Husband and Wife and the Commissioner of Taxation

[2003] AATA 342

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 342

ADMINISTRATIVE APPEALS TRIBUNAL      ) NT2001/121, NT2001/124-126,

) NT2002/161-162, NT2001/123,

TAXATION APPEALS DIVISION  ) NT2002/127-129, NT2002/159-160

Re		THE HUSBAND APPLICANT
and THE WIFE APPLICANT
And			THE COMMISSIONER OF TAXATION

RESPONDENT

DECISIONS

Tribunal Mr J Block, Deputy President

Date14 April 2003

PlaceSydney

Decision

In respect of matters NT2001/121, 124-126 and NT2001/123, 127-129, the objection decisions are affirmed.

In respect of matters NT98/212, 213 and NT98/214, 215, the Tribunal determines that the Applicants are not entitled to any exemption pursuant to section 160ZZQ(16) of the Income Tax Assessment Tax 1936; the Tribunal also determines that no further remission of additional tax should be granted to the Applicants.

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

[SGD] Mr J Block   Deputy President 

CATCHWORDS

TAXATION - income tax - assessable income - business activities - deposits made into accounts assessed as income received from taxpayers’ company - capital gains tax - whether exemption available under section 160 ZZQ (16) of the Income Tax Assessment Act - whether additional tax should be remitted.

Income Tax Assessment Act 1936 - ss 160ZZQ, 160P, 160N, 222, 223, 227, 226J and 226X

Taxation Administration Act 1953 - ss 14ZZK; 14ZS

Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614  

REASONS FOR DECISION

14 April  2003 Mr J Block, Deputy President

PART A – INTRODUCTION AND GENERAL

1.      In respect of matters numbered NT2001/121, 124-126 and NT2001/123, 127-129, the objection decisions under review are the disallowance by the Respondent of objections dated 5 January 2001 by the Applicants against assessments in respect of the years ending 30 June 1990, 30 June 1991, 30 June 1992 and 30 June 1993 (collectively the “relevant years” and each a “relevant year”; in some cases a particular relevant year is referred to by the actual year to which it relates).

2.      In respect of matters numbered NT1998/212,213 and NT1998/214,215, Deputy President McMahon in a decision dated 12 September 2000 (“the original decision” and the term “original hearing” has a corresponding meaning) affirmed objection decisions referable to the years ending 30 June 1994 and 30 June 1995 (collectively the “later years” and each a “later year”).  On appeal by the Applicants, the Federal Court, by consent, ordered that the appeals be dismissed insofar as they related to the first and second grounds of appeal, but remitted the original decision for consideration and determination of two issues (“the remitted issues” and each a “remitted issue”) in accordance with orders 3 and 4 of the Federal Court order, reading as follows:

3. The decision of the Administrative Appeals Tribunal dated 12 September 2000 be set aside in so far as it:

(i) failed to make any determination of the availability, if any, or quantum of the entitlement of the Applicants to an exemption from liability to tax on the capital gain, as calculated by the Respondent in the assessments under review, accruing to the applicants on their disposal of the property at 105 White Road, on 6 May 1995, being an exemption for the period from 15 July 1988 until 6 March 1993, arising pursuant to section160ZZQ (16) of the Income Tax Assessment Act, 1936; and

(ii) failed to make any determination as to the Applicants’ entitlement, if any, to a remission of additional tax, and if determined to be so entitled, the amount of any such remission, that was assessed to them by the Respondent in the assessments under review.

4. The Applicants’ applications for review to the Administrative Appeals Tribunal be remitted to the Tribunal for the consideration and determination of the two issues referred to in Order 3 above.

3.      The Husband appeared on behalf of himself and the Wife.  Mr D.B. McGovern SC, instructed by Mr Adrian Mow, an officer of the Respondent, appeared for the Respondent.

4. In respect of the objection decisions referable to the relevant years, the Tribunal had before it the T Documents lodged in respect of each of the Applicants pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 together with exhibits as follows:-

Exhibit A1 is a statement by the Husband which is undated but which was date- stamped by the Tribunal on 31 October 2002.  It relates in particular to the relevant years; because it in effect constituted the Husband’s evidence in chief, Exhibit A1, (but excluding its annexures), is included in this decision as follows:

1.    “I am the Applicant.

2.    I was born in l950 in the Peoples' Republic of China.

3.    I attended school in China until primary grade five.  In l962 I left China with my brother and came to Hong Kong.  My mother remained in China and died in l987.   My father had died in l953.

4.    In Hong Kong I attended an evening college to study English.  I started work in l963 in Hong Kong as a trainee clerical assistant in a bank.  I was their youngest employee.

5.    After five and half years at the bank I joined a company called Oil Co as a clerk.  I was there for one year.  I then went to a firm as a clerk and was also there for a year.  I then worked at Foreign Exchange as a dealer for three years.

6.    After that, I went to work for Bank Limited for three years as a foreign exchange dealer.  I then moved to a construction company called Holdings Limited as an administration manager where I was mainly looking after building projects in the Peoples' Republic of China.  I had that job for thirteen years.  It involved a lot of travel.

7.    In 1987 I came with my wife and son to Australia.  We decided to move to Australia because, from our son's point of view, we wanted to leave Hong Kong before its annexation by the Peoples' Republic of China in 1997.  Personally, I was reluctant to leave Hong Kong and move to Australia because I had worked for so long in Hong Kong and I was totally unfamiliar with the Australian commercial business place.  I remitted approximately A$200,000. 00 from Hong Kong to Australia at that time.  I believed it was necessary to establish funding here in order to get approval for permanent migration.  That money represented nearly all of my life's savings.  After a while I returned to Hong Kong, as I was still employed and resident there and, once we had decided to seek to remain in Australia permanently, I resigned and came back to Australia under a business migration program.

8.    I arrived in Australia to settle permanently in December 1989.  My Wife had been living here with our son since 1987.  Together with the Wife, I immediately started business as an importer, wholesaler and distributor of Chinese and Asian goods through the Company, a company set up by my Wife and me.  I had no background in that trade but I had a lot of contacts in the Chinese community.  I was introduced to many people who became our suppliers by our relatives and good friends, many of whom I'd met or become known to through my extensive travels and dealings in the Peoples' Republic of China and the territory of Hong Kong.

9.    Initially, it was necessary to devote an amount of approximately A$250,000 to working capital of the importing and selling business - carried out though the Company.  By and large I was able to get credit from suppliers in Hong Kong and China so I did not have to outlay significant sums for stock.  Additionally, on moving to Australia I had sold our apartment in Hong Kong for about A$160,000 and left that money in an account in Hong Kong to pay suppliers there.

10.I remember that in about 1990 I wanted to expand the business of the Company. I recall that I spoke to the ANZ bank at (suburb) (where the Company banked), and discussed with an officer at that branch the possibility of borrowing approximately A$2,000,000 for this purpose.  That officer, whose name I cannot recall, told me that before the Bank would consider such an application it would need various accounting materials for review to determine whether the Company had the ability to repay such an amount of money.  Sometime after that a relative of mine, Mr A (my mother's younger sister's son), approached me and said that he had a reasonably large sum of money which he was looking to invest.  He told me that he got this money from selling some Chinese artefacts on coming to Australia.  Following discussions with him, I borrowed from Mr A, a total sum of A$1,650,000.  We received this money over a period from November 1991 to September 1994.  Each advance was paid in cash.

11. I had known Mr. A since he was a child (as best I can recall, for at least 35 years).  Therefore, at the time I borrowed the money from him, he and I knew each other very well.  Although the amounts of money received from him were large amounts and paid in cash, that was something I was used to from my work when I lived in Hong Kong and was not unusual amongst the Chinese business community generally.  It was not unusual for me, whilst I was working in Hong Kong, to carry large amounts of cash in the course of any one day when transacting business for my employer.  Therefore I saw a need for meeting Mr A in order to receive from him the various advances in cash during the period from November 1991 to September 1994.

12.He made the loans to me, I understood, partly to help my Wife and I out, and partly as an investment for Mr A.  Partly also, it is the way of Chinese People - known as Uui - to help those of the family and community.  He hoped to settle in Australia and had applied for permanent residency.

13.The terms of the lending were that the loan was repayable at one month's notice unless the circumstances of its investment made that impracticable - if the money had been invested in real estate, for example.  There was no provision for the payment of interest, but any profit generated by utilisation of the funds was to be divided by Mr A and me on an equal basis.

14.Some of the borrowings were utilised in the business of the Company.  Mr A was made aware by me of how that business was going.

15.Some of the borrowings were also used in the acquisition of real estate through various corporate entities.  A schedule setting out the utilisation of the borrowed funds is attached as Annexure l.

16.In l995 the sum of A$550,000 in cash was repaid to Mr A as a partial discharge of the borrowings.  These funds came from the proceeds of the sale of 105 White Road.

17.In September 1996 my brother repaid to Mr A the balance of the borrowings owing A$1,100,000.  At the same time, I became liable to repay that amount to my brother.  Annexed as Annexure 2 is a copy of a Deed of Agreement evidencing those transaction, and copies of debit advices from the Bank Limited in Hong Kong recording the payment by my brother to Mr A of that amount.

18.A significant amount of the funds borrowed initially from Mr A was deposited by me into my and my Wife's accounts with Commonwealth Bank of Australia - account numbers (blank) and (blank) respectively.  The deposits were made in small amounts.  I had been told by many people that one could not deposit amount over A$10,000 in cash. I did not know the reason for that, it's just that everyone had advised me this way.  Subsequently, I learnt from fellow businessmen that as we were in business, we could deposit more than A$10,000 at a time without a problem.

19.Additionally also, a large amount of the borrowings and other funds of mine were used in 'cheque swapping' with Mr C.  Mr C is a relative of my Wife's - his surname ' and her maiden name ' are the same.  They come from the same province of China.  Mr C was in Australia as a Chinese student.  His father asked my Wife to look Mr C up and look out for his interests.

20.When we first made contact with Mr C in Australia he was living in Sydney.  He was importing Chinese health products, but was not really a competitor in the market place to the business of the Company.

21.Mr C often approached me and asked if I would give him cash for the face value of a cheque he had received in payment for sales of Chinese health products.  It was his practice to always obtain cheques made out to 'cash' from his customers.  On these occasions, I gave him cash to the face value of the cheque and then banked the cheque to either my account or my Wife's account with the Commonwealth Bank.  I was happy to help a relative and friend in this manner - it is a common occurrence within the Chinese community.  None of these cheque deposits into this Commonwealth Bank account from the 'cheque swapping' arrangement represents income.

22.Occasionally, cheques negotiated by me with Mr C would not be met on presentation.  If that occurred I rang Mr C and he contacted the drawer.  He then contacted me to tell me when the cheque could be presented again.  Very, very rarely a cheque would not be paid even then.  In those circumstances Mr C either gave me cash to cover the value of the cheque, or further cash cheques to an equivalent amount.

23.Mr C was married, although his wife lived in China.  She had no approval to come to this country.  Mr C became sick in, I think, late 1995 and his wife was allowed then, on compassionate grounds to come and care for him.  He had cancer and was in St George Hospital.  When his wife arrived in Australia he was very ill.  My Wife helped Mrs C to care for Mr C when he was in hospital.

24.When the Australian doctors gave up hope of Mr C, he went back to China with his wife and died a few months later.  His death on 17 April 1996 is recorded in a death certificate, a copy of which together with a translation is Annexure 3.

25.Mrs C then came back to Australia to obtain her citizenship.  We helped her with this as it had been one of Mr C’s last wishes.  D, of the Senator’s office, contacted the relevant Beijing authorities seeking that they process her application on an urgent basis.   She left Australia, as best I recall in 1998.  The last knowledge I have of Mrs C’s whereabouts is that she was living in Guang Xhou City.

26.The 'cheque swapping' carried out with Mr C was done for no charge or fee.  I did not claim from him any commission or discount factor for the negotiation of his cash cheques.  I made no profit out of the transactions.

27.Additionally, some deposits to my Commonwealth Bank account represented funds from a business association with Mr W.  Through a corporate arrangement in which Mr W and I were interested, fruit was exported in 1994 to Asia.   Some was freighted by air, and some - as oranges and honeydew - was shipped by sea.  There was difficulty selling the fruit once it arrived in Asia and no profit on the transaction was made - in fact we lost money on the venture.

28.Mr W’s contribution for the export of that fruit was given to me and banked to my CBA account.  It was used as part payment for the purchase of the fruit and other costs of the venture.  Additionally, I disbursed some funds for Mr and Mrs W for the purchase of a property by them at Strathfield in 1994.  Those funds were later reimbursed to me by Mr W.  Attached as Annexure 4 is a copy of a statement from Mr W detailing the payment of the contribution disbursements referred to.

The remaining exhibits are set out in tabular form as follows:

Exhibit A2	“Final Submission” by the Husband	17  March 2003  (It is of no probative value)
Exhibit R1	A letter by Adrian Mow of the Respondent to the Husband	6 March 2003
Exhibit R2	A Witness Statement by Mr J R Greenwood	14 March 2003
Exhibit R3	Consent Order by the Federal Court and referred to in clause 2.	4 March 2002
Exhibit R4	Appeal books in three volumes prepared for the Federal Court in respect of the appeal which gave rise to the remitted issues.  The Tribunal is concerned in the main with volume 2 which contains pages 202 to 706 and being evidence given at the original hearing.

5.      The evidence revealed that Exhibit A1, and being the Husband’s witness statement, is identical to his witness statement in respect of the original hearing but with two exceptions. The two exceptions are referable to clauses 10 and 18; in relation to the original decision the witness statement of the Husband was drawn so as to refer to borrowings by both Applicants from Mr A.  Exhibit A1 was amended (presumably having regard to the original decision) in respect of those two clauses only, so as to state that the borrower from Mr A was the Husband alone.

6.       Upon application by the Respondent, the Tribunal directed that the evidence given before it in respect of either of the Applicants would be evidence in respect of the other of them.  In fact the Wife did not appear at the hearing; the Husband said that she was still in Hong Kong. Her very brief witness statement, which had been sent to the Tribunal, was not tendered. That witness statement could in any event be described in general terms as merely confirmatory of the witness statement of the Husband, and being Exhibit A1.

7.        In respect of the hearing of these matters there have been long delays caused by the Applicants.  The Tribunal does not consider it necessary to set out in detail all of the numerous directions hearings; relevant information in respect of some of them will suffice: -

(a)On 5 December 2001 a second telephone conference was held; a file note in respect of that conference indicated that the Applicants’ solicitor S advised that witness statements in respect of three overseas witnesses were being prepared.

(b)On 11 July 2002, a third telephone conference was held.  S advised that he did not have the three witness statements but expected them by 24 July 2002.

(c)A timetable for the conduct of the matter was agreed at or about that time but the Applicants did not comply with that timetable.

(d)On 3 September 2002, a directions hearing before me resulted in further directions; in particular witness statements were required pursuant to direction 1 from the Applicants by 31 October 2002.  The last paragraph of that direction reads:

“It was noted that the period referred to in direction 1 was allowed at the express request of the Applicant’s solicitor and notwithstanding that it is longer than is usual, and notwithstanding a prior failure by the Applicant to furnish the documentation referred to.  The Tribunal noted that it would be reluctant to grant any further extensions in the absence of good cause and would consider dismissal if direction 1 is not complied with in accordance with its terms.”

(e)The matter was listed for hearing from 10 to 13 December 2002.  Prior to 10 December 2002 the Applicants applied for those dates to be vacated.  In respect of that Application S wrote a letter to the Tribunal dated 25 November 2002.  It contained submissions in brief as follows:

The submissions for the Husband and the Wife on the application for a vacation, in brief, are:

“…

1.    The evidence of Mr A and Mrs C is of fundamental importance to the Applicants’ applications before the Tribunal;

2.    Difficulties of a logistic and practical nature have combined to prevent the Applicants from presenting that evidence in accordance with the Tribunal’s directions;

3.    To the extent that they have been able, the Applicants have filed evidence and otherwise complied with the relevant timetable;

4.    There is no prejudice to the Commissioner if a vacation is granted;

5.    Arrangements are in hand which should mean that the evidence of Mr A and Mrs C will be available to be filed and served in a fairly short period;

6.    The foregoing being the case, it is in the interests of justice that the Applicants be given the opportunity to present to the Tribunal’s decision on our clients’ application.”

(f)In an affidavit dated 5 December 2002 in support of the application for vacation of the hearing dates in December 2002 S said:

“On 5 December 2002, I S of Sydney in the State of New South Wales say on oath: -

1.        I am the solicitor for the Applicant.

2        I say that the evidence of Mr A and of Mrs C, if as I am instructed, and if accepted, is of fundamental importance to the Applicant’s case and may well be determinative.

3.        The Applicant is prepared to indicate that no further adjournments will be sought other than for the most exceptional reason such as serious ill health.

4.        I spoke to the Applicant this morning.  I am reliably informed by him and verily believe:

(a) Mr A will not give a statement to any Chinese national or resident lawyer.  Mr A harbours a fear that if he were to do so, he would expose himself to jeopardy and possible civil or criminal sanction in China.

(b) that the Applicant was telephoned by Mrs C late last night from the United Kingdom.  Mrs C will definitely return to China by the end of February 2003.  The Applicant offered to pay for her to fly from the UK if she couldn't.  The Applicant asked Mrs C whether she would give a statement to someone in the UK and she said she would give it once she got back to China.”

(g)The postponement was granted to enable Z, a solicitor, to travel to China after 15 December 2002 in order to obtain the necessary statements.  At that time it was agreed that the hearings would take place on five days commencing 17 March 2003 and being dates acceptable to the parties and also to the Tribunal.

(h)No witness statements were produced.  A further directions hearing was held on 26 February 2003 at the request of the Respondent.  There was no appearance for the Applicants.  The Tribunal’s directions dated 26 February 2003 reads as follows:

“The Tribunal noted that these matters were previously listed for 3 days commencing 10 December 2002.   S appeared on behalf of the Applicants (and Mr. D.B. McGovern S.C appeared for the Respondent), at a directions hearing on 5 December 2002.   At that directions hearing, application was made on behalf of the Applicants for a postponement of the hearing (and thus to vacate the listed dates in December 2002). The postponement was applied for in particular because Mr A, a resident of the Peoples’ Republic of China (“China”) had agreed to furnish a witness statement and to give evidence by video link, but was not prepared to travel from China. Accordingly arrangements had been made for Z. a solicitor, to travel to China in order to obtain a witness statement but Z would not be able to travel prior to 15 December 2002.   It was expected in addition that Z would obtain a witness statement from Mrs C who is also a resident of China; in respect of Mrs C, however, there was a further complication in that she had travelled to the United Kingdom and was not expected to return to China until February 2003.

1.    The postponement application was made on the basis that two vital witnesses were unavailable but whose evidence was expected to be obtained for use at the hearing.

2.    A postponement was thus granted at the request of S and the listed dates in December 2002 were vacated, specifically in order to enable Z to obtain the statements in question.  The matter was relisted for 5 days commencing 17 March 2003 and being dates selected by the parties as convenient to them and the Tribunal.  S indicated that the Applicants intended to brief senior counsel to appear on their behalf at the hearing.

3.    The Tribunal did not issue any directions as to the provision of the witness statements.  However the Tribunal indicated that, having regard to the history of these applications and the fact that the Applicants have delayed the applications on diverse occasions, the Tribunal would be unwilling to grant any further postponements in the absence of very strong reasons, and such as for example serious illness verified by appropriate medical evidence.

4.    The representatives of the parties said that they would agree a timetable for the future prosecution of these applications.  It was also agreed that, on the assumption that witness statements would be produced timeously, the matter would be brought before this Tribunal for a directions hearing prior to 17 March 2003, to ensure that everything necessary had been done to ensure that these applications are heard without further delay on 17 March 2003 and the other succeeding listed days.

5.    A directions hearing was accordingly convened for today. Mr McGovern appeared for the Respondent but there was no appearance for the Applicants. Mr McGovern advised the Tribunal that S had withdrawn; he referred to a fax dated 20 February 2003 reading:“ We no longer act for the Applicants in the above matters.  We have written to the Tribunal advising of it.”

6.    In fact the Tribunal had received a fax to this effect also dated 20 February 2003 from S addressed to the Tribunal and which contains a statement that the last address of the Applicants is in Lane Cove, NSW 2066. S stated that they would forward a copy of the correspondence to the Applicants at that address.

7.    S had emphasised that the evidence referred to previously was essential to the case for the Applicants. No witness statements have however been received in respect of the witnesses named or any others.

DIRECTIONS

1.    The Applicants must by not later that 9:30 a.m. on 10 March 2003 serve and file the statements of any witnesses (and including if so desired those of Mr A and Mrs C) on whom they intend to rely.

2.    This directions hearing is to be adjourned to and relisted at 9:30 a.m. on 10 March 2003.  If the Applicants fail to comply with Direction 1, they should note that the Respondent has foreshadowed a dismissal application, which may in all the circumstances, and having regard to the history of delay in these applications, and in such event be granted.

3.    This direction must be sent to the Applicants by courier at the Lane Cove address furnished by S.”

(i)The directions hearing on 26 February 2003 was adjourned, as appears from the preceding subclause, to 10 March 2003. It will be noted also that the Tribunal had agreed that the evidence of the overseas witnesses could be given by video-link.  On 10 March 2003, the Husband appeared. He said that the Wife was in China in order to obtain the necessary witnesses’ statements.  (The Tribunal had been advised by S that to obtain the witness statements required the services of Z and that the Wife did not have the necessary expertise for this purpose).  The Respondent had given notice of a dismissal application and in respect of which application Mr Adrian Mow had prepared a lengthy affidavit.  However, Mr Mow who appeared for the Respondent, did not press that dismissal application.  The Tribunal’s direction dated 10 March 2003 reads as follows:

“The Husband appeared in person on behalf of the Applicants and Mr Adrian Mow appeared for the Respondent.   The Husband advised the Tribunal that he does not intend to brief Senior Counsel or indeed any representation and intends to represent his Wife and himself at the hearing.    He said also, having regard to this Tribunal’s direction dated 26 February 2003, that Z, solicitor, has not gone to China at all but that the Wife has been in China for some months in order to obtain the witness statements of Mr A and Mrs C.

In these circumstances Mr Mow did not pursue the dismissal application of which the Respondent had given notice; the Tribunal advised the Husband that he would be given one final opportunity to produce his witness statements, i.e. until midday on Friday 14 March 2003, on the basis the Respondent’s witness statement must then be produced by 10.00am on Monday 17 March 2003.  It was noted that the Respondent’s witness lives and works on the Central Coast, and so that Mr Mow may be obliged to consult with him there during next weekend.  If the Applicants’ witness statements are produced at an earlier date, i.e. before 14 March 2003, the Respondent may be able to produce his witness statement prior to 17 March 2003.  The Husband was warned that in the absence of a very good reason, such as serious illness (backed by medical evidence) no further postponements or extensions will be granted.

DIRECTION:  Pursuant to section 33 of the Administrative Appeals Tribunal Act 1975, the Tribunal directs as follows:

Matters noted.

1.    The Applicants must serve and file their witness statements and in particular those of Mr A and Mrs C (whose evidence was described as vital to the Applicants’ case) by not later than midday on 14 March 2003.

2.    If the Applicants comply with Direction 1, the Respondent must serve and file his witness statement by 10.00am on 17 March 2003.

3.    In the absence of a very good reason, such as serious ill health backed by medical evidence, no further extensions or postponements will be granted.”

(j)Witness statements were not provided by 14 March 2003 or thereafter.

(k)When the hearing commenced on 17 March 2003, the Husband said that Mr A had decided not to furnish a witness statement because he feared repercussions from the Chinese government arising from his sale of artefacts.  A witness statement had also not been procured from Mrs C who was, so he said, still in the UK, seeking a “partner”..  The Husband informed the Tribunal, as set out previously, that the Wife was still overseas.

(l)I have deliberately set out some of the events leading up to the commencement of the hearings in order to indicate that the Applicants were given every possible opportunity to present evidence in support of their case, and also, if so desired, to be legally represented; (the Applicants were represented by a barrister and S at the original hearing).

7.      This is a convenient point at which to note that all documents quoted either in clause 7 or elsewhere in these reasons, (and including the Federal court order) have been edited so as to preserve confidentiality. This is so not only in respect of the objection decisions referable to the relevant years, but also in relation to the remitted issues.  The order of the Federal Court (Exhibit R3) was issued so as to reflect the names of the Applicants and also the address of the real property to which the first remitted issue relates. Put in other words, and in respect of the remitted issues, the Tribunal is not certain, in the absence of any direction from the Federal Court as to whether this decision should be confidential.  The Tribunal considers on balance, and although there were no application by the Husband to this effect, that it would be safest to treat its decision in respect of the remitted issues also as confidential. In referring to any real property which is relevant for the purposes of these reasons I have used the descriptions contained in the original decision.  Accordingly 105 White Road refers to the residence acquired on 18 March 1988 by the Applicants for a price of $280,000, while 24 Black Avenue refers to the residence leased by the Applicants.

8.      The Respondent’s Statement of Facts, Issues and Contentions dated 29 November 2002 under the heading, Facts (clauses 4 to 25 only) is set out by way of background as follows:

“FACTS

4.    The Applicants were both born in the Peoples Republic of China.  The first Applicant left for Hong Kong at age 12 and obtained employment as a trainee clerical assistant a year later with a bank.  After five and half years of employment at the Bank he found employment as a clerk with an oil company.  Subsequently he was employed as a clerk with another trading company and then as a dealer in foreign exchange. 

5.    After practising as a foreign dealer he then became a administration manager with a construction company for a period of 13 years.

6.    The Applicants and their son arrived from Hong Kong in Australia in 1987.  The second Applicant and her son settled permanently.  The first Applicant later settled as a permanent resident in Australia in December 1989.

7.    Prior to his settlement in 1989 the first Applicant had remitted $500,000 from Hong Kong to Australia.

8.    On 28 January 1988 the first Applicant opened a bank account with the Commonwealth Bank of Australia, at the (blank) branch with a deposit of $50,000 in to account number (blank (“the Husband’s CBA account”).  The first Applicant did not provide a tax file number (“TFN”) to the bank, nor was the account disclosed to the Respondent.

9.    On 15 July 1988 the Applicants purchased a residential property at 105 White Road, for $280,000.

10.  On 4 December 1989 the second Applicant opened a bank account with the Commonwealth Bank of Australia, at the (blank) Branch, being account number (blank) (“the Wife’s CBA account”).  The second Applicant did not provide a TFN to the bank, nor was the account disclosed to the Respondent.

11.  On 13 October 1989 the Company was incorporated and the Applicants became the Company’s sole shareholders and directors. 

12.  The Company commenced business on or around late 1989 and traded from Guildford.  The company’s business activities were the importation and wholesale distribution of Chinese and Asian goods.

13.  For the year ended 30 June 1990 the following amounts were deposited into the Applicants bank accounts:-

The Husband’s CBA Account	Amount $	Total
17,000.00
1,144.23 (bank interest)
$18,144.23
The Wife’s CBA Account	10,000.00
729.51 (bank interest)
$10,729.51

14.  For the year ended 30 June 1991 the following amounts were deposited into the Applicants bank accounts: -

The Husband’s CBA Account	Amount $	Total
368,004.40
2,045.00 (bank interest)
$370,049.40
The Wife’s CBA Account	27,964.47
282.67 (bank interest)
$28,247.14

15.  On 6 May 1992 another company was incorporated.

16.  For the year ended 30 June 1992 the following amounts were deposited into the Applicants’ bank accounts:-

The Husband’s CBA Account	Amount $	Total
659,472.96
3,562.52 (bank interest)
$663,035.48
The Wife’s CBA Account	29,013.50
567.66 (bank interest)
$29,581.16

17.  On 8 July 1992 the Applicants deposited a rental bond for the lease of residential premises at (suburb) in preparation for the demolition and rebuilding of their 105 White Road property.

18.  On 5 March 1993 the Applicants lodged their building application for the construction of a new residential dwelling with estimated construction to cost $300,000 with Municipal Council.

