In Power and FCT (2014) AAT 343 the Australian Appeals Tribunal (AAT) refused to release the taxpayer from a tax liability based on hardship.
What Follows is an outline of the issues that were considered by the AAT.
Basis of Hardship
The AAT affirmed the Commissioner’s decision not to release a taxpayer from his tax liabilities on the basis of financial hardship.
According to the financial circumstances the outstanding income tax liabilities included unpaid tax instalments and general interest charges.
In view of the taxpayer’s current income and outgoings, and his family and personal circumstances, the AAT considered that the assessments were manageable. The AAT considered that the taxpayer had paid little attention to his tax liabilities over the last five or six years, and allowed an amount due to accumulate with interest. The AAT concluded from the Taxpayers own financial Assessment that the taxpayer had capacity to pay overtime
The AAT did not accept that the taxpayer’s situation, if required to pay his tax debt, would be one of serious hardship.
Even if serious hardship had been established, the AAT would not have exercised the discretion to grant relief as the taxpayer’s situation had been brought about by his own failure to meet his tax obligations. Since being subject to PAYG instalments in 2008, the tax payer had paid only 4 of 22 assessments.
The taxpayer had made little effort to clear arrears and achieve compliance, having entered into three separate payment arrangements with the ATO, defaulting on two and cancelling the third.
Given the above serious hardship is determined on the particular circumstances of each situation. Furthermore the burden of proof is generally on the tax payer to prove that serious hardship may result if you pay your tax.
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