Mr Chen is the sole director and shareholder of ABC Staff Hire Pty Limited (the taxpayer). For many years, his company has carried on a labour hire business, connecting its clients in the poultry industry with persons willing to work for them. During the period in question, Mr Chen also owned and controlled three other labour hire companies, and owned or controlled three property investment companies, all of which were considered by the Chief Commissioner to constitute a group for the purpose of assessing payroll tax.
On 22 February 2016, the Chief Commissioner of State Revenue assessed the taxpayer to payroll tax in respect of the financial years ending 30 June 2012, 2013, 2014, and 2015. In respect of each year he determined that penalty tax was payable at the rate of 25%, and imposed interest. He later remitted the premium component of the interest, so that only interest at the market rate remained payable. The penalty tax amounted to $407,859.51. The market rate interest amounted to $85,647.86. The applicant agreed to pay the tax, penalty tax and interest by instalments.
On 22 April 2016, the applicant objected to the assessments, including the determination of penalty tax and interest. On 27 February 2017, the Chief Commissioner disallowed the objections in whole.
On 3 May 2017, the applicant commenced these proceedings, seeking review of the decisions in respect of penalty tax and market rate interest in respect of the each of the four tax years. It does not otherwise seek review of the assessments.
The company submits, in broad outline, that penalty tax should not be payable, because it took reasonable care to comply with its payroll tax obligations, and the tax default occurred for reasons outside its control and outside the control of its director, Mr Chen.
It also submits that market rate interest should be remitted, because:
1. the Commissioner contributed to the tax default by failing to assess payroll tax after audits conducted in 2008 and 2012 - thus giving the taxpayer reason to believe that payroll tax was not payable, and
2. by letting 19 months or more pass, knowing the nature of the taxpayer's operations, he allowed interest to accrue so as to produce an 'unfair burden on the applicant and a dishonest windfall to the Chief Commissioner'.
In respect of both market rate interest and penalty tax, the applicant says it is relevant to take into account that it has at all times assisted the Chief Commissioner in his investigation, and has entered into and complied with a payment plan in respect of the tax assessed.
[3]
Jurisdiction
The Tribunal has power to review decisions of the Chief Commissioner with respect to taxation where, as here, an objection has first been made and disallowed by the Chief Commissioner: s101, Taxation Administration Act 1996. The applicant for review bears the onus of proving its case: section 100(3).
The function of the Tribunal on review of a decision is to determine what is the correct and preferable decision, having regard to the material before it: s63(1), Administrative Decisions Review Act 1997.
[4]
Legislation
In respect of interest, section 21 of the Taxation Administration Act 1996 provides:
(1) If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division.
(2) Interest is payable under this section in respect of a tax default that consists of a failure to pay penalty tax under Division 2 but is not payable in respect of any failure to pay interest under this Division.
"Tax default" is defined in section 3 to mean:
a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay.
There is no issue in these proceedings that a tax default occurred when the company failed to pay payroll tax in respect of the four taxation years in question.
Section 22(1) provides:
The interest rate is the sum of:
(a) the market rate component, and
(b) the premium component.
Section 25 provides:
The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.
As indicated, premium rate interest has been remitted. Only the market rate of interest is payable.
In respect of penalty tax, Section 26 relevantly provides:
(1) If a tax default occurs, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid.
(2) Penalty tax imposed under this Division is in addition to interest. …
Section 27 provides:
(1) The amount of penalty tax payable in respect of a tax default is 25% of the amount of tax unpaid, subject to this Division.
(2) The Chief Commissioner may increase the amount of penalty tax payable in respect of a tax default to 75% of the amount of tax unpaid if the Chief Commissioner is satisfied that the tax default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a taxation law.
(3) The Chief Commissioner may determine that no penalty tax is payable in respect of a tax default if the Chief Commissioner is satisfied that:
(a) the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law, or
(b) the tax default occurred solely because of circumstances beyond the taxpayer's control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person's or the taxpayer's control) but not amounting to financial incapacity.
Section 33 provides:
The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount.
[5]
Issues for determination
In this case, the issues for determination are:
1. Whether, having regard to the material before the Tribunal, the correct and preferable decision is to remit market rate interest.
