Civil and Administrative Tribunal New South Wales Medium Neutral Citation: O'Neill Tyres Gateshead Pty Ltd & Cessnock Tyres Pty Ltd v Chief Commissioner of State Revenue [2020] NSWCATAD 314 Hearing dates: 11 August 2020 Date of orders: 16 December 2020 Decision date: 16 December 2020 Jurisdiction: Administrative and Equal Opportunity Division Before: AR Boxall, Senior Member Decision: In accordance with section 101(1)(a) of the Taxation Administration Act 1996, I confirm the decision under review. Catchwords: TAXES AND DUTIES – Administration – Penalty Tax – reasonable care to comply with taxation law Legislation Cited: Administrative Decisions Review Act 1997 ss 58, 63 Payroll Tax Act 2007 ss 3, 7, 9, 81, 82, 83, 86, 87 Schedule 1, Schedule 2, Schedule 2 clause 21 Taxation Administration Act 1996 ss 3, 4, 19, 21, 22, 25, 26, 27, 86, 89, 93, 94, 96, 100, 103, 104, 105 Cases Cited: B&L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481 Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue; International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 Commissioner of State Revenue (Vic) v Snowy Hydro Limited [2012] VSCA 145 Cessnock Tyres Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 368 Cessnock Tyres Pty Ltd v Chief Commissioner of State Revenue [2018] NSWCATAP 147 Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 Levitch Design Associates Pty Ltd atf Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215 Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227 RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64 Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773 Winston-Smith v Chief Commissioner of State Revenue [2019] NSWCA 75 Thomas v Commissioner of Taxation [2015] FCA 968 Category: Principal judgment Parties: O'Neill Tyres Gateshead Pty Ltd, Bayrond Pty Ltd and Cessnock Tyres Pty Ltd (Applicants) Chief Commissioner of State Revenue (Respondent) Representation: Solicitors: Beazley Lawyers (Applicant) Crown Solicitors (Respondent) File Number(s): 2019/00318019 Publication restriction: None REASONS FOR DECISION Introduction 1. This is an application filed by the Applicants under section 96 of the Taxation Administration Act 1996 (TAA), for the Tribunal to review a decision made by the Chief Commissioner of State Revenue (for convenience, the Respondent or the Commissioner) in which he assessed interest and penalty in connection with the Applicants' failure to pay payroll tax during the period from 1 July 2015 to 30 June 2018, and for the months of July and August 2018 (the Relevant Period). On 15 November 2018 Davidson Accountants, on behalf of the Applicants, lodged an objection to that decision, and on 12 August 2019 the Respondent disallowed the objection. A more detailed history is set out below. 2. There are three Applicants: O'Neill Tyres Gateshead Pty Ltd, Bayrond Pty Ltd and Cessnock Tyres Pty Ltd as trustee of the Mark O'Neill Family Trust. They will be referred to collectively as the Applicants and individually as an Applicant, except where the identity of a particular Applicant is relevant, when they will be referred to respectively as OTG, Bayrond or Cessnock. 3. In these reasons, each financial year (being, in accordance with the definition of financial year found in section 3 of the Payroll Tax Act 2007 (PTA), a year beginning on 1 July) within the Relevant Period is referred to as a Relevant Year, and reference to a Relevant Year followed by a reference to a specific year is to the financial year beginning on 1 July in the preceding year and ending on 30 June in that particular year. So, for example, a reference to Relevant Year 2016 is to the financial year which began on 1 July 2015 and ended on 30 June 2016. 4. References to: 1. the Section 58 Documents are to the five volumes of documents filed with the Tribunal under section 58 of the Administrative Decisions Review Act 1997 (ADRA) on 29 November 2019, and reference to a particular numbered tab of the Section 58 Documents is to the document identified under that tab number in the Section 58 Documents; and 2. the Supplementary Section 58 Documents are to the supplementary volume of documents filed with the Tribunal under section 58 of the ADRA on 7 August 2020, and reference to a particular numbered tab of the Supplementary Section 58 Documents is to the document identified under that tab number in the Supplementary Section 58 Documents 1. This review is conducted under the TAA, and the provisions of section 100 of that Act apply. Notably: 1. Sub-section 100(2) of that Act provides that neither the Applicant nor the Respondent are limited in the present application to the grounds of the objection; and 2. sub-section 100(3) of that Act provides that the Applicant "… has the onus of proving the applicant's case in an application for review", an onus which is discharged by reference to the ordinary civil standard: B&L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481. 1. The significance of sub-section 100(3) is that the Respondent's decision must stand unless the Applicant can demonstrate, on the balance of probabilities, the deficiencies in it which the Applicant alleges. A differently constituted tribunal's reasons in Levitch Design Associates Pty Ltd atf Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, at [27], outline a method of approach to this exercise, and these reasons respectfully adopt the methodology which they propose. 2. Section 63(1) of the ADRA requires the Tribunal "to decide what the correct and preferable decision is having regard to the material then before it", and section 63(2) provides that the Tribunal "… may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision". History 1. In brief, the history of the matter is as follows: 1. Each Applicant carries on business selling motor vehicle tyres at various locations in the Hunter Valley. The history of these businesses and the collaborative arrangements between the three Applicants are summarised in the Tribunal's Reasons for Decision in Cessnock Tyres Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 368 at [5] to [31]. 2. The Applicants had for many years been grouped for payroll tax purposes, and on two occasions the Applicants sought to be degrouped. 3. The first application was in 2012. It was unsuccessful. 4. The second was made on 25 September 2015, seeking degrouping with effect from 1 July 2013. Again, the Commissioner dismissed the application, by email dated 4 November 2015 to the Applicants' accountants, Davidson Accountants. 5. The Applicants objected to that decision on 10 February 2016, and the Commissioner disallowed that objection on 8 June 2016. On 3 August 2016, the Applicants requested the Commissioner to reconsider that disallowance, but on 11 August 2016 the Respondent wrote to the accountants, declining to do so. 6. The Applicants applied to the Tribunal on 28 October 2016 for the review of the decision to which the unsuccessful objection related, and in Cessnock Tyres Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 368 the Tribunal on 15 December 2017 confirmed the decision under review. 7. On 2 January 2018, the Applicants appealed against this decision to the Tribunal's Appeal Panel, which in Cessnock Tyres Pty Ltd v Chief Commissioner of State Revenue [2018] NSWCATAP 147 dismissed the appeal on 8 June 2018. 8. During the Relevant Period, the Applicants ceased lodging monthly and annual payroll tax returns, and except as described in (9) below made no payments of payroll tax under the PTA or of interest or penalty tax assessed under the TAA [1] . 