The Applicant's tax filings for the Relevant Years

1. The Applicant's tax returns for the Relevant Years were filed late on 26 and 27 January 2023.[6] It is the circumstances surrounding the filing of those returns, and when tax positions were taken, that is important in this case.
2. The Applicant accepts the tax returns for the Relevant Years contained errors and has tried to correct that. The Commissioner imposed shortfall penalties as a result of those errors in each of the Relevant Years issuing shortfall penalty assessments pursuant to section 298-30 of Schedule 1 to the TAA.[7] Those penalties are at issue in this case.
3. The Applicant and the Applicant's husband are each secondary school teachers. The Applicant's husband can no longer work and has not worked since 2021.[8] The Applicant remains employed as a teacher. The Applicant said that she relied upon her husband for all financial and tax matters.[9]
4. The Applicant's husband's evidence was that he had always completed all of the family tax returns since he married the Applicant in 1991.[10] The Applicant's son's evidence on cross-examination was that his father took a lot of pride from managing the financial matters for the family.[11]
5. The Applicant's husband is suffering from serious health challenges which are discussed further below. Alongside the Applicant's husband's serious health difficulties, the relationship between the Applicant and her husband was under strain and they separated in or around 2022.[12] It is understood that the Applicant and her husband remain separated, although they live together as the Applicant's husband needs support because of his health challenges. The Applicant is his primary carer.[13]
6. The Applicant owns one rental property and held 50% of another rental property. She also continues to work as a teacher.

The witnesses before the Tribunal and the Applicant's husband's health issues

1. The Tribunal heard witness evidence from the Applicant's husband[14] and the Applicant's son.[15]
2. The Applicant's husband is clearly suffering from serious health issues which impact his ability to communicate. He has developed a severe stutter, and it was difficult to obtain coherent evidence from him when he appeared before the Tribunal. His memory and cognition also appeared impacted.
3. The Applicant's Husband's First Witness Statement annexes medical reports and insurance documents which suggest he suffers from an adjustment disorder with depressive mood,[16] communication difficulties,[17] recurrent pain,[18] some brain atrophy and impaired mobility,[19] frequent falls, dizziness and vertigo,[20] and psychological distress.[21] The Applicant's Husband's Second Witness Statement also describes that he suffers from double vision, small vessel ischaemic conditions[22] and spinal pain.[23] The Applicant's son's evidence before the Tribunal included reference to the Applicant's husband also having serious mobility issues at times[24] and the fact that her husband suffered mobility issues is supported by the Applicant as well.[25]
4. There is also a detailed medical report annexed to the Applicant's Outline as Appendix A[26] which suggests that the Applicant's husband has an anxiety disorder, a potential neurological disorder and is unfit for work. That medical report also notes the inability to obtain a coherent medical history given the Applicant's husband's communication difficulties. That aligns with the Tribunal's experience.
5. There was a lot of time spent by the Commissioner questioning when the Applicant's husband's health issues commenced exactly. This was unnecessary. The evidence before the Tribunal is that it was during the pandemic (2020-2021) that any pre-existing health issues resulted in a significant and obvious decline in the Applicant's husband's health.[27] The Tribunal accepts that evidence. That is, the Tribunal accepts that the Applicant's husband was suffering from serious health challenges before the Applicant's returns for the Relevant Years were prepared and filed.
6. There were significant difficulties faced by the Tribunal in hearing evidence from the Applicant's husband due to his health challenges. A break was provided to the Applicant's husband because his communication difficulties only increased as more time passed, and he became tired. Following a discussion with Ms Adams and with the Applicant, the Tribunal determined that the Applicant's husband should not continue to give evidence as it was unhelpful to both him and the Tribunal.
7. This resulted in the Tribunal seeking and hearing limited evidence from the Applicant directly as well, in accordance with section 49, section 53 and section 56 of the Administrative Review Tribunal Act 2024 (Cth). When considering the Applicant's evidence, the Tribunal has taken into account the fact that she did not expect to have to give evidence.

