VTBL v FC of T

Members:
Boyle DP

Tribunal:
Administrative Appeals Tribunal, Perth

MEDIA NEUTRAL CITATION: [2023] AATA 168

Decision date: 13 February 2023

Boyle (Deputy President)

THE APPLICATIONS

1. The Applicant has made four applications by which she seeks the review of objection decisions made by the Respondent. The hearing of these applications was, at the request of the Applicant under s 14ZZE of the Taxation Administration Act 1953 (Cth) ( TAA ), held in private.[1] Pursuant to s 14ZZJ(2D) of the TAA, the Tribunal is required to ensure that, as far as practicable, the reasons for decision are framed so as not to be likely to enable the identification of the Applicant. I have, accordingly, given the Applicant and her partner a pseudonym and, as far as is practicable, avoided the inclusion of information which would readily identify the Applicant. For this reason, some of the company and trust names cited in this decision are also anonymised.

BACKGROUND

Applications 2016/2809, 2016/2810 and 2016/2811

2. The following facts are taken from paras 6-31 of the Respondent's Amended Statement of Facts, Issues and Contentions in matters 2016/2809-2016/2811 ( Respondent's 2016 SFIC ) which are admitted by the Applicant.[2] Applicant’s Amended Substituted Statement of Facts, Issues and Contentions in applications 2016/2809–2016/2811 ( Applicant’s 2016 SFIC ) para 4.

2009 tax year

3. The Applicant lodged an income tax return for the year ended 30 June 2009, disclosing a taxable income of $44,067 on 8 March 2010.[3] Hearing Book ( HB ) HB/5201.

4. On 29 March 2010, the Respondent issued a notice of assessment of income tax to the Applicant in the amount of $4,024.78 based on a taxable income of $44,067 for the year ended 30 June 2009.[4] T4; HB/5204. On 7 September 2010, the Respondent issued a notice of amended assessment allowing further non-refundable tax offsets,[5] T5; HB/5208. again based on a taxable income of $44,067.

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2010 tax year

5. On 11 August 2010, the Applicant lodged an income tax return for the year ended 30 June 2010 disclosing a taxable income of $37,536.[6] T6/46; HB/5219.

6. On 31 August 2010, the Respondent issued a notice of assessment of income tax based on a taxable income of $37,536 to the Applicant for the year ended 30 June 2010.[7] T7; HB/5221.

7. On 1 November 2011, the Respondent issued a notice of amended assessment of income tax to the Applicant for the year ended 30 June 2010 based on a taxable income to $41,007.[8] T8/52; omitted from HB.

2011 tax year

8. The Applicant lodged an income tax return for the year ended 30 June 2011 disclosing a taxable income of $25,905 on 23 April 2012.[9] T9; HB/5232.

9. On 3 May 2012, the Respondent issued a notice of assessment of income tax based on a taxable income of $25,905 to the Applicant for the year ended 30 June 2011.[10] T10.

10. On 11 April 2014, the Respondent issued a notice of amended assessment of income tax to the Applicant for the year ended 30 June 2011 based on a taxable income of $27,242.[11] T11; HB/5236.

Audit

11. By letter dated 4 May 2012,[12] T12; 5240–1. the Respondent notified the Applicant that he was commencing a preliminary risk review of her tax affairs and the tax affairs of entities controlled by the Applicant, for the 2008−2010 income years.

12. By letter dated 16 July 2012,[13] T14; HB/5244–5. the Respondent notified the Applicant that he was proceeding with a comprehensive risk review of her tax affairs and of those of her controlled entities, for the years ended 30 June 2008, 30 June 2009, 30 June 2010 and 30 June 2011.

13. By letter dated 24 January 2013,[14] T19; HB/5259. the Respondent notified the Applicant that the comprehensive risk review had been finalised and that an audit would examine various tax risks identified in that review.

14. Under cover of a letter dated 22 April 2013,[15] T25; HB/5359–75. the Respondent issued to the Applicant two notices[16] s 264 notice . under s 264 of the Income Tax Assessment Act 1936 (Cth) ( ITAA 1936 ), which required the Applicant to provide information and produce various documents as listed in the notices.

15. On or about 26 August 2013, the Applicant provided a partial response to the s 264 notices.[17] T29/247; HB/5412.

16. By letter dated 23 January 2015, the Respondent notified the Applicant that the audit had been completed and that amended assessments under s 167 of the ITAA 1936 would be issued to give effect to the findings of the audit.[18] T45; HB/6008–43.

Section 167 ITAA 1936 Default Assessments

17. On 23 January 2015, the Respondent issued a notice of amended assessment under s 167 of the ITAA 1936 to the Applicant for the year ended 30 June 2009 ( 2009 default assessment )[19] T46; HB/6044–47. as follows:

18. On 23 January 2015, the Respondent issued an amended assessment under s 167 of the ITAA 1936 to the Applicant for the year ended 30 June 2010 ( 2010 default assessment )[20] T47; HB/6048–51. as follows:

19. On 23 January 2015, the Respondent issued an amended assessment under s 167 of the ITAA 1936 to the Applicant for the year ended 30 June 2011 ( 2011 default assessment )[21] T48; HB/6052–5. as follows:

20. The Respondent issued the 2009 default assessment, the 2010 default assessment and the 2011 default assessment having, according to the Respondent, formed the view that there had been an avoidance of tax in each year due to evasion.[22] T44; HB/5987–6007.

21.

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On 23 January 2015, the Respondent issued a notice of assessment of shortfall penalty to the Applicant ( penalty assessment )[23] T49; HB/6056–7. assessing the Applicant as being liable to shortfall penalties under s 284−75(1) of sch 1 to the TAA in the following amounts for the following years:

22. On 1 April 2015, the Applicant lodged an objection to each of the 2009, 2010 and 2011 default assessments and to the penalty assessments.[24] T50; HB/6058–72. The relevant grounds of the objection were stated to be as follows:

23. On 4 April 2016, the Respondent issued a notice of objection decision [26] T144; HB/6843–4. to the Applicant in which he:

24. In his reasons for the objection decision,[28] HB/297–311. the Respondent explained the partial allowance of certain of the objections as being based on the Respondent's acceptance that 11 of the 21 properties which had been assessed as being beneficially owned by the Applicant, were held by her on trust for others.[29] HB/301–2. Two of the 21 properties had been sold in 2008 and were not included in the calculation of the assessable incomes for the relevant years.

25. By the objection decision the Respondent amended:

26. On 12 April 2016, the Respondent issued an amended assessment to the Applicant for the year ended 30 June 2009[30] T145; HB/6845. giving effect to the objection decision as follows:

27. On 12 April 2016, the Respondent issued an amended assessment to the Applicant for the year ended 30 June 2010[31] T146; HB6849. giving effect to the objection decision as follows:

28. On 12 April 2016, the Respondent issued an amended assessment to the Applicant for the year ended 30 June 2011[32] T147; HB/6853. giving effect to the objection decision as follows:

29. On 5 April 2016, the Respondent entered the following credits to the Applicant's income tax account to give effect to the objection decision:

30. On 27 May 2016 the Applicant lodged the application for review of the objection decision with the Tribunal. I note that the application for review was therefore lodged within 60 days after the receipt of the objection decision by the Applicant as required by s 14ZZC of the TAA.

The issues for determination in applications 2016/2809, 2016/2810 and 2016/2811

31. The Applicant's 2016 SFIC identified the substantive issues for determination to be as follows:

32. The Respondent's 2016 SFIC identified the issues for determination to be:

33. By para 36 of the Respondent's 2016 SFIC, the Respondent disputed that the matters identified by the Applicant as set out in [31(b), 31(c) and 31(d)] above are matters that arise for determination in these proceedings. The Respondent provided no explanation of why he contended that those issues identified by the Applicant are not to be determined in these proceedings. They were matters raised by the objection[33] T50; HB/6058–72. and, in respect of the issues identified in [31(b)] and [31(c)], were noted in para 16 of the Respondent's outline of submissions dated 4 February 2022 as still being pursued by the Applicant. Much of the evidence, both written and oral, related to these issues and a significant portion of the hearing was taken up in examining them. They were also extensively canvassed in the parties' respective closing submissions. I assume that the point that the Respondent seeks to make in para 36 of his 2016 SFIC is that, in the final analysis, the Applicant must establish two things, firstly, that the 2009, 2010 and 2011 default assessments were excessive and, secondly, what the Applicant's actual taxable income for those years was. While that is what the Applicant must achieve, determination of the issues identified by the Applicant will, in part at least, determine what the Applicant's taxable income for the relevant years was and whether the default assessments were excessive. The determination of those issues is also relevant to whether the Respondent formed the opinion that there had been fraud or evasion in respect of the 2009 and 2010 returns made by the Applicant to enliven the Respondent's power to issue amended assessments under s 170 of the ITAA 1936, which the Respondent identifies as an issue for determination (see [32(c)] above). In that regard, the Respondent's Fraud or Evasion Opinion [34] T44; HB/5987–6008. identified the Respondent's opinion of evasion as being based, amongst other things, on the variance between the Applicant's declared income and the asset betterment calculation made by the Respondent in respect of the 2009, 2010 and 2011 tax years.[35] T44; HB/5988–9 That asset betterment calculation by the Respondent was made on the basis that the properties in question were beneficially owned by the Applicant. Even more directly, the Respondent asserted that his opinion that the Applicant had engaged in evasion was also based on the Applicant's failure to disclose "significant amounts of funds [that the Applicant] had derived when [the Applicant] disposed of numerous properties in both [sic] the 2009 to 2011 income years".[36] T44; HB/5989.

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That assertion is also obviously based on the Applicant being the beneficial owner of the properties in question.

34. During the course of the hearing various further issues arose. I address those further issues in dealing with the substantive issue in relation to which the further issues arose.

35. The ultimate issues for determination are those identified by the Respondent as set out in [32] above. Determination of those issues, however, requires consideration of the other issues identified by the Applicant, all of which were the subject of evidence and submissions by both parties.

Application 2017/7664

36. The following facts are taken from the Applicant's and the Respondent's respective SFICs in application 2017/7664.[37] Respectively, the Applicant’s 2017 SFIC and the Respondent’s 2017 SFIC .

37. Between November 2005 and December 2015, the Applicant was the registered proprietor of 676 (Lot 3) Anketell Road , Anketell.

38. The Applicant purchased Anketell Road for $1,400,000 in November 2005 and sold it on 9 December 2015 for $3,696,000 (GST inclusive). The Applicant purported to sign the contract for sale of Anketell Road in August 2015 as the trustee for the G Holdings Trust.

The 2016 special assessment

39. On 30 June 2016 the Respondent issued a special assessment under s 168 of ITAA 1936 for the year ended 30 June 2016 ( the 2016 special assessment ).[38] T46; HB/8180.

40. The 2016 special assessment assessed the Applicant's tax liability as follows:

41. On 6 March 2017, the Applicant lodged an objection to the 2016 special assessment.[39] T50; HB/8207–17.

42. On 18 December 2017, the Respondent issued the objection decision to the Applicant disallowing the objection.[40] T111; HB/8581–2.

43. The Applicant lodged the application for review of that objection decision in the Tribunal on 21 December 2017 which, I note, is within the time prescribed by s 14ZZC of the TAA (see [30] above).

The issues for determination application 2017/7664

44. The Applicant's 2017 SFIC identified the issues for determination to be:

45. The Respondent's 2017 SFIC identified the issues for determination to be:

46. Although, again, the Respondent does not identify the beneficial ownership of Anketell Road as being an issue for determination, the Respondent's case is based on the premise that the Applicant was the beneficial owner of Anketell Road and was entitled to the proceeds of the sale of that property. Paragraph 20 of the Respondent's 2017 SFIC contended that the Applicant was the legal and beneficial owner of Anketell Road. That is an issue for determination in these proceedings.

THE HEARING AND THE EVIDENCE

47. The four applications were dealt with and heard together. The Applicant was represented by Ms C Burnett SC and Mr D

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Lewis and the Respondent was represented by Mr S White SC, Ms C Thompson SC and Ms L Coci. The applications were heard over ten days from 14 February 2022 to 25 February 2022. The following documents were admitted into evidence:

48. The following witnesses gave evidence at the hearing:

49. Written closing submissions totalling 59 pages were handed up by the Respondent's counsel on the last day of the hearing. Given the detail and size of these submissions, the Applicant sought leave to file responsive submissions. On 25 February 2022, I directed that the Applicant have leave to file and serve written materials in reply to the Respondent's written closing submissions by 18 March 2022. The Applicant's responsive submissions, including a schedule of evidence references, were filed on 18 March 2022.

RELEVANT LEGISLATION

50. Section 166 of ITAA 1936 is as follows:

Assessment

From the returns, and from any other information in the Commissioner's possession, or from any one or more of these sources, the Commissioner must make an assessment of:

  • (a) the amount of the taxable income (or that there is no taxable income) of any taxpayer; and
  • (b) the amount of the tax payable thereon (or that no tax is payable); and
  • (c) the total of the taxpayer's tax offset refunds (or that the taxpayer can get no such refunds).

51. Section 167 of ITAA 1936 is as follows:

Default assessment

If:

  • (a) any person makes default in furnishing a return; or
  • (b) the Commissioner is not satisfied with the return furnished by any person; or
  • (c) the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income;

    the Commissioner may make an assessment of the amount upon which in his or her

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    judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.

52. Section 168 of ITAA 1936 is as follows:

Special assessment

  • (1) The Commissioner may at any time during any year, or after its expiration, make an assessment of:
    • (a) the taxable income derived (or that there is no taxable income) in that year or any part of it by any taxpayer; and
    • (b) the tax payable thereon (or that no tax is payable); and
    • (c) the total of the taxpayer's tax offset refunds for that year or that part of it (or that the taxpayer can get no such refunds).
  • (2) Where the income, in respect of which such an assessment is made, is derived in a period less than a year, the assessment shall be made as if the beginning and end of that period were the beginning and end respectively of the year of income.

53. Section 170 of the ITAA 1936 empowers the Respondent to amend an assessment and prescribes the time in which an assessment can be amended. Relevantly, item 1 of s 170 of the ITAA 1936 allows the Respondent to amend an assessment of an individual within two years after the day on which the Respondent gives notice of the assessment to the individual and item 5 allows the Respondent to amend an assessment at any time if the Respondent is of the opinion there has been fraud or evasion.

54. Section 6-5(1) of the ITAA 1997 is as follows:

Income according to ordinary concepts (ordinary income)

  • (1) Your assessable income includes income according to ordinary concepts, which is called ordinary income .

    Note: Some of the provisions about assessable income listed in section 10-5 may affect the treatment of ordinary income.

    (Original emphasis.)

55. Section 115-25 of the ITAA 1997 relevantly provides for a discount to apply to tax liability arising out of capital gains in certain circumstances (relevant to the Applicant's issue identified in [44(c)] above).

56. Section 14ZZK of the TAA is as follows:

Grounds of objection and burden of proof

On an application for review of a reviewable objection decision:

  • (a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
  • (b) the applicant has the burden of proving:
    • (i) if the taxation decision concerned is an assessment-that the assessment is excessive or otherwise incorrect and what the assessment should have been; or
    • (ii) in any other case-that the taxation decision concerned should not have been made or should have been made differently.

57. Section 284-75 of Schedule 1 to the TAA relevantly provides as follows:

Liability to penalty

  • (1) You are liable to an administrative penalty if:
    • (a) you make a statement to the Commissioner or to an entity that is exercising powers or performing functions under a *taxation law (other than the *Excise Acts); and
    • (b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it.
  • …
  • (5) You are not liable to an administrative penalty under subsection (1) … for a statement that is false or misleading in a material particular if you, … took reasonable care in connection with the making of the statement.
  • (Original emphasis.)

58. Section 284-90 of Schedule 1 to the TAA relevantly provides:

Base penalty amount

  • (1) The base penalty amount under this Subdivision is worked out using this table and subsections (1A) to (2), and section 284-224 if relevant:
    Base penalty amount
    Item In this situation: The base penalty amount is:
    1 You have a *shortfall amount as a result of a statement described in subsection 284-75(1) or (4) and the amount, or part of the amount, resulted from intentional disregard of a *taxation law (other than the *Excise Acts) by you or your agent 75% of your *shortfall amount or part
    2 You have a *shortfall amount as a result of a statement described in subsection 284-75(1) or (4) and the amount, or part of the amount, resulted from recklessness by you or your agent as to the operation of a *taxation law (other than the *Excise Acts) 50% of your *shortfall amount or part
    3 You have a *shortfall amount as a result of a statement described in subsection 284-75(1) or (4) and the amount, or part of the amount, resulted from a failure by you or your agent to take reasonable care to comply with a *taxation law (other than the *Excise Acts) 25% of your *shortfall amount or part

59. Section 284-220 of sch 1 to the TAA provides for the base penalty to be increased by 20 per cent in certain circumstances. Section 284-220(1)(a) identifies one of those circumstances in which the base penalty can be increased by 20 per cent as the taxpayer taking steps to prevent or obstruct the Respondent from finding out about a shortfall amount, or the false or misleading nature of a statement, in relation to which the shortfall amount was calculated.

THE PARTIES' CONTENTIONS

The Respondent

60. The Respondent's 2016 SFIC made the following contentions:

61. The Respondent's 2017 SFIC made the following contentions:

The Applicant

62. The Applicant's 2016 SFIC made the following contentions:

63. The Applicant's 2017 SFIC made the following contentions:

Application for leave

  • (a) The Applicant did not contend in the 2017 objection that she, in the alternative to holding Anketell Road as bare trustee, held Anketell Road as trustee for the G Holdings Trust, further and alternately,

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    that she was a constructive trustee of Anketell Road for:
    • (i) the trustee of the G Holdings Trust; and
    • (ii) M Pty Ltd.
  • (b) The Applicant seeks leave to raise these alternative arguments.

  • The establishment of a trust in relation to land
  • (c) A trust may be established in relation to land in Western Australia provided that it is in writing. Where a trust is not in writing in relation to land, that does not limit a finding that the registered proprietor held the land on trust, including relevantly as a constructive trustee.[47] Citing Property Law Act 1969 (WA) ( PLA ) s 34 and Adamson v Hayes

    Requirements for the establishment of a trust

  • (d) The requirements for the establishment of a trust are:[48] Citing Knight v Knight (1840) 49 ER 58 .
    • (i) the intention to create the trust;
    • (ii) the existence of a valid beneficiary; and
    • (iii) identifiable and certain trust property.
  • (e) The Applicant was the sole registered proprietor of Anketell Road, the identified trust property.
  • (f) The Applicant took steps to establish a trust which was in writing and the G Holdings Trust recorded its interest in Anketell Road (but not from the commencement of the trust).

    Prior consistent dealings

  • (g) The Respondent acknowledged at para 49 of the 2017 objection decision that the Applicant held other properties as bare trustee and refers to a previous audit decision.
  • (h) The Respondent accepted, before any appeal was instituted, that 222 of 230 properties involved in developments were held on trust by the Applicant for the benefit of other entities.
  • (i) The Applicant's evidence concerning her dealings in property establish consistent methods of acquiring property using trusts, obtaining borrowed funds from financiers and developing land.

    Income tax

  • (j) Section 960-100(3) of the ITAA 1997 recognises that a person may act in different capacities and when they do, in each of the capacities, the person is taken to be a different entity.
  • (k) Similarly, s 96 of the ITAA 1936 ensures that except as provided in that Act, a trustee shall not be liable as trustee to pay income tax upon the income of the trust estate.
  • (l) The Applicant contended that she held Anketell Road as trustee and disputes the Respondent's finding that she was liable to pay GST.
  • (m) A determination that there was an enterprise conducted by a beneficiary of a trust does not conclusively determine whether a taxpayer was, for example an investor (and held assets on capital account) or a property developer (and held assets on revenue account).

    Bare trust

  • (n) The Applicant purchased Anketell Road as a bare trustee for the trustee of the G Holdings Trust. Anketell Road was purchased with the intention that it would form part of a future development.
  • (o) The trust deed dated 15 November 2005 identified the Applicant as the trustee of the G Holdings Trust. That was an error. She was not the trustee of that trust.

    New trust

  • (p) If it is not found that the Applicant was a bare trustee, the evidence of the Applicant is also consistent with the establishment of a new trust called the "G Holdings Trust" which is different from the trust established by the deed dated 1 July 2005 since there is no specific reference in the trust deed to the trust established 1 July 2005.

    Constructive trust

  • (q) If it is not found that the Applicant was a bare trustee of the G Holdings Trust or that a new trust was established by the deed of trust, the Applicant's further contention is that a constructive trust ought to be

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    recognised.
  • (r) A constructive trust may be regarded as either a trust imposed by analogy or a remedial device.[49] Citing Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 .
  • (s) The Applicant did not provide any moneys for:
    • (i) the purchase of Anketell Road; or
    • (ii) the ongoing expenses related to the Property including interest on the loan, rates and development costs.
  • (t) The Respondent concluded in the 2017 objection decision at para 44 that funds for the acquisition of Anketell Road were paid by G Pty Ltd (formerly G Holdings Pty Ltd) and loaned moneys from Liberty Funding Pty Ltd.
  • (u) While the Applicant owned Anketell Road the rental income was payable to a third party under the applicable joint venture agreement (the JVA ).
  • (v) The intended land subdivision did not occur, and Anketell Road was sold. On the sale, the proceeds were distributed to various parties. The GST liability arising on the sale was brought to account in the books and records of the G Holdings Trust.
  • (w) Equity will not allow a statute to be a cloak (an instrument) for fraud and a party may be declared to be a constructive trustee.[50] Citing Rochefoucauld v Boustead (1897) 1 Ch 196 .
  • (x) A constructive trust is ordered where it would be unconscionable for a party to retain ownership of property which rightfully belongs to another.[51] Citing Baumgartner v Baumgartner (1987) 164 CLR 137 ; Keech v Sandford (1726) 25 ER 223 .

    Income or capital gains?

  • (y) Any moneys derived from the sale of Anketell Road were not income pursuant to s 6-5 of the ITAA 1997 because:
    • (i) the moneys were not income according to ordinary concepts; further and alternately; and
    • (ii) the Applicant was not conducting a business of property development.

    Income according to ordinary principles

  • (z) As a general rule, the income derived by a taxpayer is to be determined using a method of tax accounting which, in the circumstance, is "calculated to give a substantially correct reflex of the taxpayer's income."[52] Citing Commissioner of Taxes (SA) v Executor & Trustee Agency Co of South Australia (1938) 63 CLR 108 ( Carden’s case ).
  • (aa) The Respondent considered that
    Federal Commissioner of Taxation v The Myer Emporium Ltd[53] (1987) 163 CLR 199 . and TR 97/11 [54] Commissioner of Taxation, Income tax: am I carrying on a business of primary production? ( TR 97/11 , 4 June 1997). meant that the Applicant was carrying on a business. The Respondent, however, failed to consider whether the Applicant derived directly or indirectly ordinary income from the sale of Anketell Road for the purposes of s 6-5 of the ITAA 1997.
  • (bb) Under the JVA, the Applicant did not have:
    • (i) The right to the proceeds of the sale of Anketell Road ahead of any banks, the Developer (as defined in the JVA) or the Commonwealth for GST amounts; or
    • (ii) any legal obligation to pay expenses associated with the sale of Anketell Road.
  • (cc) The sale of Anketell Road was reported in the records and books of the trustee of the G Holdings Trust. There was a net loss for income tax purposes for the relevant period.

Investor or property developer?

  • (dd) If the Applicant owed Anketell Road in her own right, she contends that she invested in Anketell Road and was not a property developer.
  • (ee) A taxpayer acquiring land in the expectation of a profit does not, of itself, result in a conclusion that the person is a property developer, or an investor.[55] Citing Shields and Commissioner of Taxation [1999] AATA 4 .
  • (ff) The proceeds of the sale of Anketell Road were not income of the Applicant, and it was, accordingly, wrong to apply s 6-5 of ITAA 1997.
  • (gg) The factors identified in the 2017 objection decision for concluding that Anketell Road was trading stock were not correct as they failed to address the factors under TR 97/11 or the factors identified in Shields.
  • (hh) If Anketell Road was trading stock, then development costs should have been allowed.

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Capital gains
  • (ii) If the Applicant owned Anketell Road in her own right, she was an investor and, on disposal, "CGT Event A1" occurred under s 104-10 of ITAA 1997, and s 115-25 of the ITAA 1997 allows the Applicant to reduce any gain arising from the disposal of Anketell Road by 50 per cent.

Remission of the general interest charge

  • (jj) The general interest charge was intended to replace the late payment penalties that were formerly imposed with a "commercially realistic charge".[56] Citing Dixon v Commissioner of Taxation (2008) 167 FCR 287 ; [2008] FCAFC 54 .
  • (kk) For the purposes of sub-ss 8AAG(5)(a)-(b) of the TAA, there are special circumstances which would render it fair and reasonable to remit all or a part of the charge, or it is otherwise appropriate to remit the charge. They are:
    • (i) The Applicant held around 230 properties, one of which was Anketell Road.
    • (ii) The Respondent accepted that 222 of the properties were held by the Applicant on trust.
    • (iii) The Applicant had a reasonable basis for believing that she held Anketell Road on trust.
    • (iv) The Applicant did not receive the rental income or proceeds of sale.
    • (v) Even if the Applicant is unable to satisfy the burden of proving a trust, the parties agreed that Anketell Road be held on trust in accordance with the JVA.
    • (vi) If the Applicant cannot pay the general interest charge the Respondent can commence proceedings against the Applicant which could result in the issuing of a bankruptcy notice.
    • (vii) The non-remission of interest on the tax-related liabilities is harsh in light of the fact that the Applicant did not personally benefit from any the transactions involving Anketell Road.

Application for leave to amend grounds of objection - application 2017/7664

64. As noted at [63(a)] above, the Applicant sought leave to raise grounds of objection that were not raised in the 2017 objection lodged with the Respondent. Section 14ZZK(a) of the TAA (see [56] above), limits the grounds of objection that a taxpayer can rely on before the Tribunal to those stated in the objection made to the Respondent, unless the Tribunal orders otherwise. By an order made by consent on 24 February 2022, I granted leave to the Applicant to raise the matters in paragraphs 9.1.2 and 9.1.3 of the Applicant's 2017 SFIC, which are reflected in [63(a)] above.

CONSIDERATION

The law - s 14ZZK(b)(i) of the TAA

65. At [46] of Commissioner of Taxation v Ross ,[57] Commissioner of Taxation v Ross (2021) 174 ALD 77 ; [2021] FCA 766 . Derrington J summarised the effect of s 14ZZK(b)(i) of the TAA as follows:

The parties generally agreed that the effect of s 14ZZK(b)(i) is that the taxpayers bear the burden of proving, on the balance of probabilities, both that the assessment is "excessive" and, also, what the assessment should have been to make the assessment right, or "more nearly right":
Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 88;
[1936] ALR 425 (Trautwein) per Latham CJ;
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 623-5;
90 ALR 341 at 343-5 (Dalco) per Brennan J and at CLR 632-4; ALR 350-1 per Toohey J;
Gashi v Commissioner of Taxation (2013) 209 FCR 301; 296 ALR 497; [2013] FCAFC 30 (Gashi) at [61]-[67]. It was also not in dispute that the onus is to the civil standard, being the balance of probabilities. It should always be kept steadily in mind that the rationale for the onus imposed by s 14ZZK(b)(i) is that the facts relating to a taxpayer's taxable income are peculiarly within their knowledge and they must be taken to know what their income is and how it was derived: Trautwein at CLR 87. It follow that there is no undue harshness in requiring a taxpayer, who has failed to lodge a return or whose return is not compliant with the taxation legislation, to bear the onus of establishing their true taxable income for the relevant income year.

66. Agreeing with the parties' view as to the effect of s 14ZZK(b)(i), Derrington J went on to make the following observations about "… the application of the onus in the context of a

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challenge to a default assessment founded upon the 'asset betterment method'":[58] Ross at [48].

Some guidance as to that question can be gleaned from a more granular analysis of the principles concerning the onus as they have been synthesised in the authorities. In general terms, the relevant authorities establish as follows:

  • (1) An assessment under s 166 is fundamentally different to an assessment under s 167 and, necessarily, the manner in which they can be challenged are also fundamentally different: Gashi [61]-[67];
    Rigoli v Commissioner of Taxation (2014) 141 ALD 529; [2014] FCAFC 29 (Rigoli) at [12].
  • (2) The assessment by the "asset betterment method" is a legitimate form of assessment: Trautwein at CLR 86-87, 99 - 100 and 105; even though it necessarily involves an amount of guesswork and, whilst almost certainly inaccurate to some extent, it is no part of the Commissioner's duty to establish what judgment he has formed in making a s 167 assessment: Gashi at [55];
    George v Federal Commissioner of Taxation (1952) 86 CLR 183 at 204;
    [1952] ALR 961 (     George ). Clearly enough, any inaccuracy follows from the circumstances which impel the Commissioner to make a default assessment, being that a process of calculating assessable income less deductions is not possible: Rigoli at [12].
  • (3) It is not part of a review of an objection decision concerning an assessment under s 167 to seek to identify the facts the Commissioner adopted for the purpose of making the assessment and whether those facts disclose a taxable income: Gashi at [55]; George at 204. The principal fact which the Commissioner is required to determine in making an assessment pursuant to s 167 is "the amount of income upon which … income tax ought to be levied": Gashi at [56].
  • (4) It is insufficient to discharge the burden under s 14ZZK(b)(i) in relation to an assessment under s 167, whether based on the asset betterment method or otherwise, to merely demonstrate that the Commissioner formed a judgment about the taxpayer's taxable income on a wrong basis and that the amount assessed far exceeded the taxpayer's taxable income: Gashi at [62]; Rigoli at [12].
  • (5) In order to establish that an assessment under s 167 is excessive, a taxpayer must positively prove their "actual taxable income" and, in doing so, must demonstrate that the amount of tax levied by the assessment exceeds their actual substantive liability: Gashi at [63]; Dalco at CLR 623-5; ALR 345-7; Trautwein at CLR 88;
    Ma v Federal Commissioner of Taxation (1992) 37 FCR 225 at 230;
    27 ALD 601 at 605 (Ma); by, in effect, furnishing a return of actual income which involves establishing both sides of the equation:
    Bosanac v Commissioner of Taxation (2019) 267 FCR 169; [2019] FCAFC 116 (Bosanac (FC)) at [57].
  • (6) In the context of a s 167 assessment based on the asset betterment method, the taxpayer must demonstrate that the identified unexplained accumulated wealth was derived from non-income sources and that may be achieved by an accepted denial of any undisclosed source of income, providing acceptable evidence of how the taxpayer spends their time, and demonstrating a reasonable explanation for any appearance of the possession of assets: Ma at FCR 230; ALD 605; Gashi at [64]-[65]. The taxpayer must account for the unexplained increase in assets by explaining the source of those assets and identifying that those sources are not taxable. "[I]f the disclosed "actual" taxable income does not explain the increase in assets, then the taxpayer is unlikely to have discharged the burden of establishing the assessment is excessive": Gashi at [65].
  • (7) The converse is that it is insufficient for a taxpayer to prove that an item in their asset betterment statement was

    ATC 11017

    wrong or should not have been included: Gashi at [63]-[67]; Rigoli at [12]. If they do not also satisfactorily explain the source or sources for the other unexplained wealth, that is that they were derived from non-income sources, the onus under s 14ZZK(b)(i) will remain unsatisfied: Gashi at [66]. A deficiency in proof of the excessiveness of the assessment results in the challenge failing: Dalco at CLR 624-6; ALR 346-7. Necessarily, this prevents a successful challenge to an assessment being made by a process of "picking and choosing" part or parts of the increased wealth relied upon by the Commissioner and attacking them as being improperly included as part of the taxpayer's taxable income: Gashi at [66]; Rigoli at [25]. A process which involves attacking elements of the Commissioner's calculation and facts in respect of which the taxpayer chooses to lead evidence is not sufficient. The same is true for a default assessment not based on the asset betterment method: Rigoli at [12].
  • (8) These principles can result in a situation where the default assessment can be assumed to be inaccurate in some respects but, in the absence of the taxpayer establishing what their actual taxable income was, it must nevertheless stand: Gashi at [77]-[79]; Woellner and Zetle, "Satisfying The Taxpayer's Burden Of Proof In Challenging A Default Assessment - The Modern Labours Of Sisyphus?"
    [2014] JlALawTA 11.
  • (9) The ultimate question in Part IVC proceedings relating to an assessment made under s 167 is whether the amount of the assessment is excessive. That places no burden on the Commissioner to show that the assessments were correctly made: Dalco at 623-4; ALR 345. The manner in which the taxpayer can discharge the burden may vary with the circumstances but "absent agreement with the Commissioner to confine the issues for determination in a Pt IVC proceeding, the Commissioner is entitled to rely upon any deficiency in the taxpayer's proof of the excessiveness of the amount assessed in seeking to uphold the assessment": Gashi at [61]. See also Dalco at CLR 624; ALR 346.
  • (10) There may be cases where the amount of taxable income depends upon the legal complexion of known facts or upon specific factual questions. In such a case, a taxpayer may successfully discharge the onus by establishing that the Commissioner included in their taxable income amounts which ought not to have been included: Dalco at CLR 624; ALR 347. However, such a situation would only arise where the Commissioner agrees to a process which is different to that described above by confining the scope of the dispute between him and the taxpayer to certain enumerated amounts. One might expect some clear expression of that agreement, involving as it does an abandonment of the advantages accorded to the Commissioner in s 167 in respect of defaulting taxpayers.

67. Justice Derrington analysed the decisions of Logan J in
Le v Commissioner of Taxation[59] [2021] FCA 303 . and the decision of the Full Court of the Federal Court of Australia in
Haritos v Federal Commissioner of Taxation.[60] [2015] FCAFC 92 ; (2015) 233 FCR 315 . That analysis applies to the present case. Relevantly his Honour stated:

[ 53 ] Mr Hack QC submitted that the decision in Le applied statements of principle from Haritos as to the manner in which a taxpayer might be able to discharge their onus of proof. In particular, it was submitted that the Full Court in Haritos (at [233]-[237]) rejected the "all or nothing" approach to the discharge of the onus of proof by a taxpayer faced with a default assessment founded on the asset betterment methodology and that Logan J had adopted that in Le (at [54]). It was submitted that the result of this was:

Where, by concession or by the Tribunal's finding, it is concluded that an amount included in an applicant's assessable income by the Commissioner is not, in truth, assessable income of the applicant the applicant has

ATC 11018

shown that the assessment is excessive to the extent of that concession or finding.

[ 54 ] It is appropriate to first consider the Full Court's decision in Haritos as it was subsequently relied upon by Logan J in Le. There, the Commissioner had undertaken a wide ranging audit of the taxpayers' affairs over a number of years and issued assessments substantially increasing the amount of their assessable income for each income year. By the time the matter had reached the Tribunal, the issues between the parties had reduced to a consideration of a number of issues relating to certain payments and expenses…

…

[ 56 ] After considering a number of arguments as to the manner in which the burden of proof applied in the case before them, the Court addressed one further argument as follows:

235. The third way in which the appellants put their argument that the Tribunal had misused the burden of proof section is related to the second. The appellants submitted that even if Mr Haritos' evidence was correctly rejected, they had nevertheless established subcontractor expenses of at least a certain amount. The Tribunal was not entitled to adopt what the appellants described as an "all or nothing" approach. If an "at least" figure was established on the evidence, then the Tribunal should have made a finding in accordance with that evidence.

236. We think that proposition is correct. If a taxpayer claims his or her expenses were $10, but fails to prove that fact because their evidence is rejected, this does not prevent the Tribunal from finding that the expenses were $5 where there is other satisfactory evidence establishing expenses of at least that amount. In our opinion, the burden of proof section does not dictate a different conclusion.

[ 57 ] Mrs Ross submitted that this latter discussion by the Full Court in Haritos had the consequence that, in attempting to discharge the burden imposed by s 14ZZK(b)(i) in relation to an assessment made pursuant to s 167, it was sufficient to identify that elements of the Commissioner's assessment were incorrect or partially incorrect and, to the extent error is shown, the taxpayer's taxable income is revealed by the remaining amount. With respect, although the Full Court in Haritos may have intended to overturn the earlier decisions of the Full Court in Gashi, Rigoli and Bosanac (FC) by a side-wind, it is probably unlikely. As the Commissioner submitted, Haritos concerned circumstances where the taxpayers and the Commissioner had reduced the scope of the hearing to a number of particular disputed amounts which, depending upon the manner in which they were resolved, would increase or decrease the amount which the parties had otherwise agreed represented the taxpayers' taxable income. In other words, the underlying circumstances in relation to the taxpayers' taxable income were generally agreed with the remaining disputed items to be determined by the Tribunal, with the results of those determinations altering the otherwise accepted amount of taxable income. Haritos was not a case where, before the Tribunal, the taxpayers' were still required to fully and completely establish the actual amount of their taxable income. Given the context in which the Court was discussing the effect of the taxpayer establishing some portion of its expenses, there is nothing exceptional about its comments at [235] to [236] and no reason to think the Court was departing from the orthodox principles described earlier.

[ 58 ] In Le, the Commissioner had made default assessments after conducting an audit and, in part, those assessments were based on the asset betterment method. The Tribunal rejected the taxpayers' application for review concerning some of the income years under review, but made alterations to the Commissioner's objection decisions relating to other income years. Logan J critiqued the Commissioner's approach to undertaking the assessments but observed that the discharge of the statutory onus "entails rather more than

ATC 11019

just a critique of that approach": at [31]. His Honour also referred to the observations of Burchett J in Ma which have been mentioned above and identified that they were directed to circumstances where the occurrence of the underlying taxable events is controversial, of which undisclosed income cases offer a paradigm case. The appellants in Le had submitted that, given what the decision in Ma permitted, the Tribunal had failed to address key elements of the explanation which they had provided for their assets…

[59] Logan J then identified why it was important for the Tribunal to consider the arguments advanced as to why the amount of declared income was excessive. His Honour said (at [52]):

This statement also underscores the importance of engaging with the explanation proffered by a taxpayer to explain, in each income year, why there is no unexplained wealth such that the taxable income as declared (or additionally conceded) is indeed the true taxable income with the consequence that the contested assessment for that year is excessive.

[60] He then considered the taxpayers' submissions as to the consequences of the Tribunal's alleged failure to consider the nature and extent of the evidence on which the taxpayers had relied as demonstrating that the credits in their bank accounts were transfers from other accounts and not income (as the Commissioner had assumed for the purpose of the taxpayer's asset betterment statement), stating (at [53]):

Against this background, particularly the emphasised parts of the observations in Haritos, the applicants' allegation that the Tribunal failed to advert to one of their central arguments as to why in each year the amount of the assessment was excessive does not just have force, it should be accepted. The flow of funds into and out of bank accounts was in evidence, as was an explanation as to why outgoings from accounts were not income. The applicants gave precision in their tabulations as to the resultant excess in the amount of each assessment. A failure to consider that explanation is, truly, a failure to undertake the statutory review function. Further, the impact of that failure is not explicable by findings as to credit, because those findings themselves were made without considering the explanation.

…

[ 61 ] His Honour then held (at [54]), in relation to the Full Courts' observations in paragraphs [233] to [236] in Haritos, that a taxpayer is entitled to succeed in having shown that an assessment is excessive even if they have not succeeded to the fullest extent:

The observations made by the Full Court in Haritos offer, with respect, elucidation about the operation of the statutory onus of proof in practice. If the material before, and accepted by, the Tribunal shows that the assessment is excessive in a particular amount, it is nothing to the point that an applicant contends that it is excessive to an even greater extent. Section 14ZZK does not have the effect that, because that contention fails, the applicant has not shown the assessment to be excessive or, related to that, that the Tribunal is thereby relieved from concluding, based on the material it has accepted, that the assessment is excessive to the extent revealed by that material.

[ 62 ] There is little doubt that, in relation to the circumstances considered in Haritos, those comments are correct. The parties before the Full Court in that case had effectively accepted that the taxpayers' taxable income in particular years was a certain amount, save that it might be increased or decreased depending upon the manner in which a number of disputed items were resolved. Even if the taxpayers' contentions in relation to those matters were only partially accepted, the amount of taxable income was to be decreased to that extent, but that was only because of the paradigm in which the parties accepted the dispute was to occur.

[ 63 ] However, his Honour's observations should not be accepted in

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relation to circumstances where the Commissioner has made a default assessment based on the asset betterment method and the taxpayer is faced with having to establish what their actual income is and that it is less than that assessed by the Commissioner. As the authorities previously referred to clearly establish, in such cases the methodology adopted by the Commissioner by which he reached a judgment about the amount of taxable income for the default assessment is not in issue. What is in issue is whether the taxpayer is able to establish both what their actual taxable income was and that it was less than the Commissioner's assessment (which gives rise to the conclusion that the latter is excessive).

…

[ 66 ] Mr Hack QC for Mrs Ross submitted that the approach adopted by Logan J in Le has the consequence that, where the Commissioner has made a default assessment using the asset betterment method, a taxpayer can succeed in establishing that the assessment is excessive by merely identifying errors in the Commissioner's methodology which inflated the amount of the default assessment. With respect, that cannot be so. Most obviously it would be directly inconsistent with the Full Court decisions in Gashi and Rigoli and the earlier High Court authorities in Dalco and Trautwein. It is an approach which would assume, wrongly, that the Commissioner's default assessment was a calculation of actual taxable income from which items might be challenged leaving the remainder as the taxpayer's actual taxable income. The authorities establish that not to be the case. It is a judgment of what the taxpayer's taxable income should be and it establishes the taxpayer's liability to the Commonwealth save and unless they can successfully challenge it by demonstrating the amount of their actual taxable income and that it is less than the amount of the default assessment. Whilst Logan J may have considered some observations in Haritos to suggest to the contrary, those statements were directed to the particular circumstances before the Full Court where the parties had agreed as to the manner in which the remaining issues in dispute were to affect the taxpayers' taxable income. That situation did not apparently exist in Le and, for the reasons explained below, did not exist in the present case.

68. In the present case there was no agreement between the parties of the type existing in Haritos, namely, an agreement to the effect that default assessment was a calculation of actual taxable income from which items might be challenged, leaving the remainder as the taxpayer's actual taxable income. The Applicant establishing that components or a component of the asset betterment calculation on which the Respondent based the s 167 of the ITAA 1936 default assessment (see [16] above) should not have been included, could (potentially) establish that the assessment was not in the correct amount, but would not, of itself, establish that it was "excessive or otherwise incorrect" for the purposes of s 14ZZK(b)(i) of the TAA. As a matter of logic, in order to establish that an assessment was excessive, it would be necessary to establish what it should have been, that is, establish what the actual taxable income was.[61] Gashi FC at 315 [63]–[65]; Ross at [47(4)], see [65] above.

69. As was the case in Ross, in the present case the parties correctly agreed that the effect of s 14ZZK(b)(i) of the TAA is that the taxpayer bears the burden of proving, on the balance of probabilities, both that the assessment is "excessive" and, also, what the assessment should have been.[62] Ross at [46]; see [64] above. Kitto J, the judge at first instance in George, described the burden on the taxpayer as follows:[63] George at 189.

… in order to carry that burden he must necessarily exclude by his proof all sources of income except those which he admits. His case must be that he did not derive from any source taxable income to the amount of the assessment. That will involve him, of course, in accounting for the increase in his assets, and it may well be that the commissioner will direct his efforts mainly or even wholly to endeavouring to meet the evidence the appellant adduces on this point. But the source of the increase in the assets is not the actual issue in the case; even if it were proved, for example, that that source consisted of winning bets on the racecourse,

ATC 11021

the issue would still be whether or not from any source the appellant derived as much taxable income as the assessment treats him as having derived.

70. The cases to which the parties referred fall into two broad categories. There are those, including Ross and George, in which the taxpayer seeks to explain increases in the taxpayer's net wealth as coming from non-income sources. The second category of cases is those in which the taxpayer seeks to establish that the property on which the asset betterment assessment was made was not the taxpayer's property or that the transaction treated as income had been mischaracterised.[64] See for example, Dalco ; Trautwein, Binetter v Federal Commissioner of Taxation (2016) 249 FCR 534 ; [2016] FCAFC 163 . and, in part, Haritos .

71. In the present case, while the amended assessments issued by the Respondent were described as being based on an "asset betterment method",[65] Reasons for Decision following audit: T45, HB/6011 para 4. the calculations of the taxable income as stated in the amended assessments (see [17(a)], [18(a)] and [19(a)] above) had four components[66] HB/6042. some of which would not ordinarily be described as asset betterment. The first component is described as "Asset Increase/Decrease". The calculations of that component for two of the three years were significantly in the negative.[67] 2009: -$1,027,674.57; 2010: -$2,460,342.79; 2011: $309,322.52. The majority of the amounts assessed as amended taxable income in each of the years were made up of the second component, "Add: Other Income"[68] 2009: $1,527,529.60; 2010: $5,142,529.60; 2011: $6,885.60. and the third component described as "Add: Private Expenses".[69] 2009: $3,751,212.06; 2010: $3,242,726.59; 2011: $4,094,657.05. The fourth component, "Add: Taxable Adjustments", were in each year relatively minor.[70] 2009: $7,779.75; 2010: $860.70; 2011: -$7,482.61. From the totals of these four components, deductions[71] 2009: $484,031.43; 2010: 506,499.38; $305,718.57. were allowed to calculate the "Taxable Income as per Asset Betterment", which was also reflected in the "Taxable Income as Adjusted" figure in each of the amended assessments.

72. The calculation of each of the three major components of the assessments were, in part at least, sought to be explained in the Reasons for Decision . The "Asset Increase/Decrease" calculation was set out in Appendix 1 Attachment A to that document.[72] Attachment A : Asset Betterment Statement; HB/6039–42 (also cited as the asset betterment calculation). In the table headed "Net Assets", the first item shown was "Assets at Cost". The first category under that heading was "Cash", under which nine bank accounts and credit cards were listed.[73] HB/6039. At para 71 of the Reasons for Decision,[74] HB/6020. the Respondent explained that "Only bank accounts held in your name, which relate to your income and expenditure, were included in the Betterment" and, at para 72, the statement was made that "For deposit accounts, the balance as at 30 June each year is shown as an asset in the Betterment". The list of accounts under the heading "Cash" in Appendix 1 Attachment A did not identify which of the nine accounts related to income and expenditure and which were deposit accounts.

73. The second component in the "Net Assets" table in Appendix 1 Attachment A,[75] HB/6039. is headed "Shares" under which 12 companies are identified, five of which are listed as having shares held by the Applicant.[76] HB/6039. Paragraphs 121-2 of the Reasons for Decision[77] HB/6025. explained that "a share registry database search shows that you owned the following shares during the 2008, 2009, 2010 and 2011 income years" and that "[t]hese amounts form part of your assets for the purpose of the Betterment".

74. The third component of the "Net Assets" table in Appendix 1 Attachment A is headed "Properties" under which 26 property addresses are listed.[78] HB/6030–40. The first seven of those properties are included in the eight properties identified in para 124 of the Reasons for Decision[79] HB/6025. with the note that "OSR property records show that you currently own the following properties" and that "[t]hese amounts form part of your assets for the purposes of Betterment".[80] HB/6025; Reasons for Decision para 125.

75. Paragraph 126 of the Reasons for Decision stated:[81] HB/6026.

OSR records show that in the period 30 June 2008 to 30 June 2011,230 properties registered in your name were sold. The consideration received upon the sale of these properties totalled $70,981,500. (Footnote omitted.)

76. At para 127 of the Reasons for Decision, the Respondent stated that the Applicant's then lawyers had advised in May 2010 that the 230 properties registered in the name of the Applicant were purchased and held for the benefit of other entities and that the Applicant derived no income from the sale of the properties. At para 128, the Respondent stated that "… the following 21 properties were not identified to be beneficially held on behalf of another entity and the income from the sale of

ATC 11022

these properties has not been returned". At para 130 on the Reasons for Decision, the Respondent advised that "[a]ccordingly the Commissioner considers that you as the registered proprietor owned and sold these properties in your own right." The total of the sale prices of these 21 properties are included in Appendix 1 Attachment A under the heading "Taxation Adjustments" under the sub-heading "Income"[82] HB/6041. in the amounts of $1,519,000.00 for 2009 and $5,134,000.00 for 2010.

77. The next element of the "Net Assets" part of Appendix 1 Attachment A appears under the heading "Assets - related entity loans".[83] HB/6040. The inclusion of these amounts in the calculation is referred to in para 120 of the Reasons for Decision and explained as follows:

You provided loans to [G Holdings] Pty Ltd. The loans accounts balances [sic] for 2008 to 2011 financial years are as follows…[84] HB/6024.

78. The balances of those loans (presumably as at 30 June in each year) are then included in the calculation of the total assets.

79. The final element of the "Net Assets" table of Appendix 1 Attachment A is the deduction of liabilities which are identified as being amounts owing to various named lending entities.[85] HB/6040.

80. Once the liabilities are deducted from the total assets position for each of the years, the increase or decrease in the net asset value from year to year is calculated to reach the "Asset Increase/Decrease" figure for each year. As noted at [71] above, for two of the three years there were significant decreases in the net asset value. Irrespective of whether the net asset value calculation in each of the three years showed a year-on-year increase or decrease, a significant component of that calculation was based on the eight properties identified in para 124 of the Reasons for Decision (see [74] above) being beneficially owned by the Applicant.

81. Similarly, the "Other Income" component of the asset betterment calculation for each of the years[86] HB/4042. was based on the 21 properties sold in the relevant years (see [76] above) being beneficially owned by the Applicant and the proceeds of sale being treated as her taxable income. While these amounts are described as forming part of the asset betterment calculation, they are, in effect, being treated by the Respondent as income according to ordinary concepts.[87] ITAA 1997 s 6-5.

82. The "Private Expenses" component of the asset betterment calculation is not specifically explained in the Reasons for Decision. Paragraphs 115-118 of the Reasons for Decision, under the heading "Expenditure from Bank Accounts", are as follows:

115. The accounts detailed in Table 4 were taken into account for the Betterment.

116. Analysis of your bank accounts shows that funds were used to meet personal expenses and/or make loan repayments.

117. The Commissioner considers that the funds in your bank accounts used to meet personal expenses or to repay loans used to acquire assets are assessable as ordinary income under section 6-5 of the ITAA 1997 as these funds represent income from unexplained sources or unidentified business activities.

118. These funds have been included in the Betterment at Appendix 1.

83. On pages 39 and 40 of 42 of the Reasons for Decision,[88] HB6040–1. under the heading "Private Expenditure", the Respondent stated that "[y]our bank statements show personal expenditure of the following during 2009 to 2011 income years" and then set out a table (headed "Private Expenses") showing seven bank accounts and credit cards against which amounts are shown for each of the years.[89] HB/6041. It is those amounts that are included in the asset betterment calculation identified in [71] above. The individual transactions from each account or credit card which are included by the Respondent in that calculation are not identified, or at least not identified in any document to which I was taken by the Respondent's written or oral submissions.

84. Some explanation of this element is provided in the Respondent's Fraud or Evasion Opinion[90] T44; HB/5987–6007. in which details of transactions in numerous bank accounts in the Applicant's name are set out. On pages 5-6 of 21 of that document,[91] HB/5991–2. at sub-para (e), the Respondent stated:

There was a variance of $3,730,748, $5,379,267 and $4,070,421 between her

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taxable income and asset betterment calculation for the 2009 and 2010 income years respectively.

85. From the Respondent's statement at para 117 of the Reasons for Decision,[92] HB/6024. I assume that the Respondent is not satisfied with the explanation provided by the Applicant that the accounts in question were used as clearing or facilitative accounts for various property related transactions, including payment of loan instalments, made by or on behalf of third parties. I also assume that the amount that the Respondent included in the asset betterment calculation for this item in each year represented the Respondent's calculation, following the audit, of the amount used to meet personal expenses or to repay loans used to acquire personal assets, although no explanation was provided by the Respondent as to how that assessment in each case was made.

86. The core issue in the present case is, firstly, whether the assets on which the asset betterment calculation was made are, or were, the property of the Applicant and, secondly, whether the amounts withdrawn from or paid into the accounts in the Applicant's name were, as she claims, not for her benefit. That second issue is also largely determined by whether the various properties in relation to which the payments were made were properties beneficially held by the Applicant, or were properties held by her on trust for others. As noted above, it was those issues which were the subject of the evidence and the submissions at the hearing.

The Properties claimed by the Applicant to be held on trust for other entities

87. As noted at [23] and [24] above, the Respondent allowed the Applicant's objection insofar as it related to certain properties that had been included in the default assessments, on the basis that those properties were not beneficially held by the Applicant. Relevant to the assessments for 2009 and 2010, the Respondent did not accept that the Applicant did not hold the following properties beneficially:

88. The Applicant made a total of five affidavits[93] HB/76–2234 (dated 8 November 2017); HB/3202–3326 (dated 15 November 2017); HB/3335–52 (dated 17 November 2017); HB/7638–934 (dated 24 August 2018); HB/3846–5064 (dated 17 October 2021). and two witness statements.[94] HB/3353–6 (dated 11 November 2016) and HB/45–6 (dated 2 May 2017).

The Applicant's evidence in relation to the properties

89. In her affidavit dated 8 November 2017, the Applicant provided the following background to the property developments with which she had been involved which are relevant to the properties in question:

90. In relation to the eight properties in question, the Applicant's evidence in her affidavit of 8 November 2017[97] Starting at HB/94. and her affidavit dated 17 October 2021[98] Starting at HB/3846. was as follows.

7 (Lot 275) Gosford Meander, Ashby

91. By a declaration of trust dated 18 October 2003,[99] HB/411. the Applicant declared that she would acquire Lot 13 (1106) Wanneroo Road (a lot which included the land which would, following subdivision, become 7 Gosford Meander) as bare trustee for G Holdings Pty Ltd. Settlement occurred on 28 May 2004.

92. The finance for the purchase was provided by a financier, with the deposit of $20,000 being paid by an entity, the identity of which the Applicant cannot now recall.

93. Lot 13 (1106) was subdivided into 17 separate lots with a balance incorporated into lot 9010. The balance lot 9010, which was 2119 square metres, was reduced to 1314 square metres after certain parts were vested in the local council. The remaining land became lot 9014 which was then subdivided to create lots 275 and 276.

94. In April 2007, the Western Australian Planning Commission endorsed the deposited plan which included Lot 275. On or about 15 June 2007 parts of Lot 9010 were sold to a third-party neighbour for $40,000. The sale was recorded in the general journal of G Holdings Pty Ltd.[100] HB/422. The "Account Transaction [Accrual]" of G Holdings Pty Ltd also recorded that transaction (less GST) on 15 June 2007.[101] HB/423.

95. In 2008, as part of a G Holdings loan which combined various individual lots, funds were obtained from Reliance Finance & Mortgage Services and a mortgage was provided by G Holdings Pty Ltd to the financier over property, including 7 (Lot 275) Gosford Meander. Reliance advanced $385,000 (based on a value to loan ratio of 65 per cent) to G Holdings Pty Ltd on the security of the mortgage over that property.

96. On or about 11 June 2009,7 (Lot 275) Gosford Meander was sold for $240,000. This was less than was owed to Reliance. A further $50,000 was required to discharge the Reliance mortgage which was paid by another entity, the identity of which the Applicant cannot recall.[102] Settlement statement, HB/424. There was no balance of funds to be returned to the developer, G Holdings Pty Ltd.

97. In her affidavit dated 17 October 2021, the Applicant provided further information relevant to this property. That included the fact that the entity which lent the money to G Holdings Pty Ltd was not Reliance, but rather a special purpose financing vehicle called Walthamstow Pty Ltd.[103] HB/3867 para 37–8. The Applicant says that, while she could not find a copy of the

ATC 11026

loan agreement between Walthamstow Pty Ltd and G Holdings Pty Ltd, she had located a draft of that agreement which she thought reflected the final loan agreement. According to that draft,[104] HB/3935. Walthamstow Pty Ltd advanced a total of $3,500,000. I note that the "Borrower" is defined in that draft as the Applicant and six companies, including G Holdings Pty Ltd. All of those parties were to give, or gave, mortgages over their respective properties which were separately listed in the document against each borrower. The Applicant gave a mortgage over at least five properties, including 7 (Lot 275) Gosford Meander[105] HB/3936. and G Holdings Pty Ltd gave a mortgage over five separate properties. I note that there is nothing in that document to suggest that the Applicant was any less of a borrower in her own right than G Holdings Pty Ltd and the other companies.

98. The Applicant goes on to state in her affidavit of 17 October 2021 that two days after the $3,500,000 was advanced by Walthamstow Pty Ltd to, as she put it "[G Holdings Trust] (amongst others)",[106] HB/3867 para 39. G Holdings Trust agreed to lend $3,500,000 to RC Enterprises Pty Ltd as trustee for the V Development Trust. This, the Applicant said,[107] HB/3867 para 41. demonstrates:

"… the flow of funds advanced under the facility with Reliance … In short;

  • (a) Walthamstow advanced to [G Holdings Trust] the sum of $3.5 million;
  • (b) I granted Walthamstow a mortgage, as instructed, over 7 (Lot 275) Gosford Meander, Ashby to secure [G]'s indebtedness to Walthamstow; and
  • (c) [G Holdings Trust] on-lent to [RC Enterprises] the $3.5 million advanced to it by Walthamstow.

99. There are problems with the Applicant's above analysis. The first problem is that, as noted above, the $3,500,000 was not advanced to G Holdings Pty Ltd, it was advanced to seven entities, including G Holdings Pty Ltd and the Applicant. The loan agreement specifically treats all of the Applicant, G Holdings Pty Ltd and the five other identified companies as the borrower. The second problem with the Applicant's analysis of that transaction is that G Holdings Pty Ltd did not advance $3,500,000 to RC Enterprises, if the loan agreement produced by the Applicant is correct.[108] HB/3941–9. The loan agreement between G Holdings (as trustee for the G Holdings trust) and RC Enterprises, was for a loan in the amount of $2,637,693. This amount appears to have been calculated on the basis of the values of 10 properties listed in a schedule which appears on the last page of the loan agreement.[109] HB/3949. Nine of those properties are identified as being owned by G Holdings Pty Ltd and the tenth property, 7 Gosford Meander, is identified as being owned by the Applicant. The total value of the 10 properties is stated to be $2,714,000 to which an "LVR" rate of 60 per cent is applied to calculate a "Subtotal" of $1,628,400 to which an amount described as "Cash contribution from [G Holdings Pty Ltd]" of $1,009,293 is added to come to the amount of the loan, $2,637,693. There is no reference in the operative provisions of the loan agreement to that schedule or any explanation of the reason for or the basis of the calculation by which the amount lent was determined. The loan agreement, which was dated 15 May 2008, was executed by the Applicant as the sole director of G Holdings Pty Ltd and as a director of RC Enterprises Pty Ltd.

100. The Applicant was cross-examined in relation to her claim that she held 7 Gosford Meander on trust for G Holdings Pty Ltd:


ATC 11027

COUNSEL:		 … I suggest to you that if this deed of trust was intended to be relied upon, and existed at the time of the purchase of this property, you would have taken steps to have it stamped and made known to the mortgagee that it was being acquired on trust for the benefit of [G Holdings]?
APPLICANT: I can only repeat the same information that I have repeated, and that is the property was acquired for a project for [G] Holdings. The property was subdivided, the sales were recorded in the books. The property was joined onto a larger property, a larger land subdivision that was marketed from [W] Property Group. It was developed, it was sold, and the sales were recorded in [G] Holdings. It was one piece that was incapable of being developed at the time, and it was some years later - those sales I believe were recorded in 04, 05, 06. I don't recall specifically, but they're itemised in the Commissioner's own documents, and the last title, it was some time later before that could be sold.[110] Transcript at 216.

101. Counsel for the Respondent took the Applicant to the draft loan agreement by which $3,500,000 was lent to the Applicant, G Holdings and others (see [98] above) and to the deed of trust referred to at [91] above. The following exchange then occurred:


COUNSEL: I want to suggest to you that in the limited material that you have provided in relation to this purchase and sale, there is no document passing between you and third parties which would in any way indicate that you were holding this property on trust for [G] Holdings?
APPLICANT: I disagree with that.
COUNSEL: And the only document that you can point to is a document that was created, you say, on 18 October 2003 to which you and [A] are signatories at page 411?
APPLICANT: I believe that the evidence of the acquisition and the sale of the 20 - there were 22 total properties developed, residential lots developed in this site and the information had previously been provided and accepted by the Commissioner of Taxation, that the sales had been reported in [G] Holdings. The development costs had been borne by [G] Holdings. The statutory payments had been paid by [G] Holdings. I believe there is other documents here that support that it was held on trust for [G] Holdings.[111] Transcript at 219–20.

