Atkinson and Commissioner of Taxation (Taxation)
[2020] AATA 1666
•22 May 2020
Atkinson and Commissioner of Taxation (Taxation) [2020] AATA 1666 (22 May 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Numbers:2017/0675
2017/1593-1596Re:Mr Glen Atkinson
The Trustee for the Atkinson Family TrustANDAPPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Senior Member Theodore Tavoularis
Senior Member Belinda PolaDate:22 May 2020
Place:Brisbane
Mr Atkinson
The Tribunal decides to set aside the Respondent’s reviewable objection decision and allow the objection in full, in respect of the 2011 income tax year for Mr Atkinson.
The Tribunal decides to vary the Respondent’s reviewable objection decisions in respect of the 2012, 2013 and 2014 income tax years. The Tribunal allows the objections decisions to the following extent:
Year Ending Income returned by Mr Atkinson Income from Benchmarking Methodology (Amended Assessments) Income from Weighted Average Methodology Amount to be Allowed 30 June 2012 $30,000 $541,892 $313,093 $228,799 30 June 2013 $21,000 $361,002 $312,349 $48,653 30 June 2014 $20,000 $360,002 $358,356 $1,646
In respect of penalties imposed on the Applicant, the Tribunal decides to:
(a)set aside the Respondent’s reviewable objection decision and allow the penalty objection in full, imposed on Mr Atkinson, in respect of the 2011 financial year; and
(b)sets aside the Respondent’s decision under review in respect of penalties imposed on Mr Atkinson in the 2012, 2013, and 2014 income tax years, to the extent of the reduction in the income tax shortfall amounts the Tribunal has identified for each of these income years in paragraph 2 above.
The Tribunal notes that in the reasons of this decision, it has found that Mr Atkinson to have been reckless, and that safe harbour provisions do not apply, and the application of penalties imposed does not produce an unreasonable or unjust result.
Atkinson Family Trust
The Tribunal decides to affirm the Respondent’s reviewable objection decisions in respect of the April 2015 and June 2015 monthly tax periods for the Atkinson Family Trust.
The Tribunal decides to vary the reviewable objection decisions in respect of the May 2015 and July 2015 monthly tax periods for the Atkinson Family Trust, the Tribunal allows the objection decision to the following extent:
Month Ending GST Shortfall Amount Assessed at Objection Adjusted GST Shortfall Amount Amount to be Allowed 31 May 2015 $3,411 $581 $2,830 31 July 2015 $4,916 $3,812 $1,104 ...........................[sgd]................................ ...........................[sgd]..........................
Senior Member Theodore Tavoularis Senior Member Belinda Pola
Catchwords
TAX AND COMMERCIAL – Income Tax – objection to amended assessment – Trustee - whether assessment is excessive – burden of proof on taxpayer - administrative penalty – GST shortfall – varied assessments
Legislation
A New Tax System (Goods and Services Tax) Act 1999
Administrative Appeals Tribunal Act 1975
Tax Administration Act 1953Cases
Briginshaw v Briginshaw (1938) 60 CLR 336
BRK (Bris) Pty Ltd v Federal Commissioner of Taxation [2001] FCA 164; 2001 ATC 4111; (2001) 46 ATR 347
Commissioner of Taxation v White (No. 2) (2010) FCA 942
Federal Commissioner of Taxation v Dalco (1989) 168 CLR 614
Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81
Hart v Federal Commissioner of Taxation (2003) 131 FCR 2003; [2003] FCAFC 105
Hua-Aus Pty Ltd v Federal Commissioner of Taxation [2010] FCA 341
Imperial Bottleshops Pty Ltd v Federal Commissioner of Taxation (1991) 91 ATC 4,546
Rejfek v McElroy (1965) 112 CLR 517
Pollock v Wellington (1996) 15 WAR 1
Pownall v Colan Management Pty Ltd (1995) 12 WAR 370
Repatriation Commission v Smith (1987) 74 ALR 537
Sanctuary Lakes Pty Ltd v Commissioner of Taxation (2013) 212 FCR 483
Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63Secondary Materials
Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purpose of entitlement to an Australian Business number
Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999?
Miscellaneous Taxation Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard
Law Administration Practice Statement PS LA 2011/8 Reconstructing records and making reasonable estimates for taxpayers affected by a disaster
Law Administration Practice Statement PS LA 2012/5 Administration of penalties for false or misleading statements that result in shortfall amountsDECISION
Senior Member Theodore Tavoularis
Senior Member Belinda Pola
22 May 2020
INTRODUCTORY AND PROCEDURAL DETAILS
Mr Glen Atkinson (‘Mr Atkinson’ and the ‘Applicant’) is an individual who operated the Karalee Tavern (or the ‘Tavern’) through Katejane Investments Pty Ltd (‘KJ Investments’). Mr Atkinson was the sole Director of KJ Investments[1].
[1] KJ Investments Pty Ltd was placed into member’s voluntary winding up on 30 June 2015, with reference to
Exhibit R3, ST15, page 651.
From around 1 April 2015, the Tavern’s operating structure was taken over by the Atkinson Family Trust (the ‘AFT’), which also owned the land and premises for the Tavern[2]. Chilligo Pty Ltd (or ‘Chilligo’) was the Trustee for the Atkinson Family Trust (or ‘AFT’), with Mr Atkinson as the sole director and company secretary of the trustee company at the time.
[2] Exhibit R5, page 5, paragraph 16.
The Applicant disagreed with the Commissioner of Taxation’s (or the ‘Respondent’ or the ‘Commissioner’) decision at audit to apply a weighted average methodology in relation to KJ Investments, with the balance of any profits from KJ Investments attributed to Mr Atkinson as company director pursuant to s12-40 of Schedule 1 to the Tax Administration Act 1953 (the ‘TAA’)[3].
[3] Exhibit R4, page 3, paragraph 10.
This resulted in the assessment of excessive director’s fees for Mr Atkinson in the 2010-11, 2011-12, 2012-13, and 2013-14 financial years (or the ‘Atkinson years’); along with the imposition of administrative penalties.
Separately, but related to the operation of the Tavern, the Applicant (the Trustee for the AFT) which operated the Tavern from early 2015, disagreed with the Commissioner’s decision at audit to apply a weighted average methodology which resulted in the calculation of a GST shortfall amount for the months of April, May, June and July 2015.
The Applicants brought the disagreement to the Respondent’s attention via lodgement of an objection to the amended assessments that were issued by the Respondent after an audit into the Applicant’s taxation affairs (being both of Mr Glen Atkinson and the Trustee for the AFT)[4].
[4] Mr Glen Atkinson: Exhibit R1, T77 to T79, pages 384 to 396; Trustee for the ATF: Exhibit R2, T16 to T17, pages 277 to 286.
The Applicants were dissatisfied with the objection outcome and, pursuant to s14ZZK of the TAA, both Applicants appealed the Respondent’s reviewable decisions to the Administrative Appeals Tribunal (or this ‘Tribunal’).
The hearing for both these Applications were heard together and occurred over three days in Gladstone, from 18 December 2019 through to 20 December 2019. The Tribunal has had regard to oral submissions made by and on behalf of the Applicants, the Applicant’s witnesses and on behalf of the Respondent. Additionally, the Tribunal has had regard to submitted written evidence, as outlined in the Exhibit Register in Annexure 1 of these reasons.
BASIC FACTUAL SUMMARY
Mr Atkinson
The Applicant, Mr Atkinson managed the Karalee Tavern which was a business that consisted of a bottle shop and hotel operations, which included the sale of alcohol, a bistro, and gaming facilities[5].
[5] Exhibit R3, ST5, page 19.
On 3 September 2015, the Commissioner wrote to Mr Atkinson informing him that they were conducting an audit of the Tavern’s business for the period of 1 July 2010 to 30 June 2015, with the Commissioner providing an audit position paper to the Applicant[6].
[6] Exhibit R1, T66, pages 350 to 357.
The Applicant replied to the Commissioner’s requests for information which formed part of the audit position paper relating to the Applicant’s personal living expenses[7]. On 6 October 2015 the Applicant’s accountant, Mr Orli Henig, responded to the Commissioner’s findings of the audit position paper[8].
[7] Exhibit R1, T64, pages 339 to 347.
[8] Exhibit R1, T67, pages 358 and 359.
On 16 November 2015, the audit by the Commissioner found an increase in income which was not retained in KJ Investments[9]. The Commissioner determined that the income would be attributed to Mr Atkinson as Director of KJ Investments. Pursuant to s12-40, Schedule 1, of the TAA, this resulted in increased income attributable to the Applicant, Mr Atkinson, for the 2010-11, 2011-12, 2012-13, 2013-14, and 2014-15 financial years in addition to administrative penalties that were payable.
[9] Exhibit R1, T68, pages 360 to 363.
From 20 November 2015 to 24 November 2015 notices of amended assessment, and notices of assessment of shortfall penalty were issued for the above mentioned financial years[10].
[10] Exhibit R1, T69 to T76, pages 364 to 383.
On 9 June 2016 the Applicant lodged an objection in relation to the Commissioner’s notices of amended assessment and of ‘notices of assessment of shortfall penalty’ received between 20 November 2015 and 24 November 2015[11]; with the Commissioner providing a notice of the objection decision with reasons on 25 June 2017[12].
[11] Exhibit R1, T77, pages 384 to 391.
[12] Exhibit R1, T79, pages 395 to 396.
The Applicant (Mr Atkinson), lodged an application for review of the objection decision with the Administrative Appeals Tribunal on 21 March 2017[13].
[13] Exhibit R1, T1, pages 1 to 9.
