MATHOURA PROPERTY PTY LTD AS TRUSTEE FOR THE MATHOURA PROPERTY TRUST v FC of T

Members:
FJ Alpins DP

Tribunal:
Administrative Appeals Tribunal, Melbourne

MEDIA NEUTRAL CITATION: [2013] AATA 922

Decision date: 20 December 2013

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FJ Alpins (Deputy President)

INTRODUCTION

1. This application for review concerns the question of the applicant's liability to an administrative penalty pursuant to s 284-75(1) of Schedule 1 to the Taxation Administration Act 1953 (Cth) (the "TAA") for a false or misleading statement constituted by its goods and services tax ("GST") Business Activity Statement ("BAS") for the month ending 31 December 2011.

FACTS

2. The following findings of fact are based upon a statement of agreed facts helpfully prepared by the parties, various documents tendered in evidence and evidence given by the applicant's witnesses. Those witnesses were Mr Mark Stevens, the managing director and shareholder of the applicant, Ms Michelle Ettia, the applicant's employee bookkeeper and Mr Stephen Nixon, of the accounting firm Michael & Nixon Pty Ltd, the applicant's tax agent. Each witness gave evidence by way of witness statement and was cross-examined.

3. The applicant, Mathoura Property Pty Ltd, is the trustee of the Mathoura Property Trust and was registered under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) in that capacity on 1 June 2009. The applicant accounts for GST on a cash basis and at all relevant times lodged its BAS on a monthly basis.

4. At the time in question, the applicant, in its capacity as trustee, carried on an enterprise of a one-off residential property development involving five apartments at 103 Mathoura Road Toorak, in Victoria. On 1 July 2010, the applicant, as vendor, entered into an "off-the-plan" contract of sale in relation to one of those apartments, for the sum of $3,095,000. The property the subject of the contract was described by reference to a proposed Plan of Subdivision. The contract provided that:

• (a) settlement was to occur on the later of the date shown (there being no date inserted) or 14 days after the vendor gave notice to the purchaser of the registration of the plan;
• (b) completion of the contract was subject to and conditional upon certain events occurring within 24 months from the day of sale, those events including the issuing of a planning permit for, and registration of, the plan of subdivision.

5. On 1 December 2011, the applicant's solicitors, in a letter to the purchaser's solicitors, informed them that the plan of subdivision had been lodged for registration that day and that registration should occur within the next seven to ten days. They wrote: "Please ensure your client is aware that settlement is imminent and her finance is in place."

6. The following day, the purchaser's solicitors in a written reply said that they were instructed that their client had been told at her recent inspection that only two parking spots were allocated to her unit, while representations had previously led her to understand that three spots were allocated. The solicitors conveyed their instructions that if three spots were not allocated, their client would seek to rescind the contract.

7. Mr Stevens immediately commenced negotiations in order to prevent such an outcome. He was most concerned that the sale of the other apartments in the development might otherwise be jeopardised.

8. Ms Ettia was responsible for compiling the information required for the preparation of the applicant's monthly BAS and for sending that information to Mr Nixon. The information was derived from a computer software program. Mr Nixon was responsible for preparing the applicant's BAS each month on the basis of the information provided by the applicant and was also responsible for lodging each monthly BAS.

9. It was the applicant's custom to lodge its BAS for the month of December before the office closed for Christmas and therefore prior to the end of the period it encompassed. Accordingly, the applicant's BAS for December 2011 was lodged by Mr Nixon on 23 December 2011, shortly after Ms Ettia provided information for that month to date. Mr Stevens and Ms Ettia went on leave in late December for the Christmas break.

10. Despite the preceding events, the applicant received the balance of the sum payable under the contract (about $3,085,000, a deposit of $10,000 having been received at the time the contract was entered into) on 28 December 2011. The payment was received into the applicant's bank loan account, thus reducing its debt to the bank. A Transfer of Land Form in relation to the property was executed that day and lodged with the State Revenue Office of Victoria, apparently by the applicant's solicitors, Stamford Lawyers, and stamped on 6 January 2012. On about the same date, the applicant received a refund with respect to its December BAS, in the amount of $49,024.

