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Tribunal: Senior Member Dr M Evans-Bonner

The AAT, in its first Small Business Tax Division case in Perth, set aside a decision of a delegate of the Commissioner of Taxation (the Commissioner). The Tribunal substituted its decision to fully release the unemployed subcontractor from his tax debt. 

The Applicant’s taxation debts started to accumulate in 2004 when he lodged his 2001, 2002 and 2003 income taxation returns. On the day before the hearing his eligible debt totaled $134,302. The bulk of this was made up of general interest charges and legal costs, which had compounded over 17 years. He also had a further $8,095 of debt, which was not eligible for release.

After examining the applicant’s income/outgoings and assets/liabilities the Commissioner conceded the applicant was suffering serious hardship. He was living in a granny flat on his mortgaged residential property, which remained unfinished because he had exhausted his finances. He had no savings and his only income was his Newstart allowance.

The Commissioner argued against the release because of his poor compliance over multiple years, coupled with his failure to prioritise his tax debts over other smaller family debts.

The Tribunal contemplated the effect of partially releasing the applicant from the debt, but the Commissioner accepted further general interest charges would accrue and it would not alleviate his serious hardship.

The Tribunal was unable to see how the applicant would even pay his tax debts in his lifetime if he was not granted a full release.

The applicant acknowledged ‘his lack of understanding of appropriate tax keeping and recording practices’ and the Tribunal was encouraged he had engaged an accounting firm to help him meet his future tax obligations.

The applicant also argued his ongoing taxation debts had been a major contributing factor to his poor mental health, preventing him from returning to paid work. The Commissioner argued there was no medical evidence confirming his mental health issues. However, the Tribunal found the applicant’s claim credible, with his agitated demeanour throughout the hearing adding further weight to concerns for his health.

Read the full decision