19.  On 6 March 1993 the Applicants entered into a lease for residential premises at 24 Black Avenue from 15 March 1993.

20.  At or around the same time the original residential dwelling on the White Road property was demolished.

21.  On 15 March 1993 the Applicants moved from another residence to 24 Black Avenue.

22.  On 16 June 1993 the Applicants entered into a contract for the construction of a residential dwelling at the 105 White Road property.  The consideration for the construction was the amount of $292,821 financed by the Applicants.  All progress payments under the contract were made in the nature of cash.

23.  On 22 June 1993 the Annual company return for the 1990 year for the Company was lodged with the Australian Securities and Investment Commission (“ASIC”).  The Annual Company Return for the 1991 year was lodged on 24 June 1993.

24.  For the year ended 30 June 1993 the following amounts were deposited into the Applicants bank accounts:-

The Husband’s CBA Account	Amount $	Total
On 22 June 1993 the Annual company return for the 1990 year for the Company was lodged with the Australian Securities and Investment Commission (“ASIC”).  The Annual company return for the 1991 year was lodged on 24 June 1993. For the year ended 30 June 1993 the following amounts were deposited into the Applicants bank accounts:-	408,036.81
4,378.45 (bank interest)
$412,415.26
The Wife’s CBA Account	136,270.44
3,427.85 (bank interest)
$139,698.29

25. On 6 July 1994 the Company was deregistered by the ASIC.

9.      Having set out the content of Exhibit A1 I do not consider it necessary to include any of the content of the Applicants’ Statement of Facts and Contentions since to do would be unnecessarily repetitive.

10. In respect of the original decision, the first remitted issue relates to a capital gains tax question arising in from section 160ZZG(16) of the Income Tax Assessment Act 1936 (“the Act”).  I emphasise in this context that I must accept the findings of fact set out in the original decision. In this regard clauses 32 to 40 of the original decision, which are relevant to the capital gains tax remitted issue, read as follows:

“…

32.  The second basis for the assessments was said to be the capital gain arising from the acquisition and sale of 105 White Road.  A house previously at that address was purchased by agreement dated 18 March 1988.  The Husband, the Wife and their son lived there from 1989 to 1993.  They decided to demolish the existing house and to build a new home on the same block.  Although there were only three members of the family, they decided to build a house containing five bedrooms and six bathrooms.  A building application was lodged on 5 March 1993.  The following day they entered into an agreement to lease 24 Black Avenue for 12 months beginning from 15 March 1993.  They moved from temporary accommodation to that address on that day.  All their furnishings from 105 White Road were moved into the Black Avenue property.  The White Road house was demolished about that time.  Council approval was obtained on 25 May 1993 and a building contract was entered into the following month. Progress payments were made to the builder, mostly in sums of five or ten thousand dollars.  All were in cash.  The Husband was not able to say whether these sums corresponded with draw downs from the nephew’s loan, although he agreed that the monies came from that source.

33.  It was the Husband’s evidence that the family was not happy living at Black Avenue.  The neighbours complained about his Wife’s dog and caused other unspecified problems.  Eventually the new dwelling at 105 White Road was habitable though not completed.  Final completion did not take place until 10 August 1994, when a satisfactory building inspection certificate was issued by the Council on that day.  It was the Husband’s case, however, that the family had moved in two months previously in June.  According to his statement of evidence, some of the furniture was moved from Black Avenue to White Road.  In cross examination, however, it appeared that the only furnishings were one mattress for each of the three persons, a folding table and folding chairs and some cooking utensils.  All of this was kept in a cupboard under the stairs from time to time.  Records of electricity, water and telephone connections to White Road are equivocal.  It is clear, however, that during the whole time in which the family is said to have been living in White Road, namely between June and December 1994, the telephone continued to be connected at Black Avenue, and rent continued to be paid for that house.

34.  The Husband said that shortly after commencing to live again in 105 White Road, the family was approached by a real estate agent who said he could obtain a very high price for the property.  A sales agency agreement was signed on 19 June 1994 (some two months prior to building completion).  The Husband’s evidence was that the family did not wish to sell the house but merely wished to ascertain the value of the property.  An auction sale took place on the site on 27 August 1994 (17 days after the Council’s certificate).  The Husband’s evidence was that in accordance with the estate agent’s suggestion, the family had cleared out the residence a few days beforehand to make it look as if nobody had lived there.  A few days after the auction, the family is said to have moved back in.  The highest bid was $1.26 million which was substantially less than the $1.75 million the agent said the property might be worth.  That bid was not accepted.

35.  Shortly afterwards, the agent scheduled another auction for 12 November 1994.  Close to that date, however, the auction was cancelled as the agent was not confident of sufficient interest in the property.  It was the husband’s evidence that the family was still living at 105 White Road at the date of the proposed second auction.

36.  His evidence further was that although the large house had been designed for their purposes “to show off to our friends and to impress business people” it was not satisfactory and they reached the conclusion that they could no longer live in the house.  They therefore moved out in December 1994 and returned to live at 24 Black Avenue.  In April 1995 they entered into a third sales agency agreement for 105 White Road.  The agent was successful in finding a buyer and the property was eventually sold for$1.2 million on 6 May 1995.  Th profit on sale has been brought to tax as a capital gain under section 160Z for the 1995 year.

37. The Applicants sought to take advantage of section 160ZZQ(12). That subsection provides that a capital gain is not to be deemed to have accrued to the taxpayer on the disposal of a dwelling if “throughout the relevant period” it was the “sole or principal residence of the taxpayer”.  The “relevant period” is defined in subsection (1) to mean the period during which the dwelling was owned by the taxpayer.  The use of the word “throughout” indicates that the exemption has application only if the dwelling was the sole or principal residence of the taxpayer for the whole of the period.  Whether or not a dwelling is a sole or principal residence is not merely a question of fact.  It also requires an intention on the part of the taxpayer that the dwelling should have that status.  During the whole of the relevant period, there were two dwellings in existence, namely the White Road and the Black Avenue dwellings.  The question is to determine the intention of the Applicants as to which was to be their principal residence for the whole of that period (Case 26/93, 93 ATC 320 at 322).

38. As the original dwelling was demolished in March 1993 and a new dwelling was constructed on the site between that date and 10 August 1994, the Applicants could only come within the exemption in section 160ZZQ(12) with the aid of subsection (5) for the construction period because it would have been physically impossible for them to live either in the new or the old dwelling throughout the relevant period. I have no doubt that Black Avenue was their principal place of residence during the whole of the relevant period. Almost all of the furniture was kept there and they maintained the lease on that property from month to month after it had expired. Although the Applicants contend otherwise, the probabilities are that they never actually resumed living at 105 White Road at all. Certainly, it was not their principal residence during the whole of the relevant period, nor was it their intention that it be so. Accordingly, subsection (5) is not available to the Applicants.  The new dwelling did not become their principal place of residence as soon as practicable after its construction.  In my view, it did not become their principal place of residence after they left it prior to demolition.  Ultimately, they moved from Black Avenue to another address in White Road after the sale of 105 White Road.

39.  From its plain lexical meaning, there can be only one principal place of residence at any one time.  At all relevant times before the demolition, during the construction period, during the sales and preparations for the auctions and afterwards, until the purchaser entered into possession of 105 White Road, the principal place of residence, in my view, for both the Husband and the Wife was Black Avenue.  This conclusion is supported by other factual evidence.  White Road was listed and put up to auction on 27 August 1994, as soon as possible after the building work was certified complete by the Council on 10 August 1994.  It remained on the market continuously until it was sold.  There was evidence that there was no need of a removalist when they moved their few belongings from White Road a second time back to Black Avenue.  There was no satisfactory explanation for the disconnection of the telephone at White Road between 31 August 1994 and 6 October 1994.  There was no convincing evidence to explain the size of the newly erected house.

40.  Accordingly, there being no entitlement to an exemption from the obligation to return the capital gain, the respondent properly included that sum as to one half share each in the 1995 income year assessments of the Applicants under section 160ZZO.  The calculations supporting the assessment indicate that the Applicants have been given the benefit of the Division 18 principal residence exemption up until June 1993, when they vacated the properly in order to demolish it and build a new residence.  The only capital gain brought to account (that is, the only capital gain for which they have been denied the principal residence exemption) is for the period from June 1993 until the sale of the property on 16 May 1995.

11.      There is another matter of a general nature which can conveniently be mentioned at this stage.  Clause 41 of the original decision reads as follows:

“A submission was raised by counsel for the Applicants that his clients should be given credit in any event for the TFN tax deducted by the Commonwealth Bank from the interest credited to the two savings accounts at CBA. I accept the respondent’s submission that the TFN credit arises by operation of law by virtue of the deduction of the TFN tax at source.  The credit does not form part of the assessment process of the respondent in respect of each of the Applicant’s taxable income for the two years in question.  The effect of section 221YYHZK is to make the amount of that credit available to each Applicant in any recovery action.  I assume, therefore, that this will be taken into account if it becomes necessary to institute any such action”.

With the consent of Mr McGovern, the provisions of clause 41 of the original decision are applicable, but only to the extent relevant, in respect of this decision in relation to the relevant years: (The T Documents indicate that credit was given in respect of TFN tax in respect of certain of the relevant years).

12.      One final matter of a general nature can be mentioned.  The Applicants have caused a number of companies to be incorporated. In 1989 a trading company was incorporated and the Applicants were its sole directors and shareholders. That company imported and distributed Chinese and Asian goods.  It was deregistered in July 1994 and another company with a similar name was incorporated in February 1995. In May 1992 yet another company was incorporated. The Husband’s evidence was that the Applicants conducted their business through a company, which was their company, (and which had its own bank account) and of which they were the only shareholders and directors.  He said that when the original company was deregistered he gave instructions for its reinstatement.  He said also that even after that company was deregistered it continued to trade.  I am not concerned with the company incorporated in February 1995 because that month is outside the relevant years.  So for that matter is July 1994 when the first company was deregistered.  I have assumed that throughout the relevant years the trading company was the first company which was incorporated in 1989, and that I am not concerned with the company incorporated in May 1992. Just as Deputy President McMahon noted in the original decision, I too take the view that nothing turns upon which particular company was in fact trading.

