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The AAT has remitted in full the administrative penalty imposed (at the rate of 25% of the tax shortfall) by the Commissioner on a taxpayer who claimed deductions for personal superannuation contributions without giving the trustee of the fund the notice required by s 290-170(1) ITAA 1997.

The AAT said, at paras 18-19:

"This is a taxpayer who contributed a significant amount to his superannuation fund in the honest but mistaken belief that he would be entitled to a tax deduction. He would, in fact, have been entitled to the deduction if the paperwork had been properly attended to. The disallowance of the deduction increased his tax bill by almost $40,000. It is harsh, in the circumstances, that he should pay a penalty of almost $10,000 when it was a shortcoming in the paperwork, pure and simple, that led to the denial of the deduction.

To the extent that administrative penalties serve the combined purposes of encouraging compliance with the law and deterring non-compliance, the penalty in this case does not achieve either of those ends. Mr Johnston struck me as a person of integrity who already treats his tax obligations seriously...There is no good purpose to be served by leaving the penalty in place."

Johnston and FCT [2011] AATA 20 (AAT, Frost SM, 20 January 2011).


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