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28 Mar 11 Decision Impact Statement - Shin

The ATO has issued a Decision Impact Statement in relation to the AAT decisions in Shin and FCT [2010] AATA 1012; 2010 ATC 10-166; [2010] AATA 1013. The case concerned whether shortfall penalties were payable under the former s 226G of ITAA 1936 and Subdivision 284-B of Schedule 1 to the Taxation Administration Act 1953, and whether any penalties should be remitted in full. The AAT found that the taxpayers had adopted a position that was reasonably arguable, based on the decision of Allsop J in an earlier case.

The ATO accepts that there was no error of law in the AAT's finding that the taxpayers had adopted a position on the deductions claimed that was reasonably arguable.

However, the ATO considers that the view of the AAT, that a taxpayer who has a reasonably arguable position on an income tax law, must be taken to have met the reasonable care standard, is inconsistent with both the key features of Part VII identified in the Explanatory Memorandum to the Taxation Laws Amendment (Self Assessment) Bill 1992, and with the comments of Hill J in Walstern [2003] FCA 1428, at 138 FCR 25-27, and of Finn J in R & D Holdings [2006] FCA 981, at [182].

The ATO says that the AAT should have found that issues in relation to the taking of reasonable care need to be determined separately from issues about the adoption of a reasonably arguable position.