An individual taxpayer has been unsuccessful before the AAT in seeking to be released from tax debts pursuant to s340-5 of Sch 1 to the Taxation Administration Act 1953.

The taxpayer had tax debts of some $58,000 which arose because of early access to his self-managed super fund (SMSF). The AAT said it was the taxpayer’s submission that he accessed the funds to meet legal expenses associated with Family Court proceedings. The AAT heard the taxpayer’s current income consisted of Newstart payments and he was also financially supported by his father. The taxpayer also had other liabilities which exceeded his assets by at least $300,000.

The AAT said the taxpayer’s financial position was “extremely dire” and that the taxpayer himself recognised that he was experiencing “pre-existing financial stress” prior to incurring the tax liabilities.

It said the financial hardship he was experiencing was independent of the requirement to satisfy his tax liabilities. Accordingly, the AAT held the taxpayer had not discharged the onus of proving that he would suffer serious hardship if he was required to pay the relevant tax debts.

Even if the taxpayer had established he would suffer serious hardship, the AAT did not consider the case warranted the discretion to release him from his tax debts.

(Re XLPZ and FCT [2016] AATA 466, AAT, Ref Nos: 2015/3474-75, Humphries DP, 1 July 2016.)