole or part of that sum of $40,368.22 but only if satisfied that he would suffer serious hardship if required to satisfy the whole or part of that liability. Even if he is so satisfied, the power is discretionary and he may decide not to exercise it. In this case, the Commissioner decided that Mr Thomas did not meet the threshold test of serious hardship. I must consider the same issues.
From the submissions Mr Thomas has made, both in the letters and in the documents he has lodged in the Tribunal, and from the statements he made at the hearing, I understand
Mr Thomas to contend that he should be released from the tax-related debt for four broadly based reasons. One relates to his health and to the impact that it has on his ability to work:“… I have provided documentation highlighting when my illness was diagnosed, this possibly some months/years after one has truly fallen ill.
When one is of ill health their expenses continue, they cannot simply turn them off, break rental agreements, have the energy to alter their situation and nor should they if this is the safety net required to get back to good health.
They are often relying on others and others as in my case also relying on them. Their ability to sometimes get up out of bed or turn their attention to income related activities can, and is, as I’ve experienced been extremely difficult at times.
A balance sheet will never indicate ones personal hardship, or mental state. They are after all just figures and a person situation can never be made absolutely transparent via a balance sheet.”[1]
[1] Documents lodged under s 37(1) of the Administrative Appeals Tribunal Act 1975 (T documents); T1 at 33
A second relates to the effect that payment will have on his health:
“… I am currently working periodically at a coastal country location where all expenses are now much less than my previous address. And some months since moving locations I am gradually feeling better, and starting to make ends meet. The looming burden of my current ATO debt as it stands is not comforting and will only see me go backwards again, mentally and financially.”[2]
[2] T documents; T1 at 33
The third reason given by Mr Thomas is:
“Remembering this debt was accrued as a result of past circumstances and it is why I ask to be released from it, enabling me to stable myself and once again enjoy life’s things as I once remembered.”[3]
[3] T documents; T1 at 33
Mr Thomas also disputed the amount of tax that he had been assessed as owing. He complained about the way in which the Australian Taxation Office (ATO) does not freeze a taxpayer’s account when the amount of tax is disputed. Instead, it continues to assess interest on the balance owing.
As I mentioned to Mr Thomas at the hearing, my powers in reviewing a decision made by the Commissioner under item 1 of s 340-5(3) of Schedule 1 to the TAA are limited and constrained by the terms of that provision. It does not permit me to assess the amount of the tax related liabilities to which it applies. They are assessed or determined under other provisions of the tax law. Had Mr Thomas wished to challenge their amounts, he should have objected to the assessments at the time. In so far as his complaint relates to the Commissioner’s having made assessments on the basis of what he has presumed to be
Mr Thomas’s income and GST taxable supplies, it must be said that the Commissioner has no option other than to do that when a taxpayer, such as Mr Thomas, has not lodged his income tax returns and BAS. Mr Thomas is now rectifying that and the Commissioner is issuing amended assessments.
Mr Thomas also contended that the tax related liabilities summarised in the Commissioner’s Outline of Submissions did not reflect credits that he had received when he had lodged his taxation returns. I adjourned the matter briefly so that a copy of the Integrated client account – running balance account statement could be obtained from the ATO. After examining it, Mr Thomas was satisfied that the credits had been correctly incorporated in the balance.
I will now set out the relevant legislative provisions and my understanding of how they are applied. I have also set out Mr Thomas’s financial circumstances so far as I can ascertain what they are for he has not provided any documentation supporting his statements. That has meant that I have considered his situation on an income that permits him to meet his current expenses as well as one that does not. Whichever is the correct view of his income, I am not satisfied that he will suffer serious hardship by being required to satisfy the tax-related liability amounting to $40,368.22. As I am not satisfied, this means that I do not have power under item s 340-5(3) to release Mr Thomas from all or part of the tax related liability to which that item relates. Even if the criterion were satisfied, I would not choose to exercise the power to do so and have set out my reasons below. Therefore, I have decided to affirm the reviewable objection decision made by the Commissioner on 15 February 2013 to disallow the objection.
LEGISLATIVE BACKGROUND
Provisions relating to release of a taxpayer from obligation to pay tax
Section 4-1 of the Income Tax Assessment Act 1997 (ITAA97) provides that:
“Income tax is payable by each individual and company, and by some other entities.”
The provisions regulating the income on which tax is payable and the persons by whom it is payable are lengthy. What is clear from them is that assessment of a person’s liability to pay income tax does not depend upon the person’s identity or particular circumstances. It depends upon a range of criteria that are objectively based. The Commissioner is required to make an assessment of the amount of a person’s taxable income and of the tax payable on that amount.[4] Once an assessment has been made, the income tax that has been assessed becomes due and payable.[5] It is a debt to the Commonwealth and payable to the Commissioner.[6]
[4] Income Tax Assessment Act 1936 (ITAA36); s 166
[5] ITAA97; s 5-5(2)
[6] TAA; s 255-5(1)
Collection of tax-related liabilities, of which income tax is one,[7] becomes a matter for Part 4.15 of Schedule 1 of the TAA. It sets out various ways in which taxes of various sorts are collected and paid. They extend to the Commissioner’s having power to sue in his official name in a court to recover any amount that remains unpaid after it is due and payable.[8] Before matters reach that point, the Commissioner may take steps to relieve the person from the immediate burden of payment by deferring the time at which an amount of tax-related liability is, or would become, payable[9] or permitting payment by instalments under an arrangement made between the person and the Commissioner.[10] Before agreeing to defer the time or to permit payment by instalments, the Commissioner will “have regard to the circumstances of … [the taxpayer’s] particular case”.
[7] TAA; s 250-10(2), item 37
[8] TAA; s 250-5(2)
[9] TAA; s 255-10. General interest charges and any penalties on unpaid amounts accrue from the deferred date: ITAA97; s 5-15.
