LNNB and Ors and Commissioner of Taxation
[2014] AATA 527
•31 July 2014
[2014] AATA 527
Division Taxation Appeals Division
File Numbers
2011/4036 - 2011/4043
Re
LNNB
APPLICANT
And
Commissioner of Taxation
RESPONDENT
File Numbers
2011/4044 - 2011/4051
Re
RFGQ
APPLICANT
And
Commissioner of Taxation
RESPONDENT
File Numbers
2011/4054 - 2011/4061
Re
XWXD
APPLICANT
And
Commissioner of Taxation
RESPONDENT
File Numbers
2011/4062 - 2011/4069
Re
DPQS
APPLICANT
And
Commissioner of Taxation
RESPONDENT
File Numbers
2011/4071 - 2011/4078
Re
KGJH
APPLICANT
And
Commissioner of Taxation
RESPONDENT
File Numbers
2011/4079 & 2011/4086
Re
QXZV
APPLICANT
And
Commissioner of Taxation
RESPONDENT
File Numbers
2012/1578 - 2012/1584
Re
WPSK
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Senior Member Bernard J McCabe
Date 31 July 2014 Place Brisbane The penalty decision for applicant XWXD in relation to the income tax year ended
30 June 2002 is varied so that the uplift of 20% pursuant to sub-section 284-220(1)(e) of Schedule 1 to the Taxation Administration Act 1953 (Cth) is not applicable.
The objection decisions are all otherwise affirmed..................................................................
Senior Member Bernard J McCabe
CATCHWORDS
INCOME TAX ASSESSMENT AND PENALTY DECISION – Amended notices of assessment and default assessments issued against taxpayers – Commissioner concedes amounts in amended assessments and default assessments not accurate – Onus on taxpayers to establish correct assessment – Failure to discharge onus – Objection decisions affirmed – Administrative penalties imposed – No evidence that imposition of penalties harsh or inappropriate – No basis for remitting penalties.
LEGISLATION
Taxation Administration Act 1953 (Cth) s 14ZZK
Taxation Administration Act 1953 (Cth) – Schedule 1, ss 284-75; 284-90; 284-220; 284-225;
286-75Income Tax Assessment Act 1936 (Cth) s 170
CASES
Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301
REASONS FOR DECISION
Senior Member Bernard J McCabe
31 July 2014
This case concerns the taxation affairs of the Taxpayer Family.[1] For the relevant years, the various members of the Taxpayer Family either failed to lodge income tax returns or filed income tax returns disclosing (in most cases) relatively small amounts of assessable income. But the Commissioner claims the taxpayers’ patterns of expenditure and asset acquisition suggest they had access to much greater income than supposed. After an audit which included an asset betterment analysis, the Commissioner issued amended notices of assessment and default assessments against the various members of the family in the relevant years of income. The Commissioner also imposed administrative penalties.
The taxpayers have asked the Tribunal to revisit these decisions.
[1] The members of the family are the father, whom I shall call Patrick (LNNB, 2011/4036-4043); the eldest son, Harry, and his wife, Monica (RFGQ, 2011/4044-4051 and XWXD, 2011/4054-4061 respectively); the younger son, John (QXZV, 2011/4079 & 2011/4086 and WPSK, 2012/1578-1584); and the two daughters, Maria (KGJH, 2011/4071-4078) and Raelene (DPQS, 2011/4062-4069).
THE ROLE OF THE TRIBUNAL UPON REVIEW
The Tribunal’s review in cases like this is informed by s 14ZZK(b) of the
Taxation Administration Act 1953(Cth) (“the TA Act”). The words of that sub-section are of crucial importance in this case, so they are worth quoting directly:
On an application for review of a reviewable objection decision:
(b) the applicant has the burden of proving:
if the taxation decision concerned is an assessment--that the assessment is excessive
or otherwise incorrect and what the assessment should have been; or
in any other case--that the taxation decision concerned should not have been made or
should have been made differently.
The sub-section assumes the taxpayer is in the best position to know about – and therefore explain and justify – his or her own tax affairs. The Commissioner has only limited sources of information available about individuals, which is as it should be. The self-assessment system proceeds on the basis the taxpayer will be able to provide the information required to justify his or her claims if called upon to do so.
The Commissioner can only ever guess at the true situation. He has the power to audit and demand information, to be sure, and he can use sophisticated computer profiling techniques and other tools to identify anomalies and make guesses where his suspicions are aroused.
But the end result is still the product of guess-work. That is why s 14ZZK(b)(i) requires a taxpayer challenging an assessment to establish:
a)that the Commissioner’s assessment was wrong; and
b)what the assessment should have been.
The Commissioner conceded there were flaws in the asset betterment analysis he used to raise the assessments against the various taxpayers in this case. That much was clear even before the commencement of the hearing. There is nothing remarkable or improper in that: the asset betterment analysis is admittedly a blunt tool. It provided a starting point for the analysis and a basis for the assessments, but that is all. As more information about the taxpayers’ affairs was gathered in the course of these proceedings, it became apparent the amended assessments were indeed wide of the mark. But it is not enough for the taxpayers to show the amended assessments are incorrect. They must go further to discharge their onus under s 14ZZK(b). As the Full Court explained in Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301, 315 at [63], each of the taxpayers must
positively prove his or her “actual taxable income” and, in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer….
That is a tall order in a case like this where many of the records have apparently been lost, the financial affairs of the family are intertwined and most of the family members appear to have a limited understanding or recollection of what occurred.
There is also the question of fraud. The amended assessments for three of the taxpayers extend back beyond the limitation period that normally applies in cases like this:
see s 170 of the Income Tax Assessment Act 1936 (Cth) (ITAA36) as it stood at the relevant time. Section 170(2) provided the limitation period could be extended – so the Commissioner could issue amended assessments that would ordinarily be out of time – if tax was avoided due to fraud or evasion. For reasons I will explain, I am satisfied there has been fraud or evasion here. It follows there is no obstacle to the issue of the amended assessments that are before me.
The taxpayers’ case depends crucially on the evidence of one of their number, whom I shall call Harry. (I have assigned fictitious names to all of the family members as the hearing was conducted in private.) Harry was the eldest son in this Lebanese family, and all the other family members testified that they trusted him to conduct their financial affairs.[2] Harry appears to have had access to most of the many bank accounts operated by family members (apart from trust accounts operated by his father), and he played a central role in the various transactions in relation to property assets. He was able to shift money around between accounts and between taxpayers.
[2] I mention the ethnicity of the family because Harry and other witnesses said the intermingling of the affairs of family members and the fact the family operated as a unit was common in families with a Lebanese cultural heritage. I am not in a position to comment on whether that observation is true; I merely note it here because it was proffered as an explanation for why this family did business in a particular way.
Harry’s evidence is crucial because it seems he was the only one who knew what was going on with the family’s finances. His sisters and parents were either uninterested (as opposed to disinterested) in what he was doing, or they were only privy to aspects of what might loosely be described as the family business. Each of the other taxpayers insisted he or she trusted Harