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Taxpayer granted full release of $130k tax debt on serious hardship grounds

Tax

A taxpayer has been granted a full release of over $130,000 in tax debts after succeeding in proving he would suffer serious hardship if forced to repay them in whole.

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The Administrative Appeals Tribunal has set aside an earlier decision by the ATO to not grant Dallas Cox a release of his taxation debt.

Mr Cox, who was previously a subcontractor in the building industry and was currently receiving the Newstart Allowance, had accumulated $134,302 in income tax debts since 2001.

The amount of income tax owed was $27,701, but he had accrued a substantial amount of general interest charge and other charges on this amount.

He had also incurred separate tax debts of over $8,000, but that was ineligible for tax relief.

The AAT found that Mr Cox would suffer substantial and long-term serious hardship if he was required to satisfy the tax liability, noting that he was 61 years old and that his only income was the Newstart Allowance.

It found that his fortnightly expenses were exceeding his fortnightly income and had to frequently cover the deficit by deferring other bills or obtaining loans from his brother and sister.

The tribunal also found that Mr Cox was living in a granny flat on his property because he was unable to afford to finish the unbuilt house on the property, and that his only assets were his car and some tools of trade.

The ATO, however, argued that Mr Cox was ineligible for tax relief, pointing to his poor compliance record over numerous years and his failure to prioritise the payment of his taxation debts over other debts.

Mr Cox acknowledged his “lack of understanding of appropriate tax keeping and recording practices” and assured the tribunal that had now engaged the services of an accounting firm to assist with his future tax obligations.

The AAT ultimately found in favour of granting him a full release of his eligible taxation debts, noting that a partial release would not alleviate his serious hardship because his minimal repayments would be cancelled out by general interest charges accruing on his outstanding debt.

“The factors which weigh in favour of granting a release include that his only assets are those that would not need to be surrendered under the PSLA in order to pay a taxation debt,” said AAT senior member Michelle Evans-Bonner.

“It is the Tribunal’s opinion that it would not be possible for [Mr Cox] to repay his full taxation debts in his lifetime and that if he were required to do so, he would suffer substantial and long-term serious hardship.

“The weight of his taxation debt is also likely to be causing some detriment to his mental health.”

Jotham Lian

Jotham Lian

AUTHOR

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

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