Holman and Commissioner of Taxation (Taxation) - [2020] AATA 1375

Holman and Commissioner of Taxation (Taxation) [2020] AATA 1375 (20 May 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2019/3060
Re:Andrew Holman
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION
Tribunal:Member D K Grigg
Date:20 May 2020
Place:Brisbane

The Tribunal affirms the decision under review.
................................[SGD]..................................
Member D K Grigg
CATCHWORDS
TAX – whether amended income tax assessment issued by the Australian Tax Office following a private ruling was excessive – whether the applicant conducted a business in partnership with his wife – indicia to be considered in determining whether a business is operated as a partnership for income tax purposes - decision under review affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Income Tax Assessment Act 1936 (Cth)
Income tax Assessment Act 1997 (Cth)
Partnership Act 1891 (Qld)
Taxation Administration Act 1953 (Cth)
CASES
Imperial Bottleshops Pty Ltd and William John King Egerton v Commissioner of Taxation [1991] FCA 276
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 Ald 634
SECONDARY MATERIALS
Taxation Ruling TR 94/8 Income Tax: Whether Business Is Carried on In Partnership (Including ‘Husband and Wife’ Partnerships)
REASONS FOR DECISION
Member D K Grigg
20 May 2020
BACKGROUND

In 2011 Mrs Lorraine Holman, the Applicant’s then wife, registered an Australian Business Number and business name for a clothing retail business under the name “Sansisterz Boutique” (“the Business”).[1] Mrs Holman also registered the Business for Goods & Services Tax.[2]
[1] Exhibit 1, T Documents, T21, pages 134-145, Historical Business Name Extract dated 9 April 2020; Exhibit 1, T Documents T1, page 15, Certificate of Registration of Business Name dated 18 May 2009.
[2] Exhibit 1, T Documents, T20, page 142, ABN Historical Details dated 8 April 2020.
On 9 October 2012 Mr Holman wrote to the Australian Taxation Office (“ATO”) requesting a private ruling as to whether his wife’s retail outlet business was being operated in a partnership with himself. Mr Holman told the ATO that:[3]
(a)the Business was purchased in 2011 but was not making any money;
(b)he paid for the Business and helped out on weekends;
(c)there was no formal partnership agreement;
(d)the partnership was the subject of an oral agreement between himself and his wife; and
(e)he and his wife had agreed on a split of profits and losses of the Business on an 80/20 basis.
[3] Exhibit 1, T Documents, T3, page 26, Letter to the ATO dated 9 October 2012.
Mr Holman lodged his income tax return (“ITR”) for the 2012 income year on 12 October 2012.[4] In his ITR Mr Holman claimed to be entitled to deduct 80% of the loss of the Business, totalling $50,543, as a partnership loss. The Business had made a loss of $63,549.00 in the 2012 financial year.
[4] Exhibit 1, T Documents, T4, paged 27-52, Applicant’s income tax return for the 2012 income year dated 12 October 2012.
On 15 November 2020 the ATO advised that it needed more information in order to make a private ruling on the status of the Business as a partnership.[5] The ATO noted that:
(a)Mr Holman had quoted the Business’ ABN in his ITR but the ABN was registered in his wife’s name only;
(b)there was no record of any partnership tax file number jointly for Mr Holman and his wife and that, normally, where a business is conducted through a partnership, it would expect that a partnership income tax return would be lodged showing the distribution of income or loss;
(c)the business activity statement (“BAS”) for the Business was lodged on his wife’s ABN; and
(d)the information currently available did not indicate the existence of a partnership.
[5] Exhibit 1, T Documents, T5, page 53, Letter from the Commissioner requesting further information dated 15 November 2012.
