1. An application for review of the objection decision was filed with ACT Civil and Administrative Tribunal (the Tribunal) on 7 May 2014. In summary, the Applicant submitted that the penalty should be waived as it took reasonable care to comply with its taxation obligations and/or had a reasonable excuse, and, in any case, there are grounds for the penalty tax to be remitted. Further, the reassessment of the tax payable for 2006-07 and 2007-08 was not authorised under section 9(3)(b) of the TAA and the initial assessment should be applied.
2. The parties lodged and exchanged Statements of Facts and Contentions and various supporting documents including lists of authorities to support their submissions. The Commissioner's office prepared a folder of all relevant documents known as the T documents.
3. At the hearing Mr Cooke, a director of the Applicant, was authorised to represent the Applicant company by letter filed at the Tribunal dated 5 June 2014. Mr McCarthy Counsel represented the Commissioner.

1. The following issues and facts were agreed.
   • (a) the Applicant was an ACT employer for the purposes of the payroll tax legislation and paid wages in the ACT for the period 1 July 2006 to 30 June 2013 (the relevant period);
   • (b) the Applicant is liable for payroll tax in the ACT for the relevant period and there has been a tax default in regard to this liability;
   • (c) while the details about which entity was liable for payroll tax liabilities was incorrectly advised to the Commissioner in 2007, the correct entity liable for the payroll tax liabilities is the Applicant;
   • (d) the tax default was not intentional on the part of the Applicant, and the Applicant co-operated and complied with the investigation undertaken in 2013 by the Commissioner; and
   • (e) the Applicant became compliant with its payroll tax liabilities from 1 April 2013.

1. At the hearing the parties agreed that the contested issues were, in summary, as follows:
   • (a) whether it is appropriate to re-assess the payroll tax liabilities of the Applicant for the years 2006-07 and 2007-08 given it is more than 5 years after the initial assessment[9]; and
   • (b) whether there are grounds, such as that the Applicant took reasonable care, for reducing the penalty tax to zero,[10] and/or whether there is a reasonable excuse to support reducing it to 25%,[11] and/or whether there are grounds for remitting the penalty wholly or partially.[12]

1. The Payroll Tax Act 1987 (PRT Act 1987) applies to the Applicant until 30 June 2011. From 1 July 2011, the Payroll Tax Act 2011 (PRT Act 2011) applies. Both Acts are tax laws for the purposes of the TAA, and where there is a tax default the TAA imposes interest[13] and penalties.[14]
2. The Commissioner may make an assessment of a tax liability, and in certain circumstances may make a reassessment of a tax liability, as occurred in this case.[15] Under section 9, a reassessment of an assessment that is more than 5 years old can only be made in two circumstances, being to give effect to a decision on objection or appeal (which is not relevant in this case) or where "at the time the initial assessment ...was made, all the facts and circumstances... were not fully and truly disclosed...".[16]
3. Where a taxpayer defaults on their tax liabilities, interest is payable and may be remitted by the Commissioner wholly or partially,[17] as occurred in this case. However, a decision about interest is not reviewable by the Tribunal.[18]
4. Where a taxpayer defaults on tax liabilities, penalty tax is payable. The minimum rate of penalty tax is 25%[19] of the unpaid tax. The rate increases to 50% if the default was caused wholly or partly by a "failure to take reasonable care"[20], unless there is a "reasonable excuse".[21]
5. Where there is an "intentional disregard of a tax law" the penalty tax rate increases substantially; however, this is not relevant to this case.[22]
6. No penalty tax is payable in certain circumstances;[23] also the penalty tax can be remitted wholly or in part in certain circumstances.[24] The penalty tax can be also remitted by the Commissioner where there is co-operation with an investigation, as occurred in this case, but this decision is not reviewable by the Tribunal.[25]
7. Decisions about penalty tax, except a decision whether to remit it under s33, are reviewable by the tribunal. Relevant sections of the TAA are extracted at the end of these Reasons.

1. The burden of showing that an objection should be sustained is with the taxpayer, the Applicant in this case.[26] The Tribunal's main task is to decide if the taxpayer has shown that the objection should be sustained.[27]
2. The Tribunal may confirm, vary or set aside the decision being reviewed, and if the decision is set aside, the Tribunal may make a substitute decision or remit the matter for decision back to the decision-maker in accordance with directions or recommendations.[28]

1. The Applicant's contentions on the two issues listed in paragraph 11 above are summarised below.

a) Whether it is appropriate to re-assess the payroll tax liabilities for the years 2006-07 and 2007-08

