Decision impact statement
Kalintas and Commissioner of Taxation
Venue: Administrative Appeals Tribunal
Venue Reference No: NT2006/0368 to 0371
Judge Name: Professor GD Walker, Deputy President
Judgment date: 29 May 2008
Appeals on foot:
No.
Impacted Advice
Relevant Rulings/Determinations:- N/A
Subject References:
GST
Income Tax
Default assessment
Onus on applicant to prove that assessments are excessive
Précis
Whether the applicant had discharged the burden of proving that assessments in respect of GST and default income tax assessments were excessive.
Decision Outcome:
Partly Adverse
Brief summary of facts
1. The Commissioner commenced a review of the applicant's income tax and GST affairs as a result of a low document home loan project that sought to cross-reference loan application data with income tax and BAS data.
2. The audit concluded that there were undisclosed amounts of GST and undisclosed amounts of income for the period 1 July 2001 to 30 June 2004.
3. Amended notices of assessment for income tax and GST assessments were issued for the following periods: GST from 1 July 2001 to 30 June 2004 and income tax from 30 June 2002 to 30 June 2004. The data relied on by the Commissioner to make the assessments had been drawn from the applicant's own statements in his loan application, at the interview with tax officers, other documentary evidence, and industry standard rates.
4. The applicant objected to the assessments and provided some further information. Prior to the hearing, the Commissioner reviewed the objection decision and the available evidence, and, at the hearing, submitted that the objection decision should be varied in a manner that was considerably more favourable to the applicant than was originally the case.
Issues decided by the court or tribunal
The taxpayer's application to the Administrative Appeals Tribunal (AAT) concerned two central issues:
1. Whether the assessments of GST for the periods from 1 July 2001 to 30 June 2004 (excluding the September 2003, December 2003 and March 2004 quarters), were excessive; and
2. Whether the amended assessments for the years ended 30 June 2002 and 30 June 2003, and the assessment for the year ended 30 June 2004, were excessive.
Subject to one qualification, the AAT found that the applicant had failed to discharge the burden of proving that the Commissioner's assessments were excessive.
The AAT decided that the Commissioner's decision on objection should be varied in accordance with the way in which the Commissioner proposed the decision be varied, except for the period December 2001 to June 2002, when the taxpayer was employed as an apprentice bricklayer.
In this regard, the AAT accepted the evidence of the taxpayer that he had earned only $7,000 during that period. The AAT noted that, in default assessment cases, it is always open to a taxpayer to assist the Commissioner or Tribunal with evidence as to their actual earnings over the period in dispute.
Tax Office view of Decision
The case concerned undisclosed income and the making of default assessments. The Tax Office accepts that the decision by the AAT to accept the evidence provided by the applicant at the hearing about his income for the March and June quarters in 2002 was open to the AAT. Nevertheless, the AAT pointed out that the Commissioner's estimates of income for those periods, which were based on information from the applicant, were quite defensible.
The AAT also pointed out that the Commissioner is not required to prove that his figures are correct, and that he can act only on the information that he has. The taxpayer has an obligation to keep proper records and, if that is not done, the Commissioner can ascertain the taxpayer's income by applying accepted standards.
Nevertheless, in default assessment cases, it is always open to the applicant to provide further information to assist in determining the most accurate assessment. It would be expected that credible evidence adduced to prove income or taxable supplies would be preferred by a court or tribunal to the use of industry averages.
Administrative Treatment
Implications on current Public Rulings & Determinations
None.
Implications on Law Administration Practice Statements
None
Court citation:
[2008] AATA 444
69 ATR 341
Legislative References:
Income Tax Assessment Act 1936 (Cth)
167
Taxation Administration Act 1953 (Cth)
14ZZK
Case References:
Graham Docker and Associates Pty Ltd and Commissioner of Taxation
[2005] AATA 1180
2005 ATC 2404
61 ATR 1077
Jones v Dunkel
[1959] HCA 8
(1959) 101 CLR 298
[1959] ALR 367
Green v Minister for Immigration and Citizenship
[2008] FCA 125
(2008) 100 ALD 346