The evidence about the Applicant's tax returns for the Relevant Years

1. The evidence presented to the Tribunal about the Applicant's returns for the Relevant Years is as follows.
2. The lateness of those returns was due to the Applicant's husband. His evidence was that in 2021 to 2023 he was struggling to complete and keep up with multiple years of tax returns due his health problems, and also because the work he had done was lost as a result of a virus corrupting his computer.[28] He said he had scanned all "transaction information" onto his computer and loaded it into his Gmail and this was lost due to a computer virus and could not be recovered. The computer virus appears to have occurred between 2019 and 2020 before the Applicant's husband stopped working in 2021 as he describes a class he was conducting at the time.[29]
3. The Applicant also said her husband lost his computer and phone.[30] This device loss appeared to have happened while he was in Asia in 2023 after the returns were submitted.[31] The Applicant's son's evidence and other correspondence on the Tribunal Book supported the Applicant's husband's evidence that he lost both his phone and computer while in Asia.[32]
4. Whether the Applicant's husband lost his phone became a point raised by the Commissioner in cross-examination with questions on matters such as the fact that his phone number remained consistent, and questions about whether he changed the contact number for the online tax agent service ("Tax Agent E") he and the Applicant utilised prior to the returns for the Relevant Years being filed. The Tribunal was bemused by this questioning as phone numbers can remain with an individual when phones are replaced and that is what telecommunications companies commonly offer. Questioning the Applicant's husband on why phone numbers did not change suggested that the Commissioner might think that this phone loss (and by inference maybe the computer loss) did not occur. But, from the Microsoft Teams Transcript of the hearing, that was never directly put to the Applicant's husband. It is assumed that the Commissioner is not making that inference nor seeking the Tribunal draw that inference.[33] Instead, the Commissioner seems to have been questioning why the Applicant's husband's phone number and not the Applicant's phone number was the contact number for Tax Agent E. The value of this questioning was of marginal benefit to the Commissioner as the loss of devices happened after the Applicant's tax returns for the Relevant Years had been filed in any event and the phone number given to Tax Agent E is not of significant relevance to this case.
5. The Applicant's husband said he sought assistance from the Applicant, but she did not have the transaction information and had never done a tax return.[34] Ms Adams cross-examined the Applicant's husband on this point at the hearing.[35] The question was when he asked for assistance. The context of the Applicant's Husband's Second Witness Statement suggests 2021[36]. Ms Adams' cross-examination revealed that the Applicant's husband had a lack of precise memory of specifically when he asked for the Applicant's assistance. The Tribunal was left with the impression it could have been in any of 2020, 2021, 2022 or 2023. This was unsatisfactory evidence. But, whatever year that was, the Tribunal finds that the evidence is clear - the Applicant's husband asked the Applicant for assistance prior to the returns for the Relevant Years being prepared and then filed on 26 and 27 January 2023. That finding arises from the context of the Applicant's husband's evidence, and was acknowledged by the Applicant.[37] It would make no sense for the Applicant's husband to ask her for assistance after the returns were lodged.
6. Ms Adams then asked the Applicant's husband why he sought assistance from the Applicant. She specifically asked him whether this was because he could not find documents to substantiate the deductions being claimed in the Applicant's returns - for instance, due to the virus on his computer. The response from the Applicant's husband was that yes, this was correct, but the Applicant did not have the necessary transaction information either.[38] This is significant evidence. Ms Adams went further and suggested that the Applicant might have told the Applicant's husband to proceed anyway despite these problems. The Applicant's husband denied this and said the Applicant was not involved at all.[39]
7. The Applicant's husband prepared the Applicant's tax returns for the Relevant Years while visiting his sister in January 2023.[40] The Applicant's son confirmed in cross-examination by Ms Adams that his father has no financial, tax or legal training.[41] This is of course of no significance either, as such training is not necessary to file tax returns and reliance on tax agents is also not necessary.[42]
8. The Applicant's husband said he prepared the tax returns for the Relevant Years using "the estimate approach".[43] The Commissioner cross-examined the Applicant's husband on this point at the hearing. The Applicant's husband confirmed he knew he did not have the necessary materials or data for the reasons noted above.[44] His evidence was that "the estimate approach" involved estimating rental income and expenses from the Applicant's rental property investments.[45] The Applicant's husband said that was because the same sort of level of income and expenses arose year on year.[46]
9. The Applicant's husband sent the returns to Tax Agent E which he said he believed would "check out the evidence of the claims" prior to those returns being filed.[47] He acknowledged that he lodged those returns with Tax Agent E as the Applicant.[48] He said that had occurred for the 2019 return,[49] but then the returns for the Relevant Years were all filed on 26 and 27 January 2023.[50] He thought that "strange" and that "surely things must have gone wrong".[51] There was no evidence from Tax Agent E, and no evidence of Tax Agent E's scope of engagement.
10. Ms Adams was critical in her cross-examination, putting to the Applicant's husband the suggestion that the Applicant and the Applicant's husband knew the claims for deductions were inflated, there was no way for Tax Agent E to check the figures given there was little to no supporting documentation, and that the Applicant's husband knew this.[52] She also put to the Applicant's husband that he had never checked with Tax Agent E as to whether claimed amounts for the property the Applicant part-owned had been appropriately reduced.[53] The Applicant's husband appeared to deny all of this and referred to his expectation that action from Tax Agent E would occur due to it having occurred in the past.[54] He also appeared to point out that he was overseas, so simply thought it had occurred.[55] It is fair to say, however, that the Applicant's husband's evidence before the Tribunal became increasingly confused as he became tired and the Tribunal is being generous in its interpretation of the Applicant's husband's responses to Ms Adams' questions at this point of the hearing. It would be fair to say that the Applicant's husband's evidence was at best vague on all these points. While I do not impugn his credibility per se, and some of his evidence was to his credit,[56] overall the evidence from the Applicant's husband was not satisfactory due to his memory and health issues.
11. The Applicant's son's evidence was supportive of the Applicant in a general way, and confirmed the family practice was for the Applicant's husband to manage all financial affairs.[57] He also confirmed his observations of the Applicant's panic and concern after receiving correspondence from the Commissioner and what he described as her considerable efforts to try to sort out the matters she faced including efforts to recover material such as invoices, bank statements and the like.[58] I accept that evidence. The Applicant's son was a credible witness.
12. The Applicant's son also referred to a number of events that happened in or around the same time as the Applicant was engaging with the Commissioner on the issues before the Tribunal. The Applicant's son said those matters put the Applicant under significant strain. These matters included the Applicant's loss of both of her parents in succession while saving up to travel to see them,[59] the Applicant's son's serious back injury where the Applicant was required to care for him, a problematic relationship between the Applicant and the Applicant's husband resulting in separation, the serious decline of the Applicant's husband's health, a period where the Applicant's husband travelled to Asia and then went missing necessitating a report to the police,[60] needing to become the carer for the Applicant's husband, and having to become the sole breadwinner for the family after the Applicant's husband was unable to work from around 2021.[61] Those matters are also noted in the Applicant's Outline.[62] There is a suggestion in the Applicant's objection dated 12 February 2024 that she was also under financial constraints as the Applicant's husband took control of their savings and she had no access to those funds.[63]
13. The most important part of the Applicant's son's evidence was his confirmation that from around 2021 or 2022 it was evident that the Applicant's husband was in serious cognitive and health decline.[64] The Applicant's son confirmed that he had a discussion with the Applicant in 2021, 2022 or 2023 about his father's cognitive decline.[65] The Applicant's son also confirmed his view that his father was not capable of managing financial affairs such as tax returns including in 2023 and for the past 3 or 4 years.[66]
14. The Applicant's evidence was heard at the behest of the Tribunal as described above.[67] She did not expect to have to give evidence, and the Tribunal has taken that into account when considering her evidence. The Applicant said that she did not check nor monitor financial matters and trusted her husband including with her tax returns as they had no prior issues, and she reacted immediately once she received a penalty notice from the Commissioner.[68] The Applicant also said that the Applicant's husband's management of financial affairs continued even after they separated.[69]
15. I note that the Commissioner seeks to make much of its questioning of the Applicant on cross-examination as to when she looked at bank statements and suggest that she must be said to have known that tax payments were not being paid from her account.[70] The Tribunal does not draw significant inferences from this questioning. While the Commissioner asked the Applicant about bank accounts, it was not clear whether other accounts controlled by the Applicant's husband might have been the source of tax payments, the Commissioner did not ask the Applicant's husband about this, and it did not ask the Applicant's husband as to how he "paid on her behalf" when that was his evidence,[71] and from what account. While the Tribunal has taken this evidence from the Applicant and the Commissioner's submissions into account, the Tribunal does not consider this point to be of the significant weight that the Commissioner submits it is.
16. In response to questions from the Tribunal, the Applicant confirmed that she never obtained a copy of, nor looked at, the tax returns that were filed for the Relevant Periods because she trusted her husband.[72] This is significant evidence from the Applicant and has greatly concerned the Tribunal. The Applicant's tax returns are her responsibility. At law, the returns are prima facie evidence that they are made by the Applicant and with her authority whoever prepares them and whoever files them.[73] The Applicant also needed to meet her obligations under law which relate to these returns and include declarations she should have made, or is deemed to have made, as a result of those returns being filed and signing those returns.[74] Those declarations are to the effect that the returns were true and correct. The returns for the Relevant Years were not correct.
17. In addition, the Commissioner made an array of submissions based on agency[75] which were to the effect that an agent's behaviour can result in tax penalties being imposed on the principal in that relationship; that is, the Applicant's husband could have been reckless and that can lead to penalties being imposed on the Applicant.[76] I record the Applicant's efforts to distinguish that case law are misguided. [77] I accept the Commissioner's submission[78] that those cases are to the effect that recklessness by an agent can impact the underlying taxpayer. The facts in those cases differing from the Applicant's facts do not distinguish her case from the principle. However, in both cases cited by the Commissioner[79] the agent at issue was a tax agent, and this is not the case when considering the Applicant's husband. Tax agents are treated in a special way in the tax legislation, and the Commissioner did not note this. However, in this specific case, the Applicant completely handed over her responsibilities to her husband so he must be said to have been acting as her and with her authority. I conclude the principle applies in this particular case.
18. The fact that the Applicant has now taken control of her own tax returns is not a factor in her favour when assessing her liability for a penalty; it reflects that she was able to assist and demonstrated an indifference to her tax obligations in the Relevant Years. It is troubling that she did not even obtain copies of the returns her husband prepared, nor did she check those returns, nor did she engage with her own obligations in any manner. Every taxpayer in Australia is responsible for their own returns. This point will be returned to below. This was also an unsatisfactory aspect of the Applicant's case.
19. The Applicant's evidence before the Tribunal was also consistent with the Applicant's son's evidence about the steps that she took to try to comply with her obligations and her prompt co-operation with the Commissioner. Such submissions were also included in the Applicant's Outline and the Applicant's Closing Submissions.[80] The Tribunal accepts that evidence and returns to it below, but notes that it is only relevant when considering issues of remission of penalties.

Engagement between the Commissioner and the Applicant

20. The Commissioner sent a letter dated 14 February 2023[81] to the Applicant seeking (amongst other matters) substantiation of claims the Applicant made in her tax returns for the Relevant Years in relation to the rental properties and for working from home expenses.
21. For example, the Applicant claimed depreciation expenses, capital allowances, interest, repairs and maintenance for her rental properties in accordance with the Income Tax Assessment Act 1997 (Cth) ("ITAA 1997").[82] There are a number of provisions in the ITAA 1997 which required the Applicant to maintain documentation to substantiate her claims.[83] The Commissioner requested those documents for the Relevant Years. There appears to have been no reply from the Applicant to the Commissioner's correspondence by the due date for response.[84]
22. The Commissioner concluded that there were errors in the Applicant's returns for the Relevant Years. Amongst other matters, the Commissioner found that the Applicant's returns were in error as she had not appropriately reduced her claims for deductions in relation to the property that she only part owned.[85] She had also made claims the extent of which could not be substantiated,- such as for the cladding special levy.[86] There were also concerns about the Applicant's work-related expenses.[87]
23. The Commissioner's audit was finalised on 9 May 2023[88] for the 2019, 2020, 2021 and 2022 years. In each of those years rental income was reduced, and claimed deductions were reduced to nil as no substantiation had been provided. Shortfall penalties for recklessness were imposed on the Applicant and notices of assessment of shortfall penalties were issued on 12 May 2023, 2 June 2023, 21 November 2023, and 28 November 2023.[89]

1. On 12 February 2024 the Applicant objected ("the first objection") to the 2019, 2020, 2021 and 2022 years using the services of a tax agent ("Tax Agent O").[90] The decisions the objection covered included the shortfall penalty assessment for the 2020 year.[91] The tax returns for the 2019, 2021 and 2022 years were attached as annexures, although the 2020 return was not. The objection also sought penalty remission.
2. From the Commissioner's Statement of Facts, Issues and Contentions dated 5 June 2025 ("Commissioner's SFIC") at [2.1], it seems no one has noticed that the first objection also covered 2020.[92]
3. Around the time the first objection was filed, the Tribunal understands a payment arrangement was also entered into by the Applicant with the Commissioner.[93]

1. By letter dated 4 July 2024, the Applicant sought remission of the penalties imposed for the 2019, 2021 and 2022 years.[94] Again, the Tribunal is unsure why this correspondence did not cover 2020. This may be connected to the Applicant's assertion expressed in October 2024, that she did not receive correspondence dated 28 November 2023, which included the assessment of shortfall penalty for the 2020 year.[95] In any event, the first objection sought penalty remission, so it is not clear why there is a further letter that did the same thing. There appears to have been no reply from the Commissioner to this letter, presumably on the basis that a reply to the first objection would cover the issues.
2. On 12 July 2024, the Applicant wrote to the Commissioner seeking that she be able to amend her returns for the Relevant Years (other than 2020) with the period to do so being granted to the end of March 2025.[96] The basis for this was her acceptance that further material was needed to support her claims for deductible costs, her reliance on her husband when completing tax returns, her husband's errors due to his health issues, the loss of records, Tax Agent E having merely submitted returns and having not checked them like she had thought they would, and the need for her to have time to reconstruct records fully.[97]
3. There is also considerable confusion on the Applicant's part reflected in the 12 July 2024 and 4 July 2024 letters. This is particularly as to what was filed in her returns and what the Commissioner had done; hence her claims that Tax Agent E had not claimed deductions.[98] As is further discussed below, the 12 July 2024 letter seems to have been treated by the Commissioner as an objection and a request for an extension of time.[99]

1. On 31 July 2024, the Commissioner disallowed the Applicant's first objection to the penalty assessments for the 2019, 2021 and 2022 years ("the first objection decision").[100] Nothing was said about the 2020 year. It appears that remained under objection.

Correspondence after the first objection decision

1. On 8 August 2024 the Applicant requested a review of the decision not to remit the penalties for the 2019, 2021 and 2022 years.[101] That letter requests a review of a remission decision with the reference 5010101620888. That is the objection decision.[102] Clearly, the Applicant did not appreciate that the next step was not a further review of the objection decision by the Commissioner. It is not clear whether she was liaised with by the Commissioner about this, but the Tribunal assumes that may have happened as the Application for Review was filed shortly afterwards on 17 August 2024. The objection to the 2020 year set out in the first objection remained outstanding.
2. In her 8 August 2024 letter[103] the Applicant referred to having filed amended returns for all of the Relevant Years on 7 August 2024. The Tribunal Book contains amended returns for 2019 dated 7 August 2024[104] and what is described in the T Document index as an amended return for 2020 dated 7 August 2024,[105] but not the other amended returns which the Applicant may have filed. The Tribunal notes that the Commissioner's SFIC refers to several amendments being made in these amended returns.[106] The Tribunal has not been provided all of the material on the Tribunal Book, but the Tribunal records the amended returns have been provided to the Tribunal by the Applicant. In any event, the amended returns are of little real significance to the shortfall penalties at issue in this case. I return to the issue of amended returns when considering remittal of penalties below.

The Application for Review in respect of the first objection decision

1. On 17 August 2024 the Applicant filed an Application for Review in this Tribunal.[107] That Application for Review was in relation to the 31 July 2024 decision that disallowed the 2019, 2021, 2022 objection, including to shortfall penalties in those years. The objection to the 2020 shortfall penalties in the first objection remained outstanding as the Commissioner did not reach a decision to that matter in its first objection decision.

Further objections filed in October 2024, including the second objection

1. An objection was then filed on 4 October 2024[108] which was to the amended assessments for 2019, 2021 and 2022 (no longer pursued in this case) and an array of other decisions by the Commissioner, including decisions relating to a self-managed superannuation fund (it appears).[109] The shortfall penalty assessments for 2019, 2021, and 2022 are referred to in the 4 October 2024 objection, but they are not obviously objected to as they had already been dealt with in the first objection and first objection decision for the 2019, 2021 and 2022 years. The Tribunal does not consider the 4 October 2024 objection nor an objection to the 2018 income year filed on 30 October 2024[110] any further as they are not relevant to this case.
2. A further objection dated 5 October 2024 was also filed ("the second objection").[111] The second objection was to the original assessment for 2020[112] (no longer pursued in this case) and to the shortfall penalty assessment for 2020.[113] Of course, the shortfall penalty assessment for 2020 had already been objected to in the first objection, but the Commissioner's first objection decision had not reached a decision in relation to 2020, and it seems no one noticed. The Applicant maintained she objected late to the 2020 shortfall penalties because she had not been provided correspondence dated 28 November 2023, and was unaware of the need to object to the 2020 material as a result. The Applicant must have been provided that material, or Tax Agent O was provided that material on her behalf, as the reference number for the 2020 shortfall penalty assessment was referred to as a decision being objected to in the first objection.[114]
3. The Applicant's efforts in the second objection, in all the other objections after the first objection, and in her correspondence, seem entirely directed to ensuring that the Commissioner took into consideration some reconstructed records which supported her claims for deductible expenses in relation to her rental properties and other matters. She was unrepresented. The confusing series of events and somewhat chaotic procedural history is understandable when considering the Applicant's actions, appreciating she was unrepresented and did not understand taxation processes.
4. The Commissioner appears to have accepted the second objection and further objections even though they were late, without expressly saying as much, or overtly considering the matter. The Tribunal assumes this to be the case because the parties entered into correspondence between October 2024 and February 2025[115] and the Applicant provided material and answers to questions.

1. The second objection was partly allowed in the objection decision dated 5 February 2025 ("the second objection decision") allowing some deductions to the Applicant, but importantly for this case, the second objection decision (finally) disallowed the objection to the shortfall penalties for 2020.[116] Amended returns and amended assessments were also issued in relation to 2018, 2019, 2020, 2021 and 2022 which provided some deductions to the Applicant.[117]
2. However, the second objection decision refers to the 12 July 2024 letter as the relevant objection it is disallowing. The first objection and second objection are the relevant objections to the 2020 shortfall penalty, and the 12 July 2024 letter does not have anything to say about the 2020 shortfall penalty. Also, as is noted above, nowhere does the second objection decision overtly consider the lateness of the Applicant's first objection nor the lateness of the Applicant's second objection.
3. It is not clear that the second objection decision properly disallows the objections to the 2020 shortfall penalty, as the live objections on that issue are not referred to at all, and the 12 July 2024 letter which is referred to does not cover the 2020 shortfall penalty. At a strictly technical level (perhaps it can even be said overly technical level), that means there is a potential issue as to whether the Tribunal has a reviewable objection decision in relation to the 2020 shortfall penalty assessment which it is empowered to review pursuant to section 14ZZA of the TAA. The Tribunal appreciates this is an unintended issue.

Clarification sought from and given by the Commissioner

1. In an effort to clarify and tidy up matters given the technical issue described above, the Tribunal emailed the parties on 4 February 2026 about this issue and obtained confirmation from the Commissioner on 9 February 2026 that:

(a) Both the first objection and the second objection were accepted by the Commissioner as in time. > > (b) The second objection decision disallows the first objection and the second objection to the 2020 shortfall penalty assessment alongside the other matters noted in that decision.

2. The Tribunal thanks the Commissioner for that prompt clarification.
3. The Tribunal comments that this sort of procedural problem should not have arisen, and for future matters the Commissioner should ensure:

(a) It overtly refers to and considers the discretion to accept late objections if it receives late objections; and > > (b) Its objection processes identify each year under objection. It is hard to understand why the Commissioner requests on objection forms that taxpayers specify reference numbers for decisions being objected to if they are never checked by the Commissioner when an objection is received; and > > (c) That the correct date of each objection being dealt with is specified in objection decisions.

An Application for Review of the second objection decision being accepted by the Tribunal Registry

1. The Applicant's Application for Review in this Tribunal were filed on 17 August 2024, prior to the second objection decision finally disallowing the objection to the 2020 shortfall penalty assessment. The 17 August 2024 Application for Review does not cover the 2020 year.
2. The Commissioner raised the issue of whether the Applicant was seeking to review the second objection decision before the Tribunal. By email dated 18 February 2025 the Applicant confirmed to the Tribunal that she intended that her proceedings extend to covering the matters disallowed in the 5 February 2025 objection decision. The Tribunal Registry accepted that email as an Application for Review, including of the 2020 shortfall penalty decision.
3. The Tribunal proceeds on the basis that the shortfall penalties at issue in this case are for all of the Relevant Years.

ANALYSIS - IS THE APPLICANT LIABLE TO A SHORTFALL PENALTY IN EACH OF THE RELEVANT YEARS?

1. There is a lot of case law which helpfully summarises the penalties regime. Recently the Tribunal issued two decisions about penalties which each provided separate summaries of the regime which I agree with and adopt below.[118]
2. In Tilli and Commissioner of Taxation [2026] ARTA 80 at [29]-[38] General Member Smith said:

[29] The law concerning administrative penalties is contained in Division 284 of Schedule 1 of the TAA [..]. Section 284-75 provides as follows:

284-75 Liability to penalty

(1)You are liable to an administrative penalty if:

(a) you make a statement to the Commissioner or to an entity that is exercising powers or performing functions under a *taxation law (other than the *Excise Acts); and

(b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it.

Note: This section applies to a statement made by your agent as if it had been made by you: see section 284-25. [...]

Exceptions to subsections (1) and (4)

(5) You are not liable to an administrative penalty under subsection (1) or (4) for a statement that is false or misleading in a material particular if you, and your *agent (if relevant), took reasonable care in connection with the making of the statement.

(6) You are not liable to an administrative penalty under subsection (1) or (4) if:

(a) you engage a *registered tax agent or BAS agent; and

(b) you give the registered tax agent or BAS agent all relevant taxation information; and

(c) the registered tax agent or BAS agent makes the statement; and

(d) the false or misleading nature of the statement did not result from:

(i) intentional disregard by the registered tax agent or BAS agent of a *taxation law (other than the *Excise Acts); or

(ii) recklessness by the agent as to the operation of a taxation law (other than the Excise Acts).

(7) If you wish to rely on subsection (6), you bear an evidential burden in relation to paragraph (6)(b). ...

[30] A taxpayer will have shortfall amount where the tax calculated on the statement made to the Commissioner is less than the tax calculated on the basis that the statement was not false or misleading.

[31] The shortfall amount is calculated using the [...] table in s 284-90 [of the TAA]. [...]

[35] The base penalty amount (BPA) is increased by 20% where the same penalty is imposed again in a subsequent year.

[36] The Commissioner must give written notice to the taxpayer of the liability to pay the penalty and of the reasons why the taxpayer is liable to pay the penalty unless the Commissioner decides to remit all of the penalty. Otherwise, the Commissioner must make an assessment of an amount of an administrative penalty under Division 284 of the TAA [..].

[37] Where an administrative penalty has been imposed, the Respondent may remit all or part of it. Although the discretion is framed broadly, the power to remit must be exercised for a proper purpose, in accordance with the objects of the TAA [..].

