Jarvis-Lavery and Commissioner of Taxation (Taxation)

Jarvis-Lavery and Commissioner of Taxation (Taxation) [2019] AATA 5409 (13 December 2019)
Division:TAXATION AND COMMERCIAL DIVISION
File Numbers: 2013/3718, 2013/3719, 2013/3720
Re:Alan Jarvis-Lavery
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION
Tribunal:Deputy President Bernard J McCabe
Senior Member Robert J Olding
Member Peter W Ranson
Date:13 December 2019
Place:Brisbane

The decisions under review are affirmed.
.......................[sgd].....................................
Deputy President Bernard J McCabe
Catchwords
TAXATION – income tax – Goods and Services Tax (GST) - input tax credits - creditable acquisitions – administrative penalties - whether the assessments were excessive – whether the Applicant discharged the burden of proof – decision affirmed
Legislation
Administrative Appeals Tribunal Act 1975 (Cth), s 19D
A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 7-1, 7-5, 9-5, 9-10, 11-5, 11-15, 29-5, 29-10, 40-5, 93-5, 189-5, 189-10, Part 4-2 Division 70
A New Tax System (Goods and Services Tax) Regulation 1999 (Cth), 40-5.09
Income Tax Assessment Act 1936 (Cth), ss 166, 167
Taxation Administration Act 1953 (Cth), s 14ZZK(b)(i); Schedule 1, Subdivision 284-B
Tax and Superannuation Laws Amendment (2013 Measures No. 1) Act 2013 (Cth), Schedule 7
Cases
Bayconnection Property Developments Pty Ltd and Commissioner of Taxation [2013] AATA 40
Bosanac v Commissioner of Taxation [2019] HCA 41
FCT v Cassaniti [2018] FCAFC 212
FCT v Dalco (1990) 168 CLR 614
Imperial Bottleshops Pty Ltd v Commissioner of Taxation (1991) 22 ATR 148

REASONS FOR DECISION
Deputy President Bernard J McCabe
Senior Member Robert J Olding
Member Peter W Ranson

Officers employed by the Commissioner of Taxation audited income tax and GST returns lodged by the Applicant, Mr Alan Jarvis-Lavery, and decided that he had substantially understated his income and over-claimed GST input tax credits. Assessments were duly issued, including for penalties. Mr Jarvis-Lavery objected against the assessments but the Commissioner wholly disallowed the objections. Mr Jarvis-Lavery then applied for review of the objection decisions by the Tribunal.
The difficulty for Mr Jarvis-Lavery is that he did not or could not produce accurate records to substantiate his returns. Also, a multitude of entries in various bank accounts, amounting to around two million dollars, were, he says, not related to his affairs but to those of his long-term friend and business associate, a Mr Jonathon Reason, apparently known as ‘Jonty’. Mr Jarvis-Lavery said the accounts were a ‘conduit’ for monies received or paid on behalf of Mr Reason and constituted a ‘running balance’ of amounts owed to him by Mr Reason.
In an attempt to satisfy his onus of proving that the assessments are excessive, Mr Jarvis-Lavery undertook what he said was a comprehensive reconciliation exercise, preparing a schedule of entries and cross-referencing it to various bank account and credit card statements. He has also produced copies of tax invoices which he says evidence his entitlement to input tax credits.
The main issue in the proceeding is whether the outcome of these exercises, as explained by Mr Jarvis-Lavery, is sufficient to satisfy the Tribunal on the balance of probabilities that the assessments are excessive. We have decided that it is not and have therefore affirmed the objection decisions.
BACKGROUND
Facts not in dispute
The following facts are not in dispute:
(a)An amount of $950,000 by which the Commissioner increased Mr Jarvis-Lavery’s assessable income was calculated by reference to three amounts paid to Mr Jarvis-Lavery’s bank account which the Commissioner considered to be income.
(b)The Commissioner maintains, and Mr Jarvis-Lavery denies, that there are many other unexplained bank account entries.
(c)Mr Jarvis-Lavery carried on a music, television and film production business and a share trading business.
(d)Mr Jarvis-Lavery was registered for GST and accounted for GST on a cash basis.
(e)Quarterly GST returns (known as Business Activity Statements or BASs) for each of the tax periods in dispute were lodged by Mr Jarvis-Lavery or on his behalf.
(f)For the first tax period, ending 30 June 2008, an amended BAS was subsequently lodged.
(g)The assessments of net amount in dispute effectively disallowed various input tax credit claims.
(h)The assessments of administrative penalties were calculated at the rate of 50% of the alleged shortfalls based on the Commissioner’s view that Mr Jarvis-Lavery was reckless as to the accuracy of the returns, plus a 20% uplift.
(i)The decisions under review by the Tribunal are decisions of the Commissioner, each dated 17 April 2013, disallowing objections against the assessments.
The essence of the dispute
At the heart of the income tax dispute are a substantial number and value of deposit entries appearing in bank accounts held or controlled by Mr Jarvis-Lavery which the Commissioner considers to be ‘unexplained’ and that he is therefore entitled to treat as income.
Although some other issues arise, the GST dispute is primarily about whether the Tribunal should be satisfied (a) Mr Jarvis-Lavery actually made and paid for certain acquisitions from an associated entity, Amabalad Pty Ltd (Amabalad) for which input tax credits (ITCs) were claimed; and (b) other acquisitions were in fact business acquisitions and not of a private or domestic nature.
These issues are difficult and contentious because Mr Jarvis-Lavery did not produce accurate records. They are exacerbated by Mr Jarvis-Lavery now claiming, in a number of cases, that the true position is not as per his lodged/amended returns. More particularly, difficulties arise because of a large number of entries in Mr Jarvis-Lavery’s bank accounts which Mr Jarvis-Lavery claims appear because the accounts were used as a ‘conduit’ for payments made and received on behalf of, or offset against, a debt owed to him by Mr Reason.
ISSUES FOR DETERMINATION
The ultimate issue for determination is whether, in each case, Mr Jarvis-Lavery has discharged the burden of proving that the assessments are excessive.
In summary, the assessments in contention relate to:[1]
(a)Income tax – assessment dated 2 April 2012 for the 2008 income year, resulting in an increase in Mr Jarvis-Lavery’s taxable income by $950,000;
(b)Goods and Services Tax (GST) – assessments dated 13 March 2012 of net amounts for each of the quarterly tax periods from 1 April 2008 to 31 March 2010, resulting in aggregate in an increased liability of $26,080;
(c)Administrative penalties – for making false or misleading statements in the income tax and GST returns for these periods. The penalty assessment, dated 2 April 2012, relating to the income tax shortfall is for $266,466.40. The total of the penalty assessments relating to the shortfalls in GST net amounts, dated 13 March 2012, is $15,648.
PRELIMINARY MATTERS
[1] Mr Jarvis-Lavery also sought review of a decision disallowing an objection against an assessment of income tax for the 2009 income year in relation to disallowance of a PAYG withholding credit claimed in his return and a related penalty assessment. The issue was not included in Mr Jarvis-Lavery’s Statement of Facts Issues and Contentions or agitated in his submissions. It appears now to be common ground that the Tribunal has no jurisdiction to review a decision disallowing a PAYG credit. In any case, we understand this issue has been resolved between the parties.
Procedural history
An oral hearing of the applications for review was conducted by a former Deputy President of the Tribunal over a period of three days from 19 to 21 September 2016. Apart from preliminary matters and opening outlines on behalf of each party, the hearing time was mainly taken up with oral evidence by Mr Jarvis-Lavery and Mr Reason.
At the conclusion of the oral hearing, the presiding member allowed time for written closing submissions to be filed, with the final submissions, being Mr Jarvis-Lavery’s reply submissions, due by 18 November 2016. Both parties filed written submissions, albeit Mr Jarvis-Lavery’s reply submissions were not received until 3 January 2017.
Regrettably, the applications for review were not decided before the expiry of the presiding member’s term of appointment to the Tribunal nor in a timely fashion thereafter. On behalf of the Tribunal, we apologise unreservedly for the delay in finalisation of this matter.
After a discussion with the parties’ representatives at a directions hearing earlier this year, it was determined that the applications should be decided by a reconstituted Tribunal by reference to the transcript and recording of the oral hearing and the witness statements and documentary evidence, and the parties’ written submissions.[2] Neither party submitted that any further oral hearing should be conducted.
[2] Administrative Appeals Tribunal Act 1975 (Cth), s 19D.
Initially, Deputy President McCabe and Senior Member Olding were constituted as the Tribunal for this purpose. However, after reviewing the voluminous materials filed by Mr Jarvis-Lavery, it was decided that consideration of the matter would benefit from including a member with specialist skills in accounting. Hence, Member Ranson was added to the reconstituted Tribunal.
The (reconstituted) Tribunal had the benefit of a transcript and a complete video recording of the hearing. After viewing the audio-visual recording and reviewing the transcript and all witness statements and other documentary evidence and written submissions, we are satisfied we are able to decide the matter in a way that provides procedural fairness to both parties.
Availability of transcript
Not surprisingly, the Commissioner’s written submissions served and filed after the oral hearing referred to oral evidence given in the hearing, which the submissions identified by reference to the transcript of the hearing.
Mr Jarvis-Lavery’s reply submissions stated that he was ‘entirely unaware of the existence of the transcript of the proceedings’ and objected to the use of the transcript in the Commissioner’s submissions. The submissions went on to state that the Mr Jarvis-Lavery was at a serious disadvantage without the transcript and that he ought to be provided with it and then given a further opportunity to respond to the Commissioner’s submissions.
Mr Swanwick, who appeared for Mr Jarvis-Lavery, did not renew this request at the subsequent directions hearing nor seek any direction in relation to the transcript. Nevertheless, we have considered whether, as a matter of procedural fairness, Mr Jarvis-Lavery should now be given an opportunity to obtain and refer to the transcript.
Recording of proceedings before courts and tribunals in Australia is standard practice as is the facility for parties to obtain transcripts of the recordings upon payment of a fee. This Tribunal follows that practice which we would have thought would be well known to legal practitioners and in that regard we note Mr Jarvis-Lavery was represented at the hearing by an experienced solicitor, who made the subsequent written submissions on his behalf. Additionally, there were at least four references to the ‘transcript’ during the third day of the hearing and it is clear from the Tribunal’s website, to which applicants are referred in Tribunal correspondence after an application for review is lodged, that hearings are recorded and may be transcribed.
Mr Jarvis-Lavery does not mention any attempt to contact the Tribunal’s registry about obtaining access to a transcript after receiving the Commissioner’s submissions. Nor is there any entry in the Tribunal’s records of such an approach being made. If there had been, arrangements could have been made for Mr Jarvis-Lavery or his representative to inspect the transcript.
In the circumstances, we conclude that there has not been any denial of procedural fairness. Mr Jarvis-Lavery had the same opportunity as the Commissioner and other party before the Tribunal to obtain access to a transcript. Allowing further time now to do so would further delay finalisation of this matter.
Burden of proof
Both Mr Jarvis-Lavery’s written submissions (at least so far as they relate to the assessments of net amount) and the Commissioner’s written submissions state that, under s 14ZZK(b)(i) of the Taxation Administration Act 1953 (Cth), Mr Jarvis-Lavery has the burden of proving that the:
assessment is excessive or otherwise incorrect and what the assessment should have been.
That is not an accurate recitation of s 14ZZK(b)(i) as it applied for the purposes of the current applications. Section 14ZZK(b) in its current form was substituted in 2013. But the substituted provision only applies to assessments made on or after 1 July 2013.[3] All of the assessments the subject of the objection decisions under review were made in 2012.
[3] Tax and Superannuation Laws Amendment (2013 Measures No. 1) Act 2013 (Cth), Schedule 7.
Thus, it is s 14ZZK(b)(i) as it applied before the 2013 amendment that applies in this case and which relevantly provided merely that an applicant has the burden of proving that ‘the assessment is excessive’.
It is common ground that the income tax assessment was raised under s 166 of the Income Tax Assessment Act 1936 following lodgement of a return and is not a default assessment made under s 167 of the amount in the Commissioner’s judgement on which tax ought to be levied. Mr Jarvis-Lavery’s submissions also acknowledge, with respect correctly, that, regardless of whether an assessment was made under s 166 of the Income Tax Assessment Act 1936 following lodgement of a return or as a default assessment under s 167, the taxpayer must prove on the balance of probabilities that the assessed amount exceeds the taxpayer’s true liability.
However, Mr Jarvis-Lavery’s submissions go on to state that:
In relation to s 167, but not s 166, the taxpayer must establish on the balance of probabilities not simply that the Commissioner’s assessment made under s 167 was wrong, but rather what the actual amount should be.
And then in response to the Commissioner’s submission that Mr Jarvis-Lavery has not satisfactorily explained other deposits to his bank accounts additional to the $950,000 added to his returned assessable income, Mr Jarvis-Lavery’s submissions go on to state:
That sounds very much like the Commissioner is trying to impose an onus on the applicant under s 167, not s 166.
That, with respect, may reveal a blurring of the distinction between the burden of proof imposed by the statute at the relevant time and the ways in which an applicant may discharge that burden which necessarily vary according to the circumstances.[4]
[4] FCT v Dalco (1990) 168 CLR 614, 624.
It is true that one such circumstance is whether the assessment was raised under s 166 or s 167. As the High Court recently confirmed in Bosanac v Commissioner of Taxation:[5]
. . . although the nature of the task for a court on appeal against a disallowance of objection is the same irrespective of whether the assessment the subject of objection was issued under s 166 or s 167 of the ITAA, the differences between s 166 and s 167 assessments sometimes mean that the manner in which a taxpayer may demonstrate that an assessment is excessive is different depending on whether it is a s 166 or s 167 assessment:. . .
Then citing with approval the Full Federal Court below:[6]
"In the case of an assessment under s 167 of the ITAA there is a lump sum assessment of taxable income rather than the computational process under s 166 of the ITAA of considering allowable deductions that may produce (sic) the taxable income. So, for example, in the case of an assessment under s 166 it is possible for the taxpayer to accept aspects of the calculations (assuming the Commissioner does not seek to advance a different position on the appeal) and focus upon whether certain deductions should have been allowed. Whereas, in the case where the assessment is made under s 167, the taxpayer will have to demonstrate by evidence both sides of the equation because the assessment involves the exercise of a power to make a lump sum assessment of the taxable income based on the information available to the Commissioner." (emphasis added)
[5] [2019] HCA 41 [28].
[6] Bosanac v Commissioner of Taxation [2019] FCAFC 116 [57].
But this does not mean, as Mr Jarvis-Lavery’s submissions appear to suggest, that where, as here, the Commissioner assessed a higher amount of taxable income by adding an additional amount to the returned assessable income, an applicant will necessarily discharge the burden of proving that the assessment is excessive by showing that the Commissioner’s rationale for adding the amount was unsound. Mr Jarvis-Lavery cannot escape the burden of proving that the assessment is excessive by seeking to confine the issue in the case to whether the Commissioner’s original rationale for arriving at components of the additional amount assessed is valid.
The view that establishing the true taxable income is required to discharge the burden of proving a s 167 assessment, but not a s 166 assessment, to be excessive is now authoritatively discredited by Bosanac. As Nettle J observed:[7]
‘. . .As has been seen, although the Commissioner and a taxpayer may agree to confine an appeal to a specific point of law or fact – and where that occurs, the taxpayer might succeed in the appeal by demonstrating that he or she is entitled to succeed on that point – in the absence of such an arrangement, the Commissioner is entitled to rely on any deficiency in the taxpayer’s proof of the excessiveness of the amount assessed in order to uphold the assessment . . . where, as here, an appeal proceeds on the basis that not all the material facts are known, either because the taxpayer has been less than forthcoming in making disclosures to the Commissioner or for some other reason, the taxpayer cannot succeed by showing only that the basis of the Commissioner’s assessment was in some respect erroneous; since for all that can be told, unless or until the taxpayer proves to the contrary, there may be other income of which the Commissioner was not aware and which the Commissioner has not taken into account. In order to succeed in such a case, the taxpayer must discharge the burden of demonstrating on the balance of probabilities the true amount of the taxpayer’s taxable income and thus that the amount determined by the objection decision is excessive. Here, that required the kind of wide survey and exact scrutiny of the plaintiff’s business activities to which the primary judge referred and which was conspicuously absent from the plaintiff’s presentation.
(Footnote omitted; emphasis added.)
[7] [2019] HCA 41, [30].
Here, the Commissioner did not agree to confine the issues to whether any components in the calculation of the amount of $950,000 were assessable income and nor has the Tribunal. To the contrary, Mr Jarvis-Lavery was on notice at least from the time the Commissioner served his Further Amended Statement of Facts and Contentions (some 15 months before the date of the oral hearing) that the Commissioner would contend that Mr Jarvis-Lavery’s returned income was understated by ‘at least’ $950,000 and that Mr Jarvis-Lavery had not satisfactorily explained deposits to his accounts that were substantially in excess of that amount.
Notwithstanding his conception of the way the burden of proof may be discharged in the context of a s 166 assessment as outlined above, Mr Jarvis-Lavery’s submissions go on to assert that he has in fact proved that the amount he now states to be his assessable income is correct. We assess the evidence said to support that proposition, and the assertion that Mr Jarvis-Lavery was entitled to the contested input tax credits, below.
We approach that task with the understanding that the following principles apply:
(a)Facts may be found on the basis of oral evidence alone. There is no barrier to a fact being found on the uncorroborated evidence of an applicant. There is no requirement that direct evidence by oral testimony or affidavit may only be accepted if corroborated.
(b)However, self-serving statements should be given close scrutiny.
(c)In respect of income tax, where a taxpayer has received funds that are not explained in contemporaneous records, the taxpayer may face a challenge in satisfying the burden of proof without corroborating evidence.
(d)Even in such cases, though, it must be borne in mind that evidence of the taxpayer is not to be regarded as prima facie unacceptable. Thus, while it will often be prudent to put forward corroborating evidence, taxpayers are not obliged to call all material witnesses or produce all material documents.[8]
(e)In respect of GST, production of a tax invoice may provide evidence that an acquisition has been made by an entity. However, a tax invoice does not create a taxable supply; it only records one, and certainly does not of itself create an entitlement to an ITC. Scrutiny of the actual transaction is required, especially where alleged transactions are between related parties.[9]
(f)Even where the entity is, as here, acknowledged to have been carrying on an enterprise, it does not follow that the recipient is necessarily entitled to an ITC in relation to the acquisition. The burden falls on the taxpayer to prove that the acquisition was made in the course of carrying on the enterprise and that the exclusion for acquisitions of a private or domestic nature does not apply.
THE INCOME TAX ASSESSMENT
[8] For this and the preceding propositions, see, for example: Imperial Bottleshops Pty Ltd v Commissioner of Taxation (1991) 22 ATR 148, 155; and FCT v Cassaniti [2018] FCAFC 212.
[9] Bayconnection Property Developments Pty Ltd and Commissioner of Taxation [2013] AATA 40.
Some further background