102. A also gave evidence in relation to this property. He provided an affidavit dated 8 November 2017.[112] HB/2235–2277 with annexures (HB/2278–3201). At the hearing, the Applicant's counsel advised that the Applicant would not seek to rely on certain paragraphs of A's affidavit. On that basis, A's affidavit was taken to be read into evidence, excluding those paragraphs.[113] Transcript at 439–40. His evidence was that:

103. A was not cross-examined specifically in relation to 7 Gosford Meander. The majority of the cross-examination of A went to his credit and the findings of various courts and tribunals as to A's credibility as a witness and to his business practices. I deal with those issues separately below.

5 (Lot 665) Seattle Elbow, Hocking

ATC 11028

104. The Applicant's evidence in her affidavit dated 8 November 2017 in relation to this property was to the effect that she had purchased and held the property on trust for H Land Company Pty Ltd. The property was originally part of a Lot 58 (120) Lenore Road, Hocking.[117] HB/100 para 135.

105. In or around early 2004, the Applicant had a conversation with A in which A had asked her to buy Lot 58 Lenore Road on trust for H Land Company. The shares in H Land Company were held by A and a business associate of A.

106. On 7 January 2004 the Applicant signed a contract for the purchase of Lot 58 Lenore Road for a purchase price of $1,400,000.[118] HB/506–7. The Applicant says that she executed a deed of trust in the same form as the one that she had executed in respect of 7 Gosford Meander (see [91] above), save that the entity for which she was purchasing the property was H Land Company. She said that she had searched for, but could not find, a copy of that deed of trust.[119] HB/101 para 138. It appears that the deed of trust was subsequently located as a document headed "Deed of Trust" dated 7 January 2005, signed by the Applicant and witnessed by someone described as "auditor", was included in the supplementary T documents filed by the Respondent on 2 February 2022 and included in the Supplementary Hearing Book filed with the Tribunal on 11 February 2022.[120] Supplementary hearing book/146. The Applicant's evidence, when cross-examined about this document, was that it was her understanding that the deed of trust had been provided to the Respondent by H Land Company[121] Transcript at 259. during an audit in 2010. This is supported by the Respondent's advice to that effect in his letter dated 10 May 2010, quoted in [177] below. The authenticity of that deed appears not to have been disputed by the Respondent at the time of that letter, but was disputed by the Respondent at the hearing.

107. The purchase of the Lot 58 Lenore Road settled on 11 February 2005. A copy of the settlement statement was exhibited to the Applicant's affidavit of 8 November 2017.[122] HB/508. The settlement statement was addressed to and identified H Land Company as the purchaser.

108. The Applicant said in her affidavit of 8 November 2017 that she cannot remember who provided the original funding for the purchase of the Lot 58 Lenore Road. The first of the titles following the subdivision of Lot 58 Lenore Road was issued in or around 2006, at which time sales of those lots commenced. According to the Applicant, the sales of the lots were recorded in the books of H Land Company.

109. The Applicant said that, in or around 2007, the loan by which Lot 58 Lenore Road was purchased was refinanced with Suncorp "under a loan account in the name of [G] Holdings Pty Ltd as trustee for the [G] Holdings Trust."[123] HB/104 para 159.

110. In or around May-June 2008, a deposited plan relating to land including Lot 58 Lenore Road was lodged at Landgate and, sometime after that, Lot 665 (5 Seattle Elbow) was created out of that land. The property was sold under a contract of sale dated 3 August 2009. The sale of the property settled in November 2009. An extract from Core Logic RP Data indicated that the sale price was $245,000 and that the Applicant was the seller.[124] HB/509–10.

111. According to the Applicant, the sale of the property was recorded in the "Accrued Sales & Associated Costs" journal of H Land Company Pty Ltd. A copy of the relevant page of that journal was exhibited to the Applicant's affidavit of 8 November 2017.[125] HB/512.

112. On 3 November 2009, G Holdings Pty Ltd recorded in its general journal a debit of $192,999.30 noted as being in relation to "Loan - Suncorp 22/3 Elliott3217" for Lot 665, and a credit to "[M] Nominees Pty Ltd" in the same amount. A copy of that general journal was exhibited to the Applicant's affidavit of 8 November 2017.[126] HB/513.

113. On 9 November 2009, there was a credit of the amount of $192,999.30 in the Suncorp loan account in the name of G Holdings Pty Ltd as trustee for the G Holdings Trust. A copy of the relevant Suncorp statement was exhibited to the Applicant's affidavit of 8 November 2017.[127] HB/514. The credit entry in the bank statement of the above amount was noted as being in relation to "Lot 665".

114. The Applicant exhibited to her affidavit of 8 November 2017 a document which appears to be an extract from the H Land Company Pty Ltd general journal, which had six debit entries

ATC 11029

described as "Loan - [M] Nominees" and six credit entries described as "Deposits Received".[128] HB/515. Four of those credit and debit entries were for $8,000 and two were for $5,500. At the top of the entries the words "16/11/2009 Part proceeds L200, L701, L90, L665, L84, L228, L709" appear.[129] HB/515.

115. An extract from the H Land Company Pty Ltd general journal, a copy of which was exhibited to the Applicant's affidavit of 8 November 2017,[130] HB/516. had 22 entries on 30 November 2009,11 credits in varying amounts and 11 debits in amounts corresponding to the credits. The credit entries were described as "Deposits Received" and the debit entries were described as "Loan - [M] Nominees". One of those credit entries and the corresponding debit entry were in the sum of $192,999.30. The extract was headed "30/11/2009 L665, 661, 662, 656 HK [Applicant] banked in GH Bank Accounts". The Applicant said[131] HB/102 para 149. that this recorded a loan in that amount to M Nominees Pty Ltd.

116. The Applicant then referred[132] HB/102 para 150. to a Suncorp statement in the name of G Holdings Pty Ltd, recording a credit on 9 December 2009 in the amount of $189,932.30, the transaction description for which was "Branch Chq Deposit … LOT 655".[133] HB/517.

117. The Applicant then referred to the H Land Company Pty Ltd general journal[134] HB/518. which had eight entries for 25 August 2010, four debit entries for various amounts and four credit entries for amounts corresponding to the debit entries. The extract of that journal was headed "25/08/2010 Rates adj Lots 337, 665, 703, 308". There was a handwritten annotation "L665" against the third entry (a debit entry). That entry was described as "Loan - [M] Nominees" and was in the amount of $1,098.62. Immediately below that entry there was a credit entry in the same amount described as "PD - Rates & Taxes".

118. The Applicant provided further information and documents in relation to this property in her affidavit dated 17 October 2021. She had, by then, located a copy of the contract for the sale of 5 Seattle Elbow which she exhibited to her later affidavit.[135] HB/4041. The Applicant was identified as the seller in that contract.

119. The Applicant further explained the transactions referred to in [113]-[118] above in paras 78-82 of her affidavit of 17 October 2021.[136] HB/3873–4. She said that the sum of $192,999.30, which she described as part of the proceeds of sale of 5 Seattle Elbow, was used to pay down G Holding Pty Ltd's debt to Suncorp. She said that "[o]n the other side of the ledger, [G Holdings Pty Ltd] recorded a credit of the same amount … to a loan account with [M Nominees Pty Ltd], meaning that [G Holdings Pty Ltd] became further indebted to [M Nominees Pty Ltd] by this amount."[137] HB/3874 para 80. She went on to state that on 30 November 2009, H Land Company Pty Ltd recorded a debit of $192,999.30 to a loan account with M Nominees Pty Ltd and an equivalent credit to another liability account named "Deposits Received". The Applicant said that she believed that the sale proceeds were accounted for in this way to reflect G Holdings Pty Ltd taking over part of H Land Company Pty Ltd's debt to M Nominees Pty Ltd.[138] HB/3874 para 80. She said that the sale was accounted for in H Land Company Pty Ltd's books.

120. While she did not refer to them in her affidavit of 17 October 2021, I note that there were "Special Conditions" to the contract of sale for the property signed by the Applicant as seller.[139] HB/4041–2. These special conditions, headed "Belvedere Hills", comprised Annexures A, B, C and D, and a plan of the lots. The Annexure setting out special condition A,[140] HB/4043–5. which noted the Applicant as the seller, contained an acknowledgment by the purchaser that they had received a copy of the restrictive covenants relating to the land and made reference to various obligations owed by the purchaser to the "developer" and by the developer to the purchaser.[141] HB/4043 para 1. That condition also referred to the property being part of the Belvedere Hills Estate. Annexure D, which described itself as "Section 136D Deed of Restrictive Covenant", a document prepared by Mony De Kerloy Barristers & Solicitors, identified the developer as H Land Company Pty Ltd.[142] HB/4049. This deed of covenant was executed by A as "sole director and sole secretary" of H Land Company Pty Ltd.[143] HB/4053. The deed also included a "Mortgagee's Consent" executed by Suncorp as mortgagee of the property by which the mortgagee consented to the creation of the restrictive covenants.[144] HB/4054.

121. A's evidence in his affidavit[145] HB/2235–3201. in relation to 5 Seattle Elbow[146] HB/2268–9 paras 135–40. was to the effect

ATC 11030

that the property was purchased by the Applicant as trustee for the H Land Company Pty Ltd. The property was one of the lots that resulted from the subdivision of the Lot 58 Lenore Road (see [110] above).

122. A said that at some time prior to the purchase of Lot 58 Lenore Road, he and the Applicant had a conversation in which he asked the Applicant to purchase Lot 58 Lenore Road on trust for H Land Company, a company of which he was, at that time, the sole director and shareholder. His evidence was that the interest payments on the loan by which the property was purchased were recorded in the accounts of H Land Company Pty Ltd. What he claimed to be relevant extracts from H Land Company Pty Ltd's general journal, were exhibited to A's affidavit.[147] HB/3086–9. These are the same records exhibited to the Applicant's affidavit dated 8 November 2017 referred to in [115]-[116] above.

123. In relation to the refinancing of the loan by which Lot 58 Lenore Road was purchased, referred to in the Applicant's affidavit as set out in [109] above, A said that he believed that the reason why the interest payments were reflected in the H Land Company Pty Ltd accounts, but the final payment made is in the account of G Holdings Pty Ltd, was the result of new arrangements put in place by Suncorp in the wake of the global financial crisis in late 2008. This, he says, resulted in Suncorp advising the Applicant that she and G Holdings Pty Ltd had to amalgamate their loans under a single loan facility.[148] HB/2268–9 para 140.

124. In effect, A's affidavit mirrors the Applicant's affidavit of 8 November 2017 in relation to this property.

125. The Applicant was cross-examined in relation to this property. The Applicant was taken to the deed of trust dated 7 January 2005. It was put to the Applicant[149] Transcript at 256. that she could not have executed the deed of trust on 7 January 2005 because movement records sourced by the Australian Taxation Office[150] R1, 80. indicated that the Applicant was outside Australia from 23 December 2004 to 13 January 2005.[151] The Applicant objected to the movement details being admitted into evidence because they had not been provided prior to the hearing and the Applicant had not had the opportunity to check her records to determine the accuracy of the ATO records. The Applicant's evidence was that, assuming that those movement records were correct, it may be that she did not execute the deed on 7 January 2005. Her evidence was that she had no recollection of having executed the deed and noted that, although it was her signature on the document, the handwritten date was not in her handwriting.[152] Transcript at 257. The best that she could remember was that the deed was signed by her sometime prior to the settlement of the purchase of Lot 58 Lenore Road. Her evidence was that:

It is what I would believe to have occurred in accordance with the way the deeds of trust were executed and stored and held for all of the land development properties.

…

It may have been prepared, and I may have signed it upon my return. I just - I don't recall.[153] Transcript at 257–8.

126. A was also cross-examined on the date of the signing of the deed dated 7 January 2005. It was put to A that both he and the Applicant were overseas on that date. The following exchange then ensued:


COUNSEL: What is the explanation, so far as you can tell, albeit you didn't sign it, for this document having been dated on a date in which you and VTBL were not present in Australia?

ATC 11031

A:		 Well a lot of these - a lot of these trust deeds were produced by other people, third parties. So they might have pre-dated or dated it and got her to sign it before that date. But these things were - I had hundreds of these things produced. So we'd sign one of these things, put it into the settlement file and that's where it stayed. They were produced by other parties, so whether it was [HS], or I got the girl at the front desk or the accountant at the time, they were always produced by other parties. As for the date, whether you sign them on that date, I can't remember. We might have pre-signed them. I just can't remember that.
COUNSEL: So, were you saying that we can't place a great deal of confidence on the date that appears on the document?
A: I can't - I don't know, but you can place importance upon the document, because the document was filed in the settlement file and it was acted upon, and that's how the accountants would account for the property, and that's where they used to return the sales of the property.[154] Transcript at 475.

127. A was also cross-examined on a deed of trust dated 26 December 2003 in relation to Lot 100 Elliot Road, Wanneroo. The deed purported to be signed by the Applicant and witnessed by A. It was again put to A that neither he nor the Applicant was in Australia on 26 December 2003. The following exchange then ensued:


COUNSEL: Right. So you agree you were not in Australia at the time this deed was witnessed and signed by VTBL on 26 December 2003?
A: Yes, that looks it, right. Yes.
COUNSEL: So it's clear, isn't it, that the deed was created at a later point in time, and then backdated, signed and witnessed by you?
A: It was either that way, or is it predated? Might have been dated before we left. We didn't fill these dates in. Other people did it. I don't know why they put the dates in, but it was not uncommon to predate something and sign it before the date. I sign documents all the time dated 30 June.
COUNSEL: What weight can the tribunal place on these deeds if they're not dated and signed on the date that's recorded on them?
A: They've been acted upon. They go in a file, the blocks got developed, the blocks got settled, the GST was remitted, and the tax was put in the tax returns. It was done by - this was an act all the time we acted upon these documents, and the thousands of transactions that we put through on that basis. Then, if you don't accept these documents, [an officer of the Respondent] accepted this in the [RN Pty Ltd] audit. He audited the [RN Pty Ltd] accounts, of which we had these trust deeds, and had - VTBL had done the same thing. He accepted that, and that was a clear passage for us that we were on the - there was nothing wrong with what we were doing. And we acted - we acted this way…
…  
COUNSEL: And you entered, or witnessed, these documents - VTBL entered into them as trustee - to obscure and to conceal the true beneficial owner of the property?
A: Not at all. There was never any intention for VTBL to be the owner of these properties. It was always under the - always under this thing of a corporate, or a trustee. And that's how we behaved, and that's how we acted, and that's how we returned them. And we did thousands of blocks of land, and a lot of them were done by deeds of trust in other people's names. VTBL was not the only one as I used. I've used a lot of other people who have done the same bare trustee arrangement, and they've been reported and they've been accepted. So the Tax Office has accepted this behaviour since 2001, 2002, '02, '03 and '04, and have signed off on it. We've been audited in 2004 by [an officer of the Respondent], and he accepted this.[155] Transcript at 478–9.

128.

ATC 11032

A was then taken to the trust deed dated 18 October 2003[156] HB/411. by which the Applicant declared that she would acquire Lot 13 (1106) Wanneroo Road as bare trustee for G Holdings Pty Ltd (see [91] above). The following exchange then occurred:

COUNSEL: And it was another document that you created to obscure and to conceal the true beneficial owner of the property?
A: Totally wrong, because the 36 lots were placed in [G] Holdings, were reported in the BAS statements in [G] Holdings, and put in the tax returns of [G] Holdings. There's only one lot that was left over out of this lot that you've - that you've accounted for it to be VTBL's asset. Yet, the other 30 lots you've accounted for them in [G Holdings], accepted them, paid the GST and the tax in that. So how do you - how does that come about then? If you've accepted it as a [G Holdings] asset, and accepted it in the BAS returns and the tax returns, then you do say that one lot here is now her asset?[157] Transcript at 479–80.

23 (Lot 103) Nicolas Drive, Casuarina

129. In her affidavit of 8 November 2017,[158] HB/127–8 paras 371–80. the Applicant described the circumstances of her purchase of this property. She said that this was one of the properties that she purchased for the benefit of another entity, in this case M Land Company Pty Ltd. To that affidavit, the Applicant attached a copy of the contract for the purchase signed by her and dated 19 February 2006.[159] HB/431–2. The purchaser is described in that contract as "[M] Land Co Pty Ltd A.T.F. the [M] Land Trust and or nominee" followed by a P.O. box. The purchase price was $850,000. Condition 9 of the contract[160] HB/432. stated "The nominee is [the Applicant]".

130. At para 373 of her affidavit,[161] HB/127 para 373. the Applicant said that, by a declaration of trust dated 19 February 2006, she declared that she would acquire the property on trust for M Land Company Pty Ltd. A copy of a deed of trust was attached to the Applicant's affidavit of 8 November 2017.[162] HB/433.

131. The Applicant's evidence at para 375 of her affidavit was that J.P. Morgan Trust Australia agreed to advance $722,500 for the purchase of the property. A copy of a letter from HLP Mortgage Company (Aust) Pty Ltd dated 9 May 2006, addressed to the Applicant, which the Applicant said was "confirming settlement of a loan", was exhibited to the Applicant's affidavit.[163] HB/870. I assume that that company was a mortgage broker which secured funding from J.P. Morgan Trust. A copy of the certificate of title for the property attached to the Applicant's affidavit[164] HB/871. shows the registered proprietor of the property to be the Applicant, and a mortgage in favour of J.P. Morgan Trust being registered over the property, with a registration date of 8 May 2006. The Applicant's evidence was that it was a condition of the loan imposed by HLP Mortgage Company (Aust) Pty Ltd, that there be an account from which monthly direct debits to service the loan could be drawn.[165] HB/127 para 376. The Applicant said that she nominated her NAB Flexi Account for this purpose.[166] HB/128 para 378.

132. According to the Applicant, each month M Nominees Pty Ltd deposited funds into the account nominated by the Applicant to cover the interest payment under the loan agreement with HLP Mortgage Company (Aust) Pty Ltd.[167] HB/128 para 378. Each month HLP Mortgage Company (Aust) Pty Ltd directly debited the required payment from the Applicant's NAB Flexi Account.

133. The Applicant also exhibited to her affidavit a copy of a letter dated 4 May 2006 from her lawyers at the time, Birman & Ride.[168] HB/434. That letter confirmed the booking of the settlement of the purchase of the property for 5 May 2006 and enclosed a settlement statement. The penultimate paragraph of that letter was as follows:

Please provide any evidence you have of an agency relationship between yourself and [M] Land Company Pty Ltd to enable stamping to be completed prior to settlement.

134. That letter from Birman & Ride also asked for two cheques, one a bank cheque in the

ATC 11033

sum of $128,186.90 with the payee being a nominated individual, and an "ordinary cheque" in the sum of $40,610.00 payable to the Commissioner of State Revenue. Although she did not refer to it in her affidavit, the Applicant also exhibited to her affidavit a copy of a letter dated 5 May 2006 on M Nominees Pty Ltd letterhead, signed by A and addressed to Bendigo Bank.[169] HB/435. That letter requested the issue of bank cheques in the amounts specified, and to the payees nominated in the Birman & Ride letter of 5 May 2006.[170] HB/435. The Applicant further exhibited copies of two bank cheques issued by Bendigo Bank in those amounts, and with the payees as requested[171] HB/436. in the M Nominees Pty Ltd letter to Bendigo Bank.

135. A's evidence in relation to this property was set out in paras 141-5 of his affidavit.[172] HB/2269–70. He said that the property was purchased by the Applicant, at his request, on trust for the M Land Company Pty Ltd and that the Applicant executed the deed of trust dated 19 February 2006 effecting that arrangement.[173] HB/2269 paras 141–2. He then referred to the 4 May 2006 letter from Birman & Ride by which two cheques were requested, and to the letter on M Nominees Pty Ltd letterhead signed by him, by which M Nominees Pty Ltd directed Bendigo Bank to draw the two cheques (see [134] above).

136. At para 144 of his affidavit, A said that this property was eventually sold on 5 November 2009 in an undeveloped condition because "we" (A does not identify who "we" refers to) needed to reduce our debt levels urgently. A exhibited to his affidavit a copy of a letter dated 26 November 2009 from a settlement agent[174] HB/3099. and the settlement statement enclosed with that letter.[175] HB/3100. The letter and the settlement statement were addressed to the Applicant. The settlement statement identified the sale price as being $920,000 with the proceeds of sale, (after payment of commission, settlement fee, disbursements rates and taxes) being distributed as follows:

The letter from the settlement agent stated that a bank deposit slip for the amount paid to the bank was enclosed with the letter, however, that document was not included in the exhibit to A's affidavit.

137. At para 145 of his affidavit, A explained that, after the payment of the moneys owed to the mortgagee (Perpetual Nominees Ltd), the balance of the proceeds was paid to M Nominees Pty Ltd and that, although the property had been purchased for $850,000 and sold for $920,000, the development of which this lot formed part gave rise to a loss and that there was no profit made by M Land Company Pty Ltd or any other company. A exhibited a copy of what he described as "the general journal" (he does not identify of which company, however, I assume it is M Nominees Pty Ltd) which recorded receipt of the $141,397.63 as well as the expenditure of $850,000.[176] HB/3101. A also exhibited to his affidavit[177] HB/3193. what he described as the BAS return for M Nominees Pty Ltd which records the same entries as the general journal.

138. The Applicant was cross-examined in relation to this property. Counsel asked whether she understood the request in Birman & Ride's letter of 4 May 2006 referred to in [134] above as being a reference to her appointment as M Land Company Pty Ltd's nominee under condition 9. The Applicant confirmed that that was her understanding. She also accepted that the deed of trust dated 19 February 2006 was "an important document to provide to the lawyers"[178] Transcript at 235. but could not recall whether it had been provided to the lawyers.[179] Transcript at 236. A was not cross-examined in relation to this property.

10 (Lot 78) Rotterdam Vista, Wanneroo

139. The Applicant's evidence in relation to this property was in paras 128-34 of her affidavit of 8 November 2017.[180] HB/99–100. Her evidence at para 128 was that she purchased this property for the benefit of G Holdings Pty Ltd. At para 129 of that affidavit, the Applicant's evidence was that an "offer and acceptance contract was signed on or around 26 August 2003 to acquire lot 100 (103) Elliot Road, Wanneroo for an amount of $780,000." Lot 78 Rotterdam Vista was originally part of Lot 100 (103) Elliot Road, Wanneroo.

140. The Applicant exhibited to her affidavit a copy of the offer and acceptance[181] HB/3103–4. and a copy of the deed of trust pursuant to which she claimed that she acquired 100 Elliot Road,

ATC 11034

Wanneroo.[182] HB/3102. The contract for sale, however, identified H Land Company Pty Ltd "or nominee" as the buyer. Further, it appears to have been signed on behalf of the buyer by A, not the Applicant, and appears to have been signed by A on 26 September 2003 and by the sellers on 5 September 2003.[183] HB/3104.

141. The deed of trust, which appears to have been signed by the Applicant and witnessed by A, was dated 26 December 2003. By that deed of trust, which was in the same form as the other deeds of trust produced by the Applicant, the Applicant "declares that [she] will acquire the property for the Beneficiary and will hold the property on trust for the Beneficiary". The Beneficiary is defined as G Holdings Pty Ltd and the property is defined as Lot 100 (103) Elliot Road, Wanneroo.

142. The Applicant also exhibited to her affidavit a copy of a settlement statement dated 10 December 2003[184] HB/3105. which stated that the date of settlement of the purchase of 100 Elliot Road, Wanneroo was 10 December 2003 and that the purchaser was the Applicant. That settlement statement also identified the sources of the purchase price as being: "Deposit $30,000.00", "Paid by The Rock Building Society $597,371.62" and "Received from you for settlement $201,449.30".

143. There are obvious discrepancies between the Applicant's narrative in paras 128-31 of her affidavit and the documents exhibited to her affidavit. Firstly, the buyer identified in the offer and acceptance is H Land Company Pty Ltd or nominee and the offer and acceptance was signed by A, a director of H Land Company Pty Ltd, on 26 September 2003, not "on or around 26 August 2003" as asserted by the Applicant. There is no explanation as to how or why, by the time of settlement on 10 December 2003, the Applicant had become the purchaser rather than H Land Company Pty Ltd, which signed the offer. Further, the deed of trust by which the Applicant declared that she " will acquire the property for the Beneficiary" postdates the settlement of the purchase of the property by some 16 days.

144. The Applicant also provided no explanation of the entry in the settlement statement, which was addressed to her, which identified $201,449.30 used to fund the purchase as having been "[r]eceived from you".

145. In paras 91-8 of her affidavit dated 17 October 2021,[185] HB/3875–6. the Applicant provided some explanation of the source of the funding for the purchase of 100 (103) Elliot Road, Wanneroo. She exhibited to that later affidavit a copy of a letter of offer dated 20 November 2003 from The Rock Building Society.[186] HB/4057. The letter was addressed to the Applicant and identified the loan principal as being $600,000. The letter made no reference to G Holdings Pty Ltd or the Applicant holding the property on trust. The Applicant also exhibited to that affidavit a document which she described as "part of an executed but undated loan agreement" for an advance of $600,000.[187] HB/4060–6. Again, that document identified the Applicant as the borrower and made no reference to the property being held on trust.

146. The Applicant also exhibited to her affidavit of 17 October 2021 a letter dated 18 December 2006 from The Rock Building Society[188] HB/4068. confirming that her loan account, described as an offset account, had been closed with the balance being transferred to another identified account. Included with that letter was a The Rock Building Society account statement for the period 1 August 2006 to 15 December 2006.[189] HB/4069. The statement showed three transfers of $4,034.74 and one transfer of $3,908.76 from an account ending in 418, and five debit entries described as "Loan Interest" in the amounts of $2,061.25, $4,018.99, $4,083.79, $3,953.30 and $4,046.43. As noted above, the only account statement included with the letter from The Rock Building Society was the above-described The Rock Building Society account statement. At para 97 of her affidavit, the Applicant said "[t]he borrower under the Suncorp facility used to refinance the debt to The Rock was [G Holdings Pty Ltd] (rather than myself)".

147. The Applicant did exhibit to her affidavit of 17 October 2021 a copy of a Suncorp account statement in the name of G Holdings Pty Ltd for the period 1 to 31 January 2007 which described the "Loan Purpose" as "Lot 100 Elliot Road, Hocking".[190] HB/4071.

148. The Applicant also exhibited to her affidavit of 17 October 2021 a copy of the mortgage given by the Applicant over 100

ATC 11035

Elliot Road, Hocking[191] HB/4075. which identified the Applicant as the mortgagor, and Suncorp as the mortgagee. Accompanying the copy of the mortgage was a copy of a Western Australian Government Office of State Revenue ( OSR ) Certificate of Stamp Duty issued on 15 December 2006 which noted the "Sum Secured" as being $2,400,000, the "Normal Advance" as being $1,800,000 and "Refinance (Normal)" as being $600,000.[192] HB/4074.

149. While the Applicant's affidavits and the documents exhibited to those affidavits may provide some explanation of the financing of $600,000 of the funds used to purchase 100 Elliot Road, Wanneroo, there is no explanation of the source of the $201,449.30 balance used to purchase the property noted in the settlement statement as being "received from you" (see [145] above).

150. At paras 132-4 of her affidavit of 8 November 2017, the Applicant set out the circumstances of the sale of 10 Rotterdam Vista.[193] HB/100. Her evidence was that on or around 16 November 2009 the property was sold for $245,000. She exhibited to that affidavit a copy of the contract by offer and acceptance which identified the Applicant as the seller.[194] HB/3106. I note that, although the conditions that were attached to the contract for the sale of this property were on "Belvedere Hills" standard forms, the first page of the conditions[195] HB/3107. deleted reference (in para 1 at least) to "Annexure A", which is described in para 2 as being the "Restrictive covenant(s)". While para 2 of the special conditions goes on to purport to be an acknowledgement by the buyer that they have received a copy of the restrictive covenants - Annexure A, there was no Annexure A to that contract, or at least none attached to the copy exhibited to the Applicant's affidavit. As noted at [120] above, it is Annexure A that identified a separate entity as the "developer".

151. At para 133 of her affidavit dated 8 November 2017,[196] HB/100. the Applicant asserted that the sale of this property was recorded in the "Accrued Sales & Associated Costs" of H Land Company Pty Ltd, referring to a document exhibited to her affidavit.[197] HB/449; note: this is the same document referred to in [111] above, which referred to the document at HB/512. The Applicant further said in para 133 of that affidavit, that the sale of this property was noted at page 28 of the Respondent's partial audit decision dated 20 November 2013 in which she said that "… the auditor, [an officer of the Respondent] acknowledged that Lot 100 Elliot Rd (which included lot 10 (78) Rotterdam Vista) was held by me as bare trustee for the benefit of (btf) [G] Holdings Pty Ltd". The Applicant exhibited to her affidavit a copy of that audit decision.[198] HB/450–502. In the opening sentence of the covering letter to that audit decision, the author advised that '[w]e have made a decision with regard to some of the taxable supplies made and creditable acquisitions reported by [G] Holdings Pty Ltd, ("you")…'[199] HB/450. At page 25 of that audit decision,[200] HB/475. which related to GST liability of G Holdings Pty Ltd, the author referred to Lot 100 Elliot Road as being held on trust by the Applicant for the benefit of G Holdings Pty Ltd. At page 27 of that report, the author referred to the sales of lots 68, 69, 78 and 96 and stated that:

We have assessed you for these sales omitted from the activity statements and calculated the GST payable using the margin scheme.[201] HB/476.

152. At pages 27 and 28 of that decision, the calculation of G Holdings Pty Ltd's liability for GST in relation to the sale of lot 78 is made in the sum of $19,815.[202] HB/477.

153. The Applicant was cross-examined in relation to this property. Counsel took the Applicant to the contract for the purchase of 100 Elliot Road and to the correspondence with The Rock Building Society. It was pointed out to the Applicant that the terms of the loan offered by The Rock Building Society nominated her as the mortgagor to secure the loan. It was then put to the Applicant that she had not advised The Rock Building Society that she held, or was to hold, 100 Elliot Road on trust.[203] Transcript at 241. The Applicant's evidence was that she could not say whether The Rock Building Society was aware of whether she held, or intended to hold, the property on trust, as she did not know what documents had been given to The Rock Building Society by the broker who arranged the finance.[204] Transcript at 242. The Applicant provided similar answers when questioned on why the settlement statement, and the correspondence from the settlement agent in relation to the purchase of that property, also

ATC 11036

identified her as the purchaser and made no reference to her holding the property on trust.