2. In respect of penalty tax:
1. Whether it is appropriate to determine pursuant to section 27(3) that no penalty tax is payable, because:
1. the company or someone acting on its behalf took reasonable care to comply with the taxation law, or
2. the tax default occurred solely because of circumstances beyond the company's control or beyond that person's control.
1. Whether, for any reason, it is appropriate to remit penalty tax pursuant to section 33.
[6]
Evidence - section 58 documents
Both parties relied on documentary evidence lodged with the Tribunal by the Chief Commissioner pursuant to section 58 of the Administrative Decisions Review Act 1997. Having regard to that material, we are satisfied of the following:
[7]
2008 audit
1. On 15 September 2008, the Chief Commissioner notified the taxpayer in writing that he was conducting a payroll tax investigation, and administered a questionnaire.
2. On 14 November 2008, answers to the questionnaire were provided by the taxpayer's external accountant, Mr Mar.
3. On 1 December 2008, the Chief Commissioner informed the taxpayer that his investigation was complete, attached provisional assessments to payroll tax in respect of the 2007 and 2008 tax years, and informed the taxpayer that 'the entity is responsible to lodge a monthly payroll tax return'. The assessments were formally issued the following day.
[8]
2012 audit
1. On 12 December 2012, the Chief Commissioner notified the taxpayer in writing that he would now conduct an investigation into the taxpayer and the other companies grouped with it for the purposes of the Payroll Tax Act 2007, in respect of payroll tax for the tax years 2009 to 2012 inclusive. He sought certain records from the taxpayer.
2. The materials were probably provided by Mr Mar, both directly in response to the letter, and personally when an officer of the Chief Commissioner attended on him, as he explained to the investigator on 20 January 2014.
3. On or about 3 July 2013, the taxpayer applied for a refund on the basis that its wages had been overstated and that, in fact, they fell below the relevant tax threshold.
4. By email dated 13 January 2014, the Chief Commissioner told Mr Mar:
If the client no longer wishes to claim the refunds previously requested (2009-2013 financial years), we can finalise the audit and send you a letter confirming this. We just need an email/letter confirming this, and the reason.
1. Mr Mar obliged him on 16 January 2014, and the investigation came to an end on 20 January 2014.
2. The audit report recorded:
Keith advised that the client would like to withdraw the refund request if they have to go through providing all the archived documents again. … The manager of Compliance Enhancement agreed and the client's refund requests will be denied upon completion of the audit.
1. It also included a grouping diagram showing the companies under the control of Mr Chen. They were the taxpayer, and nine other companies. All of these companies had been identified as part of the group in the 2008 audit.
2. On 20 January 2014, the Chief Commissioner advised Mr Mar in writing that the investigation was complete, but that:
The investigation was limited and based on the records and information provided at that time. It is possible that we may want to re-examine the same or similar issues in the future.
[9]
2015 audit
1. On 24 August 2015, the Chief Commissioner notified the taxpayer in writing that he was investigating payroll tax liabilities for the tax years 2012 to 2015. He requested certain documents.
2. On 22 September 2015, Mr Mar's firm responded by providing to the Chief Commissioner a considerable volume of documents. On the same day, the Chief Commissioner noted that these disclosed 'significant contractor payments' and sought particulars.
3. On 6 November 2015, numerous folios containing the particulars were provided by Mr Mar's firm.
4. On 24 November 2015, the Chief Commissioner requested sample contracts, which were provided on 8 December 2015.
5. On 15 and 20 January 2016, the Chief Commissioner's auditor, Ms Sharma, conducted a field audit of the taxpayer and seven related entities at Mr Mar's premises. In her audit report, Ms Sharma noted:
ABC Staff Hire Pty Limited … is a labour hire company primarily providing labour to [a] few large chicken processing companies. This business has been in operation for over 5 years and the nature of the business has remained unchanged.
1. On 16 February 2016, Ms Sharma informed Mr Mar's firm by email as follows:
Thank you for providing all the requested information in regards to the payroll tax investigation of the above clients.
Bai Li Food Services Pty Limited ("Bai Li") and ABC Staff Hire Pty Limited ("ABC Staff") are grouped for payroll tax under the common control provision of the Payroll Tax Act 2007 (PTA) for the audit period. As such payroll tax threshold has only been allowed to Bai Li. No audit issues were found for Bai li.
Audit issues for ABC Staff:
- Threshold disallowed for the audit period.
- Directors fee for 2013 financial year included.
- ABC Staff is a labour hire business procuring the services of the workers for its end user clients. All payments made to the workers are liable wages for payroll tax purposes under the employment agency provisions …. Payments made to other entities for the provision of workers has resulted in the chain of on hire arrangement …
ABC Staff is the liable party in the arrangement as it is closest to the end user client and as such payment made to the entities claimed as 'contractors' are taxable wages for ABC Staff. ….
Assessments which will incorporate interest and penalty will be issued on 23rd February and will be accompanied by a finalisation letter.
1. The audit report contained a list of seven companies forming a group with the taxpayer for payroll tax purposes. With one possible exception (as to which it is unnecessary to make a finding), these were all among the companies identified in the 2008 report as forming part of the group.
2. On 18 February 2016, there were further communications between the Chief Commissioner and Mr Mar's firm.
3. On 22 February 2016, the Chief Commissioner assessed the taxpayer to payroll tax, including penalty and interest the subject of review in these proceedings.
In her audit report, Ms Sharma gave reasons why penalty and market interest would be imposed. They included the following:
During the final stages of the audit [an external accountant other than Mr Mar] provided some additional contracts with ABC Hire and 3 of its clients …. Review of these contracts revealed various inconsistencies and detailed analysis of these contracts indicated that the contracts were modified by the client. These contracts seemed to have been modified to look similar to the contracts with Bai Li and its clients where it was accepted that Bai Li was not a labour hire company. When the client was advised that the additional documents provided will not be accepted for any further review as I needed to verify its authenticity from the customers of ABC Hire and also warned [the accountant] that providing any false and misleading information is an offence under the Taxation Administration Act, she requested to withdraw those documents. Although I did not further confirm the authenticity of the documents as those documents were not used for any further review It indicates that the client had provided some falsified and misleading information for the investigation and when made aware of its consequences tried to retract those documents.
The respondent did not adduce evidence from Ms Sharma. Though the above incident was mentioned in the respondent's submissions, it did not submit that the material before the Tribunal was sufficient to prove that the taxpayer or its accountant wilfully misled the Chief Commissioner, or bring other evidence to support such an inference. In the circumstances, I am not persuaded that the inference should be drawn, and it is inappropriate to make any finding in respect of it.
[10]
Mr Chen's evidence
Mr Chen gave evidence by way of affidavit, and oral evidence. He confirmed that he was sole director and shareholder of the taxpayer, and the sole director (and in most cases, the sole shareholder) of all the members of the group identified in the 2016 audit report.
In operating the companies forming the group, he said, he relied on the advice of internal and external accountants and solicitors, to ensure that the companies were complying with their obligations. His external accountant was Mr Mar. His employed accountant was Mr Wang. He named two law firms he had consulted from 2006 to 2015.
He said he had received "approvals for the companies' business practices" from the Chief Commissioner in 2008 and 2012, from the Australian Tax Office in 2013 and from the Workers Compensation Authority (by which he possibly meant the WorkCover Authority by its scheme agent) in 2014. In respect of the alleged 'approvals' by the respondent, he appears to have been referring to the investigations conducted in 2008 and 2012.
After the 2008 audit, he said, he had a number of conversations with Mr Wang and Mr Mar, and 'various contractors'. In these conversations, he said, he told those he was speaking to that the taxpayer company and its associated entities would 'ensure its business practices were the same as those approved in the 2008 audit'.
He then ensured that the business practices remained the same. He also ensured that the taxpayer complied with its payment plan in relation to payroll tax.
In oral evidence, he said he could not recall whether the taxpayer had been registered for payroll tax prior to the 2008 audit. In response to a question whether he could identify any document in the 2008 audit that approved his business practices, he responded his accountant advised him that the Chief Commissioner had audited his companies and said that they were all authorised. He said it was Mr Mar who told him that the respondent had approved his business practices. He could not recall precisely what was said.
