She used a sales suppression tool for years and admitted it. The Tribunal still remitted the penalties in part.
Yuen and Commissioner of Taxation [2026] ARTA 279 is one of few cases where the Tribunal has exercised the discretion under s 298-20 to remit both electronic sales suppression tool penalties and shortfall penalties. Not because the conduct was excusable, but because of who the taxpayer was.
The facts
Ms Yuen ran a restaurant through Trio Harmony. The POS system contained DDA software, an electronic sales suppression tool that deleted and renumbered sales transactions. It was installed by her former husband around 2005, before he left for China. The ESST remained in the system after their divorce in 2011. Ms Yuen used it to withdraw around $1,000 to $2,000 per month, rising to around $3,000 to $5,000 in peak season, for personal living expenses.
The ATO audited the company in 2021 and Ms Yuen personally in 2022. Amended assessments followed, along with shortfall penalties at 75% for intentional disregard and ESST penalties under ss 288-130 and 288-135. The Commissioner refused to remit any of them having regard to the matters set out in PSLA 2022/1.
Why the Tribunal partially remitted
Ms Yuen did not challenge the penalties. She accepted they were lawfully imposed. Her case was purely about remission under s 298-20.
The Tribunal found particular features warranting partial remission [51]. Ms Yuen had almost no formal education, grade 5 in Hong Kong, limited English and difficulty with reading. The Tribunal accepted this placed her in a different position to someone who simply had not completed higher education. She cooperated with the audit, acknowledged wrongdoing and had the ESST functionality removed once told it was unlawful. She also faced serious health challenges, including major surgery in September 2021.
ESST penalties were remitted by one third. Shortfall penalties were reduced from 75% to 50% of the shortfall amount.
The lesson
The Tribunal was clear: poor health or financial hardship alone would not ordinarily justify remission. ESSTs are serious. They do not just suppress sales, they erase the evidence.
But s 298-20 does not require “special circumstances”. It asks whether the penalty outcome is harsh having regard to the taxpayer’s particular circumstances. Here, the combination of limited education, cultural background, health challenges, cooperation and remedial action tipped the balance.
If you are advising on ESST or shortfall penalties, remission is not off the table. But the case has to be built around the individual, not just the hardship.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.