Acts Interpretation Act 1901 (Cth), s 29

Freedom of Information Act 1982 (Cth)

Taxation Administration Act 1953 (Cth), s 14ZZK, Schedule 1 Division 340

Taxation Administration Regulations 2017 (Cth), regulation 14

Balens v Federal Commissioner of Taxation [2013] AATA 203

Ballintine v Federal Commissioner of Taxation [2021] AATA 3089

Case 2/2017 [2017] AATA 1294

Commissioner of Taxation v A Taxpayer [2006] FCA 888

Corlette v Mackenzie [1996] FCA 423

Cox v Federal Commissioner of Taxation [2020] AATA 3857

Doery and Commissioner of Taxation [2024] AATA 1493

Dua v Federal Commissioner of Taxation [2022] AATA 1520

Fay v Federal Commissioner of Taxation [2013] AATA 504

Federal Commissioner of Taxation v Milne 2006 ATC 4503

Federal Commissioner of Taxation v Wade [1951] HCA 66; (1951) 9 ATD 337

Fitzgerald v Federal Commissioner of Taxation [2011] AATA 878

GSJW v Federal Commissioner of Taxation [2019] AATA 5170

Hulsen v Federal Commissioner of Taxation [2014] AATA 190

KNWW v Federal Commissioner of Taxation [2014] AATA 691

Lau v Federal Commissioner of Taxation [2016] AATA 46

Neimanis v Federal Commissioner of Taxation [2012] AATA 814

O'Reilly and Commissioner of Taxation [2009] AATA 235

Rasmussen and Commissioner of Taxation [2013] AATA 746

Re Adams and Commissioner of Taxation [2010] AATA 744

Re Bak and Commissioner of Taxation [2008] AATA 630

Re Vagh and Commissioner of Taxation [2007] AATA 32

Rollason v Federal Commissioner of Taxation [2006] AATA 962

Shaw v Federal Commissioner of Taxation [2022] AATA 343

Smith v Federal Commissioner of Taxation [2021] AATA 1851

SYRF v Federal Commissioner of Taxation [2021] AATA 1845

Thomas v Federal Commissioner of Taxation [2014] AATA 102

Watson and Federal Commissioner of Taxation [2014] AATA 823

Wood v Federal Commissioner of Taxation [2021] FCA 1236

Australian Taxation Office PS LA 2011/17 Debt relief, waiver and non-pursuit

1. This case is about the Commissioner's discretion to release the Applicant from certain tax liabilities due to serious hardship pursuant to Division 340 of Schedule 1 to the Taxation Administration Act 1953 (Cth) ("TAA").
2. The question before the Tribunal is whether the Applicant has demonstrated that the discretion should have been exercised in his favour and the Commissioner's decision otherwise was wrong.[1] That is the burden of proof imposed on the Applicant under section 14ZZK of the TAA.
3. For the reasons which follow, I set aside the decision under review and in substitution decide that:
   1. the Applicant is released from the relevant tax debt so that the income tax liability (including penalties for failing to lodge a tax return) is reduced to $250,000;

1. the Applicant is released from the general interest charge ("GIC") on the income tax debt to the date of this judgment in full.[2]

1. The decision under review is otherwise affirmed. All other tax debt is unaffected by this decision.

1. Division 340 of Schedule 1 to the TAA allows the Commissioner to release an individual taxpayer from particular liabilities. The Commissioner may release that taxpayer from a tax liability if the taxpayer would suffer "serious hardship" if required to satisfy the liability: Item 1 of the table in subsection 340-5(3).
2. The Applicant has outstanding GST tax debt and associated general interest charges for the period ending 30 September 2001.[3] GST is not a tax debt that can be released under Division 340 of Schedule 1 to the TAA.[4] At the hearing, the Applicant indicated he would enter into a payment arrangement in relation to that GST,[5] and he should be held to that commitment. The Tribunal notes that on the Commissioner's numbers[6] the general interest charge on that unpaid GST is now more than the unpaid GST. For absolute clarity to the Applicant, these debts must be paid. The Tribunal understands that the Applicant and the Commissioner are in the process of liaising on these issues.[7] That has not been taken into account by the Tribunal other than merely noting it here, as it is not relevant to this case.
3. The Applicant's other tax debt arises for the periods from the 2000 and 2006 to 2022 income years.[8] The Applicant says those years are wrong and it is 2007 to 2021 but he does not dispute the amount of tax debt presented by the Commissioner.[9] That tax debt comprises income tax, late lodgement penalties, PAYG, and the general interest charge. This is the relevant tax debt for these proceedings ("the relevant tax debt"). The relevant tax debt is comprised of PAYG instalments, income tax, penalties for failing to lodge on time, and GIC on the PAYG and unpaid income tax. In the Commissioner's Closing Submissions[10] the Commissioner gave the relevant tax debt a (then) current total of $528,307.08. Total GIC was approximately $148,000 and of course it continues to build.
4. The Applicant did not dispute the Commissioner's assertions about the amount of tax due at the hearing, and, in any event, he has not objected to any of the Notices of Assessment.[11] Those Notices of Assessment are deemed correct.[12]
5. Much of the relevant tax debt arises as a result of the Applicant deriving income protection insurance payments from his insurer. Those payments have been made since approximately 2002.[13] They arose as a result of a fire at a restaurant business operated by the Applicant and a serious injury suffered by the Applicant that was connected to that event.[14] The Applicant has not paid the tax due on those payments to the Commissioner for about 20 years.
6. The Applicant's Application for Release of the relevant debt said that the Commissioner released the Applicant from approximately $157,386.25 of tax debt on or around 16 June 2021. This is incorrect and this was a notification that it is "uneconomical to pursue".[15] A letter was directed to the Applicant by the Commissioner confirming the continued existence of the tax debt.[16] There was a remission of a small amount of GIC.[17]
7. The Applicant submits that there is something amiss, he was misled, that calls have been censored from the Commissioner's records, the Commissioner is relying upon false and misleading information, and he was released from this debt.[18] He also suggested that the release was because he was "non-resident".[19] I do not accept those submissions. They arise due to a misunderstanding of what the effect of a decision that a debt is "uneconomical to pursue" is. When a decision like that is made the Commissioner makes adjustments in its system, but it does not wipe the debt, as was noted in the 17 June 2021 letter sent to the Applicant.
8. The Applicant requested to be released from the relevant tax debt due to serious hardship on 25 November 2022.[20] The Commissioner refused that request on 18 April 2023.[21] The Applicant objected on 14 June 2023 and supplemented his objection on 6 September 2023.[22] The Commissioner disallowed that objection on 13 November 2023.[23]
9. The Applicant filed an Application for Review in this Tribunal on 13 December 2023.[24]

