Tschierschky and Commissioner of Taxation (Taxation)

This matter concerned an appeal by the applicant, Mr. Tschierschky, against the Commissioner of Taxation's decision to disallow his objection to the imposition of an administrative penalty. The dispute arose from the applicant's failure to disclose capital gains from the sale of shares in his 2016 and 2018 income tax returns. The Commissioner had initially assessed the applicant's 2016 return with an amended notice of assessment, including interest but no administrative penalty, on the basis that the applicant had taken reasonable care. However, subsequent to an audit of the applicant's 2018 return, which also failed to disclose capital gains, the Commissioner determined that the statements made in the applicant's returns were caused by recklessness, leading to the imposition of a base penalty under section 284-90 of the *Taxation Administration Act 1953* (Cth).

The primary legal issue before the Court was whether the administrative penalty imposed by the Commissioner was excessive or otherwise incorrect, specifically concerning the meaning of "recklessness" within the context of section 284-90 of the *Taxation Administration Act 1953* (Cth). The applicant contended that his actions, or those of his tax agent, did not amount to recklessness, arguing that a lesser penalty, such as that for failing to exercise reasonable care, should have been applied. The Court was required to determine the applicant's state of mind, and that of his tax agent, at the time the relevant statements were made in the tax returns, and whether this state of mind met the threshold for recklessness as defined by the Act.

The Court found that the applicant had failed to disclose significant capital gains on multiple occasions, including after being alerted to an audit concerning his 2016 return. Despite the initial assessment for the 2016 year not including a penalty, the subsequent omission in the 2018 return, coupled with the applicant's prior engagement with the audit process, indicated a disregard for the obligation to disclose such gains. The Court considered the applicant's tax agent's advice that they were unable to contact the client for information, but ultimately concluded that the repeated failure to disclose, particularly after the 2016 audit, demonstrated a level of indifference to the truth or falsity of the statements made in the tax returns, which satisfied the criteria for recklessness under section 284-90. The Court therefore upheld the Commissioner's decision to impose the penalty based on recklessness.