Auckram and Commissioner of Taxation (Taxation) - [2022] AATA 4691

Auckram and Commissioner of Taxation (Taxation) [2022] AATA 4691 (23 December 2022)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2021/5936
Re:Brian Auckram
APPLICANT

AndCommissioner of Taxation
RESPONDENT

Decision
Tribunal:Senior Member Dr Linda Kirk
Date:23 December 2022
Place:Sydney

The Reviewable Decision is affirmed.
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Senior Member Dr Linda Kirk
Catchwords
TAXATION – income tax – objection to assessment of assessable income – franked dividends – franking credits – where Applicant sole director and shareholder – whether company had ceased to exist at relevant time – where prior decision of AAT has attributed value of a company's assets to the Applicant for the purposes of the Social Security Act 1991 (Cth) – whether Social Security Act 1991 (Cth) transfers ownership of a company's assets to an individual – whether allegations of fraud or misconduct sufficient to discharge burden of proof – reviewable decision affirmed.
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Corporations Act 2001 (Cth)
Income Tax Assessment Act 1936 (Cth)
Income Tax Assessment Act 1997 (Cth)
Social Security Act 1991 (Cth)
Taxation Administration Act 1953 (Cth)
Cases
Commissioner of Taxation v Futuris Corporation Ltd (2008) 247 ALR 605
Danmark Pty Ltd v Federal Commissioner of Taxation (1944) 7 ATD 333
Hua-Aus Pty Ltd v Commissioner of Taxation (2010) 184 FCR 430
Secondary Materials
Miscellaneous Taxation Ruling MT 2006/1: The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number
REASONS FOR DECISION
Senior Member Dr Linda Kirk
23 December 2022
INTRODUCTION

