Taxation Administration Act 1953 (Cth) Schedule 1, ss 340-5, 340-10; s 14ZZK(b)(iii)

Re Filsell and Commissioner of Taxation [2004] AATA 1012

Powell v Evreniades and Others [1989] FCA 114; (1989) 21 FCR 252

Van Grieken v Veiland and Others [1991] FCA 167; (1991) 21 ATR 1639

Spicer and Commissioner of Taxation [2004] AATA 960

Thomas and Commissioner of Taxation [2014] AATA 102

Perrot and Commissioner of Taxation [2004] AATA 1372

Re Rasmussen and Commissioner of Taxation [2013] AATA 746; (2013) 61 AAR 323

Re Ferguson and Commissioner of Taxation [2004] AATA 779

Practice Statement Law Administration 2011/17: Debt Relief

1. Mr Alvin Phua and Ms Ethel Lau seek review of the Commissioner's decisions both dated 6 November 2014 to disallow their respective objections against the Commissioner's decisions to refuse to release them from certain tax liabilities pursuant to s 340-5 of Sch 1 of the Taxation Administration Act.[1]

1. Mr Alvin Phua and Ms Ethel Lau are the two applicants in this matter. Mr Phua is the Executive Chairman and Chief Executive Officer of Byte Power Group Limited ("the company"). Ms Lau is the Company Secretary and Chief Officer.[2] Both applicants are beneficiaries under the Apel Family Trust ("the trust").[3]

1. Both of the applicants have long-standing taxation debts. Ms Lau has not made any payment to discharge her taxation debts for 12 years.[4] Mr Phua has not made any payment to discharge his taxation debts for eight years.[5]
2. Ethel Lau has a releasable taxation liability of $2,264,366.50.[6] Alvin Phua has a releasable taxation liability of $676,284.98.[7] The following tables indicate how the taxation liability of both applicants has been calculated:

1. The "non-releasable" items in the Table are director's penalties, court ordered costs and interest.

1. There is some dispute about the quantum of the applicants' income. Ms Lau deposed that she earns a weekly net wage of $2,208.[8] Mr Phua deposed that he earns a weekly net wage of $2,928.70.[9]
2. Since 22 January 1998 the applicants are beneficiaries under the Apel Family Trust and have received income from the trust.[10] In the 2013 income year both applicants received disbursements from the trust equating to $1,890 per week each.[11]
3. Whilst the applicants have leased a car park attached to their apartment they have not declared such income. Mr Phua was questioned on whether he had attempted to generate other income by renting out all available five carparks. However, the applicant asserted that the car parks could only be rented to other occupants.[13]

1. Ms Lau deposed that she incurs $2,180.50 in weekly expenses.[14] Ms Lau has also made payments to assist her relatives. The documentary evidence shows that in 2012 and 2013 she made payments totalling $8,930 to her son as well as paying his childcare costs of more than $4,000.[15] She pays for the storage costs of her mother's effects. Her son has withdrawn more than $11,000 from the bank account of her self-managed superannuation fund.[16]
2. Mr Phua deposed that he has $2,668 in weekly expenses.[17] However, he further stated that $210 of the weekly credit card repayments are reimbursed by the company.[18] Therefore, the total weekly expenses of Mr Phua are approximately $2,458.

1. The applicants have a joint tenancy ownership of an apartment located in Macrossan Street, Brisbane ("the apartment").[19] The apartment was purchased "off the plan" in 2004 for $2,416,316.[20] There is a dispute about the current market value of the property which I will discuss below.
2. Other assets of the applicants include shares in the company held under the applicants' superannuation funds; salaries owed by the company; cash; and household goods.
3. On 8 April 2015 Ms Lau estimated that her total assets amounted to approximately $4,075,000.[21] On 12 April 2015 Mr Phua estimated that his total assets amounted to approximately $3,411,000.[22]
4. The respondent submitted that there is uncertainty about the value of the total assets of the applicants because of their incomplete disclosure. The respondent refers to lump sum deposits into Ms Lau's accounts of $49,983 and $84,000 on 19 July 2013 and 19 November 2014 respectively.[23] The source and nature of these lump sum deposits has not been explained.

1. The applicants have significant liabilities. On 8 April 2015 Ms Lau estimated that her total liabilities amounted to approximately $2,524,000.[24] On 12 April 2015 Mr Phua estimated that his total liabilities amounted to approximately $2,511,000.[25]

