Le and Commissioner of Taxation (Taxation)

[2022] AATA 610

Le and Commissioner of Taxation (Taxation) [2022] AATA 610 (30 March 2022)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2018/5029, 2018/5030, 2018/5031, 2018/5032, 2018/5033, 2018/5034

Re:Huong Le

APPLICANT

AndCommissioner of Taxation

RESPONDENT

Decision

Tribunal:Member Rob Reitano

Date:30 March 2022

Place:Brisbane

The Decision under review dated 22 August 2016 is affirmed.

...............................[SGD]..................................

Member Rob Reitano

Catchwords

TAXATION AND COMMERCIAL – default assessments – onus of proof – non-lodgement of tax returns – asset betterment – unexplained wealth – administrative penalties – remittal of penalties – decision affirmed

Legislation

Income Tax Assessment Act 1936 (Cth)

Taxation Administration Act 1953 (Cth)

Cases

Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Secondary Materials

Practice Statement Law Administration PS LA 2014/4

REASONS FOR DECISION

Member Rob Reitano

30 March 2022

INTRODUCTION

1. Huong Le (Ms Le) did not lodge income tax returns for each of the tax years ended 30 June 2009, 2010, 2011, 2012, 2013 and 2014 (which I shall refer to as the ‘relevant tax years’), so on 22 August 2016, the Commissioner of Taxation (Commissioner) issued default assessments under s.167 of the Income Tax Assessment Act 1936 (Cth) (ITAA Act) for each of the relevant tax years.

2. In relation to each of the relevant tax years the Commissioner used what is known as the Asset Betterment analysis to determine Ms Le’s income. The Commissioner then assessed tax on that income and also assessed administrative penalties based on that assessment.

3. On 4 July 2018 the Commissioner determined Ms Le’s objection which had the effect of slightly changing the default assessment for all of the relevant tax years except the 2012 tax year which remained the same. The outcome of the objection so far as income, tax payable and penalties was summarised by the Commissioner in the following table:

4. On 4 September 2018 Ms Le filed an application seeking a review of the Commissioner’s objection decision. I have reviewed the Commissioner’s and have decided to affirm that decision. What follows are my reasons for doing so.

   THE REGULATORY FRAMEWORK

5. Section 167 of ITAA Act provides the foundation for the Commissioner’s power to make a default assessment. Section 167 provides:

   If:

   (a)  any person makes default in furnishing a return; or

   (b)  the Commissioner is not satisfied with the return furnished by any person; or

   (c)  the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income;

   the Commissioner may make an assessment of the amount upon which in his or her judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.

6. Ms Le did not furnish a tax return in any of the relevant taxation years so that one of the conditions for the Commissioner making ‘an assessment of the amount upon which in his or her judgment income tax ought to be levied’ was satisfied. The Commissioner’s ‘judgment’ concerning the amount upon which ‘tax ought to be levied’ was made by using the Asset Betterment analysis which is an accepted basis that determines income by reference to increases in net asset position and expenditure over time. The Asset Betterment analysis does not involve determining an actual income figure but involves the making of a judgment (as s.167 envisages) on a rational basis.

7. On the basis of income determined by recourse to the Asset Betterment analysis the Commissioner proceeded to assess the amount of tax payable by Ms Le and made a consequential assessment of administrative penalties which I have set out earlier.

8. Next, s.14ZZK of the Taxation Administration Act 1953 (Cth) (TAA Act) contains the rules that apply to the way in which the Commissioner, and the Tribunal on review, is to deal with objections. Section 14ZZK provides:

   On an application for review of a reviewable objection decision:

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

   (b)the applicant has the burden of proving:

   (i)   if the taxation decision concerned is an assessment--that the assessment is excessive or otherwise incorrect and what the assessment should have been; or

   (ii)  in any other case--that the taxation decision concerned should not have been made or should have been made differently.

9. The effect of s.14ZZK(b)(i) of the TAA Act is that the taxpayer, in this case Ms Le, must prove first, that the Commissioner’s assessment of the tax that is to be paid is excessive or otherwise incorrect; and second must prove what the assessment should have been.

10. The need to prove those things is not discharged by showing that the methodology or aspects of the content of the methodology or assessment undertaken by the Commissioner was or is flawed or wrong. Section 14ZZK(b)(i) requires the taxpayer to prove on the balance of probabilities what the taxpayer’s actual taxable income was in order to prove the amount by which the Commissioner’s assessment is excessive or incorrect. In the absence of proving what the actual assessment should have been it is not possible to draw a conclusion that the Commissioner’s assessment is either excessive or incorrect.

11. It follows that the onus is upon Ms Le to bring evidence to demonstrate the extent of her income and, the tax that should be levied against that income for each of the relevant years.