1. The Applicant gave sworn evidence at the hearing. In terms of that evidence and other relevant facts, they can be briefly summarised.
2. The Applicant arrived in Australia from Lebanon in or around 1989. A family home was acquired in 1997 and sold for a profit in 2001.[25] The Applicant invested in a restaurant business using the proceeds of this sale.
3. The Applicant's wife purchased another house in or around 2006 in her sole name, and the Applicant appears to have resided at this address or used it as a mailing address.[26] It is not clear what happened to the proceeds of this property which was sold in 2009. This is discussed later in these reasons for decision.
4. The Applicant has three children, one of whom is a minor child.
5. The Applicant does not recall the Commissioner contacting him or his tax agent in 2003 and 2004 well before he left for Lebanon in 2009.[27] The Commissioner's cross-examination of the Applicant on that point was to the effect of putting the Commissioner's file notes to the Applicant and asking him whether those notes said what was written.[28] The Commissioner's case was ill-served by such questioning.
6. The Applicant said he thought he was "good" on his tax until 2009 due to his losses from his former restaurant business.[29] He also acknowledged that he understood he had to pay tax on the income protection insurance payments.[30]
7. The Applicant divorced his wife in or around 2009. He left Australia to return to Lebanon in 2009. Despite the divorce, the family (including the Applicant's ex-wife) continued to reside in the same house and the family lived in Lebanon together.[31]
8. The Applicant's third child was born in Lebanon in 2011. The family returned from Lebanon in 2021 together and moved to Melbourne. The Applicant's elder daughter does not reside with the remainder of the family and lives with her own family.[32]
9. The Applicant describes his family's return to Australia as an emergency due to unsafe circumstances in Lebanon, including a bombing in Beirut.[33] The Applicant says he had to take any flights he could get, and it cost more than normal. This was due to Covid restrictions as well as the dangerous situation in Lebanon.
10. The Applicant borrowed funds in order to return to Australia (US$20,000-$US31,000)[34] and repaid that lending. He also borrowed funds from a nephew for expenses when he arrived in Australia, and he repaid that borrowing.[35]
11. The Applicant's income protection insurance payment is approximately $8,019 per month and contributions from other members of the family of about $2,000 per month,[36] with a tax liability of about $2,000 per month (paid by way of PAYG towards his current year liability). The Applicant's ex-wife contributes to the family contribution of $2,000 per month, but she is on a sickness benefit of about $1,029 fortnightly.[37] The evidence was that the Applicant and his ex-wife intend to live separately, and the reason for the current household arrangements relates to illnesses on both their parts.[38]
12. The Applicant pays the rent for a 4-bedroom, 4-bathroom house in Melbourne - approximately $3,336 monthly,[39] although that amount may have increased now.[40] He spent cash on lotto tickets regularly, although the Applicant says that has ceased or is significantly reduced.[41] He pays utility costs.[42] The Commissioner also noted $31,000 of savings were used to purchase a car[43] and the existence of deposits in bank accounts totalling about $15,000 as well as a deposit in Lebanon totalling about $7,500, although there is dispute about the value of that deposit in Lebanon.[44] The Applicant says he needs those deposits for medical expenses.[45] From the bank statements provided by the Applicant it appears he transfers funds to his ex-wife for groceries, and the size of those transfers suggests he may also pay for family groceries in main part.[46] There is expenditure on tobacco or vape products that the Applicant also says is reducing.[47]
13. The Applicant says he has a current monthly surplus of about $177.[48] Assuming that this was accepted as the only potential surplus[49] and this surplus remains the same forever (which is of course unlikely), an annual amount of approximately $9,200 per year arises. If all of that was applied to his tax debt on an annual basis, it would take around 57 years to satisfy the relevant tax debt, ignoring the fact that GIC continues to build. Looking at what the Commissioner says could be added to the surplus, there may be an approximately $20,000 additional surplus per annum (ignoring groceries for now).[50] That is a surplus of $29,200 and an approximately 19-year timeframe to meet the tax obligations. Obviously, this is an untenable position.
14. The Tribunal notes that the Commissioner failed to engage on the point of how long it would take the Applicant to meet the tax debt, despite being asked specifically to do so by the Tribunal. This was disappointing. The Commissioner's Closing Submissions skirted the issue asked of it.[51] Straining to give the Commissioner the benefit of the doubt here, I assume this is because the Commissioner did not want to conclude what the Applicant's surplus was as it did not accept the Applicant's numbers. However, the Commissioner could have made some assumptions. I cannot help but wonder whether the Commissioner thought this issue did not support its case. The Commissioner should have answered the question asked of it and assisted the Tribunal as requested, as that is its obligation as a model litigant.

1. A summary of the Applicant's case and the Tribunal's consideration of those points follow.
2. The Applicant says that his state of physical and mental health and associated dysfunction has not been considered by the Commissioner in the objection decision or alternatively those matters have been given insufficient weight.[52] The Applicant submits that cases such as Cox v Federal Commissioner of Taxation [2020] AATA 3857 and Shaw v Federal Commissioner of Taxation [2022] AATA 343 support the view that mental health issues were relevant in granting debt relief.[53] Cox is considered further by the Tribunal below.
3. The Applicant says his serious mental health issues reflected that he had diminished responsibility, and he did not deliberately nor knowingly seek to be non-compliant.[54] The medication he has to take has debilitating side effects.[55] The Applicant has had suicidal thoughts including as a result of his tax debts. The Tribunal comments that the Applicant's health issues are relevant when determining their impact on his financial position and the potential to pay his tax debt in future when considering the discretion to release the Applicant from the tax debt. The Applicant's health issues are considered further below in that context. The Applicant is encouraged to continue to seek medical support for those issues. However, the Applicant needs to understand that tax obligations arise no matter the health status of the taxpayer. [56] The law is not that tax is relieved if there is illness. Australian taxpayers with significant health issues meet their tax obligations and so should the Applicant. For clarity, there is also no defence of "diminished responsibility" at taxation law and, absent the discretion in Division 340 of Schedule 1 to the TAA being exercised in the Applicant's favour, the Applicant's obligation to meet his tax liabilities remains, whatever his health condition may be.[57]
4. In terms of the failure to lodge returns, the Applicant submits that the Commissioner failed to act, and this contributed to the Applicant's confusion as to his status.[58] This suggestion is rejected and has been given no weight at all by the Tribunal. It is the Applicant's responsibility to be aware of and satisfy his tax obligations. It is the Applicant's failure, not the Commissioner's, and assertions otherwise are rejected.
5. The Applicant lived in Lebanon between 2009 and 2021, says he lodged several returns from Lebanon, made calls to the Commissioner, was told his tax liability was zero, and did not receive any mail from the Commissioner.[59] The Tribunal finds that post was sent to the Applicant by the Commissioner including Notices of Assessment. The Applicant says he received no Notices of Assessment and had no idea of his building tax liability (the Commissioner disputes that, saying there was contact with the Applicant prior to him leaving Australia).[60] The postal system in Lebanon was described to the Tribunal by the Applicant, and a recipient needs to collect mail from a central point such as a post office and to know that mail is coming or has arrived.[61] This submission does not assist the Applicant. The Applicant confirmed that the address in Lebanon that the Commissioner sent mail to (such as Notices of Assessment) was his correct address on the Commissioner's system at the time.[62] The Commissioner is entitled at Australian law to assume that delivery in the ordinary course of post and service by the Commissioner is effective at the Applicant's address.[63] This means at Australian law, those Notices of Assessment were received by the Applicant.
6. The Tribunal also advises the Applicant that the Commissioner's failure to contact him via his email address[64] is standard practice for reasons of information security, and it is perfectly legitimate for the Commissioner to use the Applicant's postal address on the ATO system and not to phone the Applicant. The Commissioner could expect postal delivery and had no evidence otherwise. Further, the Commissioner has no obligation to advise each of its millions of taxpayers about MyGov. Instead, it is the Applicant's obligation to meet his obligations under the tax law, and a google search by the Applicant would have discovered the existence of MyGov. I find, as the Applicant acknowledged, that he knew his income protection insurance payments were subject to Australian tax.
7. The Applicant said that he thought that as he lived outside of Australia that he did not have a tax liability in Australia.[65] The Tribunal comments that the Applicant's evidence is inconsistent in this regard. The Applicant says he filed returns in Australia when he was living in Lebanon. This is accepted as the Commissioner's SFIC refers to tax returns for the 2011 to 2014 income years being lodged in November 2014 which was during the period in which the Applicant was in Lebanon.[66] If the Applicant thought he had no tax liability due to living in Lebanon, why did he lodge tax returns in Australia? He also says he knew Australian tax had to be paid on his income protection insurance payments. If this is the case, how could he have thought he had no tax liability when in Lebanon? The Applicant has said that is due to losses from the restaurant business that he thought could offset his tax liability. The Tribunal has no evidence of any such losses and whether they were available to the Applicant to impact his individual tax position. All of this contradictory and unsupported evidence means the Applicant's evidence is unsatisfactory from the Tribunal's perspective.
8. On his return to Australia in April 2021, the Applicant signed up for MyGov and took steps to engage a tax agent to manage returns for 2009, 2020 and 2021.[67] He says he is not avoiding his tax affairs. That submission is contradicted by the fact that he had to file tax returns late when he returned to Australia, including one return that was late by more than 10 years. He says he only became aware of the relevant tax debts in March 2022.[68]
9. The Applicant says his compliance is demonstrated by the fact that he has registered for and pays PAYG instalments. The problem with these assertions is that the Commissioner says (and I accept) that the Applicant is in arrears for his current year obligations.[69] This would mean that the Applicant continues to not meet his tax obligations.
10. The Applicant submits that in the case of the 2023 year, the Commissioner has failed to take three amounts of $2,000 into account.[70] The difference of view is that the Commissioner applied three $2,000 payments (made on 17 October 2022, 10 September 2022 and 21 August 2022) to liabilities in 2010 and 2019, while the Applicant says those payments should have been applied to the 2023 year. While the Tribunal understands the Applicant's point, it does not advance his case. The value of the Applicant's point is that if the $6,000 was applied against the 2023 tax liability, there would still be an amount outstanding for 2023 that the Applicant has still failed to meet but it would be considerably smaller, and there would still be liabilities in 2010 and 2019. I do not accept the Applicant's submission that he did meet his 2023 tax liability.[71] I note that by the Commissioner applying the payments to those earlier tax debts, it is potentially benefitting the Applicant by reducing GIC exposure for the Applicant on the older debt. Whatever the situation with the payments in 2022 and the impact on the 2023 year, the Applicant is not meeting his current tax liability, and he is not meeting his past liabilities. Those factors are adverse to the Applicant's case.
11. The Applicant needs to appreciate that $2,000 per month is merely an estimate of his tax liabilities, and his actual liabilities are more. He is not, as he says, "ahead" of his current tax liabilities.[72] He has not met them. This is a factor that weighs against the Applicant. The Applicant needs to understand his tax liabilities must be met; it is not voluntary, and his failure to meet his obligations on a current year basis weighs against him.
12. Further, the payments the Applicant makes in PAYG have nothing at all to do with meeting his liability for the back years and are about the Applicant's current tax liabilities. As is noted above, it is of concern that these PAYG payments are insufficient to meet those current liabilities in any event and the Applicant is taking no action to deal with that. The Applicant is not in a special category, and like all other Australian taxpayers (including those with health issues and with dependants) he must meet his tax obligations.
13. The Applicant says he has offered to enter into payment plans with the Commissioner, but his offers have been rejected.[73] The Applicant says "if the tax office had accepted my offer of $300 a month since September 2022, until the present day, I would have paid by now, $8,100 toward my non eligible debt (GST) for release. And if they accepted by (sic) $500 offer, I would have paid $13,500 toward my non eligible debt for release until the present day."[74] The Tribunal is seriously unimpressed by this submission and rejects it. The Applicant has an obligation to pay tax. It does not require a payment arrangement and the Commissioner's rejection of the Applicant's suggested arrangements is completely irrelevant. The Applicant should have made payments because he is liable to do so, and when the payment arrangement was rejected, the Applicant should have made payments anyway. The Applicant has done nothing to meet his back year liabilities. Other taxpayers in Australia have met their liabilities on time, including Australian taxpayers that have dependants and that have serious health issues. This weighs substantially against the Applicant.
14. Due to his serious health issues, the Applicant is unable to work. There is little income and no capital base of substance (a car only) and no employment income. His income protection insurance payments will cease when he turns 60 which is in approximately 2 to 3 years. The Applicant will be seeking social security payments to live a basic existence. The relevant tax debt is not able to be extinguished. The existence of the relevant tax debt may prevent the Applicant from acquiring future rental accommodation. The Tribunal takes these factors into account below.
15. Payment of amounts towards the relevant tax debt would result in serious hardship for the Applicant as he would be left in a deficit, unable to meet necessities.[75] He will also be subject to child support obligations in future.[76] Other expenses such as Covid quarantine charges remain to be paid for over time. The Applicant has medical expenses he needs to meet. The Tribunal has no evidence of what those expenses are. The Tribunal takes these factors into account below.