9. In May 2017, OTG made a payment of $72,734.99 towards its accrued payroll tax liabilities at that time [2] . 10. From August 2015 onwards the Respondent wrote monthly to each of Bayrond and Cessnock, care of Davidson Accountants, concerning their outstanding monthly payroll tax payments, stating that a failure to pay would result in the issue of assessments including interest and 25% penalty tax. 11. On and from September 2015, the Respondent issued bi-monthly estimated payroll tax assessments to Bayrond and Cessnock, care of Davidson Accountants, for all months running from July 2015 until August 2018, which were payable within 14 days and included 25% penalty tax. 12. From March 2016 onwards the Respondent wrote monthly to OTG, care of Davidson Accountants, concerning its outstanding monthly payroll tax payments, stating that a failure to pay would result in the issue of assessments including interest and 25% penalty tax. 13. On and from 29 April 2016, the Respondent issued estimated payroll tax assessments to OTG, care of Davidson Accountants, for all months commencing from July 2015 until August 2018, which were payable within 14 days and included 25% penalty tax. 14. In July and September 2018, the Applicants provided the Respondent with actual wage figures for, respectively, the 2016 tax year and the 2017 and 2018 tax years. 15. On 15 November 2018 Davidson Accountants, on behalf of the Applicants, lodged objections to the Respondent's decision to assess interest and penalty tax against the Applicants in connection with their failure to pay payroll tax during the Relevant Period. 16. Although lodged outside the 60-day period provided for under section 89(1) of the TAA, the Respondent permitted the objections to proceed. 17. On 12 August 2019, the Respondent wrote to Davidson Accountants disallowing the objections for the reasons set out in his letter. 18. On 11 October 2019, the Applicants filed under section 96 of the TAA the present application, seeking the review by the Tribunal of the Respondent's determination disallowing the objection. 19. Since then, the matter has formed the subject of a succession of procedural hearings and orders, the details of which are of no particular materiality for present purposes. The issues in dispute 1. In their review applications, the Applicants indicate that the purpose of the application so to seek the remission of penalty tax and interest. Interest 1. During the hearing itself, Mr Beazley, representing the Applicants, indicated that they were no longer seeking the remission of interest charged by the Respondent on payroll tax assessed but unpaid. 2. The TAA: 1. provides in section 21 for interest to be paid on unpaid tax, including payroll tax; 2. sets out in section 22 the method for calculating interest, which is at a rate which is the sum of two rates: the "market rate component" and the "premium rate component"; and 3. in section 25, allows the Respondent to remit in individual cases either or both components, "… in such circumstances as the Chief Commissioner considers appropriate". 1. In the present case, the Respondent: 1. in his original assessment, decided to apply only the market rate component of interest; and 2. confirmed that decision in his disallowance dated 12 August 2019 of the Applicants' objection dated 15 November 2018. 1. In doing so the Respondent referred to the decision of a predecessor tribunal, Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19, in which at paragraph [61] the tribunal: 1. explained the function of the market rate component, as being "… to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due …"; 2. drew the conclusion that because of this function, the market rate component "… could rarely, if ever, be waived …"; and 3. observed that in order to justify any remission of the market rate component, "… it would be necessary to show that in some way the Commissioner contributed to the default ..". 1. In his Revenue Ruling No PTA 036 version 2, the Respondent outlines circumstances extending beyond his own contribution to the tax default in which he may be minded to remit interest, including where late payment was occasioned by what may be loosely summarised as force majeure events - postal or DX delays or natural disasters, such as fire or flood. 2. Nothing in the evidence or submissions indicated any basis for the Tribunal to consider any remission of market rate interest: the payroll tax had been assessed, it was left unpaid, and the imposition of interest calculated at the market rate was the statutory method for reallocating the economic cost of non-payment from the Commissioner to the Applicants. Mr Beazley's concession was, therefore, entirely appropriate. Had he not made it, the Tribunal would have confirmed the Respondent's decision to impose interest at the market rate. Underlying payroll tax regime 1. Before considering the Applicants' argument, that they should be relieved entirely from any liability for penalty tax in relation to payroll tax unpaid during the Relevant Period, it is useful to review briefly the applicable provisions of the PTA concerning liability to, the assessment of and the payment of payroll tax: 1. Section 7 provides that an employer "by whom taxable wages are paid or payable is liable to pay payroll tax on the wages". 2. Section 9 provides, in summary, that the tax must be paid: 1. "... within 7 days after the end of the month in which those wages were paid or payable, other than the month of June"; and 2. "within 21 days after the end of the month of June in relation to taxable wages paid or payable in the month of June". 1. The amount of payroll tax for which an employer is liable is determined in accordance with Schedules 1 and 2 of the PTA. If wages paid by a particular employer during a financial year are less than a statutory threshold, no payroll tax is payable by that employer. 1. Part 5 of the PTA provides for the constitution of payroll tax groups, and for the designation of a group member as the designated group employer. The establishment of a payroll tax group results, broadly speaking, in the calculation of payroll tax on a group basis, with the designated group member being primarily liable to pay group payroll tax so calculated; the imposition of joint and several liability on each group member to pay that tax if there is a default by another group member in doing so; and the allocation of the taxable threshold referred to above to the designated group member for purposes of calculating group liability. In the present case, at all times during the Relevant Period the Applicants were all members of a group for purposes of the PTA, of which OTG was the designated group employer. 