    THE ISSUES

12. The issues are very straightforward: has Ms Le proven what her taxable income was over each of the relevant tax years. If so, is that amount less than the amount on which the Commissioner assessed her tax liability. As will be seen it is unnecessary to consider the second issue because of the answer to the first issue. There is a secondary issue that concerns the assessment of administrative penalties.

    THE EVIDENCE

13. The Commissioner identified three categories of ‘unexplained wealth’ from Ms Le’s financial records. These were first her increased net asset position, second her expenditure and third a series of transfers of cash overseas which did not have as their origin Ms Le’s own bank accounts. From these amounts applying the Asset Betterment analysis the Commissioner made a judgment about Ms Le’s assessable income and assessed tax on that income for each of the relevant tax years. I have set out above the results of the Commissioners analysis, his assessment of the tax payable by Ms Le and his imposition of administrative penalties. It is unnecessary to repeat those things here.

14. Ms Le relied on a statement that said that in each of the relevant taxation years her taxable income was ‘nil’ because she was not earning any income in any of those years because she was caring for her young child, her oldest child (who had been diagnosed with breast cancer), her elderly mother and because she herself was suffering from chronic back pain. Ms Le said she relied ‘solely on’, Family Tax Benefit payments, which she referred to as a ‘Centrelink pension’, and her ex-husband for support in the relevant taxation years.

15. Ms Le said that her ex-husband earned a modest income from his fishing trawler business which income was used to make mortgage repayments on the house they jointly owned, to maintain the home and to provide ‘me with money for living expenses, including paying my credit card bills’. The reference to ‘my credit card bills’ assumes a little importance. Ms Le referred to her ex-husband’s tax returns as showing his business income. In particular, Ms Le said in her statement that ‘every dollar I received was either from Centrelink or my husband’. The reference to ‘every dollar I received’ assumes some importance.

16. Ms Le’s ex-husband said much the same as Ms Le in another statement that was provided to the Tribunal. 

17. Ms Le also referred to some documents that showed that she had received some money from gambling winnings in August 2010, August 2012 and 18 July 2013 in amounts of $2529.99, $41,716.85 and $27,558.44 respectively. There was also some evidence about gambling winnings in the amounts of $12,610 in April 2008 and $10,133 in September 2009. These winnings were not referred to in Ms Le’s statement even though documents relevant to them, receipts, had been provided to the Commissioner when the objection was being dealt with. I will say something more about these documents in a moment.

18. There was also one other document that was relevant to money received by Ms Le which was cheque drawn in her favour from the Commissioner of Police that was deposited in her bank account on 24 June 2010. The cheque was in the amount of $21,302.50. The Commissioner was told as part of the objection that this was the return of bail moneys but in her evidence Ms Le said the money was the return of money that the police had seized from her home. I will return to consider this matter in a moment.

19. I will deal with some other aspects of the evidence concerning these transactions and some other transaction below.

    HAS MS LE PROVEN WHAT HER INCOME WAS?

20. I am not satisfied that Ms Le has proven that her income was ‘nil’ for any of the relevant taxation years. Ms Le’s evidence apart from being self-serving was on important matters uncorroborated by other evidence whether documentary or from witnesses who would have at the very least would have been able to confirm some of the things that Ms Le was saying. Further, I do not consider that Ms Le’s evidence was reliable because of inconsistencies in it as well as the very many things that appeared to be unexplained. It is convenient here to deal with the main aspects of her evidence that mean that I do not consider that Ms Le has proven that her assessable income was ‘nil’ for any of the relevant taxation years.

21. First, so far as Ms Le’s gambling winnings are concerned Ms Le initially in her evidence denied that she gambled ‘regularly’. She said that she only went to the local tavern ‘at the time’ (referring as I understood it to the period over the relevant tax years) on ‘weekends and during public holidays’. Ms Le was clear that she gambled once a week, which was different to her evidence that she did not gamble regularly. Ms Le when asked about taking money with her to the tavern to fund her gambling said she said ‘sometimes I went without any money, sometimes my friends won, they gave me a few hundred dollars. Sometimes I don’t have money when I went there’. This of course did not account for the money she used at other times when she went to gamble which presumably was her own and the origin of which was not explained. 

22. Ms Le’s evidence was that sometimes she lost ‘a few hundred dollars or a couple of hundred dollars. But sometimes I was lucky, and I won’. Ms Le also said that ‘sometimes my children, when they gave me fifty, or my son when he got paid, gave me a couple of hundred dollars. So I used those moneys’. She also said that at times she borrowed from her friends in order to gamble. Of course, apart from the fact of her winnings from gambling being an unidentified source of money in her witness statement, the fact that Ms Le said she received money from friends, her children and her son contradicts her evidence that ‘every dollar I received was either from Centrelink or my husband’. Ms Le’s statement did not deal with her borrowings to fund her gambling or the fact that others, so it seems, gave her money to gamble. Further, the inconsistency as to where she received money from and evidence about how she funded her gambling habit was self-serving and uncorroborated.

