1. The Applicant in his evidence said that the Company could not embark on any task unless and until it had satisfied Ajilon that it carried professional indemnity cover, product liability cover and workers compensation cover. The relevant agreement is silent as to all of these (so it was contended) important aspects excepting only that clause 4 of the relevant agreement contains a sentence which obliged Ajilon to reimburse the cost of workers compensation cover. The evidence of each of the Applicant and Mr Tavener was that there was never any such reimbursement of workers compensation payments by Ajilon. Mr Tavener; who is named in one of the written agreements as the person to whom the Applicant was to report in respect of Ajilon; expressed surprise as to the fact that this is the only mention in the relevant agreement of all of these aspects.

PART C - THE INSURANCE SCHEDULE

1. Mr Comer sought to contend that Exhibit A2 indicates that cover in respect of public liability and product liability was obtained. There are a number of difficulties in respect of that contention:

(a) Exhibit A2 shows the period of insurance was 1 September 2005 to 1 September 2006 and thus does not apply to the relevant period;

(b) as to what is meant by the words "product liability" is unclear; it could relate to injury to persons resulting from the services provided or in the alternative it could relate to damages sustained in consequence of such services being found to be inadequate or negligent. The Insurance Schedule makes it clear that another document described as the Product Disclosure Statement "sets out details of your cover in place with us"; that Product Disclosure Statement was not produced notwithstanding the fact that it is clear that its content must be relevant to and probably decisive in relation to the cover referred to. Moreover it is not possible without the Product Disclosure Statement to know what cover is provided.

1. There was no documentary evidence as to insurances of this or any other kind in respect of the relevant years.

PART D - THE EVIDENCE OF THE APPLICANT

1. The Tribunal had been informed prior to the hearing that the Applicant did not intend to call any witness other than Mr Tavener. When the Respondent made it clear that he wished to cross-examine the Applicant the Applicant decided to give oral evidence himself. His witness statement, Exhibit A1, was first confirmed as true and correct. Thereafter Mr Comer examined him in such manner that his evidence took up the whole of the morning of the hearing. Exhibit A1 reads as follows:

On or around 07/07/1999 I purchased a shelf company from Patricia Holdings Pty ltd changed the company name to Coopers Consulting Associates Pty Ltd A.C.N 088492237.

Prior to this incorporation I was employed by Advantra Pty Ltd as a "Voice and Carrier services manager" which entailed the smooth operation of private telecommunications for IBM Australia, Lend Lease and others. I had a team of skilled workers to assist me.

I was approached by Ajilon Pty Ltd who offered me contract work which specialized in my sphere of expertise.

The contract between the 2 companies was designed to complete on a job by job basis work obtained by Ajilon.

An agreement was entered into and was renewable every 6 months subject performance and or work availability.

I was advised by my accountant at the time that this was a perfectly acceptable vehicle in which to run the business.

Word of mouth recommendations saw the company grow and other clients were obtained.

In 2001/2002 financial year E-serve Global provided some 70% of the personal services business income generated by the company.

The proposed changes in act from the 01/07/2000 led us to seek advice from our accountant who assured us that we were exempt from the changes for 3 main reasons

1. that we had multiple contracts

1. that the company also operated a courier business which provided more than 20% of the companies overall income

3. Because we employed a driver for the Courier contract delivery.

Both Ajilon and E-serve Global gave the company specific tasks which always ended up with and end result before moving on to a new project.

The remuneration for these Jobs were based upon the negotiated terms agreed by the Head Contractor, ie if Ajilon had agreed with a billing cycle for say 2 weeks we had to bill Ajilon within the same cycle and that cycle varied from client to client.

This was acceptable way of receiving progress payments for jobs that could take up to 6 months to complete.

Through Coopers Consulting invoices were created and paid according to each contract it received.

From My recollections My Accountant Mr. Ken Nimmo of Harrison Howard and Co received notification from the ATO in respect of an audit of Coopers Consulting for the year's up to and including 30/06/2002. Mr Nimmo provided the ATO with the requested information and no further contact was received from the ATO.

We received a further notice on the 19/02/2007 from the ATO (M Dalby) which then required the Audit of the selected years ended 30/06/2003 and 2004.