2. Under section 86 of the PTA an employer (or each member of a group constituted under Part 5) is required to register if weekly taxable wages paid by it (or aggregate weekly taxable wages paid by group members, in the case of a payroll tax group) exceed a particular threshold. Once so registered, an employer is required under section 87 of the PTA to lodge monthly returns relating to that month and, in the case of the return referrable to the month of June in each year (which is required to be lodged within 21 days after the end of June), a return covering both that month's wages but also adjustments in payroll tax applicable to the recently ended financial year. 3. Section 82 of the PTA provides for the adjustment of payroll tax amounts paid or payable by a taxpayer in order to ensure that the correct amount of payroll tax is paid for each financial year. This is supplemented by section 83, which expressly requires in section 83(1) that the Commissioner refund to the taxpayer any amount by which the aggregate monthly payments of payroll tax by the taxpayer exceed the correct amount of payroll tax payable by it for that financial year. Section 83(2) establishes a corresponding obligation on the taxpayer, to pay to the Commissioner any amount by which aggregate monthly payments of payroll tax by the taxpayer fall short the correct amount of payroll tax payable by it for that financial year. 4. Clause 21(1) of Schedule 2 to the PTA provides as follows: 5. If the Chief Commissioner is of the opinion that tax will not be payable by an employer, or, if paid, would be refunded, the Chief Commissioner may issue a certificate to that employer exempting the employer from lodging monthly returns in accordance with section 87 and any employer to whom such a certificate is issued may refrain from lodging monthly returns but must, unless the contrary is expressed in the certificate, lodge a return relating to each financial year within 21 days after the close of that financial year 6. Clause 21(3) of that Schedule provides as follows: The issue of a certificate under this clause does not exempt an employer from the payment of any payroll tax, despite the fact that it may have the effect of postponing the time for payment of any payroll tax Penalty tax 1. Section 26 of the TAA provides that, in addition to any interest payable by the taxpayer, a taxpayer is liable to pay penalty tax in connection with a tax default. The failure to pay tax in accordance with a taxation law is a tax default, under section 3 of the TAA. Section 4 of the TAA provides that the PTA is a taxation law. The consequence, therefore, is that a failure to pay payroll tax in accordance with the PTA renders the delinquent taxpayer liable to pay penalty tax. 2. Section 27(1) of the TAA sets the amount of penalty tax payable at 25% of the unpaid tax, although: 1. section 27(2) allows the Chief Commissioner to increase the amount of penalty tax in certain circumstances; and 2. section 27(3) allows the Chief Commissioner to relieve the taxpayer from the payment of penalty tax in certain circumstances, which are central to this review and are discussed below. Objections and reviews 1. The TAA provides relevantly as follows: 1. In section 94, that: The fact that an objection is pending does not in the meantime affect the assessment or decision to which the objection relates and tax may be recovered as if no objection were pending; 1. In section 103(1), that: The fact that an application for a review is pending does not in the meantime affect the assessment or other decision to which the application for review relates and tax may be recovered as if no review were pending; 1. As noted earlier, in section 3(1), that the expression "tax" includes, as well as any tax under a taxation law, ".. interest and penalty tax under Part 5"; 2. Also as noted above, in section 4, that both the TAA itself and the PTA are "taxation laws"; 3. In section 104, that: If a taxpayer's objection is allowed in whole or in part or a taxpayer's application for review is successful, the Chief Commissioner must, subject to section 19, refund any amount paid in excess of a requirement for payment under the relevant taxation law; 1. In section 19, for the refund to be provided by the Commissioner by off-setting the refund against another taxation liability of the taxpayer, if there is such a liability; and 2. In section 105, that: In addition to an amount refunded under this Division, the Chief Commissioner is required, subject to section 19, to pay interest on the amount calculated on a daily basis from the date of its payment by the taxpayer until the date of the refund at the market rate component under section 22. Some initial conclusions 1. It is clear from the legislative provisions referred to above that: 1. an employer's obligation to pay payroll tax in accordance with the PTA, together with any interest or penalty tax imposed for late payment, continues pending the determination of any objection made by it: TAA section 94; 2. similarly, an employer's obligation to pay payroll tax, together with any interest or penalty tax imposed for late payment, continues pending the determination of any review application made by it: TAA section 103; and 3. if the taxpayer is successful in its objection or review, the Commissioner is required to refund any amount overpaid by the taxpayer (TAA section 104), and to pay any interest to the taxpayer at the market rate on the refund amounts (TAA section 105). 1. Nowhere, however, does the PTA or the TAA confer on a taxpayer the right to refuse payment of tax (including penalties and interest) pending determination of an objection or review. The apparent harshness of this approach is alleviated in two ways: 1. First, the provisions of sections 104 and 105 seek to reverse any consequential unfairness; and 2. Secondly, the provisions of clause 21 of Schedule 2 of the PTA offer some scope to the Commissioner to relieve an employer from the obligation to lodge monthly payroll tax returns if satisfied that no tax will be payable or any tax paid will be refundable; it should be noted here that there is no evidence that any Applicant made any request for this relief. 1. It is not disputed by the Applicants that they did not comply with this legislative regime. It is clear from the evidence that for a period of approximately 3 years, they did not pay tax, penalties or interest in the expectation of a successful outcome to their successive degrouping application, objection, review application and appeal, apart from one payment made by OTG in 2017. They thus committed a succession of tax defaults, by failing repeatedly to file returns and to pay the tax (including interest and penalties) that they were liable to pay. Relief under TAA section 27(3) 1. The central issue is whether the Applicants should be relieved entirely from penalty tax for the Relevant Period. Section 27(3) allows the Respondent to do so if satisfied, relevantly, that: .... (a) the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the relevant taxation law.... 1. In their written submissions dated 20 July 2020 the Applicants say as follows: ".... the Applicants took reasonable care assessing their position and attending to their payroll tax obligations because: 1. They had an expectation created by Revenue NSW in 10 November 1993 that Cessnock Tyres Pty Ltd atf Mark O'Neill Family Trust would be degrouped; 2. They engaged professionals – accountants and solicitors and senior counsel to provide advice; 3. The professionals engaged in correspondence and applications and appeals with Revenue NSW; 4. The taxpayers considered the matters raised by Revenue NSW in correspondence and addressed the factual issues. 5. The taxpayer and Revenue NSW were in litigation before NCAT at the time of the tax becoming payable and the outcome of the litigation would have directly changed the tax position of all taxpayers, 6. The tax payers were clarifying and not avoiding their obligations and they should not be penalised. 7. The Revenue has said they were prepared to withdraw the interest if the dispute over the penalty tax was withdrawn". 8. What amounts to reasonable care on the part of a taxpayer for these purposes is a recurring question, concerning which there is no shortage of views expressed by courts and tribunals. Mr Beazley, representing the Applicants, observed that there was, so far as he could tell, no decided case directly analogous to the circumstances in the present application. 9. However, he referred the Tribunal to the relatively recent decision of Ward CJ in Eq in Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue; International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657. In that case, Her Honour accepted the explanation of the relevant concept of reasonable care set out in Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227, and referred to several other cases, which Mr Beasley also argued were relevant in the present review: "114 The concept of reasonable care was explained in Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227; (2014) 100 ATR 339 (Qualweld) at [95] (quoting RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64; (2004) 55 ATR 445 (RVO Enterprises) at [23]), and cited in HRC Hotel Services at [184]: In each case, it is essentially a question of fact whether the taxpayer has taken reasonable care in attending to its tax obligations. Factors that would indicate that a taxpayer took reasonable care include reasonable attempts to comply with the tax law, reasonable professional and other enquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law. 115In relation to penalty tax, reliance is placed by the plaintiffs on the decision of Commissioner of State Revenue (Vic) v Snowy Hydro Ltd [2012] VSCA 145; (2012) 43 VR 109 (Snowy Hydro) where the Court of Appeal in Victoria held (at [171]) that the obtaining of legal advice by the taxpayer was sufficient to demonstrate that the taxpayer took "reasonable care" under the analogous Victorian penalty tax provisions, notwithstanding that the relevant advice was not disclosed to the Court. 116That decision was considered in Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773 (Winston-Smith) by Emmett AJA and (at [84]) his Honour held, in the context of an application for review of a decision declining to grant an exemption from liability for duty charged under Ch 4 of the Duties Act 1997 (NSW) and for the remission of interest in respect of the duty so charged, that the taxpayer's decision not to produce certain advice meant that no inference could be drawn as to whether the taxpayer was acting in good faith in applying that advice. An appeal from that decision was recently dismissed (Winston-Smith v Chief Commissioner of State Revenue [2019] NSWCA 75), though the question as to "reasonable care" was not raised on the appeal. 117In Thomas v Commissioner of Taxation [2015] FCA 968, the question of "reasonable care" for the purposes of the penalty tax provisions in income tax law was considered by Greenwood J in the Federal Court of Australia. There, the taxpayer's position depended on the outcome of trust law proceedings that were being conducted in the Queensland Supreme Court, which affected the characterisation of certain franking credits. The taxpayer and the taxpayer's adviser had taken a position which was dependent upon a certain conception of franking credits and the way in which they might be treated, which position was ultimately found to be wrong. His Honour (at [585]) concluded that the taxpayer had acted reasonably and his position was also reasonably arguable, having regard to: the views that the tax adviser had formed; the position that was ultimately adopted by the primary judge in the Queensland Supreme Court proceedings (which was consistent with those views formed at the time by them); the difficulty each of the parties had had in coming to grips with their respective contentions; and the statements in the relevant taxation ruling (which his Honour considered were are at the least confusing and said had not surprisingly been withdrawn)." 1. There was no dispute that the Applicants had looked to Davidson Accountants for engagement – to use a deliberately neutral term - in dealing with payroll tax matters; these reasons will return below to consider further the nature of this engagement. The essence of Mr Beazley's argument was that by seeking and obtaining this assistance the Applicants had demonstrated a commitment to compliance with the PTA sufficient to ensure that they could properly be considered as having taken reasonable care to comply, so that in consequence the Respondent should exercise in their favour his discretion under section 27(3) of the TAA. 2. Mr Beazley sought in effect to draw analogies with the circumstances considered by: 1. the Victorian Court of Appeal in Commissioner of State Revenue (Vic) v Snowy Hydro Limited [2012] VSCA 145, where, at paragraph 171, the Victorian Court of Appeal stated that "…. the seeking of legal advice shows, unambiguously, that the taxpayer wished to know whether it had any obligations under the Act and, if so, what they were….", and 2. Greenwood J of the Federal Court of Australia in Thomas v Commissioner of Taxation [2015] FCA 968, which is referred to by Ward CJ in Eq in Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue; International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657; there His Honour considered whether a taxpayer had acted reasonably for purposes of an analogous Commonwealth provision, by taking on legal advice a particular approach to conceptualising company franking tax credits which was reasonably arguable but which proved, in the event, to have been legally incorrect; His Honour found that the taxpayer had in that case acted reasonably having regard to, amongst other factors, `"the views that the tax adviser had formed; the position that was ultimately adopted by the primary judge in the Queensland Supreme Court proceedings (which was consistent with those views formed at the time by them); the difficulty each of the parties had had in coming to grips with their respective contentions; and the statements in the relevant taxation ruling (which his Honour considered were are at the least confusing and said had not surprisingly been withdrawn)" (to quote with respect the summary made by Ward CJ in Eq in Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue; International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657). 1. All of these decisions were made in contexts where the investigation of conduct was limited to that of the taxpayer itself. Section 27(3), however, looks expressly to two categories of conduct in determining whether reasonable care was taken to comply with taxation law. The conduct of the taxpayer is clearly relevant; so too, is that of ".. a person acting on behalf of the taxpayer ..", as the TAA makes explicit by the parenthetical inclusion of those words in section 27(3)(a). In many cases, presumably, there will be little if any distinction between the two. In the present case, however, that is not necessarily the case. 2. The starting point is the affidavit of Mr Mark O'Neill, dated 20 May 2020. In it he states that: 1. He is a director of each of the Applicants; 2. He is a shareholder in each of the Applicants; 3. He is the manager of Cessnock, and is responsible for its day-to-day and strategic management; 4. Davidson Accountants have been Cessnock's accountants since 2007, and since around 2013 have been disputing the grouping of the three Applicants for payroll tax purposes; and 5. In his own words in the affidavit: "Our accountant drove the process with Revenue NSW and lodged an application with NCAT in or about October 2016. It was our advice that we would be successful in the degrouping. If that was the case, it affected the lodgement of payroll tax declarations and lodgements for the 2013 years onwards". 1. Mr O'Neill was cross examined by counsel for the Respondent on his affidavit. The Tribunal's informal notes of certain of the questions and answers are as follows: Q: Did your company have a payroll tax manager at Davidson Accountants? A: Yes, Mr Konink. Q: Did your company stop paying payroll tax? A: Yes, between July 2015 and 2018. We stopped in reliance on advice. Q: Did your accountants tell you to stop paying payroll tax? A: Yes. They said there was no risk because we could be successful and get a refund. Q: Did they tell you about reminder letters from the Respondent? A: No. Q: Did they tell you about the estimated assessments issued by the Respondent? A: No. Q: Did they tell you about payment demands from the Respondent? A: No. Q: Did they tell you about Legal Notices from the Respondent? A: No. Q: Did they tell you about the disallowance of the degrouping application? A: Yes. They said we should appeal. Q: Did they tell you that the objection was disallowed? A: Yes. Q: Did they tell you to resume payment of payroll tax? A: No. Q: Did they tell you about the original NCAT review application? A: No. Q: Did they tell you that it was unsuccessful? A: I cannot remember. Q: Did they tell you about the NCAT appeal? A: Yes. Mr Davidson told us that they would appeal and to "hold everything". Q: Did "hold everything" extend to penalties and interest? A: I wasn't aware of any penalties and interest. Mr Davidson did not advise me of this. 1. Then comes the affidavit of Mr Stephen O'Neill, dated May 2020. In it he states that: 1. He is a director of Bayrond; 2. He is the managing director of Bayrond, and is responsible for its day-to-day and strategic management; 3. Davidson Accountants have been Bayrond's accountants since 2007, and since around 2013 have been disputing the grouping of the three Applicants for payroll tax purposes; and 4. In his own words in the affidavit: "Our accountant drove the process with Revenue NSW and lodged an application with NCAT in or about October 2016. It was our advice that we would be successful in the degrouping. If that was the case, it affected the lodgement of payroll tax declarations and lodgements for the 2013 years onwards". 1. Mr O'Neill was cross examined by counsel for the Respondent on his affidavit. The Tribunal's informal notes of certain of the questions and answers are as follows: Q: Was your client contact for payroll tax matters at Davidson Accountants Mr Konink? A: Yes. Q: Did your company stop paying payroll tax for approximately 3 years from July 2015? A: Yes. Q: Was that on the advice of your accountants? A: Yes. Q: Did they tell you about reminder letters from the Respondent? A: No. Q: Did they tell you about the estimated assessments issued by the Respondent? A: No. Q: Did they tell you about payment demands from the Respondent? A: No. Q: Did they tell you about Legal Notices from the Respondent? A: No. Q: Did they tell you about the risk of interest and penalties? A: No. Q: Did they tell you about the proposal to lodge a degrouping application? A: I believe so. Q: Did they tell you about the disallowance of the degrouping application? A: I'm a bit vague about this. There was a meeting in 2016, and I was told something later. Q: Did they tell you to resume payment of payroll tax because of the unsuccessful application? A: No. Q: Did they tell you to resume payment of payroll tax? A: No. Q: Did they tell you about the assessment of interest and penalty tax? A: No. Q: Did they tell you about the original NCAT review application? A: I believe so. Q: Did they tell you that it was unsuccessful? A: Probably. Q: Did they tell you to start paying tax, interest and penalties? A: No. Q: Did they tell you about the NCAT appeal? A: I believe so. Q: Did they tell you about the failure of the NCAT appeal? A: Yes. 1. Mr S Davidson, the principal of Davidson Accountants, provided an affidavit dated 27 May 2020. In that affidavit Mr Davidson: 1. Outlines his professional qualifications as an accountant, and states that he has acted for the O'Neil family since 2008; 2. States that the Applicants' belief that they should be degrouped for purposes of the PTA was based on his advice; and 3. refers to the original NCAT review application and the appeal from it to the Appeal Panel of the Tribunal, and observes in paragraph 10 that: "It was during the course of this litigation that assessments were issued by the Commissioner to the Companies which included interest and penalty tax for the years 2016 onwards. The Companies had not lodged a return because of the litigation". 1. Mr Davidson was cross examined by counsel for the Respondent on his affidavit. The Tribunal's informal notes of certain of the questions and answers are as follows: Q: Were Davidson Accountants responsible for the Applicants payroll tax affairs? A: Yes. Q: Did the Applicants stop paying payroll tax in July 2015? A: Yes. Q: Was that because you told them to do so? A: Yes. Q: Did you tell them about penalty tax and interest? A: No, because I was confident of success on the substantive issue. Q: Your office received payroll tax reminders from the Commissioner. Did you tell the Applicants? A: No. Q: Did you tell the Applicants about penalty tax? A: No. Q: Did you tell the Applicants about default assessments? A: No. Q: Did you tell the Applicants about Legal Notices from the Commissioner? A: No. Q: Did you tell the Applicants about the unsuccessful objection? A: Yes. Q: Did you tell them to resume payment of payroll tax? A: No, because of the NCAT process. Q: Did you tell them about the decision in the NCAT review? A: Yes. I suggested that they appeal. I told them the reasons for the decision, and suggested that they appeal. I did not tell them to pay penalties or interest. After the unsuccessful appeal I told them we were unsuccessful. Analysis and conclusions 1. The conclusion which the Tribunal draws from the evidence is that each of Cessnock and Bayrond delegated, virtually in its entirety, to Davidson Accountants the formulation and implementation of a strategy directed at obtaining the degrouping for payroll tax purposes of the Applicants, and more generally managing the companies' compliance with their payroll tax obligations. Neither company's management played an active role in relation to payroll tax matters, but rather looked to Davidson Accountants to handle this aspect of the company's affairs. Both companies and their directors allowed the accountants to act as the sole interlocutor between them and the Respondent in relation to payroll tax matters and took little (if any) active part in identifying, monitoring or managing compliance with their payroll tax obligations. Indeed, because of the interposition of the accountants between the Applicants and the Respondent in relation to payroll tax matters, the management of Cessnock and Bayrond was to all intents and purposes unable independently of the accountants to monitor the companies' payroll tax compliance. 2. This is not to criticise either company or their directors or management for doing so. They are in the business of selling tyres, and to make use of the services of accountants to formulate and implement the companies' payroll tax strategies is commercially an understandable choice. It is a choice, however, which is not necessarily risk free. 3. The relationship between, on the one hand, Cessnock and Bayrond and, on the other, Davidson Accountants, went beyond seeking and obtaining professional advice in order to assist in compliance with a taxpayer's obligations, in the sense contemplated by Thomas v Commissioner of Taxation [2015] FCA 968 or Commissioner of State Revenue (Vic) v Snowy Hydro Limited [2012] VSCA 145. Rather, it is better characterised as the effective transfer to the accountants of responsibility for payroll tax strategy and compliance. The companies chose to delegate that responsibility, on the assumption that all would be well, rather than themselves take active steps to comply. Far from taking reasonable care to comply, they thus simply sought to place that responsibility in the hands of their accountants. 4. The difficulty for the companies is that the statutory responsibility to comply with the taxation laws concerning payroll tax inescapably remains with the taxpayer under the PTA. So long as the delegate in fact ensures compliance, the mismatch between statutory responsibility for, and the actual day-to-day implementation of, compliance is a theoretical matter. However, when the delegate implements practices which diverge from the statutory requirements, the taxpayer's responsibility for proper compliance remains unaffected and it finds itself at risk of the fines and penalties established by law to sanction non-compliance. 5. In the present case, the consequence of the Applicants' delegation is to engage the parenthetic inclusion within section 27(3)(a) of persons ".. acting on behalf of the taxpayer". As a result, the primary focus of section 27(3)(a) switches from the two taxpayers' actions to those of the accountants as persons acting on their behalf; more particularly, the question becomes whether the accountants have themselves taken reasonable steps to comply with the taxation laws. The dominant role undertaken by Davidson Accountants in formulating and implementing the payroll tax strategies and compliance of Cessnock and Bayrond which emerged from the evidence satisfied the Tribunal that they were persons ".. acting on behalf of the taxpayer". What follows is that whether the accountants themselves took reasonable care to comply with the laws relating to payroll tax is the central issue here. 6. The evidence in relation to that question is clear: 1. The accountants devised and implemented a payroll tax strategy for Cessnock and Bayrond which entirely disregarded not only the regime established under the PTA for the regular filing of payroll tax returns and payment of payroll tax, but also the provisions of sections 94 and 103 of the TAA which require that assessed tax liabilities be met even while an objection or review process continues in relation to those liabilities. 2. That they did so in the confident belief that the degrouping application would be successful does not alter this. Sections 94 and 103 of the TAA are clear, and reasonable care in the context of section 27(3) of the PTA must include, in the Tribunal's view, familiarising oneself with the effect of an objection or review on the taxpayer's payment and compliance obligations. If this is the case for a taxpayer, it must also be so professional taxation advisers who undertake payroll tax compliance work for taxpayers. 3. The evidence thus does not support the suggestion that the accountants took reasonable care to comply with the requirements of the PTA or the TAA. 1. Returning to the taxpayers themselves, in the Tribunal's view they have not therefore discharged the onus on them to prove that the Respondent incorrectly determined that section 27(3) of the TAA did not apply to relieve them of penalty tax. 2. Underlying the provisions of section 27 of the TAA is a self-evident policy of promoting compliance with taxation laws by the imposition of penalty tax for failure to comply. That the penalty tax can be increased under section 27(2) for intentional disregard by the taxpayer, or decreased under section 27(3) in order to recognise reasonable care to comply, supports the policy objective by giving the Commissioner the "stick" of penalty tax, to sanction intentional non-compliance, and the "carrot" of remission, to promote sincere and careful (albeit unsuccessful) attempts at compliance. 3. For taxpayers to escape penalty tax by the simple expedient of delegating to professional advisers management of their payroll tax affairs would undermine this policy. It is precisely to exclude such an anomalous outcome that section 27(3)(a) includes the reference to persons ".. acting on behalf of the taxpayer". The purpose is clear: the compliance sins of the delegate are to be visited on the taxpayer. There is obviously an element of judgment to be exercised in individual cases, in deciding whether a particular case is one of wholesale delegation or merely one where the taxpayer professional advice in order to assist in compliance. In the case of Cessnock and Bayrond, the Tribunal is satisfied that it is the former rather than the latter. 4. In the case of OTG, the analysis is not quite the same: 1. Other than Mr Davidson's affidavit and oral evidence, there was no evidence provided which specifically related to the management of OTG's payroll tax affairs during the Relevant Period. 2. Nothing in Mr Davidson's evidence was, for the reasons outlined above, sufficient to satisfy the Tribunal that OTG or anyone acting on its behalf had taken reasonable care to comply with its payroll tax obligations. 3. Indeed, the inference which the Tribunal drew, given the common approach as between all three Applicants in relation to payroll matters which emerges from the evidence, was that the payroll tax affairs of OTG had in all likelihood been managed in a similar way to those of the other two Applicants. 4. However, since: 1. the onus lies on OTG as Applicant to prove its case: TAA, section 100(3); 2. there is no evidence to suggest that OTG had taken steps to ensure compliance with its payroll tax responsibilities other than by engaging the services of Davidson Accountants; and 3. the evidence indicates that Davidson Accountants' approach to the Applicants' payroll tax affairs was not consistent with taking reasonable care to comply with the relevant taxation law, 1. OTG's application cannot succeed. 1. In the case of OTG, therefore, it has not in the Tribunal's view discharged the onus on it to prove that the Respondent incorrectly determined that section 27(3) of the TAA did not apply to relieve it of penalty tax. 1. Several other issues require comment. 2. The first concerns a letter dated 8 November 1993 issued to the Applicants' former accountants, Sneddon McKeown, concerning the grouping for payroll tax purposes under the Pay-Roll Tax Act 1971 of the Applicants, together with several other companies: 1. The letter was issued by the Respondent's predecessor, the Commissioner of Pay-Roll Tax, and indicates that that officer ".. was prepared to exclude Cessnock Tyres Pty Ltd atf Mark O'Neill Family Trust from the group formed under [certain provisions of the 1971 Act]". 2. The Applicants appeared to look to this letter as supporting the reasonableness of their approach, both in anticipating the success of their degrouping application and in withholding payments of payroll tax, interest and penalties. 3. The letter itself is an interesting historical artefact, and there is clearly some mystery as to why the exclusion of Cessnock from the group was not pursued further at the time. At most, however, it could give rise to suitably guarded optimism that the Commissioner, applying in the second decade of the 21st century the grouping provisions of the PTA, might take a similar view to his predecessor 20 years earlier concerning the corresponding provisions of a different (and now repealed) payroll tax statute. It could not give any certainty that the degrouping application would succeed. In any event, it could not on any analysis justify the Applicants' disregard of the clear requirements of the PTA and the TAA as to the ongoing payment of payroll tax, fines and penalties even during the determination of degrouping applications, objections and reviews. 4. Neither the existence of this letter nor its terms can, in the Tribunal's view, transform the Applicants' approach to the satisfaction of their payroll tax liabilities during the Relevant Period, and that of the accountants acting on their behalf, into one which demonstrates the reasonable care to comply which is contemplated by section 27(3) of the TAA. 1. The second concerns difficulties which appear to have arisen about the calculation and final satisfaction of the Applicants' respective liabilities for payroll tax, penalty tax and interest following the dismissal of their appeal in 2018: 1. Mr Davidson refers in paragraph 14 of his affidavit to having "... received as the accountant, several different notices of assessment and amended notices of assessment. We are unable to reconcile them". He made similar observations during his oral evidence. 2. Ms Norberta Stevens, who is a general manager with Davidson Accountants, also provided an affidavit to similar effect, setting out in some detail a series of conversations and communications between herself and officers of the respondent which took place between 13 July 2018, shortly after the Applicants' appeal to the Tribunal's Appeal Panel was dismissed, and 7 November 2018. These conversations and communications concerned the payment of outstanding payroll tax, penalty tax and interest by the Applicants; the reconciliation of payments and refunds, which was said to be complicated by the Respondent's having initiated certain recovery actions against the Applicants; and discussions between Ms Stevens and certain officers of the Respondent concerning the conditions under which the Respondent might be prepared to consider the remission of interest. 3. Mr Beazley's submissions contain a lengthy section devoted to these issues, which: 1. reiterates the difficulties which Mr Davidson and Ms Stevens say they had in understanding and clarifying information provided by the Respondent in relation to the Applicants' payroll tax affairs for the Relevant Period; 2. ventures several criticisms of the Respondent's client information systems, including the absence of "... a taxpayer portal which is user-friendly ...", and a perceived lack of substantive, formatting and presentational consistency in the provision of information to the Applicants by the Respondent; 3. asserts inconsistency of approach by the Respondent in its application, as between members of a payroll tax group, of credit balances which some group members enjoy; 4. complains of aggressive debt recovery action by the Respondent, suggesting that the Respondent "... has lost its objectivity whenever they assess these taxpayer's [sic] affairs"; and 5. suggests by way of tu quoque that the Respondent has not shown in its role as the collector of payroll tax that degree of reasonable care which it demands of taxpayers themselves. 1. Exhibited to Mr Davidson's affidavit are 282 pages of documents, which include relevantly: 1. At pages 170 to 217 (inclusive) a series of Payroll Tax Assessment Notices and supporting information issued by the Respondent on variously 14 February 2020 and 5 March 2020 to the Applicants, in which the Respondent sets out its assessments of the payroll tax, interest and penalty tax liabilities of the Applicants in respect of the Relevant Period, and records payments received on account of those liabilities up to the dates of issue of those notices; these same notices are found in Tabs 1 to 13 of the Supplementary Section 58 Documents; 2. At pages 218 to 219 (inclusive) a helpful summary and analysis of these assessments, and at pages 220 to 223 a commentary on and reconciliation of these assessments, prepared by Davidson Accountants, which indicates that having regard to these assessments, and netting the amounts variously payable by and refundable to the Applicants under these assessments and in relation to the 2019 financial year, a net amount of $5390.77 is payable to the Applicants collectively by way of refund of payroll tax; and 3. At pages 4 to 6 (inclusive) a succession of emails between Davidson Accountants and the Respondent's solicitors, dated 27 March and 16 April 2020, concerning the provision of further information relevant to the accountants' reconciliation of the various assessments. 1. The Tribunal finds itself at something of a loss to know precisely what, if anything, the Applicants hope from it in relation to this material. There appear to be two possibilities: 1. First, the Applicants may be suggesting that the Respondent's conduct in relation to the recovery of the outstanding payroll tax, interest and penalty tax, was so deficient as to justify setting aside the Respondent's decision not to relieve the Applicants of liability for penalty tax; or 2. Secondly, the Applicants may be seeking the Tribunal's intervention in the process of reconciling and adjusting the respective liabilities of the Applicants to the Respondent summarised in the assessments contained in the Supplementary Section 58 Documents. 1. As to the former: 1. The Appeal Panel of one of the Tribunal's predecessor tribunals, the Administrative Decisions Tribunal, recognised in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 at [76] that: "... it is in our view open to the Tribunal, when considering how an administrative discretion to relieve a taxpayer from interest or penalty tax should be exercised, to take account of the conduct of an administrator". 1. Under section 61 of the TAA, the Respondent: has the general administration of this Act and the other taxation laws and may do all such things as are necessary or convenient to give effect to this Act and the other taxation laws. The evidence provided by Ms Stevens and Mr Davidson demonstrates that this is precisely what the Respondent, though his officers, was attempting to do: to perform his statutory duties by seeking to recover long-overdue payroll tax, and the interest and penalty tax whose imposition is mandated by the PTA and the TAA. 1. Nothing in Ms Stevens' and Mr Davidson's affidavits or the correspondence exhibited to them discloses in the Tribunal's view any conduct on the part of the Respondent or its officers sufficient to justify the Tribunal exercising the discretion under section 27(3) of the TAA differently from the way in which it has been exercised by the Respondent. 2. In particular: 1. That there may have been some inaccuracies or inconsistencies in information provided by the Respondent in relation to the calculation of payroll tax, interest and penalty tax is in the circumstances unremarkable. The Applicants each committed at least three tax defaults per month over a period of 38 months and did not provide to the Respondent the returns on the basis of which it could more accurately assess the Applicants' tax liabilities. It is therefore unsurprising that calculation and reconciliation of the consequences of approximately 120 individual defaults may contain errors or inconsistencies, and it is disingenuous for the Applicants to claim that the existence of any such errors or inconsistencies, which in practical terms are directly or indirectly attributable to their own tax defaults, justifies the waiver by the Respondent of the penalty tax to which it is statutorily entitled. 