[10] ITAA97; s 255-15(1). The arrangement does not vary the time at which the amount is due and payable: ITAA97; s 255-15(2). General interest charges and any penalties on unpaid amounts accrue from the deferred date: ITAA97; s 5-15.
Part 4-50 of Schedule 1 to the TAA is entitled “Release from Particular Liabilities”. The Commissioner’s powers in this Part are divided into two. One category relates to the Commissioner’s powers relating to proceeds of crime proceedings. Those powers are found in Division 342 of Part 4-50. They have no relevance in this case at all. The other category relates to the Commissioner’s powers in cases of hardship. They are found in Division 340. They are relevant in this case.
Section 340-1 sets out what Division 340 is about:
“The Commissioner may release you from a particular liability that you have incurred if you are an individual, or a trustee of the estate of a deceased person, and satisfying the liability would cause serious hardship.”
Those liabilities coming within the description of a “particular liability” are set out in
s 340-10 and include tax under s 4-1 of ITAA97[11] as well as associated tax and amounts that may be payable such as additional tax, administrative penalties, General Interest Charge (GIC) and interest.[12] Those that are relevant in Mr Thomas’s circumstances are his PAYG instalments,[13] the GIC that has accrued on those PAYG instalments[14] and the penalties that he has incurred for failing to lodge income tax returns.[15] Those debts from which Mr Thomas cannot be released under Division 340 of Part 4-50 of Schedule 1 to the TAA are those debts that he has accrued in relation to the goods and services tax (GST), the GIC accrued in relation to those debts, penalties for failure to lodge Business Activity Statements (BAS) and the GIC on his failure to lodge the BAS.[16][11] TAA; Schedule 1, s 340-10(2), item 6(c)
[12] TAA; Schedule 1, s 340-10(2), items 1, 2, 3, 3A, 4 and 5
[13] TAA; Schedule 1, s 340-10(1)(e)
[14] TAA; Schedule 1, s 340-10(2), item 3
[15] TAA; Schedule 1, s 340-10(2), item 2
[16] See table setting out further details at [29] below
Section 340-5(1) provides that a person may apply to the Commissioner to release him or her, in whole or in part, from his or her liability. On receiving an application in the approved form,[17] under s 340-5(3) of the TAA:
“The Commissioner may release you, in whole or in part, from the liability if you are an entity specified in the column headed ‘Entity’ of the following table and the condition specified in the column headed ‘Condition’ of the table is satisfied.
[17] TAA; Schedule 1, s 340-5(2)
Entity and condition
Item
Entity
Condition
1
an individual
you would suffer serious hardship if you were required to satisfy the liability
2
a trustee of the estate of a deceased individual
the dependants of the deceased individual would suffer serious hardship if you were required to satisfy the liability
If the Commissioner decides to release an individual or trustee from a liability, or part of it, he may take whatever action is necessary to give effect to the decision. That may include his altering or amending an assessment that he has issued.[18] Sections 340-20 and 340-25 deal with consequential matters should the Commissioner extinguish a taxpayer’s liability to pay a fringe benefit tax instalment or a PAYG instalment.
[18] TAA; Schedule 1, s 340-15
Individual seeking release carries burden of proof
Mr Thomas has the “burden of proving” that the decision made by a DCT should have been made differently. This is the effect of s 14ZZK(b)(iii) of the TAA, which provides:
“On an application for review of a reviewable objection decision:
(a)…
(b)the applicant has the burden of proving that:
(i)-(ii)…
(iii) in any other case – the taxation decision concerned should not have been made or should have been made differently.”
The consequence of the imposition of a burden of proof upon Mr Thomas is that he is obliged to produce to the Tribunal evidence on which it can be satisfied, on the balance of probabilities, of the findings of fact that it must make in reviewing the decision. The first of those findings of fact is the ultimate finding that he would suffer serious hardship if required to satisfy the liability. That finding must be underpinned by subsidiary findings of fact relating to matters such as his financial circumstances, his ability to pay, his other obligations and the like. They will all be relevant facts in deciding whether he would suffer serious hardship of that sort and, if so, whether the discretion to release him from his liability should be exercised.
An individual in Mr Thomas’s position can satisfy that burden by producing evidentiary material and calling witnesses. There is nothing to prevent the individual from relying on evidentiary material or the testimony of witnesses called by the Commissioner as he or she would be able to do in a civil proceeding in the courts but the opportunity will often not present itself. In many cases, the only evidentiary material is that which the individual has presented to it in earlier discussions or negotiations he or she has had with the Commissioner. Review of an application to release a tax-related liability is a situation in which the facts relating to an individual’s income, expenditure, assets and debts will usually be peculiarly within the possession and knowledge of that individual and not of the Commissioner. It is the task of the individual, and not that of the Commissioner, to gather together and produce all relevant material.
SERIOUS HARDSHIP
A. What is meant by “serious hardship” and how is it assessed?
The TAA does not define what is meant by “serious hardship” or set out how to assess when an individual would suffer it if required to satisfy the liability. Division 340 does not give any guidance as to the matters to which thought should be given in determining whether the person would suffer serious hardship. Any guidance that is to be found must be found in the provision itself while having regard to its place in the administration of the taxation laws relating to income tax and related liabilities as well as in the authorities that have considered s 340-5(3) or its predecessor, s 265(1) of the Income Tax Assessment Act 1936 (ITAA36) or similar provisions.
The expression “serious hardship” has been considered both in this context and in others. The principles that can be drawn from them include:
(1)Provisions in s 265(1) of ITAA36 “… assume the existence of the tax liability and provide for relief on special grounds beyond those considered in the process of assessment.”[19]
[19] Van Grieken v Veilands [1991] FCA 167; (1991) 21 ATR 1639; 91 ATC 4,423 at [12]; 1644; 4,428 per Gummow J
(2)The expression “serious hardship” is an ordinary English expression but one influenced by its context:
“… The context in which the words appear makes it clear that the Relief Board is to consider whether the exaction of the full amount of tax would involve the dependants of a deceased taxpayer in financial difficulty which in all the circumstances can be said to be serious. The financial difficulty will be such that the dependants will be in significant need warranting action by the Relief Board to relieve their condition.”[20]
[20] Powell v Evreniades [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4,415 at [19]; 258; 122; 472-473; 4,420
(3)“… Clearly, there is a distinction between, on the one hand hardship which is serious, and on the other hand, hardship which may be said to be extreme although it is obvious enough that what will constitute either will depend upon the circumstances of a given case.
