Ng and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2010/0011 - 0013)
Judgment date: 9 June 2011
Date published: 2 November 2011
Decision outcome: Partly adverse

Summary of decision:
Outlines the ATO's response to this case which concerns undisclosed income by the taxpayer from a related company and whether administrative penalties should be remitted or reduced.

Overview of facts:
Mr Ng was an associate and employee of a company. As a result of an audit by the Commissioner, his assessments were increased for each of the years in dispute by including amounts received from the company which Mr Ng had contended were repayments of loans made to the company. During the hearing, there were adjustments agreed between the parties in relation to the amounts recorded in cash flow spread sheets. | Issues decided by the tribunal | The Tribunal determined that the taxpayer had failed to discharge the onus of proof that required him to demonstrate that the assessments were excessive,other than in respect of the agreed amounts. | The Tribunal found that the taxpayer did not provide a reasonable explanation for the source of the deposits or the existence of any loan arrangement between himself and the company and that the amounts were paid to him (in accordance with the adjusted figures conceded by the Commissioner at the start of the proceedings) and were therefore assessable to him. | Administrative penalty for tax shortfall had been imposed by the Commissioner at 75% since it was considered that the taxpayer had intentionally disregarded his obligations. The Tribunal was not satisfied that the taxpayer had "consciously disregarded his obligations" and therefore reconsidered the level of shortfall penalty to be imposed and determined the appropriate level for penalty was 50% for recklessly submitting tax returns which would raise in the mind of a reasonable person a "real risk" that the statements were incorrect. Further remission of the penalty was considered and rejected.

Issues decided:
The Tribunal determined that the taxpayer had failed to discharge the onus of proof that required him to demonstrate that the assessments were excessive,other than in respect of the agreed amounts. The Tribunal found that the taxpayer did not provide a reasonable explanation for the source of the deposits or the existence of any loan arrangement between himself and the company and that the amounts were paid to him (in accordance with the adjusted figures conceded by the Commissioner at the start of the proceedings) and were therefore assessable to him. Administrative penalty for tax shortfall had been imposed by the Commissioner at 75% since it was considered that the taxpayer had intentionally disregarded his obligations. The Tribunal was not satisfied that the taxpayer had "consciously disregarded his obligations" and therefore reconsidered the level of shortfall penalty to be imposed and determined the appropriate level for penalty was 50% for recklessly submitting tax returns which would raise in the mind of a reasonable person a "real risk" that the statements were incorrect. Further remission of the penalty was considered and rejected.

ATO view of decision:
The AAT affirmed that the imposition of the penalty on the taxpayer is not unjust in the case or that the circumstances warrant further remission, either in part or whole. The ATO considers that the decision of the AAT was reasonably open to it, on the particular facts which gave rise to a reduction in administrative penalties.

Administrative treatment:
Implications for ATO precedential documents (Public Rulings & Determinations etc) | None | Implications for Law Administration Practice Statements | None

Legislative references: Income Tax Assessment Act 1936 170(1) 173 Taxation Administration Act 1953 175A 14ZY 14ZZ(a)(i) 14ZZK(b) 284-80(1) 284-75 284-90 298-20(1) Administrative Appeals Tribunal Act 1975
Case references: Jones v Dunkel [1959] HCA 8 101 CLR 298 McCormack v FCT [1979] HCA 18 143 CLR 284 9 ATR 610 79 ATC 4111 FCT v Dalco (1990) 168 CLR 614 20 ATR 1370 90 ATC 4088 [1990] HCA 3 Hua-Aus Pty Ltd v Commissioner of Taxation [2010] FCA 341 184 FCR 430 76 ATR 1 George v FCT (1952) 86 CLR 183 [1952] ALR 961 Ma v Commissioner of Taxation (1992) 37 FCR 225 23 ATR 485 92 ATC 4373 Price Street Professional Centre Pty Ltd v Commissioner of Taxation [2007] FCA 345 (2007) 66 ATR 1 2007 ATC 4320 Hart v FCT [2003] FCAFC 105 2003 ATC 4665 53 ATR 371 131 FCR 203 BRK (Bris) Pty Ltd v Cmr of Taxation [2001] FCA 164 2001 ATC 4111 46 ATR 347 Commissioner of Taxation v Paul Andrew Burness (As Trustee for the Property of Bottazzi, A Bankrupt) [2009] FCA 1021 2009 ATC 20-135 77 ATR 61
Subject references: Assessment based on drawings from business onus of proof whether drawings were repayments or advances of income penalties