154. The Applicant was also cross-examined on the date of the trust deed being 26 December 2003. Like A (see [127] above), the Applicant was taken to the copy of her movement records which indicated that she was not in Australia on 26 December 2003.[205] Transcript at 249. The proposition was put to the Applicant that the execution of a deed of trust after the purchase of property was aimed at avoiding payment of stamp duty on a transfer of the property to the beneficial entity. The Applicant's evidence was:

I'm not sure about that. I just am aware or I recall that our - with the deeds of trusts for various land acquisitions starting back to [RN Pty Ltd] the deeds of trust were always executed prior to - sorry, after the contract or around the contract, and certainly prior to any settlement being completed. [206] Transcript at 250.

155. Counsel for the Respondent then pointed out that, in the case of this property, the settlement had occurred before the execution of the deed of trust and that the deed of trust was, supposedly, executed on Boxing Day (a public holiday), at a time when, according to the Applicant's movement records, she was not in Australia. The following exchange then ensued:


COUNSEL: I see. So, did you check what you were signing before you signed that document at all?
APPLICANT: I don't recall executing this particular document. I do recall signing multiple deeds of trust over the years. Sometimes I would be given a deed of trust by someone internal or by, you know, one of the administration people in the office with the settlement statements, with copies of transfers, with bundles of documents. I don't recall this particular…[207] Transcript at 250.
…  
COUNSEL: What I want to suggest to you is what actually did happen was that, on a date subsequent to 26 December 2003, you created a document which you dated the 26th day of December 2003 and signed it to give the impression that that was the date upon which it had been brought into existence?
APPLICANT: I'd disagree with that.
…  
COUNSEL: I'm asking you, VTBL, whether you agree that the document at 443 was not signed by you on 26 December 2003?
APPLICANT: I don't - I believe that that is a typographical error. I believe that is an error, and that it was not signed on 26 December, because it would have been signed prior to work on settlement, not a week or two later.
COUNSEL: I suggest the document at 443 was created to conceal the true beneficial owner of the property?
APPLICANT: I disagree with that.[208] Transcript at 253–4.

156. A's evidence in relation to 10 Rotterdam Vista was set out in his affidavit dated 8 November 2017 at paras 146-50.[209] HB/2270. That evidence was to the effect that the property was bought by the Applicant on trust for G Holdings Pty Ltd, that the property was part of the land comprising 100 Elliot Road, that the deed of trust for the purchase of 100 Elliot Road was signed on 26 December 2003 and that the property was part of the Belvedere Hills Estate.[210] HB/2270 para 146.

157. At para 149 of his affidavit, A said that the proceeds of the sale of 10 Rotterdam Vista were paid into the G Holdings Pty Ltd loan account with Suncorp to reduce the overall debt owed by G Holdings Pty Ltd to Suncorp Bank. At para 150 of his affidavit, A described the accounting treatment of the sale of the property as follows:

ATC 11037

150. On 16 November 2009:
  • (a) G Holdings Pty Ltd reported a debit and a credit in the amount of $197,778.08 re "Loan - Suncorp 22/3 Elliot 3217" for Lot 78 in its general journal is [annexed to the affidavit];
  • (b) an amount of $197,778.08 was credited to Suncorp Bank in the account of [G] Holdings Pty Ltd…;
  • (c) re "Lot 78 Belvedere - Discharge of Mortgage Suncorp Loan" an amount of $197,778.08 was debited and credited to [H] Land Company in its general journal re "Loan [M] Nominees"…

158. As noted at [127] above, A was cross-examined in relation to the execution of the deed of trust dated 26 December 2003. A was not otherwise cross-examined in relation to 10 Rotterdam Vista.

63 (Lot 39) Treeby Road, Anketell

159. Evidence in relation this property is set out at paras 182-194[211] HB/107–8. of the Applicant's affidavit dated 8 November 2017. Her evidence was that the property was acquired for the benefit of M Nominees Pty Ltd. The Applicant said that in or about August 2004, she had a conversation with A in which A, the sole director and shareholder of M Nominees Pty Ltd, asked her to purchase the property as trustee for M Nominees Pty Ltd. The Applicant exhibited to her affidavit a copy of a deed of trust dated 2 August 2004 signed by her and witnessed by A.[212] HB/540.

160. The Applicant's evidence was that the funding for the purchase was derived from a number of sources including $96,222.18 from M Nominees Pty Ltd. She exhibited to this affidavit copies of two Bendigo Bank bank cheques totalling $96,222.18 and a copy of M Nominees Pty Ltd's Bendigo Bank account statement showing those cheques being drawn on M Nominees Pty Ltd's account.[213] HB/541–3.

161. According to the Applicant, the balance of the funds of the purchase of the property was sourced through a finance broker with $382,500 being advanced by Adelaide Bank. The Applicant exhibited to this affidavit a copy of a document headed "Home Loan Contract" identifying the Applicant as the customer[214] HB/545. and a copy of a settlement statement dated 20 October 2004 addressed to the Applicant indicating a settlement date of 21 October 2004, a purchase price of $510,000 and $379,597.38 as being "available from your lender".[215] HB/547.

162. The Applicant said that in 2006, O Pty Ltd, a client of law firm Birman & Ride, was looking to invest (in what is not specified) and that a second mortgage was taken over the property to secure an advance by O Pty Ltd to M Nominees Pty Ltd. The Applicant exhibited to her affidavit a copy of what she described as a terms sheet for the loan by O Pty Ltd.[216] HB/549. That document identified: O Pty Ltd, as trustee for a superannuation fund, as the lender; the amount of the loan as being $700,000; the Applicant, M Nominees Pty Ltd and A as being the borrowers; the Applicant as being the mortgagor and the mortgaged property as being 63 Treeby Road, Anketell.

163. At paras 191-2 of her Affidavit, the Applicant said that in 2009, M Nominees Pty Ltd, through its sole director A, made arrangements for the sale of the property for $1,375,000. She exhibited to her affidavit a copy of a settlement statement dated 21 December 2009 addressed to the Applicant[217] HB/552. which identified the distribution of the proceeds of sale as being: $375,084.37 to Adelaide Bank; $734,234.55 to O Pty Ltd; $880 to Mortgage Ezy Pty Ltd and $212,214.14 to "Bendigo A/c".

164. The Applicant also exhibited to her affidavit a document that she described as the general journal of M Nominees Pty Ltd,[218] HB/553. which showed entries on 1 April 2010 of a debit of $212,214.14, described as "Deposit Received", and a credit entry of $1,375,000 described as "Anketell".

165. In her affidavit of 17 October 2021, the Applicant explained[219] Para 118; HB/3879. that the sum of $212,214.14 deposited into the Bendigo Bank account on the sale of the property represented the surplus left after the deduction of all selling costs, council rates, land tax and amounts paid in discharge of mortgages. In that affidavit the Applicant also explained a document that she had exhibited to her affidavit of 8 November 2017.[220] HB/554. She described the document as a screenshot of the relevant journal entry "as it appears in AccountRight software".[221] HB/554. That document identified the deposit of $212,214.14 as being "GH [BD] - 20/11/09". The

ATC 11038

Applicant said that she believed that this was a deposit into the Bendigo Bank account of BD Pty Ltd.[222] This is a pseudonym.

166. A gave evidence in relation to this property in paras 151-5 of his affidavit dated 8 November 2017.[223] HB/2271. His evidence was that the property was part of "the Anketell subdivision". He said that a large parcel of land had been purchased "around this area" by AN Land Company Pty Ltd. His evidence was otherwise to the same effect as the evidence of the Applicant as set out in [159]-[161] above.

167. The Applicant was cross-examined about this property. Her evidence was that she could recall A asking her to acquire and hold the property on trust for M Nominees Pty Ltd.[224] Transcript at 264. When cross-examined about the deed of trust dated 2 August 2004, her evidence was that she did not recall signing the deed but that it was "… not inconsistent with all of the other acquisitions that were made."[225] Transcript at 265.

168. It was put to the Applicant in cross-examination that it was important for the lender, or broker, in this case Mortgage Ezy, to know whether the Applicant was purchasing the property as trustee. The following exchange then occurred:


APPLICANT: Again, I was - these applications, I never made the applications. I never made any applications direct with any funding institution. These applications were made with - via a broker.
COUNSEL: On your instructions?
APPLICANT: Either mine or [A]'s. [A] usually instructed the brokers to obtain the finance, not me.
…  
COUNSEL: And they would have sought instructions from you as to whether the land was being bought on trust…
APPLICANT: I can't answer that if I didn't instruct them, but I would normally disclose - - -
COUNSEL: Well, hang on - - -?
APPLICANT: Because usually on a contract it would be a nominee clause, and so I would usually by the time an application was being submitted any relevant information like that would - if a contract said [M] Land Company and/or nominee, the contract would be submitted by the finance broker and the application for finance is going to be in one of the names on the contract, so that's - - -[226] Transcript at 265.

169. Later in cross-examination relating to the second mortgage that was given over the property in favour of O Pty Ltd to secure the $700,000 advance by that company, the following exchange took place between the Applicant and counsel:


COUNSEL: I suggest to you, if you had been holding the property on trust, the description of you as mortgagor would have said VTBL as trustee for whoever was the beneficial holder. Do you agree?
APPLICANT: I don't agree necessarily, because the borrower was the beneficial owner.
COUNSEL: But that's got nought to do with the granting of a mortgage as security over the property, I suggest?
APPLICANT: Technically you may be correct, however, my understanding is that - because I'm not a lawyer - that the mortgagor, as a registered proprietor, is the person who grants the mortgage, but the person who's got the advantage of the mortgage was the borrower who drew down the funds, who was the beneficial owner.[227] Transcript at 268.

170.

ATC 11039

A was also cross-examined in relation to this property. In relation to the deed of trust, the following exchange occurred:

COUNSEL: And this was another document, I suggest to you, that was backdated to 2 August 2004?
A: I suggest you're totally wrong. Because this - this - this property belonged to [M] Nominees, and it was sold and returned in [M] Nominees. And I - I remember getting another loan on this in the name of [M] Nominees from my lawyer, out of his trust account.[228] Transcript at 480.

37 (Lot 388) Seattle Elbow, Hocking

171. The Applicant gave evidence in relation to this property in paras 152-68 of her affidavit dated 8 November 2017.[229] HB/103–5. Her evidence was that this property was originally part of Lot 58 (120) Lenore Road, Hocking, the same property which included 5 (Lot 665) Seattle Elbow, Hocking (see [104]-[128] above). That being the case, much of the Applicant's evidence in relation to the purchase of 37 (Lot 388) Seattle Elbow was the same as that given in relation to 5 (Lot 665) Seattle Elbow as described in [104]-[110] above.

172. The Applicant said that on 18 December 2009, a contract for the sale of 37 Seattle Elbow for $263,000 was signed and that the sale settled on or around 9 April 2010. In her affidavit dated 8 November 2017, the Applicant stated that on 9 April 2010, G Holdings Pty Ltd recorded a debit to its Suncorp loan account of $212,902.04 relating to "L388 … Hocking" which, she said, was part of the proceeds of sale of 37 Seattle Elbow used to pay down G Holding Pty Ltd's debt to Suncorp and, on the same day, a credit to M Nominees Pty Ltd in the same amount. At para 166 of her affidavit the Applicant said that on 30 April 2010, H Land Company Pty Ltd recorded in its general journal a "Loan - [M] Nominees", relating to Lot 388 in the amount of $212,902.04. At para 168 of her affidavit of 8 November 2017, the Applicant said that on 30 April 2010 M Nominees Pty Ltd recorded in its general journal "Loan - [G] Holdings … re 388" in the amount of $212,902.04.

173. A's evidence in relation to this property was at paras 156-64 of his affidavit dated 8 November 2017.[230] HB/2271–2. As this property was originally part of 120 Lenore Road, much of A's evidence was the same as it was for 5 Seattle Elbow. At para 156 of his affidavit, A said that 37 Seattle Elbow was part of the Belvedere Hills Estate.

174. In relation to the proceeds of sale of the property, A's evidence was that $212,902.04 was paid into G Holding Pty Ltd's account with Suncorp Bank in reduction of the amount owed by that company, and was recorded in the "Accrued Sales & Associated Costs" in H Land Company Pty Ltd's accounts. His evidence was otherwise the same as that of the Applicant as set out in [172] above.

175. Neither the Applicant nor A was cross-examined in relation to 37 Seattle Elbow.

7 Monza Link, Hocking

176. The Applicant gave evidence in relation to this property at paras 103-13 of her affidavit of 8 November 2017.[231] HB/96–7. She stated at para 103 that this property was part of the land originally included in lot 79 Nicolas Road, Hocking, which she purchased on trust for H Land Company Pty Ltd.

177. Her evidence was that she could recall having a conversation with A in which he asked her to purchase Lot 78 Nicolas Road on trust for H Land Company Pty Ltd. The Applicant said that she made a declaration of trust to that effect, but that she could not find a copy of the declaration. I note that there is, however, evidence that, not only was there a deed of trust in relation to 78 Nicolas Road, but that a copy of that deed of trust had been provided to the Respondent. Paragraph 14 on page 6 of 12 of a letter dated 10 May 2010 from the Respondent to the Applicant relating to what, in that letter, was described as "an interim report on the audit", stated:

On 24 March 2010 we were provided Trust Deeds by the director of [H] LAND COMPANY Pty Ltd… The Deeds state that,

ATC 11040

as Trustee for the beneficiary [H], you purchased Lot 79 (127) Nicolas Rd Hocking and Lot 58 Lenore Rd, Wanneroo on their behalf.[232] HB/3957.

178. At para 106 of her affidavit of 8 November 2017, the Applicant said that the funding for the purchase of the property was provided by Suncorp-Metway Ltd and that on or about 2 February 2004 the purchase settled, at a purchase price of $1,800,000.[233] HB/97 paras 106–7. According to the Applicant's affidavit, in or about 2008, an application for partial subdivision of Lot 79 Nicolas Road was submitted to Landgate. Around October or November 2008, titles for the lots in the subdivision, including the title for 7 Monza Link, were issued.

179. The Applicant said that in 2010, she was requested by A on behalf of H Land Company Pty Ltd to sell 7 Monza Link and that on or about 9 April 2010, the sale of that property settled for a sale price of $277,000. She exhibited a copy of the settlement statement to her affidavit.[234] HB/426. The settlement statement was dated 11 March 2015. No explanation as to why the settlement statement was dated some five years after the sale of the property was provided in her affidavit of 8 November 2017 nor in her affidavit dated 17 October 2021. The Applicant did not address this discrepancy at the hearing, and she was no cross-examined in relation to it. The explanation for the discrepancy in the date of the settlement statement may be the same as the discrepancy in the settlement statement in respect of 19 Seattle Elbow referred to on [186] below.

180. Her evidence was that at settlement, $233,959.65 was paid to Suncorp for the discharge of that bank's mortgage, which is confirmed by the G Holdings Pty Ltd Suncorp account statement exhibited to her affidavit.[235] HB/427. That statement did show a credit of that amount on 10 April 2010 with the reference "Lot 7". The account loan purpose identified at the top of that statement was "Hocking Belvedere Hills Estates". The balance of the sale price of $277,000 was, according to the settlement statement,[236] HB/426. used to pay council and water rates and land tax.

181. The Applicant exhibited to her affidavit of 8 November 2017 a document headed M Nominees "General Journal" which, among other things, contained a debit entry described as "Loan - [G] Holdings 1" for $233,959.65 and a credit entry in the same amount described as "[M] Investment 3" on 10 April 2010.[237] HB/428.

182. The Applicant's evidence[238] HB/97 para 113. was that there was no balance from the settlement to be paid to the developer, H Land Company Pty Ltd. In her affidavit of 17 October 2021, having repeated what is set out in [180] and [181] above, the Applicant at para 65 said that it was her understanding that H Land Company Pty Ltd had a substantial debt to M Nominees Pty Ltd throughout the entire period, primarily because M Nominees Pty Ltd had borrowed money from Suncorp for the benefit of a joint venture between M Nominees Pty Ltd and H Land Company Pty Ltd. It was her understanding that M Nominees Pty Ltd was entitled to, and did, charge interest on the outstanding loan to H Land Company Pty Ltd. She says that it was her further understanding that the reason that there was a credit to M Nominees Pty Ltd in the general journal is because G Holdings Pty Ltd had agreed to take over some of the debt owed by H Land Company Pty Ltd to M Nominees Pty Ltd, in exchange for being able to use the proceeds of sale of properties to reduce G Holding Pty Ltd's indebtedness to Suncorp.

183. Neither the Applicant nor A was cross-examined in relation to 7 Monza Link.

19 (Lot 659) Seattle Elbow, Hocking

184. The Applicant gave evidence in relation to this property in paras 169-81 of her affidavit of 8 November 2017.[239] HB/105–6. Her evidence was to the effect that she had purchased and held the property on trust for H Land Company Pty Ltd. The property was originally part of Lot 58 (120) Lenore Road, Hocking, which was the same land from which 5 and 37 Seattle Elbow were created (see [104] and [171] above).

185. The Applicant's evidence in her affidavit of 8 November 2017 in relation to the purchase of 120 Lenore Road was to the same effect as that set out above in relation to 5 and 37 Seattle Elbow. As with those properties, at the time of her affidavits the Applicant could not locate a copy of the deed of trust relating to the purchase of 120 Lenore Road,

ATC 11041

however, a copy was subsequently provided by the Respondent (see [106] above).

186. At para 178 of her affidavit of 8 November 2017,[240] HB/106. the Applicant said that on 11 March 2010 a contract for the sale of 19 (Lot 659) Seattle Elbow was signed for a sale price of $260,000, with settlement occurring on or about 21 April 2010. The Applicant exhibited to her affidavit a copy of the settlement statement dated 25 February 2015.[241] HB/535. In cross-examination of the Applicant, counsel for the Respondent pointed out that the date appearing on the settlement statement exhibited to the Applicant's affidavit appeared to be wrong. The Applicant's evidence was that the 25 February 2015 date was likely to be the date that that copy of the settlement statement was printed and confirmed that the date of settlement was on or around 21 April 2010.[242] Transcript at 262. It is likely that a similar explanation would apply to the anomaly in the date of the settlement statement for 7 Monza Link (see [179] above).

187. According to the Applicant, at the date of settlement of the sale of the property, the G Holdings Pty Ltd loan facility had been paid out and, accordingly, the balance of the proceeds of the sale of the property in the amount of $215,246.22 was paid into G Holdings Pty Ltd bank account. The Applicant said that the sale was recorded in the "Account Transaction [Accrual]" of G Holdings Pty Ltd and on 21 April 2010 the general ledger of G Holdings Pty Ltd recorded a credit in the amount of $215,246.22. On that same day, according to the Applicant, the G Holdings Pty Ltd general journal debited that amount from the Bendigo Bank account of G Holdings Pty Ltd and credited the same amount to M Nominees Pty Ltd. Copies of the ledgers and journals referred to by the Applicant were exhibited to her affidavit.[243] HB/536–8.

188. The Applicant said[244] HB/106 para 181. that the "GST [Detail - Accrual]" of H Land Company Pty Ltd for the period 1 July 2010 to 30 September 2010 included an entry on 1 July 2010 for the sale of 19 Seattle Elbow. A copy of that document was exhibited to her affidavit.[245] HB/539.

189. In her affidavit dated 17 October 2021, the Applicant said that the sale of 19 Seattle Elbow was slightly different to the other properties in that, at the time of sale, G Holdings was no longer indebted to Suncorp.[246] HB/3875. This meant that the proceeds of sale were deposited into G Holdings Pty Ltd's account with Bendigo Bank, with the debit and credit entries being recorded in the relevant journals and ledgers. This resulted in an increase in G Holding's Pty Ltd's indebtedness to M Nominees Pty Ltd. The sale was accounted for in H Land Company's books, the effect of which was that G Holdings took over H Land Company's debt to M Nominees in the same amount.

190. The evidence of A in his affidavit of 8 November 2017 in relation to 19 Seattle Elbow was, in effect, the same as his evidence in relation to 5 and 37 Seattle Elbow as set out above.

Anketell Road

191. This property is relevant to the 2016 special assessment the subject of application 2017/7664. The Applicant's evidence was contained in her affidavit dated 24 August 2018.[247] HB/7638–65. At para 94 of her affidavit,[248] HB/7652. the Applicant said that Anketell Road was one of the properties that she purchased for the benefit of another entity and that Anketell Road was purchased with the intention of it forming part of a future development. She referred to, or exhibited to her affidavit, a copy of a joint venture agreement dated 12 November 2005,[249] HB/8220–1. a document headed "Default Notice - Joint Venture" dated 1 July 2015 issued under the joint venture agreement,[250] HB/7851. a letter dated 2 July 2015 on M Nominees Pty Ltd letterhead[251] HB/7852. and a notice of termination of the joint venture agreement dated 15 July 2015.[252] HB/7853.

192. The Applicant's evidence was that, by a declaration of trust dated 15 November 2005, she declared that she would acquire and hold Anketell Road on trust for G Holdings Pty Ltd. She exhibited a copy of the deed of trust to her affidavit.[253] HB/7854. Her execution of the deed of trust was witnessed by A.

193. The Applicant explained in para 97 of her affidavit of 24 August 2018,[254] HB/7652. that earlier, on 15 November 2005, she had executed a deed of trust declaring that she was purchasing Anketell Road for the benefit of A Land Company Pty Ltd and that, on the same day, she had executed a deed of cancellation of that earlier declaration of trust. She exhibited copies

ATC 11042

of the deed of trust dated 15 November 2005 naming A Land Company Pty Ltd as the beneficiary,[255] HB/7855. and a document headed "Deed of Cancellation and Replacement" dated 15 November 2005.[256] HB/7856. The earlier deed of trust in favour of A Land Company Pty Ltd was witnessed by HS, however, the deed of cancellation and replacement and the second deed of trust, supposedly executed on the same day, were witnessed by A. The Applicant at the hearing explained that HS "… was a consultant, [who] worked with us, a former Australian Taxation Office auditor and had worked for [A] and the family … since 1999".[257] Transcript at 175.

194. The Applicant was cross-examined on the circumstances of the execution of these three deeds. The following exchange occurred:


COUNSEL: Do we understand from this document at 7856 that on 15 November 2005 it was understood or realised that deed number 1 at 7855 was wrong, and it should be replaced with deed number 2 at 7854?
APPLICANT: Yes.
…  
COUNSEL: But it appears to have been witnessed by [A], is it?
APPLICANT: Correct, yes.
COUNSEL: Do you recall [HS] was no longer available to sign, although he does appear to have signed or witnessed the 7855 - - -?
APPLICANT: I don't recall the execution of the documents. I don't know where [HS] was that day, that afternoon. All these documents were executed correcting - - -
COUNSEL: You don't really recall much about the circumstances in which these three documents were signed, do you?
APPLICANT: Specifically, no.
COUNSEL: Do you recall the circumstances as to how they became prepared; who prepared them?
APPLICANT: I do not recall who prepared them.[258] Transcript at 176.

195. At para 98 of her affidavit dated 24 August 2018, the Applicant identified a number of errors in the documents referred to above. She said that:

all of which was not correct, and:

196. Her evidence was that she has never been the trustee of the G Holdings Trust.

197. According to the Applicant,[259] HB/7653 para 100. the funding for the purchase of Anketell Road was provided by Liberty Funding Pty Ltd which agreed to advance $1,050,000. She referred to the loan application[260] HB/8374. made in her name as borrower. The Applicant said that it was a term

ATC 11043

of the loan from Liberty Funding Pty Ltd that they required a bank account from which Liberty Funding Pty Ltd could directly debit the monthly mortgage payments. The Applicant said that she nominated the NAB Flexi Account for that purpose. This was an account that had been opened for several years, initially in connection with the activities of RN Pty Ltd (see [89] above). I believe that the Applicant's reference to "Liberty Funding Pty Ltd" in paras 100-2 of that affidavit was an error and that the name of the company that provided the money for the purchase was "Liberty Finance Pty Ltd". From para 103 onwards of her affidavit, the Applicant referred to Liberty Finance Pty Ltd, and the documents exhibited to her affidavit were in the name of Liberty Finance Pty Ltd, not Liberty Funding Pty Ltd.

198. The Applicant's evidence was that each month, M Nominees Pty Ltd deposited funds into the NAB Flexi Account to cover the payments to Liberty Finance Pty Ltd.

199. The settlement of the purchase of Anketell Road, for $1,400,000, occurred on or around 4 January 2006. The settlement statement exhibited to the Applicant's affidavit[261] HB/7869. identified the $1,400,000 purchase price as being $1,037,037.80 provided by "Liberty Funding Pty Ltd" and $425,123.37 being from "Purchaser or other source".

200. At paras 108-14 of her affidavit,[262] HB/7655. the Applicant referred to her having reviewed the financial records of the corporate trustee of the G Holdings Trust and the 2016 tax return of the G Holdings Trust. She said that Anketell Road was recognised in the accounts of G Holdings as trustee of the G Holdings Trust for the financial year ending 30 June 2016 as an asset sold in the course of that financial year. She exhibited to her affidavit a copy of the relevant extract of the G Holdings Trust accounts which showed the Anketell Road property as an asset of the trust.[263] HB/7881.

201. At para 111 of her affidavit,[264] HB/7655. the Applicant said that on or around 4 January 2006, an amount of $1,400,000 for the purchase of Anketell Road was "erroneously" recorded as a debit in the general journal of A Land Company Pty Ltd. She said that on 1 July 2009, an amount of $1,400,000 was recorded as a credit in the general journal of A Land Company Pty Ltd as a reversal of the 4 January 2006 entry, and that on 1 July 2013, an amount of $1,400,000 was "correctly" recorded in the general journal of the G Holdings Trust representing the purchase of Anketell Road. Copies of the ledgers and journals referred to above were exhibited to her affidavit. At para 114 of her affidavit the Applicant, in effect, speculated that after consulting with DCW, whom she described as the group accountant, one of the other accountants noted that the purchase of Anketell Road had been wrongly recorded in the A Land Company Pty Ltd accounts and reversed that transaction, however, failed to make the corresponding adjustment in the G Holdings Trust accounts which was not done until 2013.

202. The Applicant exhibited to her affidavit copies of documents relating to the loan from Liberty Finance Pty Ltd used to purchase Anketell Road. These documents included an account statement on "Liberty" letterhead, addressed to the Applicant for the period 4 January 2006 to 4 December 2015.[265] HB/7900–8. That statement showed an opening balance on 4 January 2006 of $1,041,562.80, with monthly direct debits identified as "Interest Charged" and credits identified as "Direct Debit Repayment" in similar amounts throughout the period of the statement. The closing balance at 8 December 2015 was $977,977.78.[266] HB/7900.

203. The Applicant referred to a letter from Liberty Finance to the Respondent dated 16 March 2017 which confirmed that the loan was discharged on 9 December 2015.[267] HB/8061.

The Applicant's NAB Flexi Account

204. At paras 117-30 of her affidavit dated 24 August 2018,[268] HB/7656–8. the Applicant explained the use of her NAB Flexi Account. Her evidence was to the following effect:

205. In several places in her affidavit of 24 August 2018, the Applicant referred to her having reviewed the NAB Flexi Account bank statements that were exhibited to her affidavit. As noted above, these statements start on 1 July 2011 and ran to 21 September 2016, when the account was closed. That is a period outside the scope to which the assessments and objections relate.

206. It is not clear why the Applicant referred to the bank statements in respect of the NAB Flexi Account from 1 July 2011 onwards rather than to account statements for the relevant period, which is 1 July 2009 to 30 June 2011. Copies of bank statements for that relevant period were exhibited to and commented on, in detail, in the affidavit of A dated 8 November 2017.[270] HB/2235–77.

207. In paras 76-90 of his affidavit of 8 November 2017,[271] HB/2250–61. A provided an analysis of the use of the Applicant's NAB Flexi Account. His evidence was that in or around 2002, pursuant to the joint venture that M Nominees Pty Ltd had entered into, that company was responsible for interest payments on the loans used to purchase the properties. A did not want the lenders to have direct access to any of M Nominees Pty Ltd's operating accounts, so he asked the Applicant whether she had an account that could be used for that purpose. She nominated the NAB Flexi Account.

208. A said that from that time on, he directed his accounts staff at M Nominees Pty Ltd to draw cheques on M Nominees Pty Ltd for each interest payment due at least five days before the interest payment was due, to take a copy of the cheque and to write on the copy of the cheque the name of the property to which the payment related. The staff were then to complete bank deposit slips and payment vouchers specifying the lot number and address of the relevant property, the name of the beneficial owner and the amount paid. The M Nominees Pty Ltd cheque was then to be deposited into the NAB Flexi Account. A stated that there were minor changes to that process relating to recording the name of the lender and to the payee to be named on the cheques. Initially the financier was named as the payee, however, this changed at NAB's direction after which time the Applicant was named as the payee. A exhibited to his affidavit hundreds of examples of cheques drawn by M Nominees Pty Ltd under this process over the period 1 July 2008 to 23 March 2011, some with the deposit slip attached and the later ones with the M Nominees Pty Ltd payment voucher attached.[272] HB/2394–822.

209.

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At para 84 of his affidavit,[273] HB/2252. A said that he instructed his accounts staff to review the NAB Flexi Account bank statement when they were received each month and to notate alongside each debit entry, the details of the property to which the debit related. A exhibited to his affidavit the account statements for the period 1 July 2008 to 30 June 2011, some, but not all of which, were annotated by a named member of A's accounts staff in the way described.[274] HB/2823–98.

210. At para 85 of his affidavit, A listed 17 financiers from which he said M Nominees Pty Ltd, or a related entity, took loans in the period from 1 July 2008 to 30 June 2011 to acquire properties. At para 86 of his affidavit, A said that from 1 July 2008 to 30 June 2011, M Nominees Pty Ltd, or related entities, drew and deposited cheques into the NAB Flexi Account for payment of interest on loans in respect of properties beneficially owned by 15 corporate entities (some as trustees) which he listed.

211. At para 87 of his affidavit,[275] HB/2253. A detailed the cheques drawn in July 2008 in accordance with the procedure described above, identifying the entity which drew the cheque, the amount of the cheque or cheques, and, in respect of the withdrawals from the account, the financier to whom the payment was made (in some cases) and the property to which the payment related. He also noted that in that month there was a deposit of a rental cheque received for one of the properties that was being rented.

212. A's evidence was that the same procedure was followed in respect of the NAB Flexi Account through to June 2011.[276] HB/2259 para 88.

213. At para 89 of his affidavit, A said that he had reviewed the debit entries in the account from 1 August 2008 to 30 June 2011 and determined that over that period 16 financiers were identified as having received payments from that account. All of the financiers had lent money for developments being undertaken by M Nominees Pty Ltd. He also identified the following debit entries:

214. An analysis of the NAB Flexi Account was also undertaken by Mr David Bay who provided two reports: the first report dated 16 December 2020[277] HB/5065-164. and a second report dated 18 October 2021.[278] HB/5165–80. Mr Bay also produced a spreadsheet titled "[G] Holdings Pty Ltd Accounts Transactions Accrual [01/07/04 to 30/06/2011]", which was handed up at the hearing.[279] A6.