From this point on we were unable to convince Mr. Dalby that we were exempt from the changes in the act. Mr. Dalby proved to be totally uncooperative and it got to a stage where we had to file an official complaint against him on the 24/09/2007.

The complaint centered on Mr. Dalby's insistence of continually changing the required documentation and when each and every document was supplied made an assessment without utilizing any of the information. Also Mr. Dalby's comment in private to me showed his dislike for people that were more successful than him.

Since that time we have had a number of "decisions" from the ATO as well as conflicting verbal and written statements and I am now thoroughly confused. Because of this I continued to ask my financial advisor Mr. Martin Comer of Sultana Investments to help me with resolving this long running and unjust dispute around the administrative penalties and interest charged on the basis of not taking reasonable care in reporting the amount of attributable income in the income tax returns.

1. It must be said that the Applicant's oral evidence went far beyond the rather sparse detail of Exhibit A1. It must also be noted that in examination in chief many questions were leading in nature. Mr Kasep did not think it necessary to object and Mr Comer was permitted to proceed on this basis.
2. I do not think it necessary to go into great detail as regards the Applicant's oral evidence and accordingly this Part D is confined to some of the more salient aspects.
3. The Applicant said that the Company was incorporated in July 1999; prior to that date he was employed as a PAYG earner. It was at about that time that he first became involved with Ajilon.
4. The Applicant said that the original project for Telstra related to the building of a single bill system and designed to enable a customer of Telstra to receive one bill for a variety of services. He said that it was necessary to report to Telstra's management on a weekly basis as to the number of bills produced and also to report on expectations going forwards, and in addition as to ongoing costs. He said that it was also necessary to report to Ajilon through Mr Tavener.
5. The Applicant said that he had to complete timesheets which had to be signed off by Telstra and which were then forwarded to Ajilon.
6. Invoices were rendered to Ajilon on a fortnightly basis and Ajilon, after checking the invoices against the timesheets which had been produced, made payments of the invoices generally after about eight days.
7. The Applicant said that it was necessary that WorkCover costs be incurred and that it was also necessary to have professional indemnity and public liability cover. The Applicant was referred to item 7 of the table forming part of the Insurance Schedule contained in Exhibit A2; he said the product liability cover was required in respect of work to be performed by him on behalf of Coopers Consulting. He said also that the insurance was taken by Coopers Consulting which paid the relevant premium.
8. When referred to clause 4.1 of the relevant agreement the Applicant said that Ajilon did not ever compensate the workers compensation costs incurred by Coopers Consulting.
9. The Applicant said that, while Telstra work was generally performed at Telstra's offices on a Telstra-supplied computer, testing could be conducted on his home office computer, but using dummy information. Real information could not be accessed outside Telstra's premises.

Alienation of personal services income: contractors and consultants

Changes to the tax law that affect contractors and consultants

On 1 July 2000 the New Business Tax System (Alienation of Personal Services Income) Act 2000 introduced changes to the tax treatment of personal services income earned by contractors and consultants. The changes to the law apply only to personal services income.

> WORK OUT WHETHER YOU ARE AFFECTED BY THESE CHANGES

Follow the steps outlined in the following flowchart and use the following notes to work out whether your personal services income is affect by the changes to the tax law. If the personal services income is paid to a company, partnership or trust, the words 'you' and 'your' refer to that entity.

If you had a prescribed payments system (PPS) declaration in force at 13 April 2000, the changes to the tax law apply from 1 July 2002.

If you are a commission agent, special rules apply. Contact us for more information.

> UNSURE?

If you are not sure about any step in the flowchart or checklist, or whether the changes to the tax law apply to you, you can:

• Phone 13 28 66
• Speak to your tax adviser, or
• Apply to us for a determination. You can get a copy of the Alienation of personal services income: application for determination - personal services business - form (NAT 3360) and Alienation of personal services income: application for determination - personal services business - instructions (NAT 3363) from our website at www.ato.gov.au or by phoning 1300 720 092

1. The Applicant was then examined in some detail, but as to the 2002 tax year and which is not one of the relevant years. In that year services were provide by Coopers Consulting to Ajilon and to another company in New Zealand. Income from Ajilon constituted a little less than 30% of all of the relevant income. The Applicant said that the two companies were not associated; in answer to questions from Mr Comer he confirmed that they had no directors in common, that they had no shareholders in common, and in general terms that they were not associated in any way whatever. The Applicant, having considered the Fact Sheet in respect of the 2002 year was satisfied that it was not necessary for him to make contact with the Australian Tax Office and that an exemption was available; he said moreover in categoric terms that the Company was exempt and that it was a personal services entity.
2. The remainder of this Part D relates in the main to the cross-examination of the Applicant.
3. The Applicant agreed that the single bill project for Telstra commenced in 1999 and ended in 2000.
4. The Applicant agreed that the first page of Exhibit A2 related to the period from 2005 to 2006 and was thus not referable to the relevant years. In respect of the Insurance Schedule his attention was drawn to its content as regards the Product Disclosure Statement. He said that he had nothing other than Exhibit A2. It was put to the Applicant that without the Product Disclosure Statement it was not possible to ascertain what the policy covered. The Applicant said that he did not agree, however, the Applicant agreed that, in any event, item 7 in the table on the Insurance Schedule contained in Exhibit A2 makes no reference to professional indemnity cover.
5. The Applicant was referred to Exhibit A6 which is a purchase order raised by Telstra in relation to Ajilon and which refers to "Project Manager"; the Applicant said that he was not a project manager; he went on to say that he was a business support person whose services included project manager elements.
6. Referred to clause 1.1 of the relevant agreement the Applicant agreed that it related to the provision of professional business services.

1. Mr. Tavener commenced by confirming the content of his witness statement, Exhibit A7, which reads as follows:

I Mr. Ross John Tavener of 11 Tamar Place Wharoonga Sydney NSW, State as follows :-

I have been self employed through my company Tavener management services since 1995.

I was introduced to Mr. Cooper around 1999 via a referral from Icon Recruitment a recruitment company employed by Ajilon Pty Ltd to source specialists in the field of programming and project management particularly in the field of information Technology.

At the time I was a subcontractor to Ajilon in Sydney and my role was to complete certain projects given to me by Ajilon and to also source new business from Ajilon's existing client base and create new contacts.

I was also responsible to oversee the jobs which I had won for the company to ensure the smooth operation of the project.

Ajilon was a Melbourne based company with some 80-90 subcontractors employed and was just branching out into Sydney, at this time there were only around 4 subcontractors employed of which Mr. Cooper was one.

On occasion I would gain a job for Ajilon and would select the subcontractor to do the Job. One job in particular was the "pensioner discount programme" for Telstra. This Job was allocated to Mr. Cooper and I oversaw the job to its successful conclusion. The process of initially getting the job was to firstly get a purchase order raised by the client to Ajilon Pty Ltd which would specify the specific Job requested the time frame to complete the works and a budgeted costing on the works. Then that, job would be allocated to a contractor either by me or a dedicated employee of Ajilon.

As a contractor to Ajilon and working closely with Ajilon personnel I am aware that all subcontractors must have Public Liability Insurance, professional indemnity insurance and workers compensation insurance without which they could not work for the company.

The company paid all of its contractor's progress payments @ a daily rate invoiced for time periods agreed to by both parries that could be either weekly fortnightly or monthly.

I am aware that all jobs allocated to the contractors were for a specific result. There were occasions when the client would cease the job before its conclusion or a Contractor was taken off the job because of poor workmanship but that never happened to my knowledge with Mr. Cooper.