1. The Applicant contended that at the time of the initial assessment all the facts and circumstances were fully and truly disclosed, and therefore a re-assessment of years 2006-07 and 2007-08 was not authorised under section 9(3)(b) of the TAA. The Applicant stated that it "acted honestly", and had fully and truly disclosed facts at that time that "the Applicant knew were relevant to the assessment of the tax liability".[29]

b) Whether there are grounds for reducing the penalty tax

1. The Applicant contended that the "Applicant's business activities are numerous and complex"[30] (the Applicant was a corporate trustee as well as an employee), and the Directors of the Applicant company were not full-time and not expert. The Directors had established a "system for compliance"[31] including engaging an accounting firm to review taxation matters, supporting an accounting system and ensuring that staff were engaged to report payroll tax liabilities to the Commissioner. The Applicant had submitted returns, and the PAYG elements of the returns were accurate and the non-disclosure of other elements was not intentional.
2. The Applicant agreed that in some respects its systems failed: its "professional advisors did not accurately advise the Applicant".[32] Further, the Applicant contended that the default was "exacerbated"[33] by the Respondent, which "should have recognised earlier that it was not correct to be reporting wages... and no superannuation..."[34]
3. On the basis of the matters in paragraphs 23 and 24 above, the Applicant contended that it had exercised reasonable care, and/or that there was a reasonable excuse for any absence of it.
4. In regard to remitting the penalty tax, in addition to the matters raised in paragraphs 23 and 24 above, the Applicant contended that it had taken steps to mitigate the circumstances which resulted in the liability for the penalty tax. These steps included clarifying and then complying with definitions of elements to be included in payroll tax liabilities i.e. fringe benefits, and also paying a large proportion of the reassessed tax liabilities before the re-assessment letter was issued.
5. In support of its contentions, the Applicant submitted a list of five authorities. It quoted two cases[35] about the test for what taking reasonable care means, submitting that it does not mean "the doing of everything possible" and that it is a question of fact which requires considering a range of factors about the taxpayer's behaviour. The Applicant distinguished the case of Jokhan and Commissioner for ACT Revenue [36] as one in which the taxpayer was found to have intentionally disregarded a tax law, which is not the case here. On this basis, the Applicant submitted that the poor professional advice by its advisors is a factor that supports a reduction in the penalty tax in this case.

1. The Respondent's contentions against the two issues listed in paragraph 16 above are summarised below.
   1. Whether it is appropriate to re-assess the payroll tax liabilities for the years 2006-07 and 2007-08
2. The Respondent contended that the Applicant had not fully and truly disclosed the facts for a tax assessment and therefore, a re-assessment was authorised under section 9(3)(b) of the TAA. It relied on a number of authorities.
3. In Commissioner of Taxation (Cth) v Riverside Road Lodge Pty Ltd (In Liq),[37] the court found against the taxpayer since further information of a material kind was required before the amount of tax could be assessed. In Australasian Jam Co Pty Limited v Federal Commissioner of Taxation[38] the court found that a taxpayer cannot escape a re-assessment due to an omission to include material information which was "obvious on the face of the return" and could have been "immediately and willingly supplied" by the taxpayer if requested to do so.[39]
   1. Whether there are grounds for reducing the penalty tax
4. The Respondent submitted that the Applicant cannot rely on the ignorance of its Directors or staff to justify the tax default.[40] Further it cannot rely on an error of its professional advisors, in this case its accountant, to excuse the Applicant from its obligations.[41]
5. The Respondent submitted that it is the Applicant's obligation to provide the required information in its reports, and not the responsibility of the Commissioner to "gather the material".[42] Further, the forms and screens for reporting provided by the Commissioner contained information about what was required to be included in the reports on payroll.
6. In regard to the grounds for remitting the penalty tax, the Respondent contended that there had been no mitigation, and that the Applicant had only taken those steps necessary to be compliant and which should have been done since the reporting began. Further, there was nothing exceptional about the Applicant's circumstances to justify remitting the penalty tax. In any case, it would not be fair and reasonable to do so given the tax default resulted from a failure to disclose its true taxable wages.