215. In his first report, Mr Bay set out his qualifications and his experience. He has a Master's Degree in International Business from the University of Western Australia (1996) and a Bachelor's Degree in Business majoring in accounting from the University of South East Queensland (1989). He has a Diploma in Finance and Mortgage Broking Management (2020) and was formerly a member of CPA Australia. Mr Bay is the principal of a business providing forensic accounting services, preparation of business plans and mortgage broking. This business has operated since January 2016.

216. At para 3 of his first report,[280] HB/5067. under the heading "Background", Mr Bay referred to the taxation assessments that the Respondent issued to the Applicant, in which "the Commissioner included amounts withdrawn from an account … being the NAB [Flexi Account] … as private expenditure". At para 5 of his report, Mr Bay set out the scope of his report, which was to provide his "professional opinion" as to:

217. As I noted at the hearing,[281] Transcript at 602. the characterisation of Mr Bay's evidence as expert evidence, as that term is used in law, is not necessarily unqualified. The phrasing of the questions on which he was asked to opine (see [216] above), in particular the request for him to express opinions on the nature, application and sources of funds, on its face, may invite a degree of speculation as to intentions and intended purpose rather than the application of Mr Bay's defined area of expertise, which I take to be forensic analysis.[282] See XQDX and Commissioner of Taxation (2021) 114 ATR 170 ; [2021] AATA 4070 at [53] and the cases referred to therein, particularly the analysis of Deputy President Forgie and Member Ermert on the use of expert evidence in the AAT in Vestas - Australian Wind Technology Pty Limited and Comptroller-General of Customs (2017) 72 AAR 119 ; [2017] AATA 791 . As was the case in XQDX, even if opinions expressed may have qualified weight, the report is still useful as a forensic guide which identifies relevant accounts, records and transactions as recorded in the "source material" to which Mr Bay had access, as identified in para 6 of his report. Counsel for the Applicant and I had the following exchange in her closing submissions:


TRIBUNAL: All he can say is "Yes, there was an amount paid into the NAB account on such and such a date and the bank record indicates that it came from a particular company, or alternatively there is an entry in one of the relative companies' or trusts' statements which indicates a payment was made on that day.
MS BURNETT: Yes. And can I make it clear, Deputy President, that that is what his report does, in substance. The detail of his report is that exercise. Now, it may be you could form a view about whether it was necessary or appropriate for him to take the next step and draw an inference as to how you might characterise those transactions, but we mainly rely on his report for the actual work of tracing and identifying the payments - which are numerous and time-consuming and something we did wish to assist with, is that that tracing exercise for which we primarily put forward Mr Bay and we say that that evidence that he gives of what the amounts were, when they were made, to whom they were paid, by whom they were deposited, the way in which they correspond to the lenders loan schedule and the other payment and deposit schedules, that is the valuable and useful evidence that assists the tribunal.
And it is from that that an inference can be drawn, perhaps more appropriately by the tribunal than by Mr Bay, but we would say by any intelligent observer of these facts that this NAB Flexi Account was used as a clearing account for interest payments. Now, that's an inference that we say is available on more than just the balance of probabilities but certainly on the balance of probability and Mr Bay's evidence is a large part of taking it over that threshold.[283] Transcript at 603.

218. I have treated Mr Bay's reports and his evidence in line with the explanation provided by Ms Burnett.

219. At paras 7-8 of his first report, Mr Bay set out the approach that he took and the method that he used, providing an example of the latter, and explaining the meaning and relevance of the information set out in the spreadsheet.[284] HB/5069–70. At para 9 of his first report, Mr Bay set out the results of his analysis and, at para 9.7.9.2 of his report,[285] HB/5075. stated:

This table sums all transactions over the period 1 July 2008 to 30 June 2011. Out of a total of 950 payments, or withdrawals, 918 of these were traced to loan payments. Out of the remaining payments, only 4 of these could not be identified. The value of the unidentified transactions is $5,561.65 from a total spend of $10,103,849.38.

220. At para 9.8 of that first report, Mr Bay, in answering the question asked of him, concluded as follows:

ATC 11047

For all of the reasons mentioned above, I am of the view that, the nature and application of the amounts withdrawn from the NAB Flexi Account represent loan repayments to multiple lenders and on behalf of multiple entities and beneficiaries (918 out of 950 transactions; and the balance are sundry other payments, better described in Figure 3 above. I am aware of the multiple beneficiaries as a result of reading information identified at Paragraph 6(f), which was further used by me to complete the property verification. Refer Annexure C "Property Verification Notes."

221. In light of the exchange with Ms Burnett quoted at [217] above, and my comments in the passage quoted, I take Mr Bay's conclusion in relation to the question posed in [216(a)] above, to be that he was able to identify relevant entries in the source material to which he had access, as detailed in para 6 of his first report (see [219] above). In other words, he was able to identify all but $5,561.65 from total payments of $10,103,849.38 as being made to lenders or in payment of the liabilities identified at para 9.7.9.3 of his report.

222. Mr Bay's analysis of the sources of the deposits made into the NAB Flexi Account were set out in paras 9.10-9.29 of his first report.[286] HB/5076–81. At paras 9.26 of his report, Mr Bay set out, in tabular form, the sources of the funds deposited into the account and, at para 9.27, referring to that table, Mr Bay said:

This table identifies the source of 99.5% of the deposits into the NAB Account. The entities supplying the funds are provided in the table. Of the $9,335,636.91 deposited into the account, only $48,807 has not been verified.

223. His conclusion at paras 9.28-9.29 was:

9.28 Question 2 Conclusion

For all of the reasons explained above, I am of the view that, the nature and source of the amounts deposited to the NAB Account represent deposits made to facilitate payments to multiple lenders and on behalf of multiple entities and beneficiaries. I am aware of the multiple beneficiaries as a result of reading information referred to in Paragraph 6(f), which further was used by me to make the property verification. Refer to Annexure C "Property Verification Notes."

9.29 There are a number of deposits that fall outside of this category which are listed in the table above. These include reversed payments, interest and some refunds, all of which have been identified and verified, with the exception of the missing cheque or payment copies to the value of $48,807.

224. As with Mr Bay's conclusion in relation to the withdrawals from the account, I take Mr Bay's conclusion in relation to the question posed in [216](b) above, to be that he was able to identify relevant entries in the source material to which he had access. In other words, he was able to identify all but $48,807 of the $9,335,636.91 deposited into the account as coming from developers and beneficial owners of properties being developed.

225. Mr Bay's analysis of the withdrawals from the account and the source of the funds deposited into the account are consistent with the Applicant's and A's evidence as set out at [204]-[213] above.

226. Mr Bay's response to the question posed in [216(c)] above, is set out in paras 9.30-9.37 of his report.[287] HB/5082–9. At para 9.37.1,[288] Note: the subsequent two paragraphs of that report (headed “ Question 3 Conclusion ”) are also erroneously numbered 9.37 and 9.37.1. Mr Bay explained his approach to answering this question as follows:

The process I followed throughout this task was, as explained, an iterative one which built a body of knowledge progressively. I had no prior knowledge of [what] this information represented and built my understanding progressively, refining the data in the spreadsheets as I went. Apart from the source data derived from the NAB account bank statements, balancing was not essential or in many cases even possible because of:

  • a) Missing data.
  • b) Illegible data.
  • c) Deposits for multiple loan repayments not always coinciding with actual payments made, either by date or amount.
  • d) The extension or rollover of mortgages to provide for cases where

    ATC 11048

    further borrowings became possible as land value increased by actual development complicates reconciliation. An example of this is loan 18 where lending increased from $475,000 to $900,000.
  • e) Differing amounts deposited and paid where for example interest rates may not have been known at the time of providing for payment.
  • f) Missing dates.

With respect to 9.37.1 (c), whilst it seems intuitive that the deposits made to the NAB account would tally exactly to subsequent payments made from the account what I observed is that whilst this may have been the expectation, it did not happen that way in practice. Further with respect to the amounts deposited, although I believe these to be for anticipated payments, which included interest components that may not have been known at the time of the deposit. That might explain why where was sometimes a balance in the NAB account that allowed for the uncertainty, and for a situation where, with sufficient balance, a deposit might not have been required for the payment to process without failure.

Further with respect to the issues raised in 9.37.1(d) I am of the view that familiarity by accounting staff with naming of these loans meant that it was possible that whilst new security might have been offered and loans extended, that when describing repayment paperwork like cheque narrations that the loans were referred to by their historical names which might explain some otherwise anomalous results.

Given that the dates for which payment were intended for were not available to me and other complications referred to above, including the imperfect alignment in values, the position cannot be meaningfully reconciled. However, the nature of the question does not require perfect reconciliation to be answered, and with such a large amount of supporting data my conclusion is drawn notwithstanding this situation.

Where there were missing dates on cheques 9.37.1(f) refers, I used my judgment to look at the dates of cheques either side of one that did not have a date, combined with the loan tables to confidently make assignations.

227. At para 9.37.1[289] As noted in footnote 288 above, this is the second paragraph numbered 9.37.1; HB/5089. of his report, Mr Bay set out his conclusion as follows:

It is my opinion that the NAB account was used as a clearing account. A clearing account is essentially an account that receives multiple deposits and makes corresponding and aligned payments, and has little other purpose. The purpose of this clearing account was to receive funds for required payments to lenders and accordingly there is a clear connection between the amounts deposited in and those paid out of the NAB Flexi Account. The deposits were made in anticipation of future loan repayments, or to top up the account for past loan repayments made from an existing balance.

228. While Mr Bay's conclusion at para 9.37 of his first report might be seen as speculation as to intent rather than an objective forensic analysis of relevant records, the objective bases from which Mr Bay drew his conclusion were identified in detail in this section of his report. These conclusions, to a large extent, relied on the analysis of the payments made from the account, and the sources of the deposits into the account dealt with by Mr Bay in the first two parts of his report.

229. Mr Bay's second report was into the loan account held by the Applicant in the accounts of G Holdings Pty Ltd.[290] HB/5160–76. At para 2.1 of this report,[291] HB/5166. Mr Bay identified having been provided with the following documents:

230. At para 3.4 of his second report[292] HB/5166. Mr Bay stated that he was generally aware of the role held by the Applicant and in broader terms, the property development activities undertaken by the group (G Holdings and related parties). Mr Bay said that he was aware that the Applicant was a senior executive and shareholder in the company, and that he considered this position of responsibility in arriving at his determinations of what might have been reasonable to expect as reasonable and normal loan account movements in a private company.

231. In para 4 of his second report,[293] HB/5168. Mr Bay explained the methodology that he had adopted in undertaking the review and reaching his conclusions. Mr Bay set out his conclusions at paras 5.1-5.3 of his second report as follows:[294] HB/5170.

5.1 As a result of my analysis I consider that the closing balance of the loan account at 30 June 2011 should have been $374,887.12 as compared to the ledger balance of $326,146.10.

5.2 I am aware that there are other loan accounts within the books of [G] Holdings belonging to [the Applicant], which might be best added together to determine the correct amount owed to [the Applicant] by [G Holdings Pty Ltd].

5.3 Some snapshot date and values of the differences between the loan account balance and the balance that I calculated, are provided for information. At no time is the loan account negative.

232. Mr Bay was cross-examined on his reports. In relation to his first report, the Respondent's counsel put to Mr Bay that "accounts are only as good as the information that's put into them", a proposition with which Mr Bay agreed.[295] Transcript at 516–7. In relation to his second report, counsel for the Respondent asked Mr Bay whether he had been asked to verify the sources of the information contained in the general journal relating to the Applicant's loan account. Mr Bay advised that he had not been asked to undertake that exercise.[296] Transcript at 518. Counsel for the Respondent also asked whether Mr Bay had formed the view that the Applicant was an experienced businessperson and whether she was truthful. He confirmed that he thought that the Applicant had been truthful with him about the loan account the subject of the second report.[297] Transcript at 518. In relation to the schedule to which the Applicant had added information about (see [229(c)] above) the following exchange occurred:


COUNSEL: So to the extent that you were to rely on those documents, and VTBL, you didn't question the truthfulness of anything that was put to you, did you?
MR BAY: I had a multi-stage approach. [Where] the comments were to VTBL's detriment, I accepted them without question because there didn't seem any purpose to verify something that reduced the balance of the loans, so that was accepted. Where the amounts were trivial I also accepted them, and I mean hundreds of dollars, not thousands. [Where] there were some fairly large amounts that I had no way of knowing if they were acceptable or not, I didn't accept VTBL's comments, and I adjusted the loan balance accordingly. So I relied equally on my own judgment to what would seem reasonable and what I have no way of knowing, because I accepted my duty was not to do anything other than arrive at what might be a reasonable loan account balance..
…  
COUNSEL: And at 2.1 there you say you were not asked to verify the source of the data?
MR BAY: That's correct.

ATC 11050

COUNSEL:		 But did you rely on the accuracy of the entries that were in the data?
MR BAY: I relied on the information such that if it was what it said it was, then my comments would hold true. But I wasn't asked to go to the ledger and reproduce the same extract.
COUNSEL: Okay. So essentially you took the books at face value to the extent that you had no other information provided to you that undermined them, is that correct?
MR BAY: That would be fair to say.[298] Transcript at 518, 520.

233. The above represents, in effect, the entire cross-examination of Mr Bay. He was not cross-examined on any particular aspect of either of his reports or challenged on any of the analysis or conclusions contained in his reports.

234. The fourth witness to give evidence at the hearing was DCW. DCW provided two affidavits, the first dated 8 November 2017[299] HB/47–75. and the second dated 15 November 2017.[300] HB/3327–34.

235. In his affidavit dated 8 November 2017, DCW said:

236. In his affidavit of 15 November 2017[310] HB/3327–34. DCW said:

237. DCW was briefly cross-examined on his statements. Cross-examined on his methodology, his evidence was:


COUNSEL: And looked at the other MYOB accounts that the company keeps?
DCW: Yes.
COUNSEL: And checked that the recording in the account transactions of accruals record accords with your judgment of whether it's a business or personal expense, is that correct?
DCW: That's not quite correct. I have looked at the accounts in the [G] Holdings loan account, VTBL, and looked at the transactions in that account and determined whether they're a business or a personal nature. I haven't referenced those to be reconciled to other company ledgers.[311] Transcript at 434–5.
…  
COUNSEL: And when you were compiling this accruals sheet, you cross-referenced those journals, you looked at those journals, did you?
DCW: I opened the journals and looked at the contents to see what the descriptor was and which other accounts were affected by the transaction.[312] Transcript at 436.

238. DCW was also cross-examined on what he had exhibited to his affidavits, or more particularly, what he had not exhibited to them. He was asked whether he had sighted copies of relevant loan agreements, including loan agreements with financiers, to which he responded that he had. the following exchange then occurred:


COUNSEL: [DCW], if you had looked at them in respect of your evidence in relation to paragraph 7 you would have attached them to your affidavit, wouldn't you?
DCW: Yes, possibly. I looked at entire ledgers, I looked at journal entries. I looked at hard copy files and they are not attached. I looked at many records.
COUNSEL: So what you say is - as I understand what your evidence is that you looked at a vast amount of evidence - a vast amount of material?
DCW: Correct.
COUNSEL: And you haven't attached any of it?
DCW: I have attached whatever has been required on the advice of the person who is the legal representative assisting me at the time. I am not a lawyer. I don't know what needs to be attached, so I gleaned the information that I needed to - - -

ATC 11053

…		  
COUNSEL: Yes. So to the extent that the accounts - the incorrect information is put into an account, you'd accept that the account can't correct that itself, it needs a human to do something?
DCW: Yes, any man in the street would accept that.
COUNSEL: Back in 2008, in September of 2008 when you first started working with [G Holdings Pty Ltd], who was doing the inputting into the email system?
DCW: There was a team of five or six accountants and they did all of the data entry for all of the companies. Each of them had a login and it would be - you can trace back to their transaction, who put it in, but I don't know who put it in, and even the logins were switched around so some people used each other's login. It was an administrative login that everyone used. I couldn't define just by the evidence that I have to hand who put the transaction in. All I know is that it got there from the accounting team.

239. As with the cross-examination of Mr Bay, DCW was not taken to or cross-examined on any specific transaction, finding or working in his affidavits.

Closing submissions

The Respondent

240. As noted earlier, the parties made oral closing submissions as well as providing written closing submissions.[313] The Respondent’s written closing submissions were filed 25 February 2022; Applicant’s written closing submissions were filed 18 March 2022. The Respondent's closing submissions were to the following effect:

Credibility of witnesses

241. The Respondent made extensive submissions in relation to the credibility of the Applicant's witnesses as set out below.

The Applicant

ATC 11055

A

Despite this admission in that case, when asked about the matter in cross-examination, A denied that he made such admission, despite having his memory refreshed. There were other instances of A denying what he had admitted to in the that case, as recorded in the Chief Justice's judgment.

DCW

David Bay

The Applicant

242. The Applicant's written closing submissions in reply to the Respondent's above submissions as to the credibility of the Applicant's witnesses were to the following effect:

The Applicant

  • (a) The accusation that the Applicant had good recollection in matters that suited her and poor recollection in matters that did not suit her, is an inaccurate characterisation of the Applicant's evidence.
  • (b) In relation to the claim that the Applicant made misrepresentations in the loan application to Liberty Finance, in particular the representations as to the Applicant's income being inconsistent with what she now claims, indicating that she has failed to disclose all her sources of income, the Applicant's response was that, when read as a whole, the loan application did not make any misrepresentation to Liberty Finance as to her income, nor did the amount referred to as income in that loan application give any indication as to the amount that was the Applicant's own assessable income. The income figure shown on the loan application referred to the Applicant's "Average annual pre-tax business income".[319] Citing HB/8385. When that is read with the description of the Applicant's "current self-employment" as being under the business name "[G] Holdings Pty Ltd" and with the business nature as being "property invest[ment] shares",[320] Citing HB/8379. and with the loan submission to Liberty Finance that referred to the Applicant as being "a property investor / share trader" with "a portfolio of property in various entities",[321] Citing HB/8420. it is apparent that the income identified in the application is the income of the entities controlled by the Applicant, not her own income.
  • (c) In relation to the timing of the execution of the trust deeds, the attack by the Respondent illustrates the significant problem caused by the Respondent's "trial by ambush" approach to these proceedings, in which he did not give the Applicant any indication that he was seeking to impugn the veracity of the trust deeds and he belatedly sought to use the Applicant's movement records.[322] Citing transcript at 86.45, 88.15–35. The Applicant signed many trust deeds, and the deeds in issue were each signed in a period 14 to 19 years ago. It is unsurprising that she did not have a clear recollection of the precise circumstances in which she signed a particular trust deed, given she did not have an opportunity to review her records that might have assisted her to refresh her memory.
  • (d) The Respondent's assertion that because loans were taken out in her name rather than relevant entities' names the Applicant must either have lied to the Tribunal or to her financiers, is not sustainable. It is not apparent how the Respondent concludes from the evidence that if, as the Applicant contends, she held the properties on trust for other entities, then she lied to her financiers. The Applicant is an individual. The fact that she was borrowing in her capacity as trustee does not change that fact.
  • (e) In relation to the attack by the Respondent on the Applicant's credibility based on her statement that "low doc" loans could only be made to individuals, not companies, the Applicant says that that was simply an error and is not material.
  • (f) The Respondent sought to impugn the Applicant's credit because she did not accept, initially at least, that a person involved in the settlement of one of the transactions, MB, was a solicitor notwithstanding that his letterhead identified him as such.[323] Citing HB/890. The Applicant is a lay person, and her oral evidence made clear that she understood conveyancing to differ from solicitors' work. Nothing turns on this.
  • (g) In relation to the Respondent's reference to the Applicant's claim that she did not have access to documents seized by the Australian Federal Police, and the Respondent's reliance on a decision of the Federal Court[324] See R6. Note: For reasons previously outlined, due to the requirements of the TAA s 14ZZJ(2D), I cannot identify the judgment. See [241(u)] above; see also footnote 1 above. in that

    ATC 11058

    regard, that judgment indicates that the Applicant's evidence was correct. The case was an interpleader by a firm of solicitors involving entitlement to hard drives containing the relevant documents. The Applicant was not a party to that action. In the end, the Court ordered that A and liquidators were to have access to the documents. No order was made in relation to the Applicant having access to the documents.
  • (h) In relation to the Respondent's claim that the Applicant failed to disclose all of her bank accounts in response to the s 264 notice, the Applicant gave a cogent and convincing explanation as to why only the accounts identified in the response were so identified - namely, that the Applicant understood the question to be referring to bank accounts in contradistinction to loan accounts or credit card accounts.
  • (i) The Respondent made two attacks on the Applicant's credit based on the joint venture agreement between the Applicant and M Nominees Pty Ltd.[325] Citing HB/8220–1. The first was that the joint venture agreement nominated the Applicant as the landowner holding the land as a trustee of the G Holdings Trust three days before the relevant trust deed was executed. The Applicant's answer to that is that the parties entered into the joint venture on the understanding that the Applicant would hold the land on trust, which did occur. This was confirmed by the oral evidence of the Applicant and A and is supported by the fact that the contract for the purchase of the property (in the name of the Applicant "& or nominee")[326] HB/7849. was signed on the same date that is reflected on the joint venture agreement.
  • (j) The second attack related to the formality of the documentation by which the Applicant claims to have issued a default notice and terminated the joint venture agreement in July 2015.[327] HB/7851–2. The Respondent suggested that these termination documents were created specifically to bolster the Applicant's claim that she held the property on trust. The Applicant pointed out that:
    • (i) the difference in this case to other cases was that the Applicant and A were concerned that M Nominees Pty Ltd (the Developer under the joint venture agreement was liable to be sued, so this more formal course was suggested by their lawyer; and
    • (ii) the Respondent's attack misfires in any event, because the joint venture agreement itself identified the Applicant as holding the property on trust.
  • (k) The Respondent's suggestion that the Applicant "concocted" her holding the Anketell Road property on trust for G Holdings Pty Ltd by subsequently adding "atf" after the Applicant's name on the contract for the sale of the property cannot be correct because the Respondent obtained the copy of the contract on which he relies to make that claim from the purchaser, not the Applicant.
  • (l) The Respondent suggested that the fact that A signed some contracts on behalf of the Applicant, or on behalf of entities controlled by the Applicant, somehow reflects adversely on the Applicant's credibility. It is not apparent how that is so.
  • (m) In response to the Respondent's contention that the Applicant placing G Holdings Pty Ltd into liquidation when it had significant tax liabilities reflects adversely on her credit, the Applicant:
    • (i) said that G Holdings Pty Ltd was not placed into liquidation, it was administration; and
    • (ii) questioned why putting G Holdings Pty Ltd into administration with tax liabilities would adversely reflect on the Applicant's credit. On the contrary, it is reflective of a director discharging their legal obligations, consistent with the purposes of the administration regime under Pt 5.3A of the Corporations Act 2001 (Cth).[328] Noting, see ss 435A and 436A.
  • (n) The Respondent suggested that the Applicant's "attitude towards

    ATC 11059

    compliance with her obligations under tax laws    " reflected badly on the Applicant's credit.[329] Citing the Respondent’s closing submissions para 137. However, he did not identify any part of the Applicant's oral evidence to support this proposition. No part of the Applicant's oral evidence suggested that she had an attitude towards compliance with her obligations under tax laws that would mean she is not credible.
  • (o) The Respondent asserted that the Applicant failed to provide copies of trust deeds when issued with a notice requiring her to do so.[330] Citing the Respondent’s closing submissions para 163. According to the Applicant, that assertion is wrong. The deeds of trust had been provided to the Respondent previously, something that the Applicant and her lawyers had pointed out to the Respondent.
  • (p) The Respondent in closing also made the assertion that the Applicant had failed to respond to s 353-10 notices ,[331] TAA s 353-10. however, the Respondent did not seek to adduce any evidence as to the circumstances of the Applicant's failure to respond and resulting convictions. The only evidence as to the surrounding circumstances is the Applicant's oral evidence, which was to the effect that there were convictions related to responses to s 353-10 notices that were either late or considered by the Respondent to be unsatisfactory.
  • (q) Similarly, in relation to the allegation of a failure to lodge a document, the only evidence as to the circumstances of a conviction is the Applicant's oral evidence. That was to the effect that the Applicant had lodged an income tax return, but that the Respondent required her to lodge an expanded income tax return, which she did, but was late in doing so.
  • (r) Neither of these matters is adverse to the Applicant's credibility. It is not apparent how late or incomplete responses point to the Applicant being at all dishonest.
  • (s) The allegation was made that the Applicant had failed to provide documents or that documents provided were missing pages. The Respondent provided a schedule identifying the missing documents and pages. The Applicant attached an annexure to her closing submissions in response to the Respondent's schedule which indicated that, in the case of many of the purportedly missing pages, either the page was not missing and was located in the evidence, or it can clearly be inferred that no relevant content is missing.

A

  • (t) The Respondent's attacks on A's credibility are not probative of the issues that the Tribunal has to decide.
  • (u) This is not a case about A's character. The Tribunal has to determine whether the Applicant held the necessary intention to hold, and held, the relevant properties on trust.
  • (v) The Respondent's attacks against A concern instances of alleged concealment of the underlying control or ownership of assets. That is not inconsistent with the trusts established in the present case, noting that it is not accepted that the trusts involved impropriety. A trust established for the purposes of concealment or discretion, or even for an improper purpose, is still a trust at law.[332] Citing Lewis v Condon (2013) 85 NSWLR 99 at [4] , [54]–[79].
  • (w) The Applicant relies on A's evidence for a limited purpose - to corroborate her account that A asked her to acquire properties as trustee for various entities and that he asked her if he could use the NAB Flexi Account to receive amounts that would then be direct debited for interest payments to lenders. Neither of those matters is inconsistent with any of the conduct levelled at A.

243. The Respondent also submitted[333] Respondent’s closing submissions paras 52–3. that I should draw inferences, applying the principles in
Jones v Dunkel,[334] (1959) 101 CLR 298 . from the Applicant's failure to call certain witnesses. These include:

  • (a) an accountant who worked in the G Holdings Pty Ltd office, and who had provided an affidavit, which was not read;

    ATC 11060

  • (b) the Applicant's son, about whom the Applicant gave some evidence, and who was intermittently observing the proceedings;
  • (c) a second accountant who witnessed the execution of many of the trust deeds in evidence in these proceedings;
  • (d) HS, a former accountant of the Applicant and A, who witnessed the execution of many of the trust deeds in evidence in these proceedings;
  • (e) FL, a finance broker who was instructed by the "Group";
  • (f) any officer of any lending institution who lent money to the Applicant and her associated entities; and
  • (g) any solicitor or settlement agent who acted for the Applicant on any of the land transactions considered in the proceedings.

244. The Applicant responded in her written closing submissions as follows:

  • (a) Contrary to the Respondent's assertion that the rule in Jones v Dunkel "plainly applies" in the Tribunal, it does not apply as a rule in the Tribunal, as is made clear by
    Leach v Comcare[335] [2021] FCAFC 134 . at [90].[336] Noting, see also Howes v Comcare [2016] FCA 1521 at [68] . Rather, in appropriate circumstances, the Tribunal may, in the course of its fact finding, draw inferences consistent with the logic underpinning that rule; that is, in appropriate circumstances, it may be open as a matter of logic to infer from a party's failure to call a particular witness that the witness would not have assisted the party's case.
  • (b) For the reasons explained by the Applicant's counsel in oral closing submissions and explored by the Tribunal with the Respondent's counsel during his oral closing submissions, the Applicant was not put on notice of the Respondent's case of sham. She had no notice that the Respondent was making allegations that required corroboration as to the veracity of various key documents.

Credibility of witness - consideration

The Applicant

245. There are aspects of the Applicant's evidence, identified by the Respondent in closing submissions set out in [241] above, which are open to question. Those questions, however, are largely addressed by the Applicant's reply to the Respondent's closing submissions set out in [242] above.

246. There is, however, some substance to the Respondent's criticism that the Applicant appeared to have reconstructed her evidence, in particular, to claim to remember conversations that she said that she had with A over a decade ago. While the Applicant's claim that she remembered these specific conversations might be pushing the bounds of credibility, (particularly in light of her being unable to remember other more recent interactions; for instance with financiers, brokers and settlement agents), the contemporaneous records and the Applicant's and A's conduct, support there being an arrangement of the type claimed by the Applicant. As both the Applicant and A explained in their respective affidavits and at the hearing, the practice that the Applicant, A and those with whom they undertook property developments engaged in, had been in place since around 2000 or 2001 when the Applicant, at A's request, allowed R N Pty Ltd, a shelf company that had been purchased by the Applicant for share trading, to be used for property developments undertaken by A.[337] Applicant’s affidavit dated 8 November 2017 paras 52–3; HB/88. The Applicant's other main company, G Holdings Pty Ltd, was used for the same purpose from about 2005 onwards.[338] Applicant’s affidavit dated 8 November 2017 para 67–72; HB/90–1.

247. At paras 73-84 of her affidavit dated 8 November 2017,[339] HB/91–3. the Applicant explained "the usual practice" applied in the various property developments undertaken by the Applicant, A and A's associated companies and partners from around 2002 onwards. That description is set out in [89(m)]-[89(q)] above.

248. A's affidavit dated 8 November 2017 at paras 59-75[340] HB/2246–50. described the practice used by A, his companies and his development partners in undertaking the property developments from 2002 onwards. Insofar as A's evidence involved the Applicant, it confirmed the Applicant's description of her involvement in purchasing properties on trust for the "beneficial owner", the funding of the developments (including her applying for finance) and all of the costs associated with the developments being borne

ATC 11061

by the developer in each case, not the Applicant.

249. A's affidavit[341] HB/2250–61 paras 78–90; see [208]–[213] above. also confirmed the Applicant's evidence as to her NAB Flexi Account being used as a "clearing account" for servicing the costs of the developments, including payments to lenders.

250. Accordingly, while the Applicant's claims to be able to remember particular conversations with A in which he asked her to hold a particular property forming part of a broader property development on trust for another entity seem questionable, I accept the Applicant's evidence that over many years and many broadacre subdivision developments undertaken by A, his companies and business associates, the Applicant purchased and held property in trust for other entities, either at the request of A on particular occasions or as part of a general practice. The Respondent in fact accepted that to be the case in relation to the vast majority of the 230 properties registered in the name of the Applicant which were included in these developments (see [75] above). Following the audit, the Respondent accepted that all but 21 of those 230 properties registered in the Applicant's name were beneficially held by the Applicant for another entity (see [76]) above) and then, subsequently, accepted that all but eight of the relevant properties were not beneficially owned by the Applicant (see [23]-[24] above).

