Federal Court of Australia

Wood v Commissioner of Taxation [2021] FCA 1236

ORDERS

THE COURT ORDERS THAT:

1.    The Applicant’s application for an order suppressing his identity be dismissed.

2.    The proceedings as originally filed in the name of ZCSB continue in the name of the Applicant, Dr James Wood.

3.    The Applicant’s amended Notice of Appeal dated 8 April 2021 be dismissed.

4.    The Applicant pay the Respondent’s costs as agreed or as taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

KERR J:

1    On 29 January 2018, the Commissioner of Taxation (the Commissioner) decided not to grant Dr James Wood (Dr Wood) a release from his tax liabilities under s 340-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (Taxation Act). As at 23 August 2020, those liabilities were in the sum of $1,191,003.90. On 20 July 2018, after considering the Dr Wood’s objection, the Commissioner affirmed its decision (the Reviewable Decision).

2    On 14 September 2018, Dr Wood lodged an application for review of the Reviewable Decision with the Administrative Appeals Tribunal (the Tribunal). On 5 February 2021 the Tribunal published its reasons for affirming the Reviewable Decision: ZCSB and Commissioner of Taxation (Taxation) [2021] AATA 138.

3    In the Tribunal Dr Wood had been entitled to have his name anonymised. In this Court he filed a notice of appeal from a tribunal using the pseudonym that had earlier been allocated to him by the Tribunal. He then applied for a suppression or non-publication order regarding the publication of his identity and the identity of his immediate family members in these proceedings. I heard that application on 9 September 2021 and on the same day I delivered oral ex-tempore reasons dismissing it. I indicated I would incorporate my reasons into this judgment. As they do not bear on the substance of his appeal I will include them as recorded in the transcript as an annexure edited only for grammar and the removal of some unnecessary duplication.

Background

4    Dr Wood is a highly skilled medical professional. He completed his medical school training in the United Kingdom including four years of training towards becoming a paediatric surgeon. He emigrated to Australia with his wife in 1999 and commenced work in Perth. I accept that Dr Wood has made a large contribution to his adopted country in that capacity. However he failed to give appropriate priority to his tax obligations.

5    Dr Wood does not put in issue any of the background facts that were found by the Tribunal at [16]-[51] of its reasons. It is convenient therefore to set out those findings before the Court turns to the issues which arise in this appeal:

Background and family

16.    The Applicant emigrated from the United Kingdom to Australia with his partner, JG, in 1999 when they were aged 29 and 31 years old respectively. Neither Dr Wood nor JG had secured employment on their arrival in Australia. Both had completed medical school training in the United Kingdom, and the Applicant had completed four years of training towards becoming a paediatric surgeon.

17.    The Applicant and JG have three children:

•    CW born April 2002;

•    SW born March 2004; and

•    EW born January 2007.

Employment and income

18.    From 1999 to 2000, the Applicant was employed as a Surgery Registrar in Perth. From 2000 to 2002, he worked as a Paediatric Surgery Registrar at the Children's Hospital at Westmead (‘CHW’), from 2002 to 2003 as a Paediatric Surgery Registrar at Princes Margaret Hospital in Perth, and in 2003 as a Paediatric Research Fellow at CHW.

19.    In 2004, the Applicant was admitted to paediatric surgery training with the Royal Australasian College of Surgeons (RACS). He deferred the commencement of his clinical training at RACS to commence a PhD degree at the University of Sydney.

20.    Over the period 2004 to 2006, the Applicant worked part-time as a surgical registrar at CHW, as an Education Fellow at RACS in Melbourne, and assisting paediatric surgical colleagues in private hospitals. This required him to register an ABN as a sole trader in his name commencing on 3 March 2005. In the period March 2005 to October 2006, his main source of income was from employment at CHW and at RACS Melbourne. The Applicant was unfamiliar with the system of billing health funds responsible for payment of the services he provided. The fees he derived from such work were ‘minimal’, and on 30 September 2006 the Applicant cancelled his registration for GST. However, ‘unbeknown to the Applicant his ABN remained active despite his sole source of income from October 2006 being that of an employee earning a wage.’

21.    During the period from January 2007 to 2011, the Applicant was undertaking his PhD part-time whilst also completing his clinical training at CHW in 2007, Sydney Children's Hospital in 2008 and 2011, Monash Children's Hospital in 2009, and Royal Children's Hospital, Melbourne in 2010.

22.    From September 2011 to September 2012, the Applicant was working full time as a paediatric surgery registrar at the Sydney Children’s Hospital. In the 2013 financial year, he was employed at NSW Health Service - Sydney Local Health District, Macquarie University, the Sydney Children's Hospital (Randwick and Westmead), and Adventist Healthcare, and also undertaking his PhD.

23.    In 2014, he continued working at NSW Health Service, Macquarie University and Adventist Healthcare. He also worked on developing a practice as a surgical assistant to supplement his income as an employee after his contract with Sydney Children's Hospital came to an end. This work started ‘very slowly’, and he was assisting one surgeon with one or two cases every week. He was paid by rendering an invoice to the patient (or the patient’s health fund) under his ABN. The Applicant’s ‘transition from employee to independent contractor was a difficult one for [him] to manage.’ He initially ‘made a very poor attempt at sending invoices to the health funds’ which was not ‘very successful’ so he ‘started using a billing service.’

24.    In the 2015 financial year, the Applicant continued to try to increase his income as a surgical assistant and devoted most of his time to this business. He also tried to take some of the family responsibilities from JG who was ‘showing signs of fatigue because of her demanding job’. In the 2016 tax year, JG took a break from work due to her ongoing illness.

25.    In his oral evidence at the hearing, the Applicant told the Tribunal that his current work is assisting cardiac surgeons during surgery and also working in intensive care. His work as a surgical assistant is on a case-by-case basis following a referral from surgeons with whom he has established a working relationship. The work in intensive care is provided to him by a locum agency on a shift basis. He has been working in the same intensive care department for six years and the shifts are regular. In both roles he works as an independent contractor. As regards his work as a surgical assistant, he invoices the health funds in accordance with the relevant codes for each procedure. He explained that this invoicing work is ‘onerous’ and that he sends the information to the billing company which processes the invoices and sends them to the health fund and then the funds are paid through to him. In relation to the intensive care work he is paid by the locum agency who is paid by the hospital for his services.

26.    The Applicant told the Tribunal that he does not keep any records of the work he does outside of sending the invoices to his billing company which renders an invoice for him.

Tax obligations

27.    In relation to his tax obligations, the Applicant told the Tribunal that when he started doing more private work, he was trying to manage his own tax affairs. His 2014 to 2016 tax returns were ‘complicated’ because they included business income he earned as a surgical assistant. Putting this information together for his accountant was ‘time consuming’ as he ‘did not have the ability to maintain an accounting system to keep track of [his] income or how [he] should be providing for [his] tax after working as an employee.’ As a result, he had to retrieve invoices that he had issued in order to calculate his business income. During cross-examination, the Applicant agreed that he did not in fact need to retrieve invoices as his billing company did this, and therefore this was not a contributing factor to his inability to do his tax.

28.    The Applicant told the Tribunal he was aware he had to pay taxes, but he was not aware of ‘the process for going and doing that as a sole trader.’ He stated:

It had never been made obvious to me and when money came in… it was used for things that were more imminently pressing and had to be paid.

29.    When he became aware of the extent of his tax liability, he sought the advice of Bongiorno & Partners (NSW) Pty Ltd (Bongiorno & Partners) and then Mr Newcombe.

