The Administrative Appeals Tribunal has partially allowed a taxpayer’s objection to an administrative penalty of 75% for “intentional disregard” and held the penalty should be reduced to 50% for “recklessness” for the 2001, 2002 and 2003 income years.
- The Tribunal heard details of a “controversy” relating to the taxpayer’s employment with a research institution leading to a purported “termination” and legal proceedings between the parties.
- It heard that in March 1996, the employer paid an amount to the taxpayer, which included an amount treated by the employer as a Lump Sum A Payment (ie an amount paid for unused long-service leave and annual leave). Tax instalments had been deducted from the total payment made by the employer.
- The Tribunal also heard that in August 1998, the taxpayer received an amount from his super fund calculated as a gross amount less tax withheld.
- The Tribunal understood the taxpayer’s position as being that the amounts should have been characterised as compensation receipts, capable of apportionment over later income years and assessable to him only when paid out to him from a “defence fund”.
- The taxpayer declared the money he later received in his 2001, 2002 and 2003 income tax returns, and he also claimed tax credits in those returns for the tax withheld in 1996 and 1998.
- A penalty at the rate of 75% was imposed on the “tax withheld” claims made by the taxpayer in his 2001, 2002 and 2003 income tax returns.
The Tribunal said it was satisfied that the shortfall amounts did not result from “intentional disregard” of a tax law; but rather, it found they resulted from “recklessness” as to the operation of a tax law. The Tribunal said that “recklessness” was demonstrated by the taxpayer’s not having sought or taken advice on the specific question of entitlement to the tax credits. Note the decision was released on 8 May 2014.
(AAT Case [2014] AATA 242, Re Research Scientist and FCT, AAT, Ref No: 2012/2098-2100, Frost DP, 28 April 2014.)
[LTN 88, 12/5/14]