1. Mr Tavener said that he was aware of the terms of the relevant agreement. When asked whether there were any conditions which had to be fulfilled before a task could commence he said that cover in respect of workers compensation, professional indemnity and public liability were needed and evidence that they had been procured had to be provided.
2. Mr Tavener said invoices were to be rendered fortnightly and in accordance with the daily rate. He said that he himself did not sign off as to payments but that there was an officer in Ajilon's service whose task it was to check invoices against timesheets. He said also that no one from Telstra could sign off on them.
3. Mr Tavener said that as between Telstra and Ajilon there were milestones and progress payments but that the Company was not involved.
4. Mr Tavener said that Ajilon never had occasion to sue the Company for damages nor was it ever necessary to require rectification of defects. He went on to say that if their work caused problems contractors could be penalised; he referred in this context to the termination provisions of the relevant agreement.
5. When asked whether there were any other possible consequences to a contractor who performed defective work he said that that contractor would be given no further work and that "sometimes there is a negotiated financial settlement involving financial loss [to the contractor]."
6. The remainder of this Part E relates in the main to the cross-examination of Mr Tavener.
7. Mr Tavener said that Exhibit A7 was prepared by Mr Comer after he. verbalised it and that Exhibit A7 reflects what he had verbalised. (It may be noted that as was the case with the Applicant, Mr Tavener's evidence before the Tribunal was considerably more extensive than that contained in his witness statement.)
8. Mr. Taverner was surprised that the relevant agreement contained no obligation as to insurance cover of any kind.
9. It was put to Mr Tavener that the manner in which payment was made to the Company might differ from the manner in which payments were made by Telstra to Ajilon; he agreed that this was correct in that Telstra would have a progress payment relationship with Ajilon while the Company received payment fortnightly and calculated in accordance with a daily rate.
10. It was also put to Mr Tavener that if the Applicant worked for a number of days the Company would receive payment from Ajilon even if Ajilon could not recover from Telstra. Mr Tavener agreed that the Company received a daily rate not in anyway conditional on results.

1. The "forever exempt claim" was abandoned at a late stage, but before that it was pursued with some considerable force.
2. Mr Comer referred to the Fact Sheet on a number of occasions in terms which were highly critical of it. It was pointed out to him that even if that Fact Sheet might have been worded with rather more precision there could not be an estoppel against the operation of the statute.
3. In essence, the "forever exempt" claim was made on the basis that because the Company was entitled to the exemption in the 2002 year it was forever exempt thereafter. The manner in which the Applicant was examined in chief indicated in clear terms that the 2002 exemption arose in the specific circumstances applicable to that tax year because the Company's income was derived from two separate and unconnected sources and that neither source contributed 80 per cent or more of the aggregate income. The examination of the Applicant in this context went to some pains to draw out the fact that the two companies were unconnected in all respects. In the relevant years, the position changed in that all of the relevant income was derived from one source and one source only. The Applicant was aware, or should have been aware, of the fact that the Company's position had become altogether different. The legislation makes it clear that the system operates on a year by year basis; that this is so is altogether logical in that the position of a company might vary from one year to another and this indeed is exactly what happened in the case of the Company; it was entitled to an exemption for the 2002 year (when it had two unrelated clients, but not during the relevant years and when it had only one client. If the Applicant was in any way uncertain, a simple enquiry of any tax agent or lawyer would have furnished him with advice as to the correct position. It must be remembered that the Applicant is an intelligent and educated person; on the balance of probabilities the fact that the Applicant did not make any such enquiry suggests that his failure may not have been inadvertent. The Tribunal considers it unlikely that he was misled by the Fact Sheet. These aspects are relevant in particular to the question of penalty referred to later in these reasons.
4. As ASFIC demonstrates the Applicant relied for the purposes of this matter on a number of grounds and by no means only on the "forever exempt" claim.

1. The Tribunal notes that it was furnished with helpful written submissions by the Respondent on which it has drawn to some considerable extent for the purposes of this Part G.
2. Part 2-42 of the Income Tax Assessment Act 1997 (Cth) contains the personal services income regime. The background and purpose behind the statutory provisions which comprise the regime were extensively considered by Senior Member Sweidan in Re Skiba and Federal Commissioner of Taxation [2007] AATA 1705; (2007) 67 ATR 682 at [35] - [51]. They were also considered by Lindgren J in Federal Commissioner of Taxation v Metaskills Pty Ltd [2003] FCA 766; (2003) 130 FCR 248.
3. The starting point of the regime is s 84-5(1) which defines "personal services income" in the following manner:

84-5 Meaning of personal services income

(1) Your *ordinary income or *statutory income, or the ordinary income or statutory income of any other entity, is your personal services income if the income is mainly a reward for your personal efforts or skills (or would mainly be such a reward if it was your income).