30.    In his oral evidence, the Applicant told the Tribunal that his tax agents asked him for information in relation to how the business was developing, including projected income, and this ‘made it a lot more complicated’ than he expected it would be.

31.    The Applicant told the Tribunal that his current practice is that he submits his figures to Bongiorno & Partners and they send him back the business activity statement which provides what tax he owes which he then pays. The funds that come in from the billing agency for the surgical assistant work now goes into an account from which he is paying his tax liabilities.

32.    The Applicant did not make any payments towards his Tax Debt in the year ended 30 June 2019. On 5 August 2020, he made a payment of $20,000 towards the Tax Debt.

Assets and liabilities

33.    The Applicant provided information by way of Schedule 1 – Assets and Liabilities to the Statement of Michael Newcombe on 5 February 2020 as to his assets and liabilities as follows:

Household income

34.    The Applicant stated in the materials provided by him on 5 February 2020, that his income for the year ending 30 June 2020 will be $430,000 or $249,000 after tax. The current yearly income of the Applicant’s partner, JG, will be $66,500 after tax for the year ending 30 June 2020.

Household expenditure

35.    The Applicant stated in the materials provided by him on 5 February 2020 that he expects his total yearly household expenditure to be $271,135 in the year ending 30 June 2020 as itemised below:

Rent

36.    Based on information provided by the Applicant, he and his family currently reside in rental accommodation in Wahroonga and expect to spend $91,248 on rent in the year ending 30 June 2020.

37.    In his statement dated 5 February 2020, the Applicant wrote that their family home ‘is modest for a family of 5 living in Sydney comprising 3-4 bedrooms, 2 bathrooms, combined living and dining room and outdoor space.’ The main factor in choosing to the rent the property is that it is close to the schools their children attend. The Applicant agreed in cross-examination that his children’s schools are both on the train line and, if they were to move houses, the schools would be readily accessible if the house were near public transport.

38.    In his oral evidence, the Applicant confirmed that the residence consists of four bedrooms and three bathrooms and includes a pool and billiard games room on the lower level and a rumpus room on the upper level. He maintained that it is ‘modest accommodation’ for a family of five.

39.    The Applicant told the Tribunal that he is planning to move to cheaper rental accommodation once his eldest daughter completes her schooling in late 2020. They have extended the lease on their current property on three occasions, most recently in October 2019.

Children’s private school fees

40.    Based on information provided by the Applicant, he and JG expect to spend approximately $110,724 in private school fees for their children in the year ending 30 June 2020.

41.    In his statement dated 5 February 2020, the Applicant wrote that he and JG made the decision to enrol their children at a private school when CW was aged 10 years. They made this decision because their working hours meant that they would not always be able to collect the children from school, and ‘a private school was more flexible for parents who had demanding jobs.’ They also ‘believed that the children would have a wider range of opportunities at a private school and that this would be within [their] expected budget.’ Having themselves been educated in the UK, they were ‘not familiar with the Australian education system’ and the schools they visited were most like those he had attended. They were aware of the cost of these private schools, however at the time they were both close to finishing their respective specialist training, and they were planning to work as independent consultants which would provide the income necessary to support three children to attend private schools. He told the Tribunal that he has not reached this estimated income because he has not finished his training.

42.    The Applicant told the Tribunal that he and JG had ‘given a lot of thought’ to relocating the children to a government school. He is aware that some of Sydney’s best public schools are located in his area. However, he has always believed it is important that education should all be ‘in one place’. This had been his and JG’s experience and their ‘suspicions were confirmed’ when he consulted the scientific literature. He formed the view that his children may be adversely impacted if they were to be relocated from their existing schools.

Groceries, clothing and household costs

43.    Based on information provided by the Applicant, the estimated expenditure on these items is $51,600 per annum or $4,300 per month in the year ending 30 June 2021.

44.    During cross examination, the Applicant was referred to entries in bank statements that show expenditure on a range of items including holidays, restaurant dinners, theatre tickets and parking fees which the Applicant agreed are discretionary expenditure and ‘could be economised on’.

Family support

45.    In the latter part of 2016, the Applicant learned that his father, then aged 87 years, had early signs of dementia making it difficult for his 79 year old mother to care for him. His father and mother were on a modest pension to support themselves, but this was inadequate to attend to his father's medical costs. Over the period 2016 to 2017, the Applicant made three trips back to the United Kingdom to assist his mother in the course of his father's move to a nursing home unit because of his dementia. His father passed away in December 2019. The Applicant helped his father with the payment of his medical bills in the sum of GBP 5,825.72. During cross-examination he agreed that he gave priority to his father’s medical bills ahead of his own taxation liability.

46.    The Applicant currently sends his mother $1,000 per month and also assists his brother financially.

Overseas travel

47.    The Applicant agreed that he spent $63,799.43 in overseas travel in the calendar year 2019. He travelled to England in January and December 2019 and the family went on an ‘educational trip’ in June 2019 which included visiting Montreal and Boston.

Partner’s employment and income

48.    The Applicant told the Tribunal that JG is employed as a registrar at a public hospital. She works part-time, usually two to three nights per week, and earns approximately $2,100 per fortnight excluding overtime.

Projected income and outgoings

49.    Michael Newcombe is a Chartered Accountant and the Applicant’s representative. He provided a statement dated 14 August 2020, which included the following projected income and outgoings of the Applicant’s household:

50.    In his oral evidence, Mr Newcombe told the Tribunal that the projected income figures were based on the most up-to-date available information. He did not have the 2019 tax return nor did he have 2019 BAS returns at the time. The information came from earlier tax returns and information provided by the Applicant.

51.    During cross-examination, Mr Newcombe stated that he does not anticipate the Applicant’s income will increase in the next five years as in his opinion the Applicant has reached the limit of his potential income as a surgical assistant.

(footnotes omitted)

The Tribunal’s decision

6    The Tribunal first identified the legal principles it was required to apply in addressing Dr Wood’s appeal. It observed that a taxpayer who is dissatisfied with an objection decision made by the Commissioner has a right to apply to the Tribunal for review but in that regard s 14ZZK(b)(ii) of the Taxation Act establishes that the taxpayer has the burden of proving that the decision should not have been made or should have been made differently. That is not in contest.

7    The Tribunal then identified the provisions of the Taxation Act which provided for the capacity for dispensation correctly as follows:

10.    Division 340 of Schedule 1 to the TAA is titled, ‘Commissioner’s power in cases of hardship’. Section 340-1 outlines ‘What this Division is about’ and states:

The Commissioner may release you from a particular liability that you have incurred if you are an individual, or a trustee of the estate of a deceased person, and satisfying the liability would cause serious hardship.

11.    Section 340-5 of Schedule 1 to the TAA provides:

340-5  Release from particular liabilities in cases of serious hardship

Applying for release

(1)     You may apply to the Commissioner to release you, in whole or in part, from a liability of yours if section 340-10 applies to the liability.

(2)     The application must be in the approved form

(3)     The Commissioner may release you, in whole or in part, from the liability if you are an entity specified in the column headed “Entity” of the following table and the condition specified in the column headed “Condition” of the table is satisfied.

Effect of the Commissioner’s decision

(4)     If the Commissioner:

(a)     refuses to release you in whole from the liability; or

(b)     releases you in part from the liability;

nothing in this section prevents you from making a further application or applications under subsection (1) in relation to the liability.