PART B - THE EVIDENCE OF THE HUSBAND

13.      The Husband having been sworn furnished his name, address and occupation.  He is currently a consultant to a company he said that he uses his expertise to help that company conduct its business.  (He did not specify the name of the company but did say that he was neither a shareholder nor a director of it).

14.      The Husband then tendered Exhibit A1; he said that it is true and correct and said also that he thought that it was identical to the witness statement furnished by him in relation to the original hearing.

15.      Having tendered Exhibit A1 the Husband then read Exhibit A2; Exhibit A2 contains submissions and not evidence.  Mr McGovern suggested that this was not the appropriate time for this purpose.  While this was undoubtedly correct, it seemed best to allow the Husband, as a self-represented party, to conduct his case as he saw fit and in effect to allow him to present his submissions when he pleased.  The Husband said that his wife was in Hong Kong and that he could call her “if I liked” (and the reference to “I” is a reference to the Tribunal).  It was pointed out to the Applicant on this and on other occasions, and in response to similar references, that this was a case being conducted by him and it was for him to decide whether a witness should or should not be called.

16.      This clause and subsequent clauses in this Part B relate to the cross-examination of the Husband.  He was initially asked to furnish information as to his business experience in China and Hong Kong; I refer in this context to Exhibit A1 which has been quoted previously in these reasons. As indicated previously, Exhibit A1 constituted in effect his evidence in chief.

17.      The Applicants first came to Australia in 1987. The Wife and their child stayed in Australia but the Husband returned to Hong Kong where he worked until 1989 and when he took up residence in Australia permanently.  Prior to 1989 the Wife opened an account with Commonwealth Bank of Australia (“CBA”) at a suburban branch and into which $50,000 was deposited on 22 January 1988. The Husband said that an amount of $200,000 was remitted in 1987 and referred to in clause 7 of Exhibit A1 and that this constituted his life savings apart from the proceeds of sale of his house in Hong Kong. That house was sold for HK$1m or about $167,000.   Accordingly the Applicants had $367,000 approximately in available funds altogether; $50,000 was deposited as set out previously.  $280,000 (and in addition stamp duty and costs) was paid for 105 White Road acquired on March 1988. 105 White Road was purchased for cash and was never mortgaged.  It may be noted that 105 White Road is situated in a suburb generally considered as a good suburb.  The price paid in 1988 indicates that it was a valuable property.

18.      Having deposited $50,000 and spent $280,000 (plus costs) on a home, the Applicants on the Husband’s evidence did not have much remaining cash. The Company’s business was commenced in December 1989.

19.      Exhibit A1 sets out that $1,650,000 was borrowed from Mr. A. Mr A is a nephew of the Husband.  The amount of $1,650,000 was borrowed, in large tranches, commencing in November 1991 and ending in September 1994

20.      The nephew had obtained the money from the sale of Chinese artefacts.   As to why the money was advanced in tranches rather than in a lump sum was not explained.  The nephew lent the money on the basis that it was repayable on one month’s notice unless the circumstances of the investment made repayment impracticable. The nephew received no interest but was entitled to one half of the profits generated from the utilisation of the funds advanced.

21.      Clauses 27 and 21 of Exhibit A1 seek to explain deposits to the Husband’s bank account as referable in part to funds derived from a business association with Mr. W. According to clause 27 there was a corporate arrangement involving the export of fruit to Asia.  This arrangement occurred in 1994, that is after the relevant years had ended.  It follows of course that clauses 27 and 28 in relation to the fruit business cannot be relevant in any way to the objection decisions which are referable to the relevant years. In any event the last sentence of clause 27 of Exhibit A1 indicates that the venture was not profitable and that money was lost. The inclusion of clauses 27 and 21 in Exhibit A1 is presumably due to the fact that Exhibit A1 is identical to the Husband’s witness statement for the original hearing excepting only for the changes to clauses 10 and 18 to which I have referred previously.

22.      The T documents in respect of each of the Husband and contained detailed information as to their respective CBA savings accounts with the relevant suburban branch. Those records reflect large numbers of deposits, always in amounts of less than $10,000 each.  In respect of many days there was not one deposit only.  It is not possible to reconcile the deposits with drawings of the alleged loan from Mr A.  The Husband’s evidence was that each drawing was in cash and by which is meant currency or notes. The Husband said that he had been told by “people” that he could not deposit more than $10,000 in cash in any one deposit and that is why there was so many deposits. He said that having drawn cash from Mr A, he could only deposit over a period and so that pending deposit the remaining moneys were retained in cash form. There was no evidence of any safe deposit or similar arrangement and pursuant to which cash could be held in safety pending deposit or utilisation.

23.      The loan moneys were obtained over the period November 1991 to September 1994. However the Company commenced business in 1989. Clause 9 of Exhibit A1 sets out that it was necessary to devote $250,000 to the Company by way of working capital. That money could not have come from the loan which commenced only some two years later. Where then did the money come from given that most of his life savings and the sale proceeds of the Hong Kong home were spent on 105 White Road? The Husband said that he earned money in Hong Kong during the 1987 and 1989; there was no evidence as to how much was earned and how much was utilised to fund the Company; nor in general terms was there any evidence as to how and when the Company was funded and capitalised. Nor was there any evidence as to how the Husband’s earnings in Hong Kong during this period would have been sufficient after living expenses to fund the Company.   It may be noted that the Husband tended to play down his status in the Hong Kong Bank and where he worked in the foreign exchange department; he said that he was only a teller.

24.      The loans from Mr A were obtained per Exhibit A1 to expand the business of the Company.  According to the Husband, the borrowings were also used to fund “cheque swapping” with Mr C.  Mr C (who died in 1996) came to Australia as a student but he did not study at any institution of learning.  On the contrary he set up in business as an importer of health products. (The Husband said at the submission stage that 90 per cent of all Chinese student entrants to Australian were not students at all but came on student visas which are easier to obtain).  The cheque swapping activities can only be categorised as bizarre. Mr C (a relative of the Wife) would sell goods to customers some of whom were also customers of the Company. Those customers, according to the Husband, would issue cheques not to cash (which could not be done for reasons, so he said, connected with partnerships) but in favour of the Company. (This evidence was in conflict with clause 21 of Exhibit A1 in which he stated that the cheques were cash cheques) Mr C would bring the cheques to the Husband who would take the cheques and deposit them to his and his Wife’s accounts) and furnish Mr C with the cash equivalent. When it was suggested that Mr C could deposit his own sale cheques and if necessary clear them specially, the Tribunal was told that many of the cheques were postdated. (There is no mention in Exhibit A1 of postdating) The arrangement was that if a cheque was dishonoured the Applicants might be asked to redeposit it or if necessary Mr C would replace the dishonoured cheque with cash or yet other cheques. The Husband said that it was embarrassing to ask Mr C whether he had his own bank account, although the Husband also said that he knew that Mr C did have his own bank account.

25.      When asked why the cheques were not made in favour of Mr C and endorsed, the Husband said that this would cause problems with his bank.  However, so he said, if cheques were made payable to the Company there was no such problem because the bank knew that the Company belonged to the Applicant and would thus accept any endorsement of cheques by the Company in favour of either of the Applicants. There was no explanation as to why the cheques were not drawn in favour of the Applicants themselves.  Even more curious is the fact that there was no charge to Mr C; moreover the Applicants bore the bank charges and duties (FID and FDT).  This activity was funded with the money alleged to have been borrowed from Mr A and who was supposed to receive one half of the profits; this enterprise necessarily resulted in a loss.  In the same context, the Husband said that moneys borrowed from Mr A were used to fund a company.  This could have occurred only of course after the loans commenced and not previously.   If loans were made to the Company by the Applicants, they would presumably have been reflected on loan account against the Company owing to the Applicants or as share capital in the Company.  This is mere conjecture because there was no evidence as to how the Company was funded and when; however the tax returns of the Applicants do not reflect income derived from the Company.  On this basis also Mr A would presumably have been entitled to nothing in return for the substantial amount alleged to have been loaned.

26.      Annexure 2 to Exhibit A1 is a document prepared by S and described as a deed between the Husband as Borrower, Mr. A as Former Lender and a New Lender whose name is not shown. The deed is not dated either on the first page or by reference to the schedule. The Husband could not remember even as to a year when the deed was signed.  The deed calls for the insertion of its date and the name of the New Lender on the first page.  The Schedule calls for the completion in item 1 of the date of the deed, in item 2 of information referable to the Borrower, in item 3 of information referable to the Former Lender, in item 4 of information referable to the New Lender, in item 5 of the Former Terms and in item 6 of the New Terms. (The Former Terms are expressed to be the terms applicable to the loan by the Former Lender whereas the New Terms are the terms applicable to the loan by the New Lender).  In fact the Schedule is completed only as to item 2 which reflects the name and address of the Husband only and as to item 3 which contains the name of the Former Lender but not his address.  The Former Terms applicable to the Former Lender and the New Terms applicable to the New Lender are all blank.  So for that matter are all the other items.  The Recitals refer to advances totalling $1,650,000 having been made in the dates and in the amounts set out in annexure A (but there is no annexure A) and then provide that on 21 June 1995 the Borrower paid $550,000 to the Former Lender and that the Former Lender would receive the remaining $1,100,000 from the New Lender.

