Cammarano and Commissioner of Taxation (Taxation)
[2022] AATA 3910
•21 November 2022
Cammarano and Commissioner of Taxation (Taxation) [2022] AATA 3910 (21 November 2022)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2020/8373, 2020/8374
Re:Robert Cammarano
APPLICANT
AndCommissioner of Taxation
RESPONDENT
File Number(s): 2020/8376, 2020/8377, 2020/8378
Re:Aniello Cammarano
APPLICANT
AndCommissioner of Taxation
RESPONDENT
Decision
Tribunal:Senior Member K James
Member N GaudionDate:21 November 2022
Place:Melbourne
Pursuant to s 43(1)(a) of the Administrative Appeals Tribunal Act 1975, The Tribunal affirms the decision under review.
........................[sgd]................................................
Senior Member K James
Member N Gaudion
Catchwords
TAXATION – audits undertaken – amended assessments issued – unexplained and unreported income – gambling- whether assessment incorrect or excessive – standard of proof not satisfied – objection decision affirmed.
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) s 33(1)(c)
Income Tax Assessment Act 1936 (Cth) s 167
Taxation Administration Act 1953 (Cth) s 14ZZK(b)(i)
Cases
Amirthalingam and Commissioner of Taxation [2012] AATA 449
Commissioner of Taxation v Ross [2021] FCA 766
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614
Gashi v Commissioner of Taxation (2013) 209 FCR 301
George v Federal Commissioner of Taxation (1952) 86 CLR 183
Le and Commissioner of Taxation [2021] FCA 303
Rigoli v Commissioner of Taxation (2014) 141 ALD 529Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63
Secondary Materials
Dennis Pearce, Administrative Appeals Tribunal; (LexisNexis, 5th ed, 2020)
REASONS FOR DECISION
Senior Member K James
Member N Gaudion21 November 2022
Background
The matters were heard together, the Applicants in these matters are brothers and for clarity will be referred to by their first names in these reasons. The parties agreed that the material accepted before the Tribunal would, where relevant, be considered with respect to each matter.
These matters concern applications for review of the Commissioner of Taxation’s (the ‘Commissioner’) disallowance of objections against amended assessments as follows:
(a)For Robert Cammarano in the 2018[1] and 2019[2] Income Years[3]; and
(b)For Aniello Cammarano in the 2017,[4] 2018,[5] and 2019[6] Income Years.
[1] 2020/8373.
[2] 2020/8374.
[3] The 12 month period ending on 30 June of the respective year.
[4] 2020/8376.
[5] 2020/8377
[6] 2020/8378.
The amended assessments were made after covert audits were undertaken by the Commissioner following a reference to him by the Australian Transaction Reports Analysis Centre (‘AUSTRAC’).
Factual Matters
Robert
In tax returns lodged with the Commissioner, Robert declared a taxable income of:
(a)$61,405 in the 2018 Income Year; and
(b)$61,789 for the 2019 Income Year.
Following his audit the Commissioner issued Robert amended assessments based on member records provided to the Australian Taxation Office (‘ATO’) by Crown Casino Melbourne (‘Crown’) which were interpreted as indicating his losses (‘Crown winnings’) for the respective years. That is, ‘the Commissioner concluded that the funds used by the Applicant to finance his gambling losses represented funds available to him in some form and that the Applicant had received unreported and unexplained income’.[7]
[7] Respondent’s Statement of Facts, Issues and Contentions (‘SFIC’) (for matters 2020/8373 & 2020/8374) filed 11 June 2021, [15] citing Audit Reasons for Decision dated 17 September 2019 (‘T9’).
As a consequence, Robert’s amended taxable income was assessed as:
(a)$1,477,122 for the 2018 Income Year; and
(b)$963,339 for the 2019 Income Year.
Aniello
In returns lodged with the Commissioner Aniello declared taxable income of:
(a)$50,250 for the 2017 Income Year;
(b)$70,354 for the 2018 Income Year; and
(c)$106,975 for the 2019 Income Year.