251. In relation to the Respondent's assertion that the Applicant made misrepresentations to Liberty Finance when applying for the $1,120,000 to purchase the Anketell Road property by representing that she owned certain properties, I find that the explanation provided by the Applicant (see [242(b)]) is correct.

252. In relation to the timing of the execution of the trust deeds, the Applicant's and A's evidence at the hearing was that she could not recall the dates that she signed particular trust deeds but explained that:

I don't recall executing this particular document. I do recall signing multiple deeds of trust over the years. Sometimes I would be given a deed of trust by someone internal or by, you know, one of the administration people in the office with the settlement statements, with copies of transfers, with bundles of documents. I don't recall this particular…[342] Transcript at 250.

253. Both the Applicant[343] See [154]–[155] above. and A[344] See [127] above. were cross-examined about the deed of trust which was dated 26 December 2003 relating to Lot 100 Elliot Road, Wanneroo. It may be that in some cases, the dates that the deeds bore did not represent the dates on which they were executed. However, the explanations provided by the Applicant and A as to the practice by which the deeds were prepared and executed as part of the development procedure used by the Applicant, A and their companies, were consistent, make commercial sense, and I accept as being true. A in particular, was quite open about the date that the deeds bore not necessarily being the date on which they were signed. While the practice adopted and admitted to by the Applicant and A may be legally questionable, it is not a matter that should affect their credibility as witnesses in relation to the matters that are to be determined in these proceedings.

254. The Respondent's repeated contention that the Applicant was misleading in putting herself forward as a mortgagor in her own name rather than as a trustee, or that this indicated that the Applicant did not hold property on trust,[345] See [241(f)] above; also referred to in the Respondent’s closing submissions paras 11(a), 212, 227, 241, 265 and 270). has little merit. The Applicant's answer to the criticism of her being described or nominated as the mortgagor (see [169] above), while, as noted by the Applicant, not expressed in legalistic terms, was, in practical terms, correct. As she was (or was to be) the registered proprietor on the title, she, and only she, could grant a mortgage over the property. Further, again as alluded to by the Applicant in the answers that she gave, the Transfer of Land Act 1893 (WA) does not provide for a registered proprietor to be noted as holding property as a trustee. Section 55(1) of that act provides that:

The Registrar shall not enter on a certificate of title notice of any trusts other than those set out in the body of the original Crown grant or certificate of title or contained or referred to in the transfer, or the ministerial order for the conveyance, of the relevant Crown land into the fee simple.

(Emphasis added.)

255.

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The fact that a registered proprietor is not to be noted as holding property on trust, and the indefeasibility of the title of the registered proprietor as named on the certificate of title bestowed by s 63 of the Transfer of Land Act, means that the primary, if not sole issue for a lender, is that the security (mortgage) is granted by the registered proprietor of the land. It is only the registered proprietor who can be the mortgagor. The rights and powers of the mortgagee under the mortgage instrument and the rights and powers of the mortgagee under div 3 of the Transfer of Land Act are not affected by whether the registered proprietor holds the mortgaged property on trust. As noted by the Applicant in her written closing submissions,[346] Applicant’s written closing submissions para 64. the mortgagee can enforce the mortgage even if the mortgagor was a trustee and even if the grant of the mortgage was in breach of trust.[347] Citing Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 136 (per Winneke P), 156–157 (per Tadgell JA); Conlan v Registrar of Titles (2001) 24 WAR 299 at 329 [174] (per Owen J); LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 at 549 [185] (per Murray J), 555 [210] (per Anderson and Steytler JJ), 568 [273] (per Pullin J); Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 171 [195]-[197]. Even if there is a shortfall after the mortgagee exercises a power of sale to realise its security, a trustee mortgagor is still liable for any amounts remaining owing to the mortgagee. This means that despite incurring a debt in the capacity of trustee, the trustee may still be sued on the debt, as they remain personally liable for that debt, despite acting as a trustee.[348] Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524 at 540 [24] , 560 [80], 577 [129]; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324 ; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 .

256. In relation to the other grounds cited by the Respondent for treating the Applicant as an unreliable or dishonest witness, as noted at [245] above, the Applicant's responsive submissions in [242] largely address those grounds. Insofar as the answers provided by the Applicant may fall short of fully answering the allegation raised by the Respondent, I do not consider that such shortfall should cause me to disbelieve the Applicant's critical evidence relating to the practice followed by the Applicant and A in relation to the many property developments undertaken since around 2000. Like the Respondent himself accepted in relation to the vast majority of the properties that were registered in the name of the Applicant, I accept the Applicant's evidence that the eight properties relevant to these proceedings were held on trust by the Applicant for the benefit of third parties.

A

257. It is fair to say that A was not a particularly good witness in a number of respects. Based on the evidence presented by the Respondent, in particular the findings of the Chief Justice set out in [241] above, and A's unconvincing (and often contradictory) contesting of his Honour's findings, there are grounds to support the Respondent's characterisation of A as a dishonest person who engages in dishonest business practices, and someone who is willing to fabricate documents. Insofar as A disputed clear findings by the Chief Justice that he had made admissions in those proceedings,[349] See for example transcript at 447–8. I prefer the findings of the Chief Justice. A's attempts to resile from admissions of dishonesty that he had made before the Chief Justice, or to dispute the findings that the Chief Justice made in relation to his conduct and character, were unconvincing.

258. I agree that there is evidence to support a conclusion that A is a person of poor character and that he has been dishonest in the past. However, A's character and his credibility in other proceedings are not probative, and certainly are not determinative of the credibility of his evidence in these proceedings in relation to the matters that I have to decide. If I were having to rely solely on A's evidence to find that the Applicant held properties in the land developments on trust, or that her bank accounts, in particular the ANZ Flexi Account, were used to facilitate those developments, the Applicant would most likely fail. However, that is not the case. A's evidence about the practices that he, the Applicant and others followed in undertaking these developments, is consistent with the evidence of the Applicant, Mr Bay, DCW and with the documentary evidence. That documentary evidence is not just the deeds of trust and the accounts kept by the Applicant and A's companies, but is also the bank statements, settlement statements and tax returns which are substantially consistent with the Applicant and A's evidence.

Mr Bay and DCW

259. The Respondent's observation that the evidence of Mr Bay and DCW was, in part, reliant on information provided by the Applicant and the books and accounts of the Applicant's and A's companies, is correct. In both cases, particularly in the case of Mr Bay, however, the material and

ATC 11063

reports that the witnesses prepared were also based on third-party records, including bank statements and third-party loan documents. The methodology used by these two witnesses were set out in detail in their respective reports. Mr Bay in particular, went into great detail to identify specific transactions and the documents, including bank statements and tax returns, upon which he relied (see [214]-[233] above). Insofar as the reports relied on information provided by the Applicant or members of A's accounting staff, or on company accounts and records, they were specifically identified by Mr Bay. Where Mr Bay was not able to satisfy himself as the nature, source or purpose of specific payments or deposits, he did not verify the transaction. Neither Mr Bay nor DCW was cross-examined on any specific transactions identified in their reports or taken to claimed inaccuracies or deficiencies in the documents upon which they relied.

260. I appreciate that the Respondent bears no burden of proof in such matters, however, in my view it takes more than each of Mr Bay or DCW accepting the somewhat self-evident general proposition that accounts are only as good as the information that is put into them (see [232] above) to render their reports and their evidence given at the hearing of no, or significantly diminished, probative value. As noted earlier, neither of them was cross-examined on any particular transactions referred to in their reports or their conclusions to illustrate that their reliance on certain records rendered their analysis and conclusions invalid.

261. However, having made the above observations, there is a distinction between the reports of Mr Bay and DCW. As set out in [259] above and in the more detailed description of Mr Bay's reports (see [214]-[233] above), Mr Bay was able to rely on third-party records and documentation to a greater extent than DCW. Further, Mr Bay was an independent consultant accountant specialising in forensic analysis with considerable experience and qualifications. Prior to his being approached to prepare the reports, he had had no contact with the Applicant or any of her associated entities.[350] HB/5067. For those reasons I accept the conclusions reached by Mr Bay in his reports (see [223] above). I am, however, unable to accept DCW's conclusions on the balances of the Applicant's loan accounts, which were largely reliant on the financial statements and journals for G Holdings Pty Ltd, prepared by others. Also, unlike Mr Bay, DCW had an historical relationship with the Applicant, having worked for the Applicant's group of companies (see [235] above) and with A, through his employment by M Nominees Pty Ltd.[351] HB/48: DCW’s affidavit dated 8 November 2017 para 2. Accordingly, he cannot be considered to be independent. Further, DCW's conclusions in relation to the balances of the loan accounts relied significantly on his assessment of the nature of transactions as either being personal expenses or being related to development of properties. That exercise must necessarily involve a degree of subjectivity.

Failure to call witnesses

262. Insofar as the Respondent contends that I should draw inferences from the Applicant's failure to call the witnesses that the Respondent identified at [243] above, the Applicant's response as set out in [244] above has merit. At the hearing the Respondent raised questions as to the authenticity and legal efficacy of the trust deeds produced by the Applicant. A number of the potential witnesses identified by the Respondent as not being called (from which, the Respondent submitted, I should draw inferences under the principle in Jones v Dunkel) were witnesses who could potentially have given evidence in relation to the execution of the deeds of trust. The Applicant contended that the reason that these witnesses were not called was that the Respondent had not raised, or at least not clearly raised, the issue of the authenticity of the deeds of trust or the argument that they were a sham as an issue prior to the hearing. Ms Burnett summarised the Applicant's position in her oral closing submissions as

ATC 11064

follows:

TRIBUNAL: But it was known that the Commissioner's position was that VTBL didn't hold the property on trust.
MS BURNETT: That's right. And indeed the objection decision, which I will take the tribunal to, which is what is under review here. The objection decision states that for seven of the eight properties in the main objection decision, one of the reasons is that the Commissioner has not been provided with any trust deeds for those properties. Now, firstly that's incorrect, and I will show the tribunal how the trust deeds were provided to the Commissioner all the way back in 2010, if not earlier. But secondly, his argument at the time of the objection was that we don't have proof of the trust. We don't have a trust deed. We don't have accounts that record this.
There was obviously a problem with the left hand not talking to the right hand in elements of the Tax Office administration of this. But they thought, in the objection decision, that there wasn't a trust deed. They weren't saying, "There's a trust deed here but we think there's something wrong with it." And if they were in that position they would need to make it clear whether they're saying it was a legal defect under the Real Property Law Act, or whether it was because of a sham and there wasn't truly an intention to give effect to the trust. Those things would have needed to be spelled out. But none of that was spelled out because, as I will take the tribunal to in a moment, the Tax Office thought it didn't have any trusts.
So it was all a bit strange, and then that mistake of the Tax Office was not cleared up in the statement of facts, issues, and contentions or in the written submissions, so the applicant was entitled to think that the Commissioner was putting her to proof in this case, and was requiring - and putting her to what the Commissioner has said he thinks is a very high difficult onus to meet, and was putting her to that proof. And so the taxpayer rightly put on evidence of the trust deed in her evidence, thinking, "Okay, well, if the Commissioner thinks he doesn't have them, or if he lost them, here they are. Here's all the other evidence."[352] Transcript at 556–7.

263. Ms Burnett's summary is correct. The primary reason stated by the Respondent in the objection decision for not accepting that the eight properties were not held on trust by the Applicant, as distinct from the 220 odd properties that the Respondent did accept as being held on trust by the Applicant, was that a deed of trust had not been provided by the Applicant. Ms Burnett was further correct in her statement that that was not the case. In all but a couple of cases, deeds of trust had been provided to and were, at the relevant times, held by the Respondent.

264. The issue of whether it was apparent that the Respondent was going to run a case based on the deeds of trust being sham or otherwise ineffective at law, as distinct from there being no relevant deed of trust or the trust deed not being put into effect, was explored with the Respondent's counsel in closing:


TRIBUNAL: Mr White, in that regard though, there's no reference is there in any of their reasons to being the Commissioner not accepting the authenticity of the trust deed or that it was a fake document backdated.
 

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In fact, if you read that, he seems to accept the trust deed by the surrounding evidence, the financial statements and so on aren't supportive of that according - - -
MR WHITE: Yes, but we would submit, your Honour, that the fact that you're taking into account all of the surrounding material which seems to be inconsistent with a deed of trust clearly strikes at the notion of whether the trust is valid or not or whether it was intended to be given effect because it's inconsistent with all these other documents.
…  
TRIBUNAL: Yes. But I suppose the case that is being put, or the rejection is on the basis that, okay, there is a trust deed, it seems to be accepted that it's an executed trust deed, but the argument is the trust supposedly effected by that trust deed was never put into effect. And that the reality was, notwithstanding the deed of trust, she was still the beneficial owner. That seems to be the thrust of the decision, doesn't it?
MR WHITE: Yes. I suppose it is the thrust of it.
TRIBUNAL: Whereas I understand the argument now to be that it's disputed that the deeds of trust, as a matter of fact, actually existed at the time, and that they have been fabricated and backdated.
MR WHITE: Yes.[353] Transcript at 637.
…  
TRIBUNAL: But that's - sorry, Mr White, that's a slightly different point, isn't it? I thought I was being taken to these documents in relation to the issue of procedural fairness, and at what point it became clear, on the case that the Commissioner was running, that the Commissioner had an argument that the deeds of trust were fabricated documents, effectively. These don't indicate that. These reasons - if you were reading that, and going ahead on the basis of this being the matter to be agitated, you wouldn't, I don't think, glean from this that the Commissioner was also going to argue that the deeds were in fact totally fabricated. Because they're looking at a bare trust, not a constructive trust, resulting trust, or whatever.
MR WHITE: Yes.
TRIBUNAL: So the analysis appears to be in the context of it being accepted that there is an extant deed of trust. But it's, for the reasons set out, doesn't - was not implemented or does not - is not sufficient to evidence an actual trust, in operation. Because otherwise if the argument is simply, well, we don't accept the authenticity of the trust deed, wouldn't that almost be an end of the matter? Certainly insofar as their arguments "other than a constructive trust."
MR WHITE: Well, I would have thought, with respect, Deputy President, that a fair reading of this document puts in play the genuineness of the relevant deeds of trust, in this case deed of trust.
TRIBUNAL: But are we looking at the - whether or not the document is a fabricated document, manufactured after the audits began and then backdated by [A] and VTBL, or are we looking here, I would have thought, on a fair reading of this, that argument isn't being run, but a broader argument or a legal argument is being run that notwithstanding the existence of this document called a deed of trust, the ATO does not accept that in reality a trust was implemented.
MR WHITE: Well, in other words, it wasn't being given effect.
TRIBUNAL: Yes.

ATC 11066

MR WHITE:		 Implemented. Not being given effect.
TRIBUNAL: That's right. But that's a different thing, as I understand one of the arguments now being run and to which objection is taken on procedural fairness grounds, is the allegation that the deed of trust itself was a fabricated document.[354] Transcript at 638–9.
…  
TRIBUNAL: Yes. And I think the objection that is made by the [A]pplicant is that that particular argument could not be gleaned from any of these reasons, and that the first time that particular argument has been raised is in these proceedings before the tribunal and without any indication that that was going to be an argument raised in the statement of facts, issues, and contentions.
MR WHITE: Well, your Honour, the answer to that is, even if that was true, it is clear that the [A]pplicant was on notice of those matters, and that she was on notice of it because, at least in part because, she was told - she understood from the very outset she had the onus to prove every aspect of her case, including whether she held the properties beneficially for another party. And that meant that she had to prove the enforceability and the veracity of those deeds.
…  
  And the argument now being put is no more than an extension of what was being described in an audit decision back in 2016 based on the information that the ATO had then been given, which clearly was quite limited. And it was not until, as I understand it, and it seems to be the case by reference to the affidavits that VTBL had filed before her adjournment application, that the deeds were not filed and provided to the Commissioner until after the adjournment when she filed the various affidavits that she turned her mind to subsequently. Now - - -
TRIBUNAL: Except, of course, we do know - and I know you're making a point - that one department of the ATO is not the same as another department. Well, we know that the deeds had been provided years earlier, hadn't they, and it was probably incompetence again by her lawyers at the time that it hadn't been pointed out when the ATO was asking for those same documents, that, well, they've already been provided in the … As far as, on one view, well, the ATO did have them. I don't know that the ATO can say, "The left hand had them and the right hand didn't know that."
  Now, it may have been an oversight by her lawyers not to say, "Well, we have already given them to you." But insofar as there is a claim that the documents didn't exist until they were filed, well, we know that the ATO did have some of them at least for years by that stage. So we know that they did exist back then.
MR WHITE: 2010, we know.[355] Transcript at 639–41.
…  
TRIBUNAL: But it was never said that one of the reasons why the ATO didn't accept that the bare trust existed was because the document purporting to evidence that was a fake. In fact, it seems to proceed on the assumption - look, there is a deed in place, however for all these ancillary reasons we don't think a trust purportedly effected by that deed has in fact been put into place - or has been effected, or acted upon. And that's why the need to go through all the other evidence from the various corporate accounts and so on, to evidence that in fact the supporting evidence didn't establish the operation of a trust. I still don't see how one reading this could glean that, oh, and by the way we're also saying the deed document is a fake.

ATC 11067

MR WHITE:		 No, I accept that. That, with respect, is a fair observation in relation to that material.

265. In his written closing submissions, the Respondent referred to the Applicant being on notice of the case that the Respondent was running. At para 88 the Respondent submitted:

On 16 December 2016, the Commissioner filed his SFIC which said at [2]:

The [R]espondent relies on s 14ZZK of the [TAA] and save for any facts expressly agreed or admitted in writing, puts the [A]pplicant to proof of all facts upon which [she] seeks to rely to establish that the assessments the subject of this proceeding, are excessive.

and at [35] and [36]:

Pursuant to s 14ZZK of the TAA the burden of proving that each of the assessments is excessive and what the correct assessment should have been rests with the [A]pplicant.

A taxpayer assessed under s 167 of the ITAA 1936 must prove the correct amount of their actual taxable income upon which tax should be levied. It is not enough to prove that the [R]espondent erred in the way he calculated the assessed amount.

(Footnote omitted.)

266. At para 96 of his written closing submissions the Respondent stated that:

On 6 November 2018, the Commissioner filed his SFIC which says at [2]:

The [R]espondent relies on s 14ZZK of the [TAA] and save for any facts expressly agreed or admitted in writing, puts the [A]pplicant to proof of all facts upon which [she] seeks to rely to establish that the assessments the subject of this proceeding, are excessive.

and at [18]-[20]:

Pursuant to s14ZZK of the [TAA] the applicant has the burden of proving that the 2016 special assessment is excessive and what the correct assessment should have been.

The 2016 special assessment is not excessive.

At all material times the [A]pplicant was the legal and beneficial owner of the Property.

(Footnote omitted.)

267. In oral closing submissions, Ms Burnett addressed the Respondent's above submissions as follows:

… Now, the tribunal asked Mr White a number of times this morning where it was evidenced in the history of this matter that the Commissioner was challenging the authenticity of the trust deed, and Mr White's answer did really boil down to the onus of proof. He said that it was clear from the documents that VTBL was being put to proof of all issues, and the tribunal's language from the ground up was apposite to that.

Now, we agree that VTBL was being put to proof of (indistinct) incident of every section 167 case, and indeed every part 4(c) where the issues are wide in scope. And the language in the Commissioner's statement of facts, issues, and contentions about putting the taxpayer to proof is boiler plate language that appears in every single statement of facts, issues, and

ATC 11068

contentions that the Commissioner files. Now, this is exactly the point that the High Court was making in Bailey ,[356] Bailey and Commissioner of Taxation (Cth) (1977) 136 CLR 214 . and Sundberg J was making in Rio Tinto.[357] Rio Tinto Ltd v Federal Commissioner of Taxation (2004) 55 ATR 321 .

And I won't quote from them again to repeat myself yesterday, but Sundberg J was saying that questions of onus of proof are quite different from the procedural fairness questions of what needs to go into a statement of facts, issues, and contentions, or in an appeal statement. They're quite different duties on the Commissioner. And indeed, as the High Court said in Bailey, the fact that the taxpayer bears the onus of proving everything makes it all the more important that the Commissioner explain what the issues and contentions are, with enough particularity that the taxpayer knows the case they have to meet.[358] Transcript at 675–6.

(Emphasis added.)

268. Again, Ms Burnett's analysis is correct. It is also my experience that the Respondent has a tendency in cases involving the review of objection decisions under the TAA to file statements of facts, issues and contentions that do little more than refer to s 14ZZK of the TAA and state that the Respondent puts the Applicant to proof of all matters not conceded. Pointing to s 14ZZK of the TAA, a provision of which the Respondent can assume the Tribunal is well aware, is of little help to the Tribunal or to an applicant in identifying any positive case that the Respondent will run. I appreciate that the Respondent does not bear any onus of proof, however, as was found in the cases referred to by Ms Burnett (see [267] above), an applicant having the onus of proof is not an answer to that applicant being taken by surprise by a positive assertion being made by a respondent which was not apparent from the respondent's objection decision or the statement of facts, issues and contentions.

269. While in some cases it could be said that an applicant, especially one legally represented, should assume that they will have to cover every possible argument that could be raised against them, I do not think that that would be a fair argument in the present case. In that regard, one needs to look at the objection decision in question and the background to the decision, in this case the audit that gave rise to the issue of the amended assessments. The Respondent had accepted that over 220 of the 230 properties registered in the Applicant's name during the relevant period were held by her on trust for others, based, in large part, on the deeds of trust produced by the Applicant during the audit and the audit of an associated entity. There is no evidence that the deeds of trust in respect of those other properties were contested as being sham, fabricated or anything other than genuine. Further, the objection decision was based on the absence of deeds of trust (which was conceded by the Respondent's counsel as being erroneous because copies of relevant deeds had been provided to the Respondent) or on the assessment that deeds of trust had not been acted upon (see [263] above), not on the basis that they were shams.

270. For the reasons set out above, I am not prepared to draw inferences under the principle enunciated in Jones v Dunkel as sought by the Respondent.

Sham

271. Independently of whether the Respondent made it clear that he was going to argue that the deeds of trust were shams, I find that that was not the case in any event. At para 70 of his written closing submissions, the Respondent describes a sham as being where there are "steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences",[359] Citing Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 ; [2004] HCA 55 at [46] . and that, "A sham transaction is used to conceal a real transaction."[360] Citing Scott v Federal Commissioner of Taxation (No 2) (1966) 40 ALJR 265 at 279 .

272. At para 74 of his written closing submissions, the Respondent contended that, while the Applicant gave evidence that her subjective intention was to give effect to the trust deeds, her subjective intention is not determinative. The Respondent said that the Applicant never intended to give effect to the trust deeds the subject of these proceedings, in the sense of holding the properties beneficially for other parties. It is, according to the Respondent, apparent that the trust deeds were merely a mechanism for the Applicant to conceal that she was the true beneficial owner of the properties.

273. For the reasons set out previously, I am satisfied that the Applicant received no direct

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benefit from the holding or the sale of the properties once developed and bore none of the costs of holding those properties. I do not accept the Respondent's contention that the Applicant never intended to give effect to the declarations of trust. On the contrary, I am satisfied on the evidence before me that the Applicant not only intended to give effect to the declarations of trust, but in fact did give effect to those trusts. That evidence was not only the documents and the statements and oral evidence of the Applicant and A, but also the analysis of Mr Bay, and, to a lesser extent, DCW. The analysis of Mr Bay, in particular, was based on bank statements and company records including tax and GST and tax returns which support the evidence of the Applicant and A.

Formalities of deeds

274. In closing, the Respondent set out in detail the legal requirements of deeds, including the requirements of s 9(1) of the PLA, and the requirement of formal delivery of the executed deed. The Respondent submitted that there was no evidence that the Applicant provided the deeds of trust to any third party, which would evidence the requisite intention of reliance on them by the Applicant. For example, there is no evidence that the Applicant provided the deeds of trusts to her finance brokers, her solicitors, her financiers, the OSR, her settlement agents, or anyone. To the contrary, the evidence was that the deeds were kept in her files. The Respondent further argued that there is no evidence that the beneficiaries recorded in the deeds accepted or relied on the deed.

275. In response, the Applicant in her closing submissions said that nothing turns on those formalities for the simple reason that an effective deed is not necessary for the valid constitution of the trusts for which the Applicant contends. The Applicant contends that where a trust is created by a declaration by the trustee, as opposed to a transfer by a settlor to the trustee, what is required is a statement, intended to be final and binding, that the property is to be held on trust. Subject to the requirements of writing in s 34 of the PLA, that statement may even be oral. It certainly does not need to be by deed.[361] George v Fletcher (Trustee) [2010] FCAFC 53 .

276. The Applicant further responded that as for the requirements of writing in s 34 of the PLA, relying on
Di Pietro v Official Trustee in Bankruptcy[362] (1995) 59 FCR 470 . at 479 (per Jenkinson J), 481-482 (per Sackville J, with whom Tamberlin J agreed), equity will recognise an unwritten trust orally declared and not permit the Statute of Frauds provisions, such as s 34 of the PLA, to be used to deny the trust. The Respondent, according to the Applicant, did not refute the Applicant's submission on this point, either orally or in writing.

277. Notwithstanding that the formalities required of a deed may not have been observed in respect of some of the declarations of trust, I am satisfied that at the relevant time the Applicant had declared that she held or would hold the relevant properties on trust for the developer, and that throughout the time that she held the property, the holding costs, including the financing costs, were met by others and that on the sale of the properties, the Applicant received none of the proceeds. Even if in one or two cases the Applicant is now unable to produce the deed of trust which she says she signed in respect of the property, I am satisfied that in circumstances where she made no contribution towards the purchase price or holding costs and received none of the proceeds of sale of the property, equity would restrain the Applicant from taking the property as hers.[363] See Di Pietro per Sackville J at 481–2 regarding proof of trusts to hold land by parole evidence.

Stamp duty

278. Pursuant to s 16 and item 8 of the Second Schedule of the Stamp Act 1921 (WA), duty is payable on any declaration of any use or trust of any property. The duty payable is $20.

279. Section 27(1) of the Stamp Act relevantly provides:

Except as otherwise provided by a stamp Act no instrument chargeable with duty and executed in Western Australia, or relating, wheresoever executed, to any property situate or deemed to be situate or to any matter or thing done or to be done in Western Australia, shall, except in criminal proceedings, be pleaded or given in evidence or admitted to be good, useful, or available in law or equity, unless it is stamped in accordance with the law in force at the time when it was first executed.

280. On 1 July 2008 the Duties Act 2008 (WA) came into operation and the need to pay duty on many trust deeds was abolished. However, the Stamp Act remains in force and applies to instruments which have been executed or transactions

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occurring prior to its commencement date.

281. At para 128 of his written closing submissions, the Respondent referred to 47 deeds of trust identified in Schedule A to the submissions[364] Note: 46 trust deeds are identified in Schedule A to the submissions. as not being stamped. At para 132 of his submissions, the Respondent observed that:

… as was discussed in Acemont, by 2005, the common law in Western Australia permitted the admission of unstamped instruments, at the behest of the party charged with payment, if they gave a suitable undertaking to pay the duty, which is in effect what [s 279 of the] Duties Act provides.

282. In the present case, the Applicant's counsel advised that the Applicant would give such an undertaking.[365] Transcript at 586. As the Court did in
Acemont Pty Ltd v Sunlong Holdings Pty Ltd[366] (2009) 77 ATR 647 ; [2009] WASC 249 . at [98]-[100], I will treat the deeds requiring stamping to be admitted into evidence on the basis of that undertaking.[367] See also Kia Ora Gold Corp NL v Washer [1982] WAR 306 at 308–10 .

Documents not provided to the Respondent

283. At paras 143-66 of his written closing submissions, the Respondent sets out what he said is a history of the Applicant failing to provide documents requested by the Respondent over a four-year period from 2009, in particular, documents "regarding the beneficial ownership of the eight properties the subject of Application 2809-2011".[368] Respondent’s closing submissions para 143. These submissions refer to extensive correspondence between the Respondent and the Applicant's then solicitors and to at least to one meeting between the Applicant, her lawyers and representatives of the Respondent.

284. Having set out that history, the Respondent at para 163 submitted:

[The Applicant] did not co-operate by providing trust deeds, or advising the Commissioner that he was already in possession of them as a result of another audit he had undertaken, that she now relies on for the eight properties the subject of Application 2809-2011.

285. In response, the Applicant's closing submissions dispute the allegation that she did not advise the Respondent that the ATO already had, and had had for some time, a number of the deeds of trust relating to the properties in issue. The Applicant identified the Respondent's "Record of client contact"[369] HB/5253–4. dated 5 November 2012,[370] Purporting to record a meeting on 8 November 2012, although referring to a telephone conversation with the Applicant on 5 November 2012. in which the following is noted:

[The Applicant] said that she was trying her best but also commented that some of the information had already been provided to the ATO and she was therefore feeling harassed.

I asked her if the information has been provided to a different business line (BSL) of the ATO. She was not sure about that.

I advised her to provide us details of the information already provided, the date provided and to whom it had been provided so that we could follow up within the office.

286. The Applicant then referred to her lawyer's letter dated 19 November 2012[371] HB/5256. repeating the Applicant's statement that much of the information requested by the Respondent had previously been provided to the ATO "during numerous other audits" and requesting an extension of time to provide the information sought. A further letter was sent by the Applicant's lawyers on 7 December 2012[372] HB/5258. seeking a further extension of time for the provision of information sought on the basis that "other but related taxation issues which entities related to [their] client [have] had to deal with in recent weeks". By letter dated 24 January 2013[373] HB/5259. the Respondent advised that they had "finalised [the] review of the 2008-11 years" and stated that "[t]o date we have not received a response to our request for information".

287. The assertion in the Respondent's letter dated 24 January 2013 is not correct. The Applicant or her lawyers had provided some of the information sought, as well as meeting with the Respondent's representatives, and, as was conceded by the Respondent's counsel at the hearing, a number of the deeds of trust relating to the properties in dispute had been provided to the Respondent previously (see [263] above).

288. As the Applicant did in her responsive closing submissions, I assume that the Respondent raised the Applicant's

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claimed failure to provide information requested by the Respondent primarily as going to her credibility. The section of the Respondent's submissions headed "Documents not provided to the Commissioner" is introduced by para 142 which was as follows:

For at least the reasons advanced below, the Commissioner submits that little, if any, weight can be placed on [the Applicant's] evidence.

