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ROLLASON v FC of T

Members:
J Block DP

Tribunal:
Administrative Appeals Tribunal

MEDIA NEUTRAL CITATION: [2006] AATA 962

Decision date: 13 November 2006

J Block (Deputy President)

Part A - introduction and background

1. On 14 March 2005, the Applicant applied to the Respondent for his release from a substantial tax liability; that application was refused by the Respondent; and in respect of that refusal dated 17 June 2005, the Applicant objected; his objection was disallowed by notice dated 19 October 2005 (T10 pp42-43). It is the disallowance of his objection (in respect of which the Applicant seeks review) which is the objection decision in this matter.

2. The Applicant was represented by Mr Christopher Catt of counsel, instructed by Mr N. Milne of McDonell, Milne & Toltz, solicitors, and the Respondent was represented by Mr Justin Smith of counsel instructed by Mr. Malcolm Chow of the ATO Legal Services Branch.

3. The Tribunal had before it the T documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 and it admitted into evidence exhibits as follows:

Exhibit A1: A statement dated 19 July 2006 by the Applicant;
Exhibit A2: Annexure A to an affidavit by Helen Randall and which is referable to certain Supreme Court proceedings (referred to more fully later in these reasons);
Exhibit A3: A batch of correspondence with the Child Support Agency in respect of the Applicant's maintenance obligations for the two children of his second marriage;
Exhibit A4: A letter to the Applicant by Ferrier Hodgson dated the 15 of September 2005;
Exhibit A5: A letter to the Applicant by Ferrier Hodgson dated 8 March 2006;
Exhibit R1: An affidavit dated 24 July 2006 by Ms Inez Mannino;
Exhibit R2: A document entitled "Narrative Details" and which contains certain notes made by the Respondent.;
Exhibit R3: A printout from domain.com.au of rental properties in the suburb in Sydney in which the Applicant resides; and
Exhibit R4: A printout from the domain.com.au as to rental properties in the eastern suburbs of Sydney.

4. 

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In his application for release dated 10 March 2005 the Applicant included an Expenditure Summary (T5 - 22) which reads as follows:

"Expenditure Summary
HOUSEHOLD EXPENDITURE FORTNIGHTLY
Circle one Mortgage Rent Board $ 1,000
Food and household supplies $ 400
Household repairs/maintenance $ 120
Electricity/gas $ 65
Telephone $ 48
Water/land rates $ 0
Clothing $ 60
Motor vehicle registration and insurance $ 38
Motor vehicle repairs/maintenance/petrol and oil $ 150
Vehicle leasing charges $ 0
Fares $ 45
School fees and other educational expenses $ 0
Household insurance $ 0
Health insurance $ 0
Life insurance $ 0
Superannuation $ 0
Medical/dental $ 0
Child support/maintenance $ 350
Child care $ 120
Hire purchase payments $ 0
Loan repayments $ 150
Entertainment $ 300
Other (specify) [illegible handwriting] $ 750
Total $ 0
Income tax liability [handwritten]   3,307
GST liability [handwritten]   600
    5,803"

5. It may be noted that this matter was originally heard on 24 July 2006; that day proved to be insufficient in order to complete the matter; a further (short) hearing took place on 1 August 2006 and after which the matter was postponed to 27 October 2006 when closing submissions were taken. Exhibits A3 and A4 were tendered on 1 August 2006; Mr Smith on that date reserved his rights in respect of Exhibit A3 but subsequently and when the hearing was concluded on 27 October 2006 consented to the tender being accepted. Exhibit A5 was tendered on 27 October 2006. Exhibits A3, A4 and A5 were all tendered after the completion of the Applicant's evidence. All other exhibits were tendered on 24 July 2006.

6. Oral evidence at some considerable length was given by the Applicant and it is necessary for me to deal with it in some detail. One important development took place between 24 July 2006 and 27 October 2006. The Tribunal was informed on 24 July 2006 that there were

ATC 2532

then pending tax debt recovery proceedings in the Supreme Court by the Respondent against the Applicant. Mr. Catt informed the Tribunal that the Applicant had not then decided whether or not to contest the recovery proceedings, which had been scheduled to be heard in the Supreme Court by His Honour Gzell J on the 8th September 2006. That action was in the event settled; the Tribunal was informed that in respect of the claim (amounting to approximately $360,000), judgment was entered by consent against the Applicant in an amount of $328,801.21. Mr Catt informed the Tribunal that of that amount an amount of approximately $75,000 was referable to GST. It is important to note that section 340-10 contained in schedule 1 to the Taxation Administration Act 1953 ("TAA") has the effect that although the Tribunal has powers of review in respect of certain taxes, those powers of review do not extend to GST. Sections 340-5 (as to the power of release in case of serious hardship) and 340-10 of Schedule 1 to TAA read as follows:

"…

  • 340-5 Release from particular liabilities in cases of serious hardship

    • Applying for release

    • (1) You may apply to the Commissioner to release you, in whole or in part, from a liability of yours if section 340-10 applies to the liability.
    • (2) The application must be in the * approved form.

    • Release by the Commissioner

    • (3) The Commissioner may release you, in whole or in part, from the liability if you are a person specified in the column headed 'Person' of the following table and the condition specified in the column headed 'Condition' of the table is satisfied:
      Person and condition
      Item Person Condition
      1. an * individual you would suffer serious hardship if you were required to satisfy the liability
      2. A * trustee of the estate of a deceased person the dependants of the deceased person would suffer serious hardship if you were required to satisfy the liability
           

    • Effect of the Commissioner's decision

    • (4) If the Commissioner:
      • (a) refuses to release you in whole from the liability; or
      • (b) releases you in part from the liability;

      • nothing in this section prevents you from making a further application or applications under subsection (1) in relation to the liability.

    • Notification of the Commissioner's decision

    • (5) The Commissioner must notify you in writing of the Commissioner's decision within 28 days after making the decision.
    • (6) A failure to comply with subsection (5) does not affect the validity of the Commissioner's decision.

    • Objections against the Commissioner's decision

    • (7) If you are dissatisfied with the Commissioner's decision, you may object against the decision in the manner set out in Part IVC.

      ATC 2533

  • 340-10 Liabilities to which this section applies
    • (1) This section applies to a liability if it is a liability of the following kind:
      • (a) fringe benefits tax;
      • (b) an instalment of fringe benefits tax;
      • (c) Medicare levy;
      • (d) Medicare levy surcharge;
      • (e) a *PAYG instalment.
    • (2) This section also applies to a liability if it is a liability that is specified in the column headed 'Liabilities' of the following table and the liability is a liability under a provision or provisions of an Act specified in the column headed 'Provision(s)' of the table:
      Liabilities and provision(s)
      Item Liabilities Provision(s)
      1 Additional tax (a) section 93 or 112B or Part VIII of the Fringe Benefits Tax Assessment Act 1986; or
      (b) section 163B or subsection 221YDB(1), (1AAA), (1AA) or (1ABA) or Part VII of the Income Tax Assessment Act 1936
      2 administrative penalty in relation to
      fringe benefits tax or *tax      		 Part 4-25 in this Schedule
      3 general interest charge (a)section 163AA or 170AA, subsection 204(3) or former subsection 221AZMAA(1), 221AZP(1), 221YD(3) or 221YDB(3) of the Income Tax Assessment Act 1936; or
      (b) section 45-80 or 45-620 or subsection 45-230(2), 45-232(2), 45-235(2) or 45-235(3) in this Schedule
      3A shortfall interest charge Division 280 in this Schedule
      4 interest section 102AAM of the Income Tax Assessment Act 1936
      5 penalty section 163A of the Income Tax Assessment Act 1936
      6 *tax (a)section 128B of the Income Tax Assessment Act 1936; or
      (b) section 128V of the Income Tax Assessment Act 1936; or
      (c) section 4-1 of the Income Tax Assessment Act 1997