On 21 November 2012 Mr Holman provided the following additional information to the ATO:[6]
·the rental agreement for the Business was in the name of Sansisterz Boutique;
·the Business had a bank account which both he and his wife were able to operate;
·public liability insurance was in the Business’ name;
·the Business’ name “Sansisterz Boutique” was registered in his wife’s name;
·the Business incurred a loss in the 2012 income tax year of $63,549 of which $50,543 represented 80%;
·the Business was originally registered as a sole trader;
·the Business was subject to a “verbal agreement when purchased”;
·business insurance was issued in both Mr Holman’s and Ms Holman’s name.
[6] Exhibit 1, T Documents, T6, pages 54-58, Bundle of documents provided by the Applicant dated 21 November 2012.
On 26 November 2012 the ATO issued a notice of assessment for the year ended 30 June 2012, based on Mr Holman’s ITR, which provided that Mr Holman’s taxable income was $0.00 and that he had taxable credits of $29,883.[7]
[7] Exhibit 1, T Documents, T7, pages 59-60, Notice of assessment of income tax for the 2012 income year dated 26 November 2012.
Subsequent to the notice of assessment being issued, the ATO then advised Mr Holman that it had ruled that a partnership did not exist for income tax purposes between Mr Holman and his wife for the year ended 30 June 2012.[8] The ATO explained that:
[8] Exhibit 1, T Documents, T8, pages 61-72, Letter from the Commissioner notifying of the private ruling and enclosing the reasons for decision dated 4 December 2012.
(a)a “partnership” for income tax purposes is defined in subsection 995-1 of the Income tax Assessment Act 1997 as:
(a) an association of persons (other than a company or a * limited partnership) carrying on business as partners or in receipt of * ordinary income or * statutory income jointly; or
(b) a limited partnership
(b)pursuant to Taxation Ruling TR 94/8 Income tax: whether business is carried on in partnership (including ‘husband and wife’ partnerships) (“Taxation Ruling”) the following factors are taken into account in deciding whether persons carrying on business as partners for income tax purposes:
oIntention of the of the parties
oConduct
·         joint ownership of business assets
·         registration of business name
·         joint business account and the power to operate it
·         extent to which the parties are involved in the conduct of the business
·         extent of capital contributions
·         entitlement of net profits
·         business records
·         trading in joint names and public recognition of the partnership
(c)considering each of those factors:
(i)Intent - it was unclear if Mr and Mrs Holman intended the Business to operate as a partnership because:
·         the Business was registered in Mrs Holman’s name only
·         the ABN of the Business was registered in Mrs Holman’s name only
·         BAS statements had been lodged with the ATO by Mrs Holman as a sole trader
·         The Business’ registrations were not consistent with Mr Holman’s assertion of a partnership
·         No statement from Mrs Holman had been provided
(ii)Ownership of Assets –
It was unclear who owned the Business’ assets
(iii)Registration of Business Name -
the Business’ name was registered in Mrs Holman’s name only
(iv)Joint Business Account –
Both Mr and Mrs Holman can operate the Business’ account, but it is unclear in whose name the bank account is registered
There is limited evidence as no bank statements have been provided
(v)Conduct –
Mr Holman told the ATO on 9 October 2012 that:[9]
[9] Exhibit 1, T Documents, T3, pages 25-26, Letter from Applicant requesting private ruling dated 9 October 2012.
[Mrs Holman] operated the business and [he] did the accounts and went in once a week to help mainly on the weekend