… Clearly there would be serious financial hardship if the dependants of a deceased person were left destitute without any means of support. That is not to say that in any particular case something less than that will not constitute serious hardship.”[21]
[21] [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4,415 at [20]-[21]; 259; 123; 478; 4,421 and cited with approval by Gummow J in Van Grieken v Veilands (1991) 91 ATC 4,423; 21 ATR 1639 at 4,428; 1644
(a)“… In Evreniades, Hill J gave such an example when he recognised that there would be ‘severe financial hardship’ if persons were left ‘destitute without any means of support’. The taxation ruling gives a similar example when it says that there would be serious hardship if a taxpayer were left ‘without the means to achieve reasonable acquisitions of food, clothing, medical supplies, accommodation, education for children and other basic requirements’. I do not see any inconsistency in these examples. Effect must be given to the qualification of ‘reasonable’ in the taxation ruling and, consistently with the reasoning of Hill J, these examples do not exclude the possibility that something less than destitution will constitute serious hardship. Whether this is so depends on the particular circumstances of each case.”[22]
[22] Commissioner of Taxation v A Taxpayer [2006] FCA 888; (2006) 91 ALD 335; 63 ATR 450, 91 ALD 335, 2006 ATC 4393 at [17]; 339; 454; 339; 4,396 per Stone J
(4)“… ‘serious hardship’ is itself the test that has to be applied to an applicant’s circumstances to decide if that applicant is eligible for relief from a tax debt. There is no other test, although there may be issues about which factors, in the particular circumstances, are or are not relevant to this determination. It is because the assessment is based so squarely on the individual circumstances that Hill J in Evreniades [Powell v Evreniades[23]] thought it was inappropriate to try and identify, in the abstract, the circumstances that would give rise to serious hardship.”[24]
[23] [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4,415
[24] Commissioner of Taxation v A Taxpayer [2006] FCA 888; (2006) 91 ALD 335; 63 ATR 450, 91 ALD 335, 2006 ATC 4393 at [16]; 339; 454; 339; 4,396 per Stone J
(5)The task lies in “… assessing the … [taxpayer’s] individual circumstances by reference to normal community standards”.[25]
[25] Commissioner of Taxation v A Taxpayer [2006] FCA 888; (2006) 91 ALD 335; 63 ATR 450; 2006 ATC 4393 at [55]; 347; 461; 4,402-4,403 per Stone J
(a)What amounts to “reasonable acquisitions” of relevant necessities is assessed by reference to what is “… not excessive or unreasonable in all the circumstances. …”.[26]
[26] [2006] FCA 888; (2006) 91 ALD 335; 63 ATR 450; 91 ALD 335, 2006 ATC 4393 at [19]; 339; 454-455; 4,396 (emphasis in original)
(b)Those matters can be assessed by the decision-maker “… from its own knowledge and experience, determine what were and what were not reasonable living costs …”.[27]
(c)The expression “normal community standards” is not a term used in item 1 of s 340-5(3) or in Division 340 generally. The principles that can be drawn from cases that have considered the expression in other areas of the law suggest that community standards relate to a variety of matters and cannot be the subject of evidence. The decision-maker, be it a jury,[28] a magistrate[29] or an administrative decision-maker is expected to draw on its own collective knowledge of such things.
(d)“… There can be no doubt that the jury would have understood, from the general directions given by her Honour, that they were to assess any injury to the plaintiff’s reputation resulting from the imputations and they were to undertake that assessment from the point of view of ordinary reasonable decent members of the community. … In that regard they had been told that the question was whether ordinary reasonable members of the community would think less of the plaintiff. …”[30]
(e)“ In Reader’s Digest [Reader’s Digest Services Pty Ltd
v Lamb[31]] Brennan J emphasised that any standard to be applied must be one common to society, rather than one which reflects an attitude of a section of it…”.[32](6)In assessing serious hardship, an individual’s potential bankruptcy may be relevant in assessing his or her capacity to work and so to generate income.[33]
(a)An example is found in Commissioner of Taxation v A Taxpayer in which Stone J in CTAT decided that the Tribunal’s decision that serious hardship was very likely to follow should the individual be made bankrupt was a reasonable decision. It was reasonable even though the applicant’s income was substantial when reference was made to community standards. His circumstances, though, were not usual when assessed by those same standards for he faced complications arising from his wife’s illness if his income were jeopardised by his being made bankrupt. Those complications centred on his wife’s illness and the costs associated with her illness, domestic support and educating his children. The costs themselves are assessed by reference to what would be regarded as reasonable according to community standards.
[27] Powell v Evreniades [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4,415 at [43]; 264; 129; 483 per Hill J
[28] Radio 2UE Sydney Pty Ltd v Chesterton [2009] HCA 16; (2009) 238 CLR 460; 254 ALR 606; French CJ, Gummow, Heydon, Kiefel and Bell JJ
[29]Buckley v Wathen [1973] VicRp 51; [1973] VR 511 at 515 per Smith ACJ with whom Little and Nelson JJ agreed
[30] Radio 2UE Sydney Pty Ltd v Chesterton [2009] HCA 16; (2009) 238 CLR 460; 254 ALR 606 at [59]; 483; 621 per French CJ, Gummow, Kiefel and Bell JJ
[31] [1982] HCA 4; (1982) 150 CLR 500
[32] Radio 2UE Sydney Pty Ltd v Chesterton [2009] HCA 16; (2009) 238 CLR 460; 254 ALR 606 at [49]; 480-481; 619 per French CJ, Gummow, Kiefel and Bell JJ
[33] Corlette v Mackenzie (1996) 62 FCR 597; 42 ALD 193; Wilcox, Einfeld and Foster JJ at 600; per Einfeld J at 600; 196 per Einfeld J
B.At what time is “serious hardship” assessed?
Whether a person would suffer serious hardship “… is an issue which clearly enough arises to be looked at at the time of the application. …”, Hill J said in Powell v Evreniades.[34] Although not considering the powers of the Tribunal, he clearly expected the Relief Board, which was the relevant body at the time, to have regard to matters that had occurred since the application had been made to it.[35] This approach is consistent with that of the High Court in Shi v Migration Agents’ Registration Authority[36] (Shi). As Kirby J expressed the general principle in his judgment in Shi, while the terms of a particular enactment may lead to a different conclusion:
“ When making a decision, administrative decision-makers are generally obliged to have regard to the best and most current information available. This rule of practice is no more than a feature of good public administration. When, therefore, the Tribunal elects to make ‘a decision in substitution for the decision so set aside’, as the Act permits, it would be surprising in the extreme if the substituted decision did not have to conform to such a standard.”[37]
[34] [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4,415 at [48]; 266; 130; 484; 4,426
[35] [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4,415 at [58]; 268; 133; 487; 4,428
[36] [2008] HCA 31; (2008) 235 CLR 286; 248 ALR 390; 48 AAR 345; 103 ALD 467; 82 ALJR 1147; Kirby, Hayne, Heydon, Crennan and Kiefel JJ
[37] [2008] HCA 31; (2008) 235 CLR 286; 248 ALR 390; 48 AAR 345; 103 ALD 467; 82 ALJR 1147 at [41]; 299-300; 400; 356; 477; 1156
Section 340-5(3) of the TAA is not an enactment that leads me to take a different conclusion. The question whether an individual “would suffer hardship if … required to satisfy the liability” (emphasis added) is a question very much framed in the moment of when it is being answered. It is not framed in terms of whether an individual would have suffered hardship if required to satisfy the liability at some time in the past or will do so if required to do so in the future. The liability changes as time goes by due to such matters as the GIC and interest charges. An individual’s circumstances change as time goes by. Those changes may be for the worse but, on occasion, they may be for the better. Section 340-5(3) does not ask the decision-maker to forecast the future or to divine what would have happened in the past.[38]
COMMISSIONER’S POLICY
[38] I will return to this aspect at [84]-[93] below when considering the exercise of the general discretion that arises when an individual would suffer the requisite serious hardship.
The approach
The Commissioner has issued a Practice Statement, PS LA 2011/17 (the Policy), on the subject of debt relief.[39] He states in his introduction that:
“… It must be followed by tax officers unless doing so creates unintended consequences or where it is considered incorrect. …”
If tax officers consider that it has unintended consequences or consider it incorrect, they are directed to refer it to an appropriate authority within the Commissioner’s office.
[39] A full copy of the Policy is available online at the website of the Australian Taxation Office (ATO): type="1">
As Mr Thomas is an individual, Item 1 of s 340-5(3) is the provision conferring power on the Commissioner to release him from his liability, or part of it, for the PAYG instalments and the GIC on the amount of his liability. The Commissioner has that power if satisfied that Mr Thomas would, in satisfying the debt or part of it, suffer from serious hardship. The Commissioner has set out a three step approach to determine whether a person is suffering serious hardship. It is an approach that provides a very practical structure within which to gather together the information required to ascertain whether a person would suffer serious hardship if required to satisfy the liability.
In broad terms, the first of the Commissioner’s steps relates to identifying those for whom the individual has responsibility and, taking into account the income and assets of those other persons, working out the degree of the individual’s responsibility for them.[40] The second relates to working out the individual’s income and outgoings and the third to his or her assets and liabilities. I will outline the main points only of its second and third steps. The matters raised under the first step have no relevance in this case as Mr Thomas is single.
[40] Policy at [39]-[40]
The second of the Commissioner’s steps is:
“42. … concerned with quantifying the person’s capacity to meet the tax liability from their current income. The tests in sequence are:
(i)What is the person’s capacity to pay, as measured by the income and outgoings stated in the application or supporting documents, that is, what net income remains after deducting total outgoings from total income?
(ii)Does the ATO accept that the income and outgoings stated are accurate and that the outgoings are necessary, or there is scope to increase the net income available or to reduce outgoings to meet the tax debt without serious detriment to living standards?
(iii)If there is a margin by which available income exceeds reasonable outgoings, is it sufficient to allow the liability to be met within an acceptable time frame?
43.In relation to the second test in subparagraph 42(ii) of this practice statement, the appearance of claims that a person incurs above-average expenditure on food, clothing or services, a high level of private travel or entertainment expenses, or payments for leisure goods such as caravans, boats and higher-priced motor vehicles would usually lead the ATO to a conclusion that capacity to pay exists. Within this test, the ATO also seeks to determine whether there are optional expenditures which could be reduced or deferred to improve capacity to pay the tax debt.”
The third step sets out a number of tests:
“45. The tests within this segment are concerned primarily with determining whether the person’s equity in assets is indicative of capacity to pay the tax debt. As a secondary consideration, the ATO may also need to address whether the acquisition of assets has unreasonably been put ahead of meeting the tax liabilities.
46.There are several types of assets which the ATO would generally regard as normal and reasonable possessions, and which would not be expected to be surrendered or sold to meet revenue debts. Subject to the proviso that values are modest rather than extravagant, those assets include:
·ownership of, or equity in, a residential property which is the person’s home
·a motor vehicle
·furniture and household goods
·tools of trade, and
·cash on hand or bank balance sufficient to meet outgoings for necessities or other reasonable expenditures, for example, funds put aside by aged persons to cover funeral expenses.