[38] A taxpayer that is dissatisfied with such an assessment may object against it in the manner set out in Pt IVC of the TAA [..]. [Footnotes omitted]

1. In Crawford and Commissioner of Taxation [2026] ARTA 90 at [27]-[28] Deputy President Lazanas said:

[27] A person is liable to an administrative penalty if they make a statement to the Commissioner which is false or misleading in a material particular: s 284-75(1) of Schedule 1 to the TAA. The amount of the penalty is a percentage of the base penalty amount worked out in accordance with the formula in s284-85 of Schedule 1 to the TAA. The base penalty amount is worked out in accordance with the table in s 284-90(1) which, relevantly, prescribes percentages of 25%, 50% or 75% of the shortfall amount depending on the taxpayer's culpability. Under s 298-30 of Schedule 1 to the TAA, the Commissioner must make an assessment of the penalty.

[28] Where a person has a shortfall amount that resulted from recklessness by the taxpayer or their agent as to a statement made to the Commissioner about the operation of a taxation law, then the base penalty amount is 50% of the shortfall amount. [Footnotes omitted]

1. The Applicant's submissions are to the effect that she should not be liable for a shortfall penalty in the Relevant Years because:

(a) The Applicant's husband prepared all her tax returns, and she had never had a role in doing so.[119] > > (b) The Applicant's husband's health issues are a relevant factor.[120] > > (c) Tax Agent E filed the returns for the Relevant Years without checking them and this was not anticipated.[121] > > (d) She promptly acted and has sought to correct all errors, and has been co-operative with the Commissioner.[122]

2. The Commissioner's submissions are to the effect that the Applicant is liable to shortfall penalties because she accepts there were errors in the tax returns, so she made false or misleading statements to the Commissioner.[123] Those errors were of a material particular as it was likely to affect the Commissioner's decision about her tax related liability.[124] The Commissioner finally submits that it does not matter whether the Applicant knew at the time that the returns were wrong.[125]

1. I find that the Applicant's arguments about her liability for penalties do not meet her burden of proof. I am not persuaded that she is not liable for a shortfall penalty pursuant to section 284-75 of Schedule 1 to the TAA.
2. From the evidence before the Tribunal, I am satisfied that the better view is that the Applicant is liable for penalties. This is for the following reasons:

(a) The Applicant made statements to the Commissioner in the Applicant's tax returns that were filed on 26 and 27 January 2023. They are her statements at law. > > (b) The tax returns contained claims for deductions that could not be substantiated, which have been shown to be excessive and wrong, and which the Applicant accepts were wrong.[126] This is sufficient for those returns to comprise false or misleading statements made by the Applicant.[127] > > (c) I am satisfied that these errors were errors in a material particular. I agree with the findings of Deputy President Forgie in Confidential and Commissioner of Taxation [2013] AATA 112 at [890]: > > A statement claiming a deduction when none is claimable is false in a material particular. Disclosure of a taxpayer's taxable income is a fundamental aspect of a taxpayer's obligation under the ITAA36 and ITAA97 to pay the amount of tax that he or she should properly pay. It is the base line from which the Commissioner carries out his functions under that legislation. A taxpayer may properly reduce what would otherwise be the amount of taxable income for any year of income by claiming a deduction. The proper assessment of a taxpayer's taxable income lies at the heart of the assessment of the tax that is, or is not, payable on it. Speaking in general terms, false statements about amounts that may be deducted from that taxable income strike at the heart of that process. > > (d) Subsection 284-75(5) of Schedule 1 to the TAA does not apply to the Applicant to relieve her from liability for shortfall penalties. This is because taking into account the circumstances at the time the returns were filed, and considering the matter objectively,[128] I find that the Applicant did not take reasonable care[129] in her tax returns for the Relevant Years. This is for the following reasons: > > > (i) In Re Arnett and Federal Commissioner of Taxation (1998) 39 ATR 1095 at [8] Senior Member Pascoe set out what reasonable care means in this context, and I agree with his comments: > > > > Reasonable care requires a taxpayer to make a reasonable attempt to comply with the provisions of the ITAA and regulations. The effort required is one commensurate with all the taxpayer's circumstances, including the taxpayer's knowledge, education, experience and skill. > > > > (ii) I have taken into account the Applicant's and the Applicant's husband's circumstances, knowledge and skill. I have considered the issues in the Applicant's returns, and I do not consider those issues to be particularly difficult for two professionals such as the Applicant and her husband. The nature of the errors that were made is also hardly complex. Deductions were claimed on an estimated basis without any evidence. That is clearly wrong. If there was uncertainty as to what to do because of lost material, the Commissioner should have been contacted. > > > > (iii) I accept that the Applicant's husband prepared and filed the Applicant's tax returns for the Relevant Years on her behalf. The returns comprise prima facie evidence they were made by the Applicant and with her authority.[130] The Applicant does not dispute that she gave her husband authority. > > > > (iv) The Applicant's husband's evidence of taking the "estimate approach" is in substance saying that he was merely guessing what the Applicant's income and expenses were, based on prior years. Even accepting that some records were lost due to a computer virus, the "estimate approach" is not the care a reasonable person would take. A reasonable person would know that guessing amounts is not meeting their tax obligations. In the Tribunal's assessment that is glaringly obvious. Further, the law is to the effect that a taxpayer does not take reasonable care even in circumstances where their return is filed by a tax agent and the taxpayer is not dishonest and is not aware of the falsity or error in their tax return.[131] > > > > (v) I find that the Applicant's husband requested the Applicant's assistance prior to the Applicant's returns being filed. She was on notice that he was uncertain and did not have material. The Applicant's failure to assist when her husband asked her to do so is not the care a reasonable person would take. The Applicant's failure to engage following that contact from her husband is also problematic given the Applicant has now demonstrated she can manage her tax obligations herself. Similarly to Tilli and Commissioner of Taxation [2026] ARTA 80, the Applicant "chose not to know" and chose "not to ask".[132] > > > > (vi) While engaging Tax Agent E was sensible, and is a factor in the Applicant's favour, I reject the suggestion that the circumstances faced by the Applicant are Tax Agent E's fault. Relying upon Tax Agent E when there was no substantiation for deductions claimed, and no such material could possibly have been provided to Tax Agent E, does not assist the Applicant. I find there was no genuine ability for Tax Agent E to check the claimed deductions, and I accept the broad thrust of the Commissioner's submissions in that regard. I note it is not even clear from the evidence what Tax Agent E was tasked to do exactly, and I have no evidence from Tax Agent E. > > (e) Subsection 284-75(6) of Schedule 1 to the TAA does not apply to the Applicant to relieve her from liability for shortfall penalties. Specifically, Tax Agent E's involvement in the filing of the returns for the Relevant Years does not assist the Applicant. This is for the following reasons: > > > (i) There is no suggestion that Tax Agent E was provided all relevant information (as required by paragraph 284-75(6)(b) of Schedule 1 to the TAA). It cannot have been, since the Applicant's husband conceded that he lost material and substantiation material was not available. > > > > (ii) I accept the Commissioner's submission that there was no way for Tax Agent E to check the deductions claimed. From the evidence before the Tribunal, it seems that if Tax Agent E called the Applicant in relation to the 2019 year, Tax Agent E was "checking on evidence". That is, it is reasonable to infer that Tax Agent E was asking whether substantiation was available and maintained by the Applicant/Applicant's husband.[133] There is no evidence as to what was said. I find Tax Agent E could do no more than that in the circumstances.[134] > > > > (iii) It is also only arguable that Tax Agent E "made" the relevant statement at law (as required by paragraph 284-75(6)(c) of Schedule 1 to the TAA) given the Applicant's husband prepared the returns and the Applicant's Husband's Second Witness Statement even suggests he "filed" the returns for the 2019 and 2020 years (although this is assumed to be with Tax Agent E potentially) and he says he "submitted" those returns for all Relevant Years.[135] > > > > (iv) As is noted above, in any event, it does not matter who prepared or filed the returns - whether that was the Applicant or the Applicant's husband or anyone else. The Applicant is liable at law for statements made in her tax returns.

3. I have concluded that the Applicant is liable to a shortfall penalty in each of the Relevant Years as section 284-75 of Schedule 1 to the TAA is clearly applicable to her. For those reasons, the Commissioner's objection decision in relation to this issue is affirmed.

ANALYSIS - WAS A PENALTY FOR RECKLESSNESS APPROPRIATELY APPLIED OR WAS IT EXCESSIVE?

1. There is a lot of case law as to what recklessness means in the context of section 284-90 of Schedule 1 to the TAA. The Commissioner has also issued guidance to its officials and the public in MT 2008/1 and PS LA 2012/5.
2. In BRK (Bris) Pty Ltd and Commissioner of Taxation [2001] FCA 164 at [77] the Court held:

Recklessness in this context means to include in a tax statement material upon which the Act or regulations are to operate, knowing that there is a real, as opposed to fanciful, risk that the material may be incorrect, or be grossly indifferent as to whether or not the material is true and correct, and that a reasonable person in the position of the statement-maker would see there was a real risk that the Act and regulations may not operate correctly to lead to the assessment of the proper tax payable because of the content of the tax statement. So understood, the proscribed conduct is more than mere negligence and must amount to a gross carelessness. [Emphasis added].

