Tax debt release based on serious hardship refused

The AAT has affirmed the Commissioner's decision to refuse to release a taxpayer from his tax liability under s 340-5(3) of the Taxation Administration Act 1953 (TAA).

Background

The taxpayer had a total amount of tax and penalty owing of some $30,500. The AAT heard details of the taxpayer's financial and personal situation. It heard that essentially due to his wife's illness, he had been increasingly required to care for her as well as their two teenage children, and that this, combined with a lack of work in income-producing activities, meant that there had been a significant reduction in his income. The AAT noted that the couple continued to receive rent and lease payments from a former home that was rented out and from a taxi licence that was leased.

Decision

The AAT was satisfied that the taxpayer was facing serious hardship in the immediate future in the sense of lacking the means to purchase food, clothing and medical supplies for his wife and children, or to continue to provide accommodation, education for his children and other basic requirements that are reasonable by reference to general community standards. Even if he and his wife were to sell their former home and the taxi licence he had held, the AAT said the taxpayer would be likely to continue to face serious hardship.

The AAT found that the taxpayer's serious hardship came as a result of his liabilities (of which his tax debt was but one) exceeding his assets, and that the outgoings required to service those liabilities exceeded his income. As a result, it said this was not serious hardship that would arise from him being required to satisfy his tax liability – which meant the taxpayer had not met the requirement in Item 1 of s 340-5(3) of the TAA for the discretion to release him from his tax debt, in whole or in part, to be available. As he had not met the criterion, the AAT said it did not have the power to release him from his tax debts. Further, the AAT said even if it did decide that the taxpayer had met the condition in Item 1, it would not exercise the discretion to release him from his tax liability in whole or in part.

Re Rasmussen and FCT [2013] AATA 746, www.austlii.edu.au/au/cases/cth/AATA/2013/746.html.