…"

7. Ms Mannino (Exhibit R1) was not required for cross-examination and accordingly her statement can be accepted. Clauses 4, 5, 6 and 7 of Exhibit R1 read as follows:

  • "4. From reviewing the Records, the Applicant owes the amount totalling

    ATC 2534

    $600,609.84     as at 21 July 2006 to the Commonwealth of Australia and payable to the Respondent. This consists of the following:
    Type of Debt Amount
    Income Tax liabilities  
    Income Tax for the year ended 30 June 2001 $36,637.27
    Income Tax for the year ended 30 June 2004 $42,183.37
    General interest charge ('GIC') on the Income Tax liabilities for the years ended 30 June 2001 and 30 June 2004 $47,917.20
    Recovery Costs pursuant to Supreme Court Statement of Liquidated Claim filed on 5 August 2004 $659
    Subtotal $127,396.84
       
    Pay As You Go Instalments ('ITI') and GST liabilities - Integrated client account  
    ITI for the June 2001 quarter $8,276
    ITI for the September 2001 quarter $8,575
    ITI for the December 2001 quarter $23,351
    ITI for the March 2002 quarter $15,963
    ITI for the June 2002 quarter $15,963
    ITI for the September 2002 quarter $15,784
    ITI for the December 2002 quarter $15,784
    ITI for the March 2003 quarter $15,784
    ITI for the June 2003 quarter $15,784
    ITI for the September 2003 quarter $15,641
    ITI for the September 2004 quarter $15,023
    ITI for the December 2004 quarter $15,023
    ITI for the March 2005 quarter $15,023
    ITI for the June 2005 quarter $15,250
    ITI for the September 2005 quarter $14,716
    ITI for the December 2005 quarter $14,716
    ITI for the March 2006 quarter $14,439
    Total GIC calculated to 21 July 2006 relating to ITI liabilities $98,182.62
    Subtotal $353,277.62
       
    Goods and Services Tax ('GST') for the December 2000 quarter $3,686
    GST for the March 2001 quarter $3,664
    GST for the June 2001 quarter $3,635
    GST for the September 2001 quarter $3,680
    GST for the December 2001 quarter $3,625
    GST for the March 2002 quarter $3,640
    GST for the June 2002 quarter $3,630

    ATC 2535

    GST for the September 2002 quarter    		 $3,608
    GST for the December 2002 quarter $3,640
    GST for the March 2003 quarter $3,660
    GST for the June 2003 quarter $3,620
    GST for the September 2003 quarter $3,590
    GST for the December 2003 quarter $3,630
    GST for the March 2004 quarter $3,595
    GST for the June 2004 quarter $3,620
    GST for the September 2004 quarter $3,620
    GST for the December 2004 quarter $3,610
    GST for the March 2005 quarter $3,630
    GST for the June 2005 quarter $3,580
    GST for the September 2005 quarter $3,550
    GST for the December 2005 quarter $3,520
    GST for the March 2006 quarter $3,530
    Total GIC calculated to 21 July 2006 relating to GST liabilities $35,516.26
    Subtotal $115,079.26
       
    Failure to Lodge on Time $3,740
    Total GIC calculated to 21 July 2006 relating to Failure to Lodge on Time liabilities $1,116.12
    Subtotal $4,856.12
       
      $127,396.84
      $353,277.62
      $115,079.26
      $4,856.12
    TOTAL $600,609.84
  • 5. Annexed hereto and marked 'PS-1' is a copy of the Income Tax Account and the Integrated Client Account.
  • 6. Of the total of $600,609.84, the amount not eligible for release is $120,594.38, being the GST liabilities, Failure to Lodge on Time, the GIC accruing on these outstanding liabilities and the Recovery Costs.
  • 7. Total amount not eligible for release under Supreme Court of New South Wales proceedings number 4352 of 2004 is $74, 411.68, being the GST liabilities, Failure to Lodge on Time, the SIC accruing on these outstanding liabilities and the Recovery Costs.

…"

8. Mr Catt advised the Tribunal, during the course of closing submissions on 27 October 2006, that in 2005 the amount which could not be released was $74 958.46; he advised the Tribunal also that the amount which is now non-releasable is $115,079. When referring to the amount of $115,079, Mr Catt did not specify the precise date up to which that amount was calculated. It must be remembered that although in respect of the settlement a reduction was allowed, the figures in exhibit R1 were those as at 24 July 2006; since that time the

ATC 2536

aggregate amount owing will have altered and so as (presumably) to reduce by the settlement reduction allowed but so as to increase the aggregate debt owing by interest and other amounts falling due thereafter. For the purposes of this decision, of the Tribunal accepts that the current amount of the debt is approximately $600,000 and of that amount approximately $115,000 (or perhaps a somewhat higher amount) cannot be released by this Tribunal.

9. The settlement of the Supreme Court proceedings is relevant for another reason. In respect of the amount claimed in those proceedings, an amount of $328,801.21 became, notwithstanding that judgment was entered by consent, a judgment of the Supreme Court. The Respondent contends that a judgment (even though it arises from a tax debt merged into a judgment debt) is not, having regard to the decision of the High Court in Chamberlain's case, (the full citation for which appears later in this decision), within section 340-10 of schedule 1 to TAA and thus not capable of being released. This aspect will be reverted to later in the reasons.

10. There is another question which was raised at a comparatively late stage but which is relevant. The Applicant applied for the release of his debt in March 2005 at a time when his debt was considerably less than it subsequently became. The Respondent refused to accede to the Applicant's release application; his objection against that decision was disallowed and it is that objection decision which constitutes the objection decision before the Tribunal. On 27 October 2006 there was, during closing submissions, discussion as to whether the Tribunal has the power to remit the debt owing as at March 2005 (and to which the objection decision under review is referable) or by contrast, the debt currently owing (and in either case excluding the GST element). Time was allowed for submissions, and a submission was subsequently received. This aspect too will be referred to later in this decision.

Part B - the Applicant's position; opening remarks by Mr Catt

11. Mr Catt in brief opening remarks (some, but not all of which are referred to in this clause 11) advised the Tribunal that:

  • (a) The Applicant is a solicitor who was admitted in 1971. As a solicitor he practices in the main in the area of shareholder and property litigation.
  • (b) The Applicant lives alone having been divorced twice. He pays maintenance for the two children of his second marriage.
  • (c) In 1998 the Applicant was indebted to the Respondent is an amount of $620,000; the Applicant sought relief from the Taxation Relief Board which will released him as to $522,000 leaving a balance owing of $100,000.
  • (d) The Applicant was made bankrupt on his own petition and Max Donnelly ("the Trustee") was appointed as his trustee. A failure to pay compulsory contributions to the Trustee resulted in the period of his bankruptcy being extended from 3 years to 8 years; his release will thus occur in January 2007.
  • (e) The Law Society did not in consequence of the Applicant's bankruptcy revoke his practising certificate.
  • (f) The Applicant works for Lane & Lane for a fixed consultancy fee of $3300 per week, which is inclusive of GST. The Applicant is not an employee of Lane & Lane.