47.Other assets such as caravans (except where a caravan serves as the person’s residence), holiday homes, luxury motor vehicles, boats, substantial life assurance or annuity entitlements, shares and other investments will generally be regarded by the ATO as indicating capacity to pay, through earlier disposal or use as security for borrowings, without involving serious hardship.
48.As a general proposition, the ATO would also seek to reach conclusions as to whether assets have been valued realistically, and liabilities are accurately recorded. Where doubts arise in relation to these aspects, the ATO may seek clarification of the basis of the valuation, or of other information. However, certified valuations from professional valuers will not normally be required.”
BACKGROUND
In this section of my reasons, I have set out the information that is available to me in the documents. Mr Thomas has not given me any documents, such as bank statements or loan documents and correspondence from his creditors, supporting the statements he has made.
Tax related liabilities
As at the date of the hearing, his total tax related liabilities were $74,264.93. That total was made up of the following amounts, of which only those shown in italics and totalling $40,368.22 may be the subject of his application for release from payment:
Liability
Amount
(as at 4 February 2014)
Application of section 340-10 of Sch 1 to the TAA
Income tax instalment debts
$26,232.73
s 340-10(1)(e)
General interest charge accrued on income tax instalment debts
$12,605.49
S 340-10(2) item 3
Goods and services tax debts
$21,734.00
Not applicable
General interest charge accrued on GST debts
$9,181.46
Not applicable
Failure to lodge penalty debts (Business Activity Statements)
$2,420.00
Not applicable
General interest charge accrued on Failure to lodge penalty debts (Business Activity Statements)
$561.25
Not applicable
Failure to lodge penalty debts (income tax returns)
$1,530.00
S 340-10(2) item 2
Non-tax related liabilities
Mr Thomas has non-tax related liabilities. The amount of those liabilities and the way they were incurred together with their current status as disclosed in a document lodged by
Mr Thomas in January 2014 before the hearing and at and after the hearing are:
Liability
Amount before hearing
Adjusted amount
Reason for variation
Bay Corp
$25,000.00
$6,000.00
(reduction contingent on full payment)
Bay Corp press for repayment “now and again” and have suggested repayment of $6,000.00 to settle the matter. Mr Thomas has advised them that he would “compromise the ATO” if he were to repay the loan.
Loan from mother
$30,000.00
$30,000.00
His mother is “not pressing” for repayment,
Mr Thomas said.Loan from grandfather
$12,000.00
Nil
Loan set off against inheritance under grandfather’s will when he died. Debt extinguished.
Allianz Insurance
$5,000.00
Nil
Mr Thomas understands that Allianz Insurance is no longer pursuing the debt.
Vehicle
$9,000.00
Nil
Mr Thomas said that he had paid this amount over a period of eight to ten years.[41]
TOTAL
$81,000.00
$36,000.00
[41] His statement at the hearing that he had fully paid it is not consistent with his statement in the document he lodged in January 2014 that the Commonwealth Bank had reduced the debt by half and that he had paid that reduced amount: [12].
Assets
Mr Thomas disclosed the following assets in the document he lodged in January 2014:
Asset
Estimated value
National Australia Bank account
$6,500.00
JB Were account
$500.00
Superannuation – MLC
$7,430.00
TOTAL
$14,430.00
Income
On the basis of a letter dated 30 January 2014 from Mr Thomas’s tax agent, I find that his taxable income for the financial years 2009 to 2011 is that set out in the following table. That shown in italics against the 2012 and 2013 financial years is the amount she has estimated to be his taxable income but he was yet to lodge his returns.
Year
Taxable income
2013
$18,405
2012
$44,846
2011
$19,195
2010
$30,005
2009
$12,347
At the hearing, Mr Thomas estimated that his “income to date” was $47,000 gross i.e. he had not deducted the costs of his building materials and other tax deductible items. I understood him to mean that this was his gross income for the six months from 1 July 2013 to 31 December 2013. This seems to be correct when I note that his note sent to Ms Smyth and dated February 2014 is headed “6 monthly overview of Income and expenses July 1st 2013, through to December 30th, 2013”. There then followed the statement:
“Income: $47,050.88 gst is not a part of this and I have not charged gst to clients.”
Although not pursued at the hearing, there is a question whether Mr Thomas’s GST turnover will meet the registration turnover threshold of $50,000.[42] If he does, an assessment will then need to be made of supplies he makes to determine whether they are taxable supplies and subject to the payment of GST. An assessment of that sort is not relevant in the context of a review of a decision refusing to release Mr Thomas from existing tax liability but it is indicative of the variables at play in his situation.
[42]
Expenses
In the following table, I have set out the expenses as Mr Thomas understood them to be at the hearing. These are the figures used by Ms Smyth to update her written submissions. She lodged those on 7 February 2014. At the same time, she forwarded a note written to her by Mr Thomas setting out further revised figures. He made those revisions after assessing his expenses for the period 1 July to 31 December 2013 and divided his expenses into those that have attracted the imposition of GST and those that have not.
I acknowledge that Ms Smyth has not had an opportunity to question Mr Thomas about these figures and nor have I. If the figures were to lead to a different decision from the one that I am making, I would have given her that opportunity. As it is, they do not lead to a different decision although the reasons are a little different. In view of that, I will set out the figures Mr Thomas gave at the hearing in one column and the revised figures and further figures in the second. At the hearing, he did not divide the expenses into those that were tax deductible items and those that were not.