Notification of the Commissioner’s decision

(5)     The Commissioner must notify you in writing of the Commissioner’s decision within 28 days after making the decision.

(6)     A failure to comply with subsection (5) does not affect the validity of the Commissioner’s decision.

Objections against the Commissioner’s decision

(7)     If you are dissatisfied with the Commissioner’s decision, you may object against the decision in the manner set out in Part IVC.

8    The Tribunal noted that in Powell v Evreniades and others (1989) 21 FCR 252, Hill J had held in analogous circumstances that in the absence of a finding that the exaction of the full amount of tax would not entail hardship it followed that there would be no power to release a taxpayer from any part of their liability. Applying that reasoning the Tribunal then (correctly) proceeded on the basis that a finding of “serious hardship” was a jurisdictional pre-condition for the exercise of the power that Dr Wood had requested it exercise.

9    The Tribunal acknowledged that there was neither a statutory definition of “serious hardship” nor any enunciation of guiding factors or principles relevant to assessing whether such existed or not, in the TAA. The Tribunal however referred to the observations of Stone J in Commissioner of Taxation v A Taxpayer [2006] FCA 888 in that regard as guidance as follows:

67.    In Commissioner of Taxation and A Taxpayer [2006] FCA 888, Stone J approved the principles established by Hill J in Powell and stated at [16]-[17] and then at [55]:

… ‘‘serious hardship’’ is itself the test that has to be applied to an applicant’s circumstances to decide if that applicant is eligible for relief from a tax debt. There is no other test, although there may be issues about which factors, in the particular circumstances, are or are not relevant to this determination. It is because the assessment is based so squarely on the individual circumstances that Hill J in [Powell] thought it was inappropriate to try and identify, in the abstract, the circumstances that would give rise to serious hardship.

… In [Powell], Hill J gave such an example when he recognised that there would be ‘‘severe financial hardship’’ if persons were left ‘‘destitute without any means of support’’. The Taxation Ruling gives a similar example when it says that there would be serious hardship if a taxpayer were left ‘‘without the means to achieve reasonable acquisitions of food, clothing, medical supplies, accommodation, education for children and other basic requirements’’. I do not see any inconsistency in these examples. Effect must be given to the qualification of ‘‘reasonable’’ in the Taxation Ruling and, consistently with the reasoning of Hill J, these examples do not exclude the possibility that something less than destitution will constitute serious hardship. Whether this is so depends on the particular circumstances of each case… Implicitly, the Tribunal was assessing the respondent’s individual circumstances by reference to normal community standards.

68.    It is clear from the authorities that, in assessing whether ‘serious hardship’ is established, consideration must be given to whether the taxpayer, if required to pay the tax debt would experience financial difficulties which are serious, however not necessarily at the level of causing destitution.

10    The Tribunal identified that the law required there to be a causal relationship between any hardship and the tax liability, that the relevant hardship had to be financial rather than physical or social, that the resources of his household were to be taken into account and that future capacity for earnings was relevant. None of those observations appear to be contentious.

11    The Tribunal then turned to the policy guidelines that the Commissioner had issued by means of Practice Statement Law Administration 2011/17: Debt Relief, waiver and write off (PSLA 2011/17). The Tribunal had earlier referred to that policy as relevant to its task. It referred to the policy as follows:

14.    The Respondent has issued Practice Statement Law Administration 2011/17: Debt relief, waiver and write off (‘PSLA 2011/17’) which provides guidance to its officers in relation to making decisions pursuant to applications made under section 340-5 of Schedule 1 to the TAA. Relevantly it provides as follows:

8. Definition of serious hardship

‘Serious hardship’ is given its ordinary meaning.

We consider serious hardship to exist where the payment of a tax liability would result in a person being left without the means to afford basics such as food, clothing, medical supplies, accommodation or reasonable education.

We have tests to apply in helping you decide whether serious hardship exists. The object of the tests is to determine whether the consequences of paying the tax would be so burdensome that the person would be deprived of what are considered necessities according to normal community standards.

These tests are:

the income/outgoings test

the assets/liabilities test

other relevant factors.

9. Income/outgoings test

The purpose of the income/outgoings test is to assess a taxpayer's capacity to meet their tax liability from their current income. We take into account household income and expenditure along with the taxpayer's ability to provide the necessities for family members or others for whom they have responsibility. In addition, the following are relevant considerations:

•    the taxpayer's capacity to pay in a reasonable timeframe on the basis of their income and outgoings

•    scope for the taxpayer to increase their income

•    whether all expenditure could be considered reasonable and consideration of any discretionary components

•    whether the taxpayer has made attempts to defer or reschedule other financial commitments.

10. Assets/liabilities tests

The purpose of the asset/liabilities test is to assess a taxpayer's equity in, or access to, assets which may be indicative of their capacity to pay.

Consideration is given to any property owned wholly or jointly by the taxpayer and their partner, privately or within a business structure.

There are several types of assets which are regarded as normal and reasonable possessions. These would not be expected to be surrendered in order to pay a tax debt, provided they are of a reasonable nature and include:

•    ownership of, or interest in, a residential property which is the taxpayer's home

•    a motor vehicle

•    furniture and household goods

•    tools of trade

•    cash on hand or bank balances sufficient to meet immediate day-to-day living expenses

•    funds put aside by aged persons to cover funeral expenses.

•    All other significant assets need to be scrutinised to determine capacity to pay (either by sale or used as security for a loan). These assets include other real estate, multiple or luxury motor vehicles or boats, life insurance or annuity entitlements, shares and other investments, and collections for trading, investment or hobby purposes.

11. Other relevant factors

We are not bound to grant release even if a taxpayer can demonstrate serious hardship may be caused by payment of their liability. However we are obliged to act reasonably and not arbitrarily.

Examples of situations in which we may decide against granting release, even though implications of serious hardship may be drawn are where:

•    a taxpayer appears to have unreasonably acquired assets ahead of meeting their tax liabilities

•    a taxpayer appears to have disposed of funds or assets without giving consideration to their tax liability

•    release would not alleviate hardship, such as where the person has other liabilities or creditors

•    a taxpayer has paid other debts (either business or private), in preference to their tax debt

•    the taxpayer, without good reason, has not pursued debts owed to them

•    serious hardship is likely only to be short term

•    the taxpayer has a poor compliance history

•    the taxpayer is unable to show that they have planned for future debts

•    the taxpayer has structured their affairs to place themselves in a position of hardship (for example, placing all assets in trusts or related entities over which they have control)

•    the taxpayer has delayed lodgement of returns resulting in the accumulation of a large debt that they are unable to pay.

12    The Tribunal observed that there was an extensive body of case law that acknowledged the desirability of decision makers making consistent decisions provided they did not apply a policy inflexibly.

13    The reasoning of the Tribunal, as responded to the submissions made to it by Dr Wood then proceeded as follows:

75.    As noted in paragraph [14] above, PSLA 2011/17 identifies three tests that assist in determining whether a tax debt should be released in full or in part. These are the income/outgoings test, the assets/liabilities test, and other relevant factors.

(a)    Income/outgoings test

76.    Factors relevant to a consideration of this test are listed in clause 9 of PSLA 2    011/17 and include:

•    the Applicant’s capacity to pay in a reasonable timeframe on the basis of his income and outgoings

•    the scope for the Applicant to increase his income

•    whether all the Applicant’s expenditure could be considered reasonable and consideration of any discretionary components.

