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The Administrative Appeals Tribunal has decided that a decision by the Commissioner in relation to a taxpayer’s entitlement to PAYG withholding credits does not form part of an “objection decision” and is not reviewable by the Tribunal. The Tribunal in this case also affirmed the Commissioner’s decision to impose a penalty on the basis that the taxpayer had made a false or misleading statement by claiming a PAYG withholding credit.

The taxpayer was the sole director and secretary of a company. In his individual tax return he disclosed taxable income in the form of salary or wages paid to him by the company. He also claimed a PAYG withholding credit for amounts withheld from payments of his salary or wages.

The Commissioner conducted a review of the taxpayer’s income tax return, and issued an assessment in which the claim for the PAYG withholding credit was disallowed. The Commissioner also imposed an administrative penalty of 50% of the claimed PAYG withholding credit, on the basis that he had, by claiming that credit, made a false or misleading statement for the purposes of s 284-75(1) of Sch 1 to the Taxation Administration Act 1953 and that he had a shortfall amount as a result of that statement which resulted from recklessness as to the operation of a taxation law (ss 284-80, 284-85 and 284-90 in Sch 1 to the TAA).

The taxpayer purported to object to the primary assessment on the basis that he was entitled to the PAYG withholding credit in issue. He also objected to the penalty assessment.

The Tribunal accepted that it lacked jurisdiction to review the Commissioner’s decision concerning the taxpayer’s entitlement to the PAYG withholding credit. A credit for PAYG withholding which appears on a notice of assessment arises only by reason of the operation of s 18-15(1) of Sch 1 to the TAA and is not a particular of the assessment but rather a particular of the statement of account between the taxpayer and the Commissioner. Accordingly, a taxpayer cannot properly object to an assessment on grounds concerning entitlement to PAYG withholding credits. Such a claim does not constitute dissatisfaction with an “assessment” for the purposes of s 175A(1) of the Income Tax Assessment Act 1936. To the extent that the taxpayer’s objection purported to be against the primary assessment, it did not form part of nor constitute a “taxation objection” within the terms of s 14ZL of the TAA. The taxpayer’s objection was only properly made against the penalty assessment.

The consequence was that the Commissioner’s decision on review that the taxpayer was not entitled to the claimed PAYG withholding credit did not form part of the “objection decision” within the terms of Pt IVC of the TAA, nor constitute an objection decision in itself. The Commissioner’s decision with respect to the PAYG withholding credit was not capable of review by the Tribunal.

As to the penalty, the Tribunal noted that there was no documentary evidence before the Tribunal in the form of books and records containing accounting entries made contemporaneously with the making of payments by the company to the taxpayer, nor any evidence, save for a payment summary created after the assessments had issued, that the company had complied with its reporting requirements. The taxpayer admitted that, in fact, no withholding had occurred. The Tribunal therefore found that the taxpayer’s return constituted a false or misleading statement, and that the taxpayer had been reckless as to the operation of the taxation law.

The Commissioner’s decision on penalty was affirmed.

Re Confidential and FCT [2014] AATA 257 (AAT, F J Alpins DP, 30 April 2014).

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