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YRORITA v FC of T

Members:
G Ettinger SM

Tribunal:
Administrative Appeals Tribunal, Sydney

MEDIA NEUTRAL CITATION: [2012] AATA 716

Decision date: 16 October 2012

Ms G Ettinger (Senior Member)

SUMMARY

1. Mr Vladimir Yrorita is seeking review of a decision of the Commissioner of Taxation, (the Commissioner) dated 9 March 2011 disallowing his objection against an assessment for the year 2007. The Commissioner, the Respondent in these proceedings, held that $53,000 of superannuation benefit withdrawn by Mr Yrorita from AustralianSuper and paid to the ETK Superannuation Fund (ETK Fund), should have been included as assessable income in his income tax lodgement for the 2007 year.

2. Mr Yrorita who lives in the USA gave oral evidence at the hearing by telephone, and indicated he had only received $38,370 of the $53,000. He said that he did not make inquiries as to the status of the rest of the money, and argued that he required the withdrawal of the funds due to financial hardship. He gave evidence regarding the care he provides for his severely disabled son whose hospital admission and surgery in the USA in 2007, cost approximately $23,000.

3. Mr R Scruby of counsel who appeared for the Commissioner, made submissions regarding the status of the ETK Fund, and the fact that Mr Yrorita had not made appropriate inquiries or applications in regard to the release of the moneys. He submitted that fraud and or tax evasion could be concluded from application of the relevant legislation by the Commissioner, and hence the Tribunal.

4. I was mindful of all the circumstances which have arisen in this case, and the submissions of both parties. Although I acknowledge that Mr Yrorita's son is disabled and required hospitalisation and surgery, I was not satisfied that he (Mr Yrorita) had made the appropriate inquiries regarding withdrawal of the funds, nor that there was sufficient substantiation that the funds withdrawn were used to pay for the child's medical treatment.

5. I preferred the submissions of the Respondent in some aspects, and have varied the objection decision in respect of penalties. My reasons follow.

ISSUES BEFORE THE TRIBUNAL

6. The Tribunal had to decide:

  • • Whether there was evasion to the extent that the Respondent may issue an amended assessment for the income year ended 30 June 2007 under section170 of the Income Tax Assessment Act 1936 (ITAA 1936);
  • • Whether the amount of $53,000 withdrawn from AustralianSuper should have been included in the Applicant's assessable income for the year ended 30 June 2007 in accordance with subsection 26AFB(2) of the ITAA 1936;
  • • Whether the discretion in subsection 26AFB(4) of the ITAA 1936 should be exercised in the Applicant's favour;
  • • Whether the Applicant is liable for an administrative penalty pursuant to Division 284 of Schedule 1 of the Taxation Administration Act 1953 (TAA) for the 2007 year;
  • • If the Applicant is liable for an administrative penalty, whether there are any grounds for any part of the penalty to be remitted pursuant to subsection 298-20(1) of Schedule 1 of the TAA.

THE RELEVANT LEGISLATION

7. The relevant legislation in this matter is the Income Tax Assessment Act 1936 (ITAA 1936), in particular sections 170, 26AFB(2), 26AFB(4), and the Taxation Administration Act 1953 (TAA), in particular section 284 of Schedule 1 and 298-20(1) of Schedule 1.

8. The Superannuation Industry (Supervision Act) 1993 and Superannuation Industry (Supervision) Regulations 1994 are also relevant in the regulation of superannuation bodies. I have noted from the Respondent's documents that the ETK Fund was established in November 2006, and that it was not a complying superannuation fund, and indeed was not a superannuation fund at all. The Respondent has noted that it appears to have been merely two bank accounts established for the purposes of enabling persons to obtain early release of their superannuation in contravention of the legislative regime.

Applicant's evidence and submissions

9. At the hearing, Mr Yrorita gave evidence by telephone from the USA. Following the conclusion of the hearing, and because Mr Yrorita had not had an opportunity of considering the Respondent's written submissions which were handed up at the close of the evidence, I gave him the opportunity of doing so. He responded some days later with a written submission and some attachments which were related to a child support matter. A copy was made available to the Respondent, and I have taken the submission into account in my decision making.

10. I noted that in 2007, Mr Yrorita who was then 37, was working as a fitter and turner, and earning $72,000 gross per annum. He said that because he needed money for his disabled son's heart surgery in 2007, he withdrew $53,000 from AustralianSuper, which was deposited into the ETK Fund. He said that he was not aware that the ETK Fund was not a legitimate superannuation fund. He stated that he also thought he was eligible to access his retirement fund. The Applicant also indicated that he only received $38,370 of the $53,000. Mr Yrorita said that he did not make inquiries as to the status of the rest of the money, assuming it had been used to pay tax, and argued that he required the withdrawal of the funds due to the financial hardship in which he found himself.

11. I have noted that on 21 March 2007 $53,000 was transferred by AustralianSuper to an ETK Fund bank account. On 27 March 2007, $38,370 was transferred from the ETK Fund account to the Applicant's account. The bank statements obtained by the Commissioner indicate that the funds were dispersed by the Applicant in the following way: $7,240.00 was paid in reduction of Mr Yrorita's credit card debt in April 2007. The Applicant paid $18,364.64 to reduce his indebtedness under a personal loan in May 2007, and the balance of the $38,370 was withdrawn by the Applicant in a series of cash withdrawals in amounts of $800 or less. Mr Yrorita's evidence was that withdrawals funded (i) the purchase of a car for $5,000; (ii) $2,000 to pay for a storage shed for his parents; and (iii) the purchase of a computer for $700.

12. Mr Yrorita gave evidence of caring for his severely disabled son whose hospital admission and surgery in 2007 cost approximately $23,000. He said that the surgery was done in the USA, where he has no medical insurance. He stated that his son has had several heart operations and eye surgery, and that he is blind, deaf, and mute, and requires 24 hour care. His son is 16 years old, and Mr Yrorita now also has a daughter who is 10 months old.

13. The Applicant gave evidence about the payment for his son's operation, which he said was paid for provisionally by his aunt, his father's sister, Bernadette Yrorita Pascual, who died in 2010. In reply to the fact the Commissioner required substantiation of the payment, Mr Yrorita wrote in his submission: For not having receipt of me paying her back, I could say my family do not need a receipt to help anyone in the family especially when it is about life and death situation.

14. Mr Yrorita also provided documents indicating he has a child support debt of $36,471.29, and that he is unemployed.

Respondent's submissions

15. Mr Scruby submitted on behalf of the Commissioner that Mr Yrorita had committed fraud or was involved in tax evasion. He defined those as follows in his written submissions:

'Fraud' means common law fraud. That is, the making of a statement that is false with knowledge of its falsity or reckless indifference as to its falsity: see
Kajewski v Commissioner of Taxation [2003] FCA 258 at [111].

'Evasion' was described by Dixon J in
Denver Chemical Manufacturing Co v Commissioner of Taxation (NSW) (1949) 79 CLR 296 at 313 in the following terms:

I think it is unwise to attempt to define the word 'evasion'. The context of s 210(2) [of the Income Tax (Management) Act 1936 (NSW)] shows that it means more than avoid and also more than a mere withholding of information or the mere furnishing of misleading information. It is probably safe to say that some blameworthy act or omission on the part of the taxpayer or those for whom he is responsible is contemplated. An intention to withhold information lest the commissioner should consider the taxpayer liable to a greater extent than the taxpayer is prepared to concede, is conduct which if the result is to avoid tax, would justify finding evasion.

16. Mr Scruby submitted that in Mr Yrorita's case, a fraud was perpetuated on the Commissioner by the operators of the ETK Fund. He emphasised that pursuant to Item 5 of section 170(1) of the ITAA 1936, there was no requirement that the fraud be committed by the taxpayer. He submitted further that the ETK Fund was the Applicant's agent, at least for the purpose of obtaining the funds from AustralianSuper and paying them to the Applicant, and that accordingly the Applicant had engaged in evasion in terms of the legislation. He noted further that there was an inference to be drawn that if Mr Yrorita actually thought he was entitled to the funds, he would have sought to withdraw them from AustralianSuper directly, rather than via the ETK Fund, and that his actions constituted evasion.

17. Mr Scruby noted that the Applicant admitted he had not made any inquiries regarding the legalities of withdrawing his superannuation, and had not disclosed the amount withdrawn to his tax agent. He submitted that this conduct indicated to the Commissioner that the Applicant was recklessly indifferent in regard to the accuracy of his tax return when he signed it for lodgement.

18. He submitted that accordingly the penalties imposed applied, and that no discretion to remit those was appropriate.

Whether the amount of $53,000 withdrawn from AustralianSuper should have been included in the Applicant's assessable income for the 2007 year (section 26AFB(2) of the ITAA 1936)

19. Mr Yrorita's evidence was that he understood he had withdrawn $53,000 of superannuation from AustralianSuper which was paid into the ETK Fund. He submitted that because he only received $38,370, he thought the rest had been taken out to pay tax. He agreed that he had not made any inquiries about whether, at age 37, he was entitled to withdraw superannuation, but stated that he needed the money because he was separated from his wife, had a disabled son who required medical treatment, and was experiencing financial difficulties.

20. The Applicant agreed in cross-examination that he had not asked his tax agent about the possible inclusion of the superannuation payment he had received in his 2007 tax return.

21. Mr Yrorita also answered questions in cross-examination about why he had opened a separate bank account to deposit the moneys received from the superannuation fund. I was satisfied from his replies that he had done so as a matter of convenience in regard to work and geographical location.

22. Mr Scruby addressed the application of section 26AFB(2) of ITAA 1936 from the Commissioner's point of view. He submitted that there did not appear to be any contest that the requirements of section 26AFB(2) had been met. The section follows as relevant.

  • (2) Where:
    • (a) in a year of income and on or after the proclaimed superannuation standards day, a taxpayer receives or obtains a benefit of any kind out of, or attributable to assets of, an exempt fund;
    • (b) at the time when the benefit was provided, there were in force regulations for the purposes of subsection 31(1) of the Superannuation Industry (Supervision) Act 1993 prescribing standards applicable to the fund; and
    • (c) the provision of the benefit resulted in a failure of the fund to comply with such of those standards as are prescribed for the purposes of this section by regulations made under this Act;

    the assessable income of the taxpayer of the year of income shall include the amount or value of that benefit.

23. He submitted that, (pursuant to section 26AFB(2) of ITAA 1936), the Applicant obtained a benefit out of, or attributable to an Australian superannuation fund, being an exempt fund, and noted that the provision of that benefit, (the $53,000), resulted in the contravention of prescribed regulations, because the Applicant had no entitlement to early release of his superannuation funds. Neither had he taken any of the necessary steps to seek release of the funds.

24. I am mindful of the requirements of the Superannuation Industry (Supervision Act) 1993, (SISA). Part 3 provides the operating standards for superannuation entities which regulated superannuation funds must comply with in accordance with section 34 of the SISA.

25. Division 6.2 of the Superannuation Industry (Supervision) Regulations 1994 (SISR), contains the payment standards for regulated superannuation funds. Regulation 6.17(2)(a) of the SISR states that a member's benefits in a fund may be paid out only by being cashed in accordance with Division 6.3 or Part 7A of the SISR.

26. Division 6.3 of the SISR provides the conditions of release which a person must satisfy in order to withdraw their preserved benefits and restricted non-preserved benefits from a superannuation fund. Regulation 6.18(1) of the SISR provides that a member's preserved benefits in a regulated superannuation fund may only be cashed on or after the satisfaction of a condition of release. The conditions of release are specified in Schedule 1 of the SISR and include, amongst others, retirement, death, permanent incapacity, attaining 65 years, APRA approved purposes, severe financial hardship and compassionate grounds. It is likely that only the ultimate three conditions may have been appropriate to consider in Mr Yrorita's case.

27. Regulation 6.19A(1) is concerned with compassionate grounds, which contemplate a person may apply to APRA in writing to have his or her preserved benefits released to pay for medical treatment, palliative care, funeral and allied expenses or in cases of foreclosure of a mortgage. Mr Yrorita's evidence was that he neglected to make any such application.

28. Regulation 6.01(5) of the SISR is concerned with conditions for release of superannuation benefits on the grounds of severe financial hardship. Conditions include a person having been on income support continuously for 26 weeks, and being unable to meet reasonable and immediate family living expenses. As Mr Yrorita was earning income of $72,000 in 2007, I am satisfied he was clearly not eligible for the application of Regulation 6.01(5) of the SISR.

29. A priori the payment of the amount of $53,000 from AustralianSuper was made in breach of Regulation 6.18(1) of the SISR, and must therefore be assessable pursuant to section 26AFB(2) of the ITAA 1936. However, I am mindful that Mr Yrorita received only $38,370 of the total amount, so before making a decision regarding the application of section 26AFB(2), I have taken into account both the Applicant's and the Commissioner's submissions.

30. In that regard, Mr Scruby submitted that the Commissioner thought it necessary to draw to the Tribunal's attention the question of whether the relevant benefit for the purposes of section 26AFB(2)(a) was the $53,000 paid out of AustralianSuper, or the $38,370 paid into the Applicant's bank account. He noted that income under section 26AFB is statutory income, as defined in section 6-10 of the ITAA 1997, and as listed in the guide in section 10-5 of the ITAA 1997. He noted further that section 6-10(3) of the ITAA 1997 states that income will be statutory income, even if the taxpayer has not received it, as soon as it is applied or dealt with in any way on [the taxpayer's] behalf or as [they] direct. Mr Scruby submitted that the Applicant directed AustralianSuper to pay the amount to the ETK Fund. Accordingly from the Commissioner's point of view, the full $53,000, (and not merely the $38,370), was a benefit received by the Applicant, because it was received by the ETK Fund as directed by the Applicant.

31. I have considered Mr Yrorita's evidence that he made no inquiries or applications about the release of the superannuation funds, and did not include the amount in his assessable income. His withdrawal of the funds from AustralianSuper can be characterised as an Eligible Termination Payment (ETP) because the funds were withdrawn and not rolled-over into a legitimate superannuation fund. I agree with Mr Scruby's submissions, and am satisfied that Mr Yrorita was obliged to include the superannuation payout as part of his assessable income for the 2007 year.

32. I have also considered the Respondent's submissions on which amount should be assessable. I find the submissions persuasive. Mr Yrorita's age of 37 years at the time, and his reliance on persons unidentified here, to convince him he could withdraw his superannuation from AustralianSuper and pay it into the ETK Fund, indicated to me that he thought he had found a way around the legislation. Unfortunately for him, and to his detriment, he only received $38,370 of the $53,000.

33. I find that the full amount of $53,000 must be included in the application of section 26AFB(2) of the ITAA 1936.

Whether the discretion in subsection 26AFB(4) of the ITAA 1936 should be exercised in the Applicant's favour

34. I have noted that section 26AFB(4) of the ITAA 1936 may apply where the Commissioner and the Tribunal standing in his shoes, is satisfied that it is unreasonable that section 26AFB(2) should apply to the whole or part of a benefit received by the taxpayer. In forming the view regarding what unreasonable means in terms of section 2AFB(2), I must have regard to the nature of the fund, and such other matters relating to the receiving or obtaining of the benefit by the taxpayer as the Tribunal considers relevant.

35. In that regard I have taken into account the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 4) 1987 (EM), noting that Senior Member Walsh in
Mason v Commissioner of Taxation [2012] AATA 133 stated as follows at [25]:

Former section 26AFB of the ITAA 1936 was inserted into the ITAA 1936 by Taxation Laws Amendment Act (No.4) 1987 (1987 Amendment Act). The Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 4) 1987 (1987 EM), which introduced the 1987 Amendment Act, states:

Clause 11 will insert new section 26AFB in Division 2 of Part III of the Principal Act in order to continue the policy embodied in existing sections 26AF and 26AFA designed to prevent abuse of concessions available to approved funds by payment of excessive or unauthorised benefits, following establishment of the new supervisory arrangements. The new section will ensure that where a taxpayer receives any such benefits from a fund approved by the Insurance and Superannuation Commissioner (or a fund which was formerly approved by the Insurance and Superannuation Commissioner) then the benefits will be subject to tax unless the Commissioner of Taxation is satisfied that this would be unreasonable. As noted above, this section will apply to benefits received from those funds which have at any time obtained tax exemption under section 23FC after Regulations have been made under the Standards Act embodying requirements relating to the level and nature of benefits paid.