1. What r_ecklessness_ means can be summarised from the case law as follows:

(a) Recklessness is not found merely because errors are made in tax returns.[136] > > (b) Dishonesty is not required.[137] > > (c) Intentional disregard is not the test, and actual knowledge is not required, indifference of consequences foreseeable by a reasonable person can comprise recklessness.[138] > > (d) Recklessness is something more than failing to take reasonable care.[139] > > (e) Believing something to be true does not mean that a taxpayer was not reckless.[140] > > (f) Inaction can be evidence of indifference and can comprise evidence of recklessness.[141] > > The Commissioner's submissions

2. The Commissioner says the Applicant was reckless in making the false or misleading statements in her tax returns for the Relevant Years. The Commissioner's Outline relies upon the Applicant's burden of proof, and is to the effect that the Tribunal cannot be satisfied on the balance of probabilities from the material presented by the Applicant, that the Applicant did not make the false or misleading statements in her tax returns for the Relevant Years recklessly.[142]
3. The Commissioner's Closing Submissions are to the effect that the evidence before the Tribunal about the Applicant's lack of engagement in her own tax returns, the Applicant's husband's conduct, the Applicant's authority being given to her husband to prepare and file her tax returns, the overt nature of Applicant's husband's health issues at the time the tax returns for the Relevant Years were being prepared and then filed as raised in the Applicant's son's evidence, the evidence that the Applicant's husband asked her for assistance, and the evidence from the Applicant as to her review of bank accounts, all suggest that the Applicant "deliberatively ignored the blatant risk that her income tax returns would be inaccurate or not lodged at all".[143]
4. The Commissioner's Closing Submissions also repeatedly raise, with increasing emphasis, that the Applicant's Closing Submissions refer to a "statutory test" for recklessness when there is no statutory test.[144] This did not assist the Commissioner. The answer to that repeated point should have been obvious to the Commissioner. The Applicant is self-represented, she is a secondary school teacher, she is not a lawyer, she is not a tax professional, and she is using terminology that is unfamiliar to her. To try and make hay from such a minor error repetitively in those circumstances is not a substantive point and the Tribunal wonders at the necessity to raise it repeatedly in this manner. It is not as if the Tribunal is unaware and required that submission to reveal something to it.

The Applicant's submissions and the Tribunal's findings in relation to those submissions

1. The Applicant submits she is not guilty of recklessness because:

(a) "Recklessness requires awareness of a real risk and conscious disregard."[145] She also focuses upon the errors not arising due to "dishonesty".[146] These submissions are wrong at law. Recklessness does not require actual knowledge as indifference is sufficient. Recklessness at law also does not require conscious disregard and nor does it require dishonesty. > > (b) Her profession as a teacher reflects integrity and diligence and she makes submissions about her character and service to the community.[147] These submissions are not relevant. As the Tribunal advised the Applicant at the hearing, the imposition of a shortfall penalty is not a test of character or integrity on her part. The Tribunal assessed the Applicant as a caring, well-meaning person, a trusted professional, who is much loved by her family and respected in the community. The Applicant conducted herself at the hearing in a positive manner. When issuing the shortfall penalty assessments, the Commissioner was not making a judgment against the Applicant's character. The Commissioner was assessing the circumstances at the time the returns for the Relevant Years were filed and determining whether objectively those circumstances reflect gross indifference because a reasonable person would have foreseen the risk that false or misleading statements might be made in her tax returns. All of this means that evidence presented by the Applicant such as character reports are not relevant in any way at all to the issue before the Tribunal.[148] To put the matter quite bluntly to the Applicant, a taxpayer can be a canonised saint and still have a shortfall penalty imposed upon them under the TAA for any false and misleading statements. It is an objective test for the Tribunal to consider taking into account all of the circumstances, and in this case, it is about the circumstances at the time the tax returns for the Relevant Years were filed. This is further discussed below. > > (c) Tax Agent E has greater culpability.[149] The Tribunal does not accept this submission for the reasons stated above.[150] Whatever the Applicant thought Tax Agent E was capable of doing, Tax Agent E could not possibly have checked the claims made by the Applicant. The evidence at the Tribunal was clear. There was no material substantiating the claims for deductions that the Applicant made in her tax returns and that comprise her false and misleading statements. The Applicant's husband knew this and asked for her assistance, and the Applicant knew this as well, both as a result of the request for assistance and because she knew about the virus on the Applicant's husband's computer. In the light of that, Tax Agent E does not have greater culpability. > > (d) The Applicant took steps and proactive action to sort out the errors and to co-operate with the Commissioner and the Applicant may be in some financial hardship.[151] She has also faced personal challenges.[152] Co-operating with the Commissioner after the event does not negate the circumstances at the time the false or misleading statement was made to the Commissioner.[153] These factors are not relevant to the determination of the question of the circumstances at the time the returns for the Relevant Years were filed and the false or misleading statement was made to the Commissioner. I return to these factors when I consider remittal of the penalties below. I do not accept the Applicant's submission[154] that PS LA 2012/5 supports the view that corrective action is a factor when considering whether the imposition of penalties was 'harsh', but I consider this point when considering the remittal of penalties below. > > (e) Proportionality and fairness because the errors were made in good faith and were inadvertent.[155] Genuine compliance, transparency and good faith are inconsistent with recklessness.[156] Acting in good faith does not mean that a taxpayer was not reckless.[157] I also do not accept the submission that the errors were inadvertent. The evidence before the Tribunal is that the Applicant's husband used the "estimate approach" knowing he did not have the available data. The evidence before the Tribunal is that the Applicant's husband asked for assistance from the Applicant and she did not provide assistance. The Applicant's Outline supports the conclusion that she knew about the virus on the Applicant's husband's computer and the loss of records.[158] The evidence before the Tribunal is that the request made by the Applicant's husband was that she assist to find the substantiating material. She did not assist. > > (f) The Applicant had no actual awareness of the Applicant's husband's lack of cognitive capacity to manage her tax returns[159] - The Applicant's Closing Submissions are to the effect that she had an awareness her husband was unwell but had no "actual awareness"[160] of his lack of cognitive capacity to manage financial matters.[161] I do not accept this submission. > > > (i) The Applicant's submission contradicts her son's evidence which was to the effect that his father was not capable of preparing financial matters from around 2021 and had visibly declined by 2023 when the returns for the Relevant Years were filed.[162] > > > > (ii) Her submission does not deal with the fact that the Applicant's husband asked for her assistance prior to the returns being filed and she did not provide assistance. She was aware he needed assistance. > > > > (iii) Her submission in the Applicant's Closing Submissions is also contrary to the Applicant's Outline: "During the relevant years, my husband was suffering from a serious neurological condition that began in March 2021, resulting in stuttering, cognitive decline, disorientation, memory deterioration, and an inability to work" (Emphasis added).[163] Of course the Tribunal accepts that the Applicant's husband's condition will have declined over time, but it prefers the Applicant's son's evidence to her submission in the Applicant's Closing Submissions when considering the situation at the time the returns were filed. > > > > (iv) In any event, "actual awareness" is not the test and the Applicant's submission that "the legal test for recklessness requires actual, contemporaneous awareness of a substantial risk and a decision to proceed regardless"[164] is not entirely correct.[165] Indifference can be recklessness. An analysis of what a reasonable person would do in the circumstances is part of the test. The question is whether the Applicant chose to disregard a risk or was grossly indifferent to a risk that a reasonable person in her position would have considered could result in the content of her tax returns for the Relevant Years including false and misleading statements. > > (g) The Applicant relies upon two cases "Cheung v FCT [2021] AATA 3851" and "Dwyer v FCT [2018] AATA 456" for the proposition that "honest reliance on others - without awareness of a risk - does not constitute recklessness even where substantial inaccuracies occurred".[166] The cases with those citations are Rainforth and Child Support Registrar [2021] AATA 3851 and 1622619 (Migration) [2018] AATA 456. They do not say what the Applicant asserts. They are not even about tax penalties. In any event, when searching the databases, and as was noted by the Commissioner,[167] neither case cited by the Applicant actually exists. The principle she asserts is not correct in any event.[168] I have had recent cause to comment on the use of artificial intelligence before the Tribunal, and I suspect artificial intelligence was used here (although I cannot be certain).[169] If artificial intelligence was used, I repeat what I said in Smith and Commissioner of Taxation [2026] ARTA 25 at [83]: > > If artificial intelligence is used as a research tool, cases identified must be found on public websites (such as www.austlii.edu.au) and, assuming they exist, read before they are put to the Tribunal. Otherwise, the Tribunal's time and scarce resources are being wasted, as the Tribunal must look for cases that do not exist and read cases that have no relevance at all. Unfortunately, that is exactly what has happened here, whether artificial intelligence was used or not.

1. The Applicant has not met her burden of proof to satisfy the Tribunal on that balance of probabilities that the shortfall penalties were excessive, nor has she demonstrated on the balance of probabilities that the Applicant and/or the Applicant's husband were not reckless as to a statement made to the Commissioner about the operation of a taxation law.
2. This is because of five facts which the Applicant has not countered before the Tribunal.

