Condon v Commissioner of Taxation
[2023] FCA 561
•2 June 2023
FEDERAL COURT OF AUSTRALIA
Condon v Commissioner of Taxation [2023] FCA 561
File numbers: QUD 42 of 2021
QUD 43 of 2021
QUD 44 of 2021
QUD 45 of 2021Judgment of: DERRINGTON J Date of judgment: 2 June 2023 Catchwords: TAXATION – appeals pursuant to s 14ZZ(1)(a) of the Taxation Administration Act 1953 (Cth) in respect of assessments made under s 167 of the Income Tax Assessment Act 1936 (Cth) – assessments made by the Commissioner applied “asset betterment method” – nature of the onus of proof taxpayer is required to satisfy under s 14ZZO(b)(i) of the Taxation Administration Act 1953 (Cth) – obligation of taxpayer to show what their assessable income was in relevant year – insufficient to attempt to establish that Commissioner’s asset betterment statements were in error – taxpayer unable to establish what his assessable income was in each year of income – appeals dismissed
EVIDENCE – onus of proof – taxpayer’s evidence neither reliable nor credible – taxpayer’s affairs characterised by undocumented, cash transactions in respect of which no records were kept – absence of corroborating or supporting evidence – taxpayer unable to establish necessary facts to prove his actual assessable income on his evidence alone
Legislation: Administrative Appeals Tribunal Act 1975 (Cth)
Income Tax Assessment Act 1936 (Cth)
Income Tax Assessment Act 1997 (Cth)
Taxation Administration Act 1953 (Cth)
Motor Dealers and Chattel Auctioneers Act 2014 (Qld)
Cases cited: Allard v Commissioner of Taxation (1992) 24 ATR 493
Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1
Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214
Bosanac v Commissioner of Taxation (2019) 267 FCR 169
Bosanac v Commissioner of Taxation (2019) 374 ALR 425
Commissioner of Taxation v Cassaniti (2018) 266 FCR 385
Commissioner of Taxation v Clark (2011) 190 FCR 206
Commissioner of Taxation v Ross (2021) 174 ALD 77
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89
Evans v Federal Commissioner of Taxation (1989) 20 ATR 922
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Federal Commissioner of Taxation v Australia and New Zealand Savings Bank Ltd (1994) 181 CLR 466
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614
Federal Commissioner of Taxation v Montgomery (1999) 198 CLR 639
Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310
Gashi v Commissioner of Taxation (2013) 209 FCR 301
George v Federal Commissioner of Taxation (1952) 86 CLR 183
Haritos v Commissioner of Taxation (2015) 233 FCR 315
Jones v Dunkel (1959) 101 CLR 298
Le v Commissioner of Taxation (2021) 390 ALR 132
Ma v Federal Commissioner of Taxation (1992) 37 FCR 225
McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284
Puzey v Commissioner of Taxation (2003) 131 FCR 244
Rigoli v Commissioner of Taxation (2014) 141 ALD 529
Thomas v Commissioner of Taxation (1972) 46 ALJR 397
Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63
Weston v Public Trustee (1986) 4 NSWLR 407
Woods v Deputy Commissioner of Taxation (1999) 43 ATR 491
Woellner and Zetler, ‘Satisfying The Taxpayer’s Burden Of Proof In Challenging A Default Assessment – The Modern Labours Of Sisyphus?’ [2014] 7 Journal of the Australasian Law Teachers Association 11
Division: General Division Registry: Queensland National Practice Area: Taxation Number of paragraphs: 462 Date of hearing: 7-9, 12-14 December 2022, 27 January 2023 Counsel for the Appellant: Ms F Chen Solicitor for the Appellant: Morgan Conley Solicitors Counsel for the Respondent: Mr V Brennan Solicitor for the Respondent: Hall & Wilcox ORDERS
QUD 42 of 2021
QUD 43 of 2021
QUD 44 of 2021
QUD 45 of 2021BETWEEN: CHRISTOPHER GERARD CONDON
Appellant
AND: COMMISSIONER OF TAXATION
Respondent
ORDER MADE BY:
DERRINGTON J
DATE OF ORDER:
2 JUNE 2023
THE COURT ORDERS THAT:
1.In appeal QUD 42 of 2021:
(a)the appeal be dismissed;
(b)the appellant pay the respondent’s costs of the appeal.
2.In appeal QUD 43 of 2021:
(a)the appeal be dismissed;
(b)the appellant pay the respondent’s costs of the appeal.
3.In appeal QUD 44 of 2021:
(a)the appeal be dismissed;
(b)the appellant pay the respondent’s costs of the appeal.
4.In appeal QUD 45 of 2021:
(a)the appeal be dismissed;
(b)the appellant pay the respondent’s costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DERRINGTON J:
INTRODUCTION
In these proceedings, Mr Christopher Condon appeals, pursuant to s 14ZZ(1)(a)(ii) of the Taxation Administration Act 1953 (Cth) (TAA), from four Objection Decisions made by the Commissioner of Taxation (the Commissioner). Those decisions concerned his objections to default and Amended Assessments made pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) (ITAA36) in respect of the income years ended 30 June 2015, 30 June 2016, 30 June 2017 and 30 June 2018 (the Relevant Years). Each of the assessments had been made using the “asset betterment method”.
The Commissioner allowed Mr Condon’s objections in part and determined that alterations ought to be made to reduce his taxable income, as set out in the original assessments. However, the objections were otherwise refused, such that the assessment remained to the effect that he had understated his assessable income in each of the Relevant Years.
In this Court, he contended that the Commissioner’s assessments of his taxable income for each of the Relevant Years was excessive. He submitted that he had proved his actual taxable income for those years and had provided a reasonable explanation for any income or appearance of the possession of assets in those years that had previously been unexplained. He asked the Court to set aside or vary each of the Commissioner’s Objection Decisions.
Conversely, the Commissioner submitted that Mr Condon had failed to furnish sufficient evidence to discharge his onus of proving that the assessment for any of the Relevant Years was excessive or otherwise incorrect, and what the assessments should have been, as required by s 14ZZO of the TAA. The Commissioner sought orders that the appeals against each of the Objection Decisions be dismissed.
For the reasons that follow, Mr Condon has failed to establish what his actual taxable income was for each of the Relevant Years, and that the Commissioner’s assessments were excessive. In very general terms, that conclusion is based on the following matters. First, his challenge to the assessments appears to have been diverted at an early stage of the objection process to focus on the correctness of the Commissioner’s asset betterment statements for each Relevant Year. That focus was forensically inappropriate. While efforts were made to correct that, it meant ultimately that the necessary attention was not devoted to the proper issues on an appeal of this nature, as derived from the text of s 14ZZO of the TAA, such that the evidence adduced in the proceedings fell short of that which was actually required by that section. Secondly, Mr Condon’s financial affairs were characterised by the regular use of cash where possible, the absence of written records of transactions, and even the absence of any correspondence referring to transactions. It followed that, in order to prove his assessable income in each of the Relevant Years, his testimony as to his affairs needed to be accepted. That became impossible once it was concluded that he was neither a reliable nor credible witness. Thirdly, he was unable to establish that expenditure or receipts by him across the Relevant Years in relation to alleged gambling, the buying and selling of motor vehicles, the receipts of so-called reimbursements from his employer, money received from a former partner and her daughter, and foreign currency transactions were not, or were not reflective of, assessable income. Fourthly, none of the Relevant Years was exceptional in any of these respects. When each was considered, the same conclusion as to the sufficiency of the evidence emerged. Fifthly, even if Mr Condon’s credit was put to one side, to a very real degree the evidence that was adduced was overly general, inconsistent and confusing. That also would have prevented any conclusion that he had discharged his onus in respect of each of the Relevant Years.
BACKGROUND
Mr Condon claimed that, over the course of the Relevant Years, he earned $453,481 in net salary and wage income (net of pay-as-you-go withholding tax and superannuation) from his employer, the Townsville Pastoral Agricultural & Industrial Association (the TPAIA).
For each of those years, he lodged an income tax return reporting his primary source of income as being the salary and wages he received. The parties agreed that his income from that organisation was as follows:
Income year
Date lodged
Salary & wages
Interest
Deductions
Tax on taxable income
2015
1 November 2016
$153,932
Nil
Nil
$48,010
2016
1 November 2016
$170,982
Nil
Nil
$55,175
2017
11 September 2019
$163,480
Nil
$3,300
$51,575
2018
25 August 2018
$170,507
$3,887
$185
$54,362
Subject to the addition of capital gains from the sale of certain properties in the United States, the above table represented Mr Condon’s position as to what was his actual taxable income for the Relevant Years.
The Commissioner’s audit and default assessments
On 19 May 2020, the Commissioner assessed Mr Condon for each of the Relevant Years pursuant to s 167 of the ITAA36 and issued default assessments for all four years (the Amended Assessments). For each year, he formed the opinion of evasion, identifying in the income tax returns furnished by Mr Condon an avoidance of tax resulting in a shortfall. In preparing the Amended Assessments, the Commissioner applied the asset betterment methodology to determine Mr Condon’s tax liability.
The details of the Amended Assessments are set out in the following table:
Year ended
Date notice of amended assessment issued
Taxable income assessed (default)
Tax on taxable income
30 June 2015
19 May 2020
$367,955
$139,126.75
30 June 2016
19 May 2020
$599,264
$243,215.80
30 June 2017
19 May 2020
$466,424
$183,122.80
30 June 2018
19 May 2020
$1,877,816
$818,249.20
Mr Condon’s objections
On or around 17 July 2020, Mr Condon lodged objections to the Amended Assessments. On 23 December 2020, the Commissioner issued his Objection Decisions, allowing in part the objections for each of the Relevant Years.
On 25 February 2021, he issued notices of (further) amended assessment to Mr Condon for each of the Relevant Years (the Further Amended Assessments). The details of those Further Amended Assessments can be summarised as follows:
Year ended
Date notice of amended assessment issued
Taxable income assessed (default)
Tax on taxable income
30 June 2015
25 February 2021
$252,810
$87,311.50
30 June 2016
25 February 2021
$584,156
$236,417.20
30 June 2017
25 February 2021
$456,036
$178,448.20
30 June 2018
25 February 2021
$1,545,821
$668,851.45
More specifically, in the Objection Decisions, the Commissioner accepted that Mr Condon’s taxable income was to be reduced by the following amounts, which were referable to identified non-assessable sources:
(a)In respect of the 2015 year:
(i)$4,820 in gambling winnings;
(ii)$9,639.28 in credit card reimbursements from his employer;
(iii)$16.80 in respect of an understatement of the balance of his Citibank account 431167154;
(iv)$24,700 for incorrect “unexplained deposits”; and
(v)$75,978.44 for transfers between Mr Condon’s own accounts;
(b)In respect of the 2016 year:
(i)$4,000 for a transfer between Mr Condon’s own accounts; and
(ii)$11,107.96 in reimbursements from his employer;
(c)In respect of the 2017 year:
(i)$28,792.38 in reimbursements from his employer; and
(d)In respect of the 2018 year:
(i)$23,079 in gambling winnings;
(ii)$150,000 which was withdrawn to purchase US currency;
(iii)$1,898.60 interest on estate funds;
(iv)$1,988.91 interest on estate funds;
(v)$132,416 for distribution to beneficiaries;
(vi)$14,328.77 in reimbursements from his employer;
(vii)$26,000.42 for withdrawals and deposits into Mr Condon’s own accounts; and
(viii)$37,500 which was deposited from Mr Condon’s Sportsbet account.
The Further Amended Assessments decreased Mr Condon’s taxable income, but continued to recognise understatements. Across the Relevant Years, the further amended taxable income and the corresponding understatements were as follows:
(a)for the 2015 income year, taxable income of $252,810, reflecting an alleged understatement of $98,878;
(b)for the 2016 income year, taxable income of $584,156, reflecting an alleged understatement of $413,174;
(c)for the 2017 income year, taxable income of $456,036, reflecting an alleged understatement of $292,556; and
(d)for the 2018 income year, taxable income of $1,545,821, reflecting an alleged understatement of $1,375,314.
