Torresi and Commissioner of Taxation (Taxation)

[2019] AATA 2954

Torresi and Commissioner of Taxation (Taxation) [2019] AATA 2954 (14 June 2019)

Division:TAXATION AND COMMERCIAL DIVISION

File Number:           2018/2199

Re:Ines Torresi

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Mr A. Maryniak QC, Member

Date of decision:                   14 June 2019

Date of written reasons:        26 August 2019

Place:Melbourne

For the reasons given orally at the conclusion of the hearing of this matter, the Tribunal affirms the decision under review.

.........[sgd]............................................

Mr A. Maryniak QC, Member

Catchwords

TAXATION – Taxation Administration Act 1953 – Failure to lodge income tax return – Imposition of administrative penalty – Decision not to exercise discretion to remit any part of administrative penalty – Decision under review affirmed

Legislation

Taxation Administration Act 1953 (Cth)

Secondary Materials

Practice Statement Law Administration PS LA 2014/4

REASONS FOR DECISION

Mr A. Maryniak QC, Member

26 August 2019

1. At the conclusion of the hearing of this matter, the terms of the decision intended to be made and the reasons therefore, were stated orally.

2. The oral reasons for the decision have been transcribed by Epiq Australia Pty Ltd.  Whereas those oral reasons may reflect the inelegance of an extempore decision, they are in fact the reasons for the said decision.

3. An extract of the said transcript is annexed hereunto and furnished to the Applicant and to the Respondent as it is the reason for the Tribunal’s decision.

I certify that the following twenty (20) paragraphs are a true copy of the reasons for the decision of Mr A. Maryniak QC, Member

.....[sgd]....................................................

Associate 

Dated: 26 August 2019

Date of hearing:

14 June 2019

Applicant:

Self-represented

Solicitor for the Respondent:

Counsel for the Respondent:

Mr Jack Clarke
Australian Taxation Office

Mr James Strong

EXTRACT OF TRANSCRIPT PROCEEDINGS

1. [MEMBER:] Before the tribunal is the applicant’s application to review the Commissioner’s decision to deny in full the applicant’s objection to the Commissioner or respondent’s earlier decision not to exercise the discretion conferred on him by section 298(2)(1) of Schedule 1 of the Taxation Administration Act 1953 to remit any part of the administrative penalty imposed on the applicant pursuant to section 284(75)(3) of Schedule 1 of that Act in relation to the applicant’s failure to lodge her income tax return for the year of income ending 30 June 2015.

2. This whole issue before the tribunal is whether the applicant has discharged her burden of proving that the objection decision and my inference that a remission decision should not have been made or should have been made differently.

3. The tribunal is conscious of the effect, nature and burden imposed by section 14ZKB2 of that Act so far as the obligation on the applicant to prove any matters that are in dispute.  The factual background to the matter is essentially agreed.  The factual foundation for the dispute is fairly set out in paragraphs six, through to 37 of the respondent’s amended statement of facts, issues and contentions as provided to the applicant and lodged with the tribunal and dated or received 3 May 2019.

4. The relevant sections under the Act and when I’m saying the “Act” - I mean the Taxation and Administration Act 1953 - section 284, 75(3) provides that a tax payer is liable to an administrative penalty if there is a failure to give a return notice or other document to the Commissioner by the day it is required to be given and the document is necessary for the Commissioner to determine a tax related liability and the Commissioner determines the tax related liability without the assistance of that document.

5. Section 284(90) sets out at a table on the base penalty amount that an entity is liable to pay the penalty rate set out in the table as section 284(90) does not of itself amount to an unjust outcome and during discussions with counsel for the respondent it’s clear that the 75 per cent penalty is the blanket one which applies where there is a failure to comply with 284(75)(3).

6. Section 284 - subsection 224(1) allows the Commissioner and in this case the tribunal sitting in the shoes of or standing in the shoes, rather of the Commissioner, to reduce the base penalty amount to an extent of the entity or their tax agent treated a taxation or is applying in a particular way et cetera - not reading out the entirety of that provision - but no such statement is made by the Commissioner or relied upon the applicant in this case, therefore 284 224(1) doesn’t apply. 

7. The applicant was required to lodge an income tax return for the year ended 30 June 2015, however, the applicant failed to lodge a document with the Commissioner or any evidence as to why that document wasn’t lodged at the time.  In accordance with item 7 of section 284(90) the applicant is liable to an administrative penalty under section 284 (75)(3) and the base penalty amount for this penalty is as I mentioned, 75 per cent, of the tax related liability which is an amount of $15,094.  There is no issue between the parties as to the calculation of that amount.