Following his audit the Commissioner issued Aniello amended assessments also based on member records provided to the ATO by Crown Casino Melbourne but differed from those issued to Robert in that they were based on his ‘“Buy ln” amounts during the Relevant Years being the total monies known to have been exchanged for gaming chips at a casino table’.[8]
[8] Respondent’s SFIC (for matters 2020/8376, 2020/8377 & 2020/8378) filed 11 June 2021, [15] citing Amirthalingam and Commissioner of Taxation [2012] AATA 449, [43].
In producing his audit amended assessments, ‘[t]he Commissioner concluded that the funds used by the Applicant to finance his gambling activities represented funds available to him in some form and that the Applicant had received unreported and unexplained income to fund his gaming chip purchases’.[9]
[9] Respondent’s SFIC (for matters 2020/8376, 2020/8377 & 2020/8378) filed 11 June 2021, [17] citing Audit Reasons for Decision dated 17 September 2019 (‘T11’).
As a consequence Aniello’s amended taxable income was assessed as:
(a)$839,000, for the 2017 Income Year;
(b)$557,000 for the 2018 Income Year; and
(c)$230,600 for the 2019 Income Year.
Differing approach of the Commissioner in making audit amended assessments
Before the Tribunal, counsel for the Respondent advised that the different approach to the amount on which the Respondent assessed each of the Applicants was because the Respondent ‘picked the higher figure. So, in the case of Robert… the higher figure was the net loss figure. That was higher than the buy-in figure. In the case of [Aniello], the buy-in figure was higher than the net loss figure and so the buy-in figure was the figure that was adopted’.[10]
[10] Hearing Transcript, 63 lines 23-28.
Disallowance of Objections
The Commissioner disallowed the Applicant’s objections on 22 October 2020 following discussion and correspondence with the Applicant’s Tax Agent, and after an ATO request for further information was not forthcoming.
Relevant Legislation
Burden and Standard of Proof
The conduct of these matters proceeded on the parties having a difference of opinion of the operation or effect of the appropriate burden of proof and the relevant standard of proof. This is discussed in detail below.
The Respondent advised at the audit and objection stages, and his SFIC filed before the hearing, that reliance would be placed on section 14ZZK(b)(i) of the Taxation Administration Act 1953 (Cth) (‘TAA’), ‘save for any facts expressly agreed or admitted in writing’.[11]
[11] Respondent’s SFIC (for matters 2020/8373 & 2020/8374) filed 11 June 2021, [4].
Section 14ZZK of the TAA provides:
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 in 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.
Section 167 of the Income Tax Assessment Act 1936 (Cth) (‘ITAA 1936’) states that if:
(a) any person makes default in furnishing a return; or
(b) the Commissioner is not satisfied with the return furnished by any person; or
(c) the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income;
the Commissioner may make an assessment of the amount upon which in his or her judgement income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.[12]
[12] See reference to this provision as relied on by the Commissioner in the Respondent’s SFIC (for matters 2020/8373 & 2020/8374) filed 11 June 2021, [22].
The above legislative provisions have taken various forms over the years and been the subject of numerous decisions of Courts and Tribunals. In the context of the issues raised in the present matters, the Federal Court has recently summarised the relevant legal principles.
In Le and Commissioner of Taxation,[13] Logan J summarised the Tribunal’s role as follows:
Given the issues at large in this statutory appeal from the Administrative Appeals Tribunal (Tribunal), it is helpful to commence by recalling some basal features of the review of an objection decision by the Tribunal.
On an application for review of a reviewable objection decision in respect of an assessment, an applicant has the burden of proving that the assessment is excessive or otherwise incorrect…That is hardly a modern phenomenon. Like provision was found on enactment, and remained present for decades thereafter…
…
The explicit and implicit casting of an onus on an applicant in either a taxation appeal in this Court or an objection decision review in the Tribunal purposely negates any possible suggestion that, by the making of an assessment, the Commissioner of Taxation (Commissioner) assumes an onus of proving that the recipient of that assessment is indebted to the Commonwealth in the amount of the liability thereby created. There are policy and pragmatic reasons for this, arising from the first-hand knowledge of a taxpayer of the taxable events in comparison with the Commissioner, who is, necessarily, a stranger to the occurrence of those events.
