Davies and Commissioner of Taxation

[2005] AATA 753

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 753

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No TT2004/9

TAXATION APPEALS  DIVISION		)
Re		THOMAS DAVIES

Applicant

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Miss Mary Imlach (Senior Member)

Date8 August 2005  

PlaceHobart

Decision The decision under review is affirmed.

..............................................

Senior Member  

CATCHWORDS

Taxation - GST - whether assessments of GST tax raised by respondent were excessive - applicant unable to discharge burden of proving assessments were excessive - decision under review affirmed

A New Tax System (Goods and Services Tax) Act 1999

Taxation Administration Act 1953

REASONS FOR DECISION

8 August 2005 Miss Mary Imlach (Senior Member)         

BACKGROUND

1.      Thomas Davies (the applicant) operated various businesses in which he carried out boot and shoe repairs and made retail sales at various locations.  He traded under the name of Caboolture Cobbler for over six months from 1 July 2000 to approximately 25 January 2001.  He then traded under the name Sandgate Cobbler until May 2003.  The applicant was registered for GST from 1 July 2000.

2.      In mid 2003 a GST Field Officer of the respondent’s office visited the applicant for the purpose of seeking lodgement of outstanding Business Activity Statements (BAS).  The field officer used figures and information supplied to him by the applicant to prepare BAS for the period 1 July 2000 to 30June 2003.

3.      The applicant informed the field officer that the figures in the cashbook provided by him had been increased during the period 1 January 2001 to 30 June 2002 for the purpose of procuring loan funds for a car, he used 75% for the business.  The field officer analysed the figures and information supplied by the applicant and reduced the cash book figures for the period 1 January 2001 to 30 June 2002 by 40%.

4.      The field officer determined the sales and expenses during the period 1 June 2000 to 30 June 2003 based on the information provided from the cash book and allowing for the reduction of 40% for the period 1 January 2001 to 30 June 2002.  As a result of the field officer’s determinations, GST net amounts for the quarterly periods commencing from 1 June 2000 to 30 June 2003 were calculated by the respondent and liabilities raised.

5.      The respondent’s office made a processing error and only assessments relating to the tax for the three months ending 30 September 2001, 31 December 2001, 31 March 2002 and 30 June 2002 were issued on 22 October 2003.

6.      The assessments for the tax periods ending 30 September 2000, 31 December 2000, 31 March 2001, 30 June 2001, 30 September 2002, 31 December 2002, 31 March 2003 and 30 June 2003 did not issue until 19 May 2004.

7.      The applicant wrote to the respondent on 21 January 2004 indicating that he had received the statements, that he could not afford to pay the outstanding amounts and that he should not have been assessed to pay GST during the period as he did not make enough money to pay GST.

8.      The respondent wrote to the applicant on 26 February 2004 requesting further evidence from him why the assessments raised were incorrect and requesting him to show the respondent what they should be.

9.      On 11 March 2004 the applicant presented another cash book (Cash Book 2) to the respondent in relation to the period January 2001 to June 2002.

10.     The respondent wrote to the applicant on 16 March 2004 requesting more detailed information concerning the matter.  The respondent wrote to the applicant again on 7 April 2004 advising him that his letters of 21 January 2004 and 11 March 2004 were not considered to be a valid objection.

11.     The applicant wrote to the respondent in a letter dated 24 March 2004 which the respondent received on 28 April 2004, in which the applicant indicated that he wished to object to the assessments, that the figures in Cash Book 2 were the correct figures for the period January 2001 to June 2002, that he did not earn enough money to pay GST in his 2 1/2 years of self-employment and that the income tax returns lodged by him were created using the same figures supplied to his accountant as those supplied to the respondent’s field officer.

ISSUE

12.     The issue before the Tribunal is whether a valid objection has been lodged by the applicant for any quarter from 1 July 2000 to 30 June 2003.

APPLICANT’S CASE

13.     The applicant appeared at the Tribunal self-represented.  He stated that he had been advised by the Tax Office in June 2000 “to play it safe and register for GST”.  He claimed that he knew at the time he registered for GST that “he could not make that kind of money” ie $50,000.00.  He believed that the Government’s criteria was that you only had to pay GST if you earned $50,000.00 or more and that he had informed the respondent of this.

14.     The applicant admitted that he inflated the figures because he had been told to do so by a broker, so that he could obtain a loan to buy a property.  He believed that was the mistake he had made.  He added that he always had someone else do the figures for his business as he hated doing them and he handed his books onto his accountant.

RESPONDENT’S CONTENTIONS

15.     The respondent who was represented at the hearing by Mr Ivica Bolonja contended that in order for an objection to be valid there must be three criteria:

(1)      that there is a right to object

(2)      the objection is lodged within time and

(3)      the objection is in the correct form and content

16.     The respondent claimed that the letters from the applicant to the respondent dated 21 January 2004 and 11 March 2004 were not valid objections but the applicant’s letter of 24 March 2004 did contain sufficient grounds of objection to direct the respondent to the aspects of the assessments that the applicant considered to be incorrect.

17.     The respondent argued that at 24 March 2004 assessments had issued only in respect of the GST tax periods for quarters ended 30 September 2001, 31 December 2001, 31 March 2002 and 30 June 2002 and that a valid objection had been lodged in respect of those periods.  It was contended further that as the assessments in respect of the periods for the quarters 30 September 2000, 31 December 2000, 31 March 2001, 30 June 2001, 30 September 2002, 31 December 2002, 31 March 2003 and 30 June 2003 did not issue until 19 May 2004 there was no valid objection in respect of those periods.