Part C - the evidence of the Applicant; evidence in chief

12. The Applicant commenced by confirming that Exhibit A1 is true and correct. In examination in chief Mr Catt led the Applicant through his witness statement. The word "lead" is particularly relevant in this context because, as a reference to the transcript (TS12 to TS19) will indicate, many questions were put in what was distinctly leading fashion, thus enabling the Applicant to answer with a simple "yes".

13. For reasons set out later in this decision, I think it desirable in dealing with the Applicant's evidence, and particularly his evidence in cross-examination to include extracts from the transcript; in no other way can the nature of the Applicant's evidence be fully demonstrated.

14. In respect of the amount of $100,000 which remained outstanding in 1999, I refer to the following extract from TS12 and 13 as follows:

"…

ATC 2537

MR KATT: Right. Are you John Cameron Rollason of 20A/3 Darling Point Road, Edgecliff?---I am.

Are you the applicant in this matter?---I am.

Are you the defendant in the matter before the Supreme Court instigated by the Commissioner of Taxation?---I am.

Were you declared bankrupt on 1 February 1999?---Yes.

Are you still a bankrupt?---Yes.

How did your bankruptcy arise?---It arose principally from an accumulation of debts following the significant or massive decline in income from my previous form, Gadens, and in circumstances where I have been found to be liable for income tax on moneys I have never been - I've never received and all consequent upon the recession of the early '90s and then accompanied by a significant amount of expenses relating to a divorce whereby I basically was left without assets that had to be applied pursuant to the terms of the divorce and in conjunction with the support of the then young children.

You are released of your debt to the extent of $522,000?---Yes.

You were required to pay $100,000?---Yes.

Were you able to pay that amount?---I wasn't able to raise funds to pay that amount. I hoped my ex wife who had then sold the house that she had acquired during the divorce would, from the proceeds of that, agreed to make it available to me because the terms of the divorce had overlooked what would happen when she sold it. She declined to do it and I was unable to pay that sum and at a time when, as a consequence of proceedings by the commissioner and the issue of a bankruptcy notice by him I was confronted with a bankrupt through the court at the suit of the Commissioner, I was advised by accountants to make my own application which happened two days before, otherwise I would have been bankrupted by the Commissioner.

…"

15. As to why the Applicant requires a unit in Edgecliff, and in relation to his entertainment expenses I refer to TS17 and 18:

"…

I would like to take you to your application for release and I particularly take you to page T522 towards the end of that document?---Yes.

This is the schedule of your expenses on a fortnightly basis?---Yes.

You've shown rent expense of $1000 per fortnight?---Yes.

Can you please explain to Deputy President Block why you consider it necessary to rent a unit at Edgecliff?---When I rented it I had one son still living with me who was completing his course at university and it was approximate - he was a full time student and it was approximate to the university. It's also adjacent to the station from which I can access my office in Martin Place. At present my son lives in the district and he shares a flat in Double Bay and so it's the community in which I live in that sense. It's also the area from which I source most of my new clients or new work and where people I know live. The proximity to the station is very important to me from the point of view that I have - because of emphysema I have a limited - my ability to walk any significant distance is very limited and it also means that the cost of public transport - cost of transport to and from the office is very small. Whilst the flat is old it's clean and conveniently located.

THE D.PRESIDENT: Your son is at university, which university is that?---UTS.

When did he finish at UTS?---I'm sorry, where?

When?---When - he finished 2004, end of, middle of 2005.

MR KATT: Mr Rollason, you've shown entertainment expenses of $300 per fortnight?---Yes.

And will you please explain to Deputy President Block why you consider it necessary to pay these amounts?---The area in which I practise is one which is easy to sustain in a large firm where you have access to large corporate clients. Lane and Lane is not a large corporate firm, it is a small, principally, property firm with a small business commercial practice. For me to

ATC 2538

attract the sort of original work and the client base that I need to sustain my presence there I need to be able to be out there to meet people who may have the sorts of problems that I am able to advise on. And the best way of meeting people like that is to entertain in the sense of lunch or other sort of small events where you meet people that can hopefully produce more legal work. That's probably a reasonably conservative estimate of the true expense. It would be better if I could probably do more marketing, which is what it is. But that's basically what I am able to do.

Further down that schedule you show loan repayments of $150, is that correct?---No, at the time I did that statement there was some residual bank small debt which is now ultimately been paid out so that's no longer being paid.

And the amount shown as other payment to trustee which is recorded at $750, is that correct?---Yes. No, sorry, no that, in the circumstances I previously explained that was increased from that figure in about July 2005 to what was then about $2,250 which is now about 15 - $15 to $1,600 I suppose per fortnight.

So that was the figure that you previously referred to of $3,570.11 per month?---Yes.

So approximately half of that would be in the order of $1,750?---Yes.

Do you have any assets which aren't shown on your application?---I have some money on deposit in the bank, $20,000. I have a current balance in a current account, a cheque account of about $8,000.

THE D.PRESIDENT: I have money on deposit with the bank of?---$20,000. I have a current credit balance in my cheque account of about $8,000. I have some shares in an unlisted public company which were bought at $5,000, the value of which I don't know.

You say unlisted public company?---Yes.

…"

16. The Applicant confirmed that he has an amount on deposit with a bank (Commonwealth Bank of Australia) of $20,000 and a credit balance in his current account with the same bank of $8,000 with the bank. He also purchased shares in Australian Technology Innovation Fund at a cost of $5,000; the current value at that asset is not known.

17. The Applicant confirmed that he required a practising certificate because he appears in court. He said also (TS19) that, in the event of a second bankruptcy, he might not be allowed to practise as a solicitor.

Part D - the evidence of the Applicant; cross-examination

18. The Applicant agreed that the onus is on him in order to establish that he should be granted a release. He said also that as a litigation lawyer he is experienced in the preparation of evidence and documents for court.

19. As regards the application for release the cross-examination revealed that it was in a number of important respects incomplete. In particular the form called for documentation in support of the deductions claimed. No such documentation was furnished. See TS24 and TS25 as follows:

"When you read that application for release at the time of completing it you were aware that it was asking for you to disclose as fully as possible your asset and liability position as well as your income and outgoing position?---Yes.

And you say that you've done that?---Yes.

That you did that when you filled out the application for release?---Yes.

Would you accept then that coming before the Tribunal it is incumbent upon you to some respect also to disclose fully your asset and liability position as well as your outgoings and income position?---Yes.

You say that you've done that as fully as possible, do you?---Yes.

You haven't produced in these proceedings any document from a source other than under your own hand, is that correct?---Well annexed to my statement there is material from your office and from, I understand there's also material from the trustee in which has been read or relied upon by Mr Katt.

With those exceptions there's nothing else?---No.

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You haven't produced any document to support any of your asset or liability statements made in your application for release?---No.

Nor indeed in respect of, with one exception, the outgoing position, as shown in your application for release?---No.

You're not saying, are you, that there are no documents that are available to support your outgoing position?---No.