289. It may be that the Applicant (or her lawyers) could have, or even should have, made greater efforts to provide documents requested by the Respondent or more specifically identified when and to whom documents requested by the Respondent had already been provided. However, whether the Applicant should have done things differently is not an issue to be determined in these proceedings. Insofar as the Respondent raises the Applicant's conduct as a reason for giving "little, if any, weight" to her evidence, then I do not accept that contention. Firstly, certain of the claimed failures, in particular the failure to provide deeds of trust, were not correct or were only partially correct. Secondly, the Applicant had engaged with the Respondent's officers, and her lawyers had tried to explain why she was unable to provide information within the timeframe imposed by the Respondent (see [284]-[286] above). The Applicant is not on trial in these proceedings for having failed to cooperate with the Respondent, or for having failed to produce documents pursuant to s 264 of the ITAA 1936. I have assessed the Applicant's credibility on the basis of all of the evidence, including her evidence at the hearing, and I do not accept the Respondent's contention that the Applicant's claimed failure to provide documents in a timely manner (even if that were the case) impacts the credibility of her evidence in relation to the matters that are to be decided in these proceedings.

Sources of income

290. At paras 167-79 of his written closing submissions, the Respondent referred to a lack of evidence led by the Applicant as to how she earned her income, and what corporate structure she had in place to do so. The Respondent claimed that "[i]n the absence of clear evidence concerning the sources of [the Applicant's] wealth, she has not discharged her onus".

291. The above argument assumes that the Applicant did have other sources of income, in particular income generated by property developments utilising a corporate structure. That may have been the case, however, the Respondent does not point to evidence on which I could make that assumption. Further, it was not a matter specifically raised by the Respondent in the audit, the objection decision or in the statements of facts issues and contentions. It was also not a matter on which the Applicant was cross-examined. Understandably, the Applicant's evidence sought to address the objection decision, which, at page 1 of 15 of the reasons for decision,[374] HB/297. summarised the objection made by the Applicant as being that:

292. It was the elements of the above objections that were not allowed by the objection decision which the Applicant purported to address by her evidence.

293. In the above paragraphs of his written closing submissions, the Respondent identified possible sources of income and assets which the Applicant may have had, which the Applicant has not adequately explained. However, they were not matters specifically identified by the Respondent in the objection decision except insofar as they may emerge from or were included in the transactions in the bank accounts identified and discussed under the heading "Bank Accounts" at pages 11-14 of 15 in the objection decision.[375] HB/307–10.

294. The Applicant's closing submissions did not specifically respond to these paragraphs of the Respondent's closing submissions. Insofar as potential

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unexplained income or wealth was identified in the asset betterment calculation, then I consider those below.

Bank accounts

295. The Respondent's written closing submissions stated that the Applicant contended that various bank accounts included by the Respondent in the asset betterment calculation were utilised to fund the mortgages for properties which she held as bare trustee for other entities. The Respondent contended that the trust deeds that are relied upon in this context are infected with the same problems as the trust deeds relating to the eight properties specifically found in the objection decision to be beneficially owned by the Applicant. These are the properties referred to in [87] and [191] above.

296. At paras 235-76 of his written closing submissions, the Respondent referred to seven properties which he says come within the scope of this consideration. These properties are:

297. The Applicant's closing submissions did not address these paragraphs, except for the comment at para 65 of the Applicant's submissions that she rejected paras 270-1 of the Respondent's written closing submissions. Those paragraphs repeated the argument that the Applicant being designated as the borrower and the mortgagor in her name was evidence that she did not hold the property on trust. That issue is dealt with at [254] above and the paragraphs preceding that paragraph.

298. As noted above, the properties, and the corresponding trust deeds identified by the Respondent at paras 235-76 of the written closing submissions are not the eight properties which, in the objection decision, were considered by the Respondent to be beneficially owned by the Applicant. Further, they are not among the 21 properties initially found in the Respondent's audit not to be beneficially owned by someone other than the Applicant.[376] HB/7838; page 5 of 15 of the objection decision. These properties are addressed between paras 230-437 (not inclusive) of the Applicant's affidavit dated 8 November 2017[377] HB/114–33. in explaining the transactions in the NAB Flexi Account. At para 209 of her affidavit of 8 November 2017,[378] HB/111. the Applicant, in referring to these properties and other properties, asserted that:

… I as trustee for other entities in the property development venture bought the following properties. Each property was purchased by obtaining loans from third parties in relation to which [M] Nominees made a loan repayment through the NAB account.

299. From the above it appears that the Respondent, as a result of the audit, and for the purposes of the assessments the subject of the objection, accepted that these seven properties were not held beneficially by the Applicant, except (apparently) in the assessment of the transactions in the NAB Flexi Account. There is no explanation, or at least none to which I was taken, as to why these seven properties were not identified in the audit and in the objection decision as being beneficially owned by the Applicant in the same way that the eight properties identified by the objection decision were so identified (see [295] above).

300. In any event, for the same reasons that I find that the eight properties specifically identified in the objection decision as being beneficially owned by the Applicant were not so owned, I find that these seven properties were, as the Applicant claims, not held beneficially by her. This conclusion is further supported by the analysis of the transactions in the NAB Flexi Account undertaken by Mr Bay, which identified the source and destination of the funds that passed through the NAB Flexi Account.

Investec bank account

301. The Applicant's evidence[379] HB/137–9, Applicant’s affidavit dated 8 November 2017 paras 478–92 was to the following effect:

302. The Respondent's written closing submissions[382] Respondent’s written closing submissions paras 277–85. were to the following effect:

303. The documentary evidence[383] HB/1140–1, AvantGard interest statement dated 14 April 2014. would appear to support the Respondent's contention that, contrary to the Applicant's claim, the money paid into the Investec account came from the Applicant's own resources, not from G N Land Company Pty Ltd. In her closing submissions,[384] Applicant’s closing submissions para 75. the Applicant said that the assumption that money was paid from the Applicant's AvantGard account into the Investec account is incorrect and that the AvantGard account and the Investec account were in fact the same account. The argument put by the Applicant is that because there is reference in both the AvantGard and the Investec statements to an identical contract number, "[t]he only inference reasonably open is that, consistently with the [A]pplicant's evidence, the two documents refer to the same bank account". That, in my view, is little more than speculation on the part of the author of those submissions.

304. Otherwise, the documentary evidence does little to support either party's

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submissions. Contrary to what the Respondent asserted (see [302(b)] above), the Facility Agreement does not define the Applicant as a borrower in "her personal capacity and as a director of [G Holdings]" (the latter of which does not make sense in any event), or otherwise. As claimed by the Applicant, the Facility Agreement defined G N Land Company Pty Ltd as "Borrower" on page 1.[385] HB/1064. On that same page of the Facility Agreement, the Applicant is defined by her name and, by that defined name is, in the "Definitions and interpretation" section of the Facility Agreement, defined, with G Holdings Pty Ltd, as "Guarantors".[386] HB/1072.

305. It is also the case that, as claimed by the Applicant, it was the borrower, (i.e. G N Land Company Pty Ltd), which was, pursuant to clause 8.24 of the Facility Agreement,[387] HB/1102. required to open the interest security account.

306. That, however, largely became irrelevant when, according to the Applicant, the whole of the $610,323.13 balance of the Investec account was withdrawn in July 2009 and paid into the nominated NAB account[388] HB/1151. which the Applicant said was applied to a loan taken out by another of the Applicant's companies, FB Investments Pty Ltd. The Applicant provided no explanation as to why money held as security for G N Land Company Pty Ltd's liability to Investec was used to reduce the indebtedness of another of her companies. However, the end result is that any argument that the Applicant held the money in the account on trust for the benefit of G N Land Company ceased to apply when the money in the account was paid out to satisfy or reduce a debt of FB Investments Pty Ltd. It can be assumed that the payment of the $610,323.13 was made at the direction of the Applicant, who remained the account holder throughout, or pursuant to some right granted by the Applicant for those moneys to be drawn from the account. In the absence of any explanation supported by evidence indicating the contrary, I am entitled to assume that the money withdrawn from the Investec account was used for the Applicant's benefit. It was clearly not used for the benefit of G N Land Company Pty Ltd. I am not satisfied that the Applicant has discharged the onus of establishing that the moneys passing through this account were not for her benefit or should not be treated as income.

Bendigo bank account no. ----8627

307. The Applicant's evidence in relation to this account in her affidavit of 8 November 2017 was:

This account was opened in connection with the purchase of a property located at … Mandurah. I acquired this property as bare trustee for [G] Holdings Pty Ltd. It is not concerned with any personal expenditure on my part. A bundle of documents regarding this account is as pages 1033 to 1082 of [Annexure 1 to the Applicant's affidavit].[389] HB/140, Applicant’s affidavit dated 8 November 2017 para 501.

308. The Applicant did not exhibit a copy of a trust deed or other document evidencing that she held the property on trust for G Holdings Pty Ltd. The "bundle of documents" exhibited to her affidavit consisted solely of bank statements in the Applicant's name for the period June 2007 to July 2011.

309. In her affidavit dated 17 October 2021, the Applicant's evidence at paras 133-47[390] HB/3882–4. was to the following effect:

310. This account is not addressed in the Respondent's closing submissions. I am satisfied that on the evidence presented by the Applicant that this Bendigo Bank account related to the Mandurah property acquired in trust by the Applicant on behalf of G Holdings Pty Ltd, and that this account was used for the purpose of purchasing and holding that property. The Respondent had found in the G Holdings GST audit that the beneficial owner of the property was G Holdings Pty Ltd and assessed GST as payable by G Holdings Pty Ltd accordingly. I am satisfied that the Applicant has discharged the onus of establishing that the moneys passing through this account were not for her benefit and should not be treated as income.

Bendigo Bank account no. ----2227

311. The Applicant's evidence in relation to this bank account in her affidavit dated 8 November 2017 at paras 497-9[393] HB/139–40. was to the following effect:

312. The Applicant was cross-examined in relation to her claim that the Landgren Road property had been acquired by her on trust as she claimed. The answers given by the Applicant in cross-examination were consistent with her affidavit evidence. The purport of her evidence was that this was another of the properties that she had purchased on trust to be developed and sold in accordance with the practice that she and A had followed since around 2001. I note that this is not a property which was identified in the audit or in the objection decision as being beneficially owned by the Applicant as the eight properties referred to in [87] and [191] were.

313. The Respondent's closing submissions[395] Respondent’s closing submissions para 287. noted that the Applicant did not produce a contract for the purchase of this property and submitted that the deed of trust in respect of the property suffers from all of the problems identified by the Respondent in relation to other deeds of trust. The Respondent's contention is that trust deed was brought into existence for the purpose of concealing that the Applicant was the true legal and beneficial owner of the property. For the same reasons that I did not accept that argument in relation to the other deeds of trust and properties, I do not accept the argument in relation to this property. I am satisfied that the Landgren Road property was acquired and held on trust by the Applicant for the benefit of

ATC 11076

other parties in accordance with the standard practice used by the Applicant and A in respect of the other developments undertaken by them, and that the Applicant did not bare any of the costs of the development nor receive any direct benefit from the sale of the property on completion of the development. I accept that the Bendigo Bank account no. ----2227, which related to Landgren Road property, was not an account from which the Applicant received a benefit. I am satisfied that the Applicant has discharged the onus of establishing that the moneys passing through this account were not for her benefit and should not be treated as income.

Loan to G Holdings Pty Ltd

314. The Applicant gave evidence in relation to her loan accounts with G Holdings Pty Ltd in paras 672-92 of her affidavit dated 8 November 2017.[396] HB/181–4. That evidence was to the following effect:

315. The Respondent's written closing submissions raised issues with the Applicant's explanation as follows:

316. The Respondent's submissions have considerable merit. There is a singular lack of relevant documentation produced by the Applicant to substantiate the convoluted process which resulted in her being paid $1,000,000 by G Holdings Pty Ltd. Her assertion that the $1,000,000 paid to her represented $896,607.43 plus interest of $103,392.57, remarkably coming to exactly $1,000,000, smacks of an accounting, post-the-event concoction. As the Respondent pointed out, there is an absence of evidence, other than entries in the books of companies controlled by the Applicant and a letter from HFL Australia's lawyer requiring money held in the Applicant's account to be put up as security, to support her story. There is certainly a lack of contemporaneous, third-party documentation to support critical components of her story. There is no evidence to support a transfer to G Holdings Pty Ltd of the claimed liability of G 218 Pty Ltd to the Applicant. Further, there is no documentary evidence, or even a legal basis put forward, for interest being charged on the claimed loan of $896,607.43 which, by coincidence, caused the amount payable to be exactly $1,000,000. Where is the loan agreement pursuant to which this interest was payable?

317. Not only are critical elements of the Applicant's story not supported by any verifiable evidence and are at odds with what little independent evidence is available (e.g. settlement statements and the deed of priority between the mortgagees), her story is inconsistent with the answers that the Applicant gave in response to the s 264 notice. The Applicant was cross-examined at some length in that regard and her evidence was unconvincing. Trying to explain why, when asked whether, during the period 30 June 2008 to 30 June 2011 she had provided a loan to anyone, she had answered "No", her evidence was as follows:


APPLICANT: The loan that was made from the sale of the [Wittenoom] Street properties was made in a different financial period. Perhaps the question was not understood properly, I'm not certain. I don't believe there were any loans made to relatives, friends or other people during that period.
COUNSEL: Or anyone else, and you see that 8(a) is asking you to give the name of the entity to whom the loan was made during the relevant period?

ATC 11078

APPLICANT:		 Yes
COUNSEL: You contend, don't you, that you made a loan to [G] Holdings during the relevant period, don't you?
APPLICANT: I believe the loan was made prior to the relevant period.
COUNSEL: But it was still current as at 2007/'08/'09/'10 and '11 wasn't it?
APPLICANT: No, it wasn't current in '11.
COUNSEL: It was repaid in October 2010, wasn't it?
APPLICANT: I believe so, yes.
COUNSEL: Well, why didn't you answer, "Yes, there was a loan that I made to [G] Holdings during the relevant period"?
APPLICANT: The question may have been misunderstood.
COUNSEL: Well, you answered it, VTBL, so how did you understand it?
APPLICANT: The accountants prepared the responses for us. During a period it was very rushed, with many other compliance activities and requirements running parallel by the Commissioner of Taxation during the same period. There may have been a misunderstanding of the question. The accountants were the same of those who maintain the records of the company and were aware of the loan account within the company, and the transaction from the sale of the [Wittenoom] Street properties and advancements. I can't explain the answer to that any better than that. They may have misunderstood during the relevant period.[398] Transcript at 356.

318. I do not accept the Applicant's evidence. The obvious explanation for the answer given in response to the s 264 notice is that it was correct, there was no loan. As the Applicant said, the answer was prepared by the accountants who were familiar with the relevant companies' accounts. I do not accept that the Applicant has established an explanation as to why the payment of the $1,000,000 should not be treated as income.

Penalties

319. The Respondent's written closing submissions outline the Respondent's position as follows:

320. The Applicant's closing submissions took issue with the Respondent's characterisation of the Applicant not being forthcoming (see [319(d)(ii)] above). The Applicant did attempt to comply with the Respondent's notices. The Applicant's attempts to comply with the notices must be seen in light of the extensive nature of the information required by the notices. In relation to the Respondent's submissions on the application of the 20 per cent uplift in circumstances where a taxpayer has previously become liable to a penalty of this kind, the Applicant said that her convictions for having failed to comply with s 353-10 notices or her late lodgement of expanded tax returns do not warrant the application of the uplift.

321. The Applicant's written submissions dated 13 January 2022[401] Paras 176–221. contended as follows:

322. In relation to the 20 per cent uplift under s 284-220, the Applicant's written submissions contended as follows:

323. The parties' respective contentions are, as one would expect, made from diametrically opposite factual assumptions, the Respondent's being made on the assumption that the assessments and the objection decision were correct, and the Applicant's being made on the opposite assumption. The resolution of the issue of penalties and potential remission of penalties will, in large part, be affected by my determination of the correctness of the assessments and the objection decision. It is, therefore, appropriate to deal with the issue of penalties and remission of penalties at the end.

Were the 2009 and 2010 default assessments validly issued by the Respondent under section 170(1) item 5 of the ITAA 1936?

324. The Applicant's written submissions[409] Paras 163–75. outlined the Applicant's argument as follows:

325. The Respondent's written closing submissions[415] Paras 316–23. were to the following effect:

THE ISSUES FOR DETERMINATION

Were the assessments excessive or otherwise incorrect - s 14ZZK(b)(i) of the TAA?

326. I am satisfied that the Applicant has established, on the balance of probabilities, that each of the 2009, 2010 and 2011 default assessments and the 2016 special assessment was excessive or otherwise incorrect. In each case the Respondent, in calculating the amount of the default assessment, relied on the asset betterment calculation contained in the audit report (see [71] above).[418] Reasons for Decision following audit: HB/6011 para 4. That asset betterment calculation, amongst other things, treated the seven properties identified in [87] and the property identified in [191] relevant to the 2016 special assessment as being beneficially owned by the Applicant, and the money passing through the Applicant's NAB Flexi Account and other accounts as being for her benefit. For the reasons set out above, I accept the Applicant's argument that over many years and in relation to multiple subdivisional developments undertaken by A, his companies and business associates, the Applicant purchased and held property on trust for other entities, either at the request of A on particular occasions, or as part of a general practice. As noted above, the Respondent in fact accepted that to be the case in relation to the vast majority of the 230 properties registered in the Applicant's name which were included in these developments (see [75] above). Following the audit, the Respondent accepted that all but 21 of those 230 properties registered in the Applicant's name were beneficially held by the Applicant for another entity (see [76] above) and then, subsequently, accepted that all but eight of the relevant properties were not beneficially owned by the Applicant (see [23]-[24] above).

327. In finding that the Applicant held the eight properties on trust for others, I am not relying on the evidence of the Applicant alone. As noted at [256] above, while A was not a particularly satisfactory witness in a lot of respects, his evidence, the documentary evidence and the evidence of Mr Bay and DCW, were consistent with the Applicant holding the properties in question on trust for other entities involved in the relevant developments. The evidence indicated that the Applicant received no direct benefit from the development and sale of the properties in question and bore none of the costs. While it was repeatedly put to the Applicant that she had no intention of putting the deeds of trust into effect and, as a matter of fact did not do so, the evidence is consistent with her having given effect to the deeds of trust. The Respondent himself accepted that that was the case with over 220 of the 230 properties registered in the Applicant's name and there was no reason that emerged from the evidence why the remaining eight properties should be treated any differently.

328. I also accept that the Applicant's NAB Flexi Account and the Bendigo Bank accounts no. ----8627 and ----2227 included in the asset betterment calculation upon which the default assessments were based, were not held by the Applicant for her benefit and that the funds that passed through those accounts should not be considered income of the Applicant. I am therefore satisfied that the assessments the subject of the objections and the objection decision were excessive or otherwise incorrect.

329. As the Respondent correctly points out, a finding that the assessments were excessive or otherwise incorrect is only half the requirement of s 14ZZK(b)(i) of the TAA. The Applicant must also establish, on the balance of probabilities, what the assessment should have been: in other words, what her actual taxable income was for each of the years. She does not do that by starting with the assessments issued by the Respondent and deducting from the assessments items which are shown to have wrongly been included. The steps necessary to satisfy this element of s 14ZZK(b)(i) of the TAA are described by Derrington J in Ross at [47] as set out in [66] above. Of particular relevance in the present case are the following comments made by Derrington J:

  • (5) In order to establish that an assessment under s 167 is excessive, a taxpayer must positively prove their "actual taxable income" and, in doing so, must demonstrate that the amount of tax levied by the assessment exceeds their actual substantive liability: Gashi [63]; Dalco at 623 - 625; Trautwein at 88;
    Ma v Federal Commissioner of Taxation [1992] FCA 359; (1992) 37 FCR 225 (Ma) at 230; by, in effect, furnishing a return of actual income which involves establishing both sides of the equation:
    Bosanac v Commissioner of Taxation [2019] FCAFC 116; (2019) 267 FCR 169 (Bosanac (FC)) [57].

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  • (6) In the context of a s 167 assessment based on the asset betterment method, the taxpayer must demonstrate that the identified unexplained accumulated wealth was derived from non-income sources and that may be achieved by an accepted denial of any undisclosed source of income, providing acceptable evidence of how the taxpayer spends their time, and demonstrating a reasonable explanation for any appearance of the possession of assets: Ma at 230; Gashi [64] - [65]. The taxpayer must account for the unexplained increase in assets by explaining the source of those assets and identifying that those sources are not taxable. "[I]f the disclosed "actual" taxable income does not explain the increase in assets, then the taxpayer is unlikely to have discharged the burden of establishing the assessment is excessive": Gashi [65].

330. The Applicant's basic contention is that her actual income was as declared in the returns that she lodged for each of the years in question. At paras 528-671 of her affidavit dated 8 November 2017[419] HB/144–81. the Applicant set out what she said were the sources of her income for each of the years in question. These included:

331. In these paragraphs the Applicant also set out the assets that she held in each of the relevant years, the living expenses (including holiday expenses) that she incurred in each of the years and sought to explain the flow of funds through her many bank accounts and credit cards. At para 635 of her affidavit of 8 November 2017, the Applicant referred to the $1,000,000 payment that she received from G Holdings Pty Ltd in February 2011 which she claimed was repayment of a loan. For the reasons set out at [316]-[318] above, I do not accept the Applicant's explanation of this payment.

332. In the present case, it being a ITAA 1936 s 167 assessment based on the asset betterment method in each year, the Applicant, as described by Derrington J at [47(6)] of Ross, must demonstrate that the identified unexplained accumulated wealth was derived from non-income sources and further in this case, to explain the transactions, and why the funds passing through accounts and credit cards in her name that have been identified by the Respondent should not be treated as income. As stated above, I accept that the Applicant has, on the balance of probabilities, established that the eight properties were not held beneficially by her and that she has explained why the funds going through the NAB Flexi Account and the two Bendigo Bank accounts referred to in [328] above, were, as Derrington J described it at [47(6)] of Ross, "derived from non-income sources". I do not accept that she has discharged that onus in respect of the other bank accounts and credit cards identified by the Respondent. In relation to those other accounts and credit cards, we have little more than the Applicant's assertion that the funds were not used by her for her benefit. Unlike the NAB Flexi Account, there was no detailed analysis based on bank statements or other third-party documents provided by the Applicant.

333. While the above represent my findings on those issues, my role is to review the objection decision[420] See Stevenson v Federal Commissioner of Taxation (1991) 29 FCR 282 . and, exercising the powers under s 43(1) of the Administrative Appeals Tribunal Act 1975 (Cth), to:

334. The exercise described in [332] is affected by the operation of s 14ZZK(a) of the TAA (see [56] above) which limits the grounds of the review of the objection decision to the grounds stated in the objection lodged by the Applicant.

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Those grounds of objection (expanded by leave at the hearing; see [64] above) are reflected in the objection decision. The grounds of the objection lodged by the Applicant are summarised in [22] above.

335. As noted at [291] above, the Respondent summarised, in my view accurately, the Applicant's objections in his reasons for the objection decision. It was the rejection of these objections, in some cases partial rejection, which were agitated in these proceedings. Given my findings as summarised above, I consider that the correct or preferable decision is to vary the objection decision to allow the Applicant's objections to the inclusion of the eight properties in the assessments issued in each of the years, as well as the NAB Flexi Account and the Bendigo Bank accounts numbered ----8627 and ----2227. This will reduce the assessments for the 2009, 2010 and 2011 years and will allow in full the objection in relation to the 2016 special assessment.

Were the shortfall penalties in the penalty assessment, as adjusted by the objection decision, correctly imposed and should the penalties be remitted in whole or in part?

336. The parties' respective contentions on this issue are set out at [319]-[321] above. As I noted at [322], the question of whether the penalties were correctly imposed and whether any should be remitted has to be determined in light of whether the assessments were found to be excessive. In the present case I have found that they were. While that finding will obviously impact the amount of the shortfall on which any penalty is based, a finding that the assessments were excessive will not necessarily affect the legal basis upon which the penalty was imposed.

337. In the case of the 2009 to 2011 default assessments, while I have allowed the Applicant's objection to the inclusion of the seven properties and some of the bank accounts included in the assessments for those years, there was still, in my view, a failure on the part of the Applicant to include all of the sources of income and that that failure was a result of the Applicant's intentional disregard of a taxation law. Accordingly, the base penalty amount calculated at 75 per cent of the shortfall under item 1 of the table in s 284-090(1) is appropriate. I find that the shortfall in the income declared by the Applicant in her returns for 2009 to 2011 was the result of more than negligence or recklessness, but rather, was deliberate conduct on her part to disregard the legislation or regulations. She is not an unsophisticated person. She is, as the Respondent pointed out, an experienced businessperson who has been engaged in complex property deals and developments in her own right over many years, and I find that she would have been well aware of her legal obligations in relation to tax. I also consider that the Applicant's lack of proper record keeping, demonstrated by her inability to produce documents (or to produce documents in a timely manner) and her inability to be able to account for all of the transactions through her various bank accounts and credit cards, is indicative of someone who has insufficient regard for the tax laws. As far as the payments, bank accounts and credit cards in relation to which I have not varied the objection decision are concerned, it would have been a relatively straight-forward exercise for the Applicant, or those who worked for her, to have kept proper records of the transactions that occurred in those accounts, or to use purpose-specific accounts. The Applicant chose not to.

338. In relation to the uplift of 20 per cent under s 284-220 of the TAA, other than failing to disclose income, I am not satisfied that the Applicant "took steps to prevent or obstruct the [Respondent] from finding out about a shortfall".[421] TAA s 284-220(1)(a). While it may be argued that the Applicant could have responded more promptly to some of the requests for production of information or documents during the audit, and it could be argued that she ought to have kept better records, any failure in that regard was, at worst, an act of omission rather than the taking of a step to prevent or obstruct the Respondent in the audit and in finding out about a shortfall.[422] See Bosanac and Commissioner of Taxation [2018] AATA 472 ( Bosanac AAT ) at [104].

339. The Respondent argues that s 284-220(1)(c) of the TAA applies to the penalties in respect of the 2010 and 2011 years because a penalty had been imposed in relation to the income year ended 30 June 2009 (see [322(a)] above). The relevant assessments for the 2010 and 2011 years were contemporaneous with

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the assessment for the 2009 year. While the penalty assessed the 2009 year was, like the penalty amounts for 2010 and 2011 years, calculated using items 1, 2 or 3 of the table in subsection 284-90(1) of the TAA, the issue is whether the assessment in respect of the 2009 year was made "previously" to the assessments for the 2010 and 2011 years given that it was made at the same time. In considering an earlier version of s 284-220(1)(c), Jessup J in Gashi at [57] found:

The policy with which the paragraph appears to be concerned is the discouragement of subsequent defalcations, once a taxpayer has been subjected to an administrative penalty of a particular kind on a previous occasion. On one view, it would not induce to the implementation of that policy if the taxpayer were subjected to the s 284-220(1)(c) uplift for each of the second and subsequent years in circumstances where he or she received assessments from the Commissioner in respect of a series of years at the one time. The question is: does "for a previous accounting period" mean "in respect of a previous accounting" or "on a previous occasion"? Counsel for the Commissioner informed me that this question has not previously been addressed by the courts, but submitted that the former construction was the correct one. Counsel for the applicants did not engage with that submission. I am disposed to accept it. Whatever legislative policy is discernible here, the latter interpretation would involve something of a strain against the words actually used in the provision. I would hold that it was open to the Commissioner to apply the uplift factor to the penalty assessments in 2004 and 2005, notwithstanding that they were served on Mr Gashi at the same time, and at the same time as was the 2003 assessment.

340. As the above passage indicates, the provision that Jessup J was considering was materially different to the current section. The s 284-220(1)(c) that Jessup J was dealing with was:

the base penalty amount was worked out using item 1, 2 or 3 of the table in subsection 284-90(1) and a base penalty amount for you was worked out under one of those items for a previous accounting period ….

(Emphasis added.)

341. The language of the current s 284-220(1)(c) is as follows:

the base penalty amount was worked out using item 1, 2 or 3 of the table in subsection 284-90(1) and a base penalty amount for you was worked out under one of those items previousl y.

(Emphasis added.)

342. Justice Jessup's judgment was based on the meaning of the words "for a previous accounting period". The wording of the current s 284-220(1)(c) is consistent with the "latter interpretation" referred to by his Honour in the above passage. In fact, given the change in the wording of the section, the interpretation found by his Honour to apply to the former language of the section "would involve something of a strain against the words" of the section as it now reads. In other words, "previously" should be interpreted to mean "on a previous occasion" as distinct from "in respect of a previous accounting period" as found by Jessup J on the former wording of that section.

343. The Applicant's written submissions referred to PSLA 2012/5 (see [322(d)] above) which relevantly provides:

15K. The increase will apply regardless of whether the previous penalty was assessed during a previous interaction, or whether it occurs on the same day. There is no requirement for the entity to be aware of the penalty for the increase to apply. This means that, where we assess multiple penalties of the same type at the same time, the increase will apply to the second and subsequent statements.[423] Citing Gashi FC .

…

17A. If imposition of the penalty provides an unintended or unjust result, we may remit the penalty in whole or in part.

…

17C. In some instances, the mechanical or calculation process of the law could result in an unintended or unjust result, and remission in part or full may be warranted.

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…

17E. As noted in paragraph 15K and Example 8, remission of the 20% uplift is usually given where:

  • • a BPA is increased because two or more penalties were assessed at the same time
  • • the entity has not been advised of a previous penalty (usually because of concurrent calculation), and
  • • the behaviour is not intentional disregard of the law.

344. I have a couple of issues with para 15K of PSLA 2012/5. Firstly, it cites the decision of the Full Court in Gashi FC (noting that the citation does not identify a pinpoint). That case did not deal with s 284-220(1)(c) of the TAA. That section was interpreted and applied by Jessup J in the first instance judgment as set out at [339] above. His Honour's findings in relation to that section were not subject to appeal, which was, in any event, dismissed by the Full Court. Secondly, para 15K does not represent the current law. It is a statement of the effect of Jessup J's decision in Gashi based on the legislation as it stood prior to 4 June 2010 when the amendment effected by the Tax Laws Amendment (2010 Measures No. 1) Bill 2010 (Cth) came into operation.[424] See Morrison and Commissioner of Taxation [2015] AATA 114 at [117] and [118] .

345. In the present case I find that s 284-220(1)(c) does not operate to apply a 20 per cent uplift to the base penalties applied under s 284-90(1) of the TAA for the 2010 and 2011 years because at the time that the penalties were worked out in respect of those years, a penalty had not "previously" been applied in respect of the 2009 year.

346. In relation to whether the penalties should be remitted, s 298-20 of sch 1 the TAA relevantly provides:

the Commissioner must give written notice of the decision and the reasons for the decision to the entity.

347. At [192] of
Sanctuary Lakes Pty Ltd v Commissioner of Taxation,[425] (2013) 212 FCR 483 ; [2013] FCAFC 50 . Greenwood J described the discretion to remit penalty under s 298-20 of the TAA as follows:

Section 298-20 addresses the topic of "Remission of Penalty". It applies to each penalty arising under each of the penalty regimes under Part 4-25. In order to provide the Commissioner with the flexibility necessary to determine the circumstances informing the exercise of the discretion to remit a penalty imposed under a Division of Part 4-25, s 298-20(1) simply provides that the Commissioner "may remit all or a part of the penalty". Section 298-20 does not provide for any considerations that must be taken into account in the exercise of the discretion to remit all or a part of the penalty.

348. His Honour at [193] further described the discretion under s 298-20 of the TAA in the following terms:

The discretion conferred by s 298-20(1) is unconstrained, according to its terms. It must, however, be exercised for a proper purpose; in accordance with the objects of the Administration Act; and according to law.

349. At [206] to [209] of Sanctuary Lakes, Greenwood J described the basis for the exercise of the discretion to remit as follows:

206. Upon a proper exercise of the discretion, the Tribunal might or might not conclude that the penalty imposed by the Administration Act on the taxpayer in failing to take reasonable care is to be remitted to zero. That is entirely a matter of merits assessment in the exercise of the discretion for the Tribunal in determining where the balance of factors lies. However, the exercise of the discretion must take account of the statutory scheme, the foundation upon which the Administration Act imposes the penalty and the questions that need to be examined in exercising the discretionary power to remit the penalty.

207. The Tribunal must be taken to have asked itself the question, does the object of the penalty regime justify the exercise of the discretion conferred by s 298-20(1) of Sch 1 so as to remit the penalty imposed upon the taxpayer by operation of s 284-75(1), s

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284-80, s 284-85 and s 284-90 of Sch 1, to nil because the statement made to the Commissioner in the absence of reasonable care nevertheless gave rise to a reasonably arguable claim for a deduction.

…

209. In exercising the discretion under s 298-20(1) to remit, the Tribunal was required to ask itself, having regard to the evidence, what were the circumstances surrounding the failure on the part of the taxpayer or its agent to exercise reasonable care in making the statement to the Commissioner that might explain the conduct the subject of the penalty and what circumstances, on the evidence, ought to be taken into account in determining, as a matter of discretion, that notwithstanding the imposition of a penalty on the taxpayer by the Administration Act on the footing of a failure to take reasonable care in making the statement, the penalty ought nevertheless be reduced either in whole or in part, and as in this case, to nothing.

350. Justice Griffiths in Sanctuary Lakes, having reviewed the language of s 227(3) of the ITAA 1936 dealing with the discretion under that act to remit penalties (which refers remission where the outcome would otherwise be harsh), observed at [247]:

In my view, there is no warrant for reading into the broad discretion conferred by s 298-20 of the TAA 1953 (or, indeed, former s 227(3) of the ITAA 1936) a requirement that the decision-maker must be satisfied that the outcome is "harsh" for the particular taxpayer in his or her individual circumstances unless penalty is remitted. One rhetorically asks what is the basis for reading into s 298-20 a term which is simply not there?

And at [249]:

In my opinion, the correct question which arises under s 298-20 should not be expressed in terms of "harshness". Rather, the question is simply whether the decision-maker is satisfied having regard to the taxpayer's particular circumstances that it is appropriate to remit penalty in whole or in part. For example, a decision-maker might determine that it is appropriate to remit penalty in whole or in part because otherwise the outcome for a particular taxpayer would be unreasonable or unjust (and therefore inappropriate), as opposed to harsh (see the observations of McHugh and Gummow JJ in
Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 465 on the different meanings of the individual words "harsh", "unjust" and "unreasonable" in a different context concerning unfair dismissal and the collocation of those words in both legislation and an industrial award).

351. In
Bosanac and Federal Commissioner of Taxation[426] [2019] AATA 1240 . at [33] I described the exercise of the discretion under s 298-20 of the TAA as follows:

The Tribunal is bound and guided by the principles spelt out by the Court in Sanctuary Lakes. On that point the parties seem to be agreed. The correct question for the Tribunal as identified by the Court in Sanctuary Lakes is whether it is satisfied, having regard to the "taxpayer's personal circumstances", that it is "appropriate" to remit the penalty in whole or in part. The judgment in Sanctuary Lakes, as applied in subsequent cases, also makes it clear that the discretion in s 298-20 of Schedule 1 is broad.

352. The Applicant in her written submissions at paras 223-6 referred to the fact that the Applicant returned her director's fee from G Holdings Pty Ltd in the income year ended 30 June 2010 when it should in fact have been returned in the income year ended 30 June 2011. This resulted in there being an excess in the return for the 2010 year but a shortfall for the 2011 year. The Applicant argues that there was no intentional disregard of or recklessness as to the operation of a taxation law. The Applicant recognised that the director's fee was assessable income and returned it- she just did so one year early. There could be no possible advantage for the Applicant in doing so.

353. The Applicant refers to PSLA 2012/5 [17W]-[17AC] and contends that the penalty imposed in respect of the shortfall in the 2011 year caused by the director's fees being returned a year early should be remitted. I agree that

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that is appropriate and in accordance with the Respondent's published practice statement.

354. In relation to the penalties applying to all other shortfall amounts, there was nothing in the evidence which would indicate that the Applicant's personal circumstances, the circumstances that have given rise to the shortfalls and the imposition of penalties or any other consideration, make it appropriate to remit any part of the penalties.

Were the 2009 and 2010 default assessments validly issued by the Commissioner under s 170(1) item 5 of the ITAA 1936?

355. Section 170, item 5 of the ITAA 1936 provides the power for an amendment to be made after the usual four-year period, in circumstances where the Respondent is of the opinion that there was fraud or evasion at the time of the original assessment.

356. The Respondent argues that he formed the reasonable view that there had been, as a minimum, evasion in respect of the returns for the 2009 and 2010 years. The Respondent contends that the relevant test is that stated by Dixon J in Denver quoted at [325(c)] above. That is an oft cited passage and I accept that to be the applicable test.

357. Fullagar J in
Australasian Jam Co Pty Ltd v Federal Commissioner of Taxation[427] (1953) 88 CLR 23 . at 37 stated the test to be:

In order that the appeals should succeed, it is necessary that I should hold that the opinion was not in fact entertained, or that it was based upon a misconception of the meaning of the word " evasion " , or that it was arrived at " capriciously, or fancifully, or upon irrelevant or inadmissible grounds " (per Rich and Dixon JJ in
Australasian Scale Co Ltd v Commissioner of Taxes (Qld) (1935) 53 CLR 534, at p 555: cf
Metropolitan Gas Co v Federal Commissioner of Taxation (1932) 47 CLR 621, at pp 636-637). In the course of a well known passage in
Moreau v Federal Commissioner of Taxation (1926) 39 CLR 65, Isaacs J said -

Unless the ground or material on which his belief is based is found to be so irrational as not to be worthy of being called a reason by any honest man, his conclusion that it constitutes a sufficient reason cannot be overridden…"

I am inclined to think, with respect, that this puts the position somewhat too strongly. The position was put to me by counsel for the Commissioner very much as I have put it above, and I think it was correctly so put. The taxpayer can, of course, obtain an actual review of an opinion or discretion of the Commissioner by the Board of Review, though not by the court…

I am satisfied that the Commissioner did entertain such a view, and that such a view is not based on any misconception of law. And I am not able to say that it was an unreasonable view - still less that it was arrived at "capriciously or fancifully or upon irrelevant or inadmissible grounds". The result is that, in my opinion, all the amended assessments were authorized by the Act, and all the appeals fail.

(Emphasis added.)

358. I also note the observations of Perram and Davies JJ in Binetter as to the application of the power under s 170(2) of the ITAA 1936:

72. For the purposes of this appeal, there is no material difference between the statutory requirements of s 170(2) in the income years 2002 to 2004 and those for the income years 2005 to 2007 contained in s 170(1) item 5. Both permitted the Commissioner to amend a notice of assessment issued for an income year at any time so long as he first formed the opinion that there had been fraud or evasion in relation to that year.

…

74. The Commissioner did, in fact, form the opinion that there had been "evasion" (although not fraud). In relation to the 2002 to 2004 income years, he did so on 29 July 2010. In relation to the 2005 to 2007 income years, he did so on 20 September 2011. His power to do so having then been enlivened, the Commissioner issued amended assessments for the income years 2002 to 2007…

359. The fact that I have found that certain of the items included in the asset betterment calculation undertaken by the Respondent upon which he based the Fraud or Evasion Opinion[428] HB/5987–6008.

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(see [33] above) were either explained by the Applicant or should not be treated as income, does not affect whether the Respondent, as a matter of fact held the requisite opinion. I am satisfied that the Respondent held the requisite opinion, and I am satisfied that that opinion was not based upon a misconception of the meaning of the word "evasion", or that it was arrived at "capriciously, or fancifully, or upon irrelevant or inadmissible grounds".[429] See Australasian Jam Co at 37 cited at [357] above.

360. I am satisfied that the Respondent had the power to issue amended assessments under s 170(1), item 5 of the ITAA 1936 in respect of the 2009 and 2010 tax years.

DECISIONS

Applications 2016/2809, 2016/2810 and 2016/2811

361. For the reasons set out above, I have found that the properties listed in [87], which were included by the Respondent in the 2009 and 2010 default assessments, were not beneficially owned by the Applicant. Accordingly, the correct or preferable decision is to vary the objection decision in relation to the 2009 and 2010 default assessments to allow the objection to the inclusion of those properties in the default assessments.

362. Further, for the reasons set out above, I have found that the moneys passing through the NAB Flexi Account and the Bendigo Bank accounts numbered ----8627 and ----2227 were not for the benefit of the Applicant. Accordingly, the correct or preferable decision is to vary the objection decision in relation to the 2009, 2010 and 2011 default assessments to allow the objection to the inclusion of money passing through those accounts as the Applicant's income or the Applicant's property in the default assessments.

363. Further, for the reasons set out above, I have found that neither s 284-220(1)(a) nor s 284-220(1)(c) applies. Accordingly, the correct or preferable decision is to vary the objection decision in relation to the 2010 and 2011 default assessments to allow the objection to the 20 per cent uplift to the penalties under s 284-220 of the TAA.

364. Further, for the reason set out in [353] above, the correct or preferable decision is to vary the objection decision to remit the penalty imposed in respect of the shortfall in the 2011 year caused by the director's fees being returned a year early.

Application 2017/7664

365. For the reasons set out above, I have found that Anketell Road, the sale of which was included by the Respondent in the 2016 special assessment, was not beneficially owned by the Applicant. Accordingly, the correct or preferable decision is to vary the objection decision in relation to the 2016 special assessment to allow the objection to inclusion of that property in the assessment.

Footnotes

[1] Pursuant to s 14ZZJ(2D) of the TAA, the Tribunal is required to ensure that, as far as practicable, the reasons for decision are framed so as not to be likely to enable the identification of the Applicant. I have, accordingly, given the Applicant and her partner a pseudonym and, as far as is practicable, avoided the inclusion of information which would readily identify the Applicant. For this reason, some of the company and trust names cited in this decision are also anonymised.
[2] Applicant’s Amended Substituted Statement of Facts, Issues and Contentions in applications 2016/2809–2016/2811 ( Applicant’s 2016 SFIC ) para 4.
[3] Hearing Book ( HB ) HB/5201.
[4] T4; HB/5204.
[5] T5; HB/5208.
[6] T6/46; HB/5219.
[7] T7; HB/5221.
[8] T8/52; omitted from HB.
[9] T9; HB/5232.
[10] T10.
[11] T11; HB/5236.
[12] T12; 5240–1.
[13] T14; HB/5244–5.
[14] T19; HB/5259.
[15] T25; HB/5359–75.
[16] s 264 notice .
[17] T29/247; HB/5412.
[18] T45; HB/6008–43.
[19] T46; HB/6044–47.
[20] T47; HB/6048–51.
[21] T48; HB/6052–5.
[22] T44; HB/5987–6007.
[23] T49; HB/6056–7.
[24] T50; HB/6058–72.
[25] See HB/6039–42.
[26] T144; HB/6843–4.
[27] T144; HB/6843.
[28] HB/297–311.
[29] HB/301–2.
[30] T145; HB/6845.
[31] T146; HB6849.
[32] T147; HB/6853.
[33] T50; HB/6058–72.
[34] T44; HB/5987–6008.
[35] T44; HB/5988–9
[36] T44; HB/5989.
[37] Respectively, the Applicant’s 2017 SFIC and the Respondent’s 2017 SFIC .
[38] T46; HB/8180.
[39] T50; HB/8207–17.
[40] T111; HB/8581–2.
[41] This is the pseudonym assigned to the Applicant’s partner.
[42] Pseudonym provided to the internal accountant employed by M Contracting Pty Ltd.
[43] Citing Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 88 ; Federal Commission of Taxation v Dalco (1990) 168 CLR 614 at 621−625 ; Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 at 314−315 ( Gashi FC ).
[44] Included in A1: HB/76–185.
[45] Citing Gashi FC at 315 [63].
[46] Included in A1: HB/45–6.
[47] Citing Property Law Act 1969 (WA) ( PLA ) s 34 and Adamson v Hayes
[48] Citing Knight v Knight (1840) 49 ER 58 .
[49] Citing Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 .
[50] Citing Rochefoucauld v Boustead (1897) 1 Ch 196 .
[51] Citing Baumgartner v Baumgartner (1987) 164 CLR 137 ; Keech v Sandford (1726) 25 ER 223 .
[52] Citing Commissioner of Taxes (SA) v Executor & Trustee Agency Co of South Australia (1938) 63 CLR 108 ( Carden’s case ).
[53] (1987) 163 CLR 199 .
[54] Commissioner of Taxation, Income tax: am I carrying on a business of primary production? ( TR 97/11 , 4 June 1997).
[55] Citing Shields and Commissioner of Taxation [1999] AATA 4 .
[56] Citing Dixon v Commissioner of Taxation (2008) 167 FCR 287 ; [2008] FCAFC 54 .
[57] Commissioner of Taxation v Ross (2021) 174 ALD 77 ; [2021] FCA 766 .
[58] Ross at [48].
[59] [2021] FCA 303 .
[60] [2015] FCAFC 92 ; (2015) 233 FCR 315 .
[61] Gashi FC at 315 [63]–[65]; Ross at [47(4)], see [65] above.
[62] Ross at [46]; see [64] above.
[63] George at 189.
[64] See for example, Dalco ; Trautwein, Binetter v Federal Commissioner of Taxation (2016) 249 FCR 534 ; [2016] FCAFC 163 . and, in part, Haritos .
[65] Reasons for Decision following audit: T45, HB/6011 para 4.
[66] HB/6042.
[67] 2009: -$1,027,674.57; 2010: -$2,460,342.79; 2011: $309,322.52.
[68] 2009: $1,527,529.60; 2010: $5,142,529.60; 2011: $6,885.60.
[69] 2009: $3,751,212.06; 2010: $3,242,726.59; 2011: $4,094,657.05.
[70] 2009: $7,779.75; 2010: $860.70; 2011: -$7,482.61.
[71] 2009: $484,031.43; 2010: 506,499.38; $305,718.57.
[72] Attachment A : Asset Betterment Statement; HB/6039–42 (also cited as the asset betterment calculation).
[73] HB/6039.
[74] HB/6020.
[75] HB/6039.
[76] HB/6039.
[77] HB/6025.
[78] HB/6030–40.
[79] HB/6025.
[80] HB/6025; Reasons for Decision para 125.
[81] HB/6026.
[82] HB/6041.
[83] HB/6040.
[84] HB/6024.
[85] HB/6040.
[86] HB/4042.
[87] ITAA 1997 s 6-5.
[88] HB6040–1.
[89] HB/6041.
[90] T44; HB/5987–6007.
[91] HB/5991–2.
[92] HB/6024.
[93] HB/76–2234 (dated 8 November 2017); HB/3202–3326 (dated 15 November 2017); HB/3335–52 (dated 17 November 2017); HB/7638–934 (dated 24 August 2018); HB/3846–5064 (dated 17 October 2021).
[94] HB/3353–6 (dated 11 November 2016) and HB/45–6 (dated 2 May 2017).
[95] HB/91 para 73.
[96] HB/555–631.
[97] Starting at HB/94.
[98] Starting at HB/3846.
[99] HB/411.
[100] HB/422.
[101] HB/423.
[102] Settlement statement, HB/424.
[103] HB/3867 para 37–8.
[104] HB/3935.
[105] HB/3936.
[106] HB/3867 para 39.
[107] HB/3867 para 41.
[108] HB/3941–9.
[109] HB/3949.
[110] Transcript at 216.
[111] Transcript at 219–20.
[112] HB/2235–2277 with annexures (HB/2278–3201).
[113] Transcript at 439–40.
[114] A’s affidavit dated 8 November 2017; HB/2247 para 130.
[115] HB/3071.
[116] HB/3072–6.
[117] HB/100 para 135.
[118] HB/506–7.
[119] HB/101 para 138.
[120] Supplementary hearing book/146.
[121] Transcript at 259.
[122] HB/508.
[123] HB/104 para 159.
[124] HB/509–10.
[125] HB/512.
[126] HB/513.
[127] HB/514.
[128] HB/515.
[129] HB/515.
[130] HB/516.
[131] HB/102 para 149.
[132] HB/102 para 150.
[133] HB/517.
[134] HB/518.
[135] HB/4041.
[136] HB/3873–4.
[137] HB/3874 para 80.
[138] HB/3874 para 80.
[139] HB/4041–2.
[140] HB/4043–5.
[141] HB/4043 para 1.
[142] HB/4049.
[143] HB/4053.
[144] HB/4054.
[145] HB/2235–3201.
[146] HB/2268–9 paras 135–40.
[147] HB/3086–9.
[148] HB/2268–9 para 140.
[149] Transcript at 256.
[150] R1, 80.
[151] The Applicant objected to the movement details being admitted into evidence because they had not been provided prior to the hearing and the Applicant had not had the opportunity to check her records to determine the accuracy of the ATO records.
[152] Transcript at 257.
[153] Transcript at 257–8.
[154] Transcript at 475.
[155] Transcript at 478–9.
[156] HB/411.
[157] Transcript at 479–80.
[158] HB/127–8 paras 371–80.
[159] HB/431–2.
[160] HB/432.
[161] HB/127 para 373.
[162] HB/433.
[163] HB/870.
[164] HB/871.
[165] HB/127 para 376.
[166] HB/128 para 378.
[167] HB/128 para 378.
[168] HB/434.
[169] HB/435.
[170] HB/435.
[171] HB/436.
[172] HB/2269–70.
[173] HB/2269 paras 141–2.
[174] HB/3099.
[175] HB/3100.
[176] HB/3101.
[177] HB/3193.
[178] Transcript at 235.
[179] Transcript at 236.
[180] HB/99–100.
[181] HB/3103–4.
[182] HB/3102.
[183] HB/3104.
[184] HB/3105.
[185] HB/3875–6.
[186] HB/4057.
[187] HB/4060–6.
[188] HB/4068.
[189] HB/4069.
[190] HB/4071.
[191] HB/4075.
[192] HB/4074.
[193] HB/100.
[194] HB/3106.
[195] HB/3107.
[196] HB/100.
[197] HB/449; note: this is the same document referred to in [111] above, which referred to the document at HB/512.
[198] HB/450–502.
[199] HB/450.
[200] HB/475.
[201] HB/476.
[202] HB/477.
[203] Transcript at 241.
[204] Transcript at 242.
[205] Transcript at 249.
[206] Transcript at 250.
[207] Transcript at 250.
[208] Transcript at 253–4.
[209] HB/2270.
[210] HB/2270 para 146.
[211] HB/107–8.
[212] HB/540.
[213] HB/541–3.
[214] HB/545.
[215] HB/547.
[216] HB/549.
[217] HB/552.
[218] HB/553.
[219] Para 118; HB/3879.
[220] HB/554.
[221] HB/554.
[222] This is a pseudonym.
[223] HB/2271.
[224] Transcript at 264.
[225] Transcript at 265.
[226] Transcript at 265.
[227] Transcript at 268.
[228] Transcript at 480.
[229] HB/103–5.
[230] HB/2271–2.
[231] HB/96–7.
[232] HB/3957.
[233] HB/97 paras 106–7.
[234] HB/426.
[235] HB/427.
[236] HB/426.
[237] HB/428.
[238] HB/97 para 113.
[239] HB/105–6.
[240] HB/106.
[241] HB/535.
[242] Transcript at 262.
[243] HB/536–8.
[244] HB/106 para 181.
[245] HB/539.
[246] HB/3875.
[247] HB/7638–65.
[248] HB/7652.
[249] HB/8220–1.
[250] HB/7851.
[251] HB/7852.
[252] HB/7853.
[253] HB/7854.
[254] HB/7652.
[255] HB/7855.
[256] HB/7856.
[257] Transcript at 175.
[258] Transcript at 176.
[259] HB/7653 para 100.
[260] HB/8374.
[261] HB/7869.
[262] HB/7655.
[263] HB/7881.
[264] HB/7655.
[265] HB/7900–8.
[266] HB/7900.
[267] HB/8061.
[268] HB/7656–8.
[269] HB/7909–73.
[270] HB/2235–77.
[271] HB/2250–61.
[272] HB/2394–822.
[273] HB/2252.
[274] HB/2823–98.
[275] HB/2253.
[276] HB/2259 para 88.
[277] HB/5065-164.
[278] HB/5165–80.
[279] A6.
[280] HB/5067.
[281] Transcript at 602.
[282] See XQDX and Commissioner of Taxation (2021) 114 ATR 170 ; [2021] AATA 4070 at [53] and the cases referred to therein, particularly the analysis of Deputy President Forgie and Member Ermert on the use of expert evidence in the AAT in Vestas - Australian Wind Technology Pty Limited and Comptroller-General of Customs (2017) 72 AAR 119 ; [2017] AATA 791 .
[283] Transcript at 603.
[284] HB/5069–70.
[285] HB/5075.
[286] HB/5076–81.
[287] HB/5082–9.
[288] Note: the subsequent two paragraphs of that report (headed “ Question 3 Conclusion ”) are also erroneously numbered 9.37 and 9.37.1.
[289] As noted in footnote 288 above, this is the second paragraph numbered 9.37.1; HB/5089.
[290] HB/5160–76.
[291] HB/5166.
[292] HB/5166.
[293] HB/5168.
[294] HB/5170.
[295] Transcript at 516–7.
[296] Transcript at 518.
[297] Transcript at 518.
[298] Transcript at 518, 520.
[299] HB/47–75.
[300] HB/3327–34.
[301] HB/57–62.
[302] HB/63–4.
[303] HB/65.
[304] HB/67.
[305] HB/68–9.
[306] HB/69.
[307] HB/70.
[308] HB/71.
[309] HB/54.
[310] HB/3327–34.
[311] Transcript at 434–5.
[312] Transcript at 436.
[313] The Respondent’s written closing submissions were filed 25 February 2022; Applicant’s written closing submissions were filed 18 March 2022.
[314] Respondent’s written closing submissions para 11(a).
[315] R8. Note: Because of the requirements of the TAA s 14ZZJ(2D) (see footnote 1 above) I have not identified that case.
[316] Citing transcript at 446.
[317] See R5.
[318] Citing Mr Bay’s first report paras 9.8, 9.13, 9.18, 9.36.
[319] Citing HB/8385.
[320] Citing HB/8379.
[321] Citing HB/8420.
[322] Citing transcript at 86.45, 88.15–35.
[323] Citing HB/890.
[324] See R6. Note: For reasons previously outlined, due to the requirements of the TAA s 14ZZJ(2D), I cannot identify the judgment. See [241(u)] above; see also footnote 1 above.
[325] Citing HB/8220–1.
[326] HB/7849.
[327] HB/7851–2.
[328] Noting, see ss 435A and 436A.
[329] Citing the Respondent’s closing submissions para 137.
[330] Citing the Respondent’s closing submissions para 163.
[331] TAA s 353-10.
[332] Citing Lewis v Condon (2013) 85 NSWLR 99 at [4] , [54]–[79].
[333] Respondent’s closing submissions paras 52–3.
[334] (1959) 101 CLR 298 .
[335] [2021] FCAFC 134 .
[336] Noting, see also Howes v Comcare [2016] FCA 1521 at [68] .
[337] Applicant’s affidavit dated 8 November 2017 paras 52–3; HB/88.
[338] Applicant’s affidavit dated 8 November 2017 para 67–72; HB/90–1.
[339] HB/91–3.
[340] HB/2246–50.
[341] HB/2250–61 paras 78–90; see [208]–[213] above.
[342] Transcript at 250.
[343] See [154]–[155] above.
[344] See [127] above.
[345] See [241(f)] above; also referred to in the Respondent’s closing submissions paras 11(a), 212, 227, 241, 265 and 270).
[346] Applicant’s written closing submissions para 64.
[347] Citing Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 136 (per Winneke P), 156–157 (per Tadgell JA); Conlan v Registrar of Titles (2001) 24 WAR 299 at 329 [174] (per Owen J); LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 at 549 [185] (per Murray J), 555 [210] (per Anderson and Steytler JJ), 568 [273] (per Pullin J); Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 171 [195]-[197].
[348] Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524 at 540 [24] , 560 [80], 577 [129]; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324 ; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 .
[349] See for example transcript at 447–8.
[350] HB/5067.
[351] HB/48: DCW’s affidavit dated 8 November 2017 para 2.
[352] Transcript at 556–7.
[353] Transcript at 637.
[354] Transcript at 638–9.
[355] Transcript at 639–41.
[356] Bailey and Commissioner of Taxation (Cth) (1977) 136 CLR 214 .
[357] Rio Tinto Ltd v Federal Commissioner of Taxation (2004) 55 ATR 321 .
[358] Transcript at 675–6.
[359] Citing Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 ; [2004] HCA 55 at [46] .
[360] Citing Scott v Federal Commissioner of Taxation (No 2) (1966) 40 ALJR 265 at 279 .
[361] George v Fletcher (Trustee) [2010] FCAFC 53 .
[362] (1995) 59 FCR 470 .
[363] See Di Pietro per Sackville J at 481–2 regarding proof of trusts to hold land by parole evidence.
[364] Note: 46 trust deeds are identified in Schedule A to the submissions.
[365] Transcript at 586.
[366] (2009) 77 ATR 647 ; [2009] WASC 249 .
[367] See also Kia Ora Gold Corp NL v Washer [1982] WAR 306 at 308–10 .
[368] Respondent’s closing submissions para 143.
[369] HB/5253–4.
[370] Purporting to record a meeting on 8 November 2012, although referring to a telephone conversation with the Applicant on 5 November 2012.
[371] HB/5256.
[372] HB/5258.
[373] HB/5259.
[374] HB/297.
[375] HB/307–10.
[376] HB/7838; page 5 of 15 of the objection decision.
[377] HB/114–33.
[378] HB/111.
[379] HB/137–9, Applicant’s affidavit dated 8 November 2017 paras 478–92
[380] HB/138 para 489.
[381] HB/1159.
[382] Respondent’s written closing submissions paras 277–85.
[383] HB/1140–1, AvantGard interest statement dated 14 April 2014.
[384] Applicant’s closing submissions para 75.
[385] HB/1064.
[386] HB/1072.
[387] HB/1102.
[388] HB/1151.
[389] HB/140, Applicant’s affidavit dated 8 November 2017 para 501.
[390] HB/3882–4.
[391] HB/4092.
[392] These are deposits of $470,000 and $530,000 made on 11 and 14 June 2007 respectively. Transfers of the same amounts were made on the same day as the deposits.
[393] HB/139–40.
[394] HB/119–20.
[395] Respondent’s closing submissions para 287.
[396] HB/181–4.
[397] Citing transcript at 356.
[398] Transcript at 356.
[399] (2009) 74 ATR 466 ; [2009] FCA 1224 .
[400] Citing LLUN and Commissioner of Taxation [2017] AATA 3058 at [45] .
[401] Paras 176–221.
[402] Citing Shawinigan Ltd v Vokins & Co Ltd [1961] 1 WLR 1206 at 1214 .
[403] Citing Explanatory Memorandum, Taxation Laws Amendment (Self Assessment) Bill 1992 (Cth) 89.
[404] Citing Hart v Federal Commissioner of Taxation (2003) 131 FCR 203 at 212–213 [33]–[34].
[405] Citing TAA s 284-220(1)(a).
[406] Citing TAA s 284-220(1)(c).
[407] Citing Bosanac v Federal Commissioner of Taxation 2018 ATC ¶10-474 at 7 , 697 [104]; [2018] AATA 472 ; Ebner v Federal Commissioner of Taxation (2006) 63 ATR 1073 at [19] .
[408] Citing Australian Taxation Office, Practice Statement Law Administration ( PS LA 2012/5 , 25 June 2020) ( PSLA 2012/5 ) at [17E]; see also Gashi v Federal Commissioner of Taxation (2012) 88 ATR 895 at 912–13 [57] per Jessup J.
[409] Paras 163–75.
[410] Citing Binetter.
[411] Citing Denver Chemical Manufacturing Co v Commissioner of Taxation (NSW) (1949) 79 CLR 296 at 313 .
[412] (1941) 6 ATD 69 .
[413] Respondent’s 2016 SFIC para 41.1.
[414] Respondent’s Fraud or Evasion Opinion: HB/5989.
[415] Paras 316–23.
[416] HB/6011–32.
[417] (2018) 265 FCR 355 ; [2018] FCA 1420 .
[418] Reasons for Decision following audit: HB/6011 para 4.
[419] HB/144–81.
[420] See Stevenson v Federal Commissioner of Taxation (1991) 29 FCR 282 .
[421] TAA s 284-220(1)(a).
[422] See Bosanac and Commissioner of Taxation [2018] AATA 472 ( Bosanac AAT ) at [104].
[423] Citing Gashi FC .
[424] See Morrison and Commissioner of Taxation [2015] AATA 114 at [117] and [118] .
[425] (2013) 212 FCR 483 ; [2013] FCAFC 50 .
[426] [2019] AATA 1240 .
[427] (1953) 88 CLR 23 .
[428] HB/5987–6008.
[429] See Australasian Jam Co at 37 cited at [357] above.

 

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