In relation to a review proceeding in the Tribunal, any casting of a formal onus of proof on a party is truly exceptional. Ordinarily in a review in the Tribunal, and has been repeatedly emphasised by the High Court, neither party carries any formal onus of proof: Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 [2006] HCA 53; (2006) 231 CLR 1, at [40]. Usually, because an administrative decision must be grounded in material reasonably capable of supporting that decision, it will be in the interest of the party contending for a particular outcome to introduce or to point to any such material in a review, but there is no formal onus. In the review of an objection decision by the Tribunal, the position is very different. If an applicant does not engender satisfaction on the part of the Tribunal that the assessment is excessive, the objection decision must be confirmed, because the onus of proof has not been discharged.
The provision for a formal onus of proof does not mean that, in a review in the Tribunal, as opposed to a taxation appeal in this Court, proof on the balance of probabilities in accordance with the rules of evidence is required. It remains the case in relation to a taxation review, as with other review proceedings in the Tribunal, that the use of such terms and related conceptions is inappropriate and “borrowed from the universe of discourse which has civil litigation as its subject”: Minister for Immigration and Ethnic Affairs v Shan Liang (1996) 185 CLR 259, at 282[14]
[13] [2021] FCA 303.
[14] Le v Commissioner of Taxation [2021] FCA 303 [1]-[2], [4]-[6].
The question the Tribunal must answer ‘is whether on the material before it that decision under consideration is the correct…one’.[15] The effect of section 14ZZK is that the applicant has the burden of satisfying the Tribunal that the original decision of the Commissioner is not the appropriate outcome.[16] The material before the Tribunal does not have to comply with the rules of evidence,[17] as the decision should be ‘reached on the best evidence available’.[18] Whilst material/evidence may be admitted, regard may not be paid to it because it is not considered to carry sufficient weight or is unsafe to be relied upon.[19] Whatever facts are considered relevant to the decision are to be established on the balance of probabilities.[20]
[15] Dennis Pearce, Administrative Appeals Tribunal (LexisNexis, 5th ed, 2020), 176.
[16] Ibid 177-8.
[17] Ibid 146; Administrative Appeals Tribunal Act 1975 (Cth), s 33(1)(c).
[18] Dennis Pearce, Administrative Appeals Tribunal (LexisNexis, 5th ed, 2020), 149.
[19] Ibid.
[20] Ibid 179.
In Commissioner of Taxation v Ross,[21] under the heading ‘The relevant legislation and principles on onus’, Derrington J summarised the relevant legal principles to include:
(a)That the effect of section 14ZZK is that ‘the taxpayers bear the burden of proving, on the balance of probabilities, both that the assessment is “excessive” and, also, what the assessment should have been to make the assessment right, or “more nearly right”’.[22]
(b)That the ‘rationale for the onus imposed by section 14ZZK(b)(i) is that the facts relating to a taxpayer’s taxable income are peculiarly within the their knowledge and they must be taken to know what their income is and how it was derived…It follow (sic) that there is no undue harshness in requiring a taxpayer…whose return is not compliant with the taxation legislation, to bear the onus of establishing their true taxable income for the relevant income year’.[23]
(c)That the ‘asset betterment method’ is a legitimate form of assessment ‘even though it necessarily involves an amount of guesswork and, whilst almost certainly inaccurate to some extent, is no part of the Commissioner’s duty to establish what judgement he has formed in making’ the appended assessment.[24]
(d)That a review of an objection decision concerning an assessment under section 167 of the ITAA 1936 does not involve the identification of ‘the facts the Commissioner adopted for the purpose of making the assessment and whether those facts disclose a taxable income’.[25] Rather, the ‘principal fact’ the Commissioner is required to determine in making an assessment under section 167 is “the amount of income upon which…income tax ought to be levied”.[26]
(e)The burden under section 14ZZK in relation to an amended assessment ‘based on the asset betterment method or otherwise’, is not discharged by merely demonstrating that the Commissioner formed a judgement on a wrong basis and the amount assessed far exceeded the taxpayer’s income.[27]
(f)In order to prove that an amended assessment is excessive, a taxpayer must positively provide their ‘actual taxable income’.[28]
(g)That if taxpayers do not satisfactorily explain the source or sources for their unexplained wealth, that is, they were ‘derived from non-income sources’, the onus under section 14ZZK will remain unsatisfied.[29]
[21] [2021] FCA 766 (‘Ross’).