11. Mr Stevens and Ms Ettia both returned from leave in mid-January. Under cross-examination and upon re-examination, Mr Stevens said that, upon his return, either Ms Ettia, the applicant's solicitors or the applicant's bank informed him of the receipt of the sale proceeds and that settlement of the contract had occurred.

12. The negotiations about the extra car parking spot continued. The parties then entered into a contract for the sale of a further car parking spot at 103 Mathoura Road, Toorak, for the sum of $38,500. That contract was signed by the purchaser on 31 January 2012 and signed by Mr Stevens on behalf of the applicant on 9 February 2012. It was agreed between the parties that the purchase price was to be held on trust by the applicant pending the issuing of a planning permit in respect of the amended plan of subdivision (which now included three car parking spots for the unit) and registration of that amended plan. The amended plan of subdivision was lodged for registration on 22 May 2012.

13. Mr Stevens has engaged in property development for about 14 years. He has also been registered for GST in his personal capacity since 2007, carrying on an enterprise of property development.

14. In his witness statement, Mr Stevens said that "I received legal advice on behalf of the Applicant that a new contract of sale to include the [extra] car park could not be entered into as the purchaser would lose her entitlement to the stamp duty concession she received by her purchase of the Unit off-the-plan on 1 July 2010." Under cross-examination, Mr Stevens said that he obtained legal advice about the purchaser's threat to rescind the contract in January or February. It seems to me likely that Mr Stevens also obtained advice in December, given that the purchaser paid the balance of the purchase price and a transfer of land was executed on 28 December. In any event, nothing turns on that point. What is clear is that Mr Stevens, on behalf of the applicant, sought and obtained legal advice about the issues surrounding the purchaser's threatened rescission of the contract, including after his return in mid-January 2012.

15. However, Mr Stevens did not seek any advice from any source about the applicant's tax obligations with respect to the sum of more than $3,000,000 received on 28 December. Under cross-examination, Mr Stevens accepted that he did not seek legal advice from the applicant's solicitors about its tax obligations when discussing the transaction with them, nor from any other source. Nor did the applicant seek accounting advice about the matter. Nor did he discuss it with Mr Nixon so as to obtain advice or so that Mr Nixon might approach the Australian Taxation Office ("ATO") about the matter.

16. That was despite the fact, according to Mr Stevens' evidence, in his 14 years of experience in property development, this was the first time that he had experienced the "unusual" circumstances of the threat of rescission of a contract.

17. Mr Stevens said that he believed that, despite the events of 28 December, settlement of the contract for the sale of the property would not occur until settlement of the car park contract and registration of the amended plan of subdivision, given the conditions governing completion set out in the former contract. Furthermore, he was also of the view that until those events occurred, the applicant was not required to disclose the payment received on 28 December in its monthly BAS. As I have indicated, that view was uninformed by any advice. Mr Stevens apparently held that view despite the fact that the applicant accounted for GST on a cash basis. Furthermore, he apparently maintained that view despite, according to his own evidence, being informed in mid-January that the contract of sale for the property had "settled".

18. Mr Stevens accepted under cross-examination that he was therefore aware, at each relevant time of lodgement, that the sale proceeds received on 28 December 2012 were not the subject of any amended BAS for December, nor were they reported in the applicant's January BAS, February BAS nor March BAS.

19. At the time that the applicant's December BAS was lodged, Mr Stevens' mother was ill. In oral evidence, Mr Stevens said that his mother had been ill over a period of about 15 years, having suffered a series of aneurysms, and had suffered strokes in late 2011 and early February 2012. Mr Stevens' mother had been living in a nursing home when she passed away on 13 March 2012. Consequently, Mr Stevens was then absent from the applicant's office for at least some of the rest of that month.

20. Ms Ettia has worked as a bookkeeper for a total period of 15 years. Under cross-examination, Ms Ettia accepted that she would have been aware that the applicant had received the sum paid under the contract on 28 December in late January or early February, as she would have undertaken a reconciliation of the applicant's bank records prior to preparing the information for the applicant's BAS for January. She also accepted that she understood at that time that the applicant accounted for GST on a cash basis.