Mr Jarvis-Lavery asserts that his inability to produce contemporaneous records and the alleged intermingling of Mr Reason’s money with his own arise out of two key factors:
·the breakdown of his relationship with his former partner, Ms Andrea March, and ensuing Family Court proceedings which impacted on his ability to access his business records; and
·the aftermath of a fire which destroyed a laundry business operated at the relevant time by Mr Reason.
Mr Jarvis-Lavery asserts, though, that the ‘reconciliation’ he produced demonstrates that numerous deposits to the various bank accounts represented repayments of amounts owed by Mr Reason or in some cases advances to cover amounts to be paid by Mr Jarvis-Lavery on Mr Reason’s behalf.
As we understand the submission, collectively these entries amounted to what Mr Jarvis-Lavery called a ‘running account’ of what was owed to him by Mr Reason. Effectively, although not described as such by Mr Jarvis-Lavery, he asserts that the reconciliation evidences a loan account between himself and Mr Reason.
Income tax returns
Before turning to the ‘reconciliation’, we should refer to the income tax returns for the 2008 income year lodged or produced on behalf of Mr Jarvis-Lavery. Those returns serve as our starting point for considering whether Mr Jarvis-Lavery has discharged the burden of proving that the income tax assessment is excessive.
In evidence there is a total of three income tax returns for the 2008 year:
·a return lodged on 15 August 2008 - prepared by an external accountant, Mr Alan Walker;
·an amended return lodged on 27 November 2009 - prepared by another external accountant, Mr Max Davenport; and
·a further amended return produced for the first time on the first day of the oral hearing of the applications for review - prepared by a third external accountant, Ms Linda Ingram.
There are marked differences in the particulars disclosed in the returns as lodged and the return presented on the first day of the hearing, as the following table demonstrates:

2008 Income tax returns Lodged 15/08/2008 Lodged 27/11/2009 Produced at hearing

$ $ $ $ $ $

Salary 0 0 60,000

Interest 0 6,228 6,499

Disputed income 0 0 0

Other 0 0 42

Business income 249,717 249,717 154,592

Purchases 45,821 45,821 355,771

Less: Closing stock 0 0 253,212

Cost of sales 45,821 45,821 102,559

Rent or lease 194 194 9,600

Interest expense 806 806 1,741

Depreciation 24,528 24,528 36,871

Motor vehicle expenses 45,076 45,076 0

Repairs and maintenance 3,124 3,124 6,667

All other expenses 87,475 87,475 41,554

Total expenses 207,024 207,024 198,992

Less: Trade debtors 0 0 14,545

Net income from business 42,693 42,693 (58,945)

