The AAT has set aside the Commissioner’s decision to impose a shortfall penalty of 50% for recklessness in relation to GST and income tax shortfalls arising from incorrectly claimed R&D expenditure and has substituted a penalty of 25% for failure to take reasonable care.
The taxpayer had signed an agreement with a registered research agency to develop an algorithm to manage warehouse operations over the internet. It claimed an R&D tax offset in its 2008 tax return and input tax credits in relation to its R&D activities in its October 2008 BAS. The Commissioner subsequently conducted an audit and disallowed both the R&D offset and input tax credits claimed and imposed 50% shortfall penalty for recklessness. Broadly, the taxpayer contended that it was not liable for the shortfall penalties in relation to GST and income tax since the liability in relation to R&D expenditure was incurred in 2008 according to the term used in the legislation.
The AAT held that the taxpayer was liable to shortfall penalties in relation to both the GST shortfall and the income tax shortfall for the relevant periods. It said the taxpayer did not incur an R&D outgoing in relation to the year ended 30 June 2008. However, the Tribunal did not consider that the taxpayer’s conduct amounted to recklessness. Rather, it held there was a failure to take reasonable care on the part of the taxpayer for the relevant periods, and substituted a penalty of 25% of the shortfall amount.
(AAT Case [2012] AATA 899, Re Outbound Logistics Pty Ltd and FCT, AAT, Ref No 2011/5198, Hughes M, 19 December 2012.)
[LTN 2, 4/1/13]