Decision impact statement

Day and Commissioner of Taxation

Venue: Administrative Appeals Tribunal
Venue Reference No: 2007/2955
Judge Name: Senior Member Dunne
Judgment date: 28 April 2010
Appeals on foot:
No.

Impacted Advice

Relevant Rulings/Determinations:

• N/A

Subject References:
Goods and Services Tax
Income Tax
Default assessments
Asset betterment
Burden of proof
Administrative penalties

Précis

Outlines the Tax Office's response to this case which concerned whether GST and income tax assessments issued as a result of applying an asset betterment methodology are excessive and whether administrative penalties were correctly imposed.

Decision Outcome

Partially adverse

Brief summary of facts

The taxpayer carried on a re-upholstery business and was registered for GST with effect from 1 July 2004. As a result of an audit, it was determined, through an asset betterment methodology, that the taxpayer was required to be registered for GST with effect from 1 July 2002, that he had failed to account for GST between that date and 1 July 2004, and that he had not declared business income for that same period. Both GST and income tax assessments were issued and administrative penalties were imposed for: (i) the taxpayer's failure to register at the correct time; (ii) his failure to lodge GST returns; and (iii) for false and misleading statements resulting in income tax shortfalls.

Objections to the tax and penalty assessments were partly allowed, and, on a review of the asset betterment, following evidence given by the taxpayer at the hearing, the Commissioner conceded that some amounts should not be included in the GST and income tax assessments.

Issues decided by the tribunal

The Tribunal found on the evidence that the taxpayer was carrying on an enterprise at all material times from 1 July 2002 to 30 June 2004, and that he should have been registered for GST as from that date (paragraph 22).

Subject to the concessions made by the Commissioner, set out at paragraphs 24 and 25, the Tribunal was not satisfied that the taxpayer had discharged the onus of proving that the relevant GST and income tax assessments were excessive (paragraph 32).

In relation to the administrative penalties imposed, the Tribunal agreed that no remission of the failure to register penalty was warranted, and that no further remission of the failure to lodge penalty was warranted past the reduction to 50% accepted by the Commissioner (paragraphs 33 and 34). The Tribunal was also satisfied that the income tax shortfalls resulted from recklessness (paragraph 37).

Tax Office view of Decision

Subject to the concessions made by the Commissioner, based on the evidence presented by the taxpayer at the hearing, the Tribunal accepted that the taxpayer had not otherwise discharged the burden of proving that the assessments were excessive or that the penalties should be further reduced. The case was decided on its own facts.

Administrative Treatment

Implications on current Public Rulings & Determinations; Implications on Law Administration Practice Statements

None

Court citation:
[2010] AATA 300
2010 ATC 10-133
75 ATR 957

Legislative References:
Income Tax Assessment Act 1936
167

A New Tax System (Goods and Services Tax) Act 1999
9-20
17-5
23-5
23-15
25-5
25-10

Taxation Administration Act 1953
14ZL(1)
14ZL(2)
14ZQ
14ZQ
14ZZK(b)

Crimes Act 1914
4AA(1)

Case References:
Eldridge v FC of T
90 ATC 4907
21 ATR 897

FC of T v Dalco
90 ATC 4088
20 ATR 1370
[1990] HCA 3

Gauci and Others v FC of T
75 ATC 4257
5 ATR 672
[1975] HCA 54

McCauley v FC of T
88 ATC 4605
19 ATR 1443

Trautwein v FC of T
(1936) 56 CLR 63
[1936] ALR 425
[1936] HCA 77

Hart v FC of T
2003 ATC 4665
[2003] FCAFC 105
(2003) 53 ATR 371

Re Addoug and Commissioner of Taxation
[2010] AATA 79
75 ATR 204