1. The Tribunal's findings about each issue are set out below.
   1. Whether it is appropriate to re-assess the payroll tax liabilities for the years 2006-07 and 2007-08
2. The Tribunal accepts that the Applicant has not behaved dishonestly. However, an honest Applicant may still be found to have failed to "accurately and truly disclose"[43] what was required for an assessment at the time it was initially made by the Commissioner. In this case it is not disputed that further information of a material kind, i.e. details of the Applicant's payments for superannuation, director's fees and fringe benefit tax, was required before the Commissioner could make an assessment.
3. Justice Fullagar in the Australasian Jam case said that allowing a reassessment in circumstances where the missing information is not known by the taxpayer but of a nature that the taxpayer is "capable of knowing, if read quite literally, may be thought to go a little too far".[44] If the missing information in the Applicant's reports for 2006-07 and 2007-08 had been of a nature that it was not known or easily known by the Applicant at the time of the initial assessment, then this may raise doubts about whether a reassessment under section 9(3)(b) is justified. However, this was not the case.
4. The missing information was known to the Applicant at the time it reported. It was making those payments in 2006-07 and 2007-08 and the information was quickly located in its records and provided by the Applicant after the Notice was issued in 2013. In the Australasian Jam case, Justice Fullagar found that a reassessment was justified where an inadvertent omission that may have been obvious on the face of the return had occurred. There is clear authority that it is not the responsibility of the Commissioner to identify missing information and to gather it.[45] The Tribunal finds that the Applicant did not accurately and truly disclose material information relevant to payroll tax for the years 2006-07 and 2007-08. A reassessment of tax for these years under section 9(3)(b) of the TAA was justified in this case.

b) Whether there are grounds for reducing the penalty tax

1. The evidence and line of authorities before the Tribunal lead to the finding that the Applicant did not take reasonable care. In Scott & Anor v Commissioner for ACT Revenue[46] the taxpayer was found to have failed to take reasonable care and to have no reasonable excuse. Similar to this case, in the Scott case there was an unintentional default that had occurred due to a number of factors including ignorance of the law and issues with a professional service.[47] In the Scott case, the tribunal quoted from RVO Enterprises Pty Ltd as trustee for the R M O'Mara Family Trust v Chief Commissioner of State Revenue ([2004] NSWADT 64 at paragraph 23) about the factors which suggest a taxpayer took reasonable care:

...attempts to comply with tax law, reasonable professional and other inquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law.

1. The Tribunal finds in this case that the Applicant over many years failed to make proper enquiries about its payroll requirements, and failed to actively oversight compliance with those requirements in the ACT, failed to have procedures in place to prevent and deal with errors in compliance. The care that the Applicant took should have been proportional to its circumstances and it was not. The Applicant was a corporate taxpayer with numerous and complex aspects to its business, employing about 90 people by the time of the hearing and with a significant annual turnover. The Tribunal also relies on matters raised by the Respondent in paragraphs 31, 32 and 33 above for this finding.
2. The matters raised in paragraphs 38 and 39 above and the matters in this and the following paragraphs lead the Tribunal to find that there was no reasonable excuse for not taking reasonable care. The Applicant submitted that its directors were not full-time and not experts, and were running a complex business that was also a corporate trustee. However, a gap in expertise or restricted availability by directors cannot excuse a failure to take reasonable care. Directors' duties do not fall away because directors are part-time or of varying backgrounds, and as a corporate trustee there were additional duties on the Applicant's directors.
3. The Applicant raised that there was a failure by its accountant which contributed to the tax default. While a failure of this nature can be taken into account in considering if there is a reasonable excuse, in the absence of any corroborating evidence an adverse finding must be drawn.[48] There is an absence of any corroborating evidence about the failure of the Applicant's accountants to properly advise in this case, which distinguishes it from the Highrise case where the circumstances about the taxpayer's accountant were corroborated and led to a finding of a reasonable excuse.
4. The Tribunal agrees with the Respondent's submissions in paragraph 33 and finds that there are no grounds for remission of the penalty tax under section 37 of the TAA. Many of the matters considered in paragraphs 38 to 41 above are also relevant to considering if a remission is justified, and support the Tribunal's finding that it is not.

(a) the Applicant did not accurately and truly disclose material information relevant to payroll tax for the years 2006-07 and 2007-08, and a reassessment of tax for these years under section 9(3)(b) of the TAA was justified in this case;

(b) the Applicant did not take reasonable care, there was no reasonable excuse for this lack of reasonable care, and no grounds for remitting tax, so no reduction of penalty tax is justified.

1. The findings above lead to the conclusion that the decision under review should be confirmed.

Taxation Administration Act 1999

(1) The commissioner may make 1 or more reassessments of a tax liability of a taxpayer.

(2) A reassessment of a tax liability must be made in accordance with the legal interpretations and assessment practices generally applied by the commissioner in relation to matters of that kind at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time.

_(3) The commissioner must not make a reassessment of a tax liability more than 5 years after the initial assessment of the liability, unless - _

(a) the purpose of the reassessment is to give effect to a decision on an objection or appeal as to the initial assessment; or

(b) at the time the initial assessment or a reassessment was made, all the facts and circumstances affecting the liability under the relevant tax law of the person in relation to whom the assessment or reassessment was made were not fully and truly disclosed to the commissioner.

(4) The initial assessment of a tax liability remains the initial assessment of the liability for this Act even if it is withdrawn under section 13.

(1) The amount of penalty tax payable in relation to a tax default is 25% of the amount of tax unpaid, subject to this division.

(2) The amount of penalty tax payable in relation to a tax default is 50% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by a failure by the taxpayer (or a person acting on behalf of the taxpayer) to take reasonable care to fulfil the taxpayer's obligations under a tax law.

(3) Subsection (2) does not apply if the tax payer satisfies the commissioner that the taxpayer (or a person acting on behalf of the taxpayer) had a reasonable excuse for the failure.

(4) Subsections (2) and (3) apply to a tax default that happened before their commencement in the same way as they apply to a tax default that happened after their commencement.

(5) The amount of penalty tax payable in relation to a tax default is 75% of the amount of tax unpaid if the 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 tax law.

_(6) No penalty tax is payable in relation to a tax default if the commissioner is satisfied that - _

(a) the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the tax law; or

(b) the tax default happened 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.

Note The commissioner's decision to impose penalty tax is an internally reviewable decision (see s 107, def internally reviewable decision), and the commissioner must give an internal review notice to the taxpayer (see s 107B).

1. Reduction in penalty tax for disclosure before investigation

The amount of penalty tax determined under section 31 is reduced by 20% if, after the commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out and before it is begun, the taxpayer discloses to the commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined.

_The commissioner may remit all or part of an amount of penalty tax payable by a person if satisfied that - _

(i) the person has taken reasonable steps to mitigate, or to mitigate the effects of, the circumstances that resulted in the liability for penalty tax; or

(ii) the circumstances that resulted in the liability for penalty tax were exceptional; and

(b) it would be fair and reasonable to remit all or part of the penalty tax.

Note The commissioner's decision to refuse to remit penalty tax payable by a person is an internally reviewable decision (see s 107, def internally reviewable decision), and the commissioner must give an internal review notice to the person (see s 107B).

[18] Scott and Anor v Commissioner of ACT Revenue [2013] ACAT 73

[25] Sections 33 and 107A, and Schedule 2, TAA)

[27] Rawson Finances Pty Ltd v Commissioner of Taxation (2013) FCAFC 26; Touma v Chief Commissioner of State Revenue [2012] NSWADT 2; Hay v Commissioner for ACT Revenue [2014] ACAT 23

[28] Section 68, ACT Civil and Administrative Act 2008

[29] Applicant's Statement of Facts and Contentions, filed 2 July 2014, page 2

[30] Applicant's Statement of Facts and Contentions in-reply, filed 5 August 2014, page 5

[31] Applicant's Statement of Facts and Contentions in-reply, filed 5 August 2014, page 6

[32] Applicant's Statement of Facts and Contentions in-reply, filed 5 August 2014, page 6

[33] Applicant's Statement of Facts and Contentions in-reply, filed 5 August 2014, page 7

[34] Applicant's Statement of Facts and Contentions in-reply, filed 5 August 2014 , page 6

[35] Peco Arts Inc v Hazlitt Gallery Ltd [1983] 3 All ER 193 at 199 cited in AES Wiring Pty Ltd and AKS Distributions Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADT 11; B and L Linings Pty Ltd and Anor v Chief Commissioner of State Revenue [2008] NSWADTAP 14 cited in AES Wiring Pty Ltd and AKS Distributions Pty Ltd v Chief CMR of State Revenue [2012] NSWADT 11

[36] [2012] ACAT 15

[37] [1990] FCA 205; (1990) 23 FCR 305

[38] [1953] HCA 52; (1953) 88 CLR 23

[39] Australasian Jam Co Pty Limited v Federal Commissioner of Taxation [1953] HCA 52; (1953) 88 CLR 23 at 33

[40] A Plus Plumbing and Building Services Pty Ltd and The Commissioner for ACT Revenue [2012] ACAT 76

[41] Jokhan and Commissioner for ACT Revenue [2012] ACAT 15

[42] Respondent's Statement of Facts and Contentions, filed 23 July 2014, page 9; Photo Corporation of Australia Pty Ltd and Commissioner for ACT Revenue [1994] ACTAAT 91

[44] Australasian Jam Co Pty Limited v Federal Commissioner of Taxation [1953] HCA 52; (1953) 88 CLR 23 at 33

[45] Photo Corporation of Australia Pty Ltd v Commissioner for ACT Revenue [1994] ACTAAT 92

[46] [2013] ACAT 73

[47] Scott and Anor v Commissioner for ACT Revenue [2013] ACAT 73, at paragraph 36

[48] Highrise Concrete Contractors (Aust) Pty Ltd v Commissioner for ACT Revenue [2014] ACAT 31 at paragraphs 52 to 54; Jokhan and Commissioner for ACT Revenue [2012] ACAT 15