(vi)Extent of capital contributions –
Mr Holman says he paid for the business
It is unclear whether Mr Holman’s purchase of the Business was a gift, loan or capital contribution
(vii)Entitlement to a share of net profits –
It is unclear if Mr Holman was entitled to a share of the net profits of the Business
(viii)Business records –
Two emails which showed that third parties sometimes emailed Mr Holman in relation to matters concerning the Business
A Business Insurance Certificate of Currency was addressed to Mr and Mrs Holman
No other business records, such as invoices, were provided despite 12 months of trading
(ix)Trading in joint names and public recognition of the partnership –
No real evidence has been presented
(d)“The overall conclusion is that the business was conducted by your wife as a sole trader and you are not entitled to any of the losses from the activity in the year ended 30 June 2012”.
As a result of the ATO’s decision on the private ruling, the ATO informed Mr Holman that his income tax assessment would be amended, removing Mr Holman’s claim for the Business loss.
On 5 December 2012 an Amended ITR was lodged on Mr Holman’s behalf by the ATO for the 2012 financial year (“Amended ITR”).[10]
[10] Exhibit 1, T Documents, T9, pages 73-94, Amended income tax return for the 2012 income year dated 5 December 2012.
Based on the Amended ITR the ATO issued an amended notice of assessment for the year ended 30 June 2012 which provided that Mr Holman’s taxable income was $106,864 and that he owed $28,576.03 in unpaid tax.[11]
[11] Exhibit 1, T Documents, T10, pages 95-98, Notice of amended assessment of income tax for the 2012 income year.
On 14 May 2018 Mr Holman wrote to the ATO explaining that he had sought legal advice to the effect that the Business was being operated as a partnership.[12]
[12] Exhibit 1, T Documents, T11, page 108, Objection form, enclosing a copy of a letter dated 14 May 2018, dated 16 November 2018.
On 16 November 2018, Mr Holman lodged an objection to the Commissioner’s assessment of his tax liability.[13]
[13] Exhibit 1, T Documents, T11, page 103, Objection form, enclosing a copy of a letter dated 14 May 2018, dated 16 November 2018.
On 20 February 2019 an ATO Review Officer confirmed in an email to Mr Holman that he had told them he had recently received advice from a lawyer that he and his wife should have been considered as operating the Business in partnership.[14]
[14] Exhibit 1, T Documents, T12, page 109, Email correspondence chain regarding the scope and grounds of the objection dated 20 February 2019 to 21 February 2019.
On 29 March 2019 Mr Holman acknowledged that the Business was registered as a sole trader but submitted that:[15]
·The bank account for the Business was in the Business’ name;
·He “worked every Saturday at the premises”;
·He “paid all the bills collated all the money etc”;
·He “took days of [sic] from work to help purchase clothes”;
·He paid $90,000 for the Business and approximately $12,000 on credit.
·The Business was paid for through solicitors;
·The “split” of profits and losses “was agreed on due to Capital Contribution”.
[15] Exhibit 1, T Documents, T14, page 115, Email correspondence chain regarding the progress of the objection dated 29 March 2019 to 1 April 2019.
On 1 April 2019 Mr Holman contended that he “provided the original capital to set-up the Business, was actively involved in the Business on a daily basis and [had] contributed more than 50%”.[16]
[16] Exhibit 1, T Documents, T14, page 114, Email correspondence chain regarding the progress of the objection dated 29 March 2019 to 1 April 2019.
On 5 April 2019 the Commissioner disallowed Mr Holman’s objection (“Decision”) on the grounds that Mr Holman had not provided sufficient proof that he was carrying on a business in partnership for income tax purposes during the income year ended 30 June 2012.[17]
