The Commissioner submitted that no reduction was justified because no voluntary disclosure had been made prior to commencement of the audit of the taxpayer's affairs. The taxpayer submitted that the Commissioner had provided no opportunity to make a voluntary disclosure. The AAT found that no voluntary disclosure could have been made because the taxpayer was not even aware that it had made a false or misleading statement in its BAS and there was no information that it could have provided to the Commissioner that would have constituted a voluntary disclosure.
The AAT said, at para 70:
"While it is true that nothing amounting to a proper voluntary disclosure was made, the contention that such a disclosure neither would nor could have been made is in my view too speculative. An offer of voluntary compliance might indeed have galvanised [the taxpayer] into action to organise a proper voluntary disclosure rather than stumbling along the confused and disorganised path that was in fact followed. Discussions with the directors might have prompted them immediately to repudiate the ITC claim and to set the circumstances before the Commissioner in an organised and coherent way."
Accordingly, the AAT found mitigating circumstances to justify the reduction of the penalty: DG Empire as trustee for DG Empire Trust and FCT  AATA 1485 (AAT, Prof Walker DP, 29 June 2007).
For a copy of the decision, go here