Mr Brian Auckram (‘the Applicant’), was the sole director of Integrity Consulting Pty Ltd (‘the Company’) from the date of its incorporation on 5 March 2001 until 30 June 2017. The Applicant was the sole shareholder of the Company from its incorporation until it was deregistered by the Australian Securities and Investments Commission (‘ASIC’) on 21 July 2019.[1]
[1] ST18, 166; ST18, 164. The reason for deregistration of the Company is listed as being ‘section 601AB [of the Corporations Act 2001]’. This means that ASIC initiated the deregistration of the Company.
The Applicant was an Australian resident for income tax purposes during the income tax year ended 30 June 2016 (‘the 2016 income year’). The Company was registered as a company under the Corporations Act 2001 (Cth) (‘Corporations Act’) for the entirety of the 2016 income year.[2]
[2] ST18, 164.
On 28 July 2016, the Applicant lodged his income tax return for the 2016 income year via his then tax agent, Symes Accountants. The Applicant’s income tax return reported as assessable income, amongst other amounts, a franked dividend of $40,415 (the ‘franked dividend payment’) and franking credits of $17,321 from the Company.[3]
[3] T09, 96.
On the same day, the Company lodged its income tax return for 2016 income tax year through the same tax agent.[4] The Company’s income tax return reported, amongst other amounts, $40,415 as total amount of franked dividends paid, and $86,574 as franking account balance.[5]
[4] ST17.
[5] ST17, 159.
On 4 August 2016, the Respondent issued a notice of assessment to the Applicant for the 2016 income year (‘the Assessment’).[6]
[6] T05.
On 12 May 2021, the Applicant objected to the Assessment.[7] The Applicant provided with his objection copies of the Tribunal’s decisions in the following proceedings:
(a)Mr Brian Auckram and Mrs Fiona Auckram and Secretary, Chief Executive Centrelink, dated 4 May 2017 (‘Centrelink AAT decision’);[8]
(b)Auckram and Secretary, Department of Social Services (Social services second review) [2018] AATA 2976 (20 August 2018) (‘Centrelink AAT appeal decision’).[9]
[7] T09, 90-119.
[8] T09, 104-111. Both proceedings concerned a decision made Centrelink in respect of the Applicant’s and Mrs Auckram’s claim for Austudy benefits. Both the Applicant’s and Mrs Auckram’s claim for Austudy benefits were cancelled or refused on the basis that the couple exceeded the asset cap test prescribed by the Social Security Act 1991 (Cth).
[9] T09, 112-119.
In his objection application, the Applicant objected against the Assessment on the basis that the Company ‘ceased to exist’ as a result of the Centrelink AAT appeal decision, and accordingly, a dividend payment cannot have been made to the Applicant.[10] He contended that ‘the AAT pierced the corporate veil by affirming the original decision dated 16 March 2016’,[11] and therefore ‘the dividend payment should not have been made (as the company had ceased to exist and legally did not own the money).’[12]
[10] T09, 92-93.
[11] See T09, 103.
[12] T09, 92-93.
On 6 July 2021, the Respondent disallowed the Applicant’s objection in full (‘the Reviewable Decision’).[13]
[13] T01, 8.
On 22 August 2021, the Applicant applied to the Tribunal for a review of the Reviewable Decision.[14]
[14] T01, 4.
The review application was heard by the Tribunal at a video-conference hearing on 4 August 2022. The Applicant was self-represented.
The following documents are before the Tribunal:
·Applicant’s Statement of Facts, Issues, and Contentions (‘ASFIC’);
·Respondent’s Statement of Facts, Issues, and Contentions (‘RSFIC’);
·Applicant’s Response to the Respondent’s Statement of Facts, Issues, and Contentions (‘ARRSFIC’);
·Section 37 T-Documents (T1-T15, pages 1-150) (‘T-Documents’);
·Supplementary T-Documents (ST16-ST19, pages 151-170) (‘Sup T-Documents’);
·Document titled T17 – CAO Attribution;
·Complaint Email of the Applicant to the Australian Taxation Office dated 1 March 2022;
·Service Request Email from Mr G Stasinopoulos dated 13 April 2021; and
·Email of Mr R Momen dated 19 January 2022.
LEGISLATIVE FRAMEWORK
Taxpayer’s onus of proof
For the purposes of this application, the provisions of the Administrative Appeals Tribunal Act 1975 (Cth) are modified by section 14ZZK of the Taxation Administration Act 1953 (Cth) (‘TAA’) which provides, in so far as it is relevant:
On an application for review of a reviewable objection decision:
…
(a)the applicant has the burden of proving that:
(i) if the taxation decision concerned is an assessment—the assessment is excessive or otherwise incorrect and what the assessment should have been; or ...
Dividends are assessable income
Pursuant to subsections 44(1) and (1A) of the Income Tax Assessment Act 1936 (Cth) (‘ITAA 1936’), a taxpayer’s assessable income includes dividends received as a shareholder:
Dividends
(1) The assessable income of a shareholder in a company (whether the company is a resident or a non-resident) includes:
(a)if the shareholder is a resident:
(i)dividends (other than non-share dividends) that are paid to the shareholder by the company out of profits derived by it from any source; and
…
(1A) For the purposes of this Act, a dividend paid out of an amount other than profits is taken to be a dividend paid out of profits.
…
‘Shareholder’ is defined in subsection 6(1) of the ITAA 1936 to include a member or stockholder.
‘Company’ is defined in section 995-1 of the Income Tax Assessment Act 1997 (Cth) (‘ITAA 1997’) as:
Company means:
(a) A body corporate; or
(b) Any other unincorporated association or non-entity joint venture.
Body corporate’ is not a defined term in the ITAA 1997. The term takes its meaning from the general law. A body corporate may be created by statue, for example a Corporations Act company.[15]
[15] Miscellaneous Taxation Ruling MT 2006/1: The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number, [31].
'Dividend' is defined in subsection 6(1) of the ITAA 1936 to include any distribution made by a company to any of its shareholders.
Attribution of value of assets
Part 3.18 of the Social Security Act 1991 (Cth) (‘Social Security Act’) provides for the attribution to individuals of the assets of private companies in that the value of those assets is treated as an asset of the person controlling the company, for the purposes of the social security legislation. The provisions of Part 3.18 apply where the social security applicant is an “attributable stakeholder” of a company,[16] which is a “designated private company” and a “controlled private company”.[17] A company is a “designated private company” if the company has consolidated revenue of less than $25 million and consolidated gross assets of less than $12.5 million. [18]
[16] Sections 1207X(1) and 1207X(2) Social Security Act.
[17] Sections 1207N and 1207Q Social Security Act.
[18] Section 1207N Social Security Act.
Incorporation and deregistration of a company
Section 119 of the Corporations Act provides that a company comes into existence as a body corporate at the beginning of the day on which it is registered.[19] Section 601AD of the Corporations Act provides that a company registered with ASIC ceases to exist on deregistration.[20]
[19] Section 119 Corporations Act.
[20] Section 601AD Corporations Act.
Notice of assessment
Section 350-10 of Schedule 1 to the TAA provides that the production of a notice of an assessable amount is conclusive evidence that:
(a)the assessment was properly made; and
(b)that the amounts and the particulars of the assessment are correct (except in Part IVC review or appeal proceedings pursuant to section 175A of the ITAA 1936).
ISSUE FOR DETERMINATION
The sole issue before the Tribunal is whether the franked dividend payment should be included in the Applicant’s assessable income for the 2016 income year.
CONTENTIONS
Applicant
The Applicant contends that the franked dividend payment should not be included in his assessment for the 2016 income year.
The Applicant contends that the Centrelink AAT appeal decision dated 20 August 2018 and the associated legislation make clear that the assets of the Company became his personal property and, in accordance with the separate entity principle, the Company therefore ‘ceased to exist’ as a separate legal and financial entity on 16 March 2016.[21]
[21] ASFIC, [48].
Respondent
The Respondent contends that the dividend payment is assessable income to the Applicant.[22] The Applicant has failed to discharge his burden of proof by contending that the Company ‘didn’t exist’ at the time of the making of the dividend payment. The Company ‘existed’ during the entirety of the 2016 income year.[23] The Centrelink AAT appeal decision only applies to the extent that it relates to the administration of the Social Security Act in relation to the Applicant’s specified circumstances in that decision.[24]
[22] RSFIC, [23(a)].
[23] RSFIC, [23(b)].
[24] RSFIC, [34].
The Applicant is limited to the grounds stated in the taxation objection unless the Tribunal orders otherwise.[25] The Applicant’s allegations of misconduct and/or fraud[26] do not discharge the Applicant’s burden of providing that the assessment is excessive, nor assist the Tribunal in determining the correct or preferable decision in this matter.[27]
[25] RSFIC, [23(c)].
[26] For examples of such statements, see T08, 79-80; T08, 85; T12, 124; T14, 141; T14, 144; ST16, 153; ASFIC, [10], [11], [62], [65], [67].
[27] RSFIC, [23(d)].
CONSIDERATION AND REASONS
The Applicant has the burden of proving that the Reviewable Decision should not have been made or that it should have been made differently.[28] Discharging the burden of proof requires the Applicant to establish the facts upon which he relies and, if it is necessary for the Applicant to establish a particular fact in order to displace the Respondent’s decision, the Applicant must satisfy the Tribunal with respect to that fact.[29]
[28] Subparagraph 14ZZK(b)(ii) TAA.
[29] Hua-Aus Pty Ltd v Commissioner of Taxation (2010) 184 FCR 430 at [22] citing Danmark Pty Ltd v Federal Commissioner of Taxation (1944) 7 ATD 333 at 337.
1) Is the franked dividend payment assessable income to the Applicant?
For the reasons that follow, the Tribunal is satisfied that the franked dividend payment is assessable income to the Applicant in the 2016 income year.
Subsection 44(1) ITAA 1936 relevantly provides that the assessable income of a shareholder in a company who is a resident includes dividends that are paid to the shareholder by the company out of the profits derived by it from any source.
The evidence before the Tribunal is that during the 2016 income year the Applicant:
(a)was an Australian resident;
(b)was the sole shareholder of the Company; and
(c)received a franked dividend of $40,415 from the Company.
As all the requirements of subsections 41(1) ITAA 1936 are met, the Tribunal finds that the franked dividend payment received by the Applicant from the Company in the 2016 income year is assessable income to the Applicant.
2) Did the Company exist during the 2016 income year?
