The AAT has upheld the Commissioner’s decision refusing to release a taxpayer from his tax debt of $26,045 on the grounds of “serious hardship”.
The tax debt arose after the Commissioner denied deductions claimed by the taxpayer under a managed investment scheme promoted by a registered tax agent. The Commissioner granted the taxpayer’s application to be released from the tax debt in part, to the extent of $70,000, but refused relief in relation to the remaining $26,045. The taxpayer objected arguing that he needed $5,560 per fortnight to avoid serious hardship for his family (including 4 teenage children).
The AAT upheld the Commissioner’s decision not to release the taxpayer from the remaining tax debt. Based on the taxpayer’s current income levels, the AAT agreed that the taxpayer could be regarded as suffering serious hardship (even if all discretionary expenditure was removed). However, if the household deficit continued, the AAT said that it was not appropriate to grant the relief under s 340-5(3) of Sch 1 to the TAA because it would not relieve the hardship. Alternatively, if the family earnings were restored to a projected surplus, the AAT held that it was not appropriate to exercise the discretion as the serious hardship condition would not apply as the debt could be cleared within 2 years.
(AAT Case [2014] AATA 691, Re KNNW and FCT, AAT, Ref No: 2013/4923, O’Loughlin SM, 22 September 2014.)
[LTN 185, 24/9[14]