77.    The Applicant’s annual gross household income, being the income earned by him as a locum doctor in intensive care and as a surgical assistant, together with the income earned by his partner JG in her part-time job as a registrar at a public hospital, as detailed in paragraph [50] above, is substantial. He relies on the considerable household expenditure in support of his claim that he satisfies the income/outgoings test for the determination of serious hardship. However, it is clear from the evidence that this expenditure includes a range of expenses that do not involve “what are considered necessities according to normal community standards”: PSLA 2011/17 at clause 8.

78.    The Applicant’s rental accommodation cannot be described as a ‘necessity’ as understood in the context of section 340-5 of Schedule 1 of the TAA and clause 8 of the PSLA 2011/17. There is no evidence that the Applicant has given any real consideration to moving to cheaper rental accommodation or to a less expensive area. His stated preference is for the family to live close to the children’s schools. He acknowledged however that the schools are on the train line and could readily be accessed by public transport, and that he plans to look for alternative accommodation for the family when his daughter completes her schooling. To put the Applicant’s circumstances into context, the Tribunal has had regard to Deputy President Forgie’s observations in Schweitzer at [132] that if Ms Schweitzer were required to sell her property and lose her inheritance, and live on the age pension and pay rent, this would not amount to serious hardship. She further noted, ‘[t]hose on the Age Pension living in rental accommodation are not, by reason of that fact alone, regarded as suffering serious hardship’.

79.    Whereas PSLA 2011/17 refers to the need for a taxpayer not to be left ‘without the means to afford basics such as... reasonable education’, it cannot be accepted that an annual expenditure of more than $100,000 per annum on private school fees is a ‘basic’ expenditure required to provide the Applicant’s children with a ‘reasonable education’. The Applicant’s evidence is that he and JG chose private schools for their children when they were new to Australia and unfamiliar with the Australian education system, and the schools they chose were ‘most like those’ they had attended in the UK. He also claims that private schools were ‘more flexible’ for parents with ‘demanding jobs’. In circumstances in which there are high quality government school alternatives in the local area, it cannot be said that an expenditure of in excess of $100,000 on private school fees is a ‘basic’ expenditure necessary for a ‘reasonable education’.

80.    The Applicant’s evidence is that he provides financial support to his mother and brother in the United Kingdom. He did not provide any reasons as to why these relatives require this support from him nor why their own resources are inadequate need to be supplemented by allowance paid to them by the Applicant. In relation to the many items of discretionary household expenditure including theatre tickets, restaurant meals, parking fees and overseas travel, the Applicant conceded that there was potential for these to be ‘economised’.

81.    The extent of the Applicant’s outgoings on rent, private school fees, and financial support for his mother and brother, and the amount of discretionary expenditure indicate that he is not experiencing financial hardship. It follows that, if he were required to meet his taxation Tax Debt, he would not experience serious hardship when there are a range of viable options available to him and his family to reduce their annual household expenditure.

82.    In determining whether there would be ‘serious hardship’ to the Applicant it is necessary to take into account the resources not only of the Applicant, but also of his partner, JG who is also a medical practitioner. The Applicant provided a five-year projected income for himself and JG. However, there is limited evidence before the Tribunal about their respective work situations, and their actual and potential earnings. In particular, there is little evidence as to the opportunities available to them to increase their household income, either by the Applicant completing his specialist training or his PhD, or by JG increasing her work hours at the hospital.

83.    The Tribunal finds, based on the information before it, that a reduction in the Applicant’s household expenditure would leave a surplus which would allow the Applicant to meet his Tax Debt in a reasonable time without impacting upon his ability to provide reasonable accommodation, food, clothing, medical supplies and education for himself and his family.

84.    For the reasons above, the Tribunal finds that the income/outgoings test is not satisfied and this weighs against the Applicant being granted a release from his Tax Debt.

(b)    Assets/liabilities test

85.    Relevant to a consideration of this test are the assets held by the Applicant and his current liabilities as set out in paragraph [33] above.

86.    In considering the Applicant’s asset and liability position, the Tribunal accepts his debts exceed his available assets and therefore this test weighs in favour of him being granted a release from his Tax Debt.

87.    On the basis of the evidence before it, the Tribunal is not satisfied that the Applicant has met the onus on him to establish that if he were required to meet his tax liability, it would result in serious hardship within the meaning of section 340-5 of Schedule 1 of the TAA.

88.    Having found that the jurisdictional precondition for the exercise of the power to release the Applicant from all or part of his Tax Debt is not satisfied, there is no need for the Tribunal to consider whether the discretionary power should be exercised.

89.    However, for the reasons that follow, the Tribunal is satisfied that even if the discretionary power were enlivened to release the Applicant from his tax liabilities, it is not appropriate in the Applicant’s circumstances that it be exercised to permit such a release in whole or in part.

2)    Should the discretion to release the Applicant from his Tax Debt be exercised?

90.    Clause 11 of PSLA 2011/17 sets out other relevant factors which may be considered in deciding whether to exercise the discretion to grant a release from taxation liabilities. Of relevance is whether the taxpayer has a poor compliance history and whether the taxpayer has delayed lodgement of returns resulting in the accumulation of a large debt that they are unable to pay.

91.    The Applicant lodged his personal income tax returns for the financial year ending 30 June 2007, 30 June 2008, 30 June 2009, 30 June 2010 and 30 June 2011 in January 2012. He lodged his income tax returns for the years ending 30 June 2014, 20 June 2015, 30 June 2016 and 30 June 2017 following the Respondent raising a default assessment against him in 2017 for the year ending 30 June 2014. The Applicant’s compliance history is therefore extremely poor.

92.    The Applicant’s evidence is that he ‘gave little thought’ to attending to his tax affairs, and that he ‘did not have the ability to maintain an account system to keep track of [his] income or how [he] should be providing for [his] tax after working as an employee.’ The lack of priority the Applicant gave to his tax obligations is not a matter that supports the exercise of a discretion to release his Tax Debt. Like all independent contractors, the Applicant is required to make provision for, and attend to, the payment of his taxation liabilities. The Tribunal does not accept that the Applicant was unaware of the process for accounting for his tax obligations as an independent contractor. As a professional and educated man who had sought and obtained financial advice in relation to his tax affairs from 2011, his claims not to have knowledge of his tax obligations are implausible, and do not therefore weigh in favour of the exercise of the discretionary release power.

93.    On the basis of this evidence, the other relevant factors do not support the grant of a release of the Applicant from his Tax Debt.

94.    For these reasons, the Tribunal finds that even if the payment of his liabilities would result in serious hardship, there is no basis upon which it would be appropriate for the Tribunal to exercise the discretionary power to release the Applicant from his Tax Debt.

CONCLUSION

95.    On the basis of the evidence before it and applying the relevant authorities and policy guidance, the Tribunal finds that the Applicant has not established that the Reviewable Decision should not have been made or should have been made differently. Accordingly, the Tribunal finds that the Applicant has not discharged his onus under section 14ZZK of the TAA.

14    For those reasons the Tribunal affirmed the Commissioner’s decision.

Dr Wood’s Grounds of Appeal

15    Dr Wood has filed an amended notice of appeal (omitting references to an earlier iteration) as follows:

The Applicant appeals from the decision not to grant a release to the Applicant from the whole or part of the tax debts of the Applicant.