New section 26AFB will assume the discretion currently available under section 26AFA in order to ensure that taxpayers are treated appropriately such as where loss of tax exemption by a fund may be regarded as a sufficient penalty for a breach of the relevant standards.

36. The 1987 EM referred to the discretion in former section 26AFA(2) of the ITAA 1936, as follows:

The Commissioner has indicated that this discretion would be exercised where there are no tax avoidance implications and where the excessive benefit arose fortuitously or in other circumstances beyond the effective control of the recipient or the employer.

37. Mr Yrorita represented himself at the hearing, so that understandably his evidence and submissions tended to merge. In support of having the discretion exercised in his favour, Mr Yrorita argued vigorously in regard to his impecunious state, and the fact he moved to the USA in mid 2007 to look after his disabled son. He now also has a daughter aged 10 months as noted above, and is unemployed and, he says, he is not receiving benefits from either Australia or the USA. He was of course keen to see the Tribunal exercise any discretion possible in his favour in order to reduce his debt obligations.

38. Mr Scruby made extensive submissions about why section 26AFB(4) should not apply in this case. A summary of those follows:

  • (a) First, the Applicant has not established that the funds were in fact used for this purpose. The funds he received were used to pay off personal debt and purchase assets for himself. The procedures in question cost about $23,000. The Applicant withdrew about $38,000. There is no documentary evidence at all which would indicate who paid for the procedures, or the relationship between this payment and the funds received by the Applicant. There is no satisfactory explanation for the absence of such evidence.
  • (b) Secondly, even if it is accepted that in some indirect way the funds were used to pay for his son's operation, that is not a sufficient reason to make it unreasonable to apply s 26AFB(2). The legislative scheme requires that persons who seek the release of funds on compassionate grounds satisfy APRA of various matters, including (i) that they do not have the financial capacity to meet the expense; and (ii) that the medical treatment is not available under the public health system (see Superannuation Industry (Supervision) Regulation 1994 (Cth) reg 6.19A(2) and (3)). It is not appropriate to permit persons to avoid these requirements via s 26AFB(4).
  • (c) Thirdly, the Applicant claims that he thought tax had been paid out of the $53,000. This is hard to accept in circumstances where he does not claim to have sought advice or to have been given any assurance in this respect from anyone. But in any event, it is not a matter which suggests that it would be unreasonable to apply s 26AFB(2).
  • (d) Fourthly, there is no satisfactory explanation for why the Applicant did not seek the release of the funds from AustralianSuper directly. The inference is that he knew or suspected that such release would not be permitted. That militates against any conclusion that it would be unreasonable to apply s 26AFB(2).
  • (e) Fifthly, beyond bare assertion the Applicant has not demonstrated that he lacks the financial capacity to pay the tax to which he has been assessed.
  • (f) Sixthly, the legislative history and effect of the equivalent provision under the new legislative regime was considered by Walsh SM in
    Mason v Commissioner of Taxation [2012] AATA 133 at [24]ff. The learned member concluded at [31] that it may be "unreasonable" to include a benefit in circumstances where it would result in double taxation and where the benefit arose in circumstances beyond the effective control of the recipient. That is not the case here.

39. My task is to weigh up the evidence and submissions regarding the discretion whether to apply section 26AFB(4). In doing so, I must decide whether the application of section 26AFB(2) would be unreasonable taking into account the nature of the fund and any other relevant persuasive matters.

40. I am mindful of the Respondent's submission that there is no clear evidence the Applicant lacks the financial capacity to pay the tax to which he has been assessed, and that, in the Commissioner's view, there was no satisfactory explanation given for why the Applicant did not seek the release of the funds from AustralianSuper directly. Further, the Respondent has drawn the inference that Mr Yrorita knew or suspected that such release would not be permitted. I reject both those submissions.

41. I was satisfied from his evidence that in 2007, Mr Yrorita was in financial difficulties. I accept that he was separated, that he had a severely disabled son, and that he moved to the USA to take care of him. I also accept from his evidence that he was assured by persons unnamed here, that the withdrawal of his superannuation funds was possible, and that he thought because he only received $38,370, the rest of the total amount of $53,000 was paid in tax.