You just haven't bothered to do it, is that right?---I've just prepared what I was advised to prepare. I did engage external lawyers based on the adage of having a fool for a lawyer if you act for yourself, so.

One of those lawyers is Mr Milne, is that right?---Mr Milne has been my adviser, he's been the solicitor on the record.

You're aware aren't you that Mr Milne has some experience in release matters?

…"

The Applicant did not provide any documents as to his assets.

20. The Applicant received payments from Lane & Lane inclusively of GST. The Applicant said that he furnished BAS statements but that he did not ever pay the GST portion to the Respondent. See TS26 and following pages as follows:

"…

MR SMITH: Can you turn back to page number T5, 24. It's the investments and savings page?---Yes.

The only investments and savings that you note there, tell me if I'm wrong, is a Commonwealth Bank account with a balance of $2000?---Yes, I've no doubt that I would be able to produce a bank statement showing that was the balance on the day that I signed it.

Today you gave evidence that you have on deposit in the same bank, Commonwealth Bank of Australia $20,000 in one account?---Yes.

And 8000 in another?---No, that account is the same account as the $8000.

I don't mean to confuse you. I mean if the 8000 is an account different to that in which the $20,000?---Yes, the 20,000 is just sitting in a deposit account.

Yes, but you now have two amounts on deposit in the Commonwealth Bank of Australia?---No, I have one amount on deposit and the 8000 is simply the present balance of the same account as is shown here.

Your total amount in the bank is $28,000, is that right?---Yes, give or take a few.

Shown here as $2000?---But at the time I signed this it was $2000.

Does that mean that in the time since March of 2005 you have accumulated $26,000, roughly $26,000 in cash and put it into the bank?---Yes, plus the figure of the $5000 which I purchased those shares with. Yes, all I've done is simply put money in the bank or paid my trustee.

So $31,000 that you have accumulated, 5000 of which you've spent on shares?---Yes.

26,000 of which you've put into a bank?---Yes.

…

MR SMITH: During that time, Mr Rollason, you have yourself paid how much to the Commissioner of Taxation?---I'm not sure what the time tables are. I don't think I've paid anything directly to the Commissioner. I think I've paid to the trustee where the money has gone.

Not all of it, Mr Rollason, has it?---Your question was, what have I paid the Commissioner?

Yes?---Yes and what I said is I don't think that in that time frame and I might just check, no, I haven't paid since that date, no, I haven't paid anything to the Commissioner, no.

THE D.PRESIDENT: Not even the GST?---No.

MR SMITH: You have no excuse, do you, for not paying that amount of money, that is at least $31,000 to the Commissioner of Taxation over the last year and a half?---Well, no, I've always known that I'm going to have to pay whatever I've satisfied to the Commissioner. It's a question of the circumstances and the best way in which it

ATC 2540

should be paid because the application was made and the point of making the application I think is that if there is an order for release then I'll have some funds that I can pay the Commissioner or fit into a context of some sort of arrangement. I mean I was still bankrupt, I still had the fundamental problem confronting me of how to manage it and quite frankly I don't know how to manage it. I've just simply said right well I'll simply put it aside, put it in the bank, put it on deposit so that when I've got to give it to the Commissioner it will be there.

In the meantime you were being paid an amount in respect of GST on a weekly basis of about $300, is that right?---Yes.

You were aware that every time that you were paid that $300 that it wasn't yours?---Yes, well I - I from soon after that was introduced, at the time that it was first introduced I had been unable to pay it I think from about the second or whatever return and because I didn't have enough money to and so I didn't know at what stage, I hadn't worked out in my mind the best way to manage it quite frankly. That's the problem, I ---

THE D.PRESIDENT: I just want to know, from the time it was introduced I didn't know --- ?---I hadn't had the money to pay the GST on an ongoing basis and it was only from this period in late 2004, early 2005 when the sequestration order that had - not the sequestration order, the order that the tax office had made on Lane and Lane had elevated that I had been able to live other than simply on the basis of credit card debt. I simply didn't have the money to pay the GST until that time, until the money then started, I was able to put it in the bank with the view, knowing that I was going to ultimately have a hearing here or somewhere.

MR SMITH: But Mr Rollason, you paid your credit card off, didn't you?---Well, it was only $3000. It was a matter of either pay 100, I just paid it off progressively at $100 a month and it went.

What distinction do you draw between paying the bank off and paying the Commissioner off?---Well, it's just that there was a matter of a small amount of current debt there that was payable on a monthly basis and which minimum amount I paid and with time because I - I don't - I haven't been using it as a credit card, I haven't been buying things on it, it goes, disappears.

…"

21. I do not think it necessary to detail the evidence given in cross-examination by the Applicant as regards his child support obligations. It was in many respects confusing. It would appear that there was, at the time of the divorce, an order of the Family Court for maintenance of $9000 per annum, and there were also references to a "sunset" provision, the nature of which was not clear. Notwithstanding the order of the Family Court there were difficulties and correspondence with the Child Support Agency and resulting in garnishees against Lane & Lane. The Applicant said that he was not aware of the law as regards maintenance obligations and the manner in which a variation of the Family Court order might be possible. (He had said previously that he also knew nothing of tax law). Specifically as to his child support obligations and by way of example see the following extract from TS31 and 32:

"…

Which court did you apply to?---I applied to the Tribunal. There is an appeal tribunal under the same mantle as I think the Child Support Agency and that - - -

When was this?---When?

When, yes?---Again 2001, 2002.

And you asked them for what?---To return it to the figure of $9000 a year.

Couldn't you ask them to make it even less?---I could have but I - to acknowledge that I do have children and I have to make some contribution to them but the arbiter of that application returned it to the $9000 figure again for a period of a year. I then - - -

Sorry, the arbiter of that application returned it?---To the $9000 figure.

But only for a year?---Only for a year because I think there was a limit on what he

ATC 2541

can do because I don't know how the whole system works but it's my understanding that it's re-assessed on an annual basis by - on some calculation that the Child Support Agency has. In the interim my wife and I had agreed that following the expiration of that year it would be maintained at the current value of $9000. Now, the Child Support Agency for quite a while declined to accept that that agreement had been reached and kept on insisting on payment of higher figures. The whole thing was a nightmare and it took huge amount of time but ultimately they were convinced that that was the figure but until that happened there were still these notices going through Lane and Lane for figures that weren't properly payable. So I simply didn't have the money in my current account to draw a cheque to pay the GST figure is the short answer. There was also a notice from the trustee which was addressed to Lane and Lane and against which the firm also withheld payment until it had a direct discussion with the trustee and negotiated for the payment of another - of a different sum. I don't know what the ultimate details were but they're reflected in the summaries that I suppose the - I suppose are reflected in the summaries that the trustee has provided.

…"

22. As to the amount of $100,000 left outstanding in 1999 the Applicant had previously said that he hoped that his first ex-wife would pay this amount out of the sale proceeds of the house to which I have referred, but she was not prepared to do so. It became clear that the letter by the Taxation Relief Board granting the release of $522,000 also specified that the Applicant was required to make arrangements to pay the remaining amount of $100,000 in instalments. The Applicant did not in fact make any effort to effect an arrangement for payment by instalments but instead sought his own bankruptcy; see in this context TS43 and TS44 as follows:

"…

THE D.PRESIDENT: You notice that this letter, T40 says in the last paragraph, let's read it together, shall we. They let you off $500,000-odd and say $100,000 we expect you still to pay and then it says, you should now contact the debt collection agency area of the Sydney Tax Office to discuss payment of the balance of your debt?---Mm.