[17] Exhibit 1, T Documents, T Documents, T2, pages 20-24, Reasons for decision dated 5 April 2019; Exhibit 1, T Documents, T Documents, T16, page 118, Letter from the Commissioner notifying of the objection decision dated 5 April 2019.
On 28 May 2019, Mr Holman filed an application for a review of the Decision by the Tribunal.[18] The Tribunal has jurisdiction to review decisions under the Act pursuant to section 25 of the Administrative Appeals Tribunal Act 1975 (Cth) and Part IVC of the Taxation Administration Act 1953 (Cth) (“TAA”).
[18] Exhibit 1, T Documents, T Documents, T1, pages 1-19, Application for review with attachments dated 28 May 2019.
ISSUE FOR THE TRIBUNAL
The issue for determination by the Tribunal is whether the Commissioner’s default income tax assessment for the financial year ended 30 June 2012 is excessive. This involves a consideration as to whether:
(e)Mr Holman operated the Business with his wife in partnership; and, if yes
(f)Mr Holman was entitled to claim a net non-primary production distribution and net income or loss at 80% in his 2012 ITR.
LEGISLATIVE BACKGROUND
Notice of Amended Assessments
Pursuant to section 166 of the Income Tax Assessment Act 1936 (Cth) (“ITAA 1936”) the Commissioner must make an assessment of the taxable income of a person, the tax payable thereon, and any tax offset refunds, from ITRs and/or from any other information in the Commissioner's possession.
Section 167(b) of the ITAA 1936 provides that, where, as here, the Commissioner is not satisfied with the ITR furnished by any person, the Commissioner may make an assessment of the amount upon which income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.
Section 175A(1) of the ITAA 1936 provides: “A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.”
Pursuant to section 14ZZK(b) of the TAA, the Applicant bears the onus of proof, in proving the assessment is excessive. To discharge this onus, the Applicant must establish necessary facts and explain why the assessment is excessive, and further, what the assessment should be.
What is a Partnership for Taxation Purposes?
Under the Partnership Act 1891 (Qld), “partnership” is defined as (section 5):
Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.
Under the Income tax Assessment Act 1997 (Cth) (“ITAA 1997”) “partnership’ is defined in subsection 995-1 for taxation purposes as:
(a) an association of persons (other than a company or a * limited partnership) carrying on business as partners or in receipt of * ordinary income or * statutory income jointly; or
(b) a limited partnership
As can be seen the definition provided for taxation purposes under the ITAA 1997 is broader in scope than that provided for under the Partnership Act. However, the general principles which govern partnerships are the same.[19]
[19] Re Knox and Commissioner of Taxation [2011] AATA 906 at [90] – [93]. Jolley v Federal Commissioner of Taxation (1989) 86 ALR 297 at p 304 and 308; see also Taxation Ruling 94/8, at [8]-[10].
Also relevant is Taxation Ruling TR 94/8 which sets out the factors considered by the ATO when determining whether a person carries on business in partnership. These factors are set out in paragraph 7(b) above.
While the Tribunal is not bound to apply the Taxation Ruling it may, and it should, apply it in exercising its discretion unless it is unlawful or “tends to produce an unjust decision”.[20]
[20] Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 645.
Brennan J explained the relevance of an adopted policy to decision-making in Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 640:
Decision-making is facilitated by the guidance given by an adopted policy, and the integrity of decision-making in particular cases is the better assured if decisions can be tested against such a policy. By diminishing the importance of individual predilection, an adopted policy can diminish the inconsistencies which might otherwise appear in a series of decisions and enhance the sense of satisfaction with the fairness and continuity of the administrative process.
The Tribunal is not aware of any cogent reason for not following the Taxation Ruling.
The Taxation Ruling is based on the case law which sets out the general principles which govern partnerships.
CONSIDERATION OF THE MATERIAL
At the hearing Mr Holman stated that he believed he and his wife were operating the Business as a partnership. Mr Holman relied on the information he had already provided to the ATO.
The Commissioner submits that Mr Holman has not provided sufficient evidence to demonstrate that he was conducting the Business as a partnership with Mrs Holman during the relevant year.
Considering the relevant factors, the Tribunal finds as follows.
Intention
Mr Holman says it was their intention to operate the Business in a partnership and that it was his belief that they were doing so.
However, a stated intention or belief alone is not sufficient. As explained in paragraph 14 of the Taxation Ruling:
…a stated intention of partnership is not, of itself, sufficient to establish a partnership, as the intention must be manifested by conduct (Re Megevand; Ex Parte Delhasse (1878) 7 Ch. D 511, Montefiorev. Smith (1876) 14 SCR (NSW) 245). The parties must understand what the partnership relationship entails, which requires more than a general understanding between them that they are in business as partners (I. R. Commrs v. Williamson (1928) 14 TC 335).
Mrs Holman wrote in a letter “to whom it may concern” dated 26 November 2019 that Mr Holman was a “major partner” in the Business.[21] She does not explain what she means by this and, in particular, she does not explain that she understands what this legally entails.
[21] Exhibit 1, T Documents, T19, page 141, Lorraine Holman Letter dated 26 November 2019.
The Business was commenced by Mrs Holman as a sole trader. This is inconsistent with Mr Holman’s contention that it was their “mutual intention to carry on business together”. Mrs Holman says she started the Business as a sole trader “in error” but provides no explanation. At no time did Mrs Holman (or Mr Holman) correct that “error” to include Mr Holman as a partner on official records.
In December 2012 Mr Holman also told the ATO that he and his wife had a “verbal agreement” from the date of purchasing the Business.[22] However, in May 2018 and in his objection application Mr Holman said he considered the business to be operating as a partnership after he consulted and obtained advice from a lawyer.[23] In other words, Mr Holman and his wife had not turned their mind to what the best structure would be for the Business from a tax perspective at the commencement of the Business, it was only after consulting a lawyer that Mr Holman believed he could claim the Business was a partnership. Mr Holman told the Tribunal that the solicitor told him he could claim the Business was a partnership because of his capital contribution.
[22] Exhibit 1, T Documents, T6, page 55, Bundle of documents provided by the Applicant dated 21 November 2012.
[23] Exhibit 1, T Documents, T11, page 101, Objection form, enclosing a copy of a letter dated 14 May 2018, dated 16 November 2018.
There is no evidence of an understanding that the parties would be contractually bound.[24]
Joint ownership of business assets
[24] See Re Knox and Commissioner of Taxation [2011] AATA 906, at [117].
Joint ownership of assets, and joint liability for debts, is indicative of a partnership.[25]
[25] Taxation Ruling, paragraph 15(a).
There is no evidence before the Tribunal concerning the Business’ assets in the 2012 financial year.

