Tavco Group Pty Ltd and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2007/6119)
Judgment date: 22 September 2008
Date published: 4 December 2008
Decision outcome: (Favourable/Adverse) Partly adverse

Summary of decision:
Outlines the Tax Office's response to this case which concerned whether administrative penalty at the rate of 50% for recklessness was correctly assessed and when an invoice is issued for GST purposes.

Overview of facts:
On 30 June 2005 the Applicant prepared and subsequently issued invoices to two different persons, each separately identifying an amount of GST charged. GST payable in respect of the transaction referred to in one invoice was included in the Applicant's activity statement for the quarterly tax period ended 30 June 2005. The GST in respect of the other invoice was omitted entirely. The Tribunal accepted that the omitted invoice, although dated 30 June 2005, was not sent to the recipient until 3 July 2005. | On 2 June 2006 the Commissioner advised the Applicant that an audit would be undertaken. On 3 July 2006 the Applicant amended its activity statement for the tax period ended 30 September 2005 to include the GST on the omitted invoice. | The Commissioner considered that the Applicant's behaviour was reckless with respect to the shortfall in respect of the GST relating to the invoice that was omitted and assessed administrative penalty at the rate of 50% (base penalty amount). | Before the hearing, the Commissioner conceded that a reduction in the base penalty of 20% was appropriate on the basis that the Applicant disclosed the shortfall on 3 July 2006 after the audit had begun on 31 May 2006. | Issues decided by the court or tribunal: | 1. Whether the Applicant was liable to an administrative penalty within the meaning of s284-75 of Schedule 1 to the Taxation Administration Act 1953 . Yes. 2. Whether the shortfall resulted from the Applicant's recklessness. Yes. 3. Whether the base penalty amount should be further remitted. Yes, by 10%. 4. Whether the invoice was "issued" in the tax period ended 30 June 2005. No, it was issued in the tax period ended 30 September 2005. | 1. Whether the Applicant was liable to an administrative penalty within the meaning of s284-75 of Schedule 1 to the Taxation Administration Act 1953 . Yes. 2. Whether the shortfall resulted from the Applicant's recklessness. Yes. 3. Whether the base penalty amount should be further remitted. Yes, by 10%. 4. Whether the invoice was "issued" in the tax period ended 30 June 2005. No, it was issued in the tax period ended 30 September 2005. | The Tribunal noted that the Applicant adduced no evidence to explain how the omission occurred which made it difficult to conclude that the Applicant had not been reckless. Evidence regarding the Applicant's overall record in accounting for GST was only relevant to remission and not to the question of whether the Applicant was reckless which must focus upon the particular act or omission leading to the shortfall. The Tribunal also noted the substantial amount of the shortfall (omitted GST of $80,271). | However, the Tribunal accepted that the evidence showed that the omission was an isolated error and there was no evidence that the Applicant had not acted honestly. Accordingly, the Tribunal concluded that a further remission of 10% of the base penalty amount was warranted. | In respect of issue 4, the Tribunal concluded that an invoice is issued for the purposes of s 29-5(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 when some act has been done to convey it to the intended recipient. In the absence of contrary evidence, the date appearing on an invoice could be taken to be the date on which that act was done. However, the Tribunal accepted evidence that in this case the invoice, although dated 30 June 2005, was not sent until 3 July 2005. | This conclusion did not affect the decision under review. However, the Tribunal noted that calculation of the general interest charge on the shortfall, which was not before the Tribunal, should be undertaken on the basis that the invoice was issued in the tax period ended 30 September 2005.

Issues decided:
1. Whether the Applicant was liable to an administrative penalty within the meaning of s284-75 of Schedule 1 to the Taxation Administration Act 1953 . Yes. 2. Whether the shortfall resulted from the Applicant's recklessness. Yes. 3. Whether the base penalty amount should be further remitted. Yes, by 10%. 4. Whether the invoice was "issued" in the tax period ended 30 June 2005. No, it was issued in the tax period ended 30 September 2005. 1. Whether the Applicant was liable to an administrative penalty within the meaning of s284-75 of Schedule 1 to the Taxation Administration Act 1953 . Yes. 2. Whether the shortfall resulted from the Applicant's recklessness. Yes. 3. Whether the base penalty amount should be further remitted. Yes, by 10%. 4. Whether the invoice was "issued" in the tax period ended 30 June 2005. No, it was issued in the tax period ended 30 September 2005. The Tribunal noted that the Applicant adduced no evidence to explain how the omission occurred which made it difficult to conclude that the Applicant had not been reckless. Evidence regarding the Applicant's overall record in accounting for GST was only relevant to remission and not to the question of whether the Applicant was reckless which must focus upon the particular act or omission leading to the shortfall. The Tribunal also noted the substantial amount of the shortfall (omitted GST of $80,271). However, the Tribunal accepted that the evidence showed that the omission was an isolated error and there was no evidence that the Applicant had not acted honestly. Accordingly, the Tribunal concluded that a further remission of 10% of the base penalty amount was warranted. In respect of issue 4, the Tribunal concluded that an invoice is issued for the purposes of s 29-5(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 when some act has been done to convey it to the intended recipient. In the absence of contrary evidence, the date appearing on an invoice could be taken to be the date on which that act was done. However, the Tribunal accepted evidence that in this case the invoice, although dated 30 June 2005, was not sent until 3 July 2005. This conclusion did not affect the decision under review. However, the Tribunal noted that calculation of the general interest charge on the shortfall, which was not before the Tribunal, should be undertaken on the basis that the invoice was issued in the tax period ended 30 September 2005.

ATO view of decision:
The Tax Office accepts that the decision to further remit the penalty by 10% was open to the Tribunal in the circumstances of this case. | The Tax Office respectfully agrees with the Tribunal's conclusion that an invoice is issued when it is sent to the intended recipient. That is consistent with the paragraph 33 of GSTR 2000/34 which remains the Tax Office view. | The comments to the contrary by the Tax Office representative at the hearing were made in error in response to an unanticipated question from the Tribunal on an issue that had not previously been raised during the course of the application for review. | The Tax Office remains committed to arguing cases consistently with published Tax Office views of the law in accordance with PS LA 2007/12, paragraph 4(viii).

Administrative treatment:
Implications on current Public Rulings & Determinations | None.

Legislative references: Taxation Administration Act 1953 (Cth) 14ZZK 284-75 284-220 A New Tax System (Goods and Services Tax) Act 1999 (Cth) 29-5
Case references: Kajewski v Federal Commissioner of Taxation [2003] FCA 258 2003 ATC 4375 (2003) 52 ATR 455 BRK (Brisbane) Pty Ltd v Federal Commissioner of Taxation [2001] FCA 164 2001 ATC 4111 (2001) 46 ATR 347 AAT Case 74/96 96 ATC 662 34 ATR 1128 Hart v Commissioner of Taxation (2003) 131 FCR 203 2003 ATC 4665 (2003) 53 ATR 371 Koon Wing Lau v Calwell (1949) 80 CLR 533 (1949) 24 ALJ 25 [1950] ALR 97 Attorney-General v Birkbeck (1884) 12 QBD 605 53 LJQB 378 32 WR 905 (1883-84) LR 12 QBD 605
Subject references: Whether penalty for recklessness was correctly applied meaning of recklessness whether base penalty amount should be further remitted when is an invoice issued?
Other references: PS LA 2006/2