Did you do that?---Yes.

Right, was the import of that discussion?---My recollection is simply that they weren't prepared to enter into an arrangement for payment by instalments.

Just be careful?---Yes.

Just for once just be careful. Are you serious?---Yes.

You've just been released from 500, the Chairman has said go and see the debt collection area about paying the balance of your debt and the previous paragraph talks about instalments and you say you went to see the debt collection agency and you - discussion of payment by instalments ensued but you were unable - they weren't prepared to allow you to pay by instalments?---No.

Well what happened, who did you go and see and when?---I contacted them by telephone and I said I had obtained this release, I'm hoping to get the figure of $100,000 or to borrow money so that I can pay the $100,000 and then secure the debt.

Yes?---And they said that I had better get the debt because - - -

Did you ever go and see them and talk about instalments?---No, I - I've always, always communicated with them by telephone. There was no offer or formula put from - by them that would suggest that they would accept a payment by instalments.

Now just wait, I want to note this. But the letter itself talks about instalments. They were in effect committing themselves to allow you to or at least the hardship board were saying, come in and see the debt recovery people in order to work out the instalments. The letter says so?---Yes.

You could have walked in armed with that letter and said, this is what I can afford to pay on a per weekly or per fortnightly or per monthly basis, they would have had to discuss it with you?---They weren't - apparently not - my recollection is they were

ATC 2542

not prepared to. They saw it as an obligation to pay $100,000 and that was it.

MR SMITH: Do you have a clear recollection of that conversation, Mr Rollason?---No, that was eight, 8½ years ago.

Can I suggest to you that what in fact happened was that when you rang the Australian Taxation Office it was they who suggested instalments and you who rejected the possibility, you deny that?---Yes.

Can Mr Rollason be shown this document, just that top page, thanks. You have a look on the left hand side. I don't identify the document for the moment, there's a number 192?---Yes.

And next to it there's a date?---Yes.

Can you read the first three lines underneath that, TP?---TP rang yesterday afternoon and asked about - - -

No just to yourself for the moment, sorry?---Yes.

Now having read that, does that alter in any way your recollection of the telephone conversation that you referred to earlier?---It now reminds me of speaking to Mr Looney. I have no recollection about instalments or should we say manageable instalments. It does remind me that there was some discussion about payment at a rate that I couldn't afford.

I suggest to you that you never suggested instalments but in fact it was suggested to you, that you pay by instalments by the ATO?---I have no - as I said to you, I have no clear recollection of any conversation at that time. As to who suggested what to whom, I have read what the note says, I have no material before me which helps me in my recollection of what was said in those conversations.

…"

23. The Applicant's evidence in cross-examination indicated that he accepted that cheaper accommodation was available in either Edgecliff or in the eastern suburbs; see TS47 as follows:

"…

Well, Mr Rollason, what about the amount of rent that you pay, that's an outgoing on a regular basis?---Yes.

You pay that either weekly or monthly, have you looked around to see if you could obtain cheaper rental accommodation?---I haven't looked for a two bedroom accommodation since my son moved out, no, which I will now do because the premises are being sold.

Well, would it surprise you to know that two bedroom accommodation is readily available at $350 a week within a short distance from the city?---I don't know that. I haven't investigated it.

…

MR SMITH: Well let's assume that you do need a two bedroom house for when your son and daughter come to stay with you, would you accept that you can still obtain suitable rental accommodation close to the city for well less than $500?---I don't know. I've no - I've not investigated that. I don't know what the answer is.

Well, can I show you some documents. This document has rental accommodation advertised currently in Edgecliff and that's the suburb that you're living in, Mr Rollason?---Yes.

The suburb where you say your contacts are?---Yes.

Where your social and business contacts are?---Yes.

You see that there are a couple of units, two bedroom units available at less than $500?---Yes.

Some over $500 and at $500?---Yes.

Now, that's just in Edgecliff, Mr Rollason, there are other units available in Sydney are cheaper than that. Can I ask you to have a look at these documents?

…

MR SMITH: These similarly are advertised two bedroom units in the eastern suburbs although there might be some dispute as to whether Botany is in the eastern suburbs, we may have overlooked that and go through, Mr Rollason and tell me if you disagree with this proposition, that rental accommodation of two bedroom units is readily available in

ATC 2543

the eastern suburbs between 300 and $350 and the last several pages deal with advertisements for Rose Bay?---I see one at 300, generally there seem to be quite a few around that figure, yes.

…"

24. Just as the Child Support Agency issued garnishees against Lane & Lane, so did the Trustee issue garnishees in respect of bankruptcy contributions. As set out previously, it was the Applicant's failure to pay contributions which resulted in the period of his bankruptcy being extended from three to eight years. The Applicant's evidence in this connection was also unclear and in particular as to his relationship with the Trustee and his obligations to pay contributions. The Applicant said that he was not familiar with bankruptcy law.

25. After to the luncheon adjournment, on the first hearing day, the Applicant was cross-examined as to the expenses claimed by him; it became clear that some at least of the amounts in question were estimates only and that some were calculated at a time when there were two persons (the Applicant had his son) living in the unit in Darling Point Road. In submissions prepared in 2005 the Respondent referred to the Applicant's expense claims as follows:

"…

The only evidence of the applicant's outgoings is contained in his application for release. The applicant has produced no document to support his claimed outgoings and nothing to support the conclusion that they are reasonable beyond the mere assertion that they are incurred. Each item is considered in the following table. The relevant consideration is whether each item is reasonable in all the circumstances.

Table of expenses


Item Amount claimed (fortnight) Comment Reasonable amount
Rent $1000 Rent in the amount of $500 per week is excessive. The applicant has not explained why he needs a two bedroom flat minutes from the city and does not indicate whether or not his son pays him any board or other amount for living in the flat. $600
Food and household supplies $400 This appears excessive and is unsupported by any evidence. A reasonable amount for a single person would be less than half this amount. $200
Household repairs and maintenance $120 The applicant has not explained why he incurs any outgoings for repair a flat that he rents. Repairs are the responsibility of the landlord, not the tenant. $0
Electricity/gas $65 This amount appears excessive. It amounts to quarterly bills for each utility in excess of $200. $50

ATC 2544

Telephone		 $48 For a single person working full-time (even with a son) this amount is excessive. It equates to a quarterly bill of $312. $30
Clothing $60 No comment $60
Motor vehicle registration and insurance $38 The only comment here is that motor vehicle expenses are claimed as a deductible item against assessable income. Thus, this and the following amount ought to be deducted from the income before tax liability is calculated. $30
Motor vehicle repairs etc. $150 Same comment as above. $150
Fares $45 - $45
Child support $350 - $350
Child care $120 There is no explanation for this. The applicant's minor children do not live with him and it cannot be suggested that a 24 year old requires child care. $0
Loan repayments $150 There is no explanation for this. To take this into account is to prefer one creditor to another. $0
Entertainment $300 This does not constitute a necessity and ought to be disregarded. $0
Trustee in bankruptcy $750 This will end in February so ought no to be counted. $0
Income tax liability $2307 $2200 (based on the 2005 income tax notice of assessment). This amount is not currently being paid by the applicant. $2200
GST liability $600 This cannot come out of any income. $0
Total $6503   $3822

…"

26. In his application for relief, the Applicant reflected tax and GST as outgoings although he did not ever pay the GST and did not, except to the extent of garnishees, on Lane & Lane, pay any other amounts of tax.