Registration of Business Name

The Business name was registered solely in Mrs Holman’s name. This is not indicative of the Business being conducted as a partnership.

Joint Business Account and The Power to Operate It

The relevance of a joint bank account is that it demonstrates whether the profits and losses of the Business are being shared, which is a key feature of a partnership.
The Business’ bank account documentation shows Mrs Holman as the “owner” of the account and Mr Holman as an authorised “user” of the account.[26] Where the form asked ‘Position held – for example, director, tax agent, trustee or partner’ the response was ‘Accountant’.
[26] Exhibit 1, T Documents, T1, page 11, Application for review with attachments dated 28 May 2019.
If Mr Holman was a joint owner of the account he would have been listed as an owner accordingly.
There is no evidence that the bank considered the Business was being operated in partnership between Mr and Mrs Holman. No bank statements have been provided.

Extent to Which the Parties Are Involved in The Conduct of The Business

Mr Holman has made the following assertions regarding his involvement in the Business:
·On 9 October 2012:[27]
[27] Exhibit 1, T Documents, T3, page 26, Letter from the Applicant requesting a private ruling dated 9 October 2012.
My wife operated the business and I did the accounts and went in once a week to help mainly on the weekend
·In November 2018:[28]
[28] Exhibit 1, T Documents, T11, page 101, Objection form, enclosing a copy of a letter dated 14 May 2018, dated 16 November 2018.
[I] was involved in the business on a weekly basis
·On 29 March 2019:[29]
I worked every Saturday…I paid all the bills collated all the money etc. I took days of [sic] my work to help purchase clothes
·On 28 May 2019:[30]
As the husband I did all the paperwork and worked in the business on the weekend.
All purchases and decisions were discussed jointly
[29] Exhibit 1, T Documents, T14, page 115, Email correspondence chain regarding the progress of the objection dated 29 March 2019 to 1 April 2019.
[30] Exhibit 1, T Documents, T1, page 8, Application for review with attachments dated 28 May 2019.
Mrs Holman wrote a letter “to whom it may concern” dated 26 November 2019 stating that Mr Holman:[31]
(g)was involved in the Business daily; and
(h)invested money and time in the Business.
[31] Exhibit 1, T Documents, T19, page 141, Lorraine Holman Letter dated 26 November 2019.
Mrs Holman does not explain in what capacity Mr Holman was involved and how much time Mr Holman spent in the Business.
It is a commonplace presumption that spouses will assist each other in the running of their businesses. This does mean that they are in “partnership” for taxation purposes. As referred to in Case N56 (1981) 81 ATC 277:
“[14] … a heavy onus is placed on a taxpayer conducting a small manual-type operation of a personalised nature as is the situation before us, to show that his wife was a necessary part of that business.
[15]… Accordingly, the question arises as to the extent of work performed by the taxpayer's wife in the normal husband/wife relationship and the work performed as part of the asserted business association which she had with her husband. Obviously the two are inextricably intermingled. In such circumstances the courts have been wary of treating the wife's role as indicative of the existence of a partnership; rather they have tended to see it as a normal incident flowing from the ordinary family relationship of husband and wife (ref. Booth v. Booth (1935) 53 C.L.R. 1 at pp. 27 and 28; see also Butler v. Madden (1941) 41 S.R. (N.S.W.) 245 at p. 247).”[32]
[32] More recently cited with approval in Re Knox and Commissioner of Taxation [2011] AATA 906 at [113].
The Tribunal accepts that Mr Holman contributed to the Business, particularly as the accounts manager, but is not persuaded that this is sufficient to establish Mr Holman as a partner of the Business.

Extent of Capital Contributions

Mr Holman says he provided the funds to purchase the Business.[33] Yet no records of relating to this transaction have been provided.
[33] Exhibit 1, T Documents, T1, page 8, Application for review with attachments dated 28 May 2019.
The ATO requested Mr Holman provide information to substantiate his capital contribution claim on a number of occasions:
(i)On 15 November 2012 the ATO asked to whether the funds for the purchase of the Business came from an account in his name or from a joint account.[34] Mr Holman responded, “from an account in my name our solicitor can verify this”. Nothing from the solicitor was ever received. Mr Holman told the Tribunal that the solicitor has subsequently died.[35]
(j)On 27 March 2019 the ATO asked what the amount of the capital contribution was and who did Mr Holman pay it to.[36] Mr Holman responded that he “paid $90,000…to the previous owner through solicitors”.[37]
[34] Exhibit 1, T Documents, T5, pages 49-50, Letter from the Commissioner requesting further information dated 15 November 2012.
[35] Exhibit 1, T Documents, T6, page 55, Bundle of documents provided by the Applicant dated 21 November 2012.
[36] Exhibit 1, T Documents, T13, page 111, Letter from the Commissioner requesting further information dated 27 March 2019.
[37] Exhibit 1, T Documents, T14,page 115, Email correspondence chain regarding the progress of the objection dated 29 March 2019 to 1 April 2019.
Mrs Holman wrote a letter “to whom it may concern” dated 26 November 2019 to say:[38]
(k)Mr Holman invested money and time in the Business.
[38] Exhibit 1, T Documents, T19, page 141, Lorraine Holman Letter dated 26 November 2019.
Mrs Holman does not say in her letter:
(l)How much money was invested by Mr Holman, when the investments were made and the purpose of the investments;
(m)How much Mr Holman contributed to the purchase of the Business; or
(n)Who else, if anyone, contributed to the purchase price of the Business.
Based on the lack of relevant corroborating documents the Tribunal is unable to determine the extent of Mr Holman’s capital contributions to the Business.

