The AAT has remitted in full a 25% penalty imposed on a taxpayer for claiming PAYG withholding credits in his tax returns which were not withheld by his employer for the 2009 and 2010 income years.
The taxpayer worked for a company in the relevant income years, during which he moved from being an independent contractor to what he characterised as an employee. However, the taxpayer’s status as an employee was never made definitive by the company and the company had refused to provide payment summaries. The taxpayer consulted a solicitor friend and the ATO Help Line on 4 occasions regarding his situation, and from the advice obtained, he lodged his tax returns on the basis that PAYG withholding had been set aside by the company. The Commissioner contended that the taxpayer was not entitled to the credits as no credits were withheld, and imposed a 25% penalty for failure to take reasonable care.
The taxpayer did not challenge the amended assessments to exclude the PAYG withholding credits claimed as the Tribunal was told by the ATO that there were no objection rights regarding PAYG credits under Pt IVC of the TAA. As a consequence, the Tribunal only looked at the issue of penalties. It held that the taxpayer did make a false statement in his tax returns and therefore the penalty of 25% was correctly imposed. However, the AAT noted that the taxpayer had been honest in his disclosures and sought advice from the ATO, even though the advice “was not very helpful”. Therefore, it held that the penalty should be remitted in full as it would be harsh in the circumstances.
(AAT Case [2012] AATA 848, Re Waldeck and FCT, AAT, Ref Nos 2012/2591-2, McCabe SM, 3 December 2012.)
[LTN 236, 5/12]