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The AAT has dismissed the taxpayers' application to have GST penalties imposed by the Commissioner reduced on the grounds that they arose as a result of the alleged negligence of the taxpayers' former accountant.

The penalties in question were assessed at 50% of the amount of the shortfall that arose out of the transaction on the basis the shortfall was the product of recklessness rather than a mere want of reasonable care. The Commissioner remitted 25% of the penalties but the taxpayers asked for more generous treatment.

The taxpayers argued that they were blameless in the management of their affairs and were the victims of their tax agent accountant.

The AAT said, at para 6:

"Unfortunately for the taxpayers, their argument in respect of the decision to levy a penalty at 50% cannot succeed even if I accept their version of what occurred. There clearly is some basis for believing there was reckless conduct on the part of the agent: the solicitor’s advice and the (admittedly hearsay) comments of the new accountant together with the size of the mistakes suggest something was seriously wrong with the way in which the taxpayers’ tax affairs were being managed. I did not hear from the accountant, but that was not surprising in the circumstances. The taxpayers have simply not produced (and probably were unable to produce) evidence that would enable me to say the Commissioner’s conclusions on this point were wrong. Given the evidentiary burden imposed by s 14ZZK(b) of the [Tax Administration Act 1953], that means this aspect of their application for review cannot succeed. I therefore affirm the objection decision in that respect."

Hirezi and Ors and FCT [2012] AATA 688 (AAT, McCabe SM, 8 October 2012).


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