Taxable income 42,693 48,921 7,596

Mr Jarvis-Lavery’s reply submissions did not dispute that examination of the returns reveals these differences in the particulars between the amended return as lodged and the return produced on the first day of the hearing, which were set out in the Commissioner’s final submissions. Nor did he attempt to explain the reason for the differences.
Curiously, the return presented on the first day of the hearing suggests wages were paid to Mr Jarvis-Lavery by an employer. However, the Australian Business Number (ABN) of the putative employer noted in the return is, in fact, Mr Jarvis-Lavery’s own ABN. One cannot pay wages to oneself. This aspect does not imbue the Tribunal with confidence that the latest iteration of the return is any more accurate than the first two.
Notably, while Mr Jarvis-Lavery engaged accounting professionals to prepare these returns, none of these accountants were called to give evidence regarding how they arrived at the particulars disclosed in the returns.
At the oral hearing, there was some discussion about why Ms Ingram was not called. A witness statement by Ms Ingram had been filed. However, it only addressed what was said to be a scheduled meeting with the Commissioner’s officers which did not proceed. It said nothing of the contents of any return.
Initially, it seemed Mr Swanwick sought to take issue with the Commissioner referring to Ms Ingram not being called to give evidence, because the Commissioner had indicated that Ms Ingram would not be required for cross examination. That is not surprising, given the limited content of her witness statement.
It is, of course, for an applicant to prove their case. If Ms Ingram could have given evidence relevant to his taxable income, Mr Jarvis-Lavery could have arranged for her to give evidence, if necessary making application for an order requiring her attendance. Indeed, Mr Jarvis-Lavery specifically confirmed that there was no reason why Ms Ingram could not have attended.[10]
[10] Transcript, page 59, line 44.
In cross-examination, when asked in each case whether there was any reason why Mr Walker or Mr Davenport could not be at the hearing, Mr Jarvis-Lavery gave an identical reply:
‘He was never asked to be.’[11]
[11] Transcript, page 59, line 46 to page 60, line 2.
Regardless of any issues regarding obtaining records that might have been held by Ms March, as discussed further below, it is reasonable to assume that professional accountants would prepare and retain copies of financial statements and/or working papers to support preparation of income tax returns. No such statements were produced in evidence before the Tribunal nor, so far as the evidence indicates, any attempt made to cause them to be produced to the Tribunal.
Ultimately, no satisfactory explanation for the failure to call any of the accountants or put copies of their working papers into evidence was offered by Mr Jarvis-Lavery.
Additionally, a copy of a statement of financial position provided by Mr Jarvis-Lavery to his bank, dated 22 July 2008 and in which Mr Jarvis-Lavery warranted the truth of its contents, shows gross income of $250,000. Curiously, this amount is also shown as ‘take-home pay/after-tax profit’.
Noting that this amount greatly exceeds the taxable income disclosed in the tax returns for the 2008 year, Mr Jarvis-Lavery suggested in evidence that the amount would have represented prospective income for the 2009 income year. There is nothing on the statement to indicate the year to which it relates and it was clear that Mr Jarvis-Lavery could not give evidence of a positive recollection that it related to the 2009 year. Even if that were so, there was no attempt to explain the substantial leap from the disclosed income for the 2008 year to the prospective income for 2009.
Mr Jarvis-Lavery also explicitly confirmed in cross-examination that Mr Davenport’s firm prepared accounts for his business as a sole trader. Again, such accounts were not produced in evidence, Mr Jarvis-Lavery again offering by way of explanation only that:
‘I haven’t been asked to.’
and:
‘I didn’t see any need to.’[12]
[12] Transcript, page 60, line 20 to 21 and page 60, line 34.
Mr Jarvis-Lavery did go on to refer to those accounts being in the subpoena room in connection with Family Court proceedings. But that does not explain why a copy could not be or was not obtained from Mr Davenport’s firm. In any case, he acknowledged he could have obtained a copy from the subpoena room[13] and, as noted, the documents were released from the subpoena room many months before the hearing.
[13] Transcript, page 60, line 31.
The assessment
The Commissioner’s reassessment increasing Mr Jarvis-Lavery’s returned assessable income by $950,000 was calculated by reference to three significant deposits to his BankWest account:

Date of deposit

Amount

19 September 2007

$250,000

11 December 2007

$200,000

28 April 2008

$500,000

Taking the first deposit as an example, Mr Jarvis-Lavery’s Statement of Facts, Issues and Contentions (SFIC), which he adopted as his evidence, noted that a series of subsequent transactions on the BankWest account occurred, as follows:
·On 26/9/07 $40,000 was sent from the same account to Linen Express Pty Ltd, one of the Reason companies.
·On 3/10/07 $100,000 was transferred to Linen Express (sic) – another Reason company.
·On 9/10/07 $15,000 was paid to South Pacific Laundry – being a payment to the contractor who was performing all the laundry services on behalf of Linen Express in the aftermath of the fire.
·On 24/10/07 $20,000 was paid to AJL’s credit card. This was partial reimbursement of expenses which AJL had paid or was to pay on his credit card on behalf of Reason companies. The credit card records reveal that on 25/10/07 $21,175 was paid from that card to a washing machine supplier to Geelong and Surf Laundry – a payment on behalf of one of Reason’s companies.
·On 24/10/07 $10,000 was paid to South Pacific Laundry – being a payment to a contractor who was performing all the laundry services on behalf of Linen Express in the aftermath of the fire.
·On 25/10/07 a payment of $10,000 was made to the Citivisa credit card account of AJL. The card records show that on 29/10/07 $5,000 was paid to Reason’s accountant.
However, in the same SFIC Mr Jarvis-Lavery described the process of examining the individual movements in the accounts in this way as:
‘. . . pointless and misleading because they formed part of a much larger series of transactions, which need to be understood in total in order to understand their nature.’
Similar explanations and observations are made in respect of the other two large deposits to the BankWest account.
Somewhat inconsistently, Mr Jarvis-Lavery nevertheless submitted that these explanations were capable of discharging the onus of proof by explaining why the three deposits were not assessable income. Even if an explanation of why the three deposits are not assessable income were sufficient to discharge the onus of proving the assessments to be excessive – which we have already indicated we do not accept – these explanations in our view would not achieve that result.
The explanations, other than insofar as they merely identify the account to which subsequent payments from the account were made, are unsupported by any contemporaneous corroborating records or other evidence. The other entries in Mr Jarvis-Lavery’s reconciliation are largely in the $5,000 to $10,000 range, with a few in higher amounts such as $15,000, $20,000 and $25,000. There is no explanation of why these large amounts were paid when they were paid.
Accordingly, it is necessary to examine the ‘reconciliations’ which Mr Jarvis-Lavery put into evidence. But first we outline the matters of context raised by Mr Jarvis-Lavery - the breakdown of his relationship with Ms March and the fire that destroyed the laundry business assets.
Relationship with Ms March
Ms March was Mr Jarvis-Lavery’s de facto wife until the relationship broke down and Mr Jarvis-Lavery left the family home in mid-2009.[14] Ms March had been involved in the business affairs of Mr Jarvis-Lavery and associated entities.
[14] Transcript, page 73, line 26.
In the aftermath of the breakdown of the relationship, Family Court proceedings ensued which resulted in many boxes of records relevant to the business affairs of Mr Jarvis-Lavery and Ms March, and associated entities, being lodged in a subpoena room at the Court. We accept it would have been challenging to extract copies of relevant documents from the large amount of materials held at the Court, but note Mr Jarvis-Lavery confirmed he was able to access the subpoena room and, more significantly, was able to retrieve the records in February or March 2016,[15] approximately six months before the oral hearing.
[15] Transcript, page 72, lines 42 to 44.
Ms March was not called to give evidence nor were any orders sought requiring her to attend to give evidence or to produce records. Mr Jarvis-Lavery’s explanation was that Ms March had ignored orders issued in the course of the Family Court proceedings and therefore he did not expect she would comply with an order of the Tribunal.
The laundry business and the fire
The following explanation of events relating to a laundry business owned and operated first by entities associated with Mr Jarvis-Lavery, and subsequently by Mr Reason’s entities before being seriously damaged by a fire, summarises evidence given by Mr Jarvis-Lavery.
Through associated entities, Mr Jarvis-Lavery owned and conducted a laundry business from 2004 until on or about 1 July 2006 when the business was sold to entities controlled by Mr Reason. This resulted, according to Mr Jarvis-Lavery, in a debt of $400,000 being assumed and owed by Mr Reason or associated entities to Mr Jarvis-Lavery.
On 8 April 2007, the laundry business assets were substantially destroyed by a fire. Mr Jarvis-Lavery gave evidence that, in the aftermath of the fire, he assisted Mr Reason in keeping the business operating. Mr Jarvis-Lavery described the process in his SFIC as follows:
‘In the aftermath of the fire, and during the subsequent sale of the laundry business – a period from Easter 2007 to about June 2008 – the daily management of the funding of the business was a process of ad hoc crisis management. The income from the business ceased until a subcontractor could be found to perform the laundry processing. There was a significant period before a flow of funds from insurance started to happen, most of which was playing “catch-up” to expenses which had already been incurred. In the meantime, payments had to be made. They were made from whatever source was available, and when funds were received they were deposited initially to cover whichever account was convenient – including to accounts which would clear insurance cheques immediately rather than leaving them uncleared and thus unavailable for a couple of business days. So AJL’s and March’s credit cards were used to the maximum to pay business expenses. Their bank accounts were used for the same purpose. When any particular payment was received or deposit was made into an account, it was a combination of reimbursement for past expenses and re-charging to enable further expenses to be paid. To try to say: “This deposit paid for the following items of expenditure” is as silly as trying to say: “The tax payments made by John Smith were applied to buy three shells for a tank”. It was simply treated as a consolidated revenue fund, and it was only in the aftermath that a proper accounting could be done as to who had finished up owing anything to whom.”
However, there is no evidence that a ‘proper accounting’ was ever done. Certainly no contemporaneous record of any such ‘accounting’ was put before the Tribunal.
Although raised for the first time in cross-examination, Mr Jarvis-Lavery also asserted that funds said to belong to Mr Reason or his associated entities were deposited to Mr Jarvis-Lavery’s accounts because Mr Reason’s financier, the National Australia Bank (NAB), was at the relevant time closely monitoring Mr Reason’s position. Because of a concern that the Bank would freeze Mr Reason’s account, monies were, so it was said, deposited to Mr Jarvis-Lavery’s accounts instead.
An insurance claim was made and accepted in relation to the fire. Although the sale to Mr Reason’s entities had occurred by the time the fire occurred, Amabalad was named as an insured on the policy. This was because Amabalad continued to own capital equipment over which the NAB held charges.
Although Amabalad had no entitlement to the insurance proceeds, a number of large cheques in settlement of the insurance claim were drawn by the insurer, CGU, in favour of Amabalad. These were deposited, at least initially, to Amabalad’s account. Mr Jarvis-Lavery gave evidence that he was advised CGU mistakenly drew the insurance cheques in the name of Amabalad because that company appeared first in the alphabetical listing of the insured entities in the insurance documentation. When confronted with signed releases for payments to Amabalad, he said these were presented for signing when the cheques were drawn and available for collection and a choice was made to accept the cheques drawn in favour of Amabalad rather than delay receipt of the insurance proceeds by requiring new cheques to be drawn in favour of the correct entities.
It would be surprising for a major insurance company to mistakenly pay out substantial sums – a total of $1,350,000 - to an entity with no entitlement to the amounts other than at the specific request of the insured. But what is more curious in the current context is how the amounts so received were dealt with. Mr Jarvis-Lavery asserts in his SFIC that:
‘In each case the cheque was immediately deposited into the bank account of Bulk Billing Pty. Ltd. – a Reason company.’
How that was able to be done was not explained. Nor why funds were then transferred back to Mr Jarvis-Lavery’s account if they were ultimately destined to be used to meet expenditure of Reason entities.
It was in this context, Mr Jarvis-Lavery said, that the various amounts came to be paid into and out of his accounts on behalf of Mr Reason. The end result, he said, is that rather than Mr Jarvis-Lavery receiving an amount of income in fact he was owed a net amount by Mr Reason or his entities.
The ‘reconciliation’ spreadsheet Mr Jarvis-Lavery produced for this proceeding, called the ‘AJL Analysis’, demonstrates, so the submission goes, that this was the net effect of what he called an ongoing ‘running balance’ account.
The ‘reconciliations’
To give an indication of the scale of the intermingling of funds implicit in the ‘running balance’ explanation, over the period covered by the AJL Analysis spreadsheet – 12 July 2006 to 26 June 2009 – the total amount paid into accounts operated by Mr Jarvis-Lavery was $2,009,050. The spreadsheet runs to some 24 pages and contains around 820 entries, involving seven accounts in the name of Mr Jarvis-Lavery and another seven accounts in the name of Mr Reason and his associated entities.
The total amount credited to Mr Jarvis-Lavery’s accounts in the 2008 income year was $1,395,150.[16] By way of comparison, both Mr Jarvis-Lavery’s original and amended income tax returns for the year disclosed business income of $249,717, and the return proffered on the first day of the hearing nominated the amount of $154,592.
[16] Calculated as the sum of all deposits to JKL bank accounts between 1 July 2007 and 30 June 2008 as shown in column B (‘Amounts from JKR’) in the annexure to the Applicant’s further witness statement dated 17 May 2016 (A2).
There was also in evidence a spreadsheet prepared by or on behalf of Mr Reason, called the ‘AJR JKR Reconciliation Transaction Guide’ which Mr Jarvis-Lavery adopted. This spreadsheet is also not a contemporaneous record of the transactions but rather a retrospectively created document. Mr Reason’s ‘analysis’ lists payments to Mr Jarvis-Lavery totalling $1,992,050.
There are difficulties with Mr Jarvis-Lavery’s explanation for the large number of entries in his accounts and the alleged ‘reconciliation’ of these entries as discussed below.
The period covered by the ‘reconciliation’
Mr Jarvis-Lavery’s explanation that funds were deposited to his account in the course of ‘ad hoc’ financial management in the aftermath of the fire is not consistent with the period during which the numerous deposits to his accounts occurred. The entries listed in the AJL Analysis commence on 12 July 2006 and those listed in the AJL JKR Reconciliation commence on 29 June 2006. However, the fire did not occur until 8 April 2007.