1. A central transaction occurred in the 2003 financial year which has been referred to as the "Put and Call Option Agreement". On 27 November 2002 Apel Pacific Group Ltd, as trustee of the Apel Family Trust ("the trust"), entered into a contract for shares in company ACN 100 608 080 (Byte Power Pty Ltd) with Willhart Limited as purchaser.[26] Willhart Limited later changed its name to Byte Power Group Limited ("the company").[27]
2. The consideration under the Put and Call Option Agreement was a Tranche 1 payment of "at least $3,500,000".[28]
3. On 30 June 2003 a payment $3,783,577.79 was made to the APEL Family Trust account described as "Mvmt on APEL Trust Loan".[29]
4. There is no evidence of the milestone and incentive being met. The net capital gain declared for the trust in the 2003 financial year was $2,371,522.[30]
5. The applicants have conceded that "it has not been possible for the Applicants to obtain certain information in support of their Application".[31] The applicants' submissions in reply provided that the applicants did not receive the funds. This was because either the $3,700,000 was not received by the trust or it was received but was paid to the creditors of the trust. Both of these submissions were advanced as reasons why the applicants were unable to pay the capital gains tax assessments.
6. Mr Phua asserts that the trust owed significant debts to third parties in his amended witness statement of 12 April 2015.[32] However, he did not then claim that $3,700,000 was paid to the creditors of the trust. Rather, he contended that a lesser amount of only $100,000 was received by the trust as consideration.[33]
7. The respondent has referred to the fact that when the application for remission of capital gains tax was before this Tribunal in 2011 it was brought on the basis that the trust had been paid all but $1,900,000 of the purchase price.[34] The applicants did not make any response to this submission in their reply.
8. The respondent has referred to the absence of contemporaneous documentary evidence to substantiate that these funds were paid to creditors. Ms Lau maintained in evidence that there was a document, referred to as a "spreadsheet", which discloses that the sum of $3,700,000 was paid to creditors. This document was not referred to in her affidavit nor was it filed before the hearing. The applicants did not in their reply dispute the submission of the respondent that this spreadsheet document was not tendered in evidence at the hearing.
9. The sale contract did not make any stipulation as to the payment of creditors.[35] The applicants did not provide any cogent evidence of payments by the trust to creditors in the form of producing bank records or any other financial records.
10. There is no cogent evidence before the Tribunal that the amount of $3,700,000 was even paid directly to the creditors of the trust. Such an assertion is inconsistent with the conduct of the applicants in their previous application to this Tribunal. I do not accept the explanation of Mr Lau that the sum of $3,700,000 was paid to the creditors of the trust as it is not corroborated by any reliable evidence.

1. The respondent highlighted that the applicants have paid other creditors in preference to the taxation debts.[36] Mr Phua in giving evidence was frank in stating that he would not pay any taxation debts whilst the ATO was pointing "bazookas" at him. Mr Phua is concerned that he has been unable to achieve a compromise of his taxation debts even though he had negotiations with a number of officers of the Commissioner.[37] Mr Phua was frank in admitting that he has not offered to pay his taxation debts in full. The tenor of his evidence was that he wanted the ATO to accept payment of a lesser amount rather than the full amount of the taxation debts. The applicants contend that they were attempting to negotiate what they have referred to as an "en globo settlement" and that "a part payment of the tax debt would be inconsistent with the applicant's intention to once and for all finalise matters between them".[38] It would seem that what Mr Phua is seeking is what is often referred to as a "commercial settlement" which is only accepted in those limited circumstances that are stipulated in ATO policy.[39]

1. The applicants have prioritised the payment of other creditors such as the mortgagee of the apartment which requires the applicants to make monthly payments of $11,000 to $12,000.[40] The body corporate and rates expenses are significant and amount to more than $18,000 per annum.[41]
2. The applicants have engaged in speculative activity. In January 2006 the applicants used part of the proceeds from the sale of an investment property to purchase mining shares which Mr Phua stated in giving evidence was subject to a trading halt. Rather than pay any monies towards taxation liabilities the applicants used $80,000 of the funds towards speculative investments.[42]
3. Ms Lau in her evidence confirmed that in 2008 the trust received $307,000 from the Opus Prime liquidation. She remarked that this was dispersed in the payment of creditors such as the mortgagee. One matter of concern is that the trust records which have been tendered by the applicants do not refer to this large distribution from the liquidation. This leaves me to conclude that the account records of the trust are not accurate, a fact that was confirmed by Ms Lau.
4. Ms Lau has indicated that in 2011 the applicants paid $90,000 towards the mortgage. Despite then having funding of this magnitude no attempt was made to satisfy taxation liabilities.

1. There have been audits of the income tax returns of both applicants for the 2001, 2003 and 2004 financial years. The respondent contended that Mr Phua had under-reported his income by $74,552 in 2001 and by $120,751 in 2004 (which included under-reported distributions from the trust).[43] This contention has not been disputed by Mr Phua.
2. The respondent contended that Ms Lau had under-reported her income in 2001 by $74,552, in 2003 by $828,862 and in 2004 by $144,984 (including under-reported distributions from the trust).[44] Ms Lau does not dispute that in 2001 and 2004 her income was under-reported. However, she contends that in 2003 the sum of $828,862 was her share of the capital gain and that Mr Phua's income tax return for that year had wrongly included 100 per cent of the capital gain.
3. On 28 June 2007 a sum of $500,000 was transferred to Ms Lau's superannuation fund. She was not able to explain the source of the funds. The sum was not declared in her income tax return.[45] There is no record of any superannuation entitlement in the merger contract.
4. Another example of taxation income not being declared was in 2006 when an investment property was sold for $420,000.[46] Ms Lau in her evidence confirmed that this capital gain was not declared.
5. Ms Lau stated that in December 2008 the trust received some $307,000 in the liquidation of Opus Prime. These funds were used to pay the mortgagee, the company and other expenses.[47] However, those distributions from the trust were not declared in the tax returns of the trust which were lodged.[48] Moreover, the tax returns were lodged late.[49] The returns for the relevant financial year only disclosed investment income from their company which was distributed to the applicants.[50]
6. The financial statements for the company for the financial year ended 30 June 2008 disclose that Mr Phua was issued with 8,750,122 ordinary shares by way of the issue of ordinary shares in settlement of outstanding fees and convertibles notes.[51] This allocation of shares was not declared in the income tax return for Mr Phua for the 2008 income year.[52] Ms Lau stated that she had overlooked the need to declare this income.
7. The applicants failed to disclose the financial gains that they received following to the debt to equity restructuring of the company in December 2009. Mr Phua received $207,146 in director's fees which he did not disclose.[53]
8. Ms Lau stated in evidence that in 2009 the company gave her $200,000. This payment was not reported in her income tax return. She used those funds to purchase a convertible note. There are no records in evidence which verify the source of funds to purchase the convertible note.
9. Ms Lau stated that the sum of $200,000 was for unpaid superannuation entitlements. She later acknowledged that her superannuation entitlements were about $50,000.
10. In evidence is a copy of an announcement to the Australian Stock Exchange on 2 December 2009. Appendix 3B to the announcement refers to the issuing of $2,000,000 of convertible notes plus interest totalling $2,353,369 to the Lau Superannuation Fund.[54] Ms Lau confirmed that this contribution had not been reported in the return of the fund.
11. Both applicants have declared no income in their income tax returns for the 2010 and 2011 financial years.[55] Mr Phua admitted that the credit card expenses as well as mortgage repayments had been met by the company and that he had not properly explained why he had declared these payments in his income tax returns. For those years the financial records of the company do not disclose any distributions to the trust.[56] Ms Lau also stated that the company paid their credit card expenses and in 2011 the company paid $90,000 for arrears of mortgage payments.
12. The income tax returns of the applicants do not disclose income from the company because they assert that no direct payments have been made to them. The company has made mortgage repayments and repaid credit card debts during the 2010 and 2011 income years. The applicants contend that these payments were made by the trust directing the company to make such payments. The applicants contend that any payments made by the company to or on behalf of the applicants were offset against debts owed to the applicants.[57] I do not accept that there is cogent evidence to substantiate this contention.
13. The applicants conceded that any income derived from renting out a car park in their building had not been declared as income in their tax returns although they assert that property deductions would have been claimable if they had.
14. There is evidence that the income tax returns of the applicants have not been accurately prepared. Ms Lau in giving evidence confirmed that there have not been accurate records kept for the applicants or the trust.
15. Mr Coonan had prepared income tax returns on the basis of information provided by the applicants without sighting original records.[58] The announcement to the Australian Stock Exchange on 2 December 2009 contains an Appendix which refers to a share issue in lieu of director's fees of AUD$207,146.[59] Ms Lau remarked that it was a mistake that this conversion of shares was not declared in the 2010 income tax return of Mr Phua.
16. There is evidence that the income tax returns of the applicants have been consistently lodged late. On average, the income tax returns of Mr Phua were lodged 784 days late each year between 2003 and 2013.[60] Similarly, the income tax returns of Ms Lau were lodged average 755 days later each year between 2001 and 2013.[61]

1. There was a summary of payments table in evidence which lists payments made by the company to the bank accounts of Mr Phua.[62] The total of these payments exceeds $339,000. The payments were made by the company into his accounts including his credit card from 28 March 2003 to 7 May 2015.[63]
2. One matter of concern is that there is no evidence how items of expenditure on entertainment relate to the personal expenditure of Mr Phua and what items of such expenditure relate to his business expenses. I cannot accept his assertion that all of his entertainment expenditure is of a business nature.
3. There were contradictory statements made by the applicants as to whether there are records which distinguish whether credit card expenditure by Mr Phua are business expenses or personal expenses. Mr Phua stated that he did not keep a record of what expenditure on the credit card was of a personal or a business nature. He asserted that Ms Lau kept such records. However, when Ms Lau gave evidence she was not able to state what credit card expenses of Mr Phua were a personal or business expense. She stated that she did not keep any such records. The income tax returns for the applicants do not disclose any credit card expenses of a personal nature as income.[64]
4. Ms Lau confirmed that approximately 20 per cent of restaurant expenses were personal and not business-related, and that Mr Phua would also have personal restaurant and entertainment expenses on his credit cards. However, Mr Phua asserted that all restaurant expenditure on his credit card was business-related.

