Pala v Federal Commissioner of Taxation
In this case, the AAT has affirmed penalties imposed for intentional disregard of the law (failure to remit PAYG amounts deducted).
Facts
The taxpayer (Pala, a qualified accountant) was the sole director and only employee of a company. Over a three-year period, the company paid him a salary and wages and deducted PAYG amounts, but did not remit the PAYGW to the ATO.
The issue before the AAT was whether the Tax Commissioner’s decision was correct in imposing administrative penalties of
75 per cent of the shortfall amount for intentional disregard of the law (see section 284-90 of Schedule 1 to Taxation Administration Act 1953) with uplift of 20 per cent (see section 284-220).
The taxpayer argued that the penalty rate should be set at 25 per cent of the tax shortfall (failure to take reasonable care to comply with the law). The taxpayer’s reason for this was that a Family Court dispute he was involved in meant that he was unable to pay the PAYGW. He was mindful of his tax obligations and intended to meet those obligations following resolution of the Family Court matters.
Arguing in favour of the penalty decision, the Commissioner noted that:
- The non-payment of PAYGW extended over three years (hardly consistent with carelessness).
- The non-payment was not a result of record keeping or bookkeeping mistakes (this might indicate carelessness).
- No voluntary disclosure was made either before or during the audit.
- The taxpayer’s compliance history was poor.
AAT decision
The AAT upheld the Tax Commissioner’s decision to impose a penalty of 75 per cent of the shortfall and the 20 per cent uplift for intentional disregard of the law.
Taking into account the taxpayer’s qualifications and the three-year non-payment period, the AAT held that the taxpayer knew that he had to remit the PAYGW amounts calculated and chose not to do so.