21. Under cross-examination, Ms Ettia accepted that, in the case of transactions which occurred in December following the early lodgement of that month's BAS, she would ordinarily provide information concerning such transactions to Mr Nixon upon review of the applicant's lodged December BAS, although such transactions tended not to occur at that time of year.

22. Ms Ettia accepted that she had nevertheless accounted for the receipt of the sum received on 28 December by recording it in the customary manner as sales revenue and as an equivalent reduction in the applicant's liability to the bank. However, that information was not provided to Mr Nixon for the purpose of the preparation of an amended December BAS, nor for the purpose of the preparation of its BAS for January, February nor March 2012.

23. Ms Ettia said that she withheld that information, despite being aware that the applicant accounted for GST on a cash basis, because her understanding, based on her discussion with Mr Stevens in early 2012, was that the contract for the sale of the property could be rescinded at any time until the settlement of the contract for the extra car park spot. She said that she had concluded from that discussion that it was therefore not necessary to disclose the receipt of the sum paid under the first contract in the applicant's monthly BAS until settlement of the second contract occurred and had accordingly withheld that information from Mr Nixon.

24. Ms Ettia's evidence, albeit couched in hypothetical terms, was that she had taken this course on her own initiative, that is to say, without discussing the issue with Mr Stevens - she said that she and Mr Stevens "wouldn't have spoken directly about GST". I find that evidence difficult to accept. It is contradicted by Mr Stevens' evidence that he was aware at the time that the receipt of the sales proceeds on 28 December was not disclosed in any amended December BAS nor in the subsequent BAS for January, February and March. It is also contradicted by Mr Stevens' evidence that the applicant did not disclose the receipt of the sale proceeds because of his view that it was not necessary to do so, also reflected in contemporaneous documentary evidence referred to below.

25. It is difficult to accept that events could have unfolded as they did in the absence of any communication about the applicant's tax obligations during the first three months of 2012, particularly given the fact that the applicant accounted for GST on a cash basis. It seems more likely that Mr Stevens would have given instructions to Ms Ettia reflecting the position he was taking about the matter, thus reflected in his awareness as to the contents of the subsequent BAS for the following months. Ultimately, nothing turns on that point. What is clear, and what matters, is that the applicant did not disclose the receipt of the sale proceeds before correspondence ensued between the ATO and Mr Nixon. Furthermore, neither Mr Stevens nor Ms Ettia sought any advice prior to the applicant taking the course it did.

26. On 5 March 2012, Mr Jeremy Dwyer of the ATO wrote to the applicant and said that an audit of the applicant's January 2012 BAS was to be conducted, to "substantiate input tax credits" which had been claimed. It was also stated that: "In the event that the audit raises other issues of concern, the focus may extend to other labels, tax periods or tax obligations." Certain documents were requested with respect to the January BAS. That correspondence was sent to Mr Nixon as the applicant's tax agent.

27. After a further request for those documents was made by Mr Dwyer by correspondence dated 20 March, such documents were provided by Mr Nixon on 24 March. He informed Mr Dwyer that the delay in providing them had been caused by the death of Mr Stevens' mother. On 26 March Mr Dwyer sent an email to Mr Dwyer raising an issue about two tax invoices which had been provided and also "compliance issues" about other entities in respect of which Mr Stevens was understood also to be a director. Mr Nixon responded by email the following day.

28. On 29 March, Mr Dwyer wrote the following in a letter to Mr Nixon:

"Information has come to our attention that one of the 4 properties located at 103 Mathoura Rd Toorak … has been sold and the settlement took place in December 2011. If this is correct, your client has filed to report the sale of new property on their December 2011 activity statement.

No voluntary disclosures have been made of any reporting errors since the commencement of the audit.

Your client is requested to supply copies of all completed sales contracts to date.

The ATO will be raising an assessment of tax shortfall based on the information held if no further information is supplied by the client by 5 April 2012. Information should be provided of any calculations for application of the margin scheme provisions on property supplies."

