HI6028 Taxation, Theory, Practice & Law T1, 2017 ASSIGNMENT 2 Due date: Week 10 Due date: Week 10 (Block Mode) Maximum marks: 20 (20%) Instructions: This assignment is to be submitted by the due date...

Topic
Kael v. Federal Commissioner of Taxation - (20 January 2017)
Case introduction
Mr. Seppo Kael (tax payer) was employed by Nordic Building Group Pty Ltd (Nordic). He often
did paper work in the evening after working for the day on the building site. Apart from this, he
also worked on weekends. His salary structure included an amount greater than relevant salary
to cover for regular overtime and other amounts to cover his out of pocket expenses and other
expenditures.
Mr. Kael claimed deduction in his return for overtime meal expenses as an “allowance” under
the award to buy food or drink to do with overtime in his tax returns for year 2012 & 2013. On
13the Dec’12 and 31st Oct’13, respectively, he filed his income tax returns for year 2012 and
2013 respectively.
On 17th Feb’14, the Commissioner wrote to Mr. Kael advising him that his income tax returns of
year 2012 and 2013 has been picked up for audit. In the letter issued to him, he also advised
Mr. Kael that audit will cover his claimed deduction for work related travel expenditure for year
2013 and for other work related expenses (including overtime meal) for both the years 2012 &
2013.
During the audit, Mr. Kael decreased his claim for work related travel expenditure for year 2013
and increased claim for other work related expenses for both the years (2012 & 2013).
On 18th Dec’14, commissioner reduced each of three deduction claims. On 22nd Dec’14,
commissioner issued notice of amended assessment and on the same day issued another
notice of assessment of shortfall of penalty for year 2012. The commissioner calculated the
ase penalty as 25% of the shortfall amount.
His claim was disallowed by commissioner mentioning that Kael is not entitled to claim
deduction for overtime meal expenses as relevant section of the law permits deduction for
overtime meal expenses if “allowance” is paid under industrial instrument to buy the food. His
salary does not include any component of “allowance” at all.
On 19th Feb’15, Mr. Kael wrote to commissioner objecting each of three notices.
On 18th Sep’15, Commissioner issued a notice of assessment of shortfall penalty of 25% of
shortfall amount for year 2013.
On 4th Nov’15, Mr. Kael objected to the notice. All of those 4 notices by Mr. Kael were rejected
y commissioner.
On 18th Jan’16, Mr. Kael then applied to the AAT (Administrative Appeals Tribunal) for review of
decisions made by Commissioner.
Mr. Kael initially claimed $ 3,312 for 2012 and $ 3,324 for 2013 income year (a total claim of $
6,636). He then first increased the claim to $ 3,608 for 2012 and to $ 5,923 for 2013 income
year (a total claim of $ 9,531) and later decreased the claims to $ 277 for 2012 and to $ 99 for
2013 income year (a total of just $ 376).
Ultimately, the issues left with AAT (Administrative Appeals Tribunal) to decide 1) whether Mr.
Kael was entitled to claim deduction for 2012 and 2013 for overtime meal expenses; 2) whether
commissioner was co
ect in levying 25% penalty and 3) whether the penalty should be
emitted.
As per section 14ZZK (b)(i) of the TA Act (Taxation Administration Act, 1953), Mr. Kael now has
the burden of proving that the commissioner decisions were inco
ect or excessive.
 Outline the Sections
eached and explain why those sections were
eached.
Whether overtime meal expenses can be deducted or not is depended on whether the taxpayer
had received a food or drink allowance under an industrial instrument, in terms of s 32-5 of
the Income Tax Assessment Act 1997...