27.      It is not at all surprising the deed was categorised as a sham in the original decision.  I make exactly the same finding.  It is surprising indeed that the deed incomplete as it as to vital information and details, should form part of Exhibit A1 even though it was categorised as a sham at the original hearing.  That attention was paid to the original decision is evidenced by the fact that Deputy President McMahon having noted that the borrower was reflected as the Husband only, whereas according to the relevant witness statement the Applicants were both borrowers, clauses 10 and 18 of Exhibit A1 were amended to reflect that the Husband as the only borrower; as I have said Exhibit A1 is otherwise unchanged when compared with the witness statement of the Husband for the original hearing.  The Husband said that the deed was prepared by S and that S also prepared Exhibit A1 and so that S made the two changes. Assuming that the deed was originally prepared in draft on the basis that the Husband would insert the missing details (but did not do so) it is surprising that notwithstanding the fact that the missing (and essential) detail was never inserted, the deed should still form part of Exhibit A1 prepared for this hearing. (Exhibit A1 was prepared and submitted to the Tribunal at a time when S was acting for the Applicants and prior to his application for the vacation of the hearings listed to take place in December 2002; the Tribunal thinks, having regard to the fact that he acted in the original hearing and that the original decision was remitted, by consent, only in relation to the remitted issues, that his submission of Exhibit A1, to the Tribunal was in all the circumstances ill-considered).

28.      The Husband admitted that the deed was prepared for one purpose and one purpose only and that is for production to the Respondent. He said, and repeated, that as between Chinese people no such contract is necessary and in effect and in the Chinese community contracts are effected by word of mouth. (Excepting for the Husband’s statement to this effect there was no evidence in support of this astounding allegation. He nevertheless insisted that the deed is a genuine and binding contract.  It is of course no such thing. I refer in this context to volume 2 of the Appeal Book and in particular pages 289 (from line 10) p315 (from line 10) and p317 (from line 17).

29.      It may be noted that the Husband made many references to the habits and customs of the Chinese community.  He said that they help each other and that this accounts for the cheque swapping arrangement with Mr C which assisted Mr C but caused loss to him (or the Applicants) and also assumes that Mr A would be content with the loss of his profit share in respect of the money employed.

30.      The timing of the deposits presents a considerable problem. There were, as the Husband admitted, numerous deposits to the savings accounts between August 1988 and November 1991, and when the loan from Mr A is alleged to have first commenced.  For that matter he also admitted that there were substantial deposits after September 1994 (when the loan arrangement is alleged to have ended) up to May 1995.   In respect of the Husband alone deposits between August 1988 and November 1991 totalled $710,000.  How then were the deposits outside the loan period financed? The Husband said that the money might have come from the Company.  He was asked how this could be so given that his returns for the relevant years, filed belatedly only in 1997, reflect minute incomes.  The T documents show that the Husband’s taxable income for the 1991, 1992 and 1993 relevant years was respectively $2042, $12 and $3106. The Wife, according to the T documents referable to her, fared even worse; in the 1993 relevant year, and by way of example only, she sustained a loss of $1332.   The Company did not, ex facie the tax returns, produce any income for the Applicants.

31.      It was put to the Husband that he could not obtain money from the Company in general terms, except as a dividend, interest or remuneration.  He said that he received amounts as repayments of amounts owing to him by the Company.  But how then did those loans arise?  There was no evidence of loan amounts arising and indeed Mr Greenwood’s evidence was that the Husband said that the Company was not profitable.

32.      In 1995 the audit commenced. Mr Greenwood visited the Husband on 4 May 1995 and arrangements were made for an interview one week later on 11 May 1995. During that week, two matters of major significance occurred. Firstly, and on 9 May 1995, the savings accounts were closed, and secondly, 105 White Road was sold for $1.2 million.  Mr Greenwood was not told of the accounts or of their having being closed. It was put to the Husband that the accounts were closed to avoid disclosure; he said that he disagreed. The Husband was then confronted with his evidence at the original hearing; see in particular pages 242 and 243 in the second volume of the Appeal Book which reads as follows: 

“MR BEVAN:  The next day – that is the day after Mr Greenwood arranged the first interview – you and your wife went to the Commonwealth Bank at (suburb) – I withdraw that.  You and your wife went to the Commonwealth Bank at (suburb) together, didn’t you?

THE WITNESS:        Yes.

MR BEVAN:    You both held investment savings accounts at the Commonwealth Bank at (suburb), didn’t you?

THE WITNESS:        Yes.

MR BEVAN:    Those accounts during the time that you had both been in Australia have had large amounts of money banked to the credit of them, haven’t they?

THE WITNESS:        Yes.

MR BEVAN:    On 9 May you and your wife attended the (suburb) branch of the Commonwealth Bank and you both closed your respective accounts there, didn’t you?

THE WITNESS:        Yes.

MR BEVAN:    You closed those accounts in the hope that you wouldn’t have to disclose them to Mr Greenwood 2 days later?

THE WITNESS:        Yes.

MR BEVAN:    You didn’t want to disclose them to Mr Greenwood 2 days later because you didn’t want to explain the large deposits that both you and your wife had been making to those accounts since the late 1980s when you opened the accounts?

THE WITNESS:        Yes.

MR BEVAN:    Those accounts received large amounts of cheques in them by way of deposits during the 6 or 7 years that you have had those accounts, haven’t they?

THE WITNESS:        Yes.

MR BEVAN:    Both of those account had had even larger amounts of cash deposited to the credit of them during the seven year period that you had each had those accounts, isn’t that right?

THE WITNESS:        Yes.

MR BEVAN:    You and your wife both attended the (suburb) branch of the bank in the expectation that by closing the accounts, those accounts would not have to become the subject of the interview to those later with Mr Greenwood?

THE WITNESS:        Yes.

33.     I should note, in general terms, that the two CBA accounts established for the Husband and the Wife respectively, were in fact savings accounts; they were throughout the hearing referred to sometimes as savings accounts and sometimes as bank accounts; in fact all of such references relate to the same accounts at the suburban branch of the CBA.

34.      As to his returns for the relevant years, filed only in 1997, the Husband said that he had instructed his accountant H C to prepare the returns.   Later he replaced H C with a new accountant because H C had not done so.  Mr Greenwood’s evidence was that H C denied that he was ever the auditor charged with the responsibility for the personal affairs for the Applicants.  The returns filed in 1997 were prepared by another auditor (H I); H I signed certificates that he produced the returns in accordance with information supplied by the Applicants. (As to the evidence in respect of the accountants I refer to page 667 of the Appeal Book from line 5 to the end of that page) reading as follows:

“MR BEVAN:  And that is why you are unable to explain the failure to lodge annual returns with the Australian Securities Commission at all relevant times until, the Company, was deregistered in the middle of 1994.  That, I suggest to you, explains why you and your wife never took action to lodge annual returns for the Company prior to its deregistration from the Companies Register in the middle of 1994.

THE WITNESS:        You mean lodge the tax return or annual return?

MR BEVAN:   Annual return.

THE WITNESS:        In fact, now I find it is very simple just, you know, get my accountant to do it because from before I came here permanently I appoint H C and Company to handle annual return and tax return for us, including the company and our personal.  You can check that.  The first couple of tax returns for my wife, we already lost many, many, years ago.  In fact, already in your record, okay.  So, I didn’t see there is any reason that, you know, we get into trouble by not lodging the annual return in time.

MR BEVAN:    The reality of the situation is that during the entire period prior to the commencement of the audit by the tax office into the affairs of yourself and your wife, yourself and your wife had never lodged individual tax returns in Australia, had you?

THE WITNESS:        At the time only when Mr Greenwood came to me and I double checked with my accountant and I found out.

MR BEVAN:    Yes, but by that stage ---

THE WITNESS: But I didn’t know that.  Because I left that with my accountant to do it.

MR BEVAN:    But you’d been living in Australia for six years prior to the commencement of the tax office audit, hadn’t you?

THE WITNESS:        Five and a half.

MR BEVAN:    Yes.  And yet at five and a half years ---

THE WITNESS:        No. 1995 – no, four and a half.  Because I came here at the end of 1999 – 1989, isn’t it? ”

Further as to the tax returns, it was put to the Husband that he had run the business for seven years and had never filed tax returns and that he did so only after Mr Greenwood came upon the scene when the audit started.  His answer was simply that the period was five years.  The Husband agreed that he was an experienced businessman (qualified by him by reference to “my own area”). He denied that he deposited company monies to personal bank accounts.  He said also that he did not tell Mr Greenwood about the savings accounts because Mr Greenwood did not ask about them.  He said furthermore that he closed them on advice from his accountant.   He agreed that he did not tell Mr Greenwood on 11 May 1995 that the accounts had been closed just two days previously, but repeated that he did not inform Mr. Greenwood because Mr Greenwood did not ask him.

35.      It was put to the Husband that Mr Greenwood asked categorically whether monies had been borrowed from family members. The answer was that Mr Greenwood had never asked for this information. The Husband also denied that at the interview and in relation to real property he had been asked about anything other than the purchase of 105 White Road. The Husband said in addition that at a further interview in June 1996 he still did not tell Mr Greenwood about the savings accounts and his explanation was (again) that Mr Greenwood did not ask him.   Mr Greenwood’s evidence was that he did indeed ask about all bank accounts in respect of the Company and the Applicants.

36.     105 White Road was sold for $1.2 million. The Husband agreed that in the period preceding sale there had been attempts to sell for $1.7million but said that $1.2 million was the market price.  He agreed though that he was “running scared”.