The Trustee for the Atkinson Family Trust (AFT)
On 26 April 2016 the Commissioner wrote to the Trustee of the AFT (the Applicant), which operated the Tavern from 1 April 2015, with an audit position paper, providing the Applicant with an opportunity to respond[14]. The Applicant replied to the Commissioner’s request on 20 May 2016, by way of email disputing the Commissioner’s approach and findings[15].
[14] Exhibit R2, T12, pages 203 to 210.
[15] Exhibit R2, T13, pages 211 to 213.
On 25 May 2016 the Commissioner issued an Audit Finalisation Report with regard to GST assessment for the period 1 March 2015 to 31 July 2015 (or the ‘Trust Tax Periods'), resulting in an additional liability that was payable with interest charges applied[16].
[16] Exhibit R2, T14, pages 214 to 218.
On 19 August 2016[17] the Applicant lodged an objection in relation to the Commissioner’s notice of 25 May 2016, with the Commissioner providing a notice of the objection decision with reasons on 15 December 2016[18], notifying the Applicant that their objection had been disallowed.
[17] Exhibit R2, T16, pages 277 to 285.
[18] Exhibit R2, T17, page 286.
The Applicant (the Trustee for the ATF), lodged an application for review of the objection decision with this Tribunal on 7 February 2017[19].
[19] Exhibit R2, T1, pages 1 to 8.
ISSUES FOR DETERMINATION
As a result of the Respondent’s abovementioned determinations made between 20 November 2015 and 24 November 2015 in relation to Mr Atkinson, the residual issues can be stated thus:
Mr Atkinson
(i)whether the Applicant has discharged their burden of proof to establish the Commissioner’s (Respondent’s) application of the weighted average methodology and the subsequent calculation of KJ Investments’ taxable income has resulted in the assessment of excessive director’s fees in the Atkinson years? That is, has the Applicant proved what is right or more nearly right?
(ii)whether the Commissioner (Respondent) correctly applied the relevant penalties in the 2010-11, 2011-12, 2012-13, and 2013-14 financial years (or the Atkinson years)[20]?
(iii)whether the circumstances of the Applicant’s case are such, as to engage the discretion of the Commissioner to remit the applicable shortfall penalties in whole or in part[21]?
[20] Pursuant to s284-30 and s284-75 of Schedule 1 of the TAA.
[21] Pursuant to s298-20 of Schedule 1 of the TAA.
As a result of the Respondent’s abovementioned determination made on 25 May 2016 in relation to the Trustee for the AFT, the residual issues can be stated thus:
Trustee for the Atkinson Family Trust (AFT)
(i)Whether the Applicant has discharged their burden of proof to establish the Commissioner’s assessments for the period 1 March 2015 to 31 July 2015 are excessive, on the basis of the Commissioner’s application of the weighted average methodology and resulting calculation of the GST shortfall amounts for each of the Trust Tax Periods? That is, has the Applicant proved what is right or more nearly right?
WHO BEARS THE ONUS OF PROOF?
Section 14ZZK of the TAA provides that the Applicants bear the burden of proving that assessments are excessive:
14ZZK 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.
In this review, the Applicants can only agitate matters arising from the grounds stated in the reviewable decision. Section 14ZZK of the TAA provides that Applicants in matters such as these can only agitate additional issues if the Tribunal so orders. The Tribunal has not done so during the hearing, nor has any such order been made at any of the applications’ interlocutory stages[22].
[22] Section 25(4A) of the Administrative Appeals Tribunal Act 1975 (Cth) (‘AAT Act') sits squarely within s14ZZK of the TAA because it provides “The Tribunal may determine the scope of the review of a decision by limiting questions of fact, the evidence and the issues that it considers”.
The Applicants bear the onus of proof in these proceedings. The relevant onus is on the civil standard, specifically, on the balance of probabilities. In essence, this requires the Applicants to establish it is more likely than not that the Respondent’s assessments were excessive and thus are wrong for the:
(a)application of the weighted average methodology and the subsequent calculation of KJ Investments’ taxable income which resulted in the assessment of excessive director’s fees in the 2010-11, 2011-12, 2012-13, and 2013-14 financial years (or the Atkinson years) for Mr Atkinson; and
(b)application of the weighted average methodology and resulting calculation of the GST shortfall amounts for the period 1 March 2015 to 31 July 2015 for the Trustee of the AFT.
This standard is to be contrasted to the criminal or “beyond reasonable doubt” standard of proof, which the High Court has held to be, “…inappropriate to the determination of any such fact in any civil action tried in any court in Australia where there are no statutory provisions to the contrary…”[23].
[23] Rejfek v McElroy (1965) 112 CLR 517 at 520.
The current applications are clearly not a criminal proceeding and, in the absence of any statutory provisions to the contrary, the civil or “balance of probabilities” burden of proof applies. The Full Court of the Federal Court has instructively differentiated between actual “probabilities” compared to “mere probabilities”: “There is… a distinction of substance to be drawn between the probabilities on the one hand and mere possibilities, even if they are real as distinct from fanciful, on the other…”[24].
[24] Repatriation Commission v Smith (1987) 74 ALR 537 at 538 per Beaumont J, with who Northrop and
Spender JJ agreed.
In addition to negatively proving that the assessments for the relevant Atkinson years and Trust Tax Periods were excessive and therefore wrong, the Applicants must also positively prove what the correct assessment should be so that each of the amended assessments are made “right or more nearly right”[25].
[25] Federal Commissioner of Taxation v Dalco (1989) 168 CLR 614 as per Brennan J at 623 to 625.
It is necessary that “[t]he amounts assessed represent the Commissioner’s bona fide judgement as to the amount of the taxpayer’s taxable income and the power to make the assessment was validly exercised. The assessments being valid, the burden was on the taxpayer to prove the amounts were excessive”[26].
[26] Ibid.
There is no compulsion on the Respondent to demonstrate that the assessments were correctly made. As noted by Latham CJ, “… conceivably, there might be a case where it appeared that the assessment might be taken to have been upon no intelligible basis even as an approximation, and the court would then set aside the assessment and remit it to the Commissioner for further consideration”[27]. Similarly, there is no requirement on the Respondent to provide evidence to back up its assessment for either of the Atkinson years or the Trust Tax Periods. As noted by the High Court, there is no “… onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence… unless the appellant shows by evidence that the assessment is incorrect, it [the amended assessments] will prevail”[28].
[27] Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 88.
[28] Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89, per Mason J.
As will be noted later in this Decision, the Applicants have produced certain paper records in support of their contentions. The mere production of that material does not remove or modify the abovementioned onus of proof upon the Applicants. That material must be utilised by the Applicants to discharge the onus of demonstrating, on the balance of probabilities, that the amended assessments were excessive and thus wrong.
Critically, for present purposes, the Applicants discharge the onus by applying that documentary (and any other) evidence to demonstrate, on the balance of probabilities, that they have not[29]:
incurred excessive director’s fees in the Atkinson years in the case of Mr Atkinson; and
(b)did not incur GST shortfall amounts for the Trust Tax Periods in the case of the Trustee for the AFT.
[29] Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 623.
The Applicants do not meet the requirements of the burden by simply pointing to some kind of error or mistake in how the Respondent has arrived at the amended assessments for the Atkinson years or Trust Tax Periods.
If there was such a demonstrable error in how the Respondent reached its conclusions in those amended assessments, then it would be open to this Tribunal to set aside the relevant amended assessments and remit them back to the Respondent for further consideration, as stipulated by Latham CJ in Trautwein[30].
[30] See Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 88.
The Applicants must utilise their evidence and convince a decision maker that their evidence, on the balance of probabilities, displaces the Respondent’s methodology behind the amended assessments pertaining to each of them.
There is no question that the abovementioned authorities relating to the onus of proof, as they do in the main to income tax-related cases, have equivalent application. This Tribunal would be “…absolutely correct in concluding that s14ZZK [of the TAA] imposed on [for present purposes, the Applicants] the burden of proving that the amended assessment under review was excessive”[31].
[31] See Hua-Aus Pty Ltd v Federal Commissioner of Taxation [2010] FCA 341 at page 435 [13], per Edmonds J.
HOW DOES THE APPLICANT(S) DISCHARGE THE BURDEN OF PROOF?
It is important in applications such as these to clearly identify not just the burden of proof incumbent upon Applicants, but how the Applicants must convince the Tribunal that they have discharged it. A potentially complicating factor is the reality that this Tribunal is not bound by the rules of evidence and that it may inform itself on any matter in such manner as it thinks appropriate[32].
[32] See s33(1)(c) of the AAT Act.
Thankfully, the evidentiary compass to be followed by the Tribunal is to be found in Dixon J’s (as his Honour then was) formative judgement regarding the civil or balance of probabilities standard of proof. For the Applicant to convince this Tribunal of the facts it propounds to demonstrate that the amended assessments were excessive and thus wrong:
“… the Tribunal must feel an actual persuasion of its occurrence or existence … It cannot be found as a result of a mere mechanised comparison of probabilities independently of any belief in its reality… it is not enough that the affirmative of an allegation has been made out to the reasonable satisfaction of the Tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the Tribunal. In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony or indirect references”.[33]
[33] Briginshaw v Briginshaw (1938) 60 CLR 336 at 361 and 362
Applied to the present matter, the Applicants will not discharge their burden of proof by merely inviting this Tribunal to engage in some type of “like-for-like” comparison of probable outcomes when comparing, on the one hand, the evidence that the Applicants adduced to, on the other hand, the methodology adopted by the Respondent in arriving at revised assessments for tax.
Rather, the Applicants must, to the reasonable satisfaction of the Tribunal, demonstrate that:
(a)in the case of Mr Atkinson, that there were no excessive director’s fees in the Atkinson years, and that there were no false or misleading statements appearing in either of the relevant tax years; and
(b)in the case of the Trustee of the AFT, that there were no GST shortfall amounts for the Trust Tax Periods, and that there were no false or misleading statements appearing in either of the relevant Trust Tax Periods.