On 15 February 2021, Mr Condon filed a notice of appeal in this Court in respect of each of the Objection Decisions.
BACKGROUND FACTS
The appellant
As at the time of trial, Mr Condon was a 59 year old individual taxpayer who lived in Townsville, Queensland. He deposed that he has worked for the TPAIA since mid-2003 and currently held the position of Manager. He has no spouse, children or dependants, which he said is part of the reason for his ability to accumulate substantial wealth. He also claimed to have had no major expenses or liabilities other than credit card balances, his overdraft facility and certain funds that he allegedly held for other people. His ordinary living expenses were said to be modest as he lived at his mother’s house where he was not required to pay rent, and his employer paid for his fuel and phone. His living expenses were limited to food and general discretionary spending on travel and entertainment.
Mr Condon deposed that he has been earning income since he was 15 years old, and he claimed to have accumulated wealth during his lifetime through, variously, his conduct of business enterprises until about 1995, his past work as a stevedore, and his work in several roles at the TPAIA. Throughout his 44 years of working, he claimed to have earned in excess of $2,000,000 in (net) salary and wage income. He deposed that he has had a gross salary in excess of $100,000 per annum from the TPAIA since 2008. He also claimed that he occasionally bet on boxing fights, as well as other sports and politics. He further sought to explain his wealth by reference to a gift of $75,000 from his father to assist him, through his company Bad Boys Enterprises Pty Ltd (Bad Boys), to purchase a property at 66 Ingham Road, West End 4810, in Townsville (66 Ingham Road). He also referred to an alleged gift of USD200,000 received from his close personal friend, Mr Brian Bowen. In addition, he claimed that he had been injured in a motor vehicle accident and, in 2006, received a lump sum payment of $50,000 for those injuries which amounted to $43,625.32 after legal fees. Finally, he said that he had accumulated wealth over time by investing in United States currency, collecting and selling motor vehicles, and buying and selling real property.
Agreed and disputed facts
During the course of these proceedings, Mr Condon and the Commissioner reached agreement on a substantial number of relevant facts. They were also able to identify certain disputed facts. These matters were set out in a joint Statement of Agreed and Disputed Facts dated 18 October 2021. Although the form of that document was somewhat cumbersome, it is necessary, in order to understand precisely what was and was not agreed, to replicate its substance essentially in its entirety, making only minor changes to formatting and corrections to obvious errors. The addendum to these reasons sets out those facts, which include certain drafting irregularities from within the original text of the Statement of Agreed and Disputed Facts. Some additional remarks are made in parentheses.
ISSUES TO BE DETERMINED
In Mr Condon’s written submissions, the issues requiring determination in the four appeals were identified, being whether his taxable income in the Relevant Years was as he had asserted; namely, $153,932, $170,982, $178,584 and $228,034 respectively; and whether in each income year it was less than that assessed by the Commissioner.
RELEVANT LEGISLATION AND LEGAL PRINCIPLES
Section 166 of the ITAA36 concerns assessments made by the Commissioner in the ordinary course. It requires him to assess the taxable income of any taxpayer, and the amount of tax payable thereon. Specifically, it provides:
166 Assessment
From the returns, and from any other information in the Commissioner’s possession, or from any one or more of these sources, the Commissioner must make an assessment of:
(a) the amount of the taxable income (or that there is no taxable income) of any taxpayer; and
(b) the amount of the tax payable thereon (or that no tax is payable); and
(c) the total of the taxpayer’s tax offset refunds (or that the taxpayer can get no such refunds).
By contrast, s 167 of the ITAA36 empowers the Commissioner to make a default assessment in certain circumstances. It provides:
167 Default assessment
If:
(a)any person makes default in finishing 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 judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.
The general legal principles relating to ss 166 and 167, and to the discharge of the onus of proof when an assessment is challenged, were set out in Commissioner of Taxation v Ross (2021) 174 ALD 77 (Ross). In light of the submissions made to this Court, it is necessary and appropriate to repeat much of that discussion.
Section 166 of the ITAA36 requires, unequivocally, an evidence-based calculation of a person’s taxable income, the tax payable thereon, and any tax offset refunds. By contrast, s 167 of the ITAA36 authorises the Commissioner to form a judgment as to the amount on which tax ought to be levied, once one of the matters in sub-paragraphs (a), (b) or (c), on which the power is conditioned, is satisfied. Broadly speaking, the substance of those matters is that, in the circumstances, the Commissioner is unable to make an accurate assessment in accordance with s 166.
If the taxpayer is dissatisfied with an assessment, they may object to it in accordance with Part IVC of the TAA: s 175A ITAA36. If the taxpayer is dissatisfied with the Commissioner’s decision in relation to their objection, they may apply to the Tribunal for review of that decision or appeal against it to this Court: s 14ZZ TAA.
The onus to be satisfied by a taxpayer on an appeal to this Court is identified in s 14ZZO of the TAA in the following terms:
14ZZO Grounds of objection and burden of proof
In proceedings on an appeal under section 14ZZ to a court against an objection decision:
(a)the appellant is, unless the court orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b) the appellant 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 should not have been made or should have been made differently.
The onus of proof
The effect of s 14ZZO(b)(i) is that the taxpayer bears the onus of establishing both that the assessment is “excessive” and, also, what the assessment should have been to make it right, or “more nearly right”: Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 (Trautwein) at 88 per Latham CJ; Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 (Dalco) at 623 – 625 per Brennan J and at 632 – 634 per Toohey J; Gashi v Commissioner of Taxation (2013) 209 FCR 301 (Gashi) at 314 – 315 [61] – [67] per Bennett, Edmonds and Gordon JJ.
Though the overarching principles concerning the onus might be succinctly stated, questions still arise as to its application in the context of a challenge to a default assessment, particularly one founded upon the “asset betterment method”. As observed in Ross at 88 – 90 [48], the authorities establish the following general principles:
(a)An assessment under s 166 is fundamentally different from one under s 167 and, necessarily, the manner in which they each might be challenged is also fundamentally different: Gashi at 314 – 315 [61] – [67]; Rigoli v Commissioner of Taxation (2014) 141 ALD 529 (Rigoli) at 533 [12] per Edmonds, Jessup and McKerracher JJ.
(b)The assessment by the “asset betterment method” is a legitimate form of assessment: Trautwein at 86 – 87, 99 – 100 and 105: even though it necessarily involves an amount of guesswork and, whilst almost certainly inaccurate to some extent, it is no part of the Commissioner’s duty to establish what judgment he has formed in making a s 167 assessment: Gashi at 313 [55]; George v Federal Commissioner of Taxation (1952) 86 CLR 183 (George) at 204 per Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ. Clearly enough, any inaccuracy follows from the circumstances which impel the Commissioner to make a default assessment, being that a process of calculating assessable income less deductions is not possible: Rigoli at 533 [12].
(c)It is not part of a review of an Objection Decision concerning an assessment under s 167 to seek to identify the facts that the Commissioner adopted for the purpose of making it and whether those facts disclose a taxable income: Gashi at 313 [55]; George at 204. The principal fact that the Commissioner is required to determine in making an assessment pursuant to s 167 is “the amount of income upon which … income tax ought to be levied”: Gashi at 313 [56].
(d)It is insufficient to discharge the burden under s 14ZZO(b)(i) in relation to an assessment under s 167, whether based on the asset betterment method or otherwise, merely to demonstrate that the Commissioner formed a judgment about the taxpayer’s taxable income on a wrong basis and that the amount assessed far exceeded the taxpayer’s taxable income: Gashi at 314 [62]; Rigoli at 533 [12].
(e)In order to establish that an assessment under s 167 is excessive, a taxpayer must positively prove their “actual taxable income” and, in doing so, must demonstrate that the amount of tax levied by the assessment exceeds their actual substantive liability: Gashi at 315 [63]; Dalco at 623 – 625; Trautwein at 88; Ma v Federal Commissioner of Taxation (1992) 37 FCR 225 (Ma) at 230 per Burchett J: by, in effect, furnishing a return of actual income which involves establishing both sides of the equation: Bosanac v Commissioner of Taxation (2019) 267 FCR 169 (Bosanac (FC)) at 182 [57] per Greenwood, Burley and Colvin JJ.
(f)In the context of a s 167 assessment based on the asset betterment method, the taxpayer must demonstrate that the identified unexplained accumulated wealth was derived from non-income sources, and that may be achieved by an accepted denial of any undisclosed source of income, a provision of acceptable evidence of how the taxpayer spends their time, and the demonstration of a reasonable explanation for any appearance of the possession of assets: Ma at 230; Gashi at 315 [64] – [65]. The taxpayer must account for the unexplained increase in assets by explaining the source of those assets and identifying that those sources are not taxable. “[I]f the disclosed ‘actual’ taxable income does not explain the increase in assets, then the taxpayer is unlikely to have discharged the burden of establishing the assessment is excessive”: Gashi at 315 [65].
(g)It is insufficient for a taxpayer to prove that an item in the Commissioner’s asset betterment statement was wrong or should not have been included: Gashi at 315 [63] – [67]; Rigoli at 533 [12]: if they do not also satisfactorily explain the source or sources for the other unexplained wealth, in particular by showing that it was derived from non-income sources, then the onus under s 14ZZO(b)(i) will remain unsatisfied: Gashi at 315 [66]. A deficiency in proof of the excessiveness of the assessment results in the challenge failing: Dalco at 624 – 626. Necessarily, this prevents a successful challenge to an assessment being made by a process of “picking and choosing” parts of the increased wealth relied upon by the Commissioner and attacking them as having been improperly included as part of the taxpayer’s taxable income: Gashi at 315 [66]; Rigoli at 537 [25]. A process that involves attacking elements of the Commissioner’s calculation or underlying factual conclusions is insufficient: Rigoli at 537 [25]. The same is true for a default assessment not based on the asset betterment method: Rigoli at 533 [12].
(h)The application of these principles lead to a situation in which a default assessment is assumed to be inaccurate in some respects but nevertheless stands on account of the taxpayer’s failure to establish what their actual taxable income was: Gashi at 318 [77] – [79]; Woellner and Zetler, ‘Satisfying The Taxpayer’s Burden Of Proof In Challenging A Default Assessment – The Modern Labours Of Sisyphus?’ [2014] 7 Journal of the Australasian Law Teachers Association 11.
(i)The ultimate question in Part IVC proceedings relating to an assessment made under s 167 is whether the amount of the assessment is excessive. That places no burden on the Commissioner to show that the assessments were correctly made: Dalco at 623 – 624. The manner in which the taxpayer can discharge the burden may vary with the circumstances of the case: Gashi at 315 [63]; Dalco at 624: but, “absent agreement with the Commissioner to confine the issues for determination in a Pt IVC proceeding, the Commissioner is entitled to rely upon any deficiency in the taxpayer’s proof of the excessiveness of the amount assessed in seeking to uphold the assessment”: Gashi at 314 [61]; see also Dalco at 624.
It is worth reiterating that the rationale for the onus imposed by s 14ZZO(b)(i) is that the facts relating to a taxpayer’s taxable income, including the work that they have undertaken and the transactions that they have entered into, are peculiarly within the taxpayer’s knowledge, and they must be taken to know what their income is and how it was derived: Trautwein at 87. Conversely, the Commissioner has limited knowledge of those circumstances. On that basis, there is no undue harshness in requiring a taxpayer, who has failed to lodge a return or whose return is not compliant with the taxation legislation, to bear the onus of establishing their true taxable income for each relevant income year: Ross at 87 [46].