Entitlement to Net Profits

Mr Holman said the agreement was that profits and losses would be shared on an 80/20 basis to reflect his capital contributions.
As noted above, the Tribunal is unable to determine to what extent Mr Holman financially contributed to the Business and whether an 80/20 split is reflective of his contributions.
In terms of what financial contributions were made by Mr Holman, Mr Holman provided a copy of three bank cheques dated 27 June 2011 in his name for a total sum of $9,552.50 (excluding the cheque fee).[39] At the hearing Mr Holman said these cheques had been drawn on his account. Mr Holman also provided a withdrawal slip from a Westpac account for $4,510 showing a balance in the account of $80,826.09.[40] Mr Holman told the Tribunal this was a withdrawal from his account. No bank statements have been provided and there is nothing to corroborate what the money was spent on.
[39] Exhibit 1, T Documents, T1, pages 17-18, Application for review with attachments dated 28 May 2019.
[40] Exhibit 1, T Documents, T1, page 19, Application for review with attachments dated 28 May 2019.
There is nothing to corroborate that the balance in this Westpac account was used to purchase the Business. Even if it is accepted that Mr Holman provided the funds for the Purchase of the Business, this, on its own does not support a finding that the Business was operated as a partnership.
Mrs Holman does not say in her letter:
(o)There was an oral agreement that she was in partnership with Mr Holman;
(p)What the terms of that oral agreement were – in particularly that it was agreed that profits and losses would be split 80/20.
There is no evidence that profits and losses were shared.

Business Records

Very limited business records have been provided.
Mr Holman relies on a credit application the Business applied for in July 2011.[41] Part of the credit application form required the Business to indicate the structure of the Business. The options available for selection included sole trader, partnership or company. Mr and Mrs Holman selected “sole trader”. Mr Holman is only noted on the application form as the contact person in relation to “accounts”. The form was signed by Mr Holman and dated 18 July 2011. Therefore, Mr Holman was fully aware that he and his wife were representing the Business to a third party as one of a sole trader and not as a partnership. This document does not support Mr Holman’s contention that the Business operated in a partnership.
[41] Exhibit 1, T Documents, T1, pages 12-13, Application for review with attachments dated 28 May 2019.
Mr Holman sought to rely on a new customer form completed by the Business as evidence that the Business was operated as a partnership.[42] The form merely notes Mr Holman as the accounts contact for the Business. This document does not support Mr Holman’s contention that the Business operated in a partnership.
[42] Exhibit 1, T Documents, T1, page 14, Application for review with attachments dated 28 May 2019.
A copy of page 1 of a retail lease form was provided by Mr Holman. It provides that the tenant was “Lorraine Holman Trading as Sansisterz Boutique”.[43] No mention of Mr Holman is made. This supports a finding that the Business was being operated by Mrs Holman as a sole trader. A tax invoice for the rent of the premises leased by the Business again records the Business as being operated by Lorraine Holman.[44]
[43] Exhibit 1, T Documents, T1, page 16, Application for review with attachments dated 28 May 2019.
[44] Exhibit 1, T Documents, T17, page 119, Financial Institution Account Details Form dated 18 November 2011.
Mr Holman also relied on a Business Insurance Certificate of Currency. The Certificate was addressed to both Mr and Mrs Holman. This does not necessarily mean the Business operated as a partnership. The Certificate is also not relevant to the 2012 financial year as it was not issued until 24 August 2012.[45]
[45] Exhibit 1, T Documents, T6, page 56, Bundle of documents provided by the Applicant dated 21 November 2012.
Mr Holman sought to rely on several emails he received from vendors requesting the Business pay its overdue accounts.[46] This does not substantiate that the Business was operated as a partnership as it is equally arguable that these emails were sent to Mr Holman because Mr Holman was represented to parties as the accounts contact person.

Trading in Joint Names and Public Recognition of The Partnership

[46] Exhibit 1, T Documents, T6, pages 57-58, Bundle of documents provided by the Applicant dated 21 November 2012.