42. However, I was not satisfied from Mr Yrorita's evidence that he used the superannuation funds to pay for his son's surgery. I noted that withdrawals of the $38,370 were made over a period of time from the ETK Fund's account in 2007. The Applicant's evidence was that he paid off debts, and purchased a car for $5,000, used $2,000 to pay for a storage shed for his parents, and purchased a computer for $700. This may all have been useful expenditure as far as his family was concerned, but there is no evidence at all before me that the fees for the hospital or surgery were paid by Mr Yrorita. Although I acknowledge that Mr Yrorita's son was ill and required hospitalisation, I was not satisfied that the funds withdrawn from the superannuation fund were used to pay for the child's medical treatment. I was not satisfied with his evidence that his aunt paid the hospital and surgery fees, or that he had to pay her back.

43. I am satisfied from Mr Yrorita's evidence that he is now unemployed, and caring for his disabled son. I have also seen a document indicating that he has a child support debt. I am satisfied that double taxation or whether the benefit arose in circumstances beyond the control of the Applicant do not arise (
Mason v Commissioner of Taxation).

44. However, in coming to a decision to exercise the discretion to apply section 26AFB(4), I would have to find the application of section 26AFB(2) unreasonable, having regard to the nature of the fund and other relevant matters. I am not so satisfied because although it appears Mr Yrorita was advised by persons unnamed here, regarding the ETK Fund, the evidence before me is that he did not make any appropriate inquiries either to AustralianSuper, any authority such as APRA, or his tax agent. Further I am not satisfied that the funds were used to pay for his son's surgery.

45. Accordingly, I am not satisfied to find the application of section 26AFB(2) unreasonable, and hence cannot exercise the discretion.

Whether there was evasion to the extent that the Respondent may issue an amended assessment for the income year ended 30 June 2007 under section 170 of the Income Tax Assessment Act 1936 (ITAA 1936)

46. I am mindful that Item 5 in subsection 170(1) of the ITAA 1936 permits the Commissioner to amend an assessment at any time if he is of the opinion there has been fraud or evasion.

47. The relevant part of Mr Yrorita's evidence in regard to whether there was evasion, was that he assumed he only received $38,370 of the $53,000 withdrawn from AustralianSuper, because the rest was the tax component. These are not his exact words, but the sense of what he meant. I understood that he said he did not think to speak to his accountant or include the amounts of superannuation as part of his assessable income because he thought he had already paid tax on the $53,000 which was withdrawn.

48. Mr Scruby submitted that there was fraud perpetrated on the Commissioner by the operators of the ETK Fund, and submitted that pursuant to Item 5 of section 170(1) of the ITAA 1936, there was no requirement that the fraud be committed by the taxpayer. Mr Scruby submitted however, that the Applicant had evaded the payment of tax by intentionally failing to declare in his assessable income for 2007, the amount of superannuation benefits he received.

49. He noted further that the Applicant:

  • (a) failed to make any reasonable inquiries as to the bona fides of proceeding to have the $53,000 removed from AustralianSuper;
  • (b) made use of the Fund to access this money because he understood it was "easier" than applying for it while a member of AustralianSuper;
  • (c) further failed to take any reasonable steps to understand the tax consequences of his actions; and
  • (d) failed to ensure that any amount of tax was either withheld by the Fund or remitted to the ATO.

50. I am mindful that Mr Yrorita did not deny that he had not made inquiries regarding the legalities of withdrawing his superannuation at age 37 years, and that he did not inform his tax agent of the funds he withdrew. I have noted that Dixon J described evasion as follows in
Denver Chemical Manufacturing Co v Commissioner of Taxation (NSW) (1949) 79 CLR 296 at [313]:

I think it is unwise to attempt to define the word 'evasion'. The context of s 210(2) [of the Income Tax (Management) Act 1936 (NSW)] shows that it means more than avoid and also more than a mere withholding of information or the mere furnishing of misleading information. It is probably safe to say that some blameworthy act or omission on the part of the taxpayer or those for whom he is responsible is contemplated. An intention to withhold information lest the commissioner should consider the taxpayer liable to a greater extent than the taxpayer is prepared to concede, is conduct which if the result is to avoid tax would justify finding evasion.