There are also difficulties with Mr Jarvis-Lavery’s assertion that amounts due to Mr Reason or his associated entities were diverted to Mr Jarvis-Lavery’s account because of monitoring by the NAB; in particular:
(a)The evidence indicates that payment of the insurance claim allowed Mr Reason’s obligations to the NAB to be cleared. The insurance claims were fully paid out by 7 April 2008.
(b)There is also evidence of a charge to the NAB being released upon payment of an amount of $423,523.97 on 13 November 2007.
Mr Jarvis-Lavery also gave evidence that the involvement of himself and Ms March in assisting Mr Reason in relation to the laundry business wrapped up in mid-2008 after Mr Reason sold the laundry business to a Mr Tang.[17]
[17] Transcript, page 74, lines 20 to 24.
Why, then, did the intermingling of funds between the Jarvis-Lavery and Reason entities continue to the end of 2009? No convincing explanation appears in the evidence or submissions.
Inconsistencies in treatment of entries
As noted, Mr Jarvis-Lavery presented the AJL Analysis as a running account between himself and Mr Reason and his associated entities. It was, in effect, a loan account.
Mr Jarvis-Lavery also prepared a ‘GST Transaction Guide’ for this proceeding. Examination of that document reveals entries for a series of receipts from customers in the quarter ended 30 June 2008. These include five amounts of $10,000 from Laundry Assets Pty Ltd (one of Mr Reason’s entities) on which GST of $909.09 is indicated for each transaction, and a similar entry for $1,500 from the same company also showing GST payable by Mr Jarvis-Lavery. As those six entries also appear in the AJL Analysis, in that document they purport to be simply part of the running balance arrangement.
These two alleged treatments are entirely inconsistent. The same payments cannot be both payment of consideration for services as the GST Transaction Guide indicates and merely an entry in a loan account in repayment of a debt as their inclusion in the AJL Analysis indicates. They may conceivably be one or the other, but they cannot be both.
Other aspects of the ‘reconciliation’
There are other aspects of the purported reconciliation that are unsatisfactory.
Mr Jarvis-Lavery and Mr Reason both gave evidence that the starting balance of debt owed by Mr Reason to Mr Jarvis-Lavery was $400,000. No documentation was produced to evidence this debt or the terms of repayment. The debt was said to arise out of a set of transactions resulting in the purchase of the laundry business by Mr Reason’s entities in which an entity or entities took over a liability said to have been owed by Amabalad to Mr Jarvis-Lavery for unpaid wages, invoices for services and amounts he had advanced to Amabalad. There was no evidence of any attempt to substantiate that aspect of the ‘reconciliation’ by, for example, obtaining copies of contracts from lawyers engaged by the parties confirming the amount of the debt.
The debt was also said to be evidenced by a NAB ‘subordination agreement’, a copy of which was in evidence. However, examination of that document reveals it only refers to loans from Amabalad and The Oil Spot Pty Ltd and not amounts owed to Mr Jarvis-Lavery.
Further, the statement of financial position as at 22 July 2008 signed by Mr Jarvis-Lavery mentioned above does not include a loan of $400,000. It does, however, include in the listed assets a loan of $1,500,000 to J Trust Pty Ltd, another Reason entity.
The absence of unequivocal corroborating evidence of a debt in the substantial amount of $400,000, said to have arisen out of documented commercial transactions, is an unsatisfactory foundation for the alleged ‘running account’ between Mr Jarvis-Lavery and the Reason entities.
Mr Reason also confirmed in evidence that Mr Jarvis-Lavery had made no attempt to recover the remaining debt, stating: ‘We have an ongoing relationship’. Asked what the repayment arrangements were, he merely replied: ‘ad hoc’. He also confirmed there was no date for repayment and no interest payable.[18]
[18] Transcript, page 230, lines 38 to 43.
Finally in this regard, we note some of the amounts that Mr Jarvis-Lavery received but said belonged to Mr Reason were invested in higher interest earning accounts, without any accounting to Mr Reason for the interest earned.[19] That seems to be inconsistent with the accounts being, as Mr Jarvis-Lavery termed them, merely a ‘conduit’ for Mr Reason’s money.
[19] Transcript, page 139, lines 20 to 43.
Mr Reason’s ‘reconciliation’
As noted above, Mr Reason produced his own reconciliation which was put into evidence. Although it covers a slightly longer period, Mr Reason’s spreadsheet indicates total inflows of funds to Mr Jarvis-Lavery of $1,992,050 compared with total inflows under the AJL Analysis of $2,009,050.
Mr Reason’s witness statement stated that his spreadsheet was the result of ‘careful analysis’. The apparent purpose of doing so was to substantiate the AJL Analysis with confirmation by Mr Reason as the alleged debtor under the ‘running account’ arrangement. In his witness statement, Mr Reason purported to adopt the AJL Analysis and his own reconciliation as Mr Jarvis-Lavery did in respect of Mr Reason’s reconciliation.
However, Mr Reason’s responses to cross-examination meant that his evidence was of little assistance. Although he stated he would not give a statutory declaration lightly and he would have believed the accuracy of the contents of his statements, Mr Reason ultimately could not or would not personally affirm the accuracy of his reconciliation.
The following exchanges, representative of others that followed, give an indication of the difficulty with Mr Reason’s responses when he was questioned regarding the ‘careful analysis’ his statutory declaration indicated he had undertaken:

MR MCINERNEY: That spreadsheet, is that the spreadsheet from which you drew your summary?
MR REASON: I couldn’t say.
…
MR REASON: I would have – yeah, I mean to – if I’m – yes, where those numbers came from I couldn’t tell you offhand. Whether I had originally prepared it and this was a summary, I couldn’t, I couldn’t, I couldn’t attest to that.
…
MR MCINERNEY: Did you undertake a careful analysis of the documents?
MR REASON: Define careful analysis…
…
MR MCINERNEY: … Are you looking at [Mr Reason’s] statement?
DEPUTY PRESIDENT: Look at it please, Mr Reason.
MR REASON: “The attached reconciliation - these sums have been calculated by a careful analysis of the documents and later lodged in the subpoena room of the Family Court.” Is that the bit you’re referring to?
MR MCINERNEY: Yes.
MR REASON: Yes. I see that.
MR MCINERNEY: Well, If you could answer the question, was that your careful analysis or someone else’s careful analysis?
MR REASON: Or a combination of the both?
DEPUTY PRESIDENT: You’re being asked a question, not---
MR REASON: And I answered it.
DEPUTY PRESIDENT: I took that as you asking a question in response. If you could answer the question please.
MR REASON: So your question is was it my careful analysis or somebody else’s careful analysis?
MR MCINERNEY: Yes.
MR REASON: And if those are not the only two options to answer that question?
MR MCINERNEY: Surely you can ---
DEPUTY PRESIDENT: Whose careful analysis was it?
MR REASON: I don’t know.
MR MCINERNEY: You don’t know?
MR REASON: I had every reason to believe that the careful analysis was careful and analytic.[20]
[20] Transcript, pages 209 and 211.