Ms Chen, Counsel for Mr Condon, asserted that there was no difference between the parties as to the characterisation of the onus borne by a taxpayer when seeking to appeal an Objection Decision in relation to an assessment under s 167. That was a slightly unusual submission, given that, in paragraph 22 of Mr Condon’s written final submissions dated 3 January 2023, it was suggested that all that remained in issue in this case was those amounts that constituted the difference between the amount of the Commissioner’s assessment and the amount of assessable income asserted by Mr Condon, less the amounts that the Commissioner had now conceded. Characterising the issue in this way impliedly suggested that a taxpayer might succeed on an appeal to the extent that she or he could establish that certain discrete amounts included in an assessment were not reflective of assessable income. That suggestion is contrary to the principles set out above, which indicate that either the taxpayer is able to establish what their assessable income is or else the appeal fails. This is sometimes referred to the “all or nothing” approach.
The “all or nothing” approach
Mr Condon’s submission that, in attempting to satisfy the onus, he was not confined by the “all or nothing” approach was based on the Full Court’s decision in Haritos v Commissioner of Taxation (2015) 233 FCR 315 (Haritos). There, the Court held at 392 [235] – [236], albeit observing that it was not necessary to decide the point, as follows:
[235] The third way in which the appellants put their argument that the Tribunal had misused the burden of proof section is related to the second. The appellants submitted that even if Mr Haritos’ evidence was correctly rejected, they had nevertheless established subcontractor expenses of at least a certain amount. The Tribunal was not entitled to adopt what the appellants described as an “all or nothing” approach. If an “at least” figure was established on the evidence, then the Tribunal should have made a finding in accordance with that evidence.
[236] We think that proposition is correct. If a taxpayer claims his or her expenses were $10, but fails to prove that fact because their evidence is rejected, this does not prevent the Tribunal from finding that the expenses were $5 where there is other satisfactory evidence establishing expenses of at least that amount. In our opinion, the burden of proof section does not dictate a different conclusion.
Reliance was also placed on the decision in Le v Commissioner of Taxation (2021) 390 ALR 132 (Le) at 146 [54] in support of the proposition that a taxpayer was entitled to succeed on an appeal under s 14ZZO even if they could only establish that the Commissioner had incorrectly relied upon certain transactions specified in the asset betterment statement, and could not dispel the effect of all of the transactions to which the Commissioner referred. In effect, it was submitted that Mr Condon could “chip away” at the transactions referred to in the asset betterment statement and succeed to the extent that particular items in it were negated. Justice Logan in Le had said, at 146 [54] and 147 [56]:
[54] The observations made by the Full Court in Haritos offer, with respect, elucidation about the operation of the statutory onus of proof in practice. If the material before, and accepted by, the Tribunal shows that the assessment is excessive in a particular amount, it is nothing to the point that an applicant contends that it is excessive to an even greater extent. Section 14ZZK does not have the effect that, because that contention fails, the applicant has not shown the assessment to be excessive or, related to that, that the Tribunal is thereby relieved from concluding, based on the material it has accepted, that the assessment is excessive to the extent revealed by that material.
…
[56] … [If] the applicant introduces evidence, which is accepted and which shows that the assessment is wrong by a particular amount, then that applicant will have discharged the statutory onus of proof.
The Commissioner took issue with Mr Condon’s characterisation of the issues to be determined by this Court. He submitted that the issues to be determined were, in relation to each of the Relevant Years:
(a)whether Mr Condon’s actual taxable income was the amount he contended for; and
(b)only if the answer to (a) is yes, whether that figure is less than the amount assessed by the Commissioner, such that the Commissioner’s amount is therefore excessive.
So the submission went, if Mr Condon failed at the stage of the first enquiry, he would be unable to discharge his onus of proving that the default assessments were excessive. This was said to be supported by Ross at 94 [63] where it was stated that:
What is in issue is whether the taxpayer is able to establish both what their actual taxable income was and that it was less than the Commissioner’s assessment (which gives rise to the conclusion that the latter is excessive).
The Commissioner submitted that, “the better view on the authorities is that it is insufficient for Mr Condon to prove that some items should have been excluded from the assessment as non-taxable income; he must prove that his taxable income is limited to the amount he alleges, which as a matter of practicality, means he must prove that all other amounts are not taxable income”.
Mr Condon’s reliance on Haritos is misplaced
There are several reasons why Mr Condon’s reliance on Haritos is misplaced.
First, the Full Court’s observations in Haritos were obiter. This is pellucid from paragraph [229] of the judgment, where it stated that it was strictly unnecessary to address the question of whether the Tribunal misconstrued the burden of proof in s 14ZZK. It was only in deference to the parties’ detailed submissions that the Full Court considered it appropriate to address the issue, assuming for the sake of argument that it was wrong to hold that the Tribunal’s decision was irrational and illogical.
Secondly, as stated in Ross at 94 [63], the Full Court’s observations in Haritos “should not be accepted in relation to circumstances where the Commissioner has made a default assessment based on the asset betterment method and the taxpayer is faced with having to establish what their actual income is and that it is less than that assessed by the Commissioner”. Earlier (at 92 [57]) it was observed:
Mrs Ross submitted that this latter discussion by the Full Court in Haritos [at paragraphs 235 and 236] had the consequence that, in attempting to discharge the burden imposed by s 14ZZK(b)(i) in relation to an assessment made pursuant to s 167, it was sufficient to identify that elements of the Commissioner’s assessment were incorrect or partially incorrect and, to the extent error is shown, the taxpayer’s taxable income is revealed by the remaining amount. With respect, although the Full Court in Haritos may have intended to overturn the earlier decisions of the Full Court in Gashi, Rigoli and Bosanac (FC) by a side-wind, it is probably unlikely. As the Commissioner submitted, Haritos concerned circumstances where the taxpayers and the Commissioner had reduced the scope of the hearing to a number of particular disputed amounts which, depending upon the manner in which they were resolved, would increase or decrease the amount which the parties had otherwise agreed represented the taxpayers’ taxable income. In other words, the underlying circumstances in relation to the taxpayers’ taxable income were generally agreed with the remaining disputed items to be determined by the Tribunal, with the results of those determinations altering the otherwise accepted amount of taxable income. Haritos was not a case where, before the Tribunal, the taxpayers’ were still required to fully and completely establish the actual amount of their taxable income. Given the context in which the Court was discussing the effect of the taxpayer establishing some portion of its expenses, there is nothing exceptional about its comments at [235] to [236] and no reason to think the Court was departing from the orthodox principles described earlier.
(Emphasis added).
The Commissioner correctly submitted that the present case is distinguishable from Haritos, in that the parties have not agreed on any specific amount that represents Mr Condon’s taxable income subject to the Court’s determination as to the character of certain disputed items. Instead, the Commissioner relied on the Further Amended Assessments. His agreement to certain facts in these proceedings did not displace the taxpayer’s obligation to discharge the statutory onus. As the Commissioner submitted, it would be an unlikely and unsatisfactory outcome if, in any case where the Commissioner agreed to certain facts to assist in the timely and efficient resolution of the issues in dispute, the appellant would thereby be discharged from their burden to prove their actual taxable income, as required by the TAA.
It is worth reiterating the relevant distinction drawn in Ross at 89 – 90 [48(10)]:
There may be cases where the amount of taxable income depends upon the legal complexion of known facts or upon specific factual questions. In such a case, a taxpayer may successfully discharge the onus by establishing that the Commissioner included in their taxable income amounts which ought not to have been included: Dalco at 624. However, such a situation would only arise where the Commissioner agrees to a process which is different to that described above by confining the scope of the dispute between him and the taxpayer to certain enumerated amounts. One might expect some clear expression of that agreement, involving as it does an abandonment of the advantages accorded to the Commissioner in s 167 in respect of defaulting taxpayers.
In the absence of any such agreement in this case, the Commissioner was correct to submit that Mr Condon’s onus required him to identify what was his contended actual taxable income, and to prove that the amount contended for was the full extent of his assessable income. In doing so, he was required to provide acceptable explanations and evidence to the effect that his monetary receipts (other than wages from the TPAIA) and increases in wealth during the Relevant Years were from non-taxable sources. If he was able to do so, and his evidence was accepted, then the onus would be discharged.
Thirdly, Haritos was concerned with the statutory obligations of the AAT when conducting a review pursuant to s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) as modified by s 14ZZJ of the TAA, and the application of the onus of proof set by s 14ZZK. Before this Court, it was submitted that the observations in Haritos applied to an appeal to this Court from a decision of the Commissioner, and the application of the onus set by s 14ZZO. However, there is nothing to suggest any equivalence between the two regimes.
Fourthly, the Full Court in Haritos did not go so far as to say that where the evidence before the Tribunal (as per the circumstances of that case) shows that one or more of the disputed receipts of a taxpayer are not income, the Tribunal must necessarily allow the appeal before it. Rather, it was said at paragraph [235] of the Full Court’s decision that the Tribunal in that case should have made a “finding” as to the so-called “at least” amount. That is possibly correct, given that, in the discharge of its fact-finding function, it may be appropriate for the Tribunal to make findings as to the extent to which the taxpayer has established the amount of their taxable income. That is arguably one part of ascertaining, in accordance with s 14ZZK, whether the taxpayer has established what their taxable income is, and whether the Commissioner’s assessment is excessive. It also may be part of the Tribunal’s statutory obligation to make findings on the material questions of fact. However, it is difficult to see how that translates into an obligation to allow an appeal in this Court, applying s 14ZZO, simply because some error by the Commissioner has been shown.
Finally, as stated in Ross at 95 [67], there is nothing in either Haritos or Le that alters the principles concerning the operation of s 14ZZK(b)(i) (and s 14ZZO(b)(i)) set out above. It is unlikely that those decisions require a different approach now to be adopted. If they did, they would be inconsistent with the established Full Court authorities previously discussed, and should not be followed: see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 151 – 152 [135], 155 [147].
The decision in Le does not assist Mr Condon
The passages in the judgment in Le, on which reliance was placed by Mr Condon, do not assist him. In the first place, notwithstanding the fact that the decision in Haritos seemed to underpin Logan J’s decision in Le, for the reasons expressed above, it is not clear that it can properly be understood as capable of doing so. The Full Court was most clearly concerned with the Tribunal’s obligations to make findings in relation to contested transactions. In any event, it does not appear that the decision in Le has the effect attributed to it by Mr Condon. There, Logan J postulated a situation in which the assessment in question was shown to be “excessive in a particular amount”. In the context of an assessment under s 167 of ITAA36, and the application of the asset betterment method, such a scenario could only realistically arise where the material before the Tribunal had established the amount of the taxpayer’s assessable income and demonstrated that other receipts of money or transactions that may have occurred in the relevant years and that might have suggested a greater level of income were adequately explained. That is clearly different from the situation where the taxpayer has failed to satisfy the Tribunal that all of the receipts, and unexplained expenditures or increases in wealth, were not referable to assessable income, such that the taxpayer had failed to establish what their assessable income was. The point being made by Logan J in Le can, in this way, be understood as a practical one, and not an observation as to the proper application of the onus of proof.
The High Court’s decision in Bosanac v Commissioner of Taxation
Recent support for the “all or nothing” approach can be found in the decision of Nettle J in Bosanac v Commissioner of Taxation (2019) 374 ALR 425 (Bosanac (HC)). That case concerned an application for judicial review of a decision of the Full Court of this Court relating to an assessment by the Commissioner under s 167, in which the asset betterment method had been adopted. In the course of the appeal proceedings, the Commissioner had conceded that the sum of $600,000, which had been received by the taxpayer, was not income. It was submitted that the assessment should be reduced pro tanto. That was rejected by his Honour, who instead held as follows at 434 [24]:
But, as the primary judge held, it did not follow that the plaintiff thereby succeeded in establishing that the taxable income for the 2009 year of income was overstated by that [$600,000] or any other amount. As his Honour reasoned, the plaintiff needed to go further than attack the basis on which the Commissioner had issued the Amended Assessments. He needed to lead evidence constituting “a wide survey and an exact scrutiny of [his business] activities” in order to prove positively what his taxable income was in each year. And since that was something that the plaintiff failed to do, the Commissioner’s concession as to the $250,000 and $350,000 did not avail him. …
(Footnotes omitted).