1. I have earlier mentioned that the applicants have a joint tenancy ownership of a property located in Macrossan Street, Brisbane ("the apartment").[65] The apartment has four bedrooms and bathrooms as well as five car parks.[66]
2. Mr Phua did not consider that it was viable to rent out the apartment to generate income. Mr Phua believed that he could rent the apartment for up to $2,000 per week which is less than the mortgage payments of $2,500 per week. This may be a conservative estimate.
3. The applicants stated that they acquired the apartment so that it could be sold at a profit.[67] In 2007 the apartment was then worth approximately $3,500,000.[68] The respondent contends that $3,500,000 is the more likely the current market price of the apartment.[69] The applicants contend that the apartment is now worth less than its purchase price and have put forward appraisals by real estate agents in evidence which are annexed to the witness statement of Mr Phua of 12 April 2015.[70] The appraisal completed by Ray White contains the opinion that the property is worth $2,400,000.[71] I do not give that appraisal any weight as the comparable properties referred to in the appraisal have a smaller quantity of bedrooms and are not located in the same street as the apartment.
4. I have similar reservations when considering the appraisal completed by Remax Australia which contains an appraisal that the apartment is worth $2,300,000.[73] The appraisal referred to a number of properties including a four bedroom unit in Macrossan Street which sold for $3,150,000 in 2011. However, that report does not contain any reasons in support of that appraisal.
5. There may be some weight in the submission of the respondent that the appraisal of Remax Australia indicates that there has been a general increase in the value of city apartments. However, there is no evidence before the Tribunal upon which I can make a finding about the valuation of the apartment. Nevertheless, the equity in the apartment is certainly a significant asset.
6. The applicants have pointed out that the respondent has not submitted any valuation evidence of the apartment. However, it would not be reasonable to expect the respondent to undertake the expense of obtaining a valuation where those costs would not be recoverable and where the applicants are seeking the favourable exercise of discretion by the respondent. Rather, it is incumbent on the applicants to provide cogent evidence of the value of the apartment. While I would not expect the applicants to go to the expense of obtaining a valuation from a certified practising valuer, an appraisal from a real estate agent which contains details of comparable properties in the apartment complex would have been useful.
7. The five car parks can be rented for $130 per week.[75] When Mr Phua was questioned about renting the car parks he asserted that they could only be rented to other occupants.[76] The bank statements of Ms Lau record that she is in receipt of an income from renting the car parks.[77]

1. On 4 June 2013 Ms Lau applied for a release from her taxation debts on the grounds of serious hardship.[78] The application was not accepted because she was then five years overdue in lodging her income tax returns and had not made any payment towards her tax debts in over 10 years.[79]
2. Ms Lau then lodged her tax returns for outstanding years and again on 7 November 2013 sought release of her taxation debts. On 9 May 2014 Mr Phua also sought release of his taxation debts after lodging five years of outstanding returns declaring a nil taxable income.[80]
3. On 3 December 2013 the respondent refused to release Ms Lau from her taxation debt.[81] On 4 July 2014 the respondent similarly refused to release Mr Phua from his taxation debt.[82]
4. On 29 January 2014 Ms Lau lodged an objection against the decision of the respondent to refuse to grant a release from her tax liability.[83] Mr Phua also did so on 1 September 2014.[84]
5. On 6 November 2014 a decision in the case of each applicant was made to disallow these objections.[85] The applicants have now sought a review of the decisions to disallow their objections.

1. Section 340-5 of the Taxation Administration Act enables the Commissioner to release an individual, partially or completely, from certain tax liabilities where the individual would suffer serious hardship if required to satisfy the liability.[86]
2. The tax liabilities for which a release may be granted are listed under s 340-10.[87] There are certain liabilities of the applicants for which release from liability cannot be granted as they are not listed in this provision: namely, directors' penalty liabilities and court ordered costs and interest.
3. The Tribunal in Re Filsell and Commissioner of Taxation[88] provided that a two stage approach should be applied determining whether the discretion to release should be exercised:

"In the Tribunal's opinion, the language of the legislation requires a two stage approach. First, the decision-maker must decide whether the settlement of the liability will result in serious hardship. If that decision is favourable to the applicant, the discretion offered by sub-section 340-5(3) then falls for consideration. In reaching the decision to release in whole or part, the question to be addressed is whether, in all circumstances, it is just and proper to provide the requested relief. Matters pertaining to the incidence and consequence of the tax and the effect of its exaction upon the affairs of the person will bear upon the issue of whether the relief is just and proper..."

1. Having considered the relevant authorities, the Tribunal is required to consider two primary issues. First, whether either or both of the applicants would suffer serious hardship if they were required to satisfy their taxation liabilities.
2. Secondly, in the event that the applicants would suffer serious hardship, whether it would have been just and proper for the Commissioner to have exercised his discretion to release the applicants', in whole or in part, from payment of their tax liabilities.

1. The applicants contended that they are entitled to be wholly released from the taxation debts because they would otherwise suffer serious hardship. It was the evidence of the applicants that they were able to financially support themselves currently but that they have minimal income remaining after paying expenses.[89] The applicants contended that they would not be able to afford basic necessities if they were required to satisfy their taxation liabilities.[90]
2. The applicants submitted that the requirement to satisfy taxation debts would force them into bankruptcy. This would have a flow on effect to prevent them from holding their positions at the company.[91]
3. Another flow on effect that was referred to by the applicants was that their apartment would have to be sold. The applicants submitted that the property would be sold at a loss due to unfavourable market conditions.[92]
4. It was the submission of the respondent that there was insufficient evidence to satisfy the Tribunal that the applicants would suffer serious hardship if required to satisfy their taxation debts.[93] The respondent contended that the available evidence indicated that the applicants had significant available income in excess of expenses.[94] The respondent also provided that an adverse inference should be drawn from the applicants' failure to disclose the full details of their financial circumstances.[95]
5. The applicants contended that the value of their property would increase in the future. It was submitted that the sale of the property for a profit would enable the applicants to improve their financial position.[96]
6. The respondent contended in reply that the increased value of the applicants' property meant that it was not preferable to release the applicants from their taxation debts. It was submitted that a release would be inappropriate where the applicants may have the capacity to repay their tax debts in the near future.[97]

1. The respondent raised three other contentions as to why the exercise of a release was not the preferable decision. First, the applicants have had a poor compliance history.[98] Secondly, the applicants have preferred other creditors over payment of their taxation debts.[99] Thirdly, the applicants have repeatedly failed to make provision for their taxation debts when managing their finances.[100]

1. The Commissioner has the discretion to release an individual from tax liabilities where he or she would otherwise suffer serious hardship.[101] The meaning of "serious hardship" is not defined in the legislation.
2. The nature of what would constitute "serious hardship" has been considered in a number of cases dealing with the former s 265 of the Tax Assessment Act.[102] In Powell v Evreniades and Others[103] Hill J remarked that the term should be given its ordinary meaning. His Honour emphasised that there is a distinction between hardship which is serious and hardship which is extreme and that what would constitute either would depend on the circumstances of the case.[104] This view was generally adopted by Gummow J in Van Grieken v Veiland and Others[105] who remarked that "it was inappropriate to endeavour in the abstract to state tests of what would and would not constitute serious hardship" and "the discretion as to whether there is serious hardship turns upon a factual criterion".
3. It is not necessary that the applicants establish that the repayment of taxation debts would place them into abject poverty for the threshold of serious hardship to be met. Senior Member Hunt concluded in Spicer and Commissioner of Taxation[106] that:

"'serious hardship' in s 340-5 of the TAA 1953 may mean less than extreme financial hardship but should be hardship of a significant kind in terms of normal community standards".

1. After reviewing the evidence before me I have been unable to determine that the applicants would suffer serious hardship if they were required to satisfy the taxation liabilities which are subject to release. The applicants have not in their reply taken issue with the contentions of the respondent, which are based on the statements provided by the applicants, that Mr Phua has an excess of assets over liabilities of $900,998 and that Ms Lau has an excess of assets over liabilities of $1,551,613. The assets of the applicant include debts owed to them by the company which are payable on demand.
2. It is not possible to determine if there is serious hardship when the amounts of the superannuation funds of the applicants are not in evidence. The only evidence available to the Tribunal are some bank statements of the Lau Superannuation Fund.
3. The applicants also have entitlements to significant funds in the trust which have not been disclosed in the statements of either applicant. Mr Coggan confirmed that Mr Phua is entitled to $4,100,000 from the trust and Ms Lau is entitled to $1,600,000.[107] The company is liable to pay $3,700,000 to the trust and if this is paid then the debts owed to the applicants can be paid.
4. The Annexures C, N and M to the affidavit of Ms Lau show that the applicants have not been able to meet the expenses associated with their mortgage, rates, body corporate charges or credit card expenses.[108] This means that quite apart from considerations relating to the taxation liabilities the applicants have not been able to meet these expenses and raises a question of whether the power to release the taxation debts should be properly exercised.[109]
5. However, in giving evidence Mr Phua indicated that the applicants have now met their overdue mortgage, credit card and rates payments with funds that had been obtained from the company. He also indicated that overdue body corporate liabilities would be met soon. The applicants now assert in relation to these expenses that "they are not already in serious hardship".

1. There are several reasons why I do not consider that it would be appropriate to exercise the discretion to release the applicants from taxation liabilities even if the applicants had been found to be in serious hardship.

1. The applicants bear what the Taxation Administration Act[110] refers to as the "burden of proving" that the decision made by the Commissioner was wrong. The applicants have in my view failed to discharge this burden by failing to make full disclosure about their financial circumstances.
2. The importance for an applicant seeking release from taxation liability to make full disclosure of all relevant matters to the Tribunal was emphasised in Thomas and Commissioner of Taxation.[111] Deputy President Forgie remarked:

"Review of an application to release a tax-related liability is a situation in which the facts relating to an individual's income, expenditure, assets and debts will usually be peculiarly within the possession and knowledge of that individual and not of the Commissioner. It is the task of the individual, and not that of the Commissioner, to gather together and produce all relevant material."