Conclusion regarding income tax assessment
Despite the voluminous ‘reconciliation’ and supporting bank and credit card statements, it is, on the evidence before us, simply impossible to calculate the assessable income of the taxpayer. In view of the various issues with the reconciliation, and given the total amounts deposited to Mr Jarvis-Lavery’s accounts are far in excess of the amount of $950,000 on which the assessment was based, we are also unable to determine whether the assessable income is greater or less than the amount assessed. It follows we are unable to be satisfied that the assessment is excessive.
THE ASSESSMENTS OF NET AMOUNTS
The legal framework
Under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a taxpayer who, like Mr Jarvis-Lavery at the relevant times, is registered for GST and accounting for GST on a cash basis, generally is:
(a)liable for GST on ‘taxable supplies’ – broadly, for current purposes, supplies made for consideration in the course or furtherance of Mr Jarvis-Lavery’s production business;[21]
(b)entitled to ITCs on ‘creditable acquisitions’ – broadly, acquisitions of taxable supplies if the acquisitions are made for a ‘creditable purpose’ and the taxpayer pays or is liable to pay the consideration for the supply;[22] and
(c)required to account for GST on taxable supplies, and entitled to claim ITCs, to the extent that the consideration is received/paid in the relevant tax period.[23]
[21] GST Act, ss 7-1, 9-5.
[22] GST Act, ss 7-1, 11-5.
[23] GST Act, ss 29-5(2), 29-10(2).
To establish that an acquisition was for a creditable purpose, Mr Jarvis-Lavery must show he acquired it in carrying on one of his enterprises and that the acquisition is not of a private or domestic nature.[24]
[24] GST Act, s 11-15.
For most of the ITCs in dispute, resolution of this matter will turn upon whether Mr Jarvis-Lavery can establish that contested acquisitions were not of a private or domestic nature. In respect of alleged acquisitions from one company, Amabalad, Mr Jarvis-Lavery must in particular establish the alleged acquisitions were in fact made and that he paid the consideration for the acquisitions in the relevant tax period, which is not conceded by the Commissioner. A particular issue arises in relation to acquisitions related to Mr Jarvis-Lavery’s share trading business; this is discussed further below.
GST and ITCs are said to be ‘attributed’ to a tax period. The difference between the total amount of GST on taxable supplies and the total amount of ITCs on creditable acquisitions is the ‘net amount’ the taxpayer is liable to pay or entitled to receive from the Commissioner for the tax period.[25]
[25] GST Act, s 7-5.
It is the net amount that is the subject of the Commissioner’s assessments for each tax period and thus it is the individual net amounts for each tax period as assessed by the Commissioner that Mr Jarvis-Lavery, if he is to succeed in the application for review, must discharge the burden of proving to be excessive. While Mr Jarvis-Lavery refers to the aggregate position across the various tax periods in dispute, this is irrelevant to the task of determining whether Mr Jarvis-Lavery has discharged the burden of proving that each of the assessments of net amount are excessive.
Tax invoices and the burden of proof
An applicant does not, by the mere production of a tax invoice issued by a supplier, prove an entitlement to an ITC for the acquisition of a supply. As already noted, there are other statutory requirements that must be satisfied including, relevantly here, that the acquisition was made in the course or furtherance of an enterprise and was not of a private or domestic nature.
In this case, Mr Jarvis-Lavery gave oral evidence that the acquisitions were for business and not private purposes. That evidence was uncorroborated by any contemporaneous records or by other witnesses.
All this is not to say that an applicant who produces a tax invoice and swears or affirms that the relevant supply was acquired for a creditable purpose may not by so doing prove their entitlement to an ITC without further corroborating evidence.
But here, on Mr Jarvis-Lavery’s own evidence, his compliance with tax laws has been poor. He has lodged or caused income tax returns and BASs to be lodged on his behalf which he now says are inaccurate. He has not complied with record-keeping requirements under the tax law. In those circumstances, it is appropriate for the Tribunal to approach his evidence with caution.
Further, despite conceding there was no impediment to doing so, Mr Jarvis-Lavery did not produce financial statements for the relevant years which might have provided some basis on which to consider the claimed ITCs against the level of disclosed activities.
Additionally, there are tax invoices for which full ITCs are claimed that relate to fuel and maintenance for a Mercedes Benz GL 320 motor vehicle. It is commonplace for a motor vehicle of this kind owned by a sole trader to be used for business and private purposes, and for an apportionment to be undertaken so that only the appropriate proportion of the GST on the supply is claimed as an ITC. In fact, the vehicle was purchased for $119,990 on 12 May 2008 and a full input tax credit claimed in the tax period ended 30 June 2008.
This vehicle could readily have been turned to business or private purposes, but Mr Jarvis-Lavery’s evidence does not deal in any specific way with the claims for full ITCs on the acquisition of the vehicle or fuel and maintenance expenses. Furthermore, claiming ITCs for motor vehicle expenses is inconsistent with the proposed amended income tax return for 2008 which lists $0 against motor vehicle expenses (in contrast to the original and amended returns which claimed over $45,000 in such expenses).
Nor is there any attempt, beyond a general statement about using the acquisitions for business, to explain why, say, particular key items (other than those said to have been supplied by Amabalad) were acquired. For example, there was no proper explanation as to what particular business activities were conducted and how the items were to be used in those activities.
We also note that, as with the income tax return, there are differences between the BASs lodged and the amounts Mr Jarvis-Lavery now says are properly claimable as ITCs. Mr Jarvis-Lavery offered no real explanation of the reason for the changes, other than a suggestion that Ms March had or may have wrongly set the relevant book-keeping program used to prepare the BASs to an ‘accruals’ rather than the correct ‘cash basis’ approach. No attempt was made to demonstrate that this was in fact the source of the required changes by, for example, reference to one or more transactions for which it was suggested the original BASs may have been infected by such an error. Nor is there any report, correspondence or other evidence of the external accountants who Mr Jarvis-Lavery said were asked to review the BASs relevant to the revised position adopted by Mr Jarvis-Lavery in this proceeding.
In the particular circumstances of this case, we are not persuaded that the acquisitions evidenced only by the production of tax invoices approximately 7-8 years after the relevant transactions occurred and Mr Jarvis-Lavery’s testimony of a general nature, and without any business records relating to the acquisitions or more detailed explanation, were creditable acquisitions.
Tax period ending 30 June 2008
The Commissioner set out Mr Jarvis-Lavery’s claims and the Commissioner’s position in respect of this tax period in the following table, which Mr Jarvis-Lavery does not appear to dispute:

116.   Tax period ended 30 June 2008

117.   Mr Jarvis-Lavery’s original BAS lodged on 7 July 2008

118.   Mr Jarvis-Lavery’s amended BAS lodged on 29 March 2015

119.   Commissioner’s assessment – 13 March 2012

120.   Mr Jarvis-Lavery’s current position

121.   GST

122.   $21,817

123.   $0

124.   $0

125.   $6,909.09

126.   ITC

127.   $13,730

128.   $13,730

129.   $162

130.   $10,135.67

131.   Net amount

132.   $8,087

133.   ($13,730)

134.   ($162)

135.   ($13,226.58)

GST

Having regard to the absence of appropriate records as discussed above, we may not have been persuaded that the latest GST component for this tax period put forward by Mr Jarvis-Lavery is accurate. In particular, the concerns that the range of receipts referred to in the AJL Analysis give rise to for income tax purposes also raise doubt regarding whether all of the taxable supplies made by Mr Jarvis-Lavery, and therefore GST he is liable to pay, have been properly disclosed.
However, the Commissioner accepted Mr Jarvis-Lavery’s evidence that the GST component of the net amount for this tax period is $6,909.09. In view of this concession we have not considered this aspect further.
Input tax credit entitlement
Acquisitions relating to share trading business
The Commissioner conceded Mr Jarvis-Lavery is entitled to ITCs on certain acquisitions relating to his share trading business.
Even in respect of these acquisitions, though, the Commissioner did not accept the amount claimed by Mr Jarvis-Lavery. This is because, the Commissioner says, the acquisitions are ‘reduced credit acquisitions’ and therefore his entitlement is limited to 75% of what would otherwise be the ITC entitlement in respect of these acquisitions i.e. $65.47. If the Commissioner is incorrect in characterising these acquisitions as reduced credit acquisitions, the ITC entitlement calculated in the standard way would be $87.29. Mr Jarvis-Lavery’s reply submissions do not contest the calculation of this higher amount.
The Commissioner’s submission that these acquisitions are reduced credit acquisitions depends on his conclusion that Mr Jarvis-Lavery exceeded the ‘financial acquisitions threshold’ at relevant times. How this prospect arises requires an explanation of aspects of the rules regarding entitlement to ITCs on acquisitions that relate to financial supplies.
The general rule under section 11-15(2)(a) of the GST Act is (adopting the second person convention employed in the Act) that you do not acquire a thing for a creditable purpose, and therefore are not entitled to an ITC, to the extent that the acquisition relates to making supplies that would be input taxed. Broadly speaking, as share trading involves making supplies that would be input taxed financial supplies,[26] you are not entitled to ITCs under the general rules on acquisitions that relate to share trading. However, acquisitions of a particular kind specified in the regulations made under the Act that relate to financial supplies give rise to reduced credit acquisitions, so-called because the ITC is 75% of the amount that would be the ITC but for the restriction on ITCs that relate to making input taxed supplies.
[26] GST Act, s 40-5; A New Tax System (Goods and Services Tax) Regulations 1999 (Cth), s 40-5.09.
The Commissioner’s characterisation of these acquisitions as reduced credit acquisitions, and therefore giving rise to only reduced input tax credits, is said to apply because Mr Jarvis-Lavery exceeded the ‘financial acquisitions threshold’ at the relevant time. An exception to the general rule denying full ITCs on acquisitions that relate to making supplies that would be input taxed applies if you do not ‘exceed the financial acquisitions threshold’.[27]
[27] GST Act, Part 4-2, Division 70 and s 189.
You exceed the financial acquisitions threshold if, at a time during a particular month, broadly speaking and so far as relevant in the current context, the total amount of full ITCs to which you would be entitled but for the denial of ITCs on acquisitions that relate to making financial supplies exceeds 10% of what would be your total ITC entitlement on the same assumption.[28] In approximate terms, this means Mr Jarvis-Lavery would exceed the financial acquisitions threshold if the value of his acquisitions of taxable supplies relating to his share trading business exceeds 10% of the value of all of his business acquisitions of taxable supplies.
[28] GST Act, Division 189.
Thus, whether these acquisitions are reduced credit acquisitions turns upon whether or not Mr Jarvis-Lavery made sufficient other creditable acquisitions (that is, acquisitions that are not reduced credit acquisitions) during the period against which the financial acquisitions threshold is tested.
If, as the Commissioner asserts the Tribunal should find, Mr Jarvis-Lavery does not establish on the balance of probabilities that he made any other creditable acquisitions in the period, it must follow Mr Jarvis-Lavery’s acquisitions exceeded the financial acquisitions threshold and only the reduced (75%) entitlement will apply.