2. It is, with respect, equally disingenuous for the Applicants to complain that the Commissioner's efforts to recover unpaid tax, interest and penalties referrable to 38 months of failure to comply with their own tax obligations were heavy handed. According to the Commissioner's Client Notes [3] debt recovery action began on 31 August 2018, some nearly three months after the Appeal Panel's decision dismissing the Applicants' appeal. The Client Notes dated 27 and 31 August 2018 are instructive as to the Respondent's frustration at the continuing failure of the Applicants to pay tax, penalties and interest: 27 Aug 2018 Consistent non lodgers Ongoing matter LMTC to directors Unable to accept payment proposal due to the size of the debt EA AR 18 raised Offered 3 months IP on all accounts including interest. Requesting us to hold account until 22/9 as the accountant is on leave client keep taking long time to come to any arrangement Keep requesting EOT LN issued to regd Office. LDR warnings given on many occasion PLEASE REVIEW THE ACCOUNTS FOR LDR 31 Aug 2018 Accepted for legal debt recovery action as REFERRED TO LDR Client has been notified and warned of legal escalation for failure to make payment. No reasonable IP has been arranged given the size of the group's liability. Client's accountant has dragged out the case all in which no resolution has been reached Constant follow ups regarding the matter and lack of client's willingness to pay overdue LT has resulted in LDR action to commence. Earlier notes made after the Appeal Panel's decision was made on 8 June 2018 reveal frequent communications between the Respondent and the accountants which are consistent with the history summarised in the notes quoted above. The recovery action initiated by the Respondent was not, in the Tribunal's view, excessive or disproportionate in view of the Applicants' history of serial tax defaults during the Relevant Period, and their apparent unwillingness or inability following the dismissal of their appeal to address in a timely way the large tax debt which they owed to the Respondent. 1. As section 81 of the PTA provides, the members of a payroll tax group are jointly and severally liable for the tax liabilities of each other. It would appear to be entirely consistent with this form of liability that, until the liabilities of all group members are met, the Commissioner should decline to refund to one group member a credit balance on its individual tax account. 1. As to the latter: 1. The Tribunal's jurisdiction under section 96 of the TAA is to review decisions of the Commissioner which have been the subject of an objection under section 86 of that Act. 2. The Respondent's decision not to remit penalty tax and interest imposed on the Applicants was the decision unsuccessfully objected to. That is the decision which has been reviewed. 3. If the Applicants now wish the Tribunal to involve itself in the process of reconciling and adjusting the respective liabilities of the Applicants to the Respondent summarised in the assessments contained in the Supplementary Section 58 Documents, then there is no basis for the Tribunal to do so. 4. This is because there is no evidence before the Tribunal to suggest that: 1. that process has been completed, 2. the Respondent has made any decision resulting from that process, or 3. there has been any relevant objection under section 86 of the TAA made by the Applicants and disallowed by the Respondent. 1. If controversy persists between the Applicants and the Respondent in relation to the precise quantification of the Applicants' liabilities which results in the disallowance of an objection by the Applicants, then there may be scope for the Applicants to seek review by the Tribunal of the Respondent's decisions in relation to that controversy. At this stage, however, there is nothing concerning the difficulties which appear to have arisen about the calculation and final satisfaction of the Applicants' respective liabilities for payroll tax, penalty tax and interest following the dismissal of their appeal in 2018 which engages the Tribunal's jurisdiction under section 96 of the TAA. 1. The third concerns the possibility of increasing the penalty tax assessed against the Applicants: 1. Section 63(1) of the ADRA requires the Tribunal "to decide what the correct and preferable decision is having regard to the material then before it", and section 63(2) of that Act confers on the Tribunal in doing so "all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision"; 2. It is thus open to the Tribunal in this review to substitute for the Respondent's decision not to remit under section 27(3) of the TAA the penalty tax imposed under section 27(1) of that Act a different decision; 3. In the Tribunal's view: 1. It is clear from the evidence that the failures of Cessnock and Bayrond to meet their payroll tax and associated obligations during the Relevant Period were caused wholly or partly by the intentional disregard of taxation laws (namely the PTA and TAA) by Davidson Accountants, being persons acting on behalf of Cessnock and Bayrond; 2. It can reasonably be inferred from OTG's circumstances and Mr Davidson's evidence, even despite the absence of any evidence from OTG, that OTG's similar failure was also wholly or partly caused by Davidson Accountants' intentional disregard of the relevant provisions of the PTA and the TAA when acting for OTG; 3. The Commissioner's power under section 27(2) of the TAA to increase penalty tax imposed on account of a tax default from 25% to a higher rate, not exceeding 75%, is enlivened where the relevant default ".. was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a taxation law"; 4. That enlivening condition is, in the Tribunal's view satisfied as set out in paragraphs (a) and (b) above; and 5. In consequence, it is open to the Tribunal pursuant to section 63 of the ADRA to substitute for the Respondent's decision one to impose penalty tax at a higher rate under section 27(2) of the TAA. 1. The Tribunal considered this option, but finally decided against it. Its reason for doing so was that the immediate burden of any increased penalty tax would fall on the Applicants, rather than directly on the accountants who were the real engine of the tax defaults. While it is, in principle, possible for the economic burden of the penalty tax to be passed on to the accountants by the Applicants (as Mr Mark O'Neil foreshadowed in his evidence), that process is an imperfect one. Its imperfections risk leaving the Applicants with an appreciably higher tax burden to meet in relation to tax defaults for which they carry legal (if not moral) responsibility. Such an outcome would in all the circumstances be unfair, and accordingly the Tribunal decided not to increase the rate at which penalty tax is imposed. Order 1. In accordance with section 101(1)(a) of the Taxation Administration Act 1996, I confirm the decision under review. ********** Endnotes 1. Section 58 Documents, Tabs 90 (a), (b) and (c) 2. Section 58 Documents, Tab 90(a). 3. Section 58 Documents, Tab 307 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 December 2020