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The AAT has found that a non-practising suburban solicitor was not in such circumstances that he would suffer serious hardship if required to satisfy a tax debt. The AAT affirmed the Commissioner’s decision to refuse to exercise his discretion under s 304-5 of the Taxation Administration Act 1953 (Cth) to release the taxpayer from all or any of the tax debt.

The taxpayer was a solicitor who was no longer practising. He and his wife both received the aged pension. The taxpayer’s wife owned all of the household assets, including their place of residence.

The taxpayer’s releasable taxation liability at 4 July 2012 amounted to $130,961 with an additional liability in respect of GST of $104,326.37. This latter amount was non-releasable.

The Commissioner decided not to exercise the discretion to release because it was considered that the household had disposed of funds and assets without making proper provision to meet tax liabilities and had used available funds to discharge debts to other private creditors in preference to paying the tax. Further, the taxpayer had a poor compliance history.

The AAT considered that the expression “serious hardship” extends beyond the question whether assets are segregated. It is sufficiently broad to cover dealings at the present and foreseeably likely to continue in the future between the taxpayer and his wife, and all aspects of their relationship in respect of finance. It would be artificial to confine the examination to the question whether assets were legally segregated or quarantined. The expression “serious hardship” is sufficiently broad to involve examination of the assets and income of a spouse as a relevant consideration in an appropriate case.

Having regard to applicable principles and all of the evidence, particularly the evidence as to the absence of any likely clear hardship, and the taxpayer’s ability to obtain the necessities of life, the AAT was not persuaded that there would be any “serious” hardship if the eligible amount of debt was not released.

The AAT also found that if, contrary to the view of the tribunal, the taxpayer’s circumstances qualified for exercise of the discretion to release the debt, it should not be exercised in his favour.

Re Neimanis and FCT [2012] AATA 814 (Deputy President Brian Tamberlin QC, 20 November 2012).

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