If Mr Jarvis-Lavery establishes he made some other creditable acquisitions of a significant value, it will be necessary to examine more closely whether he exceeded the financial acquisitions threshold. If that eventuality arises, whether the 10% threshold has been exceeded must be tested, on a month by month basis, by reference to acquisitions (and imports) made or likely to be made during the relevant month and the previous or subsequent 11 months.[29]
[29] GST Act, ss 189-5 and 189-10.
As discussed below, Mr Jarvis-Lavery has not persuaded us that he is entitled to all of the ITCs claimed for other acquisitions, or for any particular acquisitions. It follows we are not persuaded, so far as ITCs are assessed at the reduced rate, the assessment is for that reason excessive.
Alleged acquisition from Amabalad
The principal item in dispute is an alleged acquisition from Amabalad for a consideration of $41,222.50 which Mr Jarvis-Lavery asserts was ‘paid’, by set-off against amounts owed to him by Amabalad, on 30 June 2008.
The Commissioner attacks this ITC claim on two bases, namely:
(a)there is no evidence that the consideration was paid in the tax period; and
(b)other than the tax invoice in evidence, there is no evidence of anything being acquired by Mr Jarvis-Lavery from Amabalad.
It is not correct to say there is no evidence of payment or of anything being acquired other than the tax invoice. Mr Jarvis-Lavery gave evidence in general terms that he received the invoiced items and that ‘payment’ was achieved by way of the alleged set off. Again, there was said to be a ‘running balance’ of amounts owed to or by Amabalad.
The tax invoice is dated 30 June 2008 and, on its face, indicates the consideration is unpaid at that date. However, Mr Jarvis-Lavery says it was paid by way of set-off. Implicit in that assertion is that, by agreement between the parties, the set-off took effect on the date the invoice was issued.
From an evidentiary perspective, there are a number of difficulties with accepting, on the balance of probabilities, this assertion is made out:
(a)The tax invoice, said to have been held by Mr Jarvis-Lavery when it was issued on the date it bears, was not produced in the course of the tax audit. Nor was it produced when Mr Jarvis-Lavery’s evidence was produced to the Tribunal in October 2014. Mr Jarvis-Lavery asserts this is because the tax invoices were held in the subpoena room, but acknowledges he could access, albeit with difficulty, documents held there.
(b)Mr Jarvis-Lavery did not give clear evidence of how the set-off was said to have been agreed with Amabalad. He did not, for example, refer to any relevant written agreement or resolution.
(c)There is no independent evidence of a ‘running balance’ account being maintained. Mr Jarvis-Lavery’s evidence was that external accountants provided taxation and accounting services for himself, Ms March and associated entities, including reviewing the BASs originally prepared by Ms March. But as already noted, no evidence was forthcoming from accountants; in particular, no financial statements, nor any loan account or other record of the alleged set off was produced.
(d)In the course of re-examination, Mr Jarvis-Lavery stated that a record of the running balance of amounts owed to him by Amabalad would have been maintained ‘in the cloud’. However, he went on to confirm that no evidence of any such cloud-based account was obtained.[30]
[30] Transcript, page 199, lines 37 to 45.
(e)As already noted, Mr Jarvis-Lavery gave evidence that personal financial statements for his business were prepared by external accountants. Such accountants would be expected to have retained copies of working papers to support their work, including the running account said to have recorded amounts set off against the amount claimed in the tax invoice. The evidence from Mr Jarvis-Lavery is that no attempt was made to seek such evidence from the accountants.
Against this background, we are not persuaded Mr Jarvis-Lavery satisfies the requirements for having made a creditable acquisition from Amabalad. In particular, we are not satisfied that a set off occurred, as alleged, on the final day of the tax period.
Other alleged creditable acquisitions
In respect of other ITCs claimed by Mr Jarvis-Lavery for this period, the Commissioner submits the Tribunal should not be satisfied on the balance of probabilities that the fundamental requirements for ITC entitlement are established – that is to say, that the acquisitions were made for a ‘creditable purpose’; in particular, that the acquisitions:
(a)were made in carrying on his enterprise; and
(b)were not of a private or domestic nature.
In other words, the Commissioner accepts Mr Jarvis-Lavery was carrying on an enterprise, but not that these acquisitions were made in the course of the enterprise and were not for private or domestic purposes.
Mr Jarvis-Lavery points to the tax invoices produced for each acquisition for which an input tax credit is now claimed. But this does not corroborate his evidence that the acquisitions were for his business and for that purpose only.
For the reasons already indicated, we are not persuaded - on the basis of the tax invoices and Mr Jarvis-Lavery’s evidence alone - that these were creditable acquisitions.
Conclusion on net amount - tax period ending 30 June 2008
For the reasons given, we are not persuaded on the balance of probabilities that the assessment is excessive.
Tax period ending 30 September 2008
The Commissioner set out Mr Jarvis-Lavery’s claims and the Commissioner’s position in respect of this tax period in the following table, which Mr Jarvis-Lavery does not appear to dispute:

160.   Tax period ended 30 September 2008

161.   Mr Jarvis-Lavery’s original BAS

162.   Commissioner’s assessment – 13 March 2012

163.   Mr Jarvis-Lavery’s current position

164.   GST

165.   $0

166.   $0

167.   $2,613.64

168.   ITC

169.   $1,434

170.   $202

171.   $417.04

172.   Net amount

173.   ($1,434)

174.   ($202)

175.   ($2,196.60)

GST

The Commissioner accepts Mr Jarvis-Lavery’s evidence that the GST component of the net amount for this tax period is $2,613.64. As for the tax period ended 30 June 2008, we may not have been persuaded that the GST payable was limited to this amount, but in view of the Commissioner’s concession have not pursued this further.
Input tax credit entitlement
Acquisitions relating to the share trading business
Again, the Commissioner concedes Mr Jarvis-Lavery is entitled to ITCs on acquisitions relating to his share trading business. As for the tax period ending 30 June 2008, the Commissioner submits these are reduced credit acquisitions and that Mr Jarvis-Lavery is entitled to ITCs totalling $156.17 for this tax period. If the Commissioner is incorrect in characterising these acquisitions as reduced credit acquisitions, the ITC entitlement calculated in the standard way would be $208.22; Mr Jarvis-Lavery’s reply submissions do not contest the calculation of this higher amount.
For the reasons set out above in relation to the tax period ending 30 June 2008, we are not persuaded on the balance of probabilities that the calculation of ITCs on these items at the reduced rate is excessive.
Other alleged creditable acquisitions
In respect of the other ITCs claimed by Mr Jarvis-Lavery for this period, the Commissioner again submits Mr Jarvis-Lavery has not discharged his burden of proving these acquisitions were creditable acquisitions.
For the reasons set out in relation to the tax period ending 30 June 2008, we agree.
Conclusion on net amount - tax period ending 30 September 2008
For the reasons given, we are not persuaded on the balance of probabilities that the assessment is excessive.
Tax period ending 31 December 2008
The Commissioner set out Mr Jarvis-Lavery’s claims and the Commissioner’s position in respect of this tax period in the following table, which Mr Jarvis-Lavery does not appear to dispute:

183.   Tax period ended 31 December 2008

184.   Mr Jarvis-Lavery’s original BAS

185.   Commissioner’s assessment

186.   Mr Jarvis-Lavery’s current position

187.   GST

188.   $0

189.   $0

190.   $3,404.54

191.   ITC

192.   $1,213

193.   $230

194.   $4,283.70

195.   Net amount

196.   ($1,213)

197.   ($230)

198.   ($879.16)

GST

The Commissioner accepts Mr Jarvis-Lavery’s evidence that the GST component of the net amount for this tax period is $3,404.54. As for the tax period ended 30 June 2008, we may not have been persuaded the GST payable was limited to this amount, but in view of the Commissioner’s concession have not pursued this further.
Input tax credit entitlement
Acquisitions relating to share trading business
Again, the Commissioner concedes Mr Jarvis-Lavery is entitled to ITCs on acquisitions relating to his share trading business. As for the tax period ending 30 June 2008, the Commissioner submits these are reduced credit acquisitions. On this basis, the Commissioner submits Mr Jarvis-Lavery is entitled to ITCs totalling $54.28 for this tax period. If the Commissioner is incorrect in characterising these acquisitions as reduced credit acquisitions, the ITC entitlement calculated in the standard way would be $72.37; Mr Jarvis-Lavery’s reply submissions do not contest the calculation of this higher amount.
For the reasons set out above in relation to the tax period ending 30 June 2008, we are not persuaded on the balance of probabilities that the calculation of ITCs on these items at the reduced rate is excessive.
Alleged acquisition from Amabalad
The principal item in dispute is an alleged acquisition from Amabalad for a consideration of $44,000 said to have been paid by set-off on 31 December 2008.
For the same reasons given in relation to the alleged acquisition from Amabalad in respect of the tax period ending 30 June 2008, we are not persuaded Mr Jarvis-Lavery has satisfied the requirements for a creditable acquisition.
Other alleged creditable acquisitions
In respect of the other ITCs claimed by Mr Jarvis-Lavery for this period, the Commissioner again submits Mr Jarvis-Lavery has not discharged his burden of proving these acquisitions were creditable acquisitions.
For the reasons set out in relation to the tax period ending 30 June 2008, we agree.
Expiry of time limit on ITC claims
For this tax period, Mr Jarvis-Lavery now claims he is entitled to a higher amount for ITCs ($4,283.70) than the amount claimed in his BAS ($1,213).
Regardless of his other submissions, the Commissioner says that, by virtue of section 93-5 of the GST Act, Mr Jarvis-Lavery would not now be entitled to claim an amount for input tax credits in excess of the amount of $1,213 he originally claimed in his BAS.
Section 93-5 of the GST Act provides that a taxpayer ceases to be entitled to an ITC to the extent that the ITC has not been taken into account in an assessment during a period of four years after the day on which a GST return (BAS), for the period to which the ITC would otherwise be attributed, was required to be lodged. As Mr Jarvis-Lavery’s BAS was required to be lodged in early 2009, the four-year period has clearly expired.
We agree section 93-5 has extinguished any ITC entitlement that might otherwise exist to the extent such entitlement would exceed the amount of $1,213 originally claimed by Mr Jarvis-Lavery. Mr Jarvis-Lavery’s reply submissions did not submit otherwise. Mr Jarvis-Lavery did not claim any further amount in his original BAS or seek to amend that BAS at any time in the ensuing four years. He cannot do so now.
In any case, as the Commissioner’s submissions point out, under section 29-10(4) of the GST Act an ITC that would be otherwise attributable to a tax period but is not taken into account in the return for that period is: (a) not attributed to that tax period; and (b) attributed to the first tax period in which it is taken into account in a return.
On either basis, to the extent ITCs now claimed exceed the amount originally claimed, they cannot be attributed to this tax period. To the extent that the net amount assessed exceeds the amount which would be the net amount if the ITCs claimed late were taken into account, the assessed net amount cannot be excessive.
Conclusion on net amount - tax period ending 31 December 2008
For the reasons given, we are not persuaded on the balance of probabilities that the assessment is excessive.
Tax period ending 31 March 2009
The Commissioner set out Mr Jarvis-Lavery’s claims and the Commissioner’s position in respect of this tax period in the following table, which Mr Jarvis-Lavery does not appear to dispute:

214.   Tax period ended 31 March 2009

215.   Mr Jarvis-Lavery’s original BAS

216.   Commissioner’s assessment

217.   Mr Jarvis-Lavery’s current position

218.   GST

219.   $181

220.   $181

221.   $0

222.   ITC

223.   $1,765

224.   $48

225.   $625.19

226.   Net amount

227.   ($1,584)