[22] Ibid [46] citing Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63, [88] (Latham CJ) (‘Trautwein’), Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614, [623]-[625] (Brennan J) and [632]-[634] (Toohey J), Gashi v Commissioner of Taxation (2013) 209 FCR 301, [61]-[67] (‘Gashi’).
[23] Ross, [46].
[24] Ibid [48(2)] citing Gashi [55], and George v Federal Commissioner of Taxation (1952) 86 CLR 183, 204 (‘George’).
[25] Ross [48(3)] citing Gashi [55] and George 204.
[26] Ross [48(3)] citing Gashi [56].
[27] Ross [48(4)] citing Gashi [62] and Rigoli v Commissioner of Taxation (2014) 141 ALD 529, [12].
[28] Ross [48(5)].
[29] Ibid [48(6)].
Her Honour concluded the discussion on the authorities with the following paragraph:
The established position remains that a taxpayer’s obligation under s 14ZZK(b)(i) is to show that the Commissioner’s assessment of their taxable income is excessive relative to their actual taxable income. It is not merely to show that his judgement as to taxable income, as identified in the default assessment, is greater than it might otherwise have been because it is based on his limited knowledge of the taxpayer’s affairs. [30]
[30] Ibid [68].
As noted in paragraphs 5 and 8 of these reasons, the Commissioner’s audit and objection decisions were based in Robert’s case on an estimate of gambling losses, and Aniello’s case an estimate of the chips he purchased. In Aniello’s case, the analysis is based upon the gambling chips gambled. As such, the amended assessments were not, strictly speaking, adopting the ‘asset betterment method’ often adopted in audits by the Commissioner. In substance, the methodology has the same underlying logic, an explanation is sought as to the source of an economic activity, here being how the gambling in a casino was funded. In paragraph 20(e) above, Derrington J noted that the authorities equally applied to other methods underlying amended assessments. The Applicants in these cases had the onus of satisfying the Tribunal that their gambling activity was sourced from non-income sources. Non-income in this context could include the after-tax income originally returned.
Material before the Tribunal
After filing witness statements in accordance with a direction of the Tribunal, at hearing, the Applicant’s representative, advised neither Applicant would give evidence. No explanation was provided for this. Evidence was given by the Applicants’ accountant and tax agent, Ms Bueti. Ms Bueti’s report, entitled ‘REPORT – Gambling activity of Mr Robert Cammarano and Aniello Cammarano – Crown Casino – ATO Decision’ was filed and affirmed by Ms Bueti.
Robert, in his filed witness statement, described himself as a ‘regular gambler at the Crown Casino Melbourne and other casinos within Australia and overseas’.[31] He also states that he gambled regularly at Crown ‘and elsewhere without using the [casino membership] card so only those transactions that I specifically used for the card recorded my gambling at the casino and the card does not reflect my total gambling activities’.[32] He goes on to state at some length that the information extracted by the Respondent from his membership card is not an accurate record of his gambling activities. His statement does not detail or explain what his actual gambling activities were and the actual sources of the funds expended.
[31] Statement of Robert Cammarano (undated), 1.
[32] Ibid.
Aniello, in his filed witness statement, states that his membership cards did not record all of his gambling activities including many unidentified winnings.[33] It does state that ‘[t]he record and report from the Casino cannot in any way record or be use (sic) to calculate the gambling activity for the purpose of accurate identification of wins or losses. The only figure [on his membership card] that identifies with accuracy any amounts on the card and hence any report is the buy in’.[34] This was the figure on which the Commissioner based the amended assessment. His statement does not explain what his actual gambling activities were and the actual sources of the funds expended.