[11]
Mr Mar's evidence
Mr Mar gave evidence by way of affidavit. He said that his firm had been the external accountants for the taxpayer since 2004. He said he tried to ensure co-operation with the Chief Commissioner's investigators, and provided information quickly when requested. He said the taxpayer paid the payroll tax assessed after the 2008 investigation within the 21 days required.
He agreed that Mr Chen had instructed him to comply with the taxpayer's obligations to the Office of State Revenue and its expectations. He said these instructions had been given 'ever since the OSR began its audit of the Applicant'. As he refers only to the 2008 audit in the body of the affidavit (though in an annexure he refers to the 2012 audit), I interpret him to mean that those instructions were given immediately after the 2008 audit.
He said that on 7 March 2017, the taxpayer entered into a payment plan for the payment of its payroll tax, and has complied with it.
He annexed a letter which he had written to the Chief Commissioner on 27 April 2017, requesting an internal review of the imposition of interest and penalty. In it, he advanced the following argument:
1. Although the audits conducted by the Australian Tax[ation] Office [in 2013] and Allianz Workers Compensation (NSW) Limited [in 2014] were not directly performed by the Office of State Revenue, the audits were conducted in a manner similar to the purpose of the office of State Revenue. Similar documents were provided to the offices and the offices unanimously concluded that the way that ABC Staff Hire conducts it business were [sic] done in compliance with relevant legislation and Act. A reasonable person will form an opinion that there was no requirement for ABC Staff Hire to alter, amend or change the way it was conducting business and structure. When the Office of State Revenue conducted the second audit on ABC Staff Hire and subsequently found issues, it should taking [sic] into account the above factor in deciding the imposition of interest charges and penalty. It would be unfair and unreasonable to impose interest charges and penalty when previously payroll related audits were concluded without findings.
2. In paragraph 19 of the letter [dated 27 February 2017 from the Chief Commissioner], we do not agree with the statement "There is no evidence that such approval was previously sought by ABC". If 3 authorities including the Office of State Revenue had the opportunity to review the organisation structure of ABC Staff Hire, I believe this implies that ABC Staff Hire has sought approval and affirmation of its existing structure.
[12]
Mr Wang's evidence
Mr Wang gave affidavit evidence. He said that he had been the taxpayer's accountant since 17 March 2007, and worked closely with Mr Chen. He said he had been involved in the 2008 and 2012 audits, and took all steps he could to co-operate with investigators and provide information requested in a timely manner.
He said the payroll tax assessed in 2008 was paid within the 21 day period as required.
He said that, after the 2008 audit, Mr Chen told him that he was happy that the Tax Office (by which, from context, it seems he meant the OSR), has:
… signed off on our business practices. And I want to make sure that we always stay in that approval. You are to make sure that we do so and if you think we've stopped complying with the Tax Office in any way please let me know so that I can fix it. …
Until 24 August 2015, when notice of the 2015 investigation was received, Mr Wang said he was under the impression that the taxpayer and the companies grouped with it were 'operating consistently with the OSR 2008 approval of the Applicant's business practice', that those practices had continued to the present, and that they had been 'acting with approval of the OSR and consistently with their NSW tax obligations'.
He said the taxpayer had met its obligations to pay the most recently assessed payroll tax in instalments.
[13]
Mr Wu's evidence'
Mr Wu gave affidavit evidence. He said that he was the director of one of the taxpayer's contractor companies. He said that in December 2008 or early 2009, Mr Wang had told him the OSR had:
said our contracting practices are okay. We are therefore focusing on making sure we continue operating in the same way that we have up to now. We want to make sure we stay within the [OSR's] approval.
[14]
Findings of fact
The findings of fact arising from the section 58 documents are set forth above.
The evidence of Mr Chen, Mr Mar, Mr Wang and Mr Wu was un-contradicted by other evidence, including documentary evidence, and I am satisfied that it is accurate. In particular, I am satisfied as follows:
1. At all material times, Mr Chen as sole director of the taxpayer retained internal and external accountants and directed them to comply with all relevant taxation laws, including laws with respect to payroll tax.
2. He understood, following the 2008 audit, that the taxpayer and his other companies were compliant with their payroll tax obligations.
3. The taxpayer, through its accountants, co-operated with the Chief Commissioner in his investigations following the 2012 notice of investigation, by providing documents and information as requested.