Mr Holman contends that “the general impression of the business operation in the immediate vicinity by other Business [sic] in the area was that we were partners”. No one gave evidence to support this contention and no detail was provided for why others held this belief. The basis of how a business is conducted is not usually information the public would be privy to unless they had a specific discussion with Mr or Mrs Holman about their operations.
The nominated account for any BAS refunds was the Business bank account. On the form advising the ATO of which bank account refunds should be posted to Mr Holman is listed as an accountant, not as partner. The Business was noted as being operated by Mrs Holman only.[47]
[47] Exhibit 1, T Documents, T17, page 119, Financial Institution Account Details Form dated 18 November 2011.
The registered business name was in Mrs Holman’s name only.
There is no persuasive evidence of Mr and Mrs Holman trading in joint names or having been recognised as operating in a partnership.
Conclusion
If the Business was being conducted as a partnership one would expect that the BAS, ABN, ITR, and business name registration would be in the partners’ joint names. Here, only Mrs Holman is registered on these business records. The BAS for the Business were lodged by Mr Holman’s wife. The Business Names Extract identifies that Mrs Holman is the sole trader of the Business.[48]
[48] Exhibit 1, T Documents, T21, pages 134-145, Historical Business Name Extract dated 9 April 2020.
Little weight can be given to Mrs Holman’s letter. Mrs Holman does not explain or state in her letter:
·How Mr Holman was involved in the Business;
·How much money was invested or when and why;
·How much time Mr Holman spent in the Business;
·How much Mr Holman contributed to the purchase of the Business;
·Who else, if anyone, contributed to the purchase price of the Business;
·That there was an oral agreement that she was in partnership with Mr Holman;
·What the terms of that oral agreement were – particularly it was agreed that profits and losses would be split 80/20.
Mrs Holman was not called by Mr Holman to give evidence at the hearing.
Mr Holman provided next to no corroborating documents to support his contentions (for example, bank statements and invoices). Mr Holman told the Tribunal that he would look for more documents if this matter needed to go further. Mr Holman has been stating that he could provide further detailed information and documents since at least one year ago.[49] The Tribunal explained to Mr Holman that the Tribunal could only make its decision on the material before it. Mr Holman said he understood.
[49] Exhibit 1, T Documents, T14, page 115, Email correspondence chain regarding the progress of the objection dated 29 March 2019 to 1 April 2019.
In Re Imperial Bottleshops Pty Ltd and William John King Egerton v Commissioner of Taxation (1991) 22 ATR 148; [1991] FCA 276, Hill J pointed out the difficulties a taxpayer has when they do not have substantiating records:
31. A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If he goes into the witness box and swears that he has incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such a statement, like statements of purpose, or object or state of mind must, however, be "tested most closely, and received with the greatest caution": Pascoe v Federal Commissioner of Taxation (1956) 11 ATD 108 at 111. It would, of necessity, be a rare case indeed where a taxpayer, claiming to have expended a very large sum of money on trading stock and other business expenses, would succeed in satisfying the burden of proving that the assessment is excessive. Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed. It must, however, be borne in mind that the evidence of a taxpayer is not to be regarded as "prima facie unacceptable", cf McCormack v Federal Commissioner of Taxation [1979] HCA 18; (1978-9) 143 CLR 284 at 302 per Gibbs J.
(emphasis added)
Taking all of the relevant factors into account together with the submitted evidence, the Tribunal has decided it is not satisfied, on the balance of probabilities, that the Business was operated by Mr and Mrs Holman as a partnership.
The Tribunal finds that, based on the available evidence, Mr Holman has failed to discharge his onus to establish that the default assessment of his taxable income for the 2012 financial year is excessive.
DECISION
The decision under review is affirmed.

I certify that the preceding 80 (eighty) paragraphs are a true copy of the reasons for the decision herein of Member D K Grigg

............................[SGD]...........................
Associate
Dated: 20 May 2020

Date of hearing:
Date reserved:

27 April 2020

27 April 2020

Applicant: By telephone

Counsel for the Respondent:

Solicitors for the Respondent:

Ms F Chen (by telephone)

S Willmer and C Stockman (by telephone)