1. Prior to the hearing the applicants had filed considerable documentation. A direction was issued to require the applicants to identify the documentation on which they relied. However, during the hearing the applicants were given leave to file more considerable documentation, including the Put and Call Option Agreement.
2. After the hearing, the applicants sought to tender more documentation relating to their application. I declined to admit this new evidence. There was no cogent reason why the documents were produced after the hearing other than to say that the applicants had been sifting through material. The applicants have had sufficient opportunity to file any documents in support of their applications. If the documents were admitted into evidence then there would be a need to reopen the hearing and allow the respondent to cross-examine the applicants. The respondent would also have to allocate resources to investigating a matter after having made submissions on the voluminous evidence that was already admitted in evidence. I was also mindful that sometime before the hearing the applicants did not consent to a proposed direction for the applicants to provide evidence of their financial circumstances, including the financial details of the trust as well as evidence of their contributions to the company.
3. The statements of the applicants do not disclose their entitlements to significant funds in the trust. The applicants are the primary beneficiaries under the trust.[112] In connection with this is that Ms Lau in giving evidence has confirmed that proper financial records of the trust have not been maintained.
4. Another reason why I cannot exercise the discretion in favour of the applicants is that I am not satisfied that the information which they have provided is correct. I have earlier referred to the fact that there is documentary evidence that on 30 June 2003 there was a payment made by the company in excess of $3,700,000.[113] However, Ms Lau in her affidavit of 8 April 2015 deposed that only $100,000 would be paid at settlement;[114] this assertion is not corroborated by the documentary evidence.
5. Another matter that causes me not to exercise the discretion that is vested in the Commissioner is the applicants' understatement of their income. Mr Phua does not dispute that in 2001 his income was under-reported by $74,552 and in 2004 his income was under-reported by $120,751.
6. In 2005 when a sum of $500,000 was transferred to the superannuation fund of Ms Lau, that sum was not declared in her income tax return. In 2006 a capital gain for the sale of an investment property was not declared. In 2007 a sum of $500,000 was transferred to the Lau Superannuation Fund which was not declared. Both applicants made admissions of their understatement of income received arising out of the company's restructuring in 2009, namely the $2,353,369 share issue to the Lau Superannuation Fund and the $207,146 share issue to Mr Phua.[115]
7. It is appropriate for the Tribunal to consider assets inclusive of joint assets or pools of money which have been contributed to by both parties. It is reasonable in these circumstances to expect that a tax liability could be met, at least in part, by the applicants selling the jointly-owned apartment and moving to more affordable accommodation. In Perrot and Commissioner of Taxation[116] this Tribunal was concerned with an application where the applicant and her family were then living on acreage property. It was considered that the option was open to the applicant to sell the acreage property and relocate to cheaper accommodation.
8. The apartment that is owned by the applicants is in a prestige location in the central business district. Although there is no reliable evidence before me to indicate the market value of the apartment, the property is certainly a substantial asset and the applicants have not taken issue with the respondent's description of the property as being a luxury apartment. The applicants may well be correct that if the apartment is sold it may not reach the suggested value of $3,500,000. Nevertheless the holding of the apartment requires the applicants to meet considerable expenses which may in the future instead be used to discharge the taxation liabilities of the applicants. The property certainly cannot be regarded as a residence of modest value in terms of Australian Taxation Office policy.[117]
9. In considering these applications I am not required to determine the contention of the applicants that the payment by the company of their mortgage expenses does not constitute assessable income. Nevertheless, these funds could be applied towards the discharge of the taxation liabilities of the applicants. It would be inappropriate in my view to exercise the discretion to release the applicants from any taxation liabilities while they are still in possession of a substantial asset which is the apartment and in the meantime have enjoyed the benefits that have been contributed to by other taxpayers such as community infrastructure and services such as Medicare.[118]

1. Another reason for declining to exercise the discretion is the potential for an increase in profitability of the company. Mr Phua stated that the company may be in a position to raise capital in the future in the medium term based on its profitability. If that was the case then Mr Phua indicated that he expected that the company would be able to pay out its debts to the applicants and the trust in full. I accept the submission of the applicants that any decision by the company to undertake a capital raising would be to further the interests of the company. Mr Phua also indicated that any demand to the company by the liquidator of the corporate trustee would not affect the viability of the company. Ms Lau was optimistic in stating that the taxation debts would be repaid when the business becomes more prosperous. This would indicate that there are prospects that the financial position of the applicants would be improved in the future.
2. There is authority for a decision-maker to consider the future position of an applicant seeking relief from payment of taxation debts.[119] In these circumstances it would be premature to consider the applications to release the taxation debts.

1. The applicants have tendered medical evidence which indicates that the applicants have some health problems. The certificates of both applicants do not certify that the applicants are unable to work. It would seem that in the case of Ms Lau there have been a number of threats by the mortgagee to take possession of the apartment which have caused her concern. If anything the medical information serves to indicate that the applicants have on a number of occasions been unable to pay the mortgage instalments.

1. Mr Phua and Ms Lau have not discharged the onus of proof to establish that they would suffer serious hardship if they were required to pay the relevant tax liabilities. Accordingly, I have decided that both of the Commissioner's taxation decisions should be affirmed. Even if the applicants had established that they would suffer serious hardship, for the reasons given I do not consider that the discretion should be appropriately exercised to release the applicants from their releasable tax liabilities.

In application no 6672 of 2014, I affirm the objection decision of 6 November 2014.

In application no 80 of 2015, I affirm the objection decision of 6 November 2014.

I certify that the preceding 98 (ninety-eight) paragraphs are a true copy of the reasons for the decision herein of Deputy President Dr P McDermott RFD

..........................................................

Ms Kathleen Cameron, Australian Taxation Office

[1] Taxation Administration Act 1953 (Cth) Sch 1 at s 340-5.

[2] Exhibit G: Statement of Mr Phua dated 12 April 2015 at p.1.

[3] Exhibit C: Common bundle of documents. CT28: Apel Family Trust Deed.

[4] Exhibit A: T Documents relating to Ms Lau. T16-20: Income tax returns for years ended 30 June 2003-2006, 2013. T44-49: Income tax returns for years ended 30 June 2007-2012.

[5] Exhibit B. T Documents relating to Mr Phua. T7-10: Income tax returns for years ended 30 June 2003-2006.

T34-39: Income tax returns for years ended 30 June 2007-2012.

[6] Exhibit H: Summary of financial information; Exhibit J: Summary of payments table.

[7] Exhibit H: Summary of financial information; Exhibit J: Summary of payments table.

[8] Statement of Ms Lau dated 8 April 2015 at [43].