His Honour proceeded to explain that this conclusion was supported by the observations of Brennan J in Dalco at 621 and the decision of the majority of the High Court in Federal Commissioner of Taxation v Australia and New Zealand Savings Bank Ltd (1994) 181 CLR 466 at 479. In this respect, Nettle J (at 435 – 436 [28]) approved the observations of Full Court in Bosanac (FC) at 182 [57], as follows:
In the case of an assessment under s 167 of the ITAA there is a lump sum assessment of taxable income rather than the computational process under s 166 of the ITAA of considering allowable deductions that may produce the taxable income. So, for example, in the case of an assessment under s 166 it is possible for the taxpayer to accept aspects of the calculations (assuming the Commissioner does not seek to advance a different position on the appeal) and focus upon whether certain deductions should have been allowed. Whereas, in the case where the assessment is made under s 167, the taxpayer will have to demonstrate by evidence both sides of the equation because the assessment involves the exercise of a power to make a lump sum assessment of the taxable income based on the information available to the Commissioner.
His Honour compared the usual approach to be adopted upon a challenge to a s 167 assessment, explained in this way, to those occasions where the Commissioner agreed to a different approach that put only discrete amounts in issue, and accepted that the determination of specific questions of fact or law in relation to those amounts would necessitate an alteration to the taxpayer’s taxable income one way or the other. That, however, is not the case here. Nor was it suggested to be.
Mr Condon must prove what his income was in the Relevant Years
It follows that Mr Condon’s submission to the effect that he might “chip away” at the Commissioner’s assessments must be rejected. In the context of his appeal from the assessments under s 167, it was instead incumbent on him to prove what his income was in the Relevant Years and that his income, so proved, was less than that assessed by the Commissioner. If he failed in this endeavour, the assessments were to stand.
Reliance on Gashi
Both parties made substantial references to the Full Court’s decision in Gashi, which also concerned default assessments pursuant to s 167 of the ITAA36, produced by the use of the asset betterment method. There were several grounds of appeal raised by Mr and Mrs Gashi (the taxpayers), but of particular significance were those relating to the use of the asset betterment method.
Certain aspects of Mr Gashi’s appeal (specifically, ground 4) related to the Commissioner’s ability to make assessments under s 167 of the ITAA36. By ground 4(a), Mr Gashi contended that, when the Commissioner ascertained an amount under that section that was, in his judgment, taxable, he was required to go further, and identify the ordinary and charging provisions of the ITAA36 and the Income Tax Assessment Act 1997 (Cth) (ITAA97) on which he relied. In other words, it was said that the Commissioner’s formation of a judgment under s 167 of the ITAA36, of necessity, involved the formation of a view as to the sources of the income by which the taxpayer’s assets were increased, and the taxable character of those sources: Gashi at 311 [47]. It was further submitted that the trial judge had erred in holding that the movement in the value of assets held by Mr Gashi in the relevant years was ordinary income under s 6-5(1) of the ITAA97: Gashi at 311 – 312 [48].
This submission was rejected by the Full Court, which observed that it proceeded upon a misstatement of the trial judge’s findings. It held that the “trial judge did not make a finding as to the nature of Mr Gashi’s income for each of the relevant years and, in particular, did not hold that the movement in the value of assets held by Mr Gashi in the relevant years was ordinary income within the meaning of s 6-5(1) of the [ITAA97]”: Gashi at 312 [49]. It added that it was not the task of the trial judge to make such findings, but to determine whether the taxpayer had discharged their onus under s 14ZZO of proving that the assessments in issue were excessive.
Mr Gashi’s appeal ground 4(b), that the trial judge should have found that the movement in the value of assets held by him in the relevant years was not ordinary income within the meaning of s 6-5(1) of the ITAA97, was also rejected. The Full Court observed that this ground proceeded upon a misconceived construction of s 167 of the ITAA36, and that an assessment under that section proceeded upon an entirely different footing to one under s 166. First, the Court stated that the asset betterment method, and the resulting assessment, must necessarily be a guess to some extent and would be “almost certainly inaccurate in fact”: Trautwein at 87. Secondly, it was “no part of the duty of the commissioner to establish affirmatively what judgment he formed [under s 167 of the ITAA36], much less the grounds of it, and even less still the truth of the facts affording the grounds”: Gashi at 313 [55], citing George at 204. Thirdly, Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 (Bailey) did not stand for the “proposition that the process of assessment under s 167 of the [ITAA36] requires the Commissioner to adopt a view of the facts and for those facts to disclose a taxable income. Bailey considered s 166 of the Act, not s 167 of the [ITAA36]”: Gashi at 313 [56]. Fourthly, the process of assessment under s 166 of the ITAA36 had “no resemblance or analogy to the process of assessment under s 167 of the [ITAA36]”: Gashi at 313 [56]; Bailey at 218 per Barwick CJ.
Of greater relevance to the issues in the present case were appeal grounds 6(a) – (b), concerning the principles applicable to the discharge of the burden under s 14ZZO of the TAA. Mr Gashi contended that the trial judge had erred in holding that he had failed to show that the assessments for the relevant years were excessive by demonstrating that the asset betterment statement was wrong. He claimed that he had established that the opening net asset position should have been greater, and that the Commissioner had conceded that certain amounts should not have been included: Gashi at 313 – 314 [59]. He, therefore, claimed that he had proved that the amount assessed as his taxable income in fact exceeded his taxable income, such that he had discharged the burden of showing that the assessments were excessive.
On this issue, the Full Court made the following observations at 314 [61], which should firmly be borne in mind by taxpayers in Part IVC proceedings, and which are apt in the present circumstances:
In seeking to establish in Pt IVC proceedings that an assessment issued under s 167 is excessive, the ultimate question was and remains whether the amount of each assessment was excessive: Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 623. Section 14ZZO of the TAA places the burden of proving each assessment is excessive on the taxpayer: Dalco at 623 citing George at 189. The TAA does not place any onus on the Commissioner to show that the assessments were correctly made: Dalco at 624 citing Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89. Indeed, absent agreement with the Commissioner to confine the issues for determination in a Pt IVC proceeding, the Commissioner is entitled to rely upon any deficiency in the taxpayer’s proof of the excessiveness of the amount assessed in seeking to uphold the assessment: Dalco at 624.
(Emphasis added).
The Court then addressed the question: “What must a taxpayer do to discharge the onus of proving that a s 167 assessment is excessive?”. In answer, it made the following pertinent observations, which, in the circumstances of the present matter, should be repeated in full:
[63] A taxpayer who seeks to establish that a s 167 assessment based on the asset betterment method of calculation is excessive must positively prove his or her “actual taxable income” and, in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer: Dalco at 623-625 and Trautwein at 88. The taxpayer must show that the unexplained accumulated wealth was from non-income sources. The manner in which a taxpayer discharges that burden is not defined or specified — it varies with the circumstances: Dalco at 624.
[64] So, for example, in Ma v Federal Commissioner of Taxation (1992) 37 FCR 225 at 230, Burchett J said that, in seeking to establish that an assessment under s 167 was excessive, that burden may be discharged:
… [I]f a taxpayer denies any undisclosed source of income, provides acceptable evidence of how he spends his time, and demonstrates a reasonable explanation for any appearance of the possession of assets, he will generally discharge his burden of proof unless some positive reason is shown why he is to be disbelieved.
[65] Justice Burchett identified a number of steps — identification of sources of income, explanation of a taxpayer’s activities and an explanation of the source or sources of a taxpayer’s assets. The steps identified by Burchett J are not surprising. In addressing a s 167 assessment based upon an asset betterment statement, a taxpayer must account for an unexplained increase in assets. The taxpayer must explain the source or sources of those assets and then identify whether that source, or those sources, are taxable. Put another way, if the disclosed “actual” taxable income does not explain the increase in assets, then the taxpayer is unlikely to have discharged the burden of establishing the assessment is excessive. And, of course, that unexplained increase in assets cannot be viewed in isolation — it must also take into account the expenditure during that period.
[66] Consistent with that view, even if a taxpayer was able to prove that an item in the Asset Betterment Statement was wrong or should not have been included, but did not adequately explain the source or sources for the otherwise unexplained increase in wealth, the taxpayer would not discharge the onus under s 14ZZO of the TAA.
The Court concluded that Mr Gashi’s appeal grounds were misconceived. Even if he had been able to prove an error in the asset betterment statement, that, of itself, would not have been sufficient to discharge the onus that he bore. He was required to demonstrate that the unexplained accumulated wealth in each of the relevant years was from non-income sources. However, he had not attempted to show the sources of funds from which he acquired assets in each of the relevant years. It followed that he had failed to discharge the onus under s 14ZZO: Gashi at 315 [67]. As the following discussion reveals, on many occasions Mr Condon’s evidence similarly did not attempt to explain the source of funds used by him to acquire assets.
The standard of proof
The standard of proof that the taxpayer must meet is the civil standard, being the balance of probabilities: McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284 (McCormack v Federal Commissioner of Taxation) at 301 per Gibbs J. However, there is no stipulation as to how the standard can be met. That will no doubt vary with the circumstances of each case.
A taxpayer is not required to prove matters by reference to contemporaneous primary documentation: cf Commissioner of Taxation v Clark (2011) 190 FCR 206 at 225 [64] – [66] per Edmonds and Gordon JJ. Nor are they required to adduce every piece of evidence available in relation to each issue: Commissioner of Taxation v Cassaniti (2018) 266 FCR 385 (Cassaniti) at 409 [88] per Steward J (with whom Greenwood and Logan JJ agreed). In Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 at 10 – 11, Hunt J (as his Honour then was) considered that:
… it is not obligatory for a taxpayer, before he can discharge his burden of proof, to call all the material witnesses and to produce all the material documents which support his evidence … It is certainly wiser for the taxpayer to do so in most cases so as to ensure that his own evidence is accepted, but even where he does not do so the tribunal of fact may nevertheless be sufficiently impressed with the taxpayer as a witness that his evidence is accepted without such corroboration or without the whole of such corroboration.
Although a decision-maker will, in the evaluation of the evidence, be cautious of a taxpayer’s self-serving statements, they are not “prima facie unacceptable”: McCormack v Federal Commissioner of Taxation at 302: and the arbiter of fact is entitled to accept them where the taxpayer is regarded as truthful. Moreover, the taxpayer is not required to corroborate each piece of evidence that is adduced before it can be accepted: Cassaniti at 409 [88].
Mathematical precision is not required in order to prove on the balance of probabilities what the correct assessment should have been. The Court is entitled to decide the appeal by reference to estimates upon inexact evidence: Allard v Commissioner of Taxation (1992) 24 ATR 493 at 499 per Hill J. This approach was adopted by Burchett J in Ma at 233 in relation to an assessment based on the asset betterment method. His Honour said:
Furthermore, the making of estimates upon inexact evidence, which is so much a feature of both judicial and administrative decision-making, cannot be uniquely excluded from appeals against betterment assessments. To refuse to consider the credit, not only of the applicant, but also of his independent and unchallenged witnesses, simply because the effect of the evidence was to support his accountant’s generalisations about double-counting rather than to hit upon a precise figure, was to fall into an error of law.
In Haritos, it was accepted that this passage supported the proposition that “in performing its review function, the Tribunal may be required to make an estimate upon inexact evidence, and it cannot avoid its responsibility to make findings by relying on the burden of proof section”: at 392 [234].
If the appellant can, by any means, demonstrate his actual taxable income and show the assessments are excessive, he is entitled to seek relief: Ma at 232.