[33] Statement of Aniello Cammarano (undated).
[34] Ibid, 1; see also the Statement of Robert Cammarano (undated), 2.
The Applicants’ closing submissions noted the differences in the basis of the Respondents assessments, in that the assessments of Robert were based on net losses whereas the assessments of Aniello were based on buy in amounts. However, the submissions went little further than saying that the use of different approaches was “not an application in fairness, consistency and transparency” and is “a failure to apply the principles of natural justice in its treatment of the Applicants”.[35]
[35] Page 6 of Applicants Closing Submissions.
The Tribunal has considered that the basis of the assessments were different as noted above. It may have been open for Aniello to say that some of the buy ins had been funded from large winnings the previous day. However, there was no evidence of the quantum of winnings that had been used to fund any buy in amounts, in part because Aniello elected not to give evidence. Therefore, the use of buy in amounts compared to net losses has not been considered further. Further, such an analysis would not have meant that Aniello has established what his income actually was.
Ms Bueti, in her report, stated her disagreement ‘with the ATO’s conclusions that the funds used for gambling activities are from ‘undeclared income sources’.[36] Further, she opined that she ‘cannot agree with the ATO findings which I say cannot be substantiated by a proper analysis of gambling activities’.[37] Her particular concerns were that:
‘[the Crown] gambling activity/record can only be used for this purpose in determining points for use in the Casino and not as an accurate record of gambling activity in any accounting 0r (sic) like sense. My findings are consistent with this and I cannot agree in any way with the ATO findings and how they calculate the alleged undeclared income component’.[38]
[36] Report – Gambling activity for Mr Robert Cammarano and Mr Aniello Cammarano – Crown Casino – ATO Decision filed 23 July 2021, 1.
[37] Ibid, 2.
[38] Ibid.
Also tendered to the Tribunal were various reports and correspondence from Crown’s Perth and Melbourne Casinos, and Star City Casino Sydney. In evidence, Ms Bueti said she had sighted the documents in forming her opinion. Their relevance was otherwise unclear.
In cross examination, Ms Bueti advised that she prepared the original returns solely on information provided by the Applicants and had not had any discussions with the Applicants about their gambling activities prior to the notices of assessment being amended.[39] She conceded that in preparing her report she did not understand the Casino documents including acknowledging that she was not an expert in analysing player reports from Crown Casino Melbourne,[40] did not witness any gambling of the Applicants and was entirely reliant upon what the Applicants told her, namely that their gambling was sourced on their gambling winnings and the earnings she returned in their original returns. She conceded that if the brothers were “professional gamblers” it would be appropriate to lodge a business return which included their gambling winnings.[41] Her evidence did not advance the Applicants case on any level.
[39] Transcript of 14 December 2021, page 54 line 7 to 9.
[40] Transcript 58 ln 30
[41] Transcript 63.
Consideration
The standard of proof, which by virtue of section 14ZZK of the TAA the Applicants have the onus, is to be satisfied on the balance of probabilities. The Tribunal has considered that the Applicants declined to give evidence in the proceedings, including being cross examined, and that there is no substantive evidence as to the actual source of the funds engaged in the extensive gambling of both Applicants.
Resultingly, the Tribunal finds the following:
(a)the Applicants’ statements fall well short of establishing their assertion that their income as stated in their original income tax return and gambling winnings was the sole source of funding their gambling;
(b)the Applicants have not established what their actual income was; and
(c)as a consequence the Applicants have not established that the assessments were excessive.
Decision
Pursuant to s 43(1)(a) of the Administrative Appeals Tribunal Act 1975, The Tribunal affirms the decision under review .
I certify that the preceding 33 (thirty-three) paragraphs are a true copy of the reasons for the decision herein of Senior Member K James, Member N Gaudion
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Associate
Dated: 21 November 2022
Date(s) of hearing: 13, 14 December 2021 Date final submissions received: 25 February 2022 Solicitors for the Applicant: David Sinclair Hall Respondent: In person Counsel for the Respondent: Tom Besanko Solicitors for the Respondent: Ingrid Toth
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