23. Second, so far as the cheque received from the Commissioner of Police for $21,302.50 is concerned Ms Le through her legal representatives originally told the Commissioner, as I have already noted, on objection that that money was the return of bail money. In her evidence Ms Le said that that money was in fact the return of money that was seized by police from her house. The change in the origin of the money was not a good start for the reliability of her explanation. The two different versions of the origins of the money did not instil much confidence about the reliability of the evidence from the outset.

24. Ms Le was next met with the inevitable question about where the money that was seized had come from in the first place, that is how it found its way into the house where she lived. Ms Le said that the money belonged, at least in part, to the four people who lived with her; her ex-husband, her mother in law, her son and someone else who was not identified. Ms Le said that only ‘about $950’ of the money that had been seized was hers. That then required an answer to the next question about why the cheque returning the money was paid to Ms Le by a cheque drawn in her favour and not anyone else’s. Ms Le explained that by suggesting that the original receipt of the seized money had been out to her, so the money was returned to her.

25. Even then, there was no satisfactory explanation for why the cheque deposited to her account on 18 June 2010 was not then followed by what would have been the rather obvious, even inevitable, withdrawals dispersing the funds to the respective owners of the other $20,000 or so. Ms Le’s evidence, like much her evidence about this cheque, that she held the money until the people it belonged to wanted it, did not really ring true if only because of the large amounts involved.

26. The version of events that Ms Le gave about the money started with the inconsistency about the source of the funds and ended with the implausibility that she kept such a large sum in her bank account even though it belonged to others. The evidence was uncorroborated by evidence from others, such as those who were said to own the money. The evidence was self-serving. I am not persuaded by it.

27. Third, on 23 August 2011 Ms Le took about $19,000 cash to the bank and in return obtained a bank cheque. Ms Le could not recall where the $19,000 came from. That is a little curious given the amount involved and the fact that the transaction seems more than a little out of the ordinary. The question about where the money came from in the first place remained completely unanswered.  

28. Fourth, Ms Lee said in her evidence that her credit card was used to pay for expenses relevant to her ex-husband’s business, but her statement said that her credit card bills were part of her living expenses. There was no evidence that demonstrated how the credit card was used; Ms Le relied solely on her say so in that regard. There was no explanation for why business expenses for her ex-husbands business were being paid onto her credit card and in turn were being paid by Ms Le.

29. Fifth, Ms Lee was taken to a personal loan which was in her name, for which she paid $600.00 per month as repayments. The repayments were made, according to Ms Le, from money received from her daughter. Again, that fact was inconsistent with her statement that ‘every dollar I received was either from Centrelink or my husband’. She suggested that this was not receiving money ‘per se’ as her daughter was not giving her money to do as she pleased with, she was only giving her money to repay the loan. That distinction is probably a fair one except in the context where Ms Le is effectively required to account for all money’s coming into her possession so as to dispel any prospect that there might be a suggestion, that her evidence should not be accepted because she was not a reliable witness generally or because she was not particularly careful enough in giving her evidence so it should be rejected. Ms Le’s daughter did not provide evidence about the loan or the repayments.

30. Sixth, Ms Lee was taken to a series of transactions, about ninety in number, that involved her in transferring various amounts of money to Vietnam in the period 29 October 2008 to 15 May 2014. The amounts varied between about $200 and $1000 although there was one transaction for an amount of $7000. She explained that the transactions for amounts of $200, of which there were about twenty such transactions, involved her using her own money to send to help her brother and that ‘the other amounts were actually charity money that were given to me by different people in order to send back to Vietnam to help the charity of a temple.’ Ms Le did not give that explanation when the objection was made. Again, it was money that came into her possession which was unaccounted for in her evidence. It was contrary to her statement that ‘every dollar I received was either from Centrelink or my husband’. Again,  it was not corroborated and was self-serving.

31. Seventh, to the extent that Ms Le said her sole sources of money were her ex-husband’s business and her ‘Centrelink pension’ that was simply not possible in the 2009, 2010 and 2011 tax years as her ex-husband’s taxable income before losses was less than the money she received. Again, that evidence was at odds with Ms Le’s evidence that ‘every dollar I received was either from Centrelink or my husband’. It may be that the discrepancy is no more than carelessness but when the amounts were specifically identified in the Commissioner’s material it is a little remarkable that the explanation was not offered at the front end of things. This is especially so given that the reliability of Ms Le’s evidence is foundational to her discharging the onus of proving what the assessment should have been.