The practical process of establishing assessable income in a relevant year
Without derogating from or diminishing in any way the taxpayer’s onus under s 14ZZO to prove what his income was in a particular year, it may be that in a particular case the process of making an objection to the Commissioner and the subsequent processes of this Court (or perhaps the Tribunal) have the effect of partly refining the issues that require attention.
In cases where an assessment has been made pursuant to s 167, and the asset betterment method has been used, the asset betterment statement prepared by the Commissioner can be an appropriate starting point for refinement of the issues, though it would be wrong to think that it operates in any way as any formal articulation of them. Instead, the statement can be used as a means by which to identify events that the Commissioner has considered to be transactions, whether they be receipts, payments, or other acquisitions of wealth, that bespeak the taxpayer having received a greater amount of assessable income than has been reflected in their returns. It should not, however, be regarded as being in any way final or conclusive. It may be that, as the objection process continues, additional sources of income or unexplained wealth emerge, on which the Commissioner might rely in any appeal. Nevertheless, the statement represents some foundation for understanding why the Commissioner assessed the taxpayer’s income as he did.
Whilst the onus remains firmly on the taxpayer, in the crystallisation of the issues for an appeal, the taxpayer may rely on the Commissioner’s Objection Decision or Appeal Statement for the purpose of identifying transactions that have been accepted as not contributing to their assessable income. That may occur, for instance (and as in this case) where the Commissioner has indicated that the receipt of an amount of money did not reflect assessable income. Indeed, here, the Commissioner issued the Amended Assessments and Further Amended Assessments to reflect his conclusions on those matters. Where that occurs, the taxpayer is relieved of the necessity of negativing the inference, otherwise available, that the relevant amounts were taxable income, to paraphrase Nettle J in Bosanac (HC) at 436 [29].
CONSIDERATION
Has Mr Condon discharged the onus?
Mr Condon asked the Court to uphold his appeals against the Commissioner’s four Objection Decisions. He submitted that he had discharged the applicable onus on the basis that he had:
(a)proved his taxable income;
(b)proved that he did not have any other sources of assessable income;
(c)provided a reasonable explanation for any appearance of the possession of assets;
(d)been able to explain previously-unexplained deposits and withdrawals as non-assessable income; and
(e)proved that his capital receipts and the non-assessable income that he received during each of the Relevant Years exceeded the increase in wealth across that period.
In summary, it was submitted on his behalf that he had provided a reasonable explanation for any appearance of the possession of assets because he has:
(a)worked for many years and accumulated significant assets over his working life;
(b)maintained stable employment since he was 15 years old and has earned over $2,000,000 in salary and wage income in the last 20 years (including gross salary in excess of $100,000 per annum since 2008); and
(c)deposed to his net asset base exceeding $1.2 million prior to the 2015 to 2018 income years, those assets having been amassed from his salary and other non-assessable sources.
More specifically, it was submitted that his net asset position as at 1 July 2014, immediately after the conclusion of the income year ending 30 June 2014 (the Base Year), was around $1,230,810.20 (in one part of the evidence, the total was said to be $1,227,240.50) and included the following assets that were not included in the Commissioner’s asset betterment statement:
(a)Unit 1020, 9000 Las Vegas Boulevard, Las Vegas, Nevada, USA — valued at approximately USD49,900 (AUD52,504.78);
(b)Unit 1277, 9000 Las Vegas Boulevard, Las Vegas, Nevada, USA — valued at approximately USD50,000 (AUD52,610);
(c)USD denominated cash — totalling approximately USD630,000 (AUD666,036);
(d)motor vehicles — valued at a total of approximately AUD364,000;
(e)shares in Bad Boys — valued at approximately AUD80,000 (or, one some occasions, AUD400,000); and
(f)money held in Bank of America account 64549000002167775449 — totalling approximately USD16,035.23 (AUD15,239.72).
In broad terms, the Commissioner submitted that Mr Condon had failed to establish what his “actual taxable income” was and, accordingly, he had failed to discharge his onus of proving that the default assessments were excessive under s 14ZZO(b) of the TAA. The consequence, so it was said, is that the challenge to the Objection Decisions must fail and the Further Amended Assessments must stand. In particular, it was submitted that the evidence revealed that Mr Condon had received other income during the Relevant Years, which he had not proved was non-taxable, either because there was no evidence corroborating his assertions to the contrary, or because the evidence that he offered was unreliable and ought to be rejected.
Mr Condon’s evidence was advanced at a high level of generality
Despite the numerous affidavits filed by Mr Condon, the substance of much of his evidence was put forward at an elevated level of abstraction. His position appeared to be that, as he had worked all of his life, he had accumulated a substantial amount of money. He claimed to have kept a large amount (in US currency) buried at his mother’s house, and also claimed to have had a somewhat indeterminate amount of cash stored in a safe at his place of work. From time to time, he would use some of that cash to meet his living expenses. The problem with this evidence was that it lacked transactional specificity.
For whatever reason, Mr Condon did not, in the terms used by Nettle J in Bosanac, lead evidence amounting to a “wide survey and exact scrutiny of [his business] activities”, nor did he demonstrate by evidence “both sides of the equation” which would reveal his taxable income. Instead, he made constant but invariably very general references to his employment income and savings, whilst being unable to provide specifics as to how his income and assets were actually used in each of the Relevant Years. Although it might be accepted that his accumulated savings enabled him to acquire a property (through his private company, Bad Boys) and two units in Las Vegas, the source of the funds used to make other acquisitions was less clear. One significant obstacle for Mr Condon was his propensity to engage in undocumented cash transactions, not to maintain records, and to use bank accounts only when he considered it necessary.
As the previous discussion concerning the manner in which a taxpayer may discharge his onus in cases such as this shows, even general evidence of a person’s financial dealings may be sufficient for the taxpayer to succeed in an appeal of an Objection Decision. There is also no inherent issue with taxpayers engaging in undocumented cash transactions, even where those transactions concern substantial amounts. However, in the context of the present appeals, the efficacy and acceptability of Mr Condon’s chosen mode of evidence as to his claimed financial dealings must ultimately depend predominantly upon his reliability as a witness, given the apparent lack of corroborating records. It is necessary to turn, then, to that issue.
Mr Condon’s credit
Mr Condon’s credit is central to the result in these appeals. However, try as one might to take him as a person whose testimony can readily be accepted, for the reasons that follow, it is not possible to do so. As his evidence emerged in the course of these proceedings, it became clear that he could not be regarded as honest, or as having any respect for the law or for appropriate behaviour. In the latter respect, for instance, he gave evidence that he has maintained a motor dealer licence since around 2012, but he denied that he carried on any business that involved dealing in motor vehicles. He effectively asserted that he held the licence in order to enable him to use dealer plates for the purposes of driving unregistered cars, and to buy vehicles for his family and friends without the need to obtain roadworthy certificates. It is said that he acquired such vehicles for his former partner, Ms Clancy, and her daughters from time to time. Although licence holders are obliged under s 74 of the Motor Dealers and Chattel Auctioneers Act 2014 (Qld) to deliver certain written statements to people to whom they sold vehicles, Mr Condon did not do so. It seems that the only reason for his non-compliance was that, quite simply, he did not regard himself as carrying on any business dealing in motor vehicles.
Mr Condon was also prepared to assist people he knew in hiding assets from their partners in the course of divorce proceedings. He seemingly admitted to transferring the registration of a car owned by a Mr Mendes into his name because Mr Mendes was concerned that his wife might seek to include it in the matrimonial assets in a divorce. He was also prepared to store $200,000 in the safe at his workplace, the Townsville Showgrounds, for the brother of his friend, Mr O’Connor, who was engaged in divorce proceedings. Although the precise motivation for this occurrence was not admitted by either Mr O’Connor or Mr Condon, the storing of the money in the safe can naturally be inferred to have been for the purposes of concealment in circumstances where the money was secreted away, and not mentioned until after the divorce proceedings had been completed. Mr Condon’s participation in the concealing of assets of a party to ongoing divorce proceedings was, on any view, reprehensible conduct and designed to interfere with the law’s due administration.
Although the manner in which Mr Condon performed his duties as the Manager of the TPAIA was not directly in issue, it is extremely difficult not to reach the conclusion that he was prepared to take liberties with that office for his own benefit. For instance, on his own evidence, he utilised the safe at the Showgrounds for the purpose of maintaining his personal finances, including by storing a significant amount of cash there. The safe was also used to keep funds for his friends and others. He used the TPAIA office staff for his own purposes, including having them receive money from Ms Clancy and her daughter, Jazmin, on his behalf. He used a large shed at the Showgrounds for the storage of his several motor vehicles, and those of other people. He asserted that his use of these facilities was subject to an agreement for which he provided consideration by permitting the TPAIA to use a backhoe that he owned when required. Although there was no evidence as to the occasions on which the TPAIA required the use of the backhoe, which had allegedly been gifted to Mr Condon, on its face the agreement appeared to significantly favour Mr Condon. Evidence was also given that Mr Condon and his friends would drive their cars on the Showground facilities, although the entitlement to do so was not established. Overall, it is apparent that he regarded the Showgrounds and the facilities there as being available to him to use as he pleased, without regard to the obligations that he owed as manager for his employer. Although this situation may have arisen consequent upon his personality, and a lack of attention given by those in charge of the TPAIA, it is otherwise generally evident that he tended to put his own interests above any duties that he relevantly owed.
It is undeniable that, in the giving of his evidence, he was often confident and self-assured. That extended to those circumstances when, after being confronted with evidence contrary to his testimony, he gave new testimony directly contradicting that which he had just given. Whilst it may be that the direct and confident manner in which a witness responds to cross-examination bespeaks forthrightness, in relation to Mr Condon no such conclusion can be drawn. Rather, his apparent confidence is an aspect of his somewhat domineering personality, which, it is apparent, he exerted over those around him. This was evident in the manner in which he attempted to speak over his interlocutor during cross-examination, some examples of which are at ts.173 lines 1-25; ts.188 lines 17-24; ts.234 lines 16-47; ts.236 line 20 – ts.237 line 27; ts.277 lines 10-45; ts.320 line 1-45; ts.371 lines 16-31. As these instances reveal, he had a tendency to attempt to direct the discussion toward those matters that he perceived assisted his case.
He is also an astute person, and was acutely aware of the issues in contention in the litigation. When giving his evidence, he deliberately sought to advance his position in relation to those issues whenever the opportunity arose, and he did this by volunteering self-serving answers rather than responding to the questions asked of him. This can be seen at the following transcript references: ts. 73 line 37 – ts.74 line 3; ts.160 lines 26-34; ts. 211 lines 9-35; ts.211 line 46 – ts.212 line 24; ts. 230 lines 24-35; ts. 237 line 18-25; ts.266 lines 36-45; ts. 275 lines 31-45; ts.374 lines 1-33; ts.379 lines 7-24. His tendency to promote self-serving answers was particularly acute in relation to the USD500,000 that he claimed to have buried in his mother’s front yard for a number of years. That alone is not to say that his evidence should therefore not be believed on all matters, but it is necessary to observe that, where he could, he slanted his evidence in a manner favourable to his case. It was also apparent that he would often attempt to anticipate the question being posed to him and try to answer it in a manner that supported his case before the question was fully put.
The Commissioner’s submission that Mr Condon was an evasive witness should be accepted. His awareness of the importance of particular issues in the case resulted in him attempting to avoid making concessions where doing so was obviously appropriate. The following transcript references evidence some examples of this: ts.76 lines 1-24; ts.141 lines 24-43; ts.153 line 21 – ts.156 line 11; ts.208 lines 18-28; ts.211 lines 15-31; ts.236 line 20 – ts.237 line 28; ts.274 lines 41 – ts.275 lines 42. It is also a matter worthy of comment that he did not appear to be in any way concerned that he had sworn affidavits that were shown to be untrue, or that evidence that he had given was shown to be incorrect. There were many examples of each of these occurrences. It is not unfair to observe that he was not particularly careful to make truthful statements under oath.