The discharge of evidentiary burden in applications such as these should be analysed in a unique way because all of the evidence propounded by a taxpayer is squarely within that taxpayer’s possession or control[34]. Indeed, the Respondent has based its revised assessments on information squarely in the purview of the Applicants. It is not as if, for example, the Respondent has obtained an independent third party expert’s report about the ambit and veracity of the Applicants’ affairs in the relevant tax periods.
[34] Latham CJ in Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 87-88.
The law affords the Applicants in these types of applications some opportunity to arrive at a “reasonable explanation” for how, for example, the nature of the transactions giving rise to the issues which attracted the attention of the Respondent resulted in revised assessment(s). The process of demonstrating a “reasonable explanation” was defined by Hill J, thus:
“A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If he goes into the witness box and swears that he has incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such a statement, like statements of purpose, must, however, be ‘tested more closely and received with the greatest of caution’… some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed.”[35]
THE LEGISLATIVE FRAMEWORK
[35] Imperial Bottleshops Pty Ltd v Federal Commissioner of Taxation (1991) 91 ATC 4,546 at 4,552 per Hill J.
Relevant provisions applying to Mr Atkinson
Section 12-40 of Schedule 1 of the TAA outlines when a company must withhold payments of remuneration it makes to an individual:
12-40 Payment to company director
A company must withhold an amount from a payment of remuneration it makes to an individual:
(a)if the company is incorporated—as a director of the company, or as a person who performs the duties of a director of the company; or
(b)if the company is not incorporated—as a member of the committee of management of the company, or as a person who performs the duties of such a member.
Penalties
Section 284-30 of Schedule 1 to the TAA provides that a trustee of a trust is liable to a penalty when:
284-30 Application of Division to trusts
If you are a trustee of a trust and:
(a)you make a statement to the Commissioner or to an officer who is exercising powers or performing functions under a *taxation law about the trust; and
(b)the statement:
(i) is false or misleading in a material particular, whether because of things in it or omitted from it; or
(ii) treated an *income tax law as applying to a matter or identical matters in a particular way that was not *reasonably arguable; or
(iii) treated a taxation law as applying in a particular way to a *scheme;
this Division applies to you as if any *shortfall amount or *scheme shortfall amount of a beneficiary of the trust as a result of the statement were your shortfall amount or scheme shortfall amount.
Section 284-75 of Schedule 1 to the TAA provides when an entity is liable to a penalty[36]:
284-75 Liability to penalty
1You 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.
[36] Miscellaneous Taxation Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard (MT 2008/1) further explains the Commissioner’s view in respect to the concepts of behaviour and penalty.
The table at s284-90 of Schedule 1 to the TAA provides how the base penalty amount is calculated:
284-90 Base penalty amount
1The 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 part2 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 part3 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
Section 284-220 of Schedule 1 of the TAA provides that the base penalty amount applied may be increased:
284-220 Increase in base penalty amount
1The *base penalty amount is increased by 20% if:
(a)you took steps to prevent or obstruct the Commissioner from finding out about a *shortfall amount, or the false or misleading nature of a statement, in relation to which the base penalty amount was calculated; or
(b)you:
(i) became aware of such a shortfall amount after a statement had been made to the Commissioner about the relevant *tax-related liability; or
(ii) became aware of the false or misleading nature of a statement made to the Commissioner or another entity after the statement had been made;
and you did not tell the Commissioner or other entity about it within a reasonable time; or
(c)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 previously; or
(ca)the base penalty amount was worked out using item 3A, 3B or 3C of the table in subsection 284-90(1) and a base penalty amount for you was worked out under one of those items previously; or
(d)the base penalty amount was worked out using item 4, 5 or 6 of that table and a base penalty amount for you was worked out under that item previously; or
(e)your liability to a penalty arises under subsection 284-75(3) and you were previously liable to a penalty under that subsection.
2The *base penalty amount for your *scheme shortfall amount, or for part of it, for an accounting period is increased by 20% if:
(a)you took steps to prevent or obstruct the Commissioner from finding out about the scheme shortfall amount or the part; or
(b)a base penalty amount for you was worked out under s284-160 for a previous accounting period.
Section 298-20 of Schedule 1 to the TAA provides that the Commissioner may remit all or part of a penalty amount[37].
Relevant provisions applying to the Trustee for the ATF
[37] The Commissioner’s view on remission is contained in Law Administration Statement PSLA 2012/5 Administration of penalties for false or misleading statements that result in shortfall amounts.
GST
Division 11 of the A New Tax System (Goods and Services Tax) Act 1999 (‘GST Act’) provides that a taxpayer is entitled to claim Input Tax Credits (‘ITCs’) on any credible acquisitions made by that taxpayer. The concept of a ‘creditable acquisition’ is defined in s11-5 of the GST Act which provides the requirements for the making of a credible acquisition[38]:
11-5 What is a creditable acquisition?
You make a creditable acquisition if:
(a)you acquire anything solely or partly for a *creditable purpose; and
(b)the supply of the thing to you is a *taxable supply; and
(c)you provide, or are liable to provide, *consideration for the supply; and
(d)you are *registered, or *required to be registered.
[38] * Denotes a term defined under section 195-1 of the GST Act.
Section 11-15 of the GST Act provides the definition of a creditable purpose:
11-15 Meaning of creditable purpose
1You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.
2However, you do not acquire the thing for a creditable purpose to the extent that:
(a)the acquisition relates to making supplies that would be *input taxed; or
(b)the acquisition is of a private or domestic nature.
Section 9-20 of the GST Act provides the definition of an enterprise[39]:
9-20 Enterprises
1An enterprise is an activity, or series of activities, done:
(a)in the form of a *business; or
(b)in the form of an adventure or concern in the nature of trade;
…..
[39] Miscellaneous Taxation Ruling MT 2006/1 contains the Commissioner’s view in respect to what constitutes the carrying on of an enterprise for the purposes of registering for an ABN. GSTD 2006/6 (GSTD 2006/6: Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the GST Act confirms that MT2006/1 applies equally to GST matters.
When the Commissioner must cancel your registration
Subsection 25-55(2) of the GST Act provides that the Commissioner must cancel your registration (even if you have not applied for cancellation of your registration) if the Commissioner is satisfied that you are not carrying on an enterprise and he believes on reasonable grounds that you are not likely to carry on an enterprise for at least 12 months.
Subsection 25-55(3) of the GST Act further provides that the Commissioner must notify you of any decision he makes under this section and such notice must specify the date of effect of the cancellation.
Subsection 25-60(1) of the GST Act states that in determining the date of effect of the cancellation of your GST registration under s25-55(2) the Commissioner may determine the date of effect to be any day occurring before, on, or after the day on which the Commissioner makes the decision[40].
[40] Paragraphs 81-86 of Law Administration Practice Statement PSLA 2011/8 contain the Commissioner’s view in respect to determining the date of effect of the cancellation of an entity’s GST registration.
Attributing the input tax credits for your creditable acquisitions
The methodology of attribution of ITCs is governed by Division 29 of the GST Act and, in particular, sub-s29-10(1) of that Act.
Subsection 29-10 (2) of the GST Act provides that when GST is accounted for on a cash basis, you are only entitled to claim an ITC to the extent of the consideration you have provided in that tax period. However, in addition to having provided part or all of the consideration for the acquisition, the taxpayer must also hold a tax invoice to attribute the ITC to a particular tax period.
Subsection 29-10(3) of the GST Act provides the taxpayer you cannot claim an input tax credit unless the tax payer holds a tax invoice:
If you do not hold a *tax invoice for a *creditable acquisition when you give to the Commissioner a *GST return for the tax period to which the input tax credit (or any part of the input tax credit) on the acquisition would otherwise be attributable:
(a)the input tax credit (including any part of the input tax credit) is not attributable to that tax period; and
(b)(b) the input tax credit (or part) is attributable to the first tax period for which you give to the Commissioner a GST return at a time when you hold that tax invoice.
However, this subsection does not apply in circumstances of a kind determined in writing by the Commissioner to be circumstances in which the requirement for a tax invoice does not apply.
The concept of a ‘tax invoice’ and the essential constituent requirements to establish that something is a tax invoice is governed by sub-s 29-70(1) of the GST Act, and requirements that a document must satisfy to be a tax invoice are set out below:
29-70 Tax invoices
1A tax invoice is a document that complies with the following requirements:
(a)it is issued by the supplier of the supply or supplies to which the document relates, unless it is a *recipient created tax invoice (in which case it is issued by the *recipient);
(b)it is in the *approved form;
(c)it contains enough information to enable the following to be clearly ascertained:
(i) the supplier’s identity and the supplier’s *ABN;
(ii) if the total *price of the supply or supplies is at least $1,000 or such higher amount as the regulations specify, or if the document was issued by the recipient—the recipient’s identity or the recipient’s ABN;
(iii) what is supplied, including the quantity (if applicable) and the price of what is supplied;
(iv) the extent to which each supply to which the document relates is a *taxable supply;
(v) the date the document is issued;
(vi) the amount of GST (if any) payable in relation to each supply to which the document relates;
(vii) if the document was issued by the recipient and GST is payable in relation to any supply—that the GST is payable by the supplier;
(viii) such other matters as the regulations specify;
(d)it can be clearly ascertained from the document that the document was intended to be a tax invoice or, if it was issued by the recipient, a recipient created tax invoice.
Subsection 29-80 of the GST Act, provides an exception to the requirements to hold a tax invoice for low value transactions of under $50.