27. Cross-examined further as to why he furnished BAS returns but did not pay the GST element in his receipts from Lane & Lane, the Applicant said that he could not afford to pay it. Some moneys which might have been paid in respect of GST were utilised (inter alia) to acquire the assets (bank deposits and shares in the unquoted company) to which I have referred. It was put to the Applicant that although the GST element in his payments was not trust money in any legal sense, it was nonetheless money which did not in any real sense belong to him; I refer to the following extract from TS56 and 57:

"…

You get your payment from Lane and Lane, right?---Yes.

And it comes with a little slip, it's not just a cheque which says the amount and then

ATC 2545

there's GST, now you know the GST doesn't belong to you. You're not a beginning lawyer, you're a lawyer who has been admitted for what 30-odd years yet you read the return for the GST once and once only, thus breaching the law over and over and over again. I don't understand why. You're not inexperienced, you're even a litigator so how do you explain that?---My - my mathematical capabilities and financial capabilities are low.

That's your answer to my question, you don't send in a return because your mathematical abilities are low?---I hadn't finished. I have no, my understanding of revenue law and taxation law, it's always been a mystery to me, it's a black - or a blind spot that I have, I know that and at the end of the day what with the other demands being made on my limited income I simply did not have the money in an account to pay it progressively and had understood that as with the other assessments I've had from the tax office it was all basically a big black hole, didn't matter what I did or what I poured in I was going to get assessments I didn't understand and I just didn't, quite frankly, understand the priorities of GST as opposed to any other revenue measure.

You didn't?---No.

…"

Part E - analysis of the evidence

28. The Applicant has been a solicitor since 1971. He was for a number of years a partner in Gadens and he is a consultant to Lane & Lane and from whom he receives a fixed sum inclusive of GST of $162,000 per annum. The Applicant said that although he devotes most of his time to Lane & Lane he does have some other minimal services income, although he did not specify any amount or source. In his application for relief the Applicant reflected $150,000 as the amount which he would derive in the ensuing year; he did not reflect any additional amount and in respect of earnings from any other source… Specifically and in answer to a request that he provide an estimate of his total income for the next 12 month period he answered (in his application for relief) "$150,000". It seems to the Tribunal to be very possible and even likely that the Applicant is in fact an employee of Lane & Lane but that for tax reasons he prefers to be described as an independent consultant. This has the double advantage to him that in the first place PAYE is not deducted and in the second place GST is received in addition to his salary.

29. From the time when he became bankrupt in 1999 (on his own petition) the Applicant has never (except under garnishees) made any payments of tax. He said, as has been noted, that he furnished BAS statements reflecting the GST but did not make any payments. The Tribunal suggested to him that although it could not be said that the GST component constituted trust money it was nevertheless earmarked for payment to the Respondent and that his failure to do so was surprising; as I have indicated the Applicant said that he did not pay GST because he could not afford to do so.

30. Given that Lane & Lane has been the recipient of a number of garnishees by the Trustee, the Child Support Agency and the Respondent, why then does it retain his services? It seems reasonable to infer that this is so because he is a valuable member of the firm. He is an experienced lawyer, and having regard to his reference to his marketing efforts, probably something of a "rainmaker"; by this is meant of course that he is able to introduce work into the firm. The Applicant's evidence that he knows nothing of bankruptcy law, tax law or the law in respect of child support is difficult to accept at face value. It must be remembered that he is been in practice in a senior position for a long time; moreover involved as he is in litigation he would know and have access, in case of need, to suitable members of the bar.

31. As I have said, I do not know how the Applicant came to be in financial difficulties in the first place and in particular how when a partner at Gadens he became liable for tax on income he did not in fact derive. But that is in the past. In 1999 he obtained relief in an amount of $522,000 on the basis that he was to arrange to pay the balance of $100,000 in instalments. He made no attempt to arrange for instalments and instead brought a petition for his own bankruptcy. He said that the Respondent would have bankrupted him if he had not done so himself but that is by no means certain; bankruptcy was of advantage to him but

ATC 2546

not his creditors. It is very probable that in respect of his expenses there is some considerable room for economy; he could as just one example obtain cheaper accommodation; it would seem that he can maintain his standard of living only if he does not pay tax.

32. The careless manner in which his relief application was prepared is disturbing; a lawyer of his experience should have known better. He said that he was advised in this respect by Mr Milne who has himself been the recipient of relief. It is difficult to understand why the application was not properly prepared, and in particular omitted the vouchers which in its terms were required.

33. Perhaps the most disturbing feature of all is the manner in which the Applicant treated his GST obligations. He rendered returns but did not make any payments. Such conduct would be reprehensible in an uneducated man; it is not acceptable from someone in the position of the Applicant; it is surely incumbent on solicitors (and particularly senior solicitors) to set an example. He said that he acquired the assets to which I have referred so that he would have something with which to negotiate with the Respondent. That was not a valid reason for failing to honour his GST obligations.

34. It is abundantly clear to me that the Applicant's current difficulties are of his own making and that he has been remiss in respect of his tax obligations. The, Respondent contended (accurately) that the Applicant has treated his tax obligations with disdain.

35. The Applicant said in evidence (as noted previously) that he fears that if he is again made bankrupt he may not retain his practising certificate. There was no Law Society evidence to this (or any other) effect and in the absence of dishonest conduct, it may be that this is not a realistic fear. Even if he does lose his certificate, which appears to be unlikely, he would presumably still be employable. Mr Catt said that he appears in court and in particular in directions hearings. Assuming that is so, another member of the firm could probably fulfil this function.

36. At the very core of this matter is the fact that the Tribunal cannot remit the GST element. Assuming that it is indeed $115,000, Mr Catt said that the Applicant might be able to make payment by instalments over a long period. Mr Smith contended that on the figures furnished by Mr. Catt in this particular context, the period would, assuming always that payments were indeed made, be very long indeed, and certainly in excess of 3 years. Mr Smith pointed out that the debt is constantly increasing having regard inter alia to GIC. But an even more salient factor is that the Respondent is entitled to doubt the validity of promises made by the Applicant in this connection. Going back to 1999, he was released of $522,000 on the basis that the balance of $100,000 would be paid in instalments; the Applicant responded by presenting a petition for his own bankruptcy. In the absence of real evidence it is not possible to accept that the Applicant had any real belief that his first ex-wife would pay the amount of $100,000 or even that he asked her to do so; there was also no evidence as to any other attempted borrowing from any other source. In the period which has ensued since he became bankrupt, the Applicant has never made any tax payment voluntarily. The fact that garnishees were issued indicates that he was also at times in default as to his obligations in respect of child support and bankruptcy contributions.

37. The Respondent's case then is that the grant to the Applicant of relief as sought by him (and even if he is granted relief for all amounts possible), the non-releasable amount is such that he will inevitably go back into bankruptcy and in all probability on his own petition. I agree that such a course of action is very likely and probably inevitable. The Respondent contends that to grant relief would be an exercise in futility.