1. The parties agreed that the remuneration received by Coopers Consulting from Ajilon during the relevant years is personal services income for the purpose of s 84-5(1) because it was received as a reward for the "personal efforts or skills" of Mr Cooper. That agreement readily accords with the conclusions reached in Re Dibarr Pty Ltd v Federal Commissioner of Taxation [2004] AATA 1030; (2004) 57 ATR 1183 at [22] (Senior Member Beddoe and Member Fisher) and Fowler v Federal Commissioner of Taxation [2008] FCA 528; (2008) 167 FCR 425 at [24] (Lindgren J).
2. In accordance with s 86-15(1), the personal services income received by Coopers Consulting is treated as the assessable income of Mr Cooper unless the exception contained in s 86-15(3) can be relied on:

Exception: personal services businesses

(3) This section does not apply if that amount is income from the *personal services entity conducting a *personal services business.

1. On the basis that Coopers Consulting is a "personal services entity" as defined by s 86-15(2), the issue to be determined is whether Coopers Consulting was conducting a personal services business.
2. Coopers Consulting did not ever apply for a personal services business determination for either of the relevant years: see s 87-15(1)(b). Accordingly, Coopers Consulting will only have conducted a personal services business if the "results test" is satisfied: s 87-15(2)(a). (It is unnecessary in this context to consider the 80% income test because it was not relevant for the relevant years.)
3. In accordance with s 87-18(3):

(3) A *personal services entity meets the results test in an income year if, in relation to at least 75% of the *personal services income of one or more individuals that is included in the personal services entity's *ordinary income or *statutory income during the income year:

(a) the income is for producing a result; and

(b) the personal services entity is required to supply the *plant and equipment, or tools of trade, needed to perform the work from which the personal services entity produces the result; and

(c) the personal services entity is, or would be, liable for the cost of rectifying any defect in the work performed.

1. The results test in s 87-18(3) has been said to embrace the defining characteristics of an "independent contractor" at common law: see Metaskills [2003] FCA 766; 130 FCR 248 at [28]. While such common law principles are useful in interpreting s 87-18(3), it is the text of the section itself which controls the outcome: see IRG Technical Services Pty Ltd v Federal Commissioner of Taxation [2007] FCA 1867; (2007) 165 FCR 57 at [37] and [47] (Allsop J); Re Taneja and Commissioner of Taxation [2009] AATA 87; 2009 ATC 10-078 at [27] (Deputy President Professor Walker and Member Frost).
2. Having regard to the observations of Sheller JA in World Book (Australia) Pty Ltd v Federal Commissioner of Taxation (1992) 27 NSWLR 377 at 386, the Commissioner in TR 2001/8: Income tax: what is a personal services business, at [114] defines the phrase "producing a result" in s 87-18(3)(a) to mean:

[T]he performance of a service by one party for another where the first-mentioned party is free to employ his/her own means (i.e., third party labour, plant and equipment etc) to achieve the contractually specified outcome. As the cases show, the essence of the contract has to be to achieve a result and not to do work. [Footnote omitted]

1. Similarly, in Skiba [2007] AATA 1705; 67 ATR 682 at [62] - [64] Senior Member Sweidan said:

[62] The phrase "for producing a result" in s 87-18(3)(a) is not defined. However case law makes it clear that the essence of producing a result is performing a service that achieves a specified outcome and not doing work: "An independent contractor undertakes to produce a given result, but is not, in the actual execution of the work, under the order or control of the person for whom he does it": Queensland Stations Pty Ltd v FCT(1945) [1945] HCA 13; 70 CLR 539 at 545[1945] HCA 13; , [1945] ALR 273 at 274 . What is involved in the concept is "the performance of a service by one party to another who is to employ men and plant for the purpose and is to be paid according to the result": Queensland Stations Pty Ltd v FCT(1945) [1945] HCA 13; 70 CLR 539 at 551[1945] HCA 13; , [1945] ALR 273 at 277 ; also see World Book (Aust) Pty Ltd v FCT(1992) 27 NSWLR 377 at 381-382, 23 ATR 412 at 416, 92 ATC 4327 at 4331, 108 ALR 510 at 514-515 ; Zuijs v Wirth Brothers Pty Ltd(1955) ; at 571-573; , at 127-129 ; Neale v Atlas Products (Vic) Pty Ltd(1955) ; , .