As mentioned already, a significant difficulty for Mr Condon in this matter is that he habitually entered into undocumented transactions involving payments that were made in cash. Indeed, he conducted his affairs on a cash basis, and asserted that he did not trust or like banks and did not believe in leaving money in them. Rather, his evidence was that, variously, he kept large amounts of cash in the safe at his work premises at the Showgrounds, under a bed at his friend’s house in the United States, and buried in the unfenced front yard of his mother’s home. Whilst the veracity of these matters is questionable, the point to be made is that, in the absence of agreements, contracts or other transactional documentation or records, proof of the occurrence of the various transactions on which Mr Condon relied was dependent upon acceptance of his evidence alone. The absence of documentation from which he could refresh his memory resulted in him often giving evidence of what he wanted to believe the transaction was or, perhaps, what he guessed it might have been. Neither version was credible. This extended to proof of the manner in which he dealt with the cash that he claimed he kept in the safe. There, the problem was exacerbated because, while he claimed he kept cash on behalf of other persons and for himself, he did not maintain any record of how the cash was used.
A further hindrance to acceptance of his evidence was that transactions that he sought to rely upon as justifying his receipt of money were explained in extremely vague and uncertain terms. He was only able to assert their broad character, and this tended to undermine the veracity of his evidence about them. Even then, he was often imprecise in the language that he used when describing the legal relations between third parties and himself. For instance, he asserted that he was holding money belonging to Mr O’Connor whilst asserting that his liability was, in fact, that of a debtor. On the evidence he gave, and allowing for the fact that he did not have legal qualifications, the arrangements that he put in place with those around him were both ambiguous and legally dubious. This extended to the ownership of the several vehicles that he purchased or acquired in and prior to the Relevant Years. His evidence as to the ownership of the vehicles that Ms Clancy drove, in particular, was nebulous and changed dramatically from time to time.
It is, therefore, unsurprising that there were many occasions on which Mr Condon claimed that he was unable to recall the nature of particular transactions. The absence of any document initiating them, or recording them or their performance, effectively denied him the opportunity to refresh his memory about them. He was thus often in the position of being unable to recall the purpose of, or reason for, many financial dealings. Even on those occasions when he was able to recall a transaction in issue, the absence of any documentary context resulted in his evidence being of a very general nature and, indeed, often caused him to proffer evidence that turned out to be incorrect. A particular instance was his inability to recall his dealings in relation to $200,000 cash, which was allegedly given to him in a shoebox by or on behalf of Mr O’Connor for storage in the safe. Similarly, he was vague about his acquisition and sale of the units in Las Vegas, and whether he had a further USD125,000 in addition to the USD500,000 that he claimed he buried in his mother’s front yard. Whilst, from time to time, he acknowledged his inability to recall certain matters, his lack of recollection was not uniform and, occasionally, he claimed to have a good memory of other events that had occurred prior to or at around the same time as the events which he said that he was unable to recall. Mr Brennan, for the Commissioner, identified in his written submissions that Mr Condon was able to specifically recall the constituent parts making up the sum of $5,000 deposited into his account on a particular day, the constituent elements of a deposit of $20,790 made in December 2014, and the price paid for a lawnmower, but was unable to remember more recent and objectively more significant matters.
It is not unfair to observe that, when faced with obvious errors in his affidavits or his previous testimony, Mr Condon would regularly resort to a claim of lack of recollection. On other occasions, he was prone to dissembling. This was particularly evident in relation to his evidence surrounding a particular bank cheque that he claimed he gave to Ms Clancy.
Similarly, some of his explanations for his conduct, or that of others, was difficult to accept. For instance, he asserted that he was content to pay interest on a line of credit, despite simultaneously asserting that he had sufficient funds in his safe to substantially pay down the indebtedness; that he had entered into an arrangement whereby he accepted Mr Mendes’ $50,000 Mustang as collateral for a loan of $20,000, as a result of which Mr Mendes forfeited the car; that he borrowed $20,000 of Mr O’Connor’s money, which was being kept in his safe, rather than using an equivalent amount of his own money that was stored in the same safe; that he hid a USD550,000 bank cheque behind a picture at a friend’s house in the USA; and that he hid a significant amount of cash under a bed at the same house.
Likewise, his assertion that he was unable to prove certain matters due to the conduct of the Australian Federal Police, which had raided and searched his premises and taken away some of his documents in 2020 or thereabouts, was somewhat disingenuous. It appears that the AFP had returned certain of the documents in early to mid-2022, and some were used for the purposes of his final affidavit. Even if, as Mr Condon claimed, some had not been returned, no explanation was given as to why his solicitors had not required their production.
It is also unsurprising that Mr Condon’s evidence lacked consistency. He made six separate affidavits for the purposes of these proceedings, and in the later ones he sought to “correct” errors in the earlier ones. Unfortunately, very little explanation was given as to why the earlier affidavits, which purported to truthfully explain his dealings and financial circumstances, were in error and needed correction. A good example of this is the document behind Tab 2 to the annexure to Mr Condon’s affidavit of 11 June 2021 in which he purported to set out his assets and liabilities as at 30 June 2014. In the circumstances, one might expect that some care would have been taken in the compilation of that document, which was central to a number of important issues. However, as the cross-examination of Mr Condon in relation to the document revealed, it was seriously flawed in numerous respects.
Further, Mr Condon’s evidence in cross-examination often conflicted with his sworn evidence in his affidavits, though he was especially reluctant to acknowledge that dissonance. See for example ts.253 line 42 – ts.254 line 21 in relation to the preparation of schedules; ts.119 lines 1-26 in relation to the ownership of a Nissan Patrol motor vehicle; ts.189 line 1 – ts.190 line 26 in relation to a loan that Mr Condon had claimed that he had made; ts.193 lines 1-6 in relation to identified payments allegedly made to him and banked on the same day; ts.225 line 1 – ts.226 line 18 in relation to the making of payments into an account; ts.262 line 42 – ts.265 line 15 in relation to USD86,500 allegedly held in one of his Bank of America accounts.
Further, in his submissions in reply, he accepted that the evidence as it emerged indicated that, as at 30 June 2014, he “held” or owned more motor vehicles than he had listed in his asset statement. Whilst this was advanced as a positive by Ms Chen, in that it showed his asset position prior to the Relevant Years to be better than had been assumed by the Commissioner, given the extent of the discrepancy, it generally undermined the accuracy of anything that Mr Condon had said either in his affidavits or in the course of his oral evidence.
I certify that the preceding four hundred and sixty-two (462) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington. Associate:
Dated: 2 June 2023
“ADDENDUM”
Net assets as at the start of the Relevant Years
Commissioner’s position
It was agreed that the Commissioner prepared an asset betterment statement that provided that Mr Condon’s net asset position as at 1 July 2014 was -$5,797.62.
Bank accounts
It was agreed that, during the Relevant Years, Mr Condon had the following bank accounts:
(a)Australia and New Zealand Banking Group 4564 6801 1420 7912 (ANZ 7912);
(b)Australia and New Zealand Banking Group 4564 6801 1520 5022 (ANZ 5022);
(c)Bendigo Bank 161321914 (BEN 1914);
(d)Bank of Queensland 21009681 (BOQ 9681);
(e)Bank of Queensland 22691242 (which was purportedly maintained in respect of the Estate of Brian Bowen, though a different account number for the Estate account was also agreed, as set out below) (BOQ 1242);
(f)Bank of Queensland 21678201 (BOQ 8201);
(g)Commonwealth Bank 269230293226 (which was denominated in USD) (CBA FX 3226);
(h)Commonwealth Bank 482300245162 (CBA 5162);
(i)Citibank 4724 3735 2063 1431 (Citi 1431);
(j)Citibank 431167154 (Citi 7154);
(k)CIT 9032561235 DBCP (which was denominated in USD) (Citi 1235 DBCP);
(l)CIT 9032561235 DBUT (which was denominated in USD) (Citi 1235 DBUT);
(m)National Australia Bank 4530 3070 0101 9124 (NAB 9124);
(n)Westpac Banking Corporation 4564 7270 0109 6641 (WBC 6641);
(o)Westpac Banking Corporation 4564 7270 0791 7477 (WBC 7477); and
(p)Westpac Banking Corporation 4564 7270 1040 9868 (WBC 9868).
It was also agreed that, during the Relevant Years, Mr Condon held the following accounts that were not included in the Commissioner’s asset betterment statement (all of which were denominated in USD):
(a)Bank of Queensland USD-678201 (BOQ USD 8201);
(b)Bank of America 0021 6777 5449 (BOA 5449);
(c)Bank of America 3250 9991 4992 (BOA 4992); and
(d)Bank of America 6455 0000 3250 8552 6831 (BOA 6831).
It was agreed that the Commissioner’s asset betterment statement included an incorrect balance as at 30 June 2014 in Mr Condon’s Citi 7154 account of $1,983.20, and that the actual balance of Mr Condon’s Citi 7154 account as at 30 June 2014 was $2,000.
Real property
It was agreed that:
(a)on 22 March 2011, Mr Condon purchased unit 1020, 9000 Las Vegas Boulevard, Las Vegas, Nevada (Unit 1020) for USD49,900; and
(b)on 1 April 2011, Mr Condon purchased unit 1277, 9000 Las Vegas Boulevard, Las Vegas, Nevada (Unit 1277) for USD50,000.
It was further agreed that, as at 1 July 2014, Mr Condon held Unit 1020 and Unit 1277, and that there were no liabilities in relation to his real property.
Motor vehicles
It was disputed that, as at 1 July 2014, Mr Condon held 17 motor vehicles with a combined estimated value of $364,000.
It was also disputed that, on 21 December 2015, he purchased from Manheim Pty Ltd a “G Truck” for $11,989.78 and a “Tipper Truck” for $5,750.32. (In the course of the hearing, it seemed to be accepted that Mr Condon had acquired the Tipper Truck for $5,750.20.)
It was disputed that there were no liabilities in relation to his motor vehicles.
Shares — Bad Boys
It was agreed that, during the Relevant Years, Mr Condon was the sole shareholder in the company, Bad Boys, holding ten ordinary shares.
It was agreed that Bad Boys owned the property at 66 Ingham Road, which, as at 26 October 2009, was valued by the Bank of Queensland at AUD $400,000.
It was disputed that there was a $320,000 overdraft drawn against 66 Ingham Road.
Cash
It was agreed that, in 2013, Mr Condon transferred USD130,000 to his BOA 5449 account.
It was otherwise disputed that:
(a)in or around August 2009, Mr Brian Bowen gave Mr Condon USD200,000 in cash as a gift;
(b)on 30 October 2009, Mr Condon drew down $300,000 on his BOQ overdraft facility (that is, his BOQ 9681 account);
(c)on 30 October 2009, Mr Condon cashed the bank cheque for $300,000 from his BOQ overdraft facility at American Express, Westpac for USD300,000;
(d)Mr Condon held USD500,000 as at 30 June 2014, which he buried in the front yard of his mother’s house at 9 Urara Street (where he lives);
(e)the USD500,000 that Mr Condon held in the 2017 income year is not taxable income.
Liabilities
It was agreed that there were no liabilities in relation to Mr Condon’s motor vehicles (notwithstanding that this fact was also disputed, as set out above), real property, shares, and cash. However, it was agreed that there were liabilities in relation to Mr Condon’s bank accounts, as included in the Commissioner’s asset betterment statement.
It was also agreed that, as at 30 June 2018, Mr Condon held $133,034.34 for the benefit of the beneficiaries of Brian Bowen’s Estate.
It was disputed that Mr Condon owed the following amounts:
(a)$60,000 to the O’Connor family; and
(b)$30,000 to Ms Jazmin Clancy.
