In Re Ogden and FCT [2016] AATA 32 the AAT found that the taxpayer, a salesman, had significantly over claimed deductions in the 2001 and 2012 income years which reduced his taxable income by some 30%. The AAT has now ruled that the taxpayer should be subject to administrative shortfall penalties that reflected the Commissioner’s claim that 50% shortfall penalties for “recklessness” should be imposed for some claims, while 75% shortfall penalties should be imposed for “intentional disregard “of the law for others, together with a 20% increase for aggravating factors.

In arriving at its latest decision, the AAT found that the position taken by the taxpayer and his agent in relation to the claims was in many respects “unprincipled and unjustifiable” in that many were without merit and others were clearly overstated or could not be substantiated in any way. In addition, it rejected the taxpayer’s claim that he made a voluntary disclosure warranting a reduction in the penalty

However, the AAT decided to “strike” a penalty of $11,500 for both years in question (reflecting the Commissioner’s penalty calculation of some $12,500 for each year) instead of taking a “line-by-line calculation”. In doing so, it stated that both the Commissioner and the AAT had already invested too many of the Commonwealth’s resources in the taxpayer’s objection and review processes, and should not invest any more.

(Re Ogden and FCT [2016] AATA 574, AAT, File Nos: 2014/6763; 2014/6764, Frost DP, 4 August 2016.)

[LTN 159, 19/8/16]


TAXATION – administrative penalty – primary tax issue decided – Commissioner given opportunity to reconsider the amount of penalty imposed on the taxpayer – overstated claims – certain expenditure not claimable – lack of evidence for some claims – whether failure to take reasonable care – whether reckless – whether intentional disregard for the law – portions of the tax shortfall amount resulting from each level of behaviour – different revised amounts depending on severity of behaviour – avoidance of expending too many Commonwealth resources in line by line calculations – adjustment of revised amount to accommodate certain claims – decision under review set aside and remitted

The relevant excessive claims


  1. The taxpayer’s tax returns for 2011 and 2012 contained deduction claims that I found to be significantly overstated: Re Ogden and Commissioner of Taxation  [2016] AATA 32 (the Primary Tax Decision). I declined to deal with administrative penalty, considering it appropriate to give the Commissioner the opportunity to reconsider the amount of penalty initially imposed upon the taxpayer. I then gave Mr Ogden the opportunity to respond. The Commissioner has submitted that the initial penalty amounts should be increased. The taxpayer disagrees, arguing that the penalty should be reduced, and even, in some respects, reduced to nil.
  2. The Commissioner had initially thought the taxpayer and/or his agent had failed to take reasonable care in making the relevant deduction claims in the tax returns. That led to the assessment of penalty at the rate of 25 per cent of the amount of the tax underpaid. But the Commissioner now says that the taxpayer and/or his agent were reckless (justifying a base penalty of 50 per cent of the tax shortfall) or, alternatively, that they intentionally disregarded the law (for which the base penalty is 75 per cent of the tax shortfall). The Commissioner also submits there are aggravating factors justifying a 20 per cent increase on the respective base amounts.


4 It will be clear from a reading of my reasons in the Primary Tax Decision that the position taken by the taxpayer and his agent was in many respects unprincipled and unjustifiable. I dealt at length with the following categories of deduction claims:

(a) ‘overtime meal allowances’ at [51]-[59]

(b) ‘staff and client amenities’ at [60]-[65];

(c) ‘heating and lighting expenses’ at [66]-[70];

(d) ‘home office running costs’ at [71]-[74];

(e) ‘sunscreen and sunglasses’ at [79]-[90];

(f) ‘rubber-soled shoes’ at [91]-[94].

  1. The claims in categories (a), (b) and (f) were entirely without merit. Those in categories (c) and (d) had some basis to them, but the amounts claimed were overstated. To some extent that was because the percentage was overly ambitious but there were also classes of expenditure (e.g. some computers and a desk) that should not have been included in the first place. Category (e) is different again: that claim failed for lack of evidence.


  1. The Commissioner has calculated that, based on the Tribunal’s findings in the Primary Tax Decision, if administrative penalty remained at 25 per cent of the shortfall amount, it would rise to $5,253.11 for the 2011 year and to $4,926.59 for the 2012 year (the Lower Revised Amounts). If administrative penalty instead were increased to 75 per cent for staff and client amenities, and 50 per cent for all other categories, and then uplifted by 20 per cent across the board, the penalty amounts would be $12,757.85 for 2011 and $12,465.91 for 2012 (the Higher Revised Amounts).
  2. Some very minor downward adjustment would need to be made to the Higher Revised Amounts since, as indicated above, not all categories of statements made in the tax returns attract the 50 or 75 per cent penalty loading. But by far most of them do. Accordingly, and to avoid the need for either the Tribunal or the Commissioner to undertake further time-consuming, line-by-line calculations with respect to every single one of the multitude of false or misleading statements made by Mr Ogden in his tax returns, I will strike the penalty amounts at $11,500 for each of the income years ended 30 June 2011 and 30 June 2012. Those amounts will undoubtedly be lower than a line-by-line calculation would reveal, but in my view both the Commissioner and the Tribunal have already invested too many of the Commonwealth’s resources in Mr Ogden’s objection and review processes, and should not invest any more.