37.      The Husband was asked about his brother who is alleged to be the New Lender under the deed. The brother has visited Australia; he is younger and a contractor. He said that his brother is “reasonable” in answer to a question as to whether he is wealthy and that he, the brother has a house in Kowloon. His asked whether his brother would be giving evidence and his answer was that he had not asked him.

38.      On a number of occasions the Husband answered questions by “you can ask my solicitor” or in similar terms.   This arose in particular in relation to the preparation of Exhibit A1 and its alteration in respect of clauses 10 and 18.

PART C. THE EVIDENCE OF MR GREENWOOD

39.      Exhibit R2 is a large box file containing Mr Greenwood’s witness statement, his witness statement in respect of the original hearing (JRG1) and numerous annexures.  Mr Greenwood testified as to the truth of his statement.  The Husband asked him no questions and that statement must be accepted.

40.      In clause 9 of his witness statement Mr Greenwood said that he did not know of the savings accounts or their closure until “quite some time later as a result of further searches made by me”.

41.      In clause 9 of his witness statement Mr Greenwood noted that on 11 May 1995 the Husband told him inter alia that the Company “was not very profitable” and that whatever moneys he had brought from Hong Kong he spent on 105 White Road and the provision of capital to the Company (Clause 10(vii) of JRG1).

42.      The Husband told Mr Greenwood that “neither he nor his wife had borrowed from any family members since their arrival here in Australia.” I include in these reasons clause 10 (xxii) of JRG1 as follows:

(xxii) neither he nor his wife had borrowed any money from any family members since their arrival in Australia (which was stated in response to a specific question from me);…”  

43.      Clause 12 of JRG 1, states specifically that Mr Greenwood asked the Husband for a list of all of the bank accounts of himself and his Wife and that the Husband showed him an extensive list of accounts but which did not include the savings accounts with CBA. Clause 12 of JRG 1 states in its final sentence “at no time during my interviews with the Husband despite extensive prompting did he ever disclose to me the existence of these two accounts”.

44.      Mr Greenwood was referred specifically to Tab 3 (statements in respect of the savings accounts) Tabs 5 and 7 (notes of the interview on 5 June 1996) Tab 15 (analysis of deposits to the savings accounts) and Tab 19 (his capital gains tax calculation).  I do not think it necessary to refer in greater detail to the wealth of material prepared by Mr Greenwood after an exhaustive investigation of the affairs of the Applicants, all of which must, having regard to the fact that the Husband did not cross-examine him, be accepted as correct.

45.     Exhibit A1 refers in clause 15 to investments in real property through corporate entities; at the hearing before me specific mention was made only of 105 White Road, which was purchased by the Applicants.

PART D - CLOSING SUBMISSIONS

46.      The Husband repeated what he had said earlier in evidence, that all of the transactions were non-capital taxable transactions.  He also said that when coming to Australia he had had a lot to learn in order to accustom himself to Australia’s laws.  In effect he attempted to paint himself as naive but not dishonest.  Given his business experience, Deputy President McMahon in the original decision doubted that he was nearly as untutored as he sought to suggest.  I make the same finding.

47.      I am satisfied that the Husband’s evidence was largely untruthful and moreover untruthful in vital areas.  Curiously enough, he remained self-possessed throughout.  He was not in the slightest disconcerted by being confronted with the fact that he had given different and inconsistent evidence at the original hearing and most notably as to the closing of the savings accounts.  Nor can it be accepted that his failure to file tax returns was caused by his accountant’s default.  The returns when filed were of course grossly distorted.  The incomes reflected would not have been remotely adequate in respect of the standard of living enjoyed by the Applicants.

48.      At the end of the hearing the Husband was still suggesting that matters could still be done “if the Tribunal so desired”.  Z could still go to China; it will be recollected that Z was supposed to go in the middle of December 2002.  The Husband’s statement that witness statements could not be obtained would indicate that a trip by Z would serve little purpose.  The failure of the Applicants to call any of Mr A, Mr C, the Husband’s brother (the New Lender) or either of the accountant must, having regard to the numerous opportunities afforded to them to do so, give rise to a negative inference against the Applicants.  This is so in particular in relation to Mrs C and Mr A, whose evidence was described by S as “absolutely vital” to the Applicants’ case.  It was presumably also vital in relation to the New Lender although S made no specific mention of him as a potential witness at the time when the hearings, set down in December 2002, were vacated at the request of the Applicants.

49.      Clauses 26 – 29 of the original decision are incorporated in this decision as follows:

“…

26. In Commissioner of Taxation v Dalco 168 CLR 614, a Full Court of the High Court held that the task for a taxpayer upon an appeal or a review is to show that the amount of money for which the tax is levied by a notice of assessment exceeds his actual substantive liability. A taxpayer does not prove that his taxable income was less than the amount shown in the assessment merely by showing that in some respects the Commissioner erred in the way in which he attributed income to the taxpayer or otherwise dealt with the material available to him. At 623, Brennan J said:

"But mere error in the formation of that judgment by the Commissioner does not warrant the setting aside of the amount assessed. Given the validity of the exercise of the power to make an assessment under section 167(b), the ultimate question is whether the amount of the assessment is excessive. The amount of the assessment might not be excessive in fact, though the reasons which led to the assessment were erroneous."

27. His Honour expressly approved of the observation of Wilcox J in the Full Federal Court hearing that "the task for the taxpayer upon an appeal or review under Pt V of the Act, is to show that the amount of money for which tax is levied by particular notice of assessment exceeds the actual substantive liability of the taxpayer".

28. A good deal of hearing time was spent cross examining the respondent's auditor in an attempt to show some procedural deficiencies in his method of interviewing and auditing. In my view, this was misconceived. There was clearly a basis justifying the default assessments raised. The history of regular large deposits to the two savings accounts, the unstable history of company incorporations and de-registrations to which the auditor referred in his initial report, the absence of bank accounts for some companies, the conduct by the husband of the trading company's ANZ bank accounts after the company had ceased to exist through failure to file proper returns, the conduct of the husband in closing the two accounts and the failure to give any explanation until proceedings in this Tribunal, all justified the making of the assessments. It then became the task of the applicants to show on the balance of probabilities that the amounts of the assessments were excessive. This could be done only by showing affirmatively, the correct amount of taxable income. Neither applicant has made any attempt by business records or expert accounting evidence to show this.

29. Their case is that every dollar assessed to them as taxable income was disputed. In the absence of any return, in other words, they ask the Tribunal to find that they had no assessable income in these two years. This is a finding I am clearly not prepared to make. It is not sufficient for the applicants to show (as they have attempted) that the monies treated by the respondent as being their income are not in truth their income. More is required of them in order to discharge the heavy onus they bear under section 14ZZK of the Taxation Administration Act. They had an onus to show what part of the bank deposits assessed as income was not their income, or to explain how they lived and conducted various businesses for two years without income, or to show what their real taxable income was otherwise during those two years. They have failed to do this.”

It will be noted that in the original hearing the Applicants conducted their case differently; in particular there was apparently (unlike the position in the hearing before me) substantial cross-examination of Mr. Greenwood. The statements as to the applicable law in the original decision were of course correct. Deputy In this case the Applicants have most significantly failed to discharge the onus on them under section 160ZZK of the Taxation Administration Act 1953 (“the TAA”)..  Indeed it must be said that they have made no real effort to do so; it is of course likely that there was no basis in fact on which they could have done so.

50.      I note in general terms that this is a case in which the Applicants have been grossly dishonest in relation to their tax affairs and moreover over a lengthy period.  The Husband’s evidence as to a loan from Mr A cannot be accepted; nor can it be accepted as to the replacement loan from his brother.  The cheque swapping arrangement is simply ludicrous; the inconsistencies between the evidence of the Husband in the hearing when compared with Exhibit A1 must be regarded as significant.  It is very probable that the Applicants simply helped themselves to the Company’s money.  Their own returns filed in 1997 reflect incomes of such minuscule amounts that it is not possible that they could have lived and educated their son on that income.  Nor is the Husband even remotely as unsophisticated as he would like to pretend.  He worked in a bank in Hong Kong for a number of years in the foreign exchange department; this is an area requiring sophistication.

51.      The provisions of the preceding subclause apply both to the Husband and also to the Wife.  It is the Husband who appeared in the hearing.  However the wife was plainly a party to the whole arrangement and a beneficiary of it.  Although she did not appear in the hearing before me, Deputy President McMahon in the original decision noted that she was alert.

PART E. ADDITIONAL TAX; THE RELEVANT YEARS

52. The Husband said nothing at all about the additional tax imposed in respect of the relevant years or for that matter in relation to the later years. He did not contend that the amounts assessed were too high or that he should be allowed any further remission. The Husband having made no submission, the Respondent did not do either. Mr McGovern referred merely to the sections of the Act which were relevant.

In respect of all of the relevant years, additional tax was imposed under section 222 of the Act. The Tribunal has limited jurisdiction as regards to additional tax imposed (having regard to section 14ZS of the TAA) depending on whether or not (and being a matter on which no information was presented to the Tribunal) it exceeded 20 per cent per annum. The Tribunal notes merely that if it has jurisdiction it would not remit the additional tax below the amounts assessed.

In respect of the first three relevant years, additional tax was imposed under section 223 of the Act, and remitted under section 227 of the Act; the extent of the remissions is such that the Tribunal would not grant any further remissions. In respect of the last relevant year (the 1993 relevant year) the regime changed and remission did not apply. Additional tax for the 1993 relevant year was imposed under sections 226J and 226X of the Act. Insofar as for the purposes of section 226X it is necessary to make a finding of hindrance; the Tribunal considers that the actions of the Applicants in relation to Mr Greenwood after the audit commenced (and in particular their untruthful answers to his questions on relevant matters, and their sudden closing of the accounts), constituted hindrance of the kind contemplated by the section.