Year ended 30 June 2015
Salary
It was disputed that Mr Condon’s taxable income for the year ended 30 June 2015 was $153,932 and was made up solely of salary and wage income from TPAIA.
Gambling
It was agreed that Mr Condon engaged in gambling throughout the 2015 income year, and that:
(a)on 9 November 2014, he won $3,500 on a boxing match bet;
(b)on 24 January 2015, he deposited $1,000 into his Sportsbet account from his WBC 7477 account;
(c)on 25 January 2015, he withdrew $1,000 from his Sportsbet account, which was deposited on 27 January 2015 into his WBC 7477 account;
(d)on 30 January 2015, he deposited from his WBC 7477 account:
(i)$300 into his BetEasy account to bet on the election (Mr Condon bet on Campbell Newman to win Ashgrove seat); and
(ii)$2,000 into his William Hill account to bet on the seat of Hinchinbrook;
(e)on 2 February 2015, he withdrew $630 from his BetEasy account, and these funds arrived in his WBC 7477 account on 3 February 2015;
(f)on 4 February 2015, he withdrew $3,320 from his William Hill account, and these funds arrived in his WBC 7477 account on the same day;
(g)on 26 May 2015, he made two $3,000 deposits from his WBC 7477 account to his BetEasy account;
(h)on 2 June 2015, he withdrew $3,000 from his BetEasy account, and this arrived in his WBC 7477 account on the same day; and
(i)on 7 June 2015, he deposited $2,500 into his BetEasy account from his WBC 7477 account.
Funds held on behalf of Rowena Clancy
It was agreed that, from around 2010 to 2011 and throughout the Relevant Years, Ms Rowena Clancy (who was Mr Condon’s partner from 2009 to around 2015) resided at 66 Ingham Road, the residence owned by Bad Boys. It was also agreed that Ms Clancy made regular cash deposits into Mr Condon’s safe and bank accounts.
It was disputed that the nature of the funds received from Ms Clancy was not taxable income. The following related matters were also disputed:
(a)Mr Condon returned the funds to Ms Clancy when requested (often when she wanted to purchase something she had saved for);
(b)by February 2015, he held at least $50,000 of Ms Clancy’s funds for her, and around this time she requested that they be returned; and
(c)on 9 February 2015, he arranged a bank cheque for $50,000 to be drawn from his BOQ 9681 account (cheque #1775334) in favour of Ms Clancy, and he gave this to her but she did not present it until 14 August 2015.
Motor vehicles
It was agreed that, in the 2015 income year, Mr Condon sold a 1968 Corvette (VIN 194678S409123) to Mr Phillip Thompson who paid him consideration of $40,000 (in several ad hoc instalments over 2 years) and a boat.
Washington Mendes
It was agreed that, in the 2015 income year, Mr Washington Mendes did some work for the TPAIA, which he invoiced through NQ General Business Supply Pty Ltd (NQ General Business Supply).
It was disputed that NQ General Business Supply invoiced the TPAIA $15,790.50. It was also disputed that this amount was paid in cash by Mr Condon, who was reimbursed by the TPAIA by a cheque of $15,790.50, and that on 9 February 2015 Mr Condon deposited the cheque for $15,790.50 and another $5,000 into his BOQ 9681 account.
Reimbursements
It was agreed that, on 9 September 2015, the TPAIA resolved at a meeting for Mr Condon to use his credit card to incur TPAIA expenses and that he would be reimbursed through MYOB and online banking.
It was also agreed that, during the 2015 financial year, Mr Condon received payments totalling $23,907.26 to his WBC 7477 account from his employer, the TPAIA, as reimbursements for expenses he incurred on behalf of the TPAIA.
Foreign currency transactions
It was agreed that:
(a)Mr Condon contended that there were a number of foreign currency transactions that were transactions of his own money and not assessable income; and
(b)the Commissioner included them as “unexplained deposits”, which increased Mr Condon’s asset position in the asset betterment methodology.
It was also agreed that, throughout the 2015 financial year, Mr Condon transferred a total of AUD $75,968.44 (that is, USD63,327.70) to his BOA 5449 account via five payments from his CBA 5162 account and one payment from his BOQ 9681 account.
Year ended 30 June 2016
Salary
It was disputed that Mr Condon’s taxable income for the year ended 30 June 2016 was $170,982 and was made up solely of salary and wage income from TPAIA.
Purchase of USD from the TPAIA
It was agreed that, in or around October 2015, Mr Condon agreed to purchase USD186,500 (cash) from the TPAIA for AUD $242,000. Mr Condon paid for the USD in four instalments, which was then deposited into a Westpac bank account (ending in 0570) in the name of TPAIA, as follows:
(a)$113,051.75 on 14 October 2015;
(b)$64,926.65 on 5 January 2016;
(c)$19,477.99 on 12 January 2016; and
(d)$45,448.65 on 12 January 2016.
Motor vehicles
It was agreed (notwithstanding that these facts were also disputed, as set out above) that, on 21 December 2015, Mr Condon purchased a G Truck for $11,989.78 and a Tipper Truck for $5,750.20.
However, it was disputed that:
(a)on 28 July 2015, $3,300 was deposited into Mr Condon’s WBC 9868 account from Mr Thompson for the sale of the Corvette mentioned above;
(b)on 21 December 2015, $14,000 was deposited into his CBA 5162 account as payment for a Volkswagen which Mr Condon sold to Mr Wayne Smithers for $14,000;
(c)on 11 January 2016, Mr Condon received $15,000 from Queensland REO (Mr Mendes’ company) to his CBA 5162 account. It was claimed that this money was transferred to Mr Condon to buy a new motor from the US for Mr Mendes for the Mustang he had sold to him. The motor was said to have been purchased on or around 21 April 2016 for $16,071.40 using Mr Condon’s Westpac credit card ending in 7477; and
(d)on 7 March 2016, Mr Condon sold his Nissan Patrol to TSV Wholesale Cars for $15,950.
Funds held on behalf of Tony O’Connor and Peter O’Connor
It was disputed that, in or about 2013, Mr Condon held $200,000 in cash for the O’Connor family in a large safe. It was also disputed that, on 15 March 2016, Mr Condon deposited $140,000 of cash he was holding in his safe on Mr O’Connor’s behalf (the Statement of Agreed and Disputed Facts not specifying whether it was Tony O’Connor’s or Peter O’Connor’s behalf) into his BOQ 9681 account and arranged for a bank cheque to be drawn for that amount from his BOQ 9681 account in favour of Ross Lawyers’ trust account.
Funds held on behalf of Rowena Clancy
It was disputed that, during the 2016 financial year, Rowena Clancy deposited a total of $5,400 into Mr Condon’s BOQ 8201 account. It was also disputed that Mr Condon held this money for Ms Clancy so she would not spend it.
Reimbursements
It was agreed that, during the 2016 financial year, Mr Condon received payments totalling $11,042.60 into his WBC 7477 account from the TPAIA as reimbursement of expenses that he paid on behalf of the TPAIA. However, the Commissioner disputed one alleged reimbursement on 28 July 2015 in the amount of $353.79.
Foreign currency transactions (AUSTRAC)
It was agreed that Mr Condon contended that there were a number of foreign currency transactions that were transactions of his own money and not assessable income. It was also agreed that the Commissioner had included them as “unexplained deposits” or “unexplained drawings”, which increased Mr Condon’s tax liability applying the asset position in the asset betterment methodology.
It was also agreed, in respect of the 2016 income year, that:
(a)the amount of $205,305 was identified in “AUSTRAC” searches for the 2016 year, and these were “outbound payments”, being cash that Mr Condon took to the United States of America on flights, which he declared;
(b)the amounts identified were:
(i)USD90,000 (AUD $127,677.68) on 10 November 2015; and
(ii)USD55,000 (AUD $77,617.84) on 2 February 2016;
(c)the source of the USD was part of the USD186,500 Mr Condon bought from the TPAIA in October 2015;
(d)on 10 November 2015, Mr Condon deposited USD50,000 of the USD90,000 into his BOA 5449 account; and
(e)on 3 February 2016, Mr Condon deposited USD55,000 into his BOA 5449 account.
Year ended 30 June 2017
Salary
It was disputed that Mr Condon’s taxable income for the year ended 30 June 2016 was $163,480 and was made up solely of salary and wage income from TPAIA.
It was agreed that Mr Condon was under the mistaken belief that, having paid tax in the United States, he did not have to pay tax in Australia, that Mr Condon now accepts that his taxable income should have included the capital gain he made on the sale of Unit 1277 in Las Vegas, and that this was disclosed in the objection lodged on or around 17 July 2020, which appears to have been accepted by the Commissioner in his objection decision dated 23 December 2020.
Unit 1277
It was agreed that, on 3 August 2016, Mr Condon sold Unit 1277 for USD85,000. It was also agreed that:
(a)Mr Condon received USD64,878.34 after paying 15% foreign owner’s tax to the IRS;
(b)he is liable to pay capital gains tax in Australia for the gain made on the sale of Unit 1277;
(c)the amount of capital gain to be included in his taxable income in the 2017 income year for the sale of unit 1277 is AUD $18,404.17; and
(d)he is entitled to a foreign income tax offset in respect of that capital gain of AUD $8,493.21.
Payments to the ATO
It was agreed that Mr Condon made payments to the ATO:
(a)on 9 February 2017, described as ATO PAYMENT SYDNEY AU 74564457040108036741872 for $900; and
(b)on 9 February 2017, described as ATO PAYMENT SYDNEY AU 74564457040108036741880 for $1,062.70.
Reimbursements
It was agreed that, during the 2017 financial year, Mr Condon received payments totalling $35,066.23 from the TPAIA as reimbursement of expenses he incurred on behalf of the TPAIA. However, the Commissioner disputed one alleged reimbursement on 7 July 2016 in the amount of $1,105.75.
Motor vehicles
It was agreed that:
(a)in August 2016, Mr Condon sold his Monster Truck to Kevin Brooks (who goes by “Terry”) for $50,000, and Mr Brooks paid him $20,000 in August 2016 (and then a further $30,000 in August 2017);
(b)on 7 September 2016, Mr Condon deposited $8,800 of cash from the sale of the Corvette sold to Mr Phillip Thompson into his WBC 9868 account; and
(c)on 28 October 2016, the appellant sold his Tipper Truck to Maheim Auctions for $5,950, and this amount was deposited into his CBA 5162 account.
It was disputed that, on 23 November 2016, Mr Condon received $4,000 from Mr Phillip Thompson into his WBC 9868 account for the sale of the Corvette.
Buried USD cash and foreign currency transactions
It was disputed that, in or around early September 2016, Mr Condon dug up cash buried in the front yard of his mother’s house and that, when he dug it up, he discovered that some of the cash was damaged. It was also disputed that, on 9 January 2017, Mr Condon deposited USD50,000 cash into his BOA 6831 account which was not in the nature of taxable income, and that the balance of his BOA 6831 account as at 11 January 2017 was USD550,017.27.
It was agreed that:
(a)on 7 September 2016, Mr Condon travelled to the United States with USD156,000;
(b)on 19 September 2016, he deposited USD147,600 and USD3,600 of this cash into his BOA 5449 account;
(c)on 3 October 2016, he sent an email to the Mutilated Currency Division of the Department of Treasury in the United States regarding damaged cash, and requested that approximately $30,000 (USD) of damaged notes be replaced/reimbursed;
(d)on or around 9 November 2016, he received a cheque from United States Treasury for USD20,100 for damaged notes (the cheque notes the payment was $9,900 short);
(e)on 16 November 2016, he travelled to the United States with USD335,500;
(f)on 16 November 2016, he deposited this cash into his BOA 5449 account;
(g)he contends he dug up $500,000 of buried USD cash and that the total undamaged cash was USD470,000 and USD30,000 cash was damaged;
(h)the United States Treasury replaced $20,100 of the damaged cash; and
(i)on 13 December 2016, he travelled to the United States and on that day he attended a BOA branch (in Los Angeles) and arranged for USD500,000 to be transferred from his BOA 5449 account to his BOA 6831 account.