29. By letter dated 30 March 2012, Mr Stevens wrote to Mr Nixon, explaining the circumstances surrounding the sale of the property and expressing his belief that settlement had not occurred in December 2011. He then said:

"There has been no need or requirement for Mathoura Property Trust to make any voluntary disclosure of any reporting errors since the commencement of the audit as it correctly reporting [sic] the sale of all apartments in the correct reporting period."

30. The following day, Mr Nixon wrote to Mr Dwyer. In his letter, he said:

"We advise that our client believes that he is not required to report the sale until all conditions attached [sic] the sale are satisfied which is expected to be resolved in April 2012."

He enclosed copies of documents, including Mr Stevens' letter of the previous day, "to demonstrate why they believe that they do no [sic] need to report the sale of [the unit] at this time for your consideration."

31. In his witness statement, Mr Nixon said that he was aware when he lodged the applicant's BAS on 23 December that the purchaser of the property had threatened to rescind the contract and that Mr Stevens was negotiating with the purchaser in order to prevent that outcome. He said that he was not aware until he received Mr Dwyer's letter of 29 March 2012 that the sale proceeds had been received on 28 December. He said that he and Mr Stevens did not discuss the applicant's tax obligations with respect to the receipt of the sale proceeds until early April 2012, after he responded to Mr Dwyer by his letter of 31 March.

32. It became apparent in the course of re-examination that Mr Nixon considered Mr Dwyer to be overly zealous in the performance of his auditing duties. He described Mr Dwyer's conduct of the audit as "very aggressive" and as involving "almost a smear campaign". There were certain discrepancies between Mr Nixon's evidence given in his witness statement and his oral evidence which caused him to retract aspects of the former. However, for the reasons that follow, it is unnecessary to address them.

PROCEDURAL HISTORY AND ISSUES BEFORE THE TRIBUNAL

33. Following completion of the audit, in late April 2012 the Commissioner assessed the applicant, in its capacity as trustee, as being liable to pay the following amounts:

• (c) a GST net amount for the monthly period ending 31 December 2011 reflecting additional GST in the amount of $226,212; and
• (d) an administrative penalty in the amount of $203,590.80, being 75% of the GST shortfall amount for the December 2011 period (worked out on the basis that the shortfall amount resulted from intentional disregard of a taxation law by the taxpayer or their agent (Item 1 in the table in s 284-90(1) in Schedule 1 to the TAA) plus an amount reflecting a 20% increase in the base penalty amount pursuant to s 284-220 in Schedule 1.

34. The applicant objected to the penalty assessment. The objection was allowed in part, by reducing the base penalty amount to 50% of the shortfall amount (worked out on the basis that the shortfall amount resulted from recklessness (Item 2 in the table in s 284-90(1)), with no increase in the base penalty amount under s 284-220. The amount of the penalty was therefore reduced to $113,106.00

35. Before the Tribunal, the Commissioner contended that the objection decision should be varied, by allowing the objection on the basis that the applicable penalty was 25% of the shortfall amount, worked out on the basis that the shortfall amount resulted from a failure by the applicant or its agent to take reasonable care to comply with a taxation law (Item 3 in the table in s 284-90(1)). Accordingly, the Commissioner contended that the assessment ought to be amended to reflect a penalty in the amount of $56,553.

36. At the commencement of the hearing, it was contended by the applicant that its December 2011 BAS did not constitute the making of a false or misleading statement for the purposes of s 284-75 in Schedule 1 to the TAA, despite the fact that the GST assessment was not in dispute. That contention was not pressed at the hearing. The applicant contended that it was not liable to an administrative penalty pursuant to s 284-75 because it and its agent took reasonable care in connection with the making of the statement for the purposes of s 284-75(5).

37. Furthermore, the applicant relied in the alternative upon the "voluntary disclosure" provisions contained in s 284-225 of Schedule 1 to the TAA. The applicant contended that the base penalty amount was thus reduced by 80% by operation of ss 284-225(2) and 284-225(3) on the basis that the requisite disclosure had occurred before the prescribed time, or that it ought to be reduced by 80% by being treated as having occurred before the requisite time, pursuant to s 284-225(5). Alternatively, the applicant contended that the base penalty amount was reduced by 20% by operation of s 284-225(1) on the basis that the requisite disclosure that occurred after the requisite time and that provision was otherwise satisfied.

