Al Rubaei and Commissioner of Taxation (Taxation)

The Administrative Appeals Tribunal considered two applications by the Applicant, Mr Al Rubaei, concerning amended income tax assessments and shortfall penalties for the 2014 financial year. The first application sought review of the Commissioner of Taxation's decision to disallow the Applicant's objection to an amended assessment for unexplained income. The second application sought review of the Commissioner's decision to disallow the Applicant's objection to the imposition of a shortfall penalty, alleging recklessness by the Applicant or their agent.

The Tribunal was required to determine whether the amended assessment for unexplained income was excessive, and consequently, whether the shortfall penalty was properly imposed. Specifically, the Tribunal had to assess whether the Applicant had discharged the onus of proof in explaining the source of funds deposited into a private bank account, and whether the shortfall amount resulted from recklessness, thereby justifying the imposition of a penalty. The Tribunal also considered whether the penalty should be remitted, in whole or in part, and whether the non-remission of the penalty was unreasonable or unjust.

The Tribunal found that the Applicant had not discharged the onus of proof under section 14ZZK of the *Taxation Administration Act 1953* (Cth) regarding the majority of the unexplained income. It rejected the Applicant's explanation for $15,500 of the $93,000 deposited into the Westpac Bank Account, finding it was not derived from "personal savings" from declared income. However, the Tribunal accepted the Applicant's explanation for $10,000 as proceeds from jewellery sales and $16,000 as a gift from his wife's family. Regarding the penalty, the Tribunal determined that a 50% shortfall penalty for recklessness was applicable, with a 20% uplift. The Tribunal concluded that the non-remission of the penalty was not unreasonable or unjust.

Accordingly, the Tribunal set aside the amended assessment for unexplained income and substituted it with a revised assessment reflecting the explained amounts. The Tribunal affirmed the decision to impose the shortfall penalty, finding it was properly imposed due to recklessness, and declined to remit the penalty.