4. The taxpayer has paid all payroll tax assessed in respect of the tax years 2012 to 2015 in accordance with the payment plan agreed to by the Chief Commissioner.
The evidence of those witnesses also demonstrates that, at all material times, Mr Chen (and, therefore, the taxpayer) was under the impression that in 2008, the Chief Commissioner 'approved' the taxpayer's 'business practices'. Mr Chen said he received this impression from Mr Mar. Mr Mar did not deny it. Having regard also to Mr Mar's submission to the Chief Commissioner of 27 April 2017 that, 'If 3 authorities including the Office of State Revenue had the opportunity to review the organisation structure of ABC Staff Hire, I believe this implies that ABC Staff Hire has sought approval and affirmation of its existing structure', it is likely that Mr Mar did advise Mr Chen that the Chief Commissioner in 2008 had approved the taxpayer's business structure and practices.
There is no evidence that the Chief Commissioner gave any such advice or approval. It is highly unlikely that he did so. He simply investigated the taxpayer, advised that it was liable to payroll tax, registered it for that purpose, and assessed it to payroll tax in respect of two years. The Chief Commissioner expressed no view as to whether further payroll tax would be assessable in respect of later tax years. Nor did he do so in 2012. There is no evidence that he advised the taxpayer that it would not be liable to payroll at any time, and I am not satisfied that he did.
[15]
Market rate interest
As a matter of practice, market rate interest is rarely if ever waived, unless the Commissioner has contributed to the tax default, because interest is both compensatory in nature and necessary to avoid discriminating against taxpayers who comply with their obligations on time: Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19. As the Appeal Panel of the former Administrative Decisions Tribunal observed [at paragraph 60]:
In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Accepted Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation.
In Trust Co of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 Judicial Member Verick observed [at paragraph 27]:
In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the 'Tax default' is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer.
The principles in Incise Technologies and Trust Co have been applied in this Tribunal: Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215.
In this case, the circumstances giving rise to the liability to payroll tax were not outside the taxpayer's control. The taxpayer itself determined the nature of its contractual relationships with related entities. It was these relationships, and the payments made pursuant to them, that rendered it liable to payroll tax.
The taxpayer argues, in effect, that the Chief Commissioner contributed to its tax default by approving its business structure and practices in the 2008 and 2012 audits. As indicated, the Chief Commissioner did not communicate any such approval, and expressed no view on whether a liability to payroll tax would arise in the tax years here in question. As indicated, the 2012 audit was brought to an end when the taxpayer withdrew its request for refunds. No indication was made to the taxpayer about its current or prospective tax liability.
It follows that the Commissioner made no contribution to the taxpayer's failure to pay payroll tax in respect of the tax years 2012 to 2015. There is no basis for a remission of interest at the market rate, notwithstanding the taxpayer's timeliness in paying the tax (once assessed) by instalments, and its co-operation with the various investigations conducted by the respondent.
Similarly, Mr Chen's innocent misapprehension that the taxpayer's business structure and/or practices had been approved by the respondent - with the consequence that he appears to have thought the taxpayer was not liable to payroll tax - does not justify a remission of market rate interest, because of the compensatory nature of the interest, and the fact that it is designed to be fair to taxpayers who pay their tax on time.
The suggestion that interest is a 'dishonest windfall' to the Commissioner because he failed to assess payroll tax earlier than he did, in circumstances where he knew of the business practices and structure of the taxpayer, is not persuasive. The full facts necessary to determine whether and, if so, in what amount, payroll tax ought be assessed were not known until the 2015 investigation was complete. There can be no suggestion of dishonesty on the part of the Chief Commissioner. It is the duty of taxpayers to comply with the taxation laws, not just when advised as to their effect by the Chief Commissioner, but at all times. The obligation to discern whether payroll tax was payable lay at all times with the taxpayer.
Nor can it be suggested that market rate interest constitutes a 'windfall' to the Chief Commissioner of any kind. As indicated, its function is to compensate the revenue for not having had the use of the moneys for the relevant period. For the same reasons, the failure to remit interest cannot be described as an 'unfair burden' on the taxpayer.