38. The applicant also contended that, if it was liable to an administrative penalty, all or a part of the penalty ought to be remitted under s 298-20 (1) of Sch 1 to the TAA.

CONSIDERATION

39. I note that while I have referred only briefly to the submissions of the parties below, I have had full regard to both their written and oral submissions.

Reasonable care

40. The applicant bears the onus of proving that it and also its agent took reasonable care in connection with the making of the BAS for the purposes of s 284-75(5) of Schedule 1 so that it is not liable to an administrative penalty pursuant to s 284-75(1) (
Sent v Commissioner of Taxation [2012] FCA 382 at [161]). (I note that it seems to me appropriate to express the onus in terms of s 284-75(5) rather than in terms of Item 3 in s 284-90(1) given that the latter provision will not arise for consideration if liability does not arise under s 284-75.)

41. The "reasonable care" test in item 3 of s 284-90 in Schedule 1 of the TAA "calls upon a taxpayer to exercise the care that a reasonable person would be likely to have exercised in the circumstances of the taxpayer in fulfilling the taxpayer's tax obligations" (
Aurora Developments Pty Ltd v Commissioner of Taxation (No 2) (2011) 196 FCR 547 at [38]). In Aurora Developments (ibid), Greenwood J then said:

"The test looks to whether such a person would have foreseen, as a reasonable probability or reasonable likelihood, the prospect that the action or step or the failure to act or take an affirmative step would result in a shortfall amount and in determining that questions, a relevant factual enquiry is whether the taxpayer made the reasonable attempts a person in the position of the taxpayer ought to have taken so as to comply with the provisions of a taxation law."

42. One question to be answered in determining whether the taxpayer and its advisers took reasonable care is whether, on the facts, there are steps that the taxpayer ought to have taken but did not take or steps that it did take that it ought not to have taken (ibid, citing
North Ryde RSL v Commissioner of Taxation (2002) 121 FCR 1 at [82]).

43. The applicant's primary submission was that it took reasonable care in connection with the making of the December BAS in its circumstances, being that Mr Stevens, the guiding mind of the applicant, was of the view that it was not necessary to account for GST purposes for the receipt of the sale proceeds on 28 December 2011 until such time as the car parking spot contract settled, upon registration of the amended plan of subdivision. In that regard, the applicant relied upon Mr Stevens' "considerable experience" as a property developer.

44. Furthermore, although this contention was relied upon to a greater extent with respect to the question of remission, the applicant contended that it took reasonable care in the circumstances given "the illness of his mother which required his attention".

45. It seems from the applicant's written submissions that in seeking to establish that reasonable care was taken with respect to the making of the December 2011 BAS it also sought to rely upon various matters with respect to the ATO officer's conduct with respect to the subsequent audit. I accept the Commissioner's submission that those matters are irrelevant to the question of whether reasonable care was taken with respect to the making of the BAS in question and accordingly I deal with them below, in the other context in which they were raised by the applicant.

46. The applicant was an entity engaged in an enterprise of a one-off property development. Its managing director had 14 years experience in property development. The applicant's bookkeeper was an experienced bookkeeper. The applicant had available to it and made use of the services of solicitors and a tax agent. The applicant accounted for GST on a cash basis. It received sale proceeds in excess of $3,000,000 paid pursuant to a contract for the sale of one of the five apartments in that development. Mr Stevens' evidence was that he considered the circumstances surrounding the receipt of the sale proceeds to be "unusual" and that he had never experienced them before.

47. What care would a reasonable person be likely to have exercised in the applicant's circumstances in fulfilling the applicant's tax obligations? I consider that such a person, if in any doubt as to whether it should and consequently would account for those proceeds in the month in which they were received, would seek legal or accounting advice about the issue. Such a person would at least, upon becoming aware that the sale proceeds had been received (as the applicant did in mid-January), provide that information to its tax agent, so that the agent could consider whether an amended BAS for the period should be prepared or other steps should be taken so as to fulfil the applicant's obligations, which might involve communicating with the ATO about the matter. Mr Stevens' experience as a property developer did not obviate the need for such steps to be taken.