38. In conclusion as to the Applicant's evidence, it will be clear that, as I have indicated, I did not find it impressive. The Applicant's own evidence that he retained GST amounts because he needed them tells its own story. The Applicant appears to believe that his own needs take precedence over his obligations.

Part F - Chamberlain v Deputy Federal Commissioner of Taxation (1998) 164 CLR 502 ("Chamberlain")

39. Although the result may be harsh I am of the view that the judgment of the High Court in Chamberlain has the effect that the judgment debt is indeed a debt which falls outside the relieving provisions of section 340-10. That

ATC 2547

judgment appears to me to make it clear that when a tax debt is merged into a judgment debt it is the latter which is the relevant debt. I refer in this context to the following passage from the judgment:

"…

All this may be accepted for the purposes of the present appeal but it has little to do with the question at issue. This is not a situation in which all that is involved is the conduct of the respondent or indeed the operation of an Act which imposes liability for income tax and provides the means by which that tax may be assessed and recovered. The point of the present appeal is that the respondent brought an action against the appellant and recovered judgment against him. He obtained a judgment of the Court in which the cause of action upon which he relied merged, thereby destroying its independent existence so long as that judgment stood. And, so long as that judgment stands, it is not competent for the respondent to bring further proceedings in respect of that same cause of action. It is no answer to say that the Court might, if appropriate, stay the second action as an abuse of process. The impediment goes deeper than that; res judicata may sustain a plea of abuse of process but in that case the appropriate remedy is to strike out the later action:
Greenhalgh v. Mallard (1947) 2 All E.R. 255 at p. 257;
Dallal v. Bank Mellat (1986) Q.B. 441 at pp. 451-454. So long as the respondent chooses, as he does, to take no step to set aside the judgment and to raise no issue in the second action as to the circumstances in which that judgment was obtained, he must accept the consequences of res judicata. There is nothing in the Act or arising from the position of the respondent as a public officer that precludes the operation of that doctrine. The matter is not one for the discretion of the Court; by operation of law the cause of action relied upon by the respondent has ceased to exist.

…"

40. It follows then that assuming that this view is correct I do not have the power to relieve the Applicant of the judgment debt. If one adds that amount to the current GST element, which I also cannot relieve, the futility argument by the Respondent becomes all the more cogent.

41. I propose nevertheless to proceed on the basis that this view may not be correct and on the basis that despite Chamberlain, section 340-10 does not prevent me from granting relief from the judgment debt.

Part G - the question of whether relief can be given in relation to the current debt

42. In written submissions furnished after 27 October 2006 and as contemplated earlier in these reasons the Respondent contended that although there is an argument in favour of the proposition that the Tribunal has jurisdiction in relation to the objection decision under review and thus only in relation to tax due at the time when the application for relief was made, there is also an argument in favour of the proposition that the Tribunal has power to grant relief in relation to the debt due at this date. The Respondent indeed contends that the latter argument is to be preferred; his argument is based upon his perception of the legislative intention. I do not think it necessary to deal with this issue in detail. Suffice it to say that while I accept that there is merit in the Respondent's argument I also think that there is merit in the contrary view. Where an objection relates to a particular tax year the Tribunal has jurisdiction in relation to that tax year and no others. The Applicant in this matter sought relief in relation to tax due at a particular time and not in respect of taxes falling due thereafter. My own view is that it is at least arguable that the jurisdiction of this Tribunal is confined to the tax owing and in respect of which relief was sought. However I consider that the Respondent having in effect conceded otherwise, I should proceed on the basis that the Respondent's view is correct; it follows in other words that I intend to proceed on the assumption that I do have power to remit tax debts which arose after the relief application, excluding of course GST, although as will be seen the issue is more academic than real.

Part H - the case law generally

43. The term "serious hardship" is not defined in TAA. In
Powell v Evreniades (1989) 21 FCR 252, Hill J considered the term as used in section 265 of the Income Tax Assessment Act 1936. His Honour observed, at 258:

ATC 2548

"…

There is no definition in section 265 of what is meant by "serious hardship" nor would one expect there to be. Each of the words in the phrase is an ordinary English word having a well understood meaning. The context in which the word appears makes it clear that the relief board is to consider whether the exaction of the full amount of tax would involve the dependants of a deceased taxpayer [the individuals concerned in that case] in a financial difficulty which in all the circumstances can be said to be serious. The financial difficulty will be such that the dependants will be in significant need warranting action by the relief board to relieve their condition.

…"

See also in this context
Van Grieken v Veilands (1991) 21 ATR 1639 at 1644 per Gummow J..

44. There have been two recent judgments of the Federal Court and in which relief has been granted to the taxpayers concerned; I refer in this context to
Commissioner of Taxation v A Taxpayer 2006 ATC 4393; [2006] FCA 888 and
Commissioner of Taxation v Milne 2006 ATC 4503; [2006] FCA 1005. In each of those cases the taxpayer was able to establish both serious hardship coupled with the fact that the hardship arose from misfortune for which he was not responsible. (Milne in fact is the solicitor to the Applicant in this matter). Both cases are in my view distinguishable since in this case the hardship was in fact attributable to the conduct of the Applicant himself.

45. It is clear enough that the relief in question is discretionary in nature; as to the manner in which a discretionary power of this nature should be exercised, one of the cases most often cited is
FC of T v. Swift (1989) 89 ATC 5101 which involved discretionary powers in the Taxation (Unpaid Company Tax) Assessment Act 1982. French J said at 5116:

"…

Instead of endeavouring to spell out the circumstances in which burdens imposed by the legislation might be lifted, the Parliament has provided for a dispensation that is capable of exercise by reference to the widest range of factors. In this context, the scope and purpose of the Act can be seen as the collection of company tax subject to a dispensing power. The dispensing power is incidental and ancillary to the primary object of the legislation. On the spectrum of cases in which it could conceivably be exercised, there will be a threshold beyond which it would defeat the primary object of the legislation".

…"

46. I refer also in the same context to
Giris Pty Ltd v FCT (1968) 119 CLR 365 where the High Court considered a dispensing discretion in the income tax legislation; Menzies J said at 381:

"…

The enactment of such a provision can only be regarded as an acknowledgment by the legislature of its inability to make laws laying down prospectively what will give rise to a particular taxation liability. It leaves, as a problem for the Commissioner to decide, retrospectively and in the light of what has happened, whether the particular provision should not apply to a particular trust estate in respect of a year that has passed.

…"

47. In
Re Wilson and Minister for Territories (1985) 7 ALD 225, Deputy President Hall said at paragraph 24 of the "relevant considerations":

"…

The considerations that will be relevant to the proper exercise of the discretion whether or not to grant remission when undue hardship is established will vary from case to case. However, in my view, relevant considerations are likely to include the circumstances out of which the hardship arose; whether those circumstances were within the capacity of the applicant to have foreseen and controlled; whether the applicant has over-committed himself financially; whether the applicant or any of his dependants has suffered serious illness or accident involving irrevocable financial loss to the applicant; whether the applicant has been in regular employment; whether the circumstances of the hardship are likely to be of a temporary or recurring nature; and whether a decision to remit the rates would,

ATC 2549

as a matter of administrative justice and fairness be appropriate having regard to the fact that ratepayers, other than pensioners, are normally obliged to pay their rates in full …"

48. And in the area of case law, and perhaps most relevantly of all, in
Corlette v Mackenzie & Ors (1996) 62 FCR 597 at 598, Wilcox J said:

"…

It would be extremely odd if a taxpayer who was the author of his or her misfortunes, through imprudent or extravagant expenditure, was entitled, as a matter of right, to a release of unpaid income tax.