1. In considering whether income is "for producing a result" courts and tribunals have had regard to aspects of the nature of the work and the contracts under which that work has been undertaken such as:

(a) the effect of early termination of the agreement. See for example, Skiba [2007] AATA 1705; 67 ATR 682 at [79]:

[79] Under the contracts, upon termination, Marketcroft was entitled to payment for work performed prior to termination, whether or not the service period under the contracts had been completed. That is the applicant could walk away from the contract without the completion of any specified contractual result and still be paid.

(b) when payment is made and for what, particularly, whether it is on the achievement of a "milestone". See for example, Re Metaskills Pty Ltd and Federal Commissioner of Taxation [2005] AATA 647; (2005) 60 ATR 1055 where this Tribunal stated:

[33] AB 23 and the other engagement letters make it clear that each engagement had a start date and an end date and provided for a daily rate of remuneration ($800 per day in the case of AB 23). Mr Strong in evidence and submissions said (repeatedly) that payment would not have been made if certain "milestones" had not been achieved. The overarching agreement and the engagement letters do not contain any suggestion that this was so and indeed make it clear that payment was being made for services and not for results. (There is no mention in any of them of "milestones".)

(c) whether the work can be delegated and who bears the risk of costs arising from defective work. See for example, IRG Technical Services Pty Ltd [2007] FCA 1867; 165 FCR 57 at [44]:

[44] The capacity of work to be delegated or subcontracted, if present, is a significant factor weighing in favour of a conclusion of an independent contractor. So is the question of risk of costs for defective work.

1. Having regard to the authorities the remuneration Coopers Consulting received from Ajilon during the relevant years was not for producing a result within the meaning of s 87-18(3)(a) because:

(a) the relevant agreement does not identify any result; Coopers Consulting was simply contracted to provide "professional business services" for the duration of the agreements;

(b) Coopers Consulting was not remunerated for producing any result; it was simply remunerated for the days that the Applicant provided professional business services: clause 4.1 of the relevant agreement;

(c) The remuneration Coopers Consulting received under the terms of the relevant agreement was not in any way dependent on producing a result;

(d) On early termination of the relevant agreement_,_ Coopers Consulting was entitled to "payments ... for all worked performed by the Applicant up to the date of termination" (clause 7.2 of the relevant agreement) - which supports the contention that Coopers Consulting was simply being remunerated for the provision of professional business services by the Applicant;

(e) The relevant agreement did not confer any freedom on Coopers Consulting to delegate or subcontract the "professional business services", it was obligated to engage the Applicant: clauses 1.1 and 2.1 of the relevant agreement.

1. Having regard to the preceding provisions, Coopers Consulting cannot be said to have conducted a personal services business because the remuneration it received was not for producing a result within the meaning of s 87-18(3)(a). The conclusions reached in: IRG Technical Services Pty Ltd [2007] FCA 1867; 165 FCR 57 at [110]; Dibarr Pty Ltd [2004] AATA 1030; 57 ATR 1183 at [43] - [44]; Re Nguyen and Commissioner of Taxation [2005] AATA 876; 2005 ATC 2304 at [38] - [41] (Member Webb) and Taneja [2009] AATA 87; 2009 ATC 10-078 at [35] - [41] are entirely apposite to the circumstances in these proceedings. In particular, the conclusion in Skiba [2007] AATA 1705; 67 ATR 682 at - [66] is particularly apt:

[65] Here, the evidence shows that the personal services income derived by the applicant was not paid upon producing a result but was a fortnightly or monthly payment based on the number of hours logged onto a weekly timesheet while working under the ultimate control of the CESPs and applying skill and effort to assist the CESPs complete the projects for their clients.

[66] The ongoing skilled work provided by the applicant to the CESPs is not converted into "producing a result" within the meaning of s 87-18(3) by applying the label "deliverables" where the actuality of what occurred was the performance of ongoing work by the applicant (a skilled professional selected by the CESPs and/or their clients as suitable for their needs) under the ultimate control of the CESPs during the term of the contracts.