48. Those are the steps that the applicant ought to have taken, but did not take. What the applicant did do, but should not have done, was to withhold from the tax agent the information from its accounts about the receipt of the sale proceeds in late December, so as preclude its inclusion in any amended December BAS and the BAS for January, February and March.

49. In my view it is clear that a reasonable person in the applicant's circumstances would have foreseen, as a "reasonable probability or reasonable likelihood" the prospect that merely acting on Mr Stevens' view, uninformed by legal or accounting advice, and thus failing to account for the sale proceeds despite accounting for GST on a cash basis, would result in a shortfall amount.

50. I accept the Commissioner's submission that the applicant has failed to prove that it took reasonable care in connection with the making of the December BAS. In my view, it is clear that the applicant did not exercise the requisite care. Indeed, as the Commissioner submitted, it is apparent from the evidence of the witnesses that the applicant did not make any attempts to comply with its GST obligations with respect to the receipt of the sale proceeds. Essentially, the applicant has merely established the reason why it failed to do so. As I have indicated, contrary to the applicant's submission, Mr Stevens' experience in property development does not somehow reduce the standard of care applicable to the applicant, even more so given his own acknowledgement of a lack of experience with the particular circumstances the applicant faced. The applicant did not "enable a careful formulation" of its December 2011 BAS (see Aurora Developments at [108]).

51. Given my reasons above, it is therefore unnecessary for me to consider the Commissioner's submission that the applicant failed to exercise reasonable care in the circumstances in making its December BAS by lodging it early.

52. I note that there was some dispute between the parties about the circumstances in which the transfer of land was executed and stamped. In my view the essential point, given that the applicant accounted for GST on a cash basis, is that the sale proceeds were received. Furthermore, as the Commissioner submitted, it seemed that the applicant's submissions about the transfer could only have been relevant to the GST assessment, which was not in dispute. As my decision has not turned on the fact that the transfer of land was executed and stamped, it suffices to say the applicant's attempts to detract from the significance of that fact were less than compelling.

53. As I have said, at the time the applicant made the December 2011 BAS, Mr Stevens' mother was unfortunately ill, as I have described. That fact does not alter my conclusion that the applicant failed to exercise reasonable care in the making of the BAS in question, for the reasons I have given. As I have said, the applicant primarily relied upon the evidence concerning the illness and death of Mr Stevens' mother in the context of the issue of remission, and accordingly I address it in that context. It suffices to say that the matters I address in that context also serve to demonstrate that the applicant failed to exercise reasonable care despite the circumstances that Mr Stevens' mother was ill at the time of the December BAS was made.

54. Given my conclusion that the applicant failed to take reasonable care in connection with the making of its December 2011 BAS, it is therefore unnecessary for me to consider whether Mr Nixon, as the applicant's agent, took reasonable care in that regard.

Voluntary disclosure

55. In my view, the applicant is not entitled to any reduction of the base penalty amount under s 284-225 of Schedule 1 to the TAA. Mr Dwyer's correspondence sent to Mr Nixon on 29 March 2012 constituted the Commissioner telling the applicant for the purposes of s 284-225 that an examination was to be made of its GST affairs for the December 2011 period.

56. The applicant submitted that that was not so because the correspondence did not employ the word "audit". However, that provision does not use that word, and accordingly that submission has no foundation. Furthermore, I note that when the Commissioner told the applicant on 5 March 2012 that an audit was to be conducted with respect to its January 2012 BAS, he also stated that the audit might extend to "other labels, tax periods or taxation obligations". In any event, as the Commissioner submitted, it was accepted by Mr Stevens under cross-examination that he was made aware by Mr Dwyer's correspondence of 29 March that the auditor was examining the applicant's affairs with respect to its December BAS, particularly the transaction which occurred on 28 December.