1. Broadly, the Commissioner's case can be summarised more briefly. It is that:[77]
   1. The Commissioner has sought on a number of occasions to engage with the Applicant[78] and has no record of the Applicant seeking to contact it as he submits occurred.[79]
   2. The Commissioner contacted the Applicant prior to him leaving Australia in 2009, and he had tax debt at that time.[80] The Applicant chose not to deal with that debt.
   3. The Applicant has consistently failed to lodge tax returns on time.[81] The Applicant has consistently chosen not to satisfy his tax debt.[82] He has taken no steps to make any repayments and has made decisions so that he is in a position of hardship. This has been a deliberate behavioural choice.[83]
   4. The Applicant's financial hardship would not be relieved by a release from his tax debts.[84]

Section 340-5 of Schedule 1 to the TAA

1. Division 340 of Schedule 1 to the TAA allows the Commissioner to release individuals from particular liabilities. The Commissioner may release an individual from a tax liability if the individual would suffer "serious hardship" if they were required to satisfy the liability: Item 1 of the table in subsection 340-5(3).
2. Case law has established that when considering this issue, there is a two-step test.[85] The first step is to determine whether there is "serious hardship" (which is not defined in the legislation). That first step involves evaluating the evidence and the exercise of judgment by the Tribunal.[86] Even if there is serious hardship, that does not mean that the discretion will necessarily be exercised.
3. The second step is to consider whether it would be appropriate in all the circumstances for the discretion to be exercised, and this can include wider factors.[87] In Re Vagh and Commissioner of Taxation [2007] AATA 32 at [39], relevant matters were cited as including:

[39] Considerations relevant to the proper exercise of the discretion whether or not to grant remission when undue hardship is established will vary from case to case, however, relevant considerations are likely to include:

(a) the circumstances under which the hardship arose;

(b) whether those circumstances were within the capacity of the applicant to have foreseen and controlled;

(c) whether the applicant has over-committed himself financially;

(d) whether the applicant or any of his dependants has suffered serious illness or accident involving irrevocable financial loss to the applicant;

(e) whether the applicant has been in regular employment;

(f) whether the circumstance of the hardship are likely to be of a temporary or recurring nature;

(g) whether a decision to remit the sum would as a matter of administrative justice and fairness be appropriate having regard to the fact that taxpayers are normally obliged to pay their taxes in full, including those who struggle with the payment of their taxes. (Ferguson (supra) at [34] applying Re Wilson v Minister for Territories (1985) 7 ALD 225 at 232-3; Filsell (supra) at [20]; Kirkman v Commissioner of Taxation (AAT oral decision, unreported, 14 April 2005, Ettinger, SM) at 4-5.

(a) the probable future financial position of the applicant; see Ferguson (supra) at [12];

(b) whether the applicant has demonstrated that he or she is serious about repaying the tax debt, including whether funds were received which could have been applied towards the tax debt but were not so applied: Kirkman (supra) at p. 5-6;

(c) the circumstances in which the taxpayer has arrived at the position wherein he or she would suffer severe hardship if required to satisfy the tax liability: Corlette v Mackenzie [1996] FCA 1482; (1996) 62 FCR 597 at 598E per Wilcox J, Einfeld and Foster JJ agreeing at 600, 601.