Question of Law

1.    Whether the Tribunal erred in its application of the test of “serious hardship”

2.    Whether the Tribunal erred in failing to exercise its discretion as to relief given in section 340-5(3) of Schedule 1 to the Taxation Administration Act 1953 (Cth)

Findings of the fact that the Court is asked to make

1.    That the Applicant’s compliance history with his income tax obligations was reasonable.

Orders sought

1.    The Respondent’s decision made on 29 January 2018, in which the Respondent refused to grant the Applicant release from his tax liabilities under section 340-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth), be set aside.

2.    The Applicant be released from his tax liabilities under section 340-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth).

Grounds relied on

1.    Contrary to the reasoning at [76] to [84] of its reasons, the Tribunal should have held that the Applicant satisfied the “income/outgoings test” because on the findings made by the Tribunal the Applicant could not have paid the taxation debt within a reasonable period.

2.    Contrary to the reasoning at [90] to [94] of its reasons, the Tribunal should have applied the discretion to release the Applicant from the relevant taxation debt, including because the relocation of children from an established school environment satisfies the requisite standard for hardship purposes.

Dr Wood’s submissions

16    Dr Wood’s written submissions identify seven errors that he alleges were made by the Tribunal. The first six relate to ground 1; the seventh to ground 2:

Error 1

13.     The Tribunal erred in applying too rigidly the three tests from the PSLA instead of the two-step test required by the Act: J[74] & [90]. By adopting the Commissioner’s – who was merely a respondent before the Tribunal – stated view of the provisions the Tribunal failed to properly apply the Act and, instead, applied the Commissioner’s view of Act. That is the wrong test and was in legal error.

14.    Further, the J[90] error is worse in that it takes, as determinative factors, the items the Commissioner raises. As they are no substitute for the Act the Tribunal has taken into account an irrelevant consideration.

Error 2

15.     The Tribunal erred in concluding that I didn’t pass the income/outgoings test: J[84]. In doing so the Tribunal:

(a)     failed to consider rental income a necessity, when the absence of a place to live is by definition destitute and therefore serious hardship: J[77]-[78];

(b)     discounted the impact of schooling and school changes on the children in coming to the erroneous view in (a) above: J[78]-[79]; and

(c)     considering rental income to be discretionary spending: J[81].

Error 3

16.     The evidence before the Tribunal made clear that moving children during a schooling year has a materially adverse affect on their education. The Tribunal failed to consider this evidence, and to give it due weight, when the Tribunal entirely discounted the effect of moving schools and its impact on rental costs: J[78]-[79].

Error 4

17.     The Tribunal erred when it engaged in impermissible speculation as to what further income opportunities existed for Jane and I: J[82]. There is nothing to confirm there are further income opportunities. Indeed, there is nothing to suggesting the stated income (J[49]) would be able to maintained.

18.     Having engaged in that reasoning the Tribunal fell into impermissible speculation and judicial error: Bell IXL Investments Pty Ltd v Life Therapeutics Ltd (2008) 68 ACSR 154 at [14] per Middleton J; see also Rawson Finances Ltd v Commissioner of Taxation [2013] FCAFC 26.

19.     That error is all the more patent in light of the accepted evidence from accountant, Mr Newcombe, that I had reached the limit of my potential income as a surgical assistant: J[51].

Error 5

20.     The Tribunal erred again in impermissible speculation in making a conclusionary statement that I could reduce the household expenditure to such an extent that the tax debt can be paid off in a reasonable time: J[83]. There is no reasoning process that would cause this to be other than speculative. And the next ground shows why the reasoning must be false.

Error 6

21.     There is a further legal error in J[83]: it is so erroneous a decision that it fails Wednesbury reasonableness:

(a)     The tax debt at the time of Judgment was $1,252,763 of which $1,191,003 was eligible for release: J[3].

(b)     My and my spouse, JG, combined household surplus is $97,409, $97,409, $145,005, $145,005 and $193,098 over five years: J[49]. This is an average of $135,585 per annum.

(c)     My household expenses over the same 5 year period in (a) averages $245,568 per annum: J[49].

(d)     Assuming my household expenses could be reduced by 75% – which his unreasonable but I will give the Tribunal the benefit of that concession – they become $61,392.

22.     I would therefore have $74,193 per annum to pay towards my tax debt.

23.     If the Commissioner chooses to apply General Interest Charge the debt will grow each year.

24.     If the Commissioner did not charge any interest at all it would take me 16 years to pay it off. I am now 51 years old. I’ll then be 77.

25.     The Tribunal’s position is so manifestly unreasonable on the facts before it, it is submitted, that no reasonable person with such facts before it could make such a decision.

Error 7

26.     The Tribunal erred in relying solely on my failure to keep my lodgments up to date as determinative of the discretionary exercise function of the Act: J[92].

27.     The Tribunal has failed to take into account relevant considerations because it willfully ignored all other factors on what is just in the circumstances by its blind devotion to the failure to keep my lodgments up to date.

28.     The Act – in s 340-5(3) – specifically calls for an analsysis of all of the circumstances. The Tribunal seems to have known this fundamental issue as, at J[61], it quotes GSJW and Commissiner of Taxation [2019] AATA at [51], which itself quotes Lau and Commissioner of Taxation [2016] AATA 46 at [65]:

… If that decision [step one] is favourable to the applicant, the discretion offered by sub-section 340-5(3) then falls for consideration. In reaching the decision to release in whole or part, the question to be addressed is whether, in all the circumstances, it is just and proper to provide the requested relief. Matters pertaining to the incidence and consequence of the tax and the effect of its exaction upon the affairs of the person will bear upon the issue of whether the relief is just and proper…

(emphasis added)

29.     The Tribunal entirely failed to look at “all the circumstances” as it looked at only one circumstance: late lodgments.

30.     The Tribunal entirely failed to consider “the effect of its exaction upon the affairs of the person”.

31.     Further, the Tribunal also strayed from the PSLA that it otherwise sought to rely upon so much. It provides in [11], which the Tribunal set out at J[14]:

11. Other Relevant Factors

We are not bound to grant release even if a taxpayer can demonstrate serious hardship may be caused by payment of their liability. However we are obliged to act reasonably and not arbitrarily.

Examples of situations in which we may decide against granting release, even though implications of serious hardship may be drawn are where:

•    a taxpayer appears to have unreasonably acquired assets ahead of meeting their tax liabilities

•    a taxpayer appears to have disposed of funds or assets without giving consideration to their tax liability

•    release would not alleviate hardship, such as where the person has other liabilities or creditors

...

•    the taxpayer, without good reason, has not pursued debts owed to them

•    serious hardship is likely only to be short term

•    the taxpayer is unable to show that they have planned for future debts

•    the taxpayer has structured their affairs to place themselves in a position of hardship (for example, placing all assets in trusts or related entities over which they have control)

32.     Every one of those items weighs solidly in my favour:

(a)     I have not unreasonably acquired assets ahead of meeting my tax liabilities;

(b)     I have not disposed of funds or assets without giving consideration to my tax liability;

(c)     release would entirely alleviate hardship;

(d)     I have not failed to pursue any debts owed to me;

(e)     serious hardship is likely only to be long term;

(f)     I’m able to show that they have planned for future debts; and

(g)     I have not structured their affairs to place themselves in a position of hardship (for example, I have placed no assets in trusts or related entities over which I have control).

33.     The mere failure to consider them is fatal to the Judgment, and requires success on this appeal.

34.     But the sheer weight of those factors in my favour show the correct decision was to allow the exemption.

(footnote omitted)

The Commissioner’s submissions And Dr WOod’s Reply

17    Ms Graycar, counsel for the Commissioner filed written submissions and advanced oral submissions in respect of the above contentions. Given the conclusions I have reached reflect those advocated for by the Commissioner it is sufficient that I acknowledge the assistance I have had from Ms Graycar in reaching those I express below. To the extent Dr Wood supplemented his submissions in reply to substantive effect I also address those in my reasons.