CONSIDERATION
Witnesses
The Respondent’s submissions refer to an entitlement in this Tribunal to entertain an apprehension that witnesses having some kind of material (or other) interest in the outcome of a given matter, are inherently less reliable than those witnesses who are entirely disinterested in its outcome. Of course, this Tribunal cannot exclusively rely on this apprehension in order to gauge the level of credibility of witnesses who appeared before this Tribunal. It is, nevertheless, a convenient starting point in the exercise of any such assessment.
The witnesses who did give evidence in the applications before the Tribunal comprised:
Mr Jason Fitzgerald (who appeared both as a lay advocate for both Applicants and as a witness);
(b)Mr Glen Atkinson (as a witness on his own account and on behalf of the Trustee for the AFT); and
(c)Ms Helene Quinn (an acquaintance of both Mr and Mrs Atkinson who was responsible for the performance of informal administrative tasks in the conduct of the Tavern’s business).
The witnesses who provided statements but were not called, comprised:
Ms Julie-Anne Atkinson;
(b)Mr Graeme McManus; and
(c)Professor John Sands.
Allied to our earlier observation regarding this Tribunal’s apprehension about weighing a witness’s evidence based upon their relative interest in the decisional outcome, this Tribunal also notes that – as a general observation – any weight attributable to evidence provided by witnesses in writing that is not subject to the rigours of cross examination, should be likewise received with caution.
This is because this Tribunal’s capacity to properly scrutinise the evidence is limited to a paper writing attributable to that given witness. The absence of oral evidence given under cross-examination means this Tribunal is deprived of another potential dimension of that evidence. This Tribunal refers to the comments of Anderson J in Pollock v Wellington (1996) 15 WAR 1 as follows:
Unless the process of inference by which an opinion is reached is expressed in a manner which permits the conclusions to be scrutinised and a judgment made as to its reliability, the opinion can carry no weight: see Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370, esp at 390.
Mr Jason Fitzgerald
The Respondent contends that Mr Fitzgerald’s evidence is (1) of limited assistance for the relevant Atkinson years and (2) of insufficient detail to be useful for the Trust Tax Periods[41]. This Tribunal is of the view that such contention is well-founded upon a fulsome consideration of Mr Fitzgerald’s evidence.
[41] Exhibit R6, page 18, paragraph 73.
One of the primary difficulties with attribution of credibility to Mr Fitzgerald’s evidence derives from his relatively sparse involvement in the taxation affairs relating to both the Atkinson years and the Trust Tax Periods. In relation to the former, Mr Fitzgerald’s level of involvement seems to centre upon two telephone conversations between Mr Fitzgerald and Mr Atkinson. As well, it does not seem Mr Fitzgerald was a regular or recurrent attendee at the Tavern business having attended on only the one occasion in the Atkinson years around February 2011[42].
[42] Exhibit A2, page 37, paragraphs 3 to 9.
Thereafter, the next genuine engagement between Mr Fitzgerald and Mr Atkinson appears to have occurred in September 2014 at the Tavern, which, of course, postdates the Atkinson years presently under scrutiny[43]. The evidence points to an involvement by Mr Fitzgerald in the provision of what can be loosely described as consulting services or guidance in relation to Mr Atkinson’s intention to refinance the Tavern’s business affairs on or about May 2011.
[43] IBID, paragraph 11.
Under cross-examination, Mr Fitzgerald eventually conceded that the re-financing involved conduct by Mr Atkinson wherein certain representations were made to the financing entity on the basis of inaccurately inflated figures, and, in more general terms, falsified material. Ultimately, Mr Fitzgerald made the significant concession about the basis on which the financing entity was induced to provide funds by saying, “Yes, I accept the deceit…”[44]. It suffices for the Tribunal to say that Mr Fitzgerald’s characterisation relates to the manner in which the financing entity was approached and ultimately induced to provide financing facilities to the relevant entities.
[44] Transcript, 18 December 2019, page 32, line 27 to 31.
As against that observation, it should be noted, in fairness to Mr Fitzgerald, that he played no active role in the completion and provision of loan application documents. His evidence to this Tribunal in this regard derived from what he had been told by Mr Atkinson. The Tribunal regards Mr Fitzgerald’s purported explanation about the manner of Mr Atkinson’s approach to the bank as unconvincing.
According to Mr Fitzgerald’s evidence, Mr Atkinson’s conduct had its basis in certain questionable motivations and he ultimately accepted that what Mr Atkinson did may not have been correct, but, nevertheless, “it’s something that’s there”[45].
[45] Transcript, 18 December 2019, page 34, line 5 to 10.
As noted by the Respondent, Mr Fitzgerald’s evidence was, to an extent, compromised because of his dual role as both witness and lay representative for the Applicants in the hearing before this Tribunal. He was compelled to fashion what he was saying to best suit the outcome he was seeking to achieve (as the lay representative). His evidence did not have the necessary breadth of scope that would be expected from a truly independent and disinterested witness.
Ultimately, the evidence of Mr Fitzgerald, although well intended, and given as the best evidence he could provide, goes nowhere near facilitating a discharge of the necessary onus of proof. The Tribunal is not able to glean any convincing reality from his evidence that the subject assessments were excessive and therefore wrong. His evidence, while purporting to be ameliorative, does not point the Tribunal to necessary corrections such that those assessments can be put at either “right or more nearly right”.
Ms Helene Quinn
The primary difficulty with attributing any appreciable level of weight or credibility to Ms Quinn’s evidence derives from her lack of any serious level of engagement in the financial and administrative affairs of either or both Applicants. The Tribunal is hard-pressed to utilise her evidence to, in any meaningful and safe way, make a finding about whether the Applicants have discharged the necessary onus.
Ms Quinn’s role at the Tavern involved infrequent attendances, on a largely “as required” basis. She was unremunerated and whatever she did for the Applicant(s) was more in terms of a favour than actual remunerative work. Ms Quinn holds regular employment with Disability Services Queensland. On her own account, her role at the Tavern was very much ancillary to her remunerated work activities. Accordingly, her evidence, although well intended, can ultimately be construed as both imprecise and more likely, unreliable.
Of more significant concern (in terms of the credibility of her evidence), is Ms Quinn’s purported distancing of Mr Atkinson from any involvement with the handling or control of cash generated by the Tavern business. This Tribunal wonders how she can definitively provide this evidence in circumstances where she was an infrequent attendee at the Tavern and her role was simply one of helping her friends in a volunteer capacity. The Tribunal has misgivings about the reliability of Ms Quinn’s evidence involving what she says Mr Atkinson did or did not do, with the cash generated by the Tavern business.
In a similar vein, the Tribunal has misgivings about Ms Quinn’s observation that she “could see a huge decline in taking daily”[46]. It is stretching the bounds of credibility for her to suggest that in her predominantly ancillary and volunteer role, she could form a definitive opinion about the level of overall takings generated by the Tavern business.
[46] Exhibit A2, Witness Statement, page 43, point 12.
The Tribunal thinks the Respondent’s following contention has merit: that is, Ms Quinn purports to suggest that the decline in business takings was somehow immediately and directly affected by Mr Atkinson’s cancer diagnosis in 2014[47]. The evidence suggests the relevant diagnosis was delivered on 7 June 2014. The Tribunal finds it unlikely that the “huge decline” in takings would have manifested in the relatively brief three week period between 7 June 2014, and the end of that financial year, being 30 June 2014. The Respondent contends Ms Quinn’s evidence “is not helpful for the relevant Atkinson years”[48]. The Tribunal is of the view that her evidence is not reliable for those years.
[47] Exhibit R6, page 20, paragraph 82.
[48] Exhibit R6, page 20, paragraph 82.
Much as was the case with Mr Fitzgerald’s evidence, the Tribunal cannot safely rely upon Ms Quinn’s evidence to conclude a view that the Applicants have discharged the onus of proof incumbent upon them. Her well-intended but ultimately, unreliable evidence, does not lend any assistance to the exercise of demonstrating that any of the assessments were excessive and thus wrong. Similarly, her evidence does not point to any correction necessary to be made to the relevant assessments such that they be made right or more nearly right.
The Respondent contends that Ms Quinn’s evidence should be disregarded[49]. The Tribunal agrees and does so.
[49] Exhibit R6, page 20, paragraph 83.
Mr Glen Atkinson
Mr Atkinson gave evidence at length. He can be regarded, for all intents and purposes, as the guiding mind and spirit (obviously) of his own taxation affairs, but also for those of the Trustee for the AFT. There is no argument that the claimed shortfall in personal income tax for the Atkinson years relates to him. Similarly, the Tribunal cannot recall any convincing argument or suggestion that as sole director and company secretary of the entity that operated the Tavern business, its income (ie. that of KJ Investments), should not be rightly attributed to Mr Atkinson for the relevant Atkinson years of income.
Mr Atkinson was also the sole director and company secretary of Chilligo that acted as Trustee for the AFT. While the issue was ventilated at the hearing, the Applicants failed to provide a copy of the relevant Trust Deed relating to the AFT. No substantive reason for that failure was provided, but likewise, nor was there any plausible argument put to the Tribunal that Mr Atkinson was not the guiding mind and spirit of the Trustee for the AFT for the purposes of the amended GST assessments for the relevant Trust Tax Periods.
The Respondent has characterised Mr Atkinson’s evidence as, “inconsistent, unreliable, and at times, implausible”[50]. The further question is whether any weight should be allocated to any aspect of Mr Atkinson’s evidence. For reasons that follow, the Tribunal is of the view that this question is best answered in the negative.
[50] Exhibit R6, page 21, paragraph 87.