For the reasons that follow, the Tribunal finds that the Company existed throughout the 2016 income year. Section 601AD Corporations Act makes clear that a company registered with ASIC ceases to exist on deregistration. The evidence before the Tribunal is that the Company was deregistered on 21 July 2019. It was on this date that the Company ceased to exist. Accordingly, the Tribunal finds that Company existed during the 2016 income year.
The Applicant contends that the Centrelink AAT appeal decision determined that the assets of the Company became his personal property and, in accordance with the ‘separate entity principle’, the Company therefore ‘ceased to exist’ as a separate legal and financial entity on 16 March 2016.
For the reasons stated above, the Tribunal finds that the Company existed during the 2016 income year. It further finds that the Applicant’s argument that the assets of the Company became his personal property in accordance with the ‘separate entity principle’ is misconceived for the following reasons.
As the Tribunal stated in the Centrelink AAT decision, the provisions in Part 3.18 of the Social Security Act:
Are designed to determine the reality of who owns and controls assets or income owned by private companies or trusts by looking behind the legal structures to ensure that income support entitlements are based on a person’s level of resources, not on the way in which those resources are held.[30]
…
… the Act does not transfer ownership of a company’s assets to an individual. It merely attributes the values of an asset owned by a company or trust to an individual for the purposes of assessing their pension or allowance.[31]
[30] At [15].
[31] At [18].
The evidence before the Tribunal supports a finding that during the 2016 income year the Applicant had control of the Company as its sole director and shareholder, and accordingly the Company was a “controlled private company” with the Applicant being a 100% “attributable stakeholder”.[32]
[32] Centrelink AAT appeal decision [18].
As the Tribunal found in the Centrelink AAT appeal decision, it follows that as the Company was a “designated private company” and a “controlled private company”, and the Applicant an “attributable stakeholder”, the Act attributed the value of the assets of the Company to the Applicant so as to form part of his assets for the purposes of the “assets” test with regard to qualification by him and his wife for Austudy benefits.[33]
[33] At [19].
As the Tribunal noted in the Centrelink AAT appeal decision, the legislation does not effect a transfer of a property to the individual. Instead, its effect ‘is to deem an amount equivalent to the value of an asset of a private company controlled by an individual, to that individual solely for the purpose of the “asset” test under the legislation.’[34]
[34] At [21].
For the reasons stated above, the Tribunal finds that the Company existed during the 2016 income year and the assets of the Company were not transferred to the Applicant as a consequence of the Centrelink AAT appeal decision.
3) Applicant’s allegations of misconduct
During the course of the review proceedings, the Applicant has made various allegations of fraud and/or misconduct against government officials. For example, he alleges:
·The Centrelink AAT appeal decision ‘was influenced and effected by fraud. Government officers raised a fraudulent debt against [him] and then used that debt to harass [him] while proceeding with that case … This information must be included in the current case as it shows that the original ruling was influenced by significant confusion created by the malicious and criminal actions of Centrelink Officers.’[35]
·He provided documents showing that both the ATO lawyers and the AAT was made aware of the above. The ‘failure of the ATO lawyers … to pursue this, in the best interest of their office, suggests to [him] either a lack of competence and/or a willingness to conceal crimes.’[36]
·Despite the fact that both the AAT and the ATO have been provided with evidence of fraud by Australian Government Officers influencing the AAT Centrelink appeal decision, neither agency has reported this.[37]
[35] ASFIC, [10].
[36] ASFIC, [11].
[37] ASFIC, [65].
The Tribunal finds that none of the Applicant’s contentions in relation to purported fraud and/or misconduct by government officials are relevant to these proceedings which involve the Applicant’s claim that the Assessment is excessive. All that the Applicant can challenge in these proceedings is the amount of the particulars of the Assessment that are in dispute, not the process in which the Assessment was made. [38]
[38] Section 350-10 of Schedule 1 to the TAA; See Commissioner of Taxation v Futuris Corporation Ltd (2008) 247 ALR 605.
Further, the Applicant’s allegations do not assist the Tribunal in making the correct or preferable decision in this matter.
CONCLUSION
The Tribunal is not satisfied that the Applicant has discharged the onus on him under s 14ZZK of the TAA to demonstrate that the Assessment is excessive or otherwise incorrect.
DECISION
The Reviewable Decision is affirmed.

I certify that the preceding 43 (forty - three) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr Linda Kirk

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Associate
Dated: 23 December 2022

Date(s) of hearing: 4 August 2022

Applicant: In person

Solicitors for the Respondent: Ms M Calligaro, Australian Taxation Office

Date(s) of hearing:	4 August 2022
Applicant:	In person
Solicitors for the Respondent:	Ms M Calligaro, Australian Taxation Office