The AAT has refused to waive a tax debt even though payment of the debt would cause a business consultant serious hardship.
The taxpayer was the CEO of a former listed public company (NS) which operated a business as a satellite communications provider. The company collapsed, however, and eventually went into liquidation.
The taxpayer had an unpaid income tax debt of just over $940,100 (plus a GIC liability of almost $483,130). This was mostly the result of NS not withholding and remitting, at the taxpayer’s request, the appropriate PAYG amount from a bonus of $1.2m he received, but also because of the tax treatment of options issued under an employee share scheme (ESS). The gross amount of the bonus was invested in the taxpayer’s other business interest, but that also failed resulting in a significant loss.
At the time of the hearing, the taxpayer’s monthly income (as a business consultant) exceeded outgoings by approximately $2,000 and he and his wife had net assets of just over $25,600.
Although the AAT accepted that payment of the tax debt would cause serious hardship, it considered that it would be “unjust and improper” for the taxpayer to be released from the debt. This was largely because the taxpayer, by requesting NS to not withhold the PAYG amount from his bonus, had to bear a substantial level of responsibility” for the debt. Further, by redirecting the PAYG amount to his other business interest, the taxpayer had “placed his personal interests ahead of his tax obligations” and, in that sense, had demonstrated “a serious disregard of the need to meet his tax obligations”.
Although the AAT accepted that the circumstances leading to NS’ collapse were not foreseeable at the time and were not within the taxpayer’s capacity to control, those factors did not mitigate his level of responsibility for the tax debt.
Another factor that weighed against the taxpayer was his failure to lodge his 2013, 2014 and 2015 tax returns on time. (Ballintine v CofT [2021] AATA 3089, AAT, Groom SM, 29 July 2021.) [LTN 170, 3/9/21]
[The Commissioner may release certain types of tax under Div 340 of the TAA53, and he administers his powers under these provisions under PS LA 2011/17, which also applies to other forms of debt relief, being ‘waiver’ through the relevant minister and ‘writing off’ the tax debt.]
[Tax Month – September 2021] 3.10.21