Mr Atkinson proved to be a quite difficult witness to cross-examine. He frequently sought to second-guess questions put to him. He also sought, via various means apparent from the transcript, to, in effect, commandeer the Respondent’s Counsel’s line of questioning. Frequently, he would be referred to a given page in the material and asked a specific question about that page, but instead of addressing his attention and response to that question about that specific page, he would flick his way through the immediately following material in effort to predict the sequence of forthcoming questions.
His lay advocate, Mr Fitzgerald, sought to suggest that Mr Atkinson had a strong and experienced background in the operation of businesses such that he had developed his own methodologies for operating a given financial enterprise[51]. Mr Fitzgerald added that Mr Atkinson had in the past overpaid amounts of taxation due to errors he (Mr Atkinson) had made[52]. Mr Fitzgerald further submitted that Mr Atkinson had apparently obtained accounting qualifications to Bachelor/Degree standard, but had failed to obtain accounting qualifications three times[53].
[51] Transcript, 18 December 2019, page 25, lines 2 to 4.
[52] Transcript, 18 December 2019, page 25, lines 27 to 30.
[53] Transcript, 18 December 2019, page 75, lines 10 to 40.
Mr Atkinson purported to present an up-front and frank approach to how he dealt with financial issues that arose in the course of operation of the Tavern. For example, he openly acknowledged that he had made errors in calculating the gross margin of the business[54]. Putting that purported frankness aside, it was a repeated feature of his evidence that when confronted with a difficulty in explaining a contention put to him, Mr Atkinson sought to diminish any adverse effect arising from that contention. Inconsistencies arose with (1) the status of documents before the Tribunal, (2) the financial documents upon which he sought to rely, and (3) in particular, the loan facility with Westpac.
[54] Transcript, 19 December 2019, page 213, lines 1 to 11.
The Respondent has helpfully identified six aspects of Mr Atkinson’s evidence giving rise to the Tribunal having serious misgivings about that evidence.
(1) General inconsistencies in the evidence – alleged theft of Tavern funds
Shortfalls in cash takings were sought to be attributed to alleged theft by employees. Mr Atkinson sought to suggest that this conduct was a consistent feature of the operation of the business[55]. One of the difficulties with that kind of evidence is that he was not able to explain why there were minimal write-offs for bad debts in the financial statements, if, it was indeed the case that such theft was consistently occurring.
[55] Transcript, 18 December 2019, page 61, lines 17 to 33.
In addition, Mr Atkinson produced no evidence to indicate the business ever reported perceived theft of its funds to any external agency such as the police, nor could he point to the commencement of any recovery proceedings against a staff member. The Tribunal finds it extraordinary that there was not a single complaint to the police nor a single confrontation with a staff member for allegedly taking funds in circumstances where it is now pressed on the Tribunal to accept that, in just one theft episode, something in the order of $294,194.56 was found to be missing or stolen[56].
[56] Exhibit A2, page 10, paragraph 4.
There seemed a self-serving element to Mr Atkinson’s evidence about these alleged thefts. On the one hand the abovementioned “missing” (almost) $300,000 was recorded as a business write-off in the financial statements[57]. Yet on the other hand, there is no consistent recording of thefts either as written-off items or other contingent items. A startlingly inconsistent aspect of Mr Atkinson’s evidence arises from the reality that he was not able to provide the basis of how he could provide any evidence about alleged stolen funds, in circumstances where he suggests he had no personal control or involvement in the cash received as part of the Tavern’s operations.
[57] Transcript, 19 December 2019, page 165, lines 7 to 11.
Mr Atkinson spoke of apparently having a “… terrible habit of showing managers how the business could be ripped off” but at the same time, sought to maintain a position of minimal or no connection to any system or systems dealing with how the business actually received cash. His evidence goes nowhere near explaining this inconsistency[58]. If he did not know anything about how the business received and dealt with its cash takings, how can he be in any credible position to tell employee managers, “…how the business could be ripped off”?
[58] Transcript, 18 December 2019, page 54, lines 20 and 21.
(2) The purported disclaimer of documents
Personal Living Expenses Questionnaire
Mr Atkinson was referred to a personal living expenses questionnaire, previously filled out at the request of the Respondent[59]. While the Respondent describes the Applicant’s position regarding questions about the personal living expenses questionnaire was “recalcitrant”, the Tribunal considers his overall approach and posture to the questions as less than credible[60].
[59] Exhibit R1, T64, page 339.
[60] Exhibit R6, page 23, paragraph 94.
As often happens in the case of witnesses seeking to deny the attribution of certain documents to themselves, he purported to suggest that the signature at the foot of the document may have been his, but that he did not complete the content of the document. This then morphed into an alternate position that the subject signature “could be” his. Then ultimately, when pressed about whether it was his signature, his evidence was “I don’t know”[61].
[61] Transcript, 18 December 2019, page 86, lines 22 to 42.
With further inconsistency, the Applicant purported to suggest that the subject signature may have resembled his signature, but that (1) he did not remember affixing his signature to the document, and (2) he had some vague recollection that someone presented the last page (requiring the signature), for him to sign because this other person had earlier filled out the content of the document[62]. The state of the evidence regarding this personal living expenses questionnaire is thus quite opaque because the Tribunal is not left with any firm or reliable impression that the subject questionnaire was completed by the Applicant or, indeed, another person, and whether the Applicant was aware of its contents.
Review of cash receipts by Mr Gwynne
[62] Transcript, 18 December 2019, page 88, lines 21 to 26.
Mr Gwynne completed a review involving him examining the cash receipts of the business compared to receipts by way of EFTPOS. Mr Gwynne’s report is before the Tribunal. There is no question that Mr Gwynne was duly engaged by Mr Atkinson and that he sought to rely on Mr Gwynne’s unverified findings.
When it emerged in cross-examination that Mr Gwynne’s analysis of the ratio between cash receipts to EFTPOS was not “twenty-eighty” as reported by Mr Gwynne, it was clear that Mr Atkinson immediately sought to suggest that Mr Gwynne’s conclusion was incorrect[63]. This suggestion was both lacking in credibility and simply not supported by the evidence.
[63] Transcript, 19 December 2019, page 180, lines 31 to 39.
For example, Mr Atkinson had earlier claimed that EFTPOS revenue for the Tavern for the period 2011 to 2014, was, in fact 57%[64]. Be that as it may, in providing his evidence in chief, Mr Atkinson said that minimal or no cash was “floating around” the Tavern and that the notion that income from a business of this nature carried a lot of cash is no longer the case today[65].
[64] Exhibit A3, Annexure J, 4.1.
[65] Transcript, 18 December 2019, page 62, lines 37 to 40.
During his evidence, Mr Atkinson was taken to the findings of Mr Gwynne, wherein Mr Gwynne calculated that 80% of transactions were EFTPOS while only 20% were in cash. This is what transpired in the cross examination[66]:
Ms Wheatley QC[67]: And he records about halfway through that document that the business bank account EFTPOS transactions were at roughly (indistinct)?
Mr Atkinson: He said that, yes.
Ms Wheatley QC: Yes, and then on the next line he says “The average was 20 per cent for cash - bankable cash”?
Mr Atkinson: Yes.
Ms Wheatley QC: Do you agree with his statement there?
Mr Atkinson: Not really, no.
[66] Transcript, 19 December 2019, page 180, lines 31 to 39.
[67] Senior Counsel for the Respondent.
Mr Atkinson’s representative later tried to suggest that these documents were in fact submitted by Mr Gwynne. The Tribunal has misgivings about such a contention in circumstances where the more likely explanation is that Mr Gwynne would most likely have submitted those documents on behalf of the Applicants, not in his own capacity. It is clear that the Applicants no longer rely on the findings of Mr Gwynne. Ultimately, this fatally compromises the Tribunal’s capacity to afford any weight to Mr Gwynne’s evidence.
General ledger of AFT and wage expenses
Inconsistencies were also apparent from the AFT’s general ledger relating to wages. Mr Atkinson conceded that the wage expense for the years 2011, 2012, and 2013 were largely consistent. The average figure for wage expense during these three years of income was $229,000[68]. Mr Atkinson could not adequately or at all explain, the quantum of almost $170,000, appearing as a wage expense in the general ledger of the AFT for the first four months of the 2015 financial year[69].
[68] Exhibit R3, ST5, pages 80, 90 and 100.
[69] Exhibit R2, T10, page 157.
He sought to attribute this extraordinary level of wage expense to something he described as, a “greenfield agreement” between the Tavern and its landlord. According to Mr Atkinson’s evidence, this agreement involved the Tavern paying considerably more in wage expenses as a result of a State Award that took effect, due to a change in the ownership structure of the Tavern from KJ Investments to Chilligo (as Trustee for the AFT)[70].
[70] Transcript, 19 December 2019, page 175, lines 31 to 47; and page 176, lines 1 to 10.
Mr Atkinson then changed his answer to the question about the unusually high wage expenses when he was shown a single bookkeeping wage expense entry into General Ledger for Chilligo as trustee for the AFT, on 13 May 2015 for $99,961.15[71]. Mr Atkinson tried to explain that this one-off wage expense related only to three to four months of 2015, despite the entry not recording the particular employees to whom this sum for wages had been paid[72]. There is no reference, for example, to the addresses of these employees. Accordingly, there is no proof that the approximate sum of $100,000 was actually paid to genuine employees of the business.
[71] Exhibit R2, T10, page 155.
[72] Transcript, 19 December 2019, page 176, lines 40 to 43.
(3) The financial documents – 2011 interest expense and Related Party Loans
Mr Atkinson was able to recall and confirm the amount of interest expense he claimed in his 2011 tax return, a figure approximating $260,000. Yet, in relation to the entity to whom the sum of approximately $3,500,000 had been loaned and recorded as “related party loans”, he could not produce any loan documentation or other verification whatsoever[73].