[9] Exhibit G: Statement of Mr Phua dated 12 April 2015 at [29].

[10] Exhibit C: Common bundle of documents. CT28: Apel Family Trust Deed.

[11] Exhibit C: Common bundle of documents. CT5: Income tax return for the Apel Family Trust for the year ended 30 June 2013; Statement of Ms Lau dated 8 April 2015 at [43].

12 Exhibit G: Statement of Mr Phua dated 12 April 2015 at Annexure B; Statement of Ms Lau dated 8 April 2015 at Annexures C and D.

[13] Applicant's submissions in reply dated 6 August 2015 at [11].

[14] Statement of Ms Lau dated 8 April 2015 at [43].

[15] Exhibit A: T Documents relating to Ms Lau. T3: Release application at pp. 66, 68-70, 74; T12: Response to request for further information at pp. 268, 280, 418.

[16] Exhibit A: T Documents relating to Ms Lau. T3: Release application at pp. 66, 68-70, 74; T12: Response to request for further information at pp. 268, 280, 418.

[17] Exhibit G: Statement of Mr Phua dated 12 April 2015 at [29].

[18] Exhibit G: Statement of Mr Phua dated 12 April 2015 at [32]-[33].

[19] Statement of Ms Lau dated 8 April 2015 at [58]; Exhibit G: Statement of Mr Phua dated 8 April 2015 at [34]-[35].

[20] Statement of Ms Lau dated 8 April 2015 at [59]; Exhibit G: Statement of Mr Phua dated 8 April 2015 at [35].

[21] Statement of Ms Lau dated 8 April 2015 at [33].

[22] Exhibit G: Statement of Mr Phua dated 8 April 2015 at [27].

[23] Exhibit A: T Documents relating to Ms Lau. T12: Response to request for further information at p.269; Statement of Ms Lau dated 8 April 2015 at Annexure F.

[24] Statement of Ms Lau dated 8 April 2015 at [33].

[25] Exhibit G: Statement of Mr Phua dated 12 April 2015 at [27].

[26] Exhibit C: Common bundle of documents. CT40: Byte Power Group Limited Annual Report year ended 30 June 2003 at p.914.

[27] Exhibit C: Common bundle of documents. CT40: Byte Power Group Limited Annual Report year ended 30 June 2003 at p.883.

[28] ACN 100 608 080 Pty Limited Put and Call Option Agreement at 2.2(b)(i).

[29] Exhibit R: Byte Power Group Ltd records prepared 1 July 2015.

[30] Exhibit C: Common bundle of documents. CT39: Income tax return for the Apel Family Trust for the year ended 30 June 2003.

[31] Applicant's submissions in reply dated 6 August 2015 at [38].

[32] Exhibit G: Statement of Mr Phua dated 12 April 2015 at [21].

[34] Respondent's submissions dated 30 July 2015 at [7].

[35] Exhibit I: Documents tendered during the hearing. ACN 100 608 080 Pty Limited Put and Call Option Agreement.

[36] Respondent's submissions dated 30 July 2015 at [9].

[37] Exhibit G: Amended statement of Mr Phua dated 12 April 2015 at pp. 8-10.

[38] Applicant's submissions in reply dated 6 August 2015 at [8].

[40] Exhibit G: Statement of Mr Phua dated 12 April 2015 at [29].

[41] Statement of Ms Lau dated 8 April 2015 at Annexures M and N.

[42] Exhibit G: Statement of Mr Phua dated 12 April 2015 at [49].

[43] Respondent's submissions dated 12 May 2015 at [5].

[44] Respondent's submissions dated 12 May 2015 at [5].

[45] Exhibit A: T Documents relating to Ms Lau. T44: Income tax return for the year ended 30 June 2007.

[46] Statement of Ms Lau dated 8 April 2015 at [85].

[47] Applicants' submissions in reply dated 6 August 2015 at [42].

[48] Exhibit C: Common bundle of documents. CT14: Income tax return for the APEL Family Trust for the year ended 30 June 2009.

[51] Exhibit C: Common bundle of documents. CT21: Byte Power Group Limited Annual Report for the year ended 30 June 2008.

[52] Exhbit B. T Documents relating to Mr Phua. T 35: Income tax return for the year ended 30 June 2008.

[53] Exhibit Q: Statement to the Australian Stock Exchange dated 2 December 2009.

Exhibit B. T Documents relating to Mr Phua. T36: Income tax returns for years ended 30 June 2009.

[54] Exhibit Q: Statement to the Australian Stock Exchange dated 2 December 2009.

[55] Exhbit A. T Documents relating to Ms Lau. T 47: Income tax return for the year ended 30 June 2010. T 48: Income tax return for the year ended 30 June 2011.

Exhbit B. T Documents relating to Mr Phua. T 37: Income tax return for the year ended 30 June 2010. T 38: Income tax return for the year ended 30 June 2011.

Exhibit C: Common bundle of documents at CT 15-16, 37-38.

[56] Exhibit R: Byte Power Group Ltd records. Dated 1 July 2015.

[57] Applicants' submissions in reply dated 6 August 2015 at [17], [49].

[58] Exhibit F: Statement of Mr Coogan dated 25 May 2015.

[59] Exhibit Q: Statement to the Australian Stock Exchange dated 2 December 2009.