In giving revised figures in the document lodged after the hearing, he has not attributed any part of his vehicle expenses or mobile phone expenses to private use. Given that his girlfriend lives in Melbourne and he does not, given that his family does not live in the same town as he does and given that he lives in a town in regional Victoria, I do not accept that those expenses can necessarily be regarded in their entirety as tax deductible items. The two sets of figures are:
Nature of expense
Amount at hearing
Revised amount
Non-tax deductible items
Rent
$350
$350
Groceries
$500 (includes alcohol)
$330 (excludes alcohol)
Entertainment
$200
$350 (includes alcohol)
Medical and pharmacy
$45
$45
TOTAL
$1,095
$1,075
Tax deductible items
Fuel
$250
$330
Car registration and servicing
$130
$135
City Link
$20
$30
Mobile phone and internet
$150
$146
Income protection/insurance
$222
$222
Materials
$849
Equipment hire/fuel
$55
Tools of trade
$265
Post Box rental
$12
$13
Post and office supplies
$40
Work wear
$35
TOTAL
$784
$2,120
CONSIDERATION
Would Mr Thomas suffer serious hardship if required to satisfy the liability?
While I have set out the figures that Mr Thomas has provided, he has not given me any material that independently supports his figures. It is not enough to say that the Commissioner has not provided any material to contradict his statements for Mr Thomas carries the burden of proof. A further difficulty that I have had is that, even accepting all of the information that he has given me as correctly reflecting his situation, his situation is uncertain. Take, for example, the loan from Bay Corp. Accepting that Bay Corp has indicated that it would be prepared to accept $6,000.00 as full payment of the $25,000.00 debt that it is owed, I have no information as to whether that offer is still on the table. If it is not, the sum of $25,000.00 would seem to be the amount that Mr Thomas owes rather than $6,000.00.
In so far as Mr Thomas’s income is concerned, his estimate that his gross income was $47,000.00 in the first six months of the current financial year leaves open questions of whether he is required to be registered GST and to account for it even though he has not included GST in the amounts charged to his clients. As with any self-employed person, there is a question whether the second six months will return income at that level. Given the fluctuations in his income for the financial years between 2009 and 2013, a year of higher income in the 2014 year would be consistent with his pattern of work.
Mr Thomas has capacity to work and clearly does work. Commendably, he uses his skills to undertake voluntary work to assist community projects and, currently, a person who requires extensive modifications to his home after a disabling accident. I understand that Mr Thomas finds his voluntary work very satisfying and I understand his wish and his need to continue it. He has spoken of his struggle with depression and of the benefits that helping others brings to him in dealing with his own issues. Although he has not provided any medical evidence of his condition, I accept that this is so. At the same time, his need to help others need not compromise his earning ability. Like many in the community, I have not been given any reason why he could not arrange his work both to engage in remunerated work on the equivalent of a full-time basis and to undertake voluntary work in his free time.
If I assume that the second six months of the 2014 financial year is the same as the first and if I assume that he is not subject to obligations under the GST Act, his current gross annual income is in the order of $94,000.00. If I also assume that all of the expenses he has claimed to be tax-deductible expenses are expense of that character,[43] his net income would be $94,000.00 less $25,440.00 for work-related expenses i.e. $68,560.00. At a marginal tax rate of 32.5%, this would lead to a tax liability of $13,829 and a net income of $54,731.00 annually. That amounts to approximately $4,560.00 per month.
[43] For the reasons given at [37] above, I doubt that they are.
If that is that amount correctly reflects Mr Thomas’s situation, his monthly outgoings of a personal nature being approximately $1,075.00, are less than his net income for the same period. His work-related expenses have been accounted for in the estimate of his net annual income. The difference would be $3,485.00 in Mr Thomas’s pocket. Certainly, his debts exceed his assets. The amount by which they exceed it varies according to whether the Bay Corp debt is taken to be $6,000.00 or $25,000.00. If the former, the total of his non tax-related debts is $36,000.00 and, if the latter, their total is $55,000.00. Given that Mr Thomas has not accepted the offer to pay the lower amount, I think it more realistic to regard the whole of the debt as still remaining.
Assuming that Mr Thomas’s only assets are his Holden utility valued at $9,000.00 and his financial investments of $14,430.00, the difference between his assets totalling $23,430.00 and his non-tax related liabilities is either $12,570.00 or $31,570.00. If I add in his tax-related liabilities of $74,264.93, the difference becomes approximately either $86,834.93 or $105,834.93 depending on the amount attributed to the Bay Corp debt.
Clearly, Mr Thomas cannot meet his debts from his assets. Assuming that his net income for the current year continues and is in the order of $68,560.00, what he can do is to try to come to arrangements with his creditors to repay the debts by instalments. I note that he has entered an agreement with the Commonwealth Bank in the past to repay an amount over a period of time. On the basis of his document lodged on 3 September 2013, I find that he entered another agreement with Diners Club and repaid it monthly after it decided to write off two thirds of the debt he owed. The entire amount of the debt with Allianz Insurance was written off because of, on Mr Thomas’s understanding, his ill health and his not being at fault for the accident giving rise to the debt.
If his forecast of his income is correct, he could explore whether the option of payment by instalments is open to him with those creditors to whom he still owes money. This option may still be available with the ATO. While that option remains open in relation to each of his creditors and while they are not pressing for payment and have not taken steps to, for example, garnishee his bank account or his JB Were account, he is not facing serious hardship. He can meet his day to day expenses and, by means of his savings and his income, he can make a contribution to the payment of his debts. In view of that, the criterion that must exist before the Commissioner has power to release the whole or part of the tax related liability has not arisen. The Commissioner did not have power and I do not for I have no more powers than he does. We are both constrained by item 1 of s 340-5(3).
If Mr Thomas has misjudged his income and it is significantly lower and in the order of the income he received in alternate years, I would not reach any different position. If it were in the order of, for example, $12,347 as it was in 2009, I would reach no different decision. At that level, his monthly income would be in the order of $1,028.90 and would not cover his monthly expenses of $1,075.00. He would then be in serious hardship but it would not be serious hardship that he would suffer because he is required to satisfy the tax related liability of $40,368.22. It would be serious hardship quite apart from any level of debt that he is carrying. It would be serious hardship simply because his incoming money does not match or exceed his outgoing money. Again, the criterion required to activate the Commissioner’s power has not been satisfied. Therefore, I would have no power to release Mr Thomas from all of part of his debt.