228.   ($133)

229.   ($625.19)

GST

In relation to the GST amount, the Commissioner submits Mr Jarvis-Lavery has not provided an adequate explanation for the alleged change in GST payable.
As already noted, Mr Jarvis-Lavery did suggest Ms March may have wrongly prepared BASs on an accruals basis rather than a cash basis, referring to a setting in the accounting program used that could be set to cash or accruals. But no attempt was made to demonstrate by reference to particular transactions that the differences between the BAS as lodged and the amount of GST now claimed to be payable (nil, for this tax period) arose from this treatment.
In the absence of any explanation for the difference, and any evidence from the accountant who reviewed the BASs, we are not satisfied the amount now said to be payable reflects the GST properly payable for this tax period.
Input tax credit entitlement
Acquisitions relating to share trading business
The Commissioner accepts Mr Jarvis-Lavery is entitled to reduced credit acquisitions totalling $1.02. If the Commissioner is incorrect in characterising these acquisitions as reduced credit acquisitions, the ITC entitlement calculated in the standard way would be $1.36; Mr Jarvis-Lavery’s reply submissions do not contest the calculation of this higher amount.
For the reasons set out above in relation to the tax period ending 30 June 2008, we are not persuaded on the balance of probabilities that the calculation of ITCs on these items at the reduced rate is excessive.
Other alleged creditable acquisitions
In respect of other ITCs claimed by Mr Jarvis-Lavery for this period, the Commissioner again submits Mr Jarvis-Lavery has not discharged his burden of proving these acquisitions were creditable acquisitions.
For the reasons set out in relation to the tax period ending 30 June 2008, we agree.
Conclusion on net amount - tax period ending 31 March 2009
For the reasons given, we are not persuaded on the balance of probabilities that the assessment is excessive.
Tax period ending 30 June 2009
The Commissioner set out Mr Jarvis-Lavery’s claims and the Commissioner’s position in respect of this tax period in the following table, which Mr Jarvis-Lavery does not appear to dispute:

239.   Tax period ended 30 June 2009

240.   Mr Jarvis-Lavery’s original BAS

241.   Commissioner’s assessment

242.   Mr Jarvis-Lavery’s current position

243.   GST

244.   $230

245.   $230

246.   $0

247.   ITC

248.   $2,144

249.   $107

250.   $11,728.09

251.   Net amount

252.   ($1,914)

253.   $123

254.   ($11,728.09)

GST

In relation to the GST amount, the Commissioner submits Mr Jarvis-Lavery has provided no explanation for the alleged change in GST payable and that the amount originally returned should therefore be maintained.
For the reasons given in relation to the GST payable for the tax period ending 31 March 2009, we are not persuaded the amount now disclosed as GST payable is accurate.
Input tax credit entitlement
Acquisitions relating to share trading business
Again, the Commissioner concedes Mr Jarvis-Lavery is entitled to ITCs on acquisitions relating to his share trading business. As for the tax period ending 30 June 2008, the Commissioner submits these are reduced credit acquisitions. On this basis, the Commissioner submits Mr Jarvis-Lavery is entitled to ITCs totalling $116.38 for this tax period. If the Commissioner is incorrect in characterising these acquisitions as reduced credit acquisitions, the ITC entitlement calculated in the standard way would be $155.17; Mr Jarvis-Lavery’s reply submissions do not contest the calculation of this higher amount.
For the reasons set out above in relation to the tax period ending 30 June 2008, we are not persuaded on the balance of probabilities that the calculation of ITCs on these items at the reduced rate is excessive.
Alleged acquisition from Amabalad
The principal item in dispute is an alleged acquisition from Amabalad on 30 June 2009 for a consideration of $112,750. As for the tax period ending 30 June 2008, the Commissioner submits that the Tribunal should not be satisfied the consideration was paid during the tax period.
For the same reasons given in relation to the alleged acquisition from Amabalad in respect of the tax period ending 30 June 2008, we are not persuaded Mr Jarvis-Lavery has satisfied the requirements for a creditable acquisition.
Additionally, we note the tax invoice for this alleged acquisition records a due date for payment after the end of the tax period ending 30 June 2009. It calls for payment by 30 September 2009. Notwithstanding the substantial additional ITC amount now claimed, and this aspect being raised in the Commissioner’s written submissions, Mr Jarvis-Lavery’s reply submissions do not address the discrepancy between a payment being made on 30 June 2009, which is implicit in the assertion that the ITC is attributed to the tax period ending 30 June 2009, and the invoice nominating payment by 30 September 2009.[31]
[31] It is not immediately clear to us why, to the extent that the ITCs now claimed for this period exceed those originally claimed, any entitlement was not also extinguished by the effluxion of time for the reasons submitted by the Commissioner in respect of the additional ITC amount claimed for the tax period ended 31 December 2008. However, as the Commissioner did not make this submission for this tax period, and it is unnecessary for us to decide this question in view of the conclusion already reached, we have not considered this further. We make the same observation in respect of the tax period ended 31 March 2010, although the increased amount claimed for that period is minimal.
Other alleged creditable acquisitions
In respect of the other ITCs claimed by Mr Jarvis-Lavery for this period, the Commissioner again submits Mr Jarvis-Lavery has not discharged his burden of proving these acquisitions were creditable acquisitions.
For the reasons set out in relation to the tax period ending 30 June 2008, we agree.
Conclusion on net amount - tax period ending 30 June 2009
For the reasons given, we are not persuaded on the balance of probabilities that the assessment is excessive.
Tax period ending 30 September 2009
The Commissioner set out Mr Jarvis-Lavery’s claims and the Commissioner’s position in respect of this tax period in the following table, which Mr Jarvis-Lavery does not appear to dispute:

266.   Tax period ended 30 September 2009

267.   Mr Jarvis-Lavery’s original BAS

268.   Commissioner’s assessment

269.   Mr Jarvis-Lavery’s current position

270.   GST

271.   $2,019

272.   $2,019

273.   $0

274.   ITC

275.   $3,175

276.   $0

277.   $771.17

278.   Net amount

279.   ($1,156)

280.   $2019

281.   ($771.19)

GST

In relation to the GST amount, the Commissioner submits Mr Jarvis-Lavery has provided no explanation for the alleged change in GST payable and that the amount originally returned should therefore be maintained.

For the reasons given in relation to the GST payable for the tax period ending 31 March 2009, we are not persuaded the amount now disclosed as GST payable is accurate.
Input tax credit entitlement
Acquisitions relating to share trading business
Again, the Commissioner concedes Mr Jarvis-Lavery is entitled to ITCs on acquisitions relating to his share trading business. As for the tax period ending 30 June 2008, the Commissioner submits these are reduced credit acquisitions. On this basis, the Commissioner submits Mr Jarvis-Lavery is entitled to ITCs totalling $496.27 for this tax period. If the Commissioner is incorrect in characterising these acquisitions as reduced credit acquisitions, the ITC entitlement calculated in the standard way would be $661.69; Mr Jarvis-Lavery’s reply submissions not contest the calculation of this higher amount.
For the reasons set out above in relation to the tax period ending 30 June 2008, we are not persuaded on the balance of probabilities that the calculation of ITCs on these items at the reduced rate is excessive.
Other alleged creditable acquisitions
In respect of the other ITCs claimed by Mr Jarvis-Lavery for this period, the Commissioner again submits Mr Jarvis-Lavery has not discharged his burden of proving these acquisitions were creditable acquisitions.
Additionally, the Commissioner points out Mr Jarvis-Lavery has not produced a tax invoice for an alleged acquisition described in the GST Transaction Guide as “AGW/EWM”. Mr Jarvis-Lavery’s reply submissions do not address this issue. Accordingly, we conclude an ITC for this alleged creditable acquisition is not attributable to this tax period.
For the reasons given in relation to the tax period ended 30 June 2008, and having regard also to the matter referred to in the preceding paragraph, we are not persuaded Mr Jarvis-Lavery is entitled to the ITCs now claimed for this period.
Conclusion on net amount - tax period ending 30 September 2009
For the reasons given, we are not persuaded on the balance of probabilities that the assessment is excessive.
Tax period ending 31 December 2009
The Commissioner set out Mr Jarvis-Lavery’s claims and the Commissioner’s position in respect of this tax period in the following table, which Mr Jarvis-Lavery does not appear to dispute:

291.   Tax period ended 31 December 2009

292.   Mr Jarvis-Lavery’s original BAS

293.   Commissioner’s assessment

294.   Mr Jarvis-Lavery’s current position

295.   GST

296.   $1,816

297.   $1,816

298.   $0

299.   ITC

300.   $3,257

301.   $0

302.   $2,121.04

303.   Net amount

304.   $1,441

305.   $1,816

306.   ($2,121.04)

GST

In relation to the GST amount, the Commissioner submits Mr Jarvis-Lavery has provided no explanation for the alleged change in GST payable and that the amount originally returned should therefore be maintained.
For the reasons given in relation to the GST payable for the tax period ending 31 March 2009, we are not persuaded the amount now disclosed as GST payable is accurate.
Input tax credit entitlement
Acquisitions relating to share trading business
Again, the Commissioner concedes Mr Jarvis-Lavery is entitled to ITCs on acquisitions relating to his share trading business. As for the tax period ending 30 June 2008, the Commissioner submits that these are reduced credit acquisitions. On this basis, the Commissioner submits that Mr Jarvis-Lavery is entitled to ITCs totalling $9 for this tax period. If the Commissioner is incorrect in characterising these acquisitions as reduced credit acquisitions, the ITC entitlement calculated in the standard way would be $12; Mr Jarvis-Lavery’s reply submissions do not contest the calculation of this higher amount.
For the reasons set out above in relation to the tax period ending 30 June 2008, we are not persuaded on the balance of probabilities that the calculation of ITCs on these items at the reduced rate is excessive.
Alleged acquisition from Amabalad
The principal item in dispute is an alleged acquisition from Amabalad on 31 October 2009 for a consideration of $13,200.
For the same reasons given in relation to the alleged acquisition from Amabalad in respect of the tax period ending 30 June 2008, we are not persuaded Mr Jarvis-Lavery has satisfied the requirements for a creditable acquisition from Amabalad in this tax period.
Other alleged creditable acquisitions
In respect of the other ITCs claimed by Mr Jarvis-Lavery for this period, the Commissioner again submits Mr Jarvis-Lavery has not discharged his burden of proving these acquisitions were creditable acquisitions.
For the reasons given in relation to the tax period ended 30 June 2008, we agree.
Conclusion on net amount - tax period ending 31 December 2009
For the reasons given, we are not persuaded on the balance of probabilities that the assessment is excessive.
Tax period ending 31 March 2010
The Commissioner set out Mr Jarvis-Lavery’s claims and the Commissioner’s position in respect of this tax period in the following table, which Mr Jarvis-Lavery does not appear to dispute:

317.   Tax period ended 31 March 2010

318.   Mr Jarvis-Lavery’s original BAS

319.   Commissioner’s assessment

320.   Mr Jarvis-Lavery’s current position

321.   GST

322.   $111

323.   $111

324.   $0

325.   ITC

326.   $111

327.   $0

328.   $118.04

329.   Net amount

330.   $0

331.   $111

332.   ($118.04)

GST

In relation to the GST amount, the Commissioner submits Mr Jarvis-Lavery has provided no explanation for the alleged change in GST payable and that the amount originally returned should therefore be maintained.
For the reasons given in relation to the GST payable for the tax period ending 31 March 2009, we are not persuaded the amount now disclosed as GST payable is accurate.
Input tax credit entitlement
Acquisitions relating to share trading business
Again, the Commissioner concedes Mr Jarvis-Lavery is entitled to ITCs on acquisitions relating to his share trading business. As for the tax period ending 30 June 2008, the Commissioner submits these are reduced credit acquisitions. On this basis, the Commissioner submits Mr Jarvis-Lavery is entitled to ITCs totalling $4.50 for this tax period. If the Commissioner is incorrect in characterising these acquisitions as reduced credit acquisitions, the ITC entitlement calculated in the standard way would be $6; Mr Jarvis-Lavery’s reply submissions do not contest the calculation of this higher amount.
For the reasons set out above in relation to the tax period ending 30 June 2008, we are not persuaded on the balance of probabilities that the calculation of ITCs on these items at the reduced rate is excessive.
Other alleged creditable acquisitions
In respect of the other ITCs claimed by Mr Jarvis-Lavery for this period, the Commissioner again submits Mr Jarvis-Lavery has not discharged his burden of proving these acquisitions were creditable acquisitions.
For the reasons set out above in relation to the tax period ending 30 June 2008, we agree.
Conclusion on net amount - tax period ending 31 December 2009
For the reasons given, we are not persuaded on the balance of probabilities that the assessment is excessive.
THE PENALTY ASSESSMENTS
Mr Jarvis-Lavery filed no evidence relating to the penalty issue. There was, for example, no evidence from the accountants engaged to prepare returns and, as already noted, no explanation why such evidence was not adduced, other than that they were not asked to give evidence.
Nor were any submissions relating to the penalty assessments made on Mr Jarvis-Lavery’s behalf in closing submissions.
As with the substantive assessments of income tax and net amounts, Mr Jarvis-Lavery has the burden of proving that the penalty assessments are excessive. There is no evidentiary basis on which we could decide that any of the penalty assessments are excessive either because of the calculation of the base amount and uplift or failure to remit any part of the amount. Nor is there anything on the face of the evidence adduced in relation to the primary tax liabilities to support a case that Mr Jarvis-Lavery exercised reasonable care or that the penalties assessed are otherwise excessive.[32]
[32] Taxation Administration Act 1953 (Cth), Schedule 1, Subdivision 284-B
It follows Mr Jarvis-Lavery has not discharged the burden of proving that the penalty assessments are excessive.
CONCLUDING OBSERVATIONS
Record-keeping requirements are included in tax laws for self-evident reasons. A taxpayer who does not produce appropriate records will inevitably face a difficult task in discharging the onus of proving that an assessment is excessive. A taxpayer who substantially intermingles the funds of other entities in their own business bank accounts over an extended period, as Mr Jarvis-Lavery claims to have occurred in this case, inevitably compounds that difficulty.
Plainly, a significant amount of time and work has been involved in putting together the AJL Analysis and the GST Transaction Guide. It is unfortunate that this effort was not directed to what might be thought to be the more obvious contribution to substantiating the claimed taxation position, namely causing copies of financial statements supporting the taxation position to be put into evidence along with an explanation by the accountants who prepared them.
But for reasons never properly explained, financial statements were not produced in this case and the accountants were not called to explain them. Rather, Mr Jarvis-Lavery chose to rely primarily upon the AJL Analysis, Mr Reason’s reconciliation and the GST Transaction Guide along with his witness statements and oral evidence. These were not sufficient to discharge the onus of proof for the reasons we have given. It should go without saying that producing a substantially revised tax return on the first day of a hearing, when the preliminary procedures to prepare for a hearing had been in course for many months and directions given for the production of evidence, is self-evidently not an appropriate course.
The submissions lodged on behalf of Mr Jarvis-Lavery attempted to demonstrate how the onus of proof was said to be discharged but ultimately were constrained by the nature of the evidence produced to the Tribunal. Those submissions at times descended into attacking the Commissioner, rather than assisting the Tribunal with its task of determining whether the onus of proving the assessments to be excessive had been discharged. The final paragraph of the reply submissions illustrates the point:
The Respondent’s approach depends upon approaching these transaction (sic) in a factual vacuum and pretending that there is nothing in the surrounding circumstances which assists to explain the nature and reason for the transactions and to allow them to be correctly characterised. It is worth reiterating a passage from the Applicant’s original submissions:
It is difficult to imagine a process of ‘reasoning’ which is more offensive to rationality and commonsense. It is equivalent to poking a sharp stick into both your eyes and then declaring that there is nobody standing in front of you because you can’t see them! Of course if you blind yourself you will not see: and of course if you pretend that something has happened in an historical and commercial vacuum then you will fail to characterise it in accordance with its historical and commercial context.
Extravagant statements of that kind, no matter how satisfying to the author, do not assist the Tribunal or the taxpayer, and are an unnecessary distraction from the Tribunal’s task of arriving at the correct or preferable decision on the evidence before it. We have had full regard to the historical and commercial context of the transactions in this case as explained by Mr Jarvis-Lavery. But the evidence of that context does not demonstrate that the assessments are excessive, let alone allow us to determine the correct assessable amounts.
DISPOSITION OF THE APPLICATION FOR REVIEW
Mr Jarvis-Lavery has not discharged the burden of proving that the assessments are excessive. It follows that the objection decisions under review must be affirmed.

I certify that the preceding 349 (three hundred and forty-nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe, Senior Member Robert J Olding and Member Peter W Ranson.

..............................[sgd].........................................

Associate

Dated: 13 December 2019

Date of hearing: 19-21 September 2016

Date final submissions received:
Solicitor for the Applicant: 3 January 2017
A Swanwick

Counsel for the Respondent: D J McInerney

Solicitors for the Respondent: ATO Review and Dispute Resolution

[2019] AATA 5409

13 December 2019

Key Legal Topics

Areas of Law

Tax Law

Statutory Interpretation

Legal Concepts

Statutory Construction

2008 Income tax returns	Lodged 15/08/2008			Lodged 27/11/2009			Produced at hearing
$	$		$	$		$	$
Salary	0		0		60,000
Interest	0		6,228		6,499
Disputed income	0		0		0
Other	0		0		42
Business income	249,717	249,717	154,592
Purchases	45,821	45,821	355,771
Less: Closing stock	0	0	253,212
Cost of sales	45,821	45,821	102,559
Rent or lease	194	194	9,600
Interest expense	806	806	1,741
Depreciation	24,528	24,528	36,871
Motor vehicle expenses	45,076	45,076	0
Repairs and maintenance	3,124	3,124	6,667
All other expenses	87,475	87,475	41,554
Total expenses	207,024	207,024	198,992
Less: Trade debtors	0	0	14,545
Net income from business	42,693		42,693		(58,945)
Taxable income	42,693		48,921		7,596

Date of deposit	Amount
19 September 2007	$250,000
11 December 2007	$200,000
28 April 2008	$500,000

116. Tax period ended 30 June 2008	117. Mr Jarvis-Lavery’s original BAS lodged on 7 July 2008	118. Mr Jarvis-Lavery’s amended BAS lodged on 29 March 2015	119. Commissioner’s assessment – 13 March 2012	120. Mr Jarvis-Lavery’s current position
121. GST	122. $21,817	123. $0	124. $0	125. $6,909.09
126. ITC	127. $13,730	128. $13,730	129. $162	130. $10,135.67
131. Net amount	132. $8,087	133. ($13,730)	134. ($162)	135. ($13,226.58)

160. Tax period ended 30 September 2008	161. Mr Jarvis-Lavery’s original BAS	162. Commissioner’s assessment – 13 March 2012	163. Mr Jarvis-Lavery’s current position
164. GST	165. $0	166. $0	167. $2,613.64
168. ITC	169. $1,434	170. $202	171. $417.04
172. Net amount	173. ($1,434)	174. ($202)	175. ($2,196.60)

183. Tax period ended 31 December 2008	184. Mr Jarvis-Lavery’s original BAS	185. Commissioner’s assessment	186. Mr Jarvis-Lavery’s current position
187. GST	188. $0	189. $0	190. $3,404.54
191. ITC	192. $1,213	193. $230	194. $4,283.70
195. Net amount	196. ($1,213)	197. ($230)	198. ($879.16)

214. Tax period ended 31 March 2009	215. Mr Jarvis-Lavery’s original BAS	216. Commissioner’s assessment	217. Mr Jarvis-Lavery’s current position
218. GST	219. $181	220. $181	221. $0
222. ITC	223. $1,765	224. $48	225. $625.19
226. Net amount	227. ($1,584)	228. ($133)	229. ($625.19)

239. Tax period ended 30 June 2009	240. Mr Jarvis-Lavery’s original BAS	241. Commissioner’s assessment	242. Mr Jarvis-Lavery’s current position
243. GST	244. $230	245. $230	246. $0
247. ITC	248. $2,144	249. $107	250. $11,728.09
251. Net amount	252. ($1,914)	253. $123	254. ($11,728.09)

266. Tax period ended 30 September 2009	267. Mr Jarvis-Lavery’s original BAS	268. Commissioner’s assessment	269. Mr Jarvis-Lavery’s current position
270. GST	271. $2,019	272. $2,019	273. $0
274. ITC	275. $3,175	276. $0	277. $771.17
278. Net amount	279. ($1,156)	280. $2019	281. ($771.19)

291. Tax period ended 31 December 2009	292. Mr Jarvis-Lavery’s original BAS	293. Commissioner’s assessment	294. Mr Jarvis-Lavery’s current position
295. GST	296. $1,816	297. $1,816	298. $0
299. ITC	300. $3,257	301. $0	302. $2,121.04
303. Net amount	304. $1,441	305. $1,816	306. ($2,121.04)

317. Tax period ended 31 March 2010	318. Mr Jarvis-Lavery’s original BAS	319. Commissioner’s assessment	320. Mr Jarvis-Lavery’s current position
321. GST	322. $111	323. $111	324. $0
325. ITC	326. $111	327. $0	328. $118.04
329. Net amount	330. $0	331. $111	332. ($118.04)

Date of hearing:	19-21 September 2016
Date final submissions received: Solicitor for the Applicant:	3 January 2017 A Swanwick
Counsel for the Respondent:	D J McInerney
Solicitors for the Respondent:	ATO Review and Dispute Resolution