[60] Exhibit B. T Documents relating to Mr Phua. T7-10: Income tax returns for years ended 30 June 2003-2006.

T34-39: Income tax returns for years ended 30 June 2007-2012.

[61] Exhibit A: T Documents relating to Ms Lau. T16-20: Income tax returns for years ended 30 June 2003-2006, 2013. T44-49: Income tax returns for years ended 30 June 2007-2012.

[62] Exhibit J: Summary of payments table.

[64] Exhibit A: T Documents relating to Ms Lau. T16-20: Income tax returns for years ended 30 June 2003-2006, 2013. T44-49: Income tax returns for years ended 30 June 2007-2012.

Exhibit B. T Documents relating to Mr Phua. T7-10: Income tax returns for years ended 30 June 2003-2006.

T34-39: Income tax returns for years ended 30 June 2007-2012.

[65] Exhibit G: Statement of Mr Phua dated 12 April 2015 at [34].

[66] Exhibit C: Bundle of common documents. CT: 11-12. Real Property Data.

[67] Exhibit G: Statement of Mr Phua dated 12 April 2015 at [36]-[37].

[68]Exhibit G: Statement of Mr Phua dated 12 April 2015 at [40].

[69] Respondent's Statement of Facts, Issues and Contentions dated 12 May 2015 at [49].

[70] Affidavit of Phua dated 12 April 2015 at [44] and Annexures C and D.

[71] Statement of Ms Lau dated 12 April 2015 at Annexure Q.

72Exhibit G: Statement of Mr Phua dated 12 April 2015 at Annexure C.

[73] Statement of Ms Lau dated 12 April 2015 at Annexure R.

74Exhibit G: Statement of Mr Phua dated 8 April 2015 at Annexure D.

[75] Respondent's Statement of Facts, Issues and Contentions dated 12 May 2015 at [13].

[76] Applicant's submissions in reply dated 6 August 2015 at [11].

[77] Statement of Ms Lau dated 12 April 2015 at Annexure D.

[78] Exhibit A: T Documents relating to Ms Lau. T3: Application for release of taxation debts dated 4 June 2013.

[79] Exhibit A: T Documents relating to Ms Lau. T4: Letter from respondent dated 14 August 2013.

[80] Exhibit B. T Documents relating to Mr Phua. T34-39: Income tax returns for years ended 30 June 2007-2012.

[81] Exhibit A: T Documents relating to Ms Lau. T8: Letter from the Deputy Commissioner of Taxation dated 3 December 2013.

[82] Exhibit B. T Documents relating to Mr Phua. T4: Letter from the Deputy Commissioner of Taxation dated 4 July 2014.

[83] Exhibit A: T Documents relating to Ms Lau. T Documents. T10: Objection form dated 29 January 2014.

[84] Exhibit B. T Documents relating to Mr Phua. T Documents. T5: Objection form dated 1 September 2014.

[85] Exhibit A: T Documents relating to Ms Lau.. T2: Reasons for decision in lieu of section 37 statement dated 6 November 2014; Exhibit B. T Documents relating to Mr Phua. T2: Reasons for decision in lieu of section 37 statement dated 6 November 2014.

[86] Taxation Administration Act 1953 (Cth) Sch 1 s 340-5(3).

[87] Ibid s 340-10.

[88] Re Filsell and Commissioner of Taxation [2004] AATA 1012 at [14].

[89] Applicant's (Ms Lau's) Statement of Facts, Issues and Contentions received 13 April 2015 at [16]-[19].

[93] Respondent's Statement of Facts, Issues and Contentions dated 12 May 2015 at [66].

[96] Applicant's (Ms Lau's) Statement of Facts, Issues and Contentions received 13 April 2015 at [18].

[97] Respondent's Statement of Facts, Issues and Contentions dated 12 May 2015 at [83].

[101] Taxation Administration Act 1953 (Cth) Sch 1 s 340-5.

[102] Tax Assessment Act 1936 (Cth) s 265.

[103] Powell v Evreniades and Others [1989] FCA 114; (1989) 21 FCR 252, 259.

[105] Van Grieken v Veiland and Others [1991] FCA 167; (1991) 21 ATR 1639, 1644-1645.

[107] Exhibit F: Statement of Mr Coogan dated 25 May 2015.

[108] Statement of Ms Lau dated 8 April 2015 at Annexures C, N and M.

[109] See Thomas and Commissioner of Taxation [2014] AATA 102 at [46].

[110]Taxation Administration Act 1953 (Cth) s 14ZZK(b).

[111] Thomas and Commissioner of Taxation [2014] AATA 102 at [18].

[112] Exhibit C: Common bundle of documents. CT28: Apel Family Trust Deed at Sch 3.2.

[113] Exhibit R: Byte Power Group Ltd records prepared 1 July 2015.

[114] Statement of Ms Lau dated 8 April 2015 at [16].

[115] Exhibit Q: Statement to the Australian Stock Exchange dated 2 December 2009.

[116] [2004] AATA 1372.

[118] CF Re Rasmussen and Commissioner of Taxation [2013] AATA 746; (2013) 61 AAR 323.

[119] See Powell v Evreniades and Others [1989] FCA 114; (1989) 21 FCR 252 at 268 per Hill J; Re Ferguson and Commissioner of Taxation [2004] AATA 779.