Taxpayer given 35% penalty for BAS recklessness
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A partnership consisting of four family members – Mr B, Ms H, Ms Z and Mr D, anonymised under the pseudonym BHZD – attempted to get a 50 per cent GST shortfall penalty remitted for the development of a townhouse on anonymised land at “10 X Street”, into 10A X Street and 10B X Street.
In her 23 July 2026 decision at the Administrative Review Tribunal, general member Joanne Dunne decided to set aside the remission of the penalty assessment of a shortfall penalty on the unpaid GST.
Following the development of 10B X Street, Mr B and Ms H moved in, and it became their residence. The tribunal heard that under their initial tax agent Mr N, they “sought a refund of the withheld GST amount of $93,568 on the basis that the property was Mr B and Ms H’s main residence”.
However, in a 2 June 2021 letter, the Commissioner of Taxation advised BHZD that GST was payable on the sale of 10B X Street.
“I do not accept that Mr B took all the steps he should have to check the GST treatment of 10A X Street before simply telling Mr G (the second accountant) what to do in the September 2021 BAS,” Dunne said.
“Mr B’s knowledge of the GST outcome for 10B X Street in January/February 2021. Mr B’s knowledge that the facts at 10A X Street were exactly the same as those for 10B X Street, yet he said the GST treatment was different.
“Mr B said in evidence that he “couldn’t believe” the “instruction” to tell the conveyancer not to apply GST to the sale of 10A X Street and to send the notice to the purchaser saying as much. Mr B said in cross-examination that he “absolutely challenged” the sale of 10A X Street with Mr N.”
The general member said that she was puzzled by this evidence.
“I took [it] to be trying to convince me that the Applicant did not know about the audit or, more particularly, he did not have a copy of all of the correspondence, including the Commissioner’s 2 June 2021 letter,” Dunne said.
“Mr B accepted in cross-examination by Mr Lee that the different GST treatment of 10A X Street and 10B X Street was ‘surprising’. That is putting it mildly. It defies common sense, as the facts relating to the two properties were exactly the same. Mr B knew this. The Applicant knew from February 2021 that no refund had arisen in relation to 10B X Street. Why would 10A X Street have a different GST treatment?”
In late 2023, the commissioner issued a penalty assessment which imposed a penalty on BHZD at 50 per cent for recklessness, totalling $54,965.50.
Dunne said she had concluded that Mr B misunderstood the GST position entirely.
On the basis that the taxpayer was unable to demonstrate that all relevant taxation information was provided to Mr G, the general member ruled that the 50 per cent shortfall penalty is to be set aside and replaced by a 35 per cent penalty.
The case citation: BHZD and Commissioner of Taxation (Taxation) [2026] ARTA 1376 (23 July 2026)
28 July 2026
Carlos Tse
accountantsdaily.com.au