…"

49. Other cases, some decided by this Tribunal, were cited but I do not think it necessary to refer to them.

Part I - conclusion

50. In A Taxpayer (supra) Stone J referred in clause 15 of her judgment to the Respondent's Receivables Policy which reflects IT2440 and in particular its provisions as regards what is meant by serious hardship. The Respondent in his written submissions dealt in some detail with a number of relevant tests and his views as to each of them. I do not consider it necessary for me to refer at length to policy considerations. There is no doubt hardship in the sense that the Applicant cannot pay what he owes in tax; it is equally clear that he is responsible for the fact that he finds himself in this position. However some of the Respondent's submissions may, if only in the interests of completeness, merit inclusion in these reasons, as follows:

"Discretion

  • 21. It is useful to have regard to the relevant factors in the Policy (paragraph 24.6.31);
    • (a) Where it appears that the person has, questionably or otherwise, disposed of funds or assets without making proper provision to meet tax liabilities
  • 22. There appears to be no appearance of disposal of assets by the applicant. However, it does appear that the applicant has disposed of all of his available income without making any provision for the payment of his tax liabilities.
    • (b) Where the granting of release would not result in reduction of hardship, such as where the person has other liabilities/creditors and release from the tax debt will not relieve hardship
  • 23. The applicant is the subject of recovery proceedings brought by the Commissioner in the Supreme Court in respect of unpaid Goods and Services Tax ("GST") Pay As You Go instalments )"PAYG ITI"), failure to lodge penalties and general interest charge ("GIC"). He cannot be released form the GST, the GIC on the GST and the failure to lodge penalty liabilities under Item 340-5. In addition, if the applicant is unsuccessful in defending that action, he will be liable for the Commissioner's legal costs, a liability which is also not able to be released. The applicant's defence to this action is only partial: there is no denial of a liability: the quantum is the only issue. Accordingly, whether or not there is release granted, some outstanding debt will remain. On the applicant's account, he cannot afford any additional payments.
    • (c) Where the person has used available fund to discharge debts due to other private creditors in preference to debts due to the Commissioner
  • 24. The applicant has been paying $150 to an unidentified creditor and nothing to the Commissioner.
    • (d) Where the person has used available funds to discharge debts due to other business creditors where those payments are not considered reasonable to maintain the viability of the business and could be considered as unfair preference payments to the detriment of the Commissioner
  • 25. There is no suggestion of this.
    • (e) Where the person, for less than adequate reasons, has failed to pursue

      ATC 2550

      debts due to him or her, or to seek possible contributions from insurers, persons with joint responsibilities for debts etc
  • 26. There is no suggestion that this applicable.
    • (f) Where serious hardship is associated with a single event or short term outcome, such as might be encountered in the more speculative or seasonable business undertakings, the effects of which can be expected to abate within a short term
  • 27. This is not relevant given the solid earnings history of the applicant.
    • (g) Where the person has a poor compliance history
  • 28. The applicant has an appalling compliance history. He obtained a partial release to the extent of $522,393.94 in 1998. This amount had been incurred over a period of [x] years. The applicant failed to pay the balance of his tax liability $100,000 and presented a debtor's petition in order to be absolved of this debt. It seems, though, that the applicant has learned nothing and has continued to accrue large debts to the Commissioner. He has failed to account for GST, for PAYG instalments, income tax instalments, late penalties and interest. The liability in question represents only a portion of the applicant's default, a default that has been extensive, both in amount and time. This history shows a remarkable disdain for the Australian tax system, a system that relies on self-assessment and honesty for its efficiency. This disdain cannot be rewarded by release. Such an outcome must be inconsistent with the purpose of the taxation legislation.
    • (h) Where the person is unable to demonstrate that they have made provision for future debts
  • 29. The applicant has made no provision for his ongoing tax liability. It appears that his self-confessed financial mismanagement is not about to end. Another factor relevant to the exercise of discretion is the manner in which the applicant has approached both the Commissioner for release and the Tribunal for review of the Commissioner's refusal. The applicant is a commercial litigator of some experience. He must be familiar with the notion of onus of proof as well as with the ways in which factual assertions can be proven (or at least corroborated). Further, he is represented by another experienced lawyer, Mr Milne. Mr Milne has, himself, applied to the Commissioner (unsuccessfully) and the Tribunal (successfully) for release of considerable tax liabilities. His experience has not been utilised by his client. It is left to speculation whether this is deliberate or another example of mismanagement.

…"

51. It should be noted that the Respondent's submissions from which I quoted in the preceding clause were prepared some time ago and prior to the hearing. The payments of $150 per month were made, as transpired in evidence, on account of a credit card debt and which has now been discharged in full. In my view policy considerations are of limited relevance in this matter.

52. Put in summary, this case concerns a senior solicitor (who was for many years a partner in a large firm) who got into financial difficulties in the late nineties and sought relief from the Taxation Relief Board; that Board granted relief in an amount of $522,000, leaving $100,000 still outstanding and made it clear that it expected the remaining amount to be paid in instalments. The Applicant made no attempt to arrange for instalments and moved for his own bankruptcy. His statement in evidence that that Board was not prepared to negotiate with him as to instalments cannot be accepted. It took him only a few years to be back in substantial debt (in much the same amount) to the Respondent. There were problems during that period with the Trustee which resulted in an extension of the bankruptcy period and garnishees on Lane & Lane. Equally there were difficulties as regards child support which resulted in garnishees by the Child Support Agency. And as I have said there were garnishees by the Respondent. The

ATC 2551

moneys realised by the garnishees on the Trustee were absorbed by costs and so that no moneys flowed through to the Respondent but any payments in this context would have related to his pre-bankruptcy debt which does not concern me. Most relevantly the Applicant made no payments of tax voluntarily and in relation to the GST element simply used the money for his own benefit, and including in respect of the acquisition of some assets. As the Respondent contended his compliance record has indeed been very bad. He now seeks relief for the second time in what is after all a comparatively short period. Having regard to Swift (supra) and Giris (supra), it is my view that to grant relief would indeed defeat the purpose of the relevant tax legislation in that a taxpayer should not be able to utilise a provision of this kind to escape an obligation which he did not discharge through his own fault. The judgment of Wilcox J in Corlette (supra) is particularly relevant.

53. I also consider that to grant relief would be futile. I have come to the conclusion that I cannot grant relief in respect of the judgment debt. I also cannot grant relief for the GST element. Even if the Applicant's obligations were confined to the GST indebtedness only promises made by him as to payment could not, in all the circumstances and having regard to the history be regarded as likely to be fulfilled. As indicated previously in these reasons the Applicant's evidence did not impress me as reliable. As just one example I do not accept that a solicitor of his experience and seniority would know so little of three important legal areas or, if he was so ignorant, could not have readily obtained assistance from the bar.

54. This then is a case where to grant relief would not be proper and accordingly the decision under review must be affirmed.


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