Consideration

Ground 1: Generally

18    Dr Wood’s written submissions identify six errors said to be relevant to this ground he advances is that the Tribunal “erred in its application of the test of ‘serious hardship’”. There is no ground of appeal that the Tribunal erred in its articulation of that test. I proceed on the basis that the Tribunal’s conclusions (a) that there is no statutory definition of what is “serious hardship” and (b) the policy that the Commissioner had stated in PSLA 2011/17 which is set out at [11] above was open to be taken into account as relevant to how that question might be determined were correct.

Error 1

19    The error said to be made by the Tribunal is that it erred in law in applying too rigidly the three tests from the PSLA 2011/17. The fundamental difficulty Dr Wood faces in establishing that the Tribunal fell into that particular error is that his own submissions to the Tribunal were premised on the basis that the Tribunal should accept that his circumstances came within the income/outgoings test set out in that guidance: it not being contentious that Dr Wood had rented his home and had applied little of his income to the acquisition of assets and thus satisfied the assets/liabilities test.

20    It was in that circumstance that the Tribunal proceeded on the basis that the policy that the Commissioner had articulated in PSLA 2011/17 was relevant to its task, and it was in that context that the Tribunal had regard to the terms of that policy document in coming to the conclusion it did. Understood in that context Dr Wood’s submissions fail to identify any specific want of flexibility in its reasoning or any consideration it had failed to give attention to: the Tribunal had acknowledged that there was no statutory definition of the concept of “serious hardship” before dealing with Dr Wood’s case on the premise it had been advanced. It determined his case (albeit adversely to him) applying the test he himself had advanced. That the Tribunal focussed its reasoning on the case Dr Wood advanced does not reveal error.

21    Dr Wood’s submissions in reply contend that it was clearly open to the Tribunal and, the correct and preferable decision had been for it to find, that he had satisfied the income outgoing test. That proposition challenges the Tribunal’s finding on the merits which in the generality in which that proposition is advanced is not subject to judicial review. To the extent a question of legal unreasonableness as an error of law is asserted by Dr Wood to infect the Tribunal’s decision I address that contention under the heading of Error 6 below.

Error 2

22    Error 2 similarly impermissibly seeks to put in issue the factual findings of the Tribunal in the guise of questions of law. To the extent an error of law has been asserted I reject at the factual level that the Tribunal failed to acknowledge that Dr Wood’s rental income (sic) was a necessity. I similarly reject that the Tribunal proceeded on the basis that his outgoings on rent were inherently discretionary expenditure. The Tribunal’s consideration of the amount Dr Wood was paying for rent went not to its want of essentiality but to its quantum. The Tribunal reasoned that Dr Wood had chosen to rent highly priced accommodation in a very desirable Sydney suburb and that it would have been open to him, and it remained open to him, to find adequate accommodation for his family at a significantly cheaper price. I discern no legal error in that reasoning.

Error 3

23    Error 3 again, on analysis, challenges a factual finding made by the Tribunal under the guise of a question of law. In so far as the error it asserts turns on the Tribunal’s rejection of the evidence Dr Wood had sought to rely on it raises a straw man contention: there is nothing in the Tribunal’s reasoning as is premised, either expressly or implicitly, on Dr Wood having to withdraw his children from their private schooling mid-term. The Tribunal did no more than to address its mind to the guidance referred to in PSLA 2011/17 (as Dr Wood had relied upon) as was material to the expenses Dr Wood had incurred. That guidance was that a taxpayer is not to be left “without the means to afford basics such as…reasonable education”. Having applied that guidance to Dr Wood’s circumstances it rejected (at [79] of its reasons) that Dr Wood’s expenditure of more than $100,000 per annum on private school fees could be understood to come within the basics required to provide Dr Wood’s children with a “reasonable education” having regard to there being high quality government school alternatives which his children could attend in his local area. I discern no error in that reasoning. Dr Wood did not put in issue either in the Tribunal or in this proceeding that some of Sydney’s best public schools were located in the area in which he had chosen to live.

Error 4

24    I similarly reject that error 4 is made good. Contrary to the premise articulated in Dr Wood’s contentions the Tribunal did not base its decision on impermissible speculation that Dr Wood and his wife would increase their earnings in future years. The Tribunal was not bound to accept Dr Wood’s submissions, founded on Mr Newcombe’s evidence, that he had reached the high point of his earning capacity. Mr Newcombe is a Chartered Accountant. There was nothing requiring the Tribunal to accept him as capable of expressing an expert opinion in those regards. The premises for the opinion Mr Newcombe expressed were open to be rejected, at the factual level, by the Tribunal.

25    What the Tribunal states at [82] of its reasons rises no higher than a finding that Dr Wood (upon whom the burden of proof lay) had not established that either his or his wife’s income might not increase in the future. The Tribunal was entitled to have so concluded having regard to the circumstances it referred to as suggested that that prospect was not implausible of coming about. Those circumstances had included that Dr Wood might yet gain further qualifications as a surgeon and as such he would not be restricted to assisting his more senior colleagues.

Error 5

26    Dr Wood accepts that it was open to the Tribunal to have concluded at [83] of its reasons that on the information before it a reduction in his household expenditure would have left a surplus available to be applied towards meeting his outstanding tax obligations but takes issue with the Tribunal’s conclusionary reasoning (in the same paragraph) that such a surplus would allow him “to meet his tax debt in a reasonable time without impacting on his ability to provide reasonable accommodation, food, clothing, medical supplies and education for himself and his family”.

27    Facially there may appear to be some force in that complaint. However the reasons of a Tribunal are to be read as a whole and not with an eye to the identification of error: in Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259, Brennan CJ, Toohey, McHugh and Gummow JJ stated at [30]–[31]:

30. …in [Collector of Customs v Pressure Tankers Pty Ltd and Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280] a Full Court of the Federal Court (Neaves, French and Cooper JJ) collected authorities for various propositions as to the practical restraints on judicial review. It was said that a court should not be “concerned with looseness in the language ... nor with unhappy phrasing” of the reasons of an administrative decision-maker. The Court continued:

“The reasons for the decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error”.

31.     These propositions are well settled. They recognise the reality that the reasons of an administrative decision-maker are meant to inform and not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed.

28    That admonition is applicable in the facts of this case given that the Tribunal later recorded its ultimate conclusion in [87] of its reasons that:

87.    On the basis of the evidence before it, the Tribunal is not satisfied that the Applicant has met the onus on him to establish that if he were required to meet his tax liability, it would result in serious hardship within the meaning of section 340-5 of Schedule 1 of the TAA.

29    Notwithstanding what appears as a positive finding that at [83] I am satisfied the Tribunal’s ultimate conclusion turned on its finding at [87] that the burden of proof was on Dr Wood which burden he had failed to discharge.

30    Subject to what Dr Wood advances at Error 6 as “Wednesbury unreasonableness” the Tribunal’s conclusion in that regard was a question of fact committed to it, and not this Court, to determine.

Error 6

31    A challenge to the legal validity of any administrative decision always is potentially available on the basis of legal unreasonableness. Dr Wood advances such a challenge with respect to the conclusion of the Tribunal that he had failed to discharge the onus of proof of establishing “serious hardship”. Dr Wood submits that that finding was one no reasonable decision maker could have come to having regard to his and his wife’s income level once regard is had to the context of the daunting scale of the tax obligations he had incurred.

