The AAT has upheld the Commissioner’s decision to refuse to release a taxpayer from a tax debt on hardship grounds.

The taxpayer was assessed to pay income tax of $70,571 for the 2012-13 income year. She paid part of the tax debt but $61,108 of primary debt remained outstanding plus the GIC. She applied to be released from the debt on grounds of serious hardship pursuant to s 340-5 in Sch 1 to the TAA, but the Commissioner refused.

The evidence showed that the taxpayer’s fortnightly outgoings, including mortgage and credit card repayments, exceeded her fortnightly income by a significant amount and that she could not meet her debts as they fell due, irrespective of whether she had a tax debt. The AAT agreed that, short of selling her house and starting again, the taxpayer was facing serious hardship. However, that serious hardship did not arise because she was required to satisfy the tax liability. It arose irrespective of the tax liability. Accordingly, a prerequisite to the exercise of the discretion under s 340-5 to release all or part of the tax liability was not satisfied.

The AAT went on to say that, if it had the discretion to release all or part of the tax debt, it would not have done so because that “would be to prefer her other creditors should her income improve so that she can pay them or should she become bankrupt and her assets distributed”.

(BFCB and FCT [2017] AATA 1294, AAT, Forgie DP, File No 2016/0654, 18 August 2017.)

[Austlii website: [2017] AATA 1294; LTN 159, 22/8/17; TM August]

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