1. Case law also establishes:
   1. When determining what is serious hardship, the plain meaning of that term is to be considered: Powell v Evreniades and others 89 ATC 4415 at 4420.
   2. When considering "serious hardship" the focus is a financial focus. It is about an inability to provide for the necessities of life. The probable future financial position is relevant as well as the circumstances at the time the application for release is made: Balens v Federal Commissioner of Taxation [2013] AATA 203 at [32], [35]. Powell v Evreniades and others 89 ATC 4415 at 4420-4421; Commissioner of Taxation v A Taxpayer [2006] FCA 888 at [17]; Re Adams and Commissioner of Taxation [2010] AATA 744, at [17]; Dua v Federal Commissioner of Taxation [2022] AATA 1520 at [91]; Fitzgerald v Federal Commissioner of Taxation [2011] AATA 878 at [39]; Thomas v Federal Commissioner of Taxation [2014] AATA 102 at [21]- [22]; Wood v Federal Commissioner of Taxation [2021] FCA 1236 at [10].
   3. The entire household's financial resources are relevant, not just the taxpayer at issue: Doery and Commissioner of Taxation [2024] AATA 1493 at [43]; Neimanis v Federal Commissioner of Taxation [2012] AATA 814 at [35]; Fay v Federal Commissioner of Taxation [2013] AATA 504 [28]. In the Applicant's case, despite his submissions otherwise,[88] this includes his ex-wife. That means her cash withdrawals are relevant, as they could otherwise contribute to the household.
   4. A causal relationship is needed between the requirement to satisfy the tax liability and serious hardship: Doery and Commissioner of Taxation [2024] AATA 1493 at [44]; Rasmussen and Commissioner of Taxation [2013] AATA 746 at [40]; Wood v Federal Commissioner of Taxation [2021] FCA 1236 at [10].
   5. The "public interest" is not a relevant consideration: Commissioner of Taxation v A Taxpayer [2006] FCA 888, [49].
   6. The taxpayer's attitude to the tax liability, their compliance history and the choices made in their expenditure are relevant factors to take into account: Ballintine v Federal Commissioner of Taxation [2021] AATA 3089 at [69]; Rasmussen and Commissioner of Taxation [2013] AATA 746 at [88], [97]-[99]; Rollason v Federal Commissioner of Taxation [2006] AATA 962 at [32]- [34], [44]; Hulsen v Federal Commissioner of Taxation [2014] AATA 190 at [30]; Commissioner of Taxation v A Taxpayer [2006] FCA 888 at [28]‑[29].
   7. It is relevant to consider whether there is scope for the taxpayer to rearrange their affairs and make lifestyle adjustments so that tax obligations can be met: Re Bak and Commissioner of Taxation [2008] AATA 630 at [16].
   8. Whether the situation seems hopeless such that a rearrangement of affairs would not considerably assist, including potential bankruptcy is a relevant consideration, although potential bankruptcy does not necessarily provide grounds for release: Ballintine v Federal Commissioner of Taxation [2021] AATA 3089 at [43]; Doery and Commissioner of Taxation [2024] AATA 1493 at [27]; Cox v Federal Commissioner of Taxation [2020] AATA 3857 at [25]; O'Reilly and Commissioner of Taxation [2009] AATA 235 at [20]; KNNW v Federal Commissioner of Taxation [2014] AATA 691 at [23]; Watson and Federal Commissioner of Taxation [2014] AATA 823 at [50].
   9. It is possible to exercise the discretion over part of the relevant debt only: Shaw v Federal Commissioner of Taxation [2022] AATA 343; Smith v Federal Commissioner of Taxation [2021] AATA 1651.

1. A ruling by the Commissioner is not the law, but it does set out guidance as to how the Commissioner will apply the law. PS LA 2011/17 has been considered and applied in a number of the cases on Division 340.[89]
2. PS LA 2011/17 sets out three tests that the Commissioner applies when determining whether it will exercise its discretion under section 340-5 of Schedule 1 to the TAA. The three tests in PS LA 2011/17 address the finding of serious hardship and the exercise of the discretion to release a taxpayer from a tax debt.
3. The three tests are:
   1. The income/outgoings test, which assesses a person's capacity to meet their tax liability from their current income, taking into account household income and expenditure. This also considers the person's ability to increase their income, their level of discretionary spending and whether they have made attempts to reschedule or defer other financial commitments. It also considers the taxpayer's capacity to pay in a reasonable timeframe.
   2. The asset/liabilities test, which assesses a person's equity in or access to assets which may indicate their capacity to pay. Certain assets, such as household goods, a motor vehicle, and cash to meet day-to-day living expenses are not expected to be surrendered to meet a tax liability.
   3. Other relevant factors, which consider the person's particular circumstances and could include their tax compliance history, whether the person has other liabilities or creditors, and their plans to meet their liabilities.
4. The Applicant complains that the Commissioner has been inconsistent when applying the above three tests, and is now, before the Tribunal, taking the view he meets none of them, when in the past the Commissioner did not have that view.[90] This submission does not assist the Applicant as the Commissioner is not confined to any past position before the Tribunal, even if there was inconsistency.[91]

1. On the first step of the two-step test, I find that the Applicant is in serious hardship, and he has satisfied his burden of proof to demonstrate that. I note the Commissioner's submissions are to the effect that it accepts this as well, although there are complaints about the extent of the information provided by the Applicant about the household.[92] I do not accept the Commissioner's submission that the Applicant has failed to meet his burden of proof on this aspect.
2. The following factors support that conclusion:
   1. Income and outgoings test: I accept that the Applicant and the Applicant's household do not have substantial income following meeting liabilities. I accept that any surplus available to the Applicant both now and in future will not be likely to be significant.
   2. I accept from the medical evidence that the Applicant is currently unable to work. I also accept from the medical evidence that the Applicant's ex-wife is currently unable to work. I accept the Applicant's son's income is not significant. There is little evidence about any potential for an increase in that income.
   3. I accept that the Applicant's income will decrease rather than increase in future due to the pending cessation of his income protection insurance payments, likely reliance on social security, likely child support obligations as the Applicant and his ex-wife are likely to live separately, and because of ongoing medical expenses. I accept the Applicant has dependants, particularly a minor child.
   4. The medical evidence demonstrates that the Applicant is not able to increase his income in future due to physical and mental illness. He is more likely than not to be unable to work in future. I accept that to the extent the Applicant and his ex-wife continue to reside in the same household that she is likely to be unable to work significantly in future, if at all.
   5. I accept that paying his tax debt would place the Applicant in even greater financial hardship, and if required to meet the relevant tax debt, bankruptcy would be a possible consequence. While I accept that some decisions by the Applicant have resulted in his serious hardship, I nevertheless accept there is a causal link between serious hardship and the tax debt.
   6. I agree with the Commissioner[93] that some adjustments must be considered by the Applicant so that other members of the Applicant's household contribute more in the short to medium term (e.g. to rent, to groceries and to other costs), particularly his ex‑wife and son. The Tribunal does not accept the Applicant's suggestion that he needs a 4‑bedroom, 4-bathroom home for 4 people. The Tribunal also does not accept that the existence of the tax debt will necessarily adversely impact potential future rental properties, or that such a speculative contingency is a relevant consideration. There is no evidence of this. In addition, in terms of medical expenses which are submitted by the Applicant to take priority and to increase, there is nothing before the Tribunal that gives any substance to those asserted expenses.[94]
   7. The Tribunal advises the Applicant to remove all discretionary spending including cash withdrawals and agrees with the Commissioner that such spending should instead be directed towards payment of his tax debt. The Tribunal advises the Applicant that any savings he has should be paid to the Commissioner. There is no evidence to justify expenditure other than on meeting his tax obligations. I find that these issues do not substantively change the Applicant's position of serious hardship if required to meet the relevant tax debt in full.
   8. I accept that the Applicant is not able to meet such a sizeable tax debt in any kind of reasonable timeframe. By the Tribunal's calculations, that may be more than 50 years or at best approximately 19 years - that is, potentially beyond the Applicant's lifetime.
   9. The assets/liabilities test: I accept the Applicant has few to no assets which could be liquidated to meet his tax liabilities. The Applicant has GST liabilities and current tax liabilities which he must satisfy. He has other debts including for managed quarantine.
   10. I agree with the Commissioner that it is not obvious what happened to the proceeds of sale of the house referred to above at paragraph ‎16‎ and why that property was in the sole name of the Applicant's now ex-wife (although I understand she was his wife at the time the property was purchased, so this would have comprised a marital asset). I have no evidence that there are any such proceeds still available. Given the passage of time it may be that any such proceeds are not substantial, but this should be investigated.
   11. Other relevant factors: The Applicant's engagement in the hearing demonstrated his serious illness to the Tribunal. I agree with the comments in Cox v Federal Commissioner of Taxation [2020] AATA 3857 at [34] that suggest this issue is a relevant consideration. I am concerned that the taxation liabilities are having an adverse impact on the Applicant's mental health to a degree that is similarly extreme as was the case for the taxpayer in Cox. I also accept that this exacerbation of the Applicant's mental health makes it even less likely he will be able to increase his income to meet his liabilities.
3. On the second step of the two-step test which considers whether the Applicant should be released from the relevant tax debt, I am far more troubled. I need to consider whether a decision to remit the relevant tax debt would as a matter of administrative justice and fairness be appropriate having regard to the fact that taxpayers are normally obliged to pay their taxes in full, including those who struggle with the payment of their taxes and including taxpayers with substantial mental and physical health issues.
4. I am seriously unimpressed by the Applicant's actions (or lack of them) and his submissions before me. Applying the factors from Re Vagh and Commissioner of Taxation [2007] AATA 32, there are a number of factors which weigh very significantly against the Applicant. These include:
   1. The Applicant's complete failure to make payments to meet the relevant tax debt. This is unacceptable and demonstrates a casual attitude to his obligations. He has demonstrated no serious intention to meet his obligations.
   2. The Applicant's tax compliance history is extremely poor. The relevant tax debt spans about 20 years. Until recently he took no steps to meet a GST liability from 24 years ago. The Applicant's tax returns have been consistently late. The Applicant has not even changed the position for current liabilities as he is currently in tax arrears (no matter the position on the 2023 year) and those arrears will continue to build. This has been explained to him. His PAYG payments are not sufficient to meet his current liabilities. The Applicant has not acted to resolve that situation.
   3. The Applicant has attempted to blame the Commissioner for his failure to meet his obligations in relation to the relevant tax debt. The Commissioner is not to blame for the Applicant failing to meet his obligations. The Applicant is solely to blame. In particular:
      1. The Applicant suggested that he would have made payments towards the relevant tax debt had the Commissioner accepted a payment arrangement. A payment arrangement is not a prerequisite for the Applicant to make payments towards his liabilities. A tax liability is not a negotiation with the Commissioner; it is a liability which must be paid. The Applicant has an obligation to have made payments as he has a liability at law to do so, just like everyone else. In failing to do so, the Applicant is at fault; not the Commissioner.
      2. The Applicant also suggested the Commissioner should somehow know that the Notices of Assessment it sent did not reach the Applicant in Lebanon. There is no evidence the Commissioner knew any such thing and it is irrelevant in any event. The Applicant then went further and suggested that although the Commissioner has millions of taxpayers to manage, he ought to have phoned or emailed the Applicant after (somehow) becoming aware that the correspondence that was sent did not reach him. In any event, all of the Applicant's submissions demonstrate a fundamental misunderstanding of the law as to who is responsible for tax liabilities and how tax liabilities are notified at law. The Commissioner is entitled to act exactly as it has. The Applicant is at fault; not the Commissioner.
   4. I accept on the evidence before the Tribunal that the Commissioner engaged with the Applicant prior to his departure to Lebanon in 2009. I accept that the Applicant chose not to engage with the Commissioner and to that extent he is the author of his own building liability caused by the accretion of GIC. This is unacceptable behaviour.
5. On the other hand, some realism is needed in this case. It is a nonsensical situation to have a tax debt in place that would take the Applicant well beyond his lifetime to satisfy. I have factored in the fact that the Applicant's future household and future income prospects are poor, as is the Applicant's health situation. I have factored in the evidence we do have about the household income. I want to reach a decision that gives the Applicant a chance to make changes, and to meet his obligations. I want to encourage the Applicant to get on with it and start complying with his obligations as an Australian taxpayer like everyone else. He needs to have the ability to see light at the end of the tunnel. I also think that balancing the circumstances so that tax payments are made is important.
6. On balance, and I record some hesitation, I have determined I will exercise the discretion in section 340-5 of Schedule 1 to the TAA, but only in respect of part of the relevant tax debt. I have decided to do this to balance my concerns about the Applicant's actions against my concerns about his serious hardship. I do not accept that a full release is appropriate for this Applicant as a matter of administrative justice and fairness because of the serious issues I have noted above about the Applicant's behaviour. However, on balance, I do think some relief is justified given the extent of hardship, my concerns about the Applicant's health, and recoverability time for the relevant tax debt. I also want to encourage the Applicant to take action. I consider the Applicant very fortunate to have achieved this result.
7. I exercise the discretion in section 340-5 of Schedule 1 to the TAA. I set aside the decision under review and in substitution decide that:
   1. The Applicant is released from the relevant tax debt to the extent that the income tax liability (including penalties for failing to lodge a tax return) is reduced to $250,000;
   2. The Applicant is released from the GIC on the income tax liability to the date of this judgment in full.

1. On the numbers in the Commissioner's Closing Submissions, this would mean that the income tax (including penalties for failing to lodge on time) figure set out at paragraph 2 of those submissions will no longer be $363,187.34 but $250,000, and the GIC on that income tax debt would no longer be $141,575.95 but nil. For clarity, GIC will be applied at law to the remaining $250,000 of tax debt to the extent the Applicant does not make payments towards meeting that debt from today's date. All other relevant tax debt (the PAYG and associated GIC on that PAYG) remain unaffected by this decision. Taking the Commissioner's numbers from its Closing Submissions, this would leave an amount of relevant tax debt (including income tax, late lodgement penalties, PAYG and GIC on PAYG) at just over $273,500 of relevant tax debt.[95] Assuming the surplus is $29,200 per annum (as some of the Commissioner's numbers suggest) that will take less than 10 years to repay.
2. The Tribunal advises the Applicant that he must make payments towards his tax liabilities - what remains from this case, his GST debt (from 24 years ago) and his current liabilities. He needs to make changes to his current expenditure profile, he needs to obtain greater contributions from the members of his household, he needs to apply any and all deposits he has available to his tax liability, and he needs to seek tax advice to ensure he is compliant with his tax obligations currently (such as by increasing his PAYG payments). He should liaise with the Commissioner and get compliance steps underway. He must file his returns on time.
3. The Applicant must do these things because it is his obligation at law to do so, like all Australian taxpayers. The Applicant is warned that if he does not do take serious steps to deal with his tax obligations, the Commissioner has an array of options available to pursue the Applicant.
4. The Tribunal has given the Applicant a further chance. The Tribunal encourages the Applicant to consider this case as one step forward to finalise his issues with the Commissioner. The Applicant must take other steps forward and not disappoint the Tribunal by failing to act when given the chance.

I certify that the preceding 62 (sixty-two) paragraphs are a true copy of the reasons for the decision herein of General Member J. Dunne

........................[SGD]............................

Mr A Gherbaz Fama and Mr P Pillay, Australian Taxation Office, Litigation and Legal Services

[1] As supported by case law, for example: Dua v Federal Commissioner of Taxation [2022] AATA 1520, [82]-[85] Fay v Federal Commissioner of Taxation [2013] AATA 504, [19].

[2] As an example, on the numbers in the Respondent's Written Closing Submissions dated 17 March 2025 ("Commissioner's Closing Submissions"), this would mean that the income tax (including penalties for failing to lodge on time) figure at paragraph 2 will no longer be $363,187.34 but $250,000, and the GIC on that income tax debt would no longer be $141,575.95 but nil. For clarity to the Applicant, GIC would be applied to the remaining $250,000 of tax debt to the extent the Applicant does not make payments towards meeting that debt after the date of this judgment. All other figures in the Commissioner's Closing Submissions (including GIC on PAYG) remain debts owed by the Applicant.

[4] Section 340-10 of the TAA.

[5] Transcript 51, [27]-[30]. The Applicant's Statement of Facts, Issues and Contentions dated 24 November 2024 ("Applicant's 2nd SFIC") "T Docs 3 of 3" 78 [102].

[6] Commissioner's Statement of Facts, Issues and Contentions dated 14 October 2024 ("Commissioner's SFIC") [8].

[7] Applicant's Closing Submissions dated 7 April 2025 ("Applicant's Closing Submissions"), 10.

[8] It is noted that the Applicant makes submissions about the 2003 and 2004 years. Those submissions are irrelevant, as those income years are not before the Tribunal: Applicant's Closing Submissions [3j]. The contact by the Commissioner with the Applicant is relevant to back tax liabilities.

[9] The Applicant's 2nd SFIC "T Docs 3 of 3" 72, [92].

[10] Commissioner's Closing Submissions, [2].

[11] Transcript 8 [33]-[47], 9 [11]-[47], 10 [4]-[9].

[12] Item 2 of the table at subsection 350-10(1) of Schedule 1 to the TAA.

[14] Commissioner's SFIC [13]-[16].

[15] Respondent's Further Written Submissions dated 20 March 2025 ("Commissioner's Further Submissions") [6]-[10], [19]-[20].

[16] "T docs 1 of 3", 406. Commissioner's Further Submissions [13]. This is as set out in Practice Statement Law Administration 2011/17 Debt relief, waiver and non-pursuit ("PS LA 2011/17") [1]-[4]. It does not mean that the discretion under section 340-5 of Schedule 1 to the TAA has been exercised.

[17] 'T Docs 1 of 3" 412, reference 1-RSLQUJ7.

[18] Applicant's Response to the Commissioner's Further Written Submissions - 07/04/2025 ("Applicant's Response to Commissioner's Further Submissions"), 1, 2, 3, 5, 9, 13. Applicant's Closing Submissions 10.

[19] Applicant's Response to Commissioner's Further Submissions 5.

[24] T1. On 14 October 2024, the Administrative Appeals Tribunal became the Administrative Review Tribunal. Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 proceedings that were not finalised before 14 October 2024 are continued and finalised by the Administrative Review Tribunal. Anything done in relation to any such proceeding before 14 October 2024 is taken to have been done by the Administrative Review Tribunal.

[25] Commissioner's SFIC [12]-[13].

[26] Commissioner's SFIC [16]. The Tribunal notes that the Commissioner asserts the property was sold in 2009, yet the Applicant "used" the address until 2014 - this seems contradictory: Commissioner's SFIC [16] and [18].

[27] Transcript 11 [34]-[35]; 20 [45]-[47], 21[1]-[10]; 22[13]-[17].

[28] Transcript 25 [14] and following.

[30] Transcript 22 [45]-[46]; 23 [25].

[31] The Applicant's ex-wife and children remained in Australia without him in some period of time and they did not leave Australia together: Applicant's 2nd SFIC "T docs 3 of 3", 72 [95.2].

[33] Transcript 14 [10]-[42], 15 [1]-[15], [21]-[47]. "T docs 1 of 3" 321. Applicant's 2nd SFIC "T docs 3 of 3", 4-5.

[34] T55. Applicant's 2nd SFIC "T docs 3 of 3" 11.

[35] T55. Commissioner's SFIC [22]. "T Docs 1 of 3" 321.

[37] Transcript 48 [19]. Applicant's 2nd SFIC "T Docs 3 of 3, 38.

[38] Applicant's 2nd SFIC "T Docs 3 of 3", 38-43 sets out evidence of the Applicant's ex-wife's illness. The Applicant's health issues are set out in the Applicant's Statement of Issues dated 16 March 2024 ("Applicant's SFIC") [1]-[7]. The Applicant also provided reports from doctors in support of his case - T55, "T docs 1 of 3" 322, 328.

[39] ST17, Commissioner's SFIC [23]. I note this is different than the number in the Applicant's Application for Release dated 24 November 2022 ($2,947), but I assume this was a different rental property: 308 of "T docs 1 of 3", and the rental reference is at 311. This is also a different number than the Applicant's bank statements - see for example "T Docs 2 of 3" 21, which shows rental of $3,042 in 2023. I assume again there is an explanation such as an increase in rental.

[40] Applicant's Closing Submissions [3c].

[41] Transcript 6 [45], 11 [1]-[15]. Applicant's 2nd SFIC "T docs 3 of 3", 57. Applicant's Closing Submissions [3c], 6[c], 7.

[43] Commissioner's SFIC [47]. There is dispute as to the car's value and the circumstances of purchase (including the suggestion that the Applicant owed no tax at the time): Applicant's 2nd SFIC "T docs 3 of 3" 60-61, 66.

[44] Commissioner's SFIC [47], [49]. Applicant's 2nd SFIC "T Docs 3 of 3" 59-60.

[46] "T docs 2 of 3", 1, 2-7. The Applicant suggests his expenditure is about $600 per week on groceries: "T docs 2 of 3" 11.

[47] Transcript 6, [45], 11, [1]-[5]. Applicant's 2nd SFIC 57, [79.5]. Applicant's Closing Submissions [3c].

[48] T55, Commissioner's SFIC [46]. The Applicant also refers to considerable future medical expenses. "T docs 1 of 3" 315, [16]. Applicant's Closing Submissions [3b].

[49] The Commissioner does not accept this financial information is correct: Commissioner's SFIC [63], [75]-[80].

[50] Commissioner's Closing Submissions [27].

[51] Commissioner's Closing Submissions [69]-[71].

[52] Applicant's SFIC [1]-[7]. The Applicant also provided reports from doctors in support of his case - T55, "T docs 1 of 3" 322, 328.

[53] Applicant's SFIC [24]-[28]. The Tribunal comments that the references to mental health issues in Shaw were merely to submissions advanced by the applicant in that case, and there is no suggestion the decision was influenced by this factor.

[56] In reference to the Applicant's Closing Submissions 13-16.

[57] While I understand the Applicant is suffering from health issues, the Commissioner is not his enemy. I reject pejorative assertions made by the Applicant in his Closing Submissions such as that the Commissioner has acted with "conspiracy and imagination" - Applicant's Closing Submissions 18. All that the Commissioner has done is apply the law (while there might be differences of view about what the law is).

[59] Applicant's 2nd SFIC 'T Docs 3 of 3" 65; Applicant's SFIC [11]-[12].

[60] I accept the Commissioner's evidence that it engaged with the Applicant prior to him leaving for Lebanon in 2009 and the Applicant was aware there was tax debt.

[61] Transcript 18, [42]-47], 19 [1]-[30].

[63] Section 29 of the Acts Interpretation Act 1901 (Cth). Regulation 14 of the Taxation Administration Regulations 2017 (Cth).

[64] Applicant's 2nd SFIC [30]. Applicant's Response to Commissioner's Further Submissions, 4 [8]. Applicant's Closing Submissions 8, [9].

[69] Respondent's letter dated 17 March 2025 relating to the Applicant's 2023 tax obligations which advises him that his PAYG instalments were insufficient to meet his tax liability and $6,288.65 remains outstanding.

[70] Applicant's Response dated 7 April 2025 to the Respondent's letter dated 17 March 2025, 1-2.

[71] Applicant's Closing Submissions 9, [11].

[72] Applicant's Closing Submissions 10.

[73] Applicant's 2nd SFIC 'T Docs 3 of 3" 69-70. See also Applicant's Response to Commissioner's Further Submissions, 10.

[76] Transcript 48, [33]-[34], 51, [6], 61 [13]-[18].

[77] Commissioner's SFIC [50], [61]-[95].

[78] Commissioner's SFIC [24]-[33]; ST3; Commissioner's Closing Submissions [37]. The Applicant says he does not remember this - Applicant's Closing Submissions [9].

[79] Commissioner's SFIC [34]-[35].

[80] Commissioner's SFIC [29]. Commissioner's Closing Submissions [37].

[81] The Commissioner records at least the following returns lodged late 1999, 2000, 2001, 2002, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2019, 2020: "T Docs 3 or 3", 88; Commissioner's SFIC [25]. Commissioner's Closing Submissions [42]-[43].

[82] The Applicant has instead repaid other debts such as a debt owed to his nephew. Commissioner's Closing Submissions [40]-[41].

[83] Commissioner's Closing Submissions [56].

[84] Commissioner's Closing Submissions [45].

[85] For example, GSJW v Federal Commissioner of Taxation [2019] AATA 5170, [51]-[52]; Lau v Federal Commissioner of Taxation [2016] AATA 46 [65]; Dua v Federal Commissioner of Taxation [2022] AATA 1520, [80]; Federal Commissioner of Taxation v Milne 2006 ATC 4503, 4,510-4511.

[86] Corlette v Mackenzie [1996] FCA 423.

[87] Watson v Federal Commissioner of Taxation [2014] AATA 823, [27]-[28].

[88] Applicant's 2nd SFIC "T Docs 3 of 3" 24 [48], 34 [78] and Applicant's Closing Submissions 6[b].

[89] For example, Case 2/2017 [2017] AATA 1294 [10]-[13]; Cox v Federal Commissioner of Taxation [2020] AATA 3857, [19]; Doery and Commissioner of Taxation [2024] AATA 1493 [15], [43]-[45]; Commissioner of Taxation v A Taxpayer [2006] FCA 888 [15]-[20]; Dua v Federal Commissioner of Taxation [2022] AATA 1520, [98]; Rasmussen v Federal Commissioner of Taxation [2013] ATA 746, [56].

[90] Applicant's Closing Submissions [6].

[91] Federal Commissioner of Taxation v Wade [1951] HCA 66; (1951) 9 ATD 337.

[92] Commissioner's Closing Submissions [32].

[93] Commissioner's Closing Submissions [27].

[94] Applicant's Closing Submissions 2, [3b], 4-5. Vague assertions are not evidence.

[95] The GST debt and associated GIC on that debt is also not impacted by this decision.