Had the criterion been satisfied, would I have exercised the power?
I have asked this question lest it should be the case that I have incorrectly answered the question in the previous section of my reasons and the criterion in item 1 of s 340-5(3) has been satisfied. The power that is given by item 1 of s 340-5(3) of Schedule 1 to the TAA is a discretionary power meaning that, even if I had been satisfied that Mr Thomas would face serious hardship if required to meet the tax liability presently amounting to $40,368.22, I would not have exercised it. I will now explain why I would have reached that decision.
A. The discretionary power and its limits
The scope of any discretion given to a decision-maker under an enactment and the boundaries within which it must be exercised depend on the:
“… construction of the statute conferring the discretion. If the statute expressly states the considerations to be taken into account, it will often be necessary … to decide whether those enumerated factors are exhaustive or merely inclusive. If the relevant factors – and in this context I use this expression to refer to the factors which the decision-maker is bound to consider – are not expressly stated, they must be determined by implication from the subject-matter, scope and purpose of the Act. … [W]here a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject-matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard … By analogy, … the court will not find that the decision-maker is bound to take a particular matter into account unless the implication that he is bound to do so is to be found in the subject-matter, scope and purpose of the Act.”[44]
[44] Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; 66 ALR 299 at 39-40; 309 per Mason J with whom Dawson J agreed. See also R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45; 27 ALR 321 at 49; 325 per Stephen, Mason, Murphy, Aickin and Wilson JJ citing with approval Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505
Section 340-5(3) does not expressly state any considerations to which the Commissioner must have regard in exercising the discretion but there are considerations implicit in the provision and in the legislation. One set of considerations lies in the nature of the taxation laws imposing income tax. I have already mentioned this above but, in summary, they impose income tax on members of the community by reference to a range of objectively based criteria. At the heart of those criteria lies the fact that the member of the community has earned income and has done so in an amount that attracts the payment of income tax. It is not imposed by reference to his or her personal circumstances or identity.
As well as imposing tax liability, the taxation laws provide for the recovery of that liability. Division 255 of the TAA is concerned with collection and recovery. Of particular relevance in the context of the release of a tax liability is the Commissioner’s power to defer the time of payment and the power to permit payment by instalments. They are provided for under
ss 255-10 and 255-15 respectively. Release of a tax liability that relates to income tax amounts to the Commissioner’s relinquishing the right to claim the amount that is released.
By permitting the Commissioner to alleviate the liability either totally or in part, Parliament has allowed regard to be had to personal circumstances as well as to other relevant criteria. There is little guidance in the authorities as to the considerations that are relevant in exercising the discretion. One arises from this passage from the judgment of Wilcox J in Corlette v Mackenzie:[45]
“… If the basis of a request for release is to avoid a bankruptcy, there is really not much point in granting the application if the person is likely to be made bankrupt at the instance of another creditor. The only effect of the release would be to preclude the Australian Taxation Office from proving in the bankruptcy and taking whatever dividend might be available. …”[46]
[45] (1996) 62 FCR 597
[46] (1996) 62 FCR 597 at 600 per Wilcox J
Another consideration arises from the behaviour of the taxpayer. In assessing serious hardship, consideration is not given to how the person came to be in the particular financial situation when the application for release of debt is made. The taxpayer may have spent money wisely, imprudently or even extravagantly but, at that stage, it is a matter of “… little, if any significance, for the money, having been spent, is unavailable to be used again to alleviate the financial hardship. …”[47] Where it does become relevant is on the exercise of the discretion. That is where Wilcox J saw its relevance in Corlette v Mackenzie. In his view, “It would be extremely odd if a taxpayer who was the author of his or her own misfortunes, through imprudent or extravagant expenditure, was entitled, as a matter of right, to a release of unpaid income tax.”[48]
[47] Powell [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4,415 at [42]; 264; 128-129; 483; 4,425
[48] (1996) 62 FCR 597 at 598
At the same time, Wilcox J acknowledged that loss or circumstances outside the control of the taxpayer might be relevant. In Milne, Mr Milne’s circumstances had to some extent been brought about by the fraud of his former business partner when they were practising in partnership as legal practitioners, his own deteriorating health that caused him to suffer both severe illnesses and physical disabilities. Justice Conti considered that these were among the circumstances to which the Commissioner was required to have regard.[49]
[49] [2006] FCA 1005; (2006) 153 FCR 52; 63 ATR 538, 2006 ATC 4503 at 76
One factor that is not relevant is how the tax liability came to be incurred. This was a matter considered by Hill J in Powellv Evreniades in looking at s 265(1)(b) of ITAA36, which now equates with Item 2 of s 340-5(3) of the TAA. It focuses on serious hardship to the dependants of a deceased individual. In his Honour’s view, the only relevance of a tax liability’s being incurred because the taxpayer was found to have been a party to a tax avoidance scheme is “… that it explains how it came about that income tax was payable, but the fact that the income tax was payable will be present in every case where an application for relief under s 265 is made.”[50]
[50] [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4,415 at [51]; 267; 131; 485; 4,427
B. The Commissioner’s Practice Statement: PS LA 2011/17
In deciding whether to exercise the discretion whether to release the liability, the Commissioner has said:
“51. … it is clear that the ATO is obliged to act reasonably and responsibly, and should not act arbitrarily or capriciously. Examples of situations in which the ATO may decide against granting release, even though implications of serious hardship may be drawn, are:
·where it appears that the person has, questionably or otherwise, disposed of funds or assets without making proper provision to meet tax liabilities
·where the granting of release would not result in reduction of hardship, such as where the person has other liabilities or creditors to such an extent that release from the tax debt will not relieve hardship
·where the person has used available funds to discharge debts due to other private creditors in preference to debts due to the ATO
·where the person has used available funds to discharge debts due to other business creditors where those payments are not considered reasonably necessary to maintain the viability of the business and could be considered as unfair preference payments to the detriment of the ATO
·where the person, for less than adequate reasons, has failed to pursue debts due to them, or to seek possible contributions from insurers, or persons with joint responsibilities for debts
·where serious hardship is associated with a single event or short term outcome, such as might be less encountered in the more speculative or seasonal business undertakings, the effects of which can be expected to abate within a short term
·where the person has a poor compliance history, and
·where the person is unable to demonstrate that they have made provision for future debts.”
