Decision impact statement
Waldeck and Commissioner of Taxation
Venue: Administrative Appeals Tribunal
Venue Reference No: 2012/2591; 2012/2592
Judge Name: McCabe SM
Judgment date: 3 December 2012
Appeals on foot: No
Decision outcome: Adverse
Impacted Advice
Relevant Rulings/Determinations:- Nil
- Nil
Subject References:
Employee vs. Independent Contractor
Administrative penalty
Reasonable care
Shortfall interest remission
Remission of administrative penalty
Précis
Outlines the ATO's response to this case which concerned whether a 25% penalty for failure to take reasonable care should be remitted in part or full.
Brief summary of facts
The taxpayer provided services to a firm during the 2009 and 2010 income years. He was uncertain of whether he was an employee or a contractor for the firm.
The taxpayer sought advice from a legal practitioner as to whether he was an employee or contractor and whether he could claim Pay As You Go (PAYG) credits.
The legal practitioner advised the taxpayer that he was an employee and assisted the taxpayer in preparing income tax returns which included a claim for PAYG credits for the 2009 and 2010 income years. The legal practitioner advised the taxpayer that he was entitled to claim PAYG credits even though the firm had not withheld any amount from his remuneration.
The taxpayer also contacted the ATO Helpline on a number of occasions both before and after the taxpayer lodged his income tax returns for the 2009 and 2010 income years. The taxpayer asked how he could proceed in reporting his income and said, in a round about way, that his employer had not been withholding PAYG amounts.
The advice given by the Helpline was unhelpful, most likely because the Helpline operators did not understand the import of what the taxpayer was asking.
The Commissioner issued amended assessments and levied administrative penalties equal to 25% of the shortfall in each year on the basis that the taxpayer failed to exercise reasonable care in making statements in his returns.
The Tribunal was required to consider whether the penalty was properly imposed and whether it ought to be remitted.
Issues decided by the court or tribunal
The Tribunal affirmed the objection decision to impose an administrative penalty but remitted the penalty in full.
The Tribunal was satisfied that if the taxpayer was liable to the penalty it would be harsh in the circumstances.
ATO view of Decision
The Tribunal's decision to remit the penalty is based on the facts and circumstances in this particular case and will have no impact on other cases.
Administrative treatment
Implications for ATO precedential documents (Public Rulings & Determinations etc)
Nil
Implications on Law Administration Practice Statements
Nil
Court citation:
[2012] AATA 848
(2012) 91 ATR 478
Legislative References:
Taxation Administration Act 1953 (Cth)
18-15
298-20
Case References:
Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation
[2008] FCAFC 54
2008 ATC 20-015
69 ATR 627
Hobart Central Childcare Pty Ltd and Federal Commissioner of Taxation
[2005] AATA 1027
2005 ATC 2351
60 ATR 1314