32. Eighth, the number of unexplained deposits into Ms Le’s bank accounts was not satisfactorily explained. Ms Le’s evidence that some, almost all, of them could be attributed to her ex-husband’s dealings with the bank or matters connected with his business required at a minimum close scrutiny of each of the deposits to explain their source. There were no such explanations offered other that those which were general and high level.

33. For those reasons I am not persuaded that Ms Le has established that her income in any of the relevant taxation years was in fact ‘nil’. It follows the Ms Le has not proven that the assessments are excessive or incorrect and what the assessments should have been.

    REMISSION OF PENALTIES

34. The imposition of administrative penalties is prescribed by s. 284-75(3) of Schedule 1 of the TAA which applies where a taxpayer has failed to give returns to the Commissioner and the Commissioner determines the tax related liability without assistance from the taxpayer. The penalty is 75% of the tax shortfall and because of s. 284-220(1) is increased by 20% for subsequent years where a person has been liable to a penalty in previous year for that item.

35. I am satisfied that Ms Le is liable to the imposition of the penalties because she did not lodge a return in each of the relevant taxation years, the return was necessary for the Commissioner to assess her liability for tax accurately and the Commissioner assessed her liability without any assistance from a tax return. Ms Le is also liable to the 20% uplift in penalty for subsequent years following 2009 as a result of the penalty imposed on her for 2009. I am satisfied that the Commissioner has correctly calculated the administrative penalties.

36. Section 298-20 of the TAA provides the Commissioner with a discretion to remit all or a part of the penalty. There is no indication in s. 298-20 about when the Commissioner should exercise that discretion, but the Commissioner has provided guidance about the exercise of the discretion in Practice Statement Law Administration PS LA 2014/4 (PS LA 2014/4) no doubt to ensure so far as possible that the discretion is exercised uniformly and consistently. PS LA 2014/4 is not binding on the Tribunal but like with policy generally the Tribunal would apply it unless there was some sound reason to depart from it.[1] There does not appear to be any basis to depart from it in this case.

    [1] Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.

1. In dealing with whether an administrative penalty should be remitted in whole or part PS LA 2014/4 says that the following are relevant:

   (a)Did the Applicant have a genuine, yet mistaken, belief that lodgement was not required as opposed to an indifference to, or a rejection of, their obligations?

   (b)Did the Applicant understand their obligations to lodge but circumstances beyond his control affected their ability to lodge?

   (c)Does the amount of penalty imposed by law cause an unjust result?

   (d)Did the Applicant have credits available to offset the amount of the tax-related liability payable?

   (e)Was the Applicant extraordinarily cooperative during an examination?

   I am not satisfied that any of the grounds in PS LA 2014/4 have been made out.

2. Ms Le said that she was not able to pay any penalty but that was not supported by any satisfactory evidence about her capacity to pay any penalty other than a general statements that she was unable to pay. In any event, Ms Le did not provide an up to date material such as bank statements and the like that would permit a proper assessment to be made.  It was like much of her evidence self-serving and uncorroborated. I am not able to rely on it.

3. Belatedly Ms Le said that she had asked her accountant in each of the years whether she was required to lodge a tax return and she was advised she was not required to do so. Ms Le considered that this was ‘my oversight, my mistake’. The suggestion that there was some oversight or mistake was not contained in any witness statement filed by Ms Le and was not supported by any evidence from her ‘accountant’. For the reasons already given and especially having regard to the self-serving nature of the evidence, the lack of any form of corroboration of that evidence by her accountant and any evidence about what was said by Ms Le to her accountant in any of the years in question I am unable to find that the failure to lodge a return was a mistake based on advice given to her by her accountant.

4. I do not consider that in the circumstances there is any basis for remitting the administrative penalties or any part of them. It follows that I will affirm the Commissioner’s decision not to remit the administrative penalties or any part of them.

   CONCLUSION

5. I am unable to find that the Commissioner’s assessments of Ms Le’s tax for the 2009, 2010, 2011, 2012, 2013 and 2014 and 2017 were excessive or otherwise incorrect or what her assessment should have been. I am satisfied that the administrative penalties were correctly imposed and that there is no basis to remit them in whole or part.

6. I affirm the Commissioner’s objection decision

I certify that the preceding 42 (forty-two) paragraphs are a true copy of the reasons for the decision herein of Member R Reitano

…………………[SGD]………………..
Associate
Dated: 30 March 2022

Date of Hearing:	11 June 2021
Advocate for the Applicant:	Mr Le
Solicitor for the Respondent:	Mr A Dekkers