18.     The respondent stated that in relation to the quarters specified in the preceding paragraph there has been no reviewable decision made by the respondent and consequently the issue in relation to those periods is not a matter for the Tribunal to consider.

19.     The respondent contended that the onus of proof is on the applicant to establish that the assessments are excessive.  The respondent did not accept Cash Book 2 as proof that the applicant’s income and expenses differed from the details supplied by him to its field officer and the applicant had supplied no reason to explain why Cash Book 2 was not provided to the field officer at the time of his visit to the applicant.

EVIDENCE

20. The Tribunal took into account the evidence before it which included documents lodged pursuant to Section 37 of the Administrative Appeals TribunalAct 1975 (Documents T1-18), the written and oral submissions of the respondent, the oral submissions of the applicant and copy of adjusted profit and loss statement for the year ended 30 June 2002 prepared for the applicant by his accountant, Bob Hills & Associates, dated 27 January 2005.

FINDINGS OF FACT

21.     Based on the documentary material before it the Tribunal makes the following findings of fact.

A.       At all material times the applicant was a sole trader and was the legal        entity who had the liability for the GST issue which this Tribunal had to decide.

B.       The applicant relied on the fact that the assessments were made solely      on the basis that he had registered for GST and that he had done so because      he had been told to do so by the Australian Taxation Office.

C.       There was no evidence to show that even though the applicant       contended he knew that his business would not have a turnover in    excess of      $50,000.00 he made any effort to withdraw his registration for GST.

D.       The Tribunal noted from the material before the Hearing, that the     Commissioner’s officers had great difficulty in their efforts to obtain      information from the applicant about his GST liability and accepts the      respondent’s contention that the applicant in his letter of 24 March 2004            deliberately did not provide his contact phone number and had left his place of     residence to avoid dealing with this matter.

E.       That due to the disparities between the figures supplied to the field officer and those in Cash Book 2 and the amended 2002 Profit and Loss          Statement that reliance cannot be placed on Cash Book 2 as an accurate   basis for the liability incurred by the applicant in respect of GST during the        relevant period.

THE LEGISLATION AND FINDINGS

22. The legislative provisions that are central to the resolution of this appeal is Section 14ZZK of the Taxation Administration Act 1953. This provision reads as follows:

“On an application for review of a reviewable objection decision:

(a)       the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision related;  and

(b)       the applicant has the burden of proving that:

(i)        if the taxation decision concerned is an assessment (Other than a franking assessment) the assessment is excessive;  or

(ii)       if the taxation decision concerned is a franking assessment – the   assessment is incorrect;  or

(iii)      in any other case – the taxation decision concerned should not have         been made or should have been made differently”

and Section 9-5 of the GST Act which provides that you make a taxable supply if:

(a)       you make the supply for consideration;  and

(b)       the supply is made in the course or furtherance of an enterprise that you carry      on;  and

(c)       the supply is connected with Australia;  and

(d)       you are registered or required to be registered

and the supply is not a taxable supply or input taxed.

23.     The Tribunal is satisfied on the evidence before it that the applicant’s activities satisfy the requirements of a taxable supply and that he was required to pay GST on any taxable supplies he made during the period 1 June 2000 to 30 June 2003.

24.     Further, the Tribunal finds that the applicant elected to be registered for GST from 1 July 2000 and that this election was made although the applicant was aware his turnover would not exceed $50,000.00.

25.     The Tribunal agrees with the respondent’s contention that the onus of proof is on the applicant to show that the assessments were excessive and accepts the decisions cited by the respondent and made by this Tribunal in Way v FC of T [2003] AATA 720, Kdouh v FC of T [2005] AATA 6 and Crane v FC of T [2005] AATA 6, that it is the applicant who must prove by evidence submitted by him that the assessments made by the respondent are excessive.

26.     The only further evidence submitted by the applicant has been Cash Book 2 and the amended 2002 Profit and Loss Statement dated 31 January 2005, neither of which has been accepted by this Tribunal as cogent evidence.

27.     The Tribunal concurs with the respondent in his submission that the evidence provided by the applicant did not satisfy the burden of proof on the applicant to show that the assessments were excessive.

28.     The Respondent referred the Tribunal to the decision of the High Court in FCT v Dalco 90 ATC 4088 in which the Court concluded that ‘excessive’ referred to the amount of the assessment and that it was necessary for the taxpayer to discharge the burden of proving that his taxable income was in truth less than the amount assessed.

29.     In the present matter it was necessary for the applicant to satisfy the Tribunal on the balance of probabilities, that the amount of his GST liability for the quarters covered by the assessments was actually less that that stated in the assessment.

30.     In that regard the applicant did not provide further records other than the unsubstantiated Cash Book 2 supplied to the respondent with the applicant’s letter of 11 March 2004.  Consequently the Tribunal has concluded that the applicant has not discharged the onus of proving that the assessments were excessive and has affirmed the decision under review.

DECISION

31.     The decision under review is affirmed.

I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Miss Mary Imlach (Senior Member)

Signed:  R Hunt (Administrative Assistant)

Date/s of Hearing  31 May 2005
Date of Decision  8 August 2005
Solicitor for the Applicant          Applicant on his own behalf
Solicitor for the Respondent     Mr I Bolonja, Australian Taxation Office