57. Mr Nixon's response to Mr Dwyer sent on 31 March 2012, which enclosed Mr Stevens' letter of 30 March, constituted the applicant's first communication with the Commissioner about its December 2011 BAS. The applicant submitted that that correspondence satisfied the provisions of s 284-225. Clearly, the applicant did not "tell the Commissioner … about the shortfall amount … or the false or misleading nature" of the December BAS "before" the relevant time for the purposes of s 284-225(2).

58. Furthermore, I accept the Commissioner's submission that the requirements of s 284-225(1) (which if satisfied would reduce the base penalty amount by 20%) are not satisfied either, because the applicant did not by the correspondence of 31 March "voluntarily tell the Commissioner … about the shortfall … or the false or misleading nature of the statement".

59. First, as the Commissioner submitted, the applicant did not "voluntarily" tell the Commissioner about the transaction of 28 December. Rather, the information about the transaction was provided only after and because the Commissioner requested it. Section 284-225 requires that a taxpayer "does something of his, her or its own initiative, without prompting or apprehended pressure from the Commissioner" (see
British American Tobacco Australia Services Limited v Commissioner of Taxation [2009] FCA 1550 at [104]-[108] per Emmett J, espec. at [107]).

60. Furthermore, as the Commissioner also submitted, the applicant did not in fact tell the Commissioner about the shortfall or the false or misleading nature of the December 2011 BAS. Instead, the applicant merely told the Commissioner that he was of the view that the December 2011 BAS was not of a false of misleading nature.

61. I note that the Commissioner submitted that s 284-225(1) was not satisfied on the further grounds that the applicant did not use the "approved form" for the purposes of s 284-225(1)(b) and also because the requirements with respect to saving time or resources in the examination were not satisfied for the purposes of s 284-225(1)(c). However, given my reasons above, it is unnecessary for me to address those issues.

62. Furthermore, as the applicant did not voluntarily tell the Commissioner about the shortfall amount or the false or misleading nature of the December BAS, the exercise of the Commissioner's discretion under s 284-225(5) to treat the applicant has having done so before being told about the examination does not arise for consideration.

Remission

63. I am not satisfied, having regard to the applicant's particular circumstances, including those I have already mentioned, that it is appropriate to remit all or a part of the penalty under s 298-20 (see
Sanctuary Lakes Pty Ltd v Commissioner of Taxation [2013] FCAFC 50 at [249] per Griffiths J (Edmonds J agreeing)).

64. As I have indicated, the applicant sought remission of the penalty on the grounds that it was warranted by the ATO officer's conduct with respect to the audit. Furthermore, the applicant sought remission given the circumstances surrounding the illness of Mr Stevens' mother at the time the December BAS was lodged and her death in March 2012. The applicant also sought remission on the grounds that it was appropriate given the general interest charges ("GIC") which applied to the GST assessment relating to the shortfall and the penalty assessment.

65. The applicant focussed on its allegations about the ATO officer's conduct to a considerable, and in my view misconceived, degree. There is no aspect of Mr Dwyer's conduct that makes the outcome inappropriate having regard to the particular circumstances of the applicant (see ibid). The applicant asserted that Mr Dwyer "did not follow normal procedure" in carrying out the audit. The applicant submitted further that the auditor had failed to achieve a "rapport" with Mr Nixon and ought to have spoken to him by telephone more than he did in the period between the correspondence of 5 March and 31 March. Furthermore, the applicant submitted that further discussions ought then to have occurred prior to the issuing of the notices of assessment. The applicant submitted that the ATO officer's failure to do these things constituted a breach of the "Taxpayers' charter" issued by the ATO, that his conduct involved "standover tactics" and that he disregarded concepts of fairness and natural justice in carrying out the audit.

66. I consider the applicant's submissions concerning the ATO officer's obligations and conduct to be hyperbolic and to lack any foundation. It is apparent from Mr Nixon's evidence that Mr Dwyer failed to develop a rapport with him. Such a rapport would be admirable, but it is not required. Furthermore, I am not satisfied that an auditor is, as the applicant suggested, obliged to speak to a taxpayer or their agent each time prior to sending any written correspondence. In any event, the documentary evidence reveals that Mr Dwyer in fact made a number of unsuccessful attempts to speak to Mr Nixon by telephone during the period from 19 March to 29 March (inclusive), so that submission could hardly assist the applicant in any event. I accept the Commissioner's submission that the applicant was given sufficient opportunity to explain his position prior to the issuing of the notices of assessment. The applicant availed itself of that opportunity by the correspondence of 31 March.

