Sonntag and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (NT2006/38-9)
Judgment date: 3 January 2008
Date published: 10 September 2009
Decision outcome: Partly Adverse

Summary of decision:
Outlines the Tax Office's response to this case which concerned whether the taxpayer's income tax assessments for the relevant years were excessive and whether administrative penalties imposed for the intentional disregard of a tax law should be remitted.

Overview of facts:
• The taxpayer claimed credits for tax withheld, under the PAYG system in his income tax returns for the 2002 and 2003 years, to which he was not entitled. The taxpayer's returns for the 2002 and 2003 years were audited. As a result of the audit, the credits claimed were disallowed and the taxpayer's taxable income in each of the years was reduced by the amount of the credits claimed. In respect of the 2002 year, the Applicant's taxable income was reduced. Notices of Amended Assessment were issued in respect of the 2002 and 2003 years and tax shortfall penalties were imposed at 75% of the tax shortfall amount for an intentional disregard of a taxation law. • The taxpayer objected against the amended assessments and the imposition of the penalties. In his Notice of Objection, the Applicant claimed that his net salary should be $58,921. In the written closing submissions, the Applicant submitted that his taxable income should be $46,290.05. • The Commissioner disallowed the taxpayer's objection and the taxpayer appealed to the Administrative Appeals Tribunal. | • The taxpayer claimed credits for tax withheld, under the PAYG system in his income tax returns for the 2002 and 2003 years, to which he was not entitled. The taxpayer's returns for the 2002 and 2003 years were audited. As a result of the audit, the credits claimed were disallowed and the taxpayer's taxable income in each of the years was reduced by the amount of the credits claimed. In respect of the 2002 year, the Applicant's taxable income was reduced. Notices of Amended Assessment were issued in respect of the 2002 and 2003 years and tax shortfall penalties were imposed at 75% of the tax shortfall amount for an intentional disregard of a taxation law. • The taxpayer objected against the amended assessments and the imposition of the penalties. In his Notice of Objection, the Applicant claimed that his net salary should be $58,921. In the written closing submissions, the Applicant submitted that his taxable income should be $46,290.05. • The Commissioner disallowed the taxpayer's objection and the taxpayer appealed to the Administrative Appeals Tribunal. | Issues decided by the court | 1. The Tribunal found that the Applicant's income tax assessment for the year ended 30 June 2002 was excessive. The Tribunal reduced the Applicant's taxable income for the 2002 year to $90,767.38. This amount of $90,767.38 was the total amount of deposits received to the Applicant's bank account during the 2002 income year. 2. Penalties imposed in respect of the 2002 and 2003 years at 75% of the tax shortfall for intentional disregard were remitted by the Tribunal to 25% of the tax shortfall amount. The Tribunal found that there were extenuating circumstances that warranted the reduction in penalties. | 1. The Tribunal found that the Applicant's income tax assessment for the year ended 30 June 2002 was excessive. The Tribunal reduced the Applicant's taxable income for the 2002 year to $90,767.38. This amount of $90,767.38 was the total amount of deposits received to the Applicant's bank account during the 2002 income year. 2. Penalties imposed in respect of the 2002 and 2003 years at 75% of the tax shortfall for intentional disregard were remitted by the Tribunal to 25% of the tax shortfall amount. The Tribunal found that there were extenuating circumstances that warranted the reduction in penalties.

Issues decided:
1. The Tribunal found that the Applicant's income tax assessment for the year ended 30 June 2002 was excessive. The Tribunal reduced the Applicant's taxable income for the 2002 year to $90,767.38. This amount of $90,767.38 was the total amount of deposits received to the Applicant's bank account during the 2002 income year. 2. Penalties imposed in respect of the 2002 and 2003 years at 75% of the tax shortfall for intentional disregard were remitted by the Tribunal to 25% of the tax shortfall amount. The Tribunal found that there were extenuating circumstances that warranted the reduction in penalties. 1. The Tribunal found that the Applicant's income tax assessment for the year ended 30 June 2002 was excessive. The Tribunal reduced the Applicant's taxable income for the 2002 year to $90,767.38. This amount of $90,767.38 was the total amount of deposits received to the Applicant's bank account during the 2002 income year. 2. Penalties imposed in respect of the 2002 and 2003 years at 75% of the tax shortfall for intentional disregard were remitted by the Tribunal to 25% of the tax shortfall amount. The Tribunal found that there were extenuating circumstances that warranted the reduction in penalties.

ATO view of decision:
The decision to partially remit the penalty was open to the Tribunal in view of the evidence. The Tribunal's decision does not disclose an error of law. The decision turns on its facts and the Tax Office has not appealed against the decision.

Administrative treatment:
N/A

Legislative references: Taxation Administration Act 1953 14ZZK 12-35 284-75 284-90(1) 298-20
Case references: McCormack v Federal Commissioner of Taxation [1979] HCA 18 143 CLR 284 23 ALR 583 79 ATC 4111 Federal Commissioner of Taxation v Dalco [1990] HCA 3 168 CLR 614 90 ALR 341 90 ATC 4088 Trautwein v Federal Commissioner of Taxation [1936] HCA 77 [1936] ALR 425 56 CLR 63
Subject references: Income tax Tax shortfall penalty remission