In addition to these criteria there are two others to be found in the Policy:
“… Release from the full amount of the liability would not generally be appropriate where partial release is sufficient to avert hardship. ...”[51]
“… [T]he ATO generally takes a two to three year payment span as an individual yardstick. Capacity to pay at a limited rate which would not see the debt cleared in two to three years would be a factor indicating that granting of a partial release may be appropriate.”[52]
[51] Policy at [52]
[52] Policy at [44]
Having read the Policy and for the reasons I gave in Re Rasmussen and Commissioner of Taxation,[53] which I adopt as part of these reasons, I am satisfied that it is in keeping with the law passed by Parliament. Underpinning the reasons for applying a policy or guidelines of this sort are notions of consistency and fairness of decision-making. At the same time, they cannot pre-determine any decision. They must allow a decision-maker to consider fully matters relating to the particular circumstances of the person who will be affected by the decision but will guide the decision-maker as to the appropriate values and standards that guide the exercise of the power.[54]
[53] [2013] AATA 746; (2013) 61 AAR 323 at [14]-[23] and [84]-[93]; 329-331; 347-350
[54] See Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 640-641 per Brennan J. His views are consistent with those expressed in Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577; 2 ALD 60; 46 FLR 409 at 590; 70; 420-421 per Bowen CJ and Deane J and at 602; 80; 438-439 per Smithers J.
C. Had the criterion been satisfied, would I have exercised the power?
The answer to this question is that I would not have exercised the power. As I have mentioned earlier, Mr Thomas has demonstrated that he has capacity to work. Unquestionably, he enjoys doing his voluntary work and, in that way, making a contribution to the community. That is a very commendable thing for him to do but, as with many matters in life, it is all about timing. It should be done in addition to, and not at the expense of, being engaged in paid work. Being engaged in paid work leads to a person’s paying tax. The payment of tax is itself a contribution, albeit required by law, to the community as a whole. Without the payment of tax, infrastructure such as roads and rail, services such as schools, universities and hospitals and income maintenance schemes cannot be funded.
Mr Thomas has not given me any medical information as to his current situation. Given his change of location, lower expenses and the estimated gross income from the first six months of the 2014 financial year, it seems to me that he has the capacity to generate income to begin to repay his debts. He has chosen to repay his Diners’ Club debt rather than any part of his tax liability. Mr Thomas mentioned that Diners’ Club had reduced the debt and accepted a lesser amount as had the Commonwealth Bank. Allianz Insurance waived or wrote off the debt altogether. I have no evidence as to the basis on which these debts were reduced but I do note that each creditor was a private body capable of making decisions on such matters according to its own guidelines. Presumably, they were based on purely commercial grounds taking into account their estimate of how likely they were to recover the full amount of the debt and an estimate of how much they would have to spend in pursuing Mr Thomas for that full repayment. The Commissioner and the ATO are not in that position. They cannot make commercial decisions of that sort about debts that, on the face of it, are owed to them but which, for all practical purposes, are owed to the Australian community. They can only release a debt according to the powers given by the Parliament.
Mr Thomas’s document lodged on 3 September 2013 seems to suggest that the ATO should not expect to be paid because it has sent him revised statements of his account each month, did not freeze his account while the matter was under review, did not communicate effectively with him and applied interest at “obscene rates” far from current market rates. I do not accept that these views, however strongly and deeply held by Mr Thomas, are relevant. The ATO must act according to the law. Interest rates are set and continue to run. The fact that the ATO sends him a monthly statement keeps him abreast of his situation. I cannot view it as “heavy handed” as Mr Thomas would have me view it. The ATO will not send monthly statements once the tax liability is satisfied.
Mr Thomas has blamed his health and a previous failed business for his current dilemma. Even with that experience, he does not seem to have turned his mind to the way in which he will manage his affairs in future to meet his future tax liabilities let alone his past liabilities. He has made no arrangements to offer to pay by instalments. This is in keeping with the approach he has taken to his taxation affairs in the past. He has failed to lodge returns and is only now coming up to date.
Even if I put all of these matters aside, the release of him from the tax related liability amounting to $40,368.22 will not alter his situation. He will be in precisely the same position. His liabilities will still exceed his assets. Any one of his creditors could take steps to institute proceedings leading to his becoming bankrupt whether he is released from that sum or not. If he were to be released and one was to do so, the outcome would be that no part of the amount that was released could be recovered in the bankruptcy. That would be to the detriment of the Australian community.
All of these matters lead me to conclude that, had Mr Thomas satisfied the criterion under item 1 of s 340-5(3) of the Schedule to the TAA, I would not have exercised the discretion to release him from the tax liability. For those reasons, I affirm the objection decision of a delegate of the Commissioner dated 15 February 2013.
I certify that the sixty three paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ………..[sgd]................................................
Shivanthi Herath Associate
Date of Hearing 6 February 2014
Date of Last Submission 7 February 2014
Date of Decision 27 February 2014
Self-represented Applicant Mr Thomas
Solicitor for the Respondent Ms Anne Smyth
Review and Dispute Resolution
Australian Taxation Office
A New Tax System (Goods and Services Tax) Act 1999 (GST Act); ss 23-5, 23-15; 195-1, 188-10 and
188-15. In very broad terms, GST turnover is assessed by reference to the values of all supplies made, or likely to be made, during the 12 months ending at the end of the month in which it is being assessed. Certain supplies set out in s 188-15 are excluded.
11
16
4