32    It will be recalled that the integers of the propositions advanced by Dr Wood going to establish Error 6 are as follows:

21.    …

(a)     The tax debt at the time of Judgment was $1,252,763 of which $1,191,003 was eligible for release: J[3].

(b)     My and my spouse, JG, combined household surplus is $97,409, $97,409, $145,005, $145,005 and $193,098 over five years: J[49]. This is an average of $135,585 per annum.

(c)     My household expenses over the same 5 year period in (a) averages $245,568 per annum: J[49].

(d)     Assuming my household expenses could be reduced by 75% – which his unreasonable but I will give the Tribunal the benefit of that concession – they become $61,392.

22.     I would therefore have $74,193 per annum to pay towards my tax debt.

23.     If the Commissioner chooses to apply General Interest Charge the debt will grow each year.

24.     If the Commissioner did not charge any interest at all it would take me 16 years to pay it off. I am now 51 years old. I’ll then be 77.

33    However what is advanced by Dr Wood as logically required by applying objective mathematical principles to the facts before the Tribunal, on closer analysis, fails to establish that the Tribunal fell into jurisdictional error when it reached the conclusion Dr Wood challenges.

34    It is not in dispute that Dr Wood’s accountant, Mr Newcombe, gave evidence in the Tribunal. I take it to be uncontentious that it is his evidence that Dr Wood relies on as the foundation for the propositions he has advanced that the Tribunal’s decision was legally unreasonable.

35    If the premises upon which Mr Newcombe gave his evidence had been accepted by the Tribunal the propositions Dr Wood advances, subject to his arithmetic as I discuss below, might be plausible. However that case is not this case.

36    Mr Newcombe’s evidence as is relevant was set out by the Tribunal in tabular from at [49] of its reasons. However the Tribunal was entitled to, and did, take Mr Newcombe’s projections with more than a grain of salt. The Tribunal was entitled to its scepticism because:

(a)    It concluded that that the amounts which Mr Newcombe had projected to be Dr Wood’s future outgoings were significantly greater than that which reasonably required for his and his family’s reasonable support;

(b)    The figures Mr Newcombe had utilised in his evidence had not based been based on the most up to date information available; and

(c)    Dr Wood had not discharged his onus of proof such that it could be confident that his income and that of his wife might not increase in the future.

37    Having regard to the above Dr Wood’s submissions as rely on Mr Newcombe’s financial projections as their commencing point in order to demonstrate error for legal unreasonableness have an air of unreality about them.

38    Then even on that premise Dr Wood’s calculations are unreliable. Thus Dr Wood refers at [21(c)] and [21(d)] of his written submissions to the difference between that which he claims would be the average of his (unadjusted) projected household expenses over 5 years ($245,568 per annum) if reduced by 75% to $61,392. On his calculations that would leave him with only $74,193 per annum available to him to meet his tax obligations. However that cannot be correct.

39    Dr Wood’s reference to his combined household surplus in [21(b)] of his submissions is clearly referable to the figures Mr Newcombe provided to the Tribunal in the last row of the table found at [49] of Tribunal’s reasons. The table is set out at [5] of these reasons. The outgoings Mr Newcombe had included appear in the fourth row of that table. If in lieu of those figures, Dr Wood’s outgoings were to be substituted by a lesser amount logically the surplus available to Dr Wood would increase by that difference. If as Dr Wood submits his outgoings would be reduced by 75% his outgoings would be reduced by the sum of $184,176 per annum. On that premise Dr Wood would have available to him an average of $135,585 per annum (as per the amounts Mr Newcombe gave evidence of) as his household surplus plus an additional amount of $184,176 per annum on average.

40    Rather than Dr Wood having on average $74,193 to pay towards his tax debt as he posits he would have $319,761 per annum on average to go towards those debts. It is not necessary for the Court to decide but it appears that Dr Wood may have subtracted the reduced amount that he says represents 25% of his existing outgoings from his household surpluses as calculated by Mr Newcombe rather than adding the relevant amounts. Whatever the reason for the error it is plain that Dr Wood’s calculations must be rejected.

41    But the error that Dr Wood made in his submissions can be put to one side because it is not for this Court to substitute its findings for that of the Tribunal: its task is confined to determining whether the reasoning process of the Tribunal should be concluded to have been infected by legal error on the basis of legal unreasonableness.

42    Given the flawed starting point inherent in Dr Wood’s submissions I reject that that is established by the integers relied on by Dr Wood as set out at [32] above.

Summary

43    For the above reasons I reject that any of the six asserted legal errors entitle this Court to find that Ground 1 has been made good.

44    Because the discretion to forgive a tax debt in whole or in part is only enlivened if it is found that the requirement to pay it would cause the taxpayer to suffer serious hardship, my conclusion that Ground 1 must be rejected is sufficient to require the Court to dismiss Dr Wood’s appeal.

Ground 2

45    Given that the Court has reached the conclusion that Ground 1 must be dismissed it is strictly unnecessary to give attention to Ground 2 but as that ground has been the subject of full argument and lest I be in error I would also dismiss Ground 2 for the reasons I set out below.

46    The error Dr Wood articulates as Error 7 (Ground 2) is that the Tribunal erred when it reasoned that even if Dr Wood succeeded in establishing that he would suffer “serious hardship” that the discretion to release him from his tax liabilities in whole or in part should not be exercised. Dr Wood submits the Tribunal’s (potential) exercise of that discretion miscarried because it had failed to take into account the full range of considerations PSLA 2011/17 required it to have regard to and instead had relied on only his (admitted) failure to keep his lodgements up to date.

47    It must be accepted that in holding that the basis for exercising any discretion in Dr Wood’s favour was not made out the Tribunal did focus the greatest part of its attention on what Dr Wood characterises as his failure to keep his lodgements up to date. However that is a misleadingly benign articulation of the Tribunal’s findings and reasoning.

48    Rather than assessing Dr Wood’s conduct as having involved no more than an innocent error on his part the Tribunal made a finding that Dr Wood’s evidence that he had not been aware of his tax obligations was implausible. It was in that context the Tribunal reasoned that the lack of priority Dr Wood had given to his tax liabilities in contrast to the priority he had given to his own interests was such as would not support the exercise of any discretion to release his tax debt even if the result would be to cause him to suffer serious financial hardship.

49    I am unpersuaded that I should find that the Tribunal ignored or failed to give consideration to the other matters that cl 11 of PSLA 2011/17 potentially makes relevant. It is uncontentious that the Tribunal correctly set out that provision in its reasons. At [93] the Tribunal stated that “the other relevant factors do not support the grant of Dr Wood from his Tax Debt”. I take that to have been, self-evidently, a reference by the Tribunal to the other factors as are included in cl 11. It was for the Tribunal to place such weight on those factors in the particular circumstances of the review before it as it saw fit.

50    In any event I reject Dr Wood’s contention that save for his failure to keep his lodgements up to date “every one of [the items referred to in cl 11] weighs solidly in my favour”.

51    The Tribunal’s findings at [90]–[92] of its reasons had included that Dr Wood had disposed of the funds available to him without giving consideration to his tax liability. It is implicit that the Tribunal proceeded on the basis that it was unpersuaded that Dr Wood had planned for his future debts as he was contending he was unable to pay.

52    I would also dismiss Ground 2.

Conclusion

53    The appeal must be dismissed. The parties were agreed that costs should follow the event. I will order accordingly.