(a) Firstly, the Applicant's husband asked the Applicant for assistance prior to the returns for the Relevant Years being filed, and she did not engage with him. > > (b) Secondly, the Applicant's assistance was sought because the Applicant's husband's computer had been damaged by a virus and he did not have access to documents to substantiate the claimed deductions. The Applicant knew this, as the evidence was that she advised him she did not have the necessary material. She left the task to her husband. She chose not to know. She also did not engage with her tax returns when she is required to do so, she did not check them, she did not even get a copy of them, and she may not have signed the declarations she was required to sign. This should not be replicated in future. > > (c) Thirdly, the Applicant's husband used the "estimate approach" in the Applicant's returns which is no better than guessing. The Applicant appropriately accepts that errors arose as a consequence, and false and misleading statements were made. > > (d) Fourthly, the Applicant's husband was suffering from serious health issues at the time, including cognitive decline and this was obvious. I accept the Applicant's son's evidence as to that fact. > > (e) Fifthly, while Tax Agent E was engaged (which is a factor in the Applicant's favour) the Tribunal has no evidence from Tax Agent E, and no evidence of the nature of that engagement. From the evidence before the Tribunal, it was not possible for Tax Agent E to test the evidence substantiating the claims made in the Applicant's tax returns, as there was no evidence. Relying on Tax Agent E in those known circumstances was not reasonable.

3. From an objective standpoint, at a time prior to the returns being filed, a reasonable person would not have prepared returns taking the estimate approach, a reasonable person would have assisted when asked to do so, a reasonable person would not have relied solely upon the Applicant's husband given his evident health issues, and a reasonable person would not have submitted the returns in the form in which they were filed. Objectively, risks arose that false or misleading statements could be made in those tax returns. The Applicant has not convinced me that she and/or the Applicant's husband were other than grossly indifferent to those risks.
4. For those reasons, the Commissioner's objection decision in relation to this issue is affirmed.

ANALYSIS - SHOULD THE PENALTIES BE REMITTED IN WHOLE OR IN PART?

1. The power to remit penalties in whole or in part is set out in section 298-20 of Schedule 1 of the TAA. It is broad in scope, and simply says "The Commissioner may remit all or a part of a penalty." The background to section 298-20 reveals that it is providing an ability to remit, without constraint.[170] The Commissioner itself notes that the ability to remit penalties is unfettered and all relevant facts and circumstances should be considered. [171] The case law supports that view; it is a question whether having regard to the particular circumstances of the taxpayer it is appropriate to remit the penalty in whole or in part.[172]

The Commissioner's analysis in the first objection decision and the second objection decision

1. The Commissioner's first objection decision disallows the Applicant's objection to the 2019, 2021 and 2022 years. The Commissioner's second objection decision disallows the Applicant's objection to the 2020 year. Both objection decisions set out the statutory provisions and cross-reference the Commissioner's policy in PS LA 2012/5.[173] Both decisions do this in exactly the same manner.
2. When considering the Commissioner's first objection decision and the Commissioner's second objection decision, the reasoning provided for not remitting the penalties in whole or in part was:

(a) The Applicant advised the Commissioner in her 4 July 2024 letter that the Applicant's husband's computer was attacked by a virus and was recently stolen so she could not access the files.[174] > > (b) The Applicant tried to amend her returns for 2020, 2021, and 2022 on 11 July 2024 more than a year after the audit had been finalised.[175] There is a suggestion that her attempt to amend her returns raised concerns she was false or misleading in her 4 July 2024 letter.[176] This is repeated in the Commissioner's Outline at [92]. > > (c) Capacity to pay, hardship are not relevant to considering remittal but may be relevant to payment arrangements. Regret and remorse are not appropriate factors to consider.[177] The Commissioner's Outline doubles down on this.[178] > > (d) The Commissioner was not satisfied that the statements at issue were not made recklessly.[179] The Commissioner's Outline doubles down on this as being a rationale, saying the Tribunal can also not be so satisfied.[180]

3. The Commissioner's first objection decision stops there.[181] The Commissioner's second objection decision is a cut and paste of the first objection decision but also includes a paragraph 86[182] which sets out the matters raised in the Applicant's submissions. Paragraph 86 records the circumstances of the Applicant's husband (both his health issues and the period he went missing), the Applicant's dependence upon her husband for financial matters including her tax returns, the role of Tax Agent E, the computer virus issues, the Applicant's husband's stolen computer and phone, the efforts undertaken by the Applicant to reconstruct data, the amended returns being to ensure correctness, and the effort to co-operate with the Commissioner including by way of an agreed payment plan. Other than in relation to financial hardship, there is no analysis in the second objection decision as to why these factors were not considered relevant to the Commissioner's discretion. The Commissioner's Outline takes the same approach.[183]
4. The only additional submission from the Commissioner of any substance is that the Tribunal should not remit the penalties because it cannot be satisfied their imposition is unjust in the overall circumstances, including because the Applicant has the capacity to pay by selling rental properties.[184]

1. The Applicant's position is that she relied on others (her husband and Tax Agent E), she acted in good faith, she is a person of integrity and character, she suffered from personal hardship around the time the errors were made and is in financial hardship,[185] she was not reckless but careless, she acted promptly to tidy matters up and has been entirely co-operative, and that proportionality and fairness justify remission.[186]

1. In the Tribunal's assessment there are problems with the Commissioner's reasoning in the first objection decision and the second objection decision.
2. In particular:

(a) Firstly, while the Tribunal appreciates that the Applicant's efforts to file amended returns were close in time to her 4 July 2024 letter, the Tribunal finds itself bemused as to the Commissioner's negative conclusion against the Applicant. The Tribunal cannot see why the Commissioner did not consider the Applicant's efforts to file amended returns to be related to her attempts to reconstruct records since she received the last shortfall penalty assessment in or around November 2023, and that her description of the lost records, computer problems and the like in her 4 July 2024 letter as relating to the time at which the returns were filed. The inference drawn by the Commissioner was, in the Tribunal's assessment, unfair to the Applicant. Consistent with the evidence from the Applicant, the Applicant's son and the Applicant's husband, the alternative inference is that she acted immediately to seek to recover material to support claims for deductions and tried to file correct returns in order to sort things out with the Commissioner. After all, amended returns were filed in due course and this resulted in adjustments being agreed with the Commissioner and a reduction of penalties. > > (b) Secondly, the other substantive reason given for not exercising the power to remit penalties is that the Commissioner was not satisfied that the statements at issue were not made recklessly. The discretion to remit penalties does not rely upon a taxpayer convincing the Commissioner that the penalty should not have been imposed in the first place. This reasoning is entirely flawed and is rejected by the Tribunal. To say that the Applicant needs to convince the Commissioner that the statements at issue were not made recklessly, removes the entire point of the discretion to remit penalties. > > (c) Thirdly, regret, remorse, co-operation and seeking to correct the problems going forward and agreeing payment arrangements can be relevant factors, depending upon the circumstances. This can be seen from the case law. For instance, in Mangat and Commissioner of Taxation [2018] AATA 3012 ("Mangat") at [100] (then) Senior Member Lazanas took account of the taxpayer's actions to correct the problems going forward holding: > > Having regard to all the circumstances set out above, especially the fact that by late 2014, Dr Mangat had embarked on a course of attempting to comply with her taxation obligations which included bringing her tax returns up to date and seeking tax advice, I consider it is appropriate to further remit the penalty below 50% of the tax shortfall. .... Remission decisions need to consider the fact that a major objective of the penalty regime is to promote consistent treatment of taxpayers by reference to specified rates of penalty and, furthermore, the power to remit penalties must be exercised for a proper purpose in accordance with the objects of the TAA. ... It is appropriate, in all the circumstances, that the penalty for the tax shortfall in respect of the 2013 year should be further remitted from 50% to 40% of the tax shortfall. > > (d) Fourthly, it is only in the second objection decision in relation to 2020 that any of the circumstances listed by the Applicant were set out by the Commissioner, and even then there is no analysis of whether, taking into account the circumstances that the Applicant faced, the penalty should have been remitted on the basis that the outcome was unjust.[187] It seems that the first objection decision in relation to 2019, 2021 and 2022 did not take those circumstances into account at all in the context of considering whether to remit penalties. That was inappropriate. > > (e) While not all of the matters outlined by the Applicant are relevant_[188]_ to considering the overall circumstances, some are. The case law demonstrates that a lack of financial understanding and a lack of intent to make a false and misleading statement can be a relevant factor when considering whether to remit the penalty.[189] Personal circumstances such as difficulties caused by the death of the taxpayer's husband were considered relevant in Ryvitch and Commissioner of Taxation [2002] AATA 607. Factors such as whether there was poor past compliance history and hardship were considered relevant in Munkayilar and Commissioner of Taxation [2021] AATA 1839 at [114]. The ability to pay penalties and the impact upon the viability of the taxpayer was considered in XQDX and Commissioner of Taxation [2021] AATA 4070[190] at [122].