PART F – THE REMITTED ISSUE – 160ZZQ(16) OF THE ACT

53.      In respect of the capital gains tax issue remitted to the Tribunal by the Federal Court and in relation to the sale of 105 White Road, I commence by noting, as set out previously, that I am bound by the findings of Deputy President McMahon as contained in the original decision.  He found in particular that after the Applicants vacated 105 White Road in June 1993, they never returned to live in it as their principal place of residence.  The actual residence on 105 White Road, acquired in 1988 was totally demolished and a new and much larger residence was constructed on 105 White Road.  (The Husband in his evidence said that this occurred in part because the old house was faulty and that it leaked).

54. The legislation, which is relevant in this regard, is contained in section 160ZZQ of the Act. The definitions of “dwelling” and “relevant period,” contained in subsection (1) are set out as follows:

“dwelling'' includes:

(a)a unit of accommodation constituted by, or contained in, a building, being a unit that consists, in whole or in substantial part, of residential accommodation; and

(b)a caravan, houseboat or other mobile home;

“relevant period”, in relation to the disposal of a dwelling by a taxpayer other than a taxpayer in the capacity of a trustee, means the period after 19 September 1985 during which the dwelling was owned by the taxpayer and includes any period during which land acquired after that date on which the dwelling is erected was owned by the taxpayer before the erection of the dwelling.

55. Section 160ZZQ(5) might in certain circumstances be relevant; it reads as follows:

160ZZQ(5)  [Erection of dwelling by taxpayer]  

Where:

(a) a taxpayer has at any time (in this subsection called the ``relevant time''), whether before or after the commencement of this subsection, acquired a legal or equitable estate or interest (other than a life interest) in land; and

(b)one of the following subparagraphs is applicable:

(i) no dwelling or partly erected dwelling was on the land at the relevant time and, after that time, the taxpayer:

(A) erected a dwelling on the land; or

(B) commenced to erect a dwelling on the land but died before the erection of the dwelling was completed;

(ii) a partly erected dwelling was on the land at the relevant time and, after that time, the taxpayer:

(A) completed the erection of the dwelling; or

(B) commenced to complete the erection of the dwelling but died before the erection of the dwelling was completed;

(iii) a dwelling or partly erected dwelling was on the land at the relevant time and, after that time, the taxpayer demolished the dwelling or partly erected dwelling and:

(A) erected a new dwelling on the land; or

(B) commenced to repair or renovate the dwelling but died before the repairs or renovations were completed; and

(iv) a dwelling was on the land at the relevant time and, after that time, the taxpayer:

(A) repaired or renovated the dwelling; or

(B) commenced to repair or renovate the dwelling but died before the repairs or renovations were completed; and

(c)if sub-subparagraph (b)(i)(A), (ii)(A), (iii)(A) or (iv)(A) applies:

(i) the dwelling became the sole or principal residence of the taxpayer for the purposes of this Part as soon as practicable after the dwelling was erected, the erection of the dwelling was completed or the repair or renovation of the dwelling was completed, as the case requires and continued to be the sole or principal residence of the taxpayer for the purposes of this Part for not less than 3 months; or

(ii) the taxpayer died after the dwelling was erected, the erection of the dwelling was completed or the repair or renovation of the dwelling was completed, as the case requires and the taxpayer's death occurred:

(A) before it was practicable for the dwelling to become the taxpayer's sole or principal residence; or

(B) during the period of 3 months referred to in subparagraph (i); and

(d)an election that this subsection is to apply in relation to the dwelling is made in accordance with subsection (5A) or (5B) by:

(i) in a case where subparagraph (ii) does not apply - the taxpayer; or

(ii) in a case where sub-subparagraph (b)(i)(B), (ii)(B), (iii)(B) or (iv)(B) or subparagraph (c)(ii) applies or any other case where the taxpayer died before the end of the period allowed for making an election without having made an election:

(A) if the taxpayer held the estate or interest as a joint tenant - the surviving joint tenant; or

(B) otherwise - the trustee of the estate of the taxpayer;

the following provisions have effect:

(e)if subparagraph (c)(i) applies:

(i) the period during which the dwelling was the sole or principal residence of the taxpayer for the purposes of this Part includes:

(A) the period on and from the relevant commencing date to and including the date on which the dwelling was erected, the erection of the dwelling was completed or the repair or renovation of the dwelling was completed, as the case requires (other than any part of that period during which the taxpayer was the dependent child of another taxpayer); or

(B) the period of 4 years immediately before the dwelling became the sole or principal residence of the taxpayer (other than any part of that period during which the taxpayer was the dependent child of another taxpayer);

whichever period (in this paragraph called the ``construction period'') is the shorter period; and

(ii) no other dwelling is to be treated as having been the sole or principal residence of the taxpayer during the construction period;

(f)if sub-subparagraph (b)(i)(B), (ii)(B), (iii)(B) or (iv)(B) or subparagraph (c)(ii) applies:

(i) this Part has effect as if the dwelling was the sole or principal residence of the taxpayer at the time of his or her death; and

(ii) the period during which the dwelling was the sole or principal residence of the taxpayer for the purposes of this Part includes:

(A) the period on and from the relevant commencing date to and including the date of the death of the taxpayer (other than any part of that period during which the taxpayer was the dependent child of another taxpayer); or

(B) the period of 4 years immediately before the death of the taxpayer (other than any part of that period during which the taxpayer was the dependent child of another taxpayer);

whichever period (in this paragraph called the ``construction period'') is the shorter period; and

(iii) no other dwelling is to be treated as having been the sole or principal residence of the taxpayer during the construction period.

It does not apply in this case simply because the Applicants did not comply with paragraph (c) (i); they did not as soon as practicable after it was erected, take possession of the new dwelling as their sole or principal residence and continue to live in it as their sole or principal residence for at least three months; (during his evidence the Husband said that they did move back for three months, probably a reference to this statutory provision, but Deputy President McMahon found that they did not).  But even if they had, subclause (5) would not apply because the election referred to in paragraph (d) was not made.

56.      The subsection specifically referred to this Tribunal by the Federal Court is 160ZZQ(16) which reads as follows:

160ZZQ(16)  [Natural person - partial exemption]  

Subject to subsection (21), where:

(a)  a dwelling owned by a taxpayer referred to in paragraph (12)(a) is disposed of;

(b)  the dwelling was the sole or principal residence of the taxpayer during part only of the relevant period; and

(c)  but for this section and subsection 160ZA(1), a capital gain would have accrued to the taxpayer, or the taxpayer would have incurred a capital loss, in respect of the disposal;

a capital gain shall be deemed to have accrued to the taxpayer, or the taxpayer shall be deemed to have incurred a capital loss, as the case may be, in respect of the disposal of the dwelling, of an amount calculated in accordance with the formula

AB  - - - -,

C where:

A is the amount of the capital gain or of the capital loss, as the case may be, referred in paragraph (c);

B is the number of days in the part of the relevant period during which the dwelling was not the sole or principal residence of the taxpayer; and

C is the number of days in the relevant period.

The effect of subclause (16) is that it is necessary to calculate the number of days during which the dwelling was not the sole or principal residence in relation to the number of days in the relevant period. Having regard to the definition of “relevant period”, the relevant period is calculated by reference to the period of ownership of a dwelling. The definition of “dwelling” in turn in its terms clearly relates to a building; (see paragraph (a) of the definition.) In this instance the building in question is the new dwelling which was never the sole or principal residence of the Applicants because they never moved into it. This being so there is no relevant period and section 160ZZQ(16) of the Act does not apply.

57. Section 160P of the Act cannot in its terms apply simply because 105 White Road as a whole was acquired after 20 September 1985.

58. Section 160N of the Act provides that the loss or destruction of an asset constitutes the disposal of an asset. The CCH Reporter at page 46-729 suggests that destruction includes voluntary destruction e.g. demolition. The CCH Reporter then proceeds to refer to section 160P for the composite asset rules where a building is demolished or replaced. However, section 160P of the Act does not in its terms, for the reasons set out previously, apply.

PART G – THE REMITTED ISSUE – ADDITIONAL TAX

59. As I have indicated, the Husband said nothing whatsoever and made no contentions about this aspect. In respect of the later years, additional tax was imposed under sections 226J and 226X of the Act and where the regime provides for a rate of tax, and not a higher rate subject to remission. Remission may conceivably apply in respect of tax imposed under section 222 of the Act depending on whether the Tribunal has jurisdiction (having regard to section 14ZS of the TAA) which in turn depends on whether or not the amount is above or below 20 per cent per annum, and as to which, as I have said the Tribunal was not furnished with any information. Assuming that the Tribunal does have jurisdiction it does not consider that any further remission of tax imposed under section 222 of the Act would, in all the circumstances, be justified or appropriate.

Part H- CONCLUSION

60. In all the circumstances, the objection decisions in respect of the relevant years are affirmed. In respect of the remitted issues, the Tribunal directs that the Applicants are not entitled to any capital gains tax exemption under section 160ZZQ(16) of the Act and finds furthermore that no further remission of additional tax imposed is justified or warranted.

I certify that the 60 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J Block, Deputy President

Signed:         L Houston
  Associate

Dates of Hearing  17 and 18 March 2003
Date of Decision  14 April 2003
Advocate for the Applicant       Self represented

Counsel for the Respondent     Mr D McGovern SC

Solicitor for the Respondent     Mr Adrian Mow

.