[73] Transcript, 19 December 2019, pages 160 to 162.
Vaguely, Mr Atkinson purported to suggest that the related party “might be the National Australia Bank” or that the appearance of that $3,500,000 figure in the financial documents may have occurred as the result of some “coding error”[74].
[74] Transcript, 19 December 2019, page 161, lines 34 to 40
Mr Atkinson had no satisfactory explanation when confronted with the reality that the financial statements identified the subject $3,500,000 as a non-current asset for KJ Investments, and that on this basis, KJ Investments had advanced or loaned this amount to related entities.
(4) Entries on financial statements – tax returns and activity statements
Mr Atkinson was taken to the entry of the Westpac loan appearing in the 2011 income tax return of KJ Investments. In cross-examination, Mr Atkinson sought to suggest that this particular facility was made to Chilligo as Trustee for AFT. Once again, Mr Atkinson attributed the recording of the Westpac loan in KJ Investment’s 2011 tax return as “incorrect coding”[75].
[75] Transcript, 19 December 2019, page 163, lines 32 to 34.
Mr Atkinson’s evidence then turned to whether he checked the relevant financial statements line by line. He conceded that while he may not have checked relevant financial statements on a line by line basis, he certainly checked the relevant income tax returns on a line by line basis[76].
[76] Transcript, 19 December 2019, page 167, lines 25 to 28.
Mr Atkinson then stated in evidence before this Tribunal that he proceeded to check the relevant income tax returns on a line by line basis so that he could be sure that incorrect figures were shown such that the relevant tax returns were in fact misreporting information[77].
[77] Transcript, 19 December 2019, page 197, lines 22 to 46; and page 198, line 1.
Mr Atkinson acknowledged that his intent was to ensure that what appeared in the financial statements of the business would be the same as that reported to the Australian Taxation Office (or ‘ATO’). In cross-examination, he acknowledged that those amounts were in fact incorrect. He confirmed this in cross-examination[78]:
[78] Transcript, 19 December 2019, page 197, lines 37 to 46; and page 198, line 1.
Mr Atkinson: I make sure it’s the same as the figure that was in my return - is the same as what’s in my books.
Ms Wheatley QC: Right. Which is wrong?
Mr Atkinson: Which is inflated.
Ms Wheatley QC: Is that wrong?
Mr Atkinson: Yes, it is.
Ms Wheatley QC: Right. So you’ve checked the tax return to make sure that it’s misreporting the information?
Mr Atkinson: To make sure it’s higher, yes.
Ms Wheatley QC: It’s misreporting the information?
Mr Atkinson: Yes. Yes.
Mr Atkinson sought to explain the incorrect recording of the Westpac loan in the 2012 tax return for KJ Investments on the basis of the lease agreement between KJ Investments and Chilligo. Mr Atkinson’s evidence was that the level of flexibility in the lease agreement between KJ Investments and Chilligo was sufficiently broad to somehow encompass or absorb this error[79].
[79] Transcript, 19 December 2019, page 169, lines 32 to 38.
As a prelude to changing his position about the status of the loan and how it was recorded in the financial statements of Chilligo as Trustee for the AFT, Mr Atkinson told the hearing how he had never been concerned about balance sheets attributable to the business. He then, in a complete about-face, suggested that the Westpac loan facility was, in fact, correctly recorded in the financial statements of KJ Investments[80].
[80] Transcript, 19 December 2019, page 170, lines 10 to 14.
(5) Other problematic aspects of Mr Atkinson’s evidence
The placement of KJ Investments into voluntary administration
Mr Atkinson sought to suggest that he placed KJ Investments into voluntary administration to guard against a risk of insolvent trading[81]. The difficulty with that contention is that the Tavern business, operated by KJ Investments was then retained and operated through Chilligo as Trustee for the AFT.
[81] Transcript, 19 December 2019, page 198, lines 40 to 43.
It is less than credible to suggest that a poorly performing business would be retained, albeit, operating in an alternate vehicle, while at the same time placing KJ Investments into voluntary administration.
Mr Atkinson’s involvement in the Tavern business
This Tribunal found it difficult to understand Mr Atkinson’s level of involvement in the Tavern business. On the one hand, he purported to suggest that he had little or no personal exposure or involvement in the handling of cash takings. Yet, on the other hand, he said that he was responsible for all bookkeeping, accounting and finance aspects of the business on the basis that his previous career in banking employment adequately qualified him to perform this role[82].
[82] Transcript, 18 December 2019, page 52, lines 16 to 24.
In terms of this purported distancing from the cash funds generated by the Tavern business, Mr Atkinson suggested that he was not paid a salary from the Tavern business, and that his family was subsisting on his wife drawing a salary from an allied courier business. He further sought to suggest he did not need to draw funds from the Tavern business due to a gift or similar provision of money from his wife’s parents[83].
[83] Transcript, 18 December 2019, page 53, lines 43 to 44; page 60, lines 33 to 35.
Mr Atkinson acknowledged:
(a)errors in reported GST figures by the Tavern business, but did not seek to rectify the situation by filing amended Business Activity Statements due to a lack of apparent funds to pay additional GST[84];
(b)with reference to Mr Gwynne’s cash reconciliation report, Mr Gwynne had instructed him to prepare a sample of all relevant source documents upon which the report could be based. Despite doing so for Mr Gwynnne, Mr Atkinson’s posture towards the Respondent was entirely different. He told the Respondent that the Tavern business only took 20% of the takings in cash, and that some 60% to 70% of cash taken was returned to the Automatic Teller Machine (ATM), with the business reimbursed by the bank. However, Mr Atkinson could provide no details of reimbursement transactions[85].
[84] Transcript, 18 December 2019, page 55, line 22, and lines 29 to 33.
[85] Transcript, 18 December 2019, page 62, lines 29 to 33; and Exhibit R1, ST13, page 618 and 619.
With reference to the “flexible lease” arrangement from Chilligo to KJ Investments (operating the Tavern at the time), Mr Atkinson said that the regular or base lease payment was $10,000 per month, yet the lessee (KJ Investments) could nevertheless pay all of Chilligo‘s expenses if it wanted. This “flexible lease” arrangement apparently allowed Chilligo to demand almost any level of lease repayment from KJ Investments[86].
[86] Transcript, 18 December 2019, page 81 lines 25 to 46, and page 82, lines 1 to 26; Exhibit A5.
For reasons the Tribunal has outlined above, the Tribunal is of the view that all of Mr Atkinson’s evidence lacks credibility and is otherwise compromised to the extent that none of his evidence (whether in writing or oral), can safely be relied upon by the Tribunal. The Tribunal has misgivings about the credibility of a deponent who admitted to falsification of documents, including tax returns, designed to induce a major financier (Westpac) into advancing funds. Accordingly, the Tribunal cannot safely allocate any measure of weight to the evidence of Mr Atkinson.
Mr Atkinson does not discharge the onus of negatively demonstrating that the Respondent’s assessments were excessive and thus wrong. His evidence goes nowhere near demonstrating, to the necessary standard of proof, the corrections that need to be made to those assessments such as to make them “right or more nearly right”. Finally, the Tribunal has, because of the inherent unreliability of the Applicant’s oral evidence, significantly uncorroborated as it is by any primary source documents, significant misgivings about attaching any credibility to the secondary spreadsheets tendered on behalf of the Applicants.
Evidence of Ms Julie-Anne AtkinsonThere is a statement in the material from the Applicant’s wife, Ms Julie-Anne Atkinson[87]. Although requested for cross-examination by the Respondent, Ms Atkinson did not appear. In those circumstances, the Tribunal concludes that no weight can be safely allocated to Ms Atkinson’s evidence.
Evidence of Mr Graeme McManus[87] Exhibit A2, page 40 and 41.
The material contains a witness statement from Mr Graeme McManus[88]. Mr McManus speaks of having ‘…often offered my help and assistance when needed”[89]. In a similar vein to Ms Helen Quinn, Mr McManus seems to have been someone who “…asked Glen [Atkinson] if I could help him out if needed at the Tavern as I felt like I was still useful”[90].
[88] Exhibit A2, page 42.
[89] Ibid.
[90] Ibid.
Mr McManus’ report does not assist with the exercise of demonstrating that the assessments were excessive and thus wrong, nor does it positively demonstrate necessary corrections to those assessment such that they become “right or more nearly right”.
Mr McManus did not give oral evidence and his findings were not the subject of any cross-examination. It is appropriate that no weight should be allocated to his report.
Evidence of Professor John SandsMr Atkinson had earlier sought the advice of Professor John Sands. The Tribunal heard evidence that Professor Sands had recently passed away, and thus was not able to give oral evidence at the hearing[91].
[91] Transcript, 18 December 2019, page 65, lines 16 to 19.
Mr Atkinson was taken to certain emails passing between Professor Sands and himself, and acknowledged that some of the figures he instructed Professor Sands to consider were not accurate[92]. Mr Atkinson had misrepresented the situation in which he sought Professor Sands’ opinion, claiming he was having a theoretical argument with a business partner, and that the ATO disputed the methodology and calculations in the figures he had sent Professor Sands for consideration[93].
[92] Exhibit A4, at Annexure D, 1.8 to 2.5; and Transcript, 19 December 20119, page 212, lines 34 to 45.
[93] Exhibit A4, at Annexure D, 2.5, page 15.
Ultimately, Mr Atkinson’s contention that the Respondent’s figures were incorrect as a result of Professor Sands’ finding, was disproved. It is clear that Professor Sands’ findings are predicated on incorrect figures being provided to him via Mr Atkinson in the first place.
We do not accept Mr Atkinson’s alternate explanations for the conclusion reached by Professor Sands. It is clear that the spreadsheet provided by Mr Atkinson for Professor Sands to consider contained key data that was incorrect.