3. The Tribunal has concluded that there should be a partial remission of the penalties in the overall circumstances. I accept that the circumstances around the time that the returns for the Relevant Years were filed are relevant. I accept that there was a computer virus that caused the relevant records to not be available, I accept that the Applicant never intended to make false statements to the Commissioner, and I accept that the Applicant responded promptly to try and correct her errors and get things back on track. I accept her correspondence with the Commissioner was in an effort to try and resolve and correct any errors. I accept that around the time the false and misleading statements were made, the Applicant's focus was on the financial circumstances her family faced because the Applicant's husband could no longer work. I accept she faced separation from her husband, and her focus was on health issues suffered by both the Applicant's son and the Applicant's husband when she ought to have focused on her tax and legal obligations. I accept the combination of all of those circumstances was unusual to a degree.
4. I also reach the view that a partial remittal is warranted because the Commissioner's objection decisions were flawed and unfair to the Applicant by drawing inferences against her when other inferences in her favour could be drawn.[191] In my view, all of those factors mean that the imposition of 50% penalties in each of the Relevant Years was unjust to the Applicant.
5. However, I need to take into account the object of the penalties regime and the signal to the community. I do not accept the penalties should be remitted in full nor do I accept they should be halved as the Applicant submits. For the reasons stated above, my assessment is that the Applicant did not take reasonable care, and she and the Applicant's husband were grossly indifferent to risks that her returns for the Relevant Years would contain false and misleading statements. The Applicant chose not to know. It would be an inappropriate signal to Australian taxpayers to remit the penalties in full or to halve those penalties in those circumstances, and it would not meet the object of the regime as set out in section 284-10 of Schedule 1 to the TAA and referred to in the case law.[192] Similarly to the analysis in Mangat[193] it is appropriate to take into account my findings on the other issues, and balance that against the unfairness I have found above. I remit the shortfall penalties for each of the Relevant Years to 40% and no further than that.
6. For those reasons, I set aside the Commissioner's decision on the third issue in this case. The decision to remit the shortfall penalties is remitted to the Commissioner with a direction to issue assessments of the shortfall penalties for each of the Relevant Years at 40%.

1. I affirm the Commissioner's decision to impose penalties and to impose penalties for recklessness, because the Applicant has not met her burden of proof to satisfy me otherwise.
2. However, taking into account all of the circumstances, the first objection decision and the second objection decision are set aside to the extent of the decision not to remit the shortfall penalties in whole or in part in each of the Relevant Years. The decision to remit the shortfall penalties is remitted to the Commissioner with a direction to issue assessments of the shortfall penalties for each of the Relevant Years at 40%.

Australian Taxation Office, Litigation and Legal Services

[2] The Commissioner says that the Applicant's tax returns made false and misleading statements.

[3] T46, T48, T50, T52, T54. Microsoft Teams Transcript 24 November 2025, 39.59. Final Additional Closing Submissions of the Applicant dated 8 December 2025 ("Applicant's Closing Submissions") [1].

[5] Commissioner of Taxation v White (No.2) [2010] FCA 942 [18].

[8] Applicant's Husband's Affidavit of Facts, Issues and Contentions dated 8 July 2025 ("Applicant's Husband's First Witness Statement") [3]. The Tribunal has treated this document as a witness statement from the Applicant's husband despite its title.

[9] Applicant's Final Submissions dated 15 October 2025 ("Applicant's Outline") [1].

[10] Affidavit of the Applicant's Husband dated 24 September 2025 ("Applicant's Husband's Second Witness Statement") TB1517 [1]. It is noted that the Applicant's Husband's First Witness Statement and the Applicant's Husband's Second Witness Statement mirror one another in all major respects. Where only one of those witness statements is referred to in this decision, it can be assumed the same paragraph reference arises in relation to the other witness statement.

[11] Microsoft Teams Transcript 24 November 2025, 10.08-10.27. The Tribunal also records that some of the cross-examination of the Applicant's son - particularly questions about whether the Applicant's husband was proud of the mistakes he made -did not assist the Commissioner.

[12] Microsoft Teams Transcript 24 November 2025, 12.47.

[13] Affidavit of the Applicant's Son dated 24 September 2025 ("Applicant's Son's Witness Statement") TB1511, [5]. The Tribunal has of late been commenting on Tribunal Books prepared and lodged by the Commissioner in cases such as this where applicants are self-represented . There are obvious ways to assist the Tribunal as required by section 56 of the Administrative Review Tribunal Act 2024 (Cth). In this case, there was a period of confusion at the hearing because the Tribunal (wrongly) thought it did not have the Applicant's Son's Witness Statement. That is because it was not noted on the index to the Tribunal Book (and nor was the Applicant's Husband's Second Witness Statement). That time would not have had to be spent in confusion at the Tribunal if the index was comprehensive. It would be helpful to the Tribunal if significant documents like Witness Statements were always indexed on the Tribunal Book, no matter how they are filed by an Applicant. Getting dates and descriptions always right in the index would also be helpful. The Tribunal requests the Commissioner takes particular note of this footnote for future cases, particularly those involving self-represented applicants.

[14] Applicant's Husband's First Witness Statement. Applicant's Husband's Second Witness Statement.

[15] Applicant's Son's Witness Statement.

[16] TB1392, TB1418, TB1421, TB1424, TB1427, TB1430, TB1433, TB1436, TB1439, TB1442, TB1448.

[17] TB1393, TB1405, TB1419, TB1434, TB1440, TB1443. The Applicant's son's evidence before the Tribunal confirmed that the Applicant's Husband did not always have these health difficulties, and this was a noticeable decline: Applicant's Son's Witness Statement [6].

[21] TB1414, TB1421, TB1425, TB1428, TB1431, TB1437, TB1443.

[22] This is understood to be a heart condition.

[23] Applicant's Husband's Second Witness Statement [3], [9], [13], [15], [20].

[24] Microsoft Teams Transcript 24 November 2025, 12.57 for example.

[27] Applicant's Outline 2[3]. Applicant's Husband's Second Witness Statement [3], [6]. Applicant's son's evidence under cross-examination. Microsoft Teams Transcript 24 November 2025, 10.31.

[28] Applicant's Husband's Second Witness Statement [6], [7].

[29] Applicant's Husband's Witness Statement [7].

[31] Microsoft Teams Transcript 24 November 2025, 54.18-54.45, 55.23. Applicant's Outline 2[5].

[32] Microsoft Teams Transcript 24 November 2025, 19.43. T25-531.

[33] Following the rule in Browne v Dunn (1893) 6R 67 (HL).

[34] Applicant's Husband's Second Witness Statement [8].

[35] Microsoft Teams Transcript 24 November 2025, 44.09-47.23, 47.52-53.13, 1.00.31.

[36] Applicant's Husband's Second Witness Statement [6]-[8].

[37] Microsoft Teams Transcript 24 November 2025, 2.00.08-2.02.21.

[38] Microsoft Teams Transcript 24 November 2025, 53.24-53.59, 56.46

[39] Microsoft Teams Transcript 24 November 2025, 57.10-57.32.

[40] Applicant's Husband's Second Witness Statement [11].

[41] Applicant's son's evidence - Microsoft Teams Transcript 24 November 2025, 28.29-28.34.

[42] Australia's Future Tax System Commonwealth of Australia, 2 May 2010, page 31 - the Henry Review.

[43] Applicant's Husband's Second Witness Statement [14].

[44] Microsoft Teams Transcript 24 November 2025, 1.02.36-1.02.41.

[45] Applicant's Husband's Second Witness Statement [14].

[46] Microsoft Teams Transcript 24 November 2025, 18.24; 20.02-20.26.

[47] Applicant's Husband's Second Witness Statement [10]-[13].

[48] Microsoft Teams Transcript 24 November 2025, 27.40-38.56.

[49] Microsoft Teams Transcript 24 November 2025, 41.47-42.05.

[50] Applicant's Husband's Second Witness Statement [15]-[16].

[51] Applicant's Husband's Second Witness Statement [16], [19].

[52] Microsoft Teams Transcript 24 November 2025, 1.04.57-1.05.48.

[53] Microsoft Teams Transcript 24 November 2025, 1.05.41-1.05.48.

[54] Microsoft Teams Transcript 24 November 2025, 1.02.54-1.04.03, 1.06.11-1.06.53. 35.33-37.49

[55] Microsoft Teams Transcript 24 November 2025, 41.47-42.04.

[56] Particularly his honest acknowledgement that he did not have the necessary data or material when he prepared the Applicant's returns and used the estimate approach instead.

[57] Microsoft Teams Transcript 24 November 2025, 5.28-5.42, 10.13-10.15.

[58] Microsoft Teams Transcript 24 November 2025, 5.58-7.26. Applicant's Son's Witness Statement [4].

[59] The date she lost her parents seems to have been in 2024, after the returns for the Relevant Years were filed: Applicant's Outline 2[9].

[60] This was in December 2023. Applicant's Outline, Appendix E.

[61] Microsoft Teams Transcript 24 November 2025, 8-25-8.45, 11.25, 14.45, 15.29, 15.51, 17.41-17.43. Applicant's Son's Witness Statement [3]-[6], [10]. Applicant's Outline, Appendix E.

[64] Microsoft Teams Transcript 24 November 2025, 10.31, 11.20-11.21, 14.45-15.07, 15.29, 17.54, 19.32-19.43, 22.19-23.11.

[65] Microsoft Teams Transcript 24 November 2025, 17.54, 23.11, 23.27 and 23.41.

[66] Microsoft Teams Transcript 24 November 2025, 11.21-11.25.

[67] See paragraphs ‎17 and ‎18 above.

[68] Microsoft Teams Transcript 24 November 2025, 1.52.29, 1.53.16, 1.53.30, 1.54.39, 1.55.46, 1.57.54, 1.58.42, 2.01.16, 2.09.56.

[69] Microsoft Teams Transcript 24 November 2025, 2.09.56.

[70] The Respondent's Written Outline of Closing Submissions dated 22 December 2025 ("Commissioner's Closing Submissions") [4b(iv)].

[71] Applicant's Husband's Second Witness Statement [11] - whether that was paying Tax Agent E or the tax he had calculated.