[16]
Penalty interest
To prove that the correct and preferable decision is to determine that no penalty tax is payable, the taxpayer must show that the company or persons acting on its behalf took reasonable care to comply with the taxation law, or that the tax default occurred solely because of circumstances beyond the taxpayer's control or the control of the person acting on its behalf: section 27(3).
As indicated, the latter circumstances were not beyond the control of the taxpayer or its director.
In Levitch, the Tribunal considered what constitutes 'reasonable care to comply with the taxation law' in section 27(3), [at paragraph 112ff]:
112 Section 27(3) of the TAA provides that the Chief Commissioner may determine that no penalty tax is payable if he is satisfied that the taxpayer, or a person acting on behalf of the taxpayer, took reasonable care to comply with the taxation law, or the tax default occurred solely because of circumstances beyond the taxpayer's control of the taxpayer or a person acting on behalf of the taxpayer.
113 "Reasonable care" is an objective test, but the particular (and subjective) circumstances relevant to the taxpayer are to be considered in applying the test. It requires that the taxpayer exercise the care that a reasonable person would be likely to have exercised in the circumstances of the taxpayer. See FCT v Traviati (2012) 205 FCR 136; [2012] FCA 546 per Middleton J at [36] and [70]. Taking advice on the operation of relevant provisions can amount to reasonable care for the purposes of s 27: The Smith's Snackfood Case at [96-100]. In my view, simply hiring or relying on an accountant to prepare returns or assuming that an adviser would review returns, is not of itself a "taking advice" on the operation of relevant provisions: cf Snowy Hydro Ltd v Commissioner of State Revenue (2010) 79 ATR 118 at [81-82]; on appeal, Commissioner of State Revenue (Vic) v Snowy Hydro Ltd [2012] VSCA 145 at [170], [171].
114 In RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64; (2004) 55 ATR 445 the Tribunal, at [29], reasoned that because "reasonable care" and "circumstances beyond the control" are matters to be taken into account under s 27(3), they are not matters that are relevant for a remission of penalty tax under s 33 and so opined, that remission under s 33 would be only warranted "in exceptional and rare circumstances."
In this case, there is no evidence that Mr Chen took advice either from the taxpayer's internal or external accountants, or from its lawyers, on the operation of any particular provision of the payroll tax laws. Mr Chen simply gave a direction that the company and its related entities should comply with those laws, and seems to have left the matter with his accountants. In effect, he simply relied on his accountants to prepare whatever returns were appropriate, as in Levitch. In that case, the Tribunal was not satisfied that reasonable care had been taken. For the same reasons, the Tribunal is not so satisfied in this case. The governance of the taxpayer was in the sole hands of its director, who bore the responsibility for ensuring that it was tax compliant.
It has been held that whether reasonable care was taken and whether the tax default was beyond control are not factors which inform the discretion to remit penalty under section 33, because they are mandatory considerations for the purpose of making a determination under section 27(3): RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64; (2004) 55 ATR 445; applied in Levitch [at 114]. An alternative view is that the discretion to remit under section 33 is at large.
Whichever is the case, for the reasons already given, I am not satisfied that reasonable care was taken, or that the relevant circumstances were beyond control. There is nothing exceptional or rare about a director directing his accountants to comply with the law, or in being under an innocent misapprehension as to whether tax is payable. No other aspects of the case persuade me that it is appropriate to remit the penalty tax.
The taxpayer submitted that, in exercising the discretion to remit both market rate interest and penalty tax, it was relevant to take into account the facts that the taxpayer had co-operated with investigators and had paid payroll tax when assessed in accordance with the agreed payment plan. In exercising any discretionary power, such as the powers to remit interest and penalty, it is appropriate to take into account all relevant factors. The taxpayer in this case is to be commended for its co-operation with investigators and payment of assessed tax in accordance with the payment plan. However, even taking into account this compliance by the taxpayer, in the context of the tax defaults themselves and all the other facts as found above, I am not persuaded that it is appropriate to remit either interest or penalty, because of the compensatory nature of the former and the deterrent value of the latter.
For those reasons, the following order is made:
[17]
Order
1. The Chief Commissioner's decision of 22 February 2016 with respect to market rate interest and penalty tax is confirmed.
[18]
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
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Decision last updated: 29 June 2018