Funds held on behalf of Rowena and Jazmin Clancy
It was disputed that, during the 2017 financial year, Rowena Clancy deposited a total of $8,102 into Mr Condon’s BOQ 8201 account so that she could save this money, and that Rowena made 38 regular payments into this account in the 2017 financial year.
It was also disputed that, during the 2017 financial year, Rowena’s daughter, Jazmin, deposited a total of $2,760 into Mr Condon’s BOQ 8201 account so that she could save this money, and that Jazmin made 22 regular payments into this account in the 2017 financial year.
Gambling
It is disputed that, on or around 3 February 2017, Mr Condon travelled to Adelaide to watch the Anthony Mundine v Danny Green boxing match at Adelaide Oval and won $14,000 on the fight, which he deposited into his WBC 9868 account on 6 February 2017.
Foreign currency transactions (AUSTRAC)
It was agreed that Mr Condon contended that there were a number of foreign currency transactions that were transactions of his own money and not assessable income.
It was also agreed that the amount of $205,305 was identified in “AUSTRAC” searches for the 2017 year, and that these were “outbound payments”, being cash that Mr Condon took to the United States of America on flights which he declared of USD156,000 on 7 September 2016.
Finally, it was agreed that Mr Condon deposited USD147,600 and USD3,600 into his BOA 5449 account, and that the difference was the amount he spent.
Year ended 30 June 2018
Salary
It was disputed that Mr Condon’s taxable income for the year ended 30 June 2018 was $170,507.
It was agreed that Mr Condon was under the mistaken belief that, having paid tax in the United States, he did not have to pay tax in Australia. It was also agreed that he now accepts that his taxable income should have included the capital gain he made on the sale of Unit 1020 in Las Vegas, and that this was disclosed in the objection lodged on or around 17 July 2020, which appears to have been accepted by the Commissioner in his objection decision dated 23 December 2020.
Unit 1020
It was agreed that:
(a)on 26 October 2017, Mr Condon sold Unit 1020 for USD135,000;
(b)he received USD123,799.92 after paying 15% foreign owner’s tax to the IRS in the US;
(c)on 30 October 2017, USD123,799.92 was deposited into his BOA 4992 account;
(d)the amount of capital gain to be included in his taxable income in the 2018 income year for the sale of unit 1020 is AUD $55,217; and
(e)he is entitled to a foreign income tax offset in respect of that capital gain of AUD $13,139.11.
Reimbursements
It was agreed that, during the 2018 financial year, Mr Condon received payments totalling $22,058.46 from the TPAIA as reimbursement of expenses he incurred on behalf of the TPAIA.
Motor vehicles
It was agreed that, on 11 July 2017, Mr Condon sold his G Truck to Manheim Fowles for $12,232.
It was also agreed that, in August 2017, he received a $30,000 payment from Terry Brooks for the sale of the Monster Truck, and that he deposited these funds in four tranches into his BOQ 9681 account, as follows:
(a)$5,000 on 15 August 2017;
(b)$10,000 on 17 October 2017;
(c)$8,000 on 18 October 2017; and
(d)$7,000 on 19 October 2017.
Loans to Terry Brooks
It was agreed that Terry Brooks is a close friend of Mr Condon and on occasion Mr Condon would lend him money. It was also agreed that Mr Brooks would pay Mr Condon back, sometimes straight away and other times it took him longer.
It was agreed that the loan payments to and from Terry Brooks identified by Mr Condon were not taxable income.
Foreign currency transactions
It was agreed that:
(a)Mr Condon contended that there was a number of foreign currency transactions that were transactions of his own money and not assessable income, and that the Commissioner had included them as “unexplained deposits”, which increased his asset position in the asset betterment methodology, in particular:
(i)on 13 October 2017, in the CBA FX 3226 account an “unexplained deposit” of USD550,000 converted to AUD $702,211.21;
(ii)on or around 16 January 2018, in the Citi 1235 account an “unexplained deposit” of $116,685; and
(iii)an amount of USD817,770.35 in his Citi 1235 account was described as “US FX transaction” converted to AUD $1,052,807.05;
(b)on 7 August 2017, Mr Condon withdrew USD550,000 from his BOA 6831 account by way of bank cheque;
(c)Mr Condon intended to close this bank account, but he later changed his mind, and didn’t bank the bank cheque until his next visit to the United States;
(d)on 21 September 2017, he flew back to the United States and on 22 September 2017, he deposited the bank cheque of USD550,000 plus an additional USD5,000 in cash into a new BOA 4992 account;
(e)on 1 October 2017, he opened a Commonwealth Bank USD foreign currency account being CBA FX 3226 account;
(f)on 11 October 2017, he transferred the USD550,000 that was held in his BOA 4992 account to his CBA FX 3226 account;
(g)on 27 November 2017, he transferred a further USD155,014.66 from his BOA 4992 account to his CBA FX 3226 account and, after the payment of transfer fees, the amount receipted in the CBA FX 3226 account was USD154,986.70;
(h)on 30 November 2017, he withdrew the balance of his CBA FX 3226 account (which was USD706,098.52) and deposited this into his Citi 1235 DBCP account;
(i)on 5 December 2017, the funds in his Citi 1235 DBCP account were converted into a term deposit his Citi 1235 DBUT account (within the same account with the reference “DBUT”);
(j)on 9 January 2018, he withdrew AUD $150,000 from his CBA 5162 account to purchase USD116,685 from World First, which he paid by electronic funds transfer from his CBA 5162 account;
(k)on 16 January 2018, he deposited the USD116,685 purchased from World First into his Citi 1235 account;
(l)as at 31 January 2018, his Citi 1235 account had a balance of:
(i)USD707,105.89 on term deposit; and
(ii)USD110,664.46 (overnight multi-currency);
(m)on 14 February 2018, the USD110,664.46 in his Citibank overnight multi-currency component of his account went onto term deposit (within the same account) so that the balance of the term deposit became USD817,770.35;
(n)on or around 6 March 2018, he transferred USD817,770.35 from his Citi 1235 account into his BOQ USD 8201 account; and
(o)on or about 7 March 2018, the USD817,770.35 cleared in his BOQ USD 8201 account where it remained for the rest of the financial year.
It was disputed that the additional USD5,000 in cash that Mr Condon deposited into a new BOA 4992 account was not taxable income
Funds held on behalf of Rowena and Jazmin Clancy
It was disputed that, during the 2018 financial year, Rowena Clancy deposited a total of $21,000 into Mr Condon’s BOQ 8201 account, so that she could save this money. It was also disputed that Rowena made 21 regular payments into this account in the 2018 financial year.
It was disputed that, during the 2018 financial year, Jazmin Clancy deposited a total of $12,740 into Mr Condon’s BOQ 8201 account so that she could save this money, and that Jazmin made 54 regular payments into this account in the 2018 financial year. It was also disputed that Mr Condon still held approximately $30,000 of Jazmin’s savings.
It was agreed that Mr Condon has been unable to pay any funds to Jazmin Clancy since his bank accounts became the subject of Garnishee Notices by the Commissioner.
Gambling
It was disputed that:
(a)on 27 August 2017, Mr Condon placed a $5,000 bet on a Floyd Mayweather fight and won $9,000;
(b)on 10 December 2017, he won $22,500 profit by betting on a fight; and
(c)on 19 June 2018, he placed $9,900 on a boxing match at Garbutt Tab Corp in cash and won $17,820, which he collected in cash on 10 June 2018.
It was agreed that, on 10 December 2017, Mr Condon deposited $15,000 into his Sportsbet account from his CBA 5162 account and $5,000 into his William Hill account from his CBA 5162 account. It was also agreed that, on 11 December 2017, he deposited a further $4,000 into his William Hill account from his CBA 5162 account.
It was agreed that, in December 2017, Mr Condon withdrew his William Hill balance of $17,400 in two instalments to:
(a)$15,300 on 15 December 2017 into his CBA 5162 account; and
(b)$2,100 on 18 December 2017 into his ANZ 5022 account.
It was also agreed that, on 18 December 2017, he withdrew his Sportsbet balance of $37,500, which was deposited into his CBA 5162 account.
Estate of Brian Bowen
It was agreed that:
(a)Mr Condon contended that a number of transactions were not assessable income as they related to funds he held in his capacity as executor of Brian Bowen’s Estate (the Estate);
(b)Brian Bowen passed away on 20 August 2012;
(c)Mr Condon was the named executor in Brian Bowen’s last will and testament;
(d)on or around 6 April 2013, Mr Condon opened a BOQ 9915 account called Christopher Condon as Executor for the Estate of the Late Brian Bowen;
(e)on or around 30 April 2013, $360,148.51 of estate funds previously held by Giudes & Elliott Solicitors was deposited into the BOQ 9915 account;
(f)pursuant to the last will of Brian Bowen, Mr Condon was required to hold the residuary estate on trust for the six named beneficiaries until they each attained 25 years of age;
(g)between 6 April 2013 and the first beneficiary attaining 25 years of age, the estate funds in the BOQ 9915 account grew to $391,487.58, and the increase of funds is attributable to interest earned in the account;
(h)on or around 14 July 2017, the first of the six beneficiaries attained 25 years Mr Condon transferred the beneficiary their share of the residuary estate which was $65,257.93;
(i)on 19 October 2017, the BOQ 9915 account was closed and the balance of $327,500.36 was withdrawn;
(j)on 23 October 2017, Mr Condon set up a new account with the Bendigo Bank being BEN 1914 account and transferred the Estate’s monies ($327,500.36) that were held in the BOQ 9915 account into the BEN 1914 account;
(k)in January 2018, interest of $1,898.60 was credited to the BEN 1914 account;
(l)the interest earned on the BEN 1914 account is not income of Mr Condon’s;
(m)on or around 23 January 2018, Mr Condon transferred the Estate monies from the BEN 1914 account into his CBA 5162 account temporarily before reopening a new account being BOQ 1242 account;
(n)on 15, 16, 17 and 19 February 2018, he transferred the funds from his CBA 5162 account to the BOQ 1242 account;
(o)on 22 February 2018, two beneficiaries came of age and he arranged for their share of $132,416 ($66,208 each) to be transferred to them;
(p)the balance Estate funds remained in the BOQ 1242 account until October 2019;
(q)as at 14 May 2018, the closing balance of the BOQ 1242 account was $198,144.75;
(r)on or around 15 August 2018, another beneficiary attained 25 years of age and he transferred them their share of the residuary estate which was $65,495.11;
(s)the Estate funds remained in the BOQ 1242 account accruing interest until the account was closed on 30 October 2019;
(t)all funds and interest earned in the BOQ 1242 account is not income of Mr Condon’s as all the funds belonged to the Estate;
(u)on 30 October 2019, Mr Condon withdrew the balance estate funds ($132,782.64) from the BOQ 1242 account;
(v)on 5 November 2019, the balance Estate funds ($132,782.640 were deposited into a Bendigo Bank account with account number 169892361 (BEN 2361);
(w)on 19 May 2020, the Commissioner issued a garnishee notice to Bendigo Bank in relation to all accounts held by Mr Condon;
(x)sometime between 19 May 2020 and 19 June 2020, the Commissioner withdrew the balance of monies ($133,034.34) from the BEN 2361 account; and
(y)by letter dated 10 July 2020, the Commissioner:
(i)acknowledged that the funds transferred to him from the BEN 2361 account pursuant to the garnishee notice were funds that Mr Condon was not beneficially entitled to; and
(ii)advised Mr Condon that a refund of monies obtained from the Bendigo Bank account via garnishee notice has been issued and a cheque for $133,034.34 had been mailed to him on 8 July 2020.
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