[72] Microsoft Teams Transcript 24 November 2025, 2.11.16-2.11.58.

[73] Subsection 350-10(3A) of Schedule 1 to the TAA.

[74] Sections 388-60, 388-65, 388-70, 388-75 of Schedule 1 to the TAA.

[75] Respondent's Outline of Submissions in Reply dated 11 November 2025 ("Commissioner's Reply Outline") [7]-[24].

[76] Millar v Commissioner of Taxation [2016] FCAFC 94 [74] for example. It is noted that the Commissioner's Reply Outline relies upon the Federal Court judgment, but makes submissions (e.g., at [18]) as if what it is citing is the Full Federal Court decision.

[77] Applicant's Closing Submissions 8.

[78] Commissioner's Closing Submission [22].

[79] Millar v Commissioner of Taxation [2016] FCAFC 94; Kajewski v Federal Commissioner of Taxation [2003] FCA 258

[80] Applicant's Outline [9]. Applicant's Closing Submissions [7], [22], [23].

[82] Section 8-1, section 40-25, Division 43 of the ITAA 1997.

[83] Sections 900-175, 900-185, 900-205 of the ITAA 1997.

[84] T19. Commissioner's SFIC [79.2].

[85] Commissioner's SFIC [31]-[38].

[86] Commissioner's SFIC [45]-[48]. T3 [45].

[87] Commissioner's SFIC [49]-[50].

[91] The portion of the objection form "Enter the periods or income years the objection relates to" refers to "Start date 01/07/2018 End date 30/06/2022". TB459 to TB460. The section entitled "Provide the reference numbers and dates of the decisions and assessments you are objecting to" included the relevant notice of shortfall penalty for the 2020 year (i.e.," Reference Number 7144257785380, Date: 28 November 2023"). TB460.

[92] The T document index also refers to this objection as only covering 2019, 2021, 2022 - TB3.

[93] T24. Appendix D to the Applicant's Outline.

[95] See paragraph ‎53 below.

[97] Both the 4 July 2024 and 12 July 2024 letters are referred to in the T Document index as "letter providing supporting material to the objection." That description is not accurate, and it appears the Applicant did not receive a direct response to this correspondence. The 12 July 2024 letter is also referred to in the T document index as dated 18 July 2024, when that is the date that it was received by the Commissioner.

[98] T26 [3]. The Commissioner also referred to this in the Commissioner's SFIC [27].

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

[114] See footnote 91 above.

[115] T33, T34, T35, T36 (a still further objection dated 30 October 2024 relating to the 2018 income year which is not at issue in these proceedings), T38, T39, T40, T41, T42, T43, T44. It is noted that T44 is indexed as dated 8 May 2024, when it is really 5 February 2025. Further material provided by the Applicant during this period is set out at T55 - T101.

[117] T45, T46, T47, T48, T49, T50, T51, T52, T53, T54.

[118] Tilli and Commissioner of Taxation [2026] ARTA 80; Crawford and Commissioner of Taxation [2026] ARTA 90.

[119] Applicant's Outline 2[6]; Applicant's Closing Submissions 5[16].

[121] Applicant's Outline 2[7]; Applicant's Closing Submissions 9[33].

[122] Applicant's Outline 2[9]; Applicant's Closing Submissions 7[22]-[24].

[123] Commissioner's Outline [51]-[52].

[125] Commissioner's Outline [53]. Law Administration Practice Statement PS LA 2012/5 Administration of the false or misleading statement penalty - where there is a shortfall amount ("PS LA 2012/5") [7H], [7J].

[126] Applicant's Closing Submissions [1], [19].

[127] Kajewski v Federal Commissioner of Taxation [2003] FCA 258 [121].

[128] Assessing reasonable care is an objective test: Confidential and Commissioner of Taxation [2008] AATA 415, [57], [60]; Miscellaneous Taxation Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard ("MT 2008/1") [45].

[129] MT 2008/1 [27]-[29]; Hutson and Commissioner of Taxation [2009] AATA 574 [105].

[130] Subsection 350-10(3A) of Schedule 1 to the TAA.

[131] Kajewski v Federal Commissioner of Taxation [2003] FCA 258 [121].

[132] Tilli and Commissioner of Taxation [2026] ARTA 80 [62].

[133] Applicant's Husband's Second Witness Statement [12]. The Applicant's Husband's Second Witness Statement is confusing on this point however, as at [11] he says he prepared and submitted the 2019 and 2020 returns, he then says at [14] that after that he submitted all returns for the Relevant Years including 2019 and 2020, and he then says at [16] it was Tax Agent E that submitted all returns for the Relevant Years.

[134] There is no evidence before the Tribunal, but an inference could be drawn that if Tax Agent E called about the 2019 year, Tax Agent E was somehow given comfort that there was evidence of claimed amounts being held by the Applicant or the Applicant's husband.

[135] Applicant's Husband's Second Witness Statement [11]. Also see footnote 133 above.

[136] MT 2008/1 [99]-[102]. PS LA 2012/5 [107]-[108]. Hart v Federal Commissioner of Taxation [2003] FCAFC 105 [33]-[34].

[137] Hart v Federal Commissioner of Taxation [2003] FCAFC 105 [33]-[34].

[138] Smith and Commissioner of Taxation [2026] ARTA 25 [101]-[102]. PS LA 2012/5 [14H]; MT 2008/1 [100]-[101].

[139] Hart v Federal Commissioner of Taxation [2003] FCAFC 105 [44].

[140] Oxby and Commissioner of Taxation [2022] AATA 3239 [53]-[56].

[141] Abotomey and Commissioner of Taxation [2025] ARTA 719 [337].

[143] Commissioner's Closing Submissions [4a], [4b], [4c].

[144] Commissioner's Closing Submissions [14], [19], [20].

[146] Applicant's Outline 5[1]-[5].

[148] Such as that set out at Appendix B of the Applicant's Outline or the Applicant's Son's Witness Statement.

[150] See paragraphs ‎70(d)(vi) and ‎70(e) above.

[151] Applicant's Outline [4], [6].

[153] RFZD and Federal Commissioner of Taxation [2022] AATA 988 [69].

[154] Applicant's Closing Submissions 7[24].

[156] Applicant's Closing Submissions [7].

[157] Smith and Commissioner of Taxation [2026] ARTA 25 [102b], [102c].

[159] Applicant's Closing Submissions 4[]12]-[14].

[160] Applicant's Closing Submissions [12].

[161] Applicant's Closing Submissions [11]-[14].

[162] See paragraph ‎31 above.

[164] Applicant's Closing Submissions [14].

[165] The Tribunal accepts the submission made at [11 ] of the Commissioner's Closing Submissions on this point.

[166] Applicant's Closing Submissions 8[30].

[167] Commissioner's Closing Submissions [23].

[168] See paragraphs ‎72 to ‎74 above, and the cases referred to in those paragraphs.

[169] Smith and Commissioner of Taxation [2026] ARTA 25 [83]-[84].

[170] Explanatory Memorandum to A New Tax System (Tax Administration) Bill 1999 (Cth) [7.26], [7.28].

[172] Commissioner of Taxation v Sanctuary Lakes Pty Ltd [2013] FCAFC 50, [248], [249].

[173] T2 [35]-[42]; T3 [75]-[82].

[174] First objection decision [46].

[175] First objection decision [44].

[176] First objection decision [47]. Second objection decision [87] - although the reference there was to "your computer" rather than the Applicant's husband's computer.

[177] First objection decision [48]. Second objection decision [88].

[179] First objection decision [49]. Second objection decision [89].

[181] It might be said the Commissioner referred to the Applicant's submissions earlier in the first objection decision, but there is no suggestion they were considered when taking not account the power to remit penalties.

[184] Commissioner's Reply Outline [35]-[38].

[185] The Tribunal notes there is evidence in the T Documents and on the Tribunal Book of her submissions about her asset and income position. For example, T100, T101, Appendix C to the Applicant's Outline,

[186] Applicant's Closing Submissions 9, 10; Applicant's Outline 6, 7.

[187] Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Federal Commissioner of Taxation [2008] FCAFC 54 [20], [26].

[188] For instance, the Applicant's assertion she acted in "good faith" is not relevant: Smith and Commissioner of Taxation [2026] ARTA 25 [102b], [102c]. Anything that occurred long after the event is not relevant either.

[189] For instance, following remittal from the Federal Court to the Administrative Appeals Tribunal on penalties, in Bosanac v Federal Commissioner of Taxation [2019] AATA 1240 (and not further appealed( at [41] .

[190] While this case was appealed in Sunlite Australia Pty Ltd v Federal Commissioner of Taxation [2023] FCAFC 43 the issues relating to penalties were not appealed.

[191] The Taxpayer's Charter is to the effect that taxpayers will be treated as being honest unless thought otherwise. In that latter circumstance taxpayers are to be given an opportunity to explain. Instead, it seems that the Commissioner simply drew negative inferences from the Applicant's 4 July 2023 letter and her effort to file amended returns shortly thereafter without taking into account her circumstances and knowledge of and engagement with the tax system. Of course this was put to her, but it appears to have just been cut and pasted without further consideration of the Applicant's circumstances.

[192] Re Diarra and Commissioner of Taxation [2019] AATA 5545 at [37]; Sanctuary Lakes Pty Ltd v Commissioner of Taxation [2013] FCAFC 50 [263]-[266].