67. Nor do I consider that remission is warranted in view of the illness and death of Mr Stevens' mother. While those events were, as I have indicated, no doubt most distressing for Mr Stevens, the evidence does not establish they make the imposition of the penalty on the basis of failure to take reasonable care inappropriate. As the Commissioner submitted, the applicant had available to it the services of its bookkeeper and its tax agent, those people being responsible for the preparation and lodgement of the applicant's BAS. As the Commissioner submitted, Mr Stevens continued to carry out his duties and to engage in a number of activities as the applicant's director during December 2011 until the period of his absence following his mother's death in mid-March 2012. The evidence establishes that the shortfall occurred because of the applicant acted upon Mr Stevens' uninformed view about the matter, not because Mr Stevens was unable to attend to the applicant's taxation obligations with respect to the sale proceeds it received. The documentary evidence indicates that the death of Mr Stevens' mother merely caused the late provision of documents requested by Mr Dwyer on 5 March 2012.

68. I consider that the applicant's conduct with respect to its GST obligations in relation to the sale proceeds was cavalier. Moreover, it stood in marked contrast to the care the applicant exhibited with respect to the commercial aspects of the transaction, which included seeking legal advice in that regard.

69. The applicant treated the sales proceeds as having been received by it for all other purposes. It permitted the sale proceeds, including the GST component, to be applied in the diminution of its debt to the bank. It treated the receipt of the funds in the customary way for accounting purposes, yet at the same time, did not account for GST in the customary way despite accounting on a cash basis. Furthermore, the applicant claimed a refund in its December 2011 BAS.

70. I am cognisant of the applicant's submission that payment of the GST arguably was merely deferred to a later tax period. However, the fact is that it was not accounted for in the BAS for January, February or March 2012 and on the basis of the view of Mr Stevens would not have been accounted for in its BAS until May at the earliest. Moreover, it was not in fact accounted for at all - rather, the shortfall was detected upon audit. Accordingly, I do not consider that that submission assists the applicant.

71. Nor does the fact that the GIC applied to the GST assessment and applies to the penalty assessment warrant remission in this case. The GIC does not, as the applicant suggested, constitute an additional penalty. The payment of interest serves a different purpose - the GIC "compensates the Commissioner for any harm that might have been suffered" (
Dixon v Commissioner of Taxation (2008) 167 FCR 287 at [23], see also at [25]). GIC may therefore be imposed concurrently with liability to a penalty, as the legislature evidently envisaged. Accordingly, the mere imposition of GIC does not of itself justify remission, although it seems that it may well be a relevant consideration when considered in conjunction with other circumstances of the taxpayer if in conglomeration those circumstances make remission appropriate (
Commissioner of Taxation v Traviati (2012) 205 FCR 136 at [98]-[104]). It seems to me that that aspect of Middleton J's reasoning in Traviati remains intact despite the Full Federal Court's decision in Sanctuary Lakes.

72. However, there are no particular circumstances which assist the applicant in that regard. Furthermore, having regard to all of the applicant's circumstances, remission is not warranted by the fact that GIC has applied to the assessments given that the applicant has had the countervailing advantage of the GST component of the sale proceeds having reduced its liability to the bank and therefore having reduced the applicable interest in that regard.

CONCLUSION

73. For the above reasons, the Tribunal will vary the decision under review, by allowing the objection in part on the basis that the shortfall amount resulted from a failure to take reasonable care to comply with a taxation law for the purposes of Item 3 in s 284-90(1) of Schedule 1 to the TAA. The amount of penalty for the purposes of s 284-85 will therefore be reduced to $56,553, the base penalty amount being 25% of the applicant's shortfall amount and there being no increase nor reduction for the purposes of that provision.