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The AAT has remitted in full a 25% tax shortfall penalty imposed on a taxpayer for failure on the part of the taxpayer (or the taxpayer’s tax agent) to take reasonable care in relation to incorrect claims for work related deductions. The AAT said, at para 71:

"The Applicant’s approach to his taxation obligations seems to us to be entirely acceptable – he provided information to a registered tax agent and relied on that agent to prepare his tax return for him. It cannot reasonably be expected of a long-distance truck driver (who has engaged a registered tax agent to prepare his tax returns) that he, the driver, should undertake a detailed analysis of the taxation law and Commissioner’s rulings to determine whether a draft return prepared for him by his agent contains accurate information. There is no shortcoming in the level of care taken by the Applicant in this case."

However, the AAT found that the taxpayer's agent had failed to take reasonable care in the preparation of the taxpayer's returns. For that reason the imposition of the administrative penalty of 25% was "undoubtedly correct". However, the AAT considered such an outcome "harsh", and held that the penalty should be remitted in full under s 298-20 in Schedule 1 to the Taxation Administration Act 1953.

The AAT said, at para 74:

"The Applicant in giving his oral evidence was entirely open and candid. He did not try to any extent to conceal the truth, and he did not embellish his answers in the hope that we would view the facts in any more favourable way than was warranted. In short, his refreshingly straightforward and honest approach to giving his evidence was of considerable assistance to the Tribunal in its task of arriving at the correct or preferable decision. We are strongly inclined to the view that the Applicant’s approach to his case in the Tribunal is reflective of his general approach to meeting his tax obligations and we do not consider, in those circumstances, that he should be required to pay an administrative penalty."

Fardell and FCT [2011] AATA 725 (AAT; Block DP and Frost SM; 19 October 2011).


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