Nitram Consulting Pty Ltd and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2007/4526)
Judgment date: 16 December 2008
Date published: 20 February 2009
Decision outcome: Partly adverse

Summary of decision:
Outlines the Tax Office's response to this decision which concerned whether an administrative penalty relating to GST should be remitted.

Overview of facts:
• The Applicant, which carried on business in the hospitality industry, sold its interest in a hotel-tavern for an amount expressed to be inclusive of GST. • Relevant boxes on the contract were marked to indicate that the sale was a taxable supply and was not a supply of a going concern. • The Applicant issued a tax invoice to the purchaser showing GST of 1/11th of the sale price. • The Applicant lodged an activity statement bringing GST on the transaction to account. • However, the Applicant's accountant subsequently lodged an amended activity statement reducing the GST payable on the sale to nil and mistakenly advising the Applicant that if the Applicant lodged the amended activity statement it would receive a call from the Tax Office and the GST payable could be resolved in that way. • The Tax Office issued an assessment for the shortfall and also assessed penalty at the rate of 25% for lack of reasonable care. • The Applicant objected against the assessment of penalty and the Tax Office disallowed the objection. • The Applicant applied to the Tribunal for review of the objection decision. • It was common ground that the Applicant had failed to exercise reasonable care, but the Applicant argued that the penalty imposed at the rate of 25% should be remitted in part or in full. • The Applicant did not dispute that it does not have a particularly good compliance history. | • The Applicant, which carried on business in the hospitality industry, sold its interest in a hotel-tavern for an amount expressed to be inclusive of GST. • Relevant boxes on the contract were marked to indicate that the sale was a taxable supply and was not a supply of a going concern. • The Applicant issued a tax invoice to the purchaser showing GST of 1/11th of the sale price. • The Applicant lodged an activity statement bringing GST on the transaction to account. • However, the Applicant's accountant subsequently lodged an amended activity statement reducing the GST payable on the sale to nil and mistakenly advising the Applicant that if the Applicant lodged the amended activity statement it would receive a call from the Tax Office and the GST payable could be resolved in that way. • The Tax Office issued an assessment for the shortfall and also assessed penalty at the rate of 25% for lack of reasonable care. • The Applicant objected against the assessment of penalty and the Tax Office disallowed the objection. • The Applicant applied to the Tribunal for review of the objection decision. • It was common ground that the Applicant had failed to exercise reasonable care, but the Applicant argued that the penalty imposed at the rate of 25% should be remitted in part or in full. • The Applicant did not dispute that it does not have a particularly good compliance history. | Issue decided by the Tribunal | The Tribunal decided that the penalty should be remitted from 25% to 20% of the shortfall. | In arriving at this decision, the Tribunal noted the similarities between this case and Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Federal Commissioner of Taxation 2008 ATC 20-015 in which there was no remission of penalty. | However, the Tribunal noted that in that case the tax agent denied advising the taxpayer to proceed with a speculative lodgement of its activity statement, whereas in this case, the Applicant's accountant freely admitted to advising the Applicant to that effect. Further, this was not a case where the tax agent hoped that the Tax Office might fail to notice the change. Rather, the accountant assumed that the Tax Office would notice the change and his approach, although incorrect and imprudent, was to rely on receiving a call from the Tax Office requesting further information after lodgement of the revised activity statement. | Due to the distinction between the two matters, the Tribunal considered that a small remission of the penalty was warranted.

Issues decided:
The Tribunal decided that the penalty should be remitted from 25% to 20% of the shortfall. In arriving at this decision, the Tribunal noted the similarities between this case and Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Federal Commissioner of Taxation 2008 ATC 20-015 in which there was no remission of penalty. However, the Tribunal noted that in that case the tax agent denied advising the taxpayer to proceed with a speculative lodgement of its activity statement, whereas in this case, the Applicant's accountant freely admitted to advising the Applicant to that effect. Further, this was not a case where the tax agent hoped that the Tax Office might fail to notice the change. Rather, the accountant assumed that the Tax Office would notice the change and his approach, although incorrect and imprudent, was to rely on receiving a call from the Tax Office requesting further information after lodgement of the revised activity statement. Due to the distinction between the two matters, the Tribunal considered that a small remission of the penalty was warranted.

ATO view of decision:
The Tax Office accepts that the decision to make the small remission of the penalty was open to the Tribunal in the circumstances of this case. | However, the Tax Office cautions taxpayers against lodging activity statements on a speculative basis with a view to discussing matters with the Tax Office at a later time. The law imposes penalties for lodging false and misleading returns and this case should not be relied upon to assume that a remission of penalties would occur in these circumstances. Decisions on remission are made having regard to all of the relevant facts in the individual case and, as this case demonstrates, significant penalties may be payable for lodging incorrect activity statements.

Administrative treatment:
None required. The case was decided on its facts.

Legislative references: Taxation Administration Act 1953 (Cth 14ZZK 284-75 284-80 284-90 298-20
Case references: Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Federal Commissioner of Taxation 2008 ATC 20-015 [2008] FCAFC 54 69 ATR 627
Subject references: Administrative penalty Remission of penalty