The Tribunal has had regard to the totality of the evidence relating to instructions and material provided by Mr Atkinson to Professor Sands. The only safe finding is that Professor Sands has identified errors in that material.
Given (1) the tepid and unreliable explanations about the errors in the material provided by Mr Atkinson; (2) the only plausible conclusion to be drawn from Professor Sands’ findings is that there are errors in the source material provided by Mr Atkinson; and (3) the reality that Professor Sands is not able to be called to orally explain these discrepancies, leads the Tribunal to a conclusion that it would be unsafe to allocate any reliable measure of weight to the evidence of Professor Sands.
CONCLUSION: MR ATKINSON
The Tribunal is not of the view that Mr Atkinson has discharged his burden of proof to establish that the assessments are excessive. The Tribunal does not consider that he has adequately discharged his burden of proof to demonstrate what is right or more nearly right in terms of alternate assessments in the 2010-11, 2011-12, 2012-13, and 2013-14 financial years (or the ‘Atkinson years’).
The Applicants have ventilated these proceedings on the misconceived basis of attempting to demonstrate error in the Respondent’s formulation of the relevant assessments. As noted by the Respondent, this will not discharge the necessary burden of proof. To do so, Mr Atkinson must go further and demonstrate that substituted assessments should be preferred over and above those originally issued by the Respondent.
For reasons previously stated, the Tribunal has significant misgivings about allocating any weight whatsoever to Mr Atkinson’s evidence. He has failed to properly meet the issues raised by the Respondent in both the audit and this hearing. Mr Atkinson’s misconceived basis of attempting to discharge the necessary burden of proof can be gleaned from (1) his manner of approach to the conduct of this proceeding and (2) his failure to provide critical source documents.
For example, the methodologies and processes of the Respondent were sought to be impugned by Mr Atkinson. This exercise resulted in him making unsubstantiated and unreliable assertions about specific issues alleged against him. It could be seen through his manner of approach and instruction with reference to individuals such as Mr Gwynne and Professor Sands.
By way of further example, there seemed to be either a simple failure to supply or, alternatively, some type of obfuscation in relation to providing important documents such as relevant till tapes and copies of critically important bank statements. There was also the curious conduct relating to an initial failure followed by the eventual provision of some 15 boxes of documentary material to the Respondent. These documents were sought over a course of years by the Respondent, and were not provided until March 2018.
The Tribunal has similar misgivings in relation to the Applicants’ asserted reason for not providing relevant bank statements. Mr Atkinson said he could not afford the bank fee of $880 to facilitate release of those bank statements[94]. The two significant problems with this excuse are (1) Mr Atkinson readily provided similar material in relation to aspects of the case such as the funds received from his wife’s parents and his own wife’s drawings; and (2) $880 is a relatively miniscule amount when compared to the total value of the assessments over the Atkinson years.
[94] Transcript, 19 December 2020, page 129, lines 6 to 26.
In a further effort to apparently discharge the necessary burden of proof, and in particular, presumably in an effort to show what is right or more nearly right (in terms of assessments), the Applicants’ exhibits contain “new” or “correct” tax returns now propounded by Mr Atkinson as being correct[95]. The difficulty with such a contention is that it has no corroborative support from any primary source documents.
[95] Exhibit A4 – Annexures L, M, N and O.
As noted by the Respondent, those “new” returns, contained figures different to those provided by Mr Atkinson to Mr Gwynne. Rather predictably, the net effect of those new tax returns is that nil tax is payable in any of the Atkinson years. Given their unsubstantiated and uncorroborated nature, the Tribunal does not accept the accuracy or truthfulness of those figures.
In an effort to demonstrate error on the part of the Respondent, the Applicant has sought to rely on certain spreadsheets. To the Tribunal’s mind those spreadsheets were successfully impugned in cross-examination, and in any event, constitute the wrong way of seeking to discharge the necessary burden of proof of what is right or more nearly right.
For example:
in an effort to impugn the Respondent’s calculation of the weighted average, the Applicant has in Annexure 1.1, suggested a formula which was ultimately demonstrated to be incorrect, by virtue of the fact that Column H of the spreadsheet in the Annexure simply comprises an average of the totality of figures in Column H. This methodology was not utilised by the Respondent to calculate the weighted average[96].
(b)in an effort to demonstrate error on the part of the Respondent, the Applicant has sought to rely on Annexure 1.2 to suggest the Respondent has somehow relied on sales revenue in making calculations[97]. This is patently incorrect. The Respondent has not relied on revenue sales. The Respondent has adopted quantity and margin figures. The fundamental difference is the Applicant uses sales revenue and margin. As noted by the Respondent, the simple solution to this disagreement in the evidence would have been for the Applicant to produce primary source documents.
(c)annexure 1.3 is sought to be relied on by the Applicant to correctly calculate the “right or nearly right” figure for income[98]. It is surely beyond argument that any such formula for the calculation of income should not contain income as an input item, which is what the Applicant’s methodology in Annexure 1.3 purports to do.
(d)annexure 1.4 is predicated on the misconception that the figure of 21.19% sought to be relied on by the Applicant, is simply an average of a collection of margins and is not weighted by quantity[99].
(e)an examination of the evidence in relation to Annexures 2.0 – 2.2, leads the Tribunal to accept that both the outcome and methodology generated by these Annexures are inherently unreliable[100]. As aptly summarised by the Respondent, “For example the first line should be total sales figures (column K), less the GST (column L) which results in “Sale Ex GST” and then the Gross Profit (column P) should be divided by the “Sale Ex GST”. Both columns “C” and “M” are headed “Margin”. Mr Atkinson accepted column “M” was incorrect. Mr Atkinson also accepted that column “C” was a rounding of column “M”, but maintained the figures were different”[101]. The Tribunal accepts that Column C is simply Column M rounded, and is therefore incorrect. These calculations do not, to any measurable extent, demonstrate the assessments were excessive. Similarly, the weighted average appearing in Annexure 2.2, and specifically, cell E69, is predicated on Column C, and the weighted average calculation is therefore incorrect[102].
[96] Exhibit A4, Annexure A, 1.1, page 1.
[97] Exhibit A4, Annexure A, 1.2, page 2.
[98] Exhibit A4, Annexure A, 1.3, page 3.
[99] Exhibit A4, Annexure A, 1.4, page 4.
[100] Exhibit A4. Annexure D, 2.0, page 10; 2.1, page 11; and 2.2, page 12.
[101] Exhibit R6. Page 33 and 34, paragraph 133.
[102] Exhibit A4, Annexure D, 2.2, page 12.
The Tribunal agrees with the Respondent’s contention that the material sought to be relied upon by the Applicant does not discharge the Applicant’s onus of proof stipulated in s14ZZK of the TAA, for the relevant Atkinson years. Neither the evidence of Mr Atkinson (or other witnesses called, or those witnesses who provided written evidence but were not called or could not be called) ameliorate that deficit.
The Tribunal has difficulty in accepting Mr Atkinson’s contention that none of the income or profits from KJ Investments would have ever flowed to him. Those misgivings derive from the inherent unreliability of this evidence. The Tribunal likewise has significant difficulty accepting that while Mr Atkinson did receive drawings from the allied KJ Transport business, no such drawings were apparently received from KJ Investments. This is especially so when one considers the reality that during the Atkinson years he acted as sole director and company secretary, in addition to being a shareholder of KJ Investments.
We have further difficulty in accepting that the totality of Mr Atkinson’s living expenses can be explained by his evidence that his wife paid all of their bills. He said that during the Atkinson years, he mainly utilised cash to meet his living expenses, and that he had little in the way of personal living expenses[103]. Despite KJ Investments’ habitual payment of credit card expenses, the Tribunal does not accept that those credit cards were exclusively used to meet business expenses. Significantly, any profit that may have resided in KJ Investments was liquidated upon its winding up in 2015. The Tribunal does not find those assessments to be excessive and considers that Mr Atkinson has failed to discharge his onus of proof to establish they are so.
[103] Transcript, 19 December 2019, page 193, lines 35 and 37; and page 194, lines 18 to 22.
As mentioned earlier, there is either a dearth or total absence of any primary source material going to the proof of the income derived by KJ Investments. The Tribunal attributes the income of KJ investments to Mr Atkinson in the Atkinson years, for reasons outlined above. In the Tribunal’s view, the Respondent has correctly attributed the income of KJ Investments to Mr Atkinson as the basis for its assessments issued to him for the Atkinson years pursuant to s12-40 of Schedule 1 of the TAA.
The net effect is that Mr Atkinson cannot demonstrate alternate assessments that are right or more nearly right, and cannot be said to have discharged his onus of proof.
Mr Atkinson - Penalties
The regime for the application of administrative penalties arising from the making of false or misleading statements resulting in shortfall amounts is governed by s284-75 of Schedule 1 of the TAA. Consistent with its burden of proof in relation to the Applicant’s claims, the Applicant bears the burden of proving that any administrative penalty assessment is, on the balance of probabilities, excessive[104].
[104] Commissioner of Taxation v White (No. 2) (2010) FCA 942 at [18] and [19].
Section 284-75(5) of Schedule 1 of the TAA exempts a taxpayer from liability for penalties in circumstances where the taxpayer can demonstrate reasonable care was taken in making the statement ultimately giving rise to the shortfall.
Section 298-20 of Schedule 1 of the TAA facilitates remission by the Respondent of all or part of any previously imposed administrative penalty. The pivotal question in the exercise of discretion to remit involves a consideration of whether it is appropriate to remit, having regard to a taxpayer’s particular circumstances[105].
[105] Sanctuary Lakes Pty Ltd v Commissioner of Taxation (2013) 212 FCR 483 at [249].