8. In accordance with 298.21, the Commission and therefore the tribunal standing in the shoes of the Commissioner, has a discretion to remit all or a part of the penalty.  The discretion is unfettered, however the Commissioner and the tribunal in the exercise of the discretion is guided by the Practice Statement Law Administration PS LA 2014/4 in particular paragraph 28 of that Practice Statement Law Administration guideline provides guidance as to where a remission might occur.

9. The applicant has engaged three, possibly four grounds.  Those grounds are that where an entity has a genuine yet mistaken belief that lodgement was not require as opposed to an indifference to or a rejection of their obligation and as he understood the obligation to lodge but circumstances beyond their control affected their ability to lodge.  The amount of penalty imposed by law causes an unjust result or there were extraordinary - or there was extraordinary cooperation from the taxpayer during the examination. 

10. I should say that the applicant has, to her credit, amassed a substantial real estate holding and certainly that is something that she should be particularly satisfied with.  The applicant has put forward a range of reasons as to why she had a genuine mistaken belief - including that there were not tax consequences where there would be a rollover of funds from the sale of one property to another and the fact that she required two years of financial returns for the purchase of [the North Fitzroy property] in or about March of 2017.

11. The tribunal has considered all of the documentary evidence tendered, the oral testimony of the applicant and the submissions of the parties. 

12. On balance, the tribunal finds that the applicant has not discharged her burden of proving that any of the subparagraphs 28(a) to (e) of the Practice Statement Law Administration or the relevant guideline have been sufficiently engaged or ought to have been sufficiently engaged so that a remission of the penalty is appropriate.  So far as 28(a) is concerned the tribunal has taken into account the evidence of the applicant as to the reasons why she held the genuine mistaken belief. 

13. The respondent submits and the tribunal accepts that the size of the capital gain before any discount was substantial and that the applicant has not appeared to have sought any proper advice in respect of whether any tax was payable on that particular sum at the time and as importantly, notwithstanding the evidence that the applicant only sought to engage an accountant as of March 2017, clearly there was a substantial taxable income which had been earned during the 2016 tax year.  The preparation of that return was also said to be connected with the need to provide the two years of financials rather than the need to comply with the Australian taxation law.

14. Of particular weight against the applicant is the fact that - and on the evidence I find that such calls have been made, the applicant did not deny that the calls had not been made or received, simply could not recall.  I find that the telephone calls on 24 November 2016, on 15 December 2016 and the two calls on 10 January 2017 were, in fact, made by the relevant officer of the respondent and received by the applicant.

15. The evidence of the correspondence is more patchy.  Certainly the letters have been sent to an address that turns out to be the applicant’s parents but in light of the attempts made by the ATO to chase up the applicant in respect of the outstanding taxation payable on the capital gain, I do not take that matter any further.  The taxpayer was on notice as far as she could be and as far as the efforts that could have been made by the respondent.

16. The applicant has not pointed to any evidence which indicates that she would have been unable to obtain information as to her tax obligations had she attempted to do so and there is clearly an obligation, an overarching obligation, on the taxpayer due to the first principles that apply to taxation in Australia, that is self-assessment and there is clear obligations under the various sections of the Act.

17. There is no disclosure to support any basis for remission pursuant to 28(b).  As far as 28(c) is concerned, the tribunal accepts that the applicant has not discharged her burden of proof, demonstrating the penalty imposed was an unjust one in the circumstances of this case and particularly in the light of a consideration of all of the evidence orally including answers given in cross‑examination and the documentary evidence before the tribunal.

18. Equally, with respect to 28(e) whilst the applicant maintains that she has engaged tax professionals to get her affairs in order, it seems that she has had a habit to date of signing documents without truly understanding the details and nature of those documents, in particular the taxation returns and this was clear from the evidence regarding the perhaps unusual but not wanting to characterise them, an unusual tax claim for a travel deduction, $3850 involving a property some three or four kilometres away.  That deduction being for a period of somewhere up to 12 months only and various double claims.  Those matters are not before the tribunal.

19. However, more importantly, was the evidence that there is simply a disconnect or an apparent disconnect between the detail of the returns of the applicant that are prepared and signed by the applicant and possibly the reality of the situation.  Now, that just simply does not connect in any world or any view to a proposition that the taxpayer has made every effort to understand her obligations and has cooperated fully with the tax office and taken all reasonable care in complying with her tax obligations.  That is just not good enough and sufficient to simply just hire it off to tax agents without knowing the content and extent of what has been signed up to and lodged with the tax department as a reflection of one’s income and expenses for the relevant year.

20. In light of the findings, the applicant has again not discharged her burden of proving that the objection decision should not have been made or should have been made indifferently and in those circumstances the objection decision of 6 March 2018 is affirmed.