51. In coming to a decision regarding whether Mr Yrorita's actions constituted evasion, I have taken into account the fact he did not apply directly to AustralianSuper to withdraw funds, but was persuaded there was a different path he could take to obtain them. He did not make inquiries of any authority or AustralianSuper about the legalities of withdrawing the funds, and he opened a separate bank account, for (geographical) convenience, he said. More importantly from the Tribunal's point of view, Mr Yrorita, (for the reasons he gave), did not consult with his tax agent, or include the funds withdrawn from the superannuation fund in his tax return.

52. As Dixon J described in
Denver Chemical Manufacturing Co v Commissioner of Taxation, I am satisfied that this is a case of:

… an intention to withhold information lest the commissioner should consider the taxpayer liable to a greater extent than the taxpayer is prepared to concede, is conduct which if the result is to avoid tax would justify finding evasion.

53. I am satisfied there was evasion in terms of the legislation and that section 170(1) of the ITAA 1936 applies for the Commissioner to amend an assessment at any time if he is of the opinion there has been fraud, or, as in Mr Yrorita's case, evasion.

Whether the Applicant is liable for an administrative penalty pursuant to Division 284 of Schedule 1 of the Taxation Administration Act 1953 (TAA) for 2007; and if so, whether there are any grounds for any part of the penalty to be remitted pursuant to subsection 298-20(1) of Schedule 1 of the TAA?

54. The Applicant referred in his closing to his innocence with regard to the ETK Fund, to his financial situation, and to his son's health. He submitted:

I am not contesting that I have received the amount of $38,370 from my SuperAnnuation (sic) fund but was not aware of ETK not being a legitimate Super Fund until the audit that was done on me as I was led to believed (sic) that ETK was a legitimate SuperAnnuation (sic) Fund and that I was eligible to access my retirement fund.

…

The 25% penalty on top of the $53,000 is very substantial to imposed (sic) on me.

…

I have not been part of establishing ETK scam and I am just a victim of my circumstances. My family is already in a financial difficulties and enforcing the assessment would truly put us on unbearable financial tragedy. … It would put me on $78,247.07 in further debt on top of my Credit Card debt of over $22,000 and I do not know how I am going to repay that as I am Unemployed.

55. Mr Yrorita also submitted that he had his own health problems due to the stress he has been experiencing, and suffers from severe plaque psoriasis.

56. Mr Scruby submitted that the penalty of 25 percent was imposed pursuant to 284-75(1) of Schedule 1 of the TAA on the basis that the Applicant or his agent made a false or misleading statement to the Commissioner by omitting to make reference to the withdrawal of the $53,000 in 2007. He contended that there were no grounds for discretionary remission of the penalty.

57. I have taken into account the totality of the evidence, and all the circumstances surrounding the withdrawal of the funds, and Mr Yrorita's present circumstances. I am satisfied that had he followed the correct procedures, he may well have been permitted to withdraw all or part of the $53,000, and may not have lost $14,630.

58. I am satisfied that the discretion to impose penalty was correctly exercised, but equally, that, for the reasons given above, it should be remitted.

The Tribunal's conclusions

59. In coming to a decision, having taken into account the evidence, submissions, legislation and case law, I am mindful that the onus is on the Applicant to prove that the assessments are excessive. There is no onus on the Commissioner to show that the assessments were correctly made (
Gauci v FCT (1975) 135 CLR 614).

60. In summary, I find from the evidence that by not making the appropriate inquiries, and by not declaring the superannuation withdrawn from AustralianSuper and ETK, Mr Yrorita attempted to evade paying tax on the superannuation money. Accordingly the Commissioner had the power to amend the assessment at any time.

61. I am also satisfied that the $53,000 should have been included in the Applicant's assessable income for the year ended 30 June 2007, and that the discretion in section 26AFB(4) of the ITAA 1936 should not be exercised in the Applicant's favour.

62. I am satisfied, and find that the discretion to impose the penalty was correctly exercised, but equally, that, for the reasons given above, it should be remitted.

DECISION

63. The Tribunal varies the decision under review and remits the penalties imposed by the Commissioner of Taxation.


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