In the instant case, the Respondent has applied administrative penalties at the rate of 50% of the shortfall amount on the basis that the Applicant made a false or misleading statement(s) for the 2011, 2012, 2013 and 2014 income tax years.
Initially, an increase of 20% was applied to the base penalty amount imposed on the Applicant for the 2012, 2013, and 2014 income tax years on the basis that the Applicant behaved recklessly when making statements. However this was remitted by the Respondent[106].
[106] Exhibit R1, T66, pages 354 to 357.
Having regard to the totality of the evidence, the Tribunal considers the Applicant’s conduct to be closer to recklessness as opposed to a failure to take reasonable care to comply with taxation law. On this basis, s284-90 of Schedule to the TAA, stipulates that the base penalty comprises an amount of 50% of the shortfall amount. Relevantly, “recklessness” is accepted to comprise the following[107]:
“Recklessness in this context means to include in a tax statement material upon which the Act or regulations are to operate, knowing that there is a real, as opposed to a fanciful risk, that the material may be incorrect, or be grossly indifferent as to whether or not the material is true and correct, and that a reasonable person in the position of the statement-maker would see there was a real risk that the Act and regulations may not operate correctly to lead to the assessment of the proper tax payable because of the content of the tax statement. So understood the proscribed conduct is more than mere negligence and must amount to gross carelessness.”[108]
[107] Miscellaneous Tax Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard (refer to paragraphs 99 to 108).
[108] The Full Federal Court in Hart v Federal Commissioner of Taxation (2003) 131 FCR 2003; [2003] FCAFC 105 at [33] and [43], endorsed the comments of Cooper J in BRK (Bris) Pty Ltd v Federal Commissioner of Taxation [2001] FCA 164; 2001 ATC 4111; (2001) 46 ATR 347 at [77].
The sheer quantum of income purported to be excluded from the relevant returns for the Atkinson years is indicative of conduct comprising gross carelessness with a demonstrated disregard and indifference to the risks that would have been foreseeable to a reasonable person in such a scenario. The inevitable finding is that the Applicant has been reckless as to the operation of taxation law. On his own evidence, primary responsibility for submission and oversight of relevant figures for the business fell to Mr Atkinson.
The Tribunal has grave difficulty in departing from the categorising of Mr Atkinson’s conduct as anything other than reckless, when regard is had to the fact that (1) he was responsible for the submission of tax returns incorrectly recording loans from Westpac; (2) he was not mindful of, and was prepared to depart from, his obligation to accurately report to the Respondent due to an overwhelming desire to satisfy Westpac; and (3) he is responsible for the calculation of figures from which tax returns were based that he knew to be incorrect.
Mr Atkinson cannot derive relief from any of the “safe harbour” provisions, and is specifically precluded from doing so due to his conduct involving recklessness and intentional disregard about the accuracy of information provided to the Respondent[109]. The Respondent has correctly imposed the administrative penalties for which Mr Atkinson remains liable.
[109] Refer to section 284-75(6)(d) of TAA.
The Tribunal allows in full the penalty objection for the 2011 income tax year in respect of Mr Atkinson.
The Tribunal allows the penalty objections in respect to the 2012, 2013, and 2014 income tax years of Mr Atkinson, to the extent of the reduction in the income tax shortfall amounts the Tribunal has identified for each of these income tax years.
Remissions – Mr Atkinson
Section 298-20 of Schedule 1, TAA, facilitates remission of an administrative penalty by the Respondent in part or in full. The Tribunal notes the Respondent remitted the 20% base penalty applied to the 2012, 2013, and 2014 income tax years of Mr Atkinson[110].
[110] Exhibit R1, T66, page 356.
The Tribunal is not of the view that the administrative penalties at the rate of 50% of the shortfall amount imposed on Mr Atkinson in the 2011, 2012, 2013, and 2014 income tax years are capable of remission.
The Tribunal notes (1) the Applicant has been found to have been reckless, and that the safe harbour provisions do not apply; (2) the application of penalties in the instant case does not produce an unreasonable or unjust result.
CONCLUSION: TRUSTEE FOR THE ATKINSON FAMILY TRUST (AFT)
The Respondent contends the AFT has not discharged its burden of proof to establish the GST assessments for the Trust Tax Periods are excessive and that the AFT has not proved what is “right or more nearly right”. For reasons outlined in relation to Mr Atkinson earlier in this decision, the Tribunal believes this contention to be correct.
Again, there is a dearth or total absence of any primary source documents seeking to impugn the Respondent’s GST shortfall assessments. There is nothing before the Tribunal demonstrative of what the GST Shortfall Amounts should be during the Trust Tax Periods.
Accordingly, the Tribunal allows the decision under review but only to the extent of the Respondent’s concessions already made, such concessions arising from the original error involving the Commissioner’s application of a benchmark approach to the calculation of the GST shortfall amounts, which was subsequently revised to a weighted average methodology for each of the Trust Tax Periods.
CONCLUSION
The Tribunal makes the following findings:
The Applicants have failed to satisfy the burden incumbent upon them pursuant to s14ZZK of the TAA.
(b)The totality of the evidence can be rightly described as inconsistent, unreliable, improbable and otherwise uncorroborated. It is characterised by:
(i)a dearth or total absence of supportive independent contemporaneous and primary source documents;
(ii)the inherent unreliability of Mr Atkinson’s evidence which lacked credibility and to which little or no weight could be safely attributed; and
(iii)the inherent unreliability of the evidence given by all witnesses called by the Applicants the totality of which lacked credibility and was predominantly irrelevant, and thus not worthy of safe attribution of any weight.
(c)The Applicants have not satisfied the onus of proof upon them by virtue of the totality of all their evidence which can be rightly described as inconsistent, unreliable, improbable, and otherwise uncorroborated from primary source material.
Consequently, the Applicants have not satisfied the onus of proof incumbent upon them pursuant to s14ZZK of the TAA.
DECISION
Mr Atkinson
The Tribunal decides to set aside the Respondent’s reviewable objection decision and allow the objection in full, in respect of the 2011 income tax year for Mr Atkinson.
The Tribunal decides to vary the Respondent’s reviewable objection decisions in respect of the 2012, 2013 and 2014 income tax years. The Tribunal allows the objections decisions to the following extent:
Year Ending Income returned by Mr Atkinson Income from Benchmarking Methodology (Amended Assessments) Income from Weighted Average Methodology Amount to be Allowed 30 June 2012 $30,000 $541,892 $313,093 $228,799 30 June 2013 $21,000 $361,002 $312,349 $48,653 30 June 2014 $20,000 $360,002 $358,356 $1,646
In respect of penalties imposed on the Applicant, the Tribunal decides to:
(a)set aside the Respondent’s reviewable objection decision and allow the penalty objection in full, imposed on Mr Atkinson, in respect of the 2011 financial year; and
(b)sets aside the Respondent’s decisions under review in respect of penalties imposed on Mr Atkinson in the 2012, 2013, and 2014 income tax years, to the extent of the reduction in the income tax shortfall amounts the Tribunal has identified for each of these income years in paragraph 163 above.
The Tribunal notes that in the reasons of this decision, it has found that Mr Atkinson to have been reckless, and that safe harbour provisions do not apply, and the application of penalties imposed does not produce an unreasonable or unjust result.
Atkinson Family Trust
The Tribunal decides to affirm the Respondent’s reviewable objection decisions in respect of the April 2015 and June 2015 monthly tax periods for the Atkinson Family Trust.
The Tribunal decides to vary the reviewable objection decisions in respect of the May 2015 and July 2015 monthly tax periods for the Atkinson Family Trust, the Tribunal allows the objection decision to the following extent:
Month Ending GST Shortfall Amount Assessed at Objection Adjusted GST Shortfall Amount Amount to be Allowed 31 May 2015 $3,411 $581 $2,830 31 July 2015 $4,916 $3,812 $1,104 I certify that the preceding 167 (one-hundred and sixty-seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member Theodore Tavoularis and Senior Member Belinda Pola
…………[sgd]………………
Associate
22 May 2020
Date of hearings: 18 December, 19 December, and 20 December 2019
Representative for the Applicant: Mr Jason Fitzgerald
Senior Counsel for Respondent: Ms Amelia Wheatley QC
Annexure 1 – Exhibit List
Exhibit
Description of Evidence
R1
Section 37 Documents for Atkinson and Commissioner of Taxation received 18 May 2017, T1 to T79, pages 1 to 396.
R2
Section 37 Documents for Trustee for the Atkinson Family Trust and Commissioner of Taxation received 16 March 2017, T1 to T17, pages 1 to 286.
R3
Supplementary Documents received 19 December 2018, 3 Volumes, ST1 to ST39, pages 1 to 987.
R4
Further Supplementary Documents received 18 July 2019, ST40 to ST42, pages 988 to 1046.
R5
Respondent’s Statement of Facts, Issues and Contentions dated 10 May 2019, pages 1 to 45.
R6
Respondent’s written outline of submissions received 19 February 2020, pages 1 to 39.
R7
Respondent’s submissions in reply, received 24 March 2020, pages 1 to 6.
A1
Applicant material emailed to the Tribunal 4 February 2019, pages 1 to 380.
A2
Applicant’s documents emailed to the Tribunal 14 February 2019, pages 1 to 44.
A3
Applicant’s Statement of Facts, Issues and Contentions dated 29 March 2019, pages 1 to 4.
A4
Applicant’s Statement of Facts, Issues and Contentions dated 17 June 2019, pages 1 to 27, and Annexures pages 1 – 106.
A5
Applicant’s Original Lease
A6
Applicant’s outline of submissions received 13 March 2020, pages 1 to 16.
0
17
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