Decision impact statement
Ng and Commissioner of Taxation
Venue: Administrative Appeals Tribunal
Venue Reference No: 2010/0011 - 0013
Judge Name: Senior Member Redfern
Judgment date: 9 June 2011
Appeals on foot:
No.
Impacted Advice
Impacted Practice Statements:
Subject References:
Assessment based on drawings from business
onus of proof
whether drawings were repayments or advances of income
penalties
Decision Outcome:
Partly adverse
Précis
Outlines the ATO's response to this case which concerns undisclosed income by the taxpayer from a related company and whether administrative penalties should be remitted or reduced.
Brief summary of facts
Mr Ng was an associate and employee of a company. As a result of an audit by the Commissioner, his assessments were increased for each of the years in dispute by including amounts received from the company which Mr Ng had contended were repayments of loans made to the company. During the hearing, there were adjustments agreed between the parties in relation to the amounts recorded in cash flow spread sheets.
Issues decided by the tribunal
The Tribunal determined that the taxpayer had failed to discharge the onus of proof that required him to demonstrate that the assessments were excessive,other than in respect of the agreed amounts.
The Tribunal found that the taxpayer did not provide a reasonable explanation for the source of the deposits or the existence of any loan arrangement between himself and the company and that the amounts were paid to him (in accordance with the adjusted figures conceded by the Commissioner at the start of the proceedings) and were therefore assessable to him.
Administrative penalty for tax shortfall had been imposed by the Commissioner at 75% since it was considered that the taxpayer had intentionally disregarded his obligations. The Tribunal was not satisfied that the taxpayer had "consciously disregarded his obligations" and therefore reconsidered the level of shortfall penalty to be imposed and determined the appropriate level for penalty was 50% for recklessly submitting tax returns which would raise in the mind of a reasonable person a "real risk" that the statements were incorrect. Further remission of the penalty was considered and rejected.
ATO view of Decision
The AAT affirmed that the imposition of the penalty on the taxpayer is not unjust in the case or that the circumstances warrant further remission, either in part or whole. The ATO considers that the decision of the AAT was reasonably open to it, on the particular facts which gave rise to a reduction in administrative penalties.
Administrative Treatment
Implications for ATO precedential documents (Public Rulings & Determinations etc)
None
Implications for Law Administration Practice Statements
None
Court citation:
[2011] AATA 399
2011 ATC 10-185
83 ATR 948
Legislative References:
Income Tax Assessment Act 1936
170(1)
173
Taxation Administration Act 1953
175A
14ZY
14ZZ(a)(i)
14ZZK(b)
284-80(1)
284-75
284-90
298-20(1)
Administrative Appeals Tribunal Act 1975
Case References:
Jones v Dunkel
[1959] HCA 8
101 CLR 298
McCormack v FCT
[1979] HCA 18
143 CLR 284
9 ATR 610
79 ATC 4111
FCT v Dalco
(1990) 168 CLR 614
20 ATR 1370
90 ATC 4088
[1990] HCA 3
Hua-Aus Pty Ltd v Commissioner of Taxation
[2010] FCA 341
184 FCR 430
76 ATR 1
George v FCT
(1952) 86 CLR 183
[1952] ALR 961
Ma v Commissioner of Taxation
(1992) 37 FCR 225
23 ATR 485
92 ATC 4373
Price Street Professional Centre Pty Ltd v Commissioner of Taxation
[2007] FCA 345
(2007) 66 ATR 1
2007 ATC 4320
Hart v FCT
[2003] FCAFC 105
2003 ATC 4665
53 ATR 371
131 FCR 203
BRK (Bris) Pty Ltd v Cmr of Taxation
[2001] FCA 164
2001 ATC 4111
46 ATR 347
Commissioner of Taxation v Paul Andrew Burness (As Trustee for the Property of Bottazzi, A Bankrupt)
[2009] FCA 1021
2009 ATC 20-135
77 ATR 61