The AAT has affirmed the Commissioner’s decision to refuse to release 2 taxpayers from their tax liabilities, after finding they owned considerable assets and would not suffer serious hardship. The AAT heard that the taxpayers, Ms L and Mr P, had outstanding tax debts of $2.26m and $676,285, respectively, and had a history of failing to declare large sums of money in their tax returns. Both taxpayers were also consistently late in lodging their tax returns. Additionally, they showed a preference to fulfilling their debts to other creditors before the ATO. For instance, they made monthly mortgage payments of over $11,000 for a Brisbane apartment, estimated by the ATO to be worth $3.5m.
The AAT did not accept that the taxpayers’ assertion that they would suffer serious hardship if they were not released from their liabilities. In support of this, the AAT noted that Mr P and Ms L had an excess of assets over liabilities of over $900,000 and $1.5m, respectively. Furthermore, even if serious hardship could be established, the AAT said there were various reasons why it would be inappropriate to exercise the discretion to release the taxpayers from their tax liabilities. These reasons included the taxpayers’ history of understating their income and the fact that, if released from their tax debts, they would still be in possession of the substantial asset of their Brisbane apartment. Additionally, given that both taxpayers had indicated that payment of their tax debts would be possible if their company increased in profitability, the AAT said it would be premature to release them from the debts.
(Re Lau and FCT  AATA 46, AAT, File Nos 2014/6672-6676; 2015/0080, McDermott DP, 2 February 2016.)
[LTN 21, 3/2/16]
The AAT has refused to release two taxpayers from their tax debts after finding that they would not suffer serious hardship if required to pay.
The taxpayers, Ms Lau and Mr Phua, had outstanding tax debts of $2.26m and $676,285 respectively. Both taxpayers had a poor compliance history of failing to discharge their tax debts and not declaring large sums of money in their tax returns. They were also late in lodging their tax returns and preferred other creditors over the payment of their tax debts to the ATO, repeatedly failing to make provision for their debts when managing their finances.
The AAT affirmed the Commissioner’s decision and found that the taxpayer’s would not suffer serious hardship if they were not released from their liabilities. Ms Lau had an excess of assets over liabilities of $1.5m and Mr Phua had an excess of assets over liabilities of $900,000. The AAT found that even if serious hardship was proved, it would not have been appropriate to exercise that discretion based on the taxpayers’ poor compliance history.