Associate:

Dated:    13 October 2021

ANNEXURE A

(Revised from transcript)

In this proceeding Dr Wood has sought a judicial review of a decision of the Administrative Appeals Tribunal (the Tribunal) given in its Taxation and Commercial Division on 5 February 2021. That decision involved consideration as to whether some or all of Dr Wood’s tax debt should be the subject of release by reason of Dr Wood’s risk of suffering serious hardship if he was required to pay the tax debt. I state that only in the briefest terms because it simply identifies the nature of this proceeding. The debts in question in the proceeding in the Tribunal were relatively substantial, but that is again only by way of preface to the application that is presently before the court.

In the Tribunal Dr Wood was entitled to the benefit of a confidentiality regime and those proceedings were conducted having regard to that entitlement. The reasons of the Tribunal were published under a circumstance whereby Dr Wood was designated with an anonymised name: ZCSB. However, in this court where a proceeding is brought on the basis that the tribunal erred, the entitlement that Dr Wood had in the Tribunal for the automatic application of confidentiality at his or her request does not apply. Rather, as Jagot J held in KPTT v Commissioner of Taxation [2021] FCA 464, the exercise of judicial power in this court is to be guided by and subject to the provisions of sections 37AE to section 37AL of the Federal Court of Australia Act 1976 (Cth) (the Act), which directs the Court to give priority to the principles of open justice.

That is also consistent with what is provided for in s 17(1) of the Act, which provides that, except where it is exercised by a judge sitting in chambers, the jurisdiction of the Court shall be exercised in open Court. That does not mean that the Court is without power in an appropriate case to make a suppression or nonpublication order but the grounds that are permissive of making such an order are those provided for in s 37AG(1)(a) to (d) of the Act. However the limited scope of those provisions is made clear by subsection 37AG(2) which require a suppression order or a non-publication order to specify the ground or grounds upon which the order is made.

It is unnecessary to say much by way of the general principles that govern such an application. It is sufficient to observe that it is settled by judicial authority that the burden of establishing that one or other of the grounds that are provided in section 37AG(1)(a) to (d) have been established falls on an applicant.

I am bound by findings that the word “necessary” read in the context of section 37AG is a strong word. It is not to be given a narrow construction, but the onus on a party seeking an order under section 37AF on one or other of the grounds provided for in section 37AG is a heavy one. Mere embarrassment, inconvenience, annoyance, unreasonable or groundless fears, even commercial confidentiality alone, will not be enough to justify the making of such an order. That is because, as Allsop CJ recognised in Minister for Immigration and Border Protection v Egan [2018] FCA 1320, [4], “The principle of open justice is one of the overarching principles in the administration of justice in this court.”

There is guidance from judicial authority that the task is not one of balancing or weighing up factors in support of the interests of open justice, and the prejudice that may occur if the information be released. Rather, the test is whether it is necessary to make the order for one or other of the reasons provided for in section 37AG. If the Court is not persuaded that an order is necessary, it should not make such an order. On the other hand, if it is persuaded and satisfied that an order is necessary, it would be an error not to make it. It is against that background that I turn to what is advanced to be material in this proceeding.

Dr Wood has read an affidavit (Exhibit A1) which he has sworn on 7 September 2021 in which he seeks an order to protect the safety of any person. I take that to refer to s 37AG(1)(c) of the Act. In his affidavit Dr Wood deposes that his wife works as a medical practitioner. He gives some history of their migration to Australia and the fact that they have three young children. He deposes that both he and his wife have busy schedules combining the demands of their professional life and raising three young children.

I do not think it necessary to set out in any detail in these reasons what is the subject of an annexure detailing the problems his wife has faced in balancing the demands on her as a medical practitioner and family life. I accept that his wife took a break from her work in 2016. I also accept that an annexed letter written by Dr Betts, a clinical psychologist, refers to his wife having experienced periods of suicidal ideation in the past during which time she was in great danger.

Dr Wood concludes his affidavit with the statement, “I believe that the publication of my name and the names of my immediate family members in these proceedings may bring about stress on [my wife] and seriously affect her health and the health of our children.” The difficulty, however, is that that belief he asserts does not appear to be supported in any material way by what is contained in JGW1: a letter written by Dr Betts which is addressed to the Australian Taxation Office and dated 5 February 2020.

From the terms of that letter I am satisfied that it was intended to be adduced in the proceeding that is now appealed from the Tribunal. That is made plain by [2] of the letter as follows, “I understand that Mr Wood has made an application to the AAT for the review of the decision of the Commissioner of Taxation not to release Mr Wood from the payment of his tax debts.” Dr Betts states in the next paragraph: “The purpose of my letter is to clarify the nature of the illness suffered by Dr Wood’s wife and to give an opinion on how this illness would have affected family life.” I need not set out that which the clinical psychologist reports in respect of the history that she reports as to Dr Wood’s wife’s stress other than to indicate that it is consistent with what I earlier observed: that at some point of time his wife ceased working in approximately February 2016 at a time when she was experiencing extensive periods of suicidal ideation.

The letter continues that as a result of the sessions that she had participated in, Dr Wood’s wife had been able to develop coping skills and had gradually resumed work. It notes that currently (that is at February 2020) she is employed in the paediatric ward of the Sydney Hospital where she is undertaking night shifts so that she can be present at home for the children during the day. Critically, the report is not relevant to any stress that might be attendant in relation to the publicity of the proceedings but rather the impact of her illness on Dr Woods.

Dr Betts reports, “In my opinion, Dr Wood’s wife’s psychiatric condition would have placed significant strain on Dr Wood, who had to deal with her condition as well to take a greater responsibility for the care of their three children.” It concludes with a respectful request that those complex family, professional and psychiatric factors be taken into account when considering Dr Wood’s appeal. Its date makes plain that Dr Betts’ reference to his “appeal” is a reference to the administrative appeal that Dr Wood had commenced in the Administrative Appeals Tribunal rather than to this proceeding.

I do not have any contemporaneous evidence as to what Dr Wood’s wife’s present situation is, nor do I have a report before me addressing the risk that Dr Wood identifies in relation to the publication of his name and the names of his immediate family in these proceedings. Dr Betts’ letter simply does not address the present circumstances. Nor do I apprehend, having regard to the nature of the review that is currently before me, that I will be required to address in any detail any of the medical circumstances that Dr Wood’s wife might have had or might continue currently to be affected by. The review is in relation to Dr Wood’s tax liabilities and the fact that his wife ceased working in 2016 for a particular period of time is not relevantly contentious.

There appears to be nothing on the court record to show that Dr Betts’ letter was put into evidence before the Tribunal. While I do not dismiss that Dr Wood has a genuine concern, as he articulates in [13] of his affidavit, there is no evidence before the court that would allow me to make a finding that a non-publication order or a suppression order is necessary to protect the safety of any person: that person, of course, in the relevant circumstances being Dr Wood’s wife.

The burden of establishing an entitlement is on an applicant. I have no evidence, expert or otherwise, beyond the assertion of concern by Dr Wood that would entitle me to form a view that an order sought is necessary for the protection of the safety of his wife. I recall again that the burden of establishing the threshold for an order under section 37AF of the Act is a high one and the word “necessary” in the context of the provisions of section 37AG is a strong word. In my view, Dr Woods has not established that any of the circumstances that would enliven this court’s responsibility and duty to make such an order has been established. I am not persuaded that it is “necessary” for such an order to be made.