1. The failure on the part of Coopers Consulting to satisfy the requirements of "producing a result" under s 87-18(3)(a) is fatal in relation to the results test overall. It is not necessary for the Tribunal to consider the elements in s 87-18(3)(b) and (c) because the three elements in s 87-18(3) which comprise the results test are conjunctive: see IRG Services Pty Ltd [2007] FCA 1867; 165 FCR 57 at [111]; Dibarr Pty Ltd [2004] AATA 1030; 57 ATR 1183 at [45] and; Nguyen 2005 ATC 2304 at [45]. Nevertheless, for the reasons set out in RSFIC [53] - [57], the Tribunal notes that Coopers Consulting has not satisfied the requirements of s 87-18(3)(c), but there is evidence (of academic relevance only) which would suggest that the requirements of s 87-18(b) may have been satisfied; as set out previously the Tribunal was referred in this context to a tax return by the Company; (see also Re Dibarr Pty Ltd and Federal Commissioner of Taxation [2004] AATA 1030; 57 ATR 1183 at [46]).
2. Since all of the Applicant's personal services income which Coopers Consulting received in the relevant years came from one source, Ajilon, Coopers Consulting was not entitled to self assess the "unrelated clients test" (s 87-20); the "employment test" (s 87-) or the "business premises test" (s 87-30): see s 87-15(3); ; at . Accordingly, these tests do not call for consideration and Coopers Consulting cannot be said to have conducted a personal services business during the relevant years or either of them.

PART H - THE INCOME ATTRIBUTABLE TO THE APPLICANT

1. The Respondent in the S documents has set out in detail his calculations as to the income attributable and has also set out the methodology employed by him.
2. The end calculations differ from those set out in the amended assessments because of material obtained by the Respondent after the audit. The end calculations are, so the Tribunal was informed by Mr Kasep, more favourable to the Applicant than those set out in the amended assessments. In any event the Applicant has made no attempt to query any of such calculations. The Applicant has accordingly failed, in this regard, to discharge the onus which he bears under s 14ZZK of the Tax Administration Act 1953 (Cth) and it follows that the amounts calculated by the Respondent as the income attributable to the Applicant pursuant to s 86-15(1) for the 2003 year is $79,693.00 and for the 2004 year is $88,418.00.

1. Having regard to Re Confidential and Commissioner of Taxation (Case 3/2008) [2008] AATA 415; (2008) 72 ATR 252 as to the concept of reasonable care, the Tribunal finds that the Applicant's failure to report the personal services income amounted to failure to take reasonable care. The Applicant has not called any evidence which calls in question the correctness of the penalty imposed. The Tribunal refers in this particular context in particular to clause 57 above.
2. As the calculations in relation to the income attributable to the Applicant under s 86-15(1) have changed since the amended assessments were issued, the penalty must be re-calculated on the basis of the correct shortfall amount. Accordingly, the decisions under review must be varied to reflect that for the purposes of calculating the "base penalty amount" under item 3 in the table in s 284-90(1) of Sch 1 to the Tax Administration Act 1953 (Cth) the shortfall amount for the 1993 year is $30,804 and for the 2004 year is $34,682.
3. Administrative penalties are intended to emphasise the proper operation of the tax system: Re Hutson and Commissioner of Taxation [2009] AATA 574; 2009 ATC 10-099 at [122] (Senior Member Sweidan). While "special circumstances" need not exist before the discretion to remit a penalty can be exercised (Dixon v Federal Commissioner of Taxation [2008] FCAFC 54; (2008) 167 FCR 287 at (Spender, Ryan and Emmett JJ)) there must be proper grounds calling for remission.

1. The Tribunal determines accordingly that the objection decisions under review be varied in the following manner:

(a) The income attributable to the Applicant pursuant to s 86-15(1) of the Income Tax Assessment Act 1997 (Cth) is:

(b) In calculating the penalties payable by the Applicant pursuant to s 284-75 of Sch 1 to the Taxation Administration Act 1953 (Cth) the shortfall amount for the purpose of item 3 of the table in s 284-90(1) of Sch 1 to that Act be:

And that the objection decisions under review otherwise and as varied as aforesaid be affirmed.

I certify that the 83 preceding paragraphs are a true copy of the reasons for the decision herein of Mr Julian Block, Deputy President

Signed: ...............[sgd].................................................................

Appearance for the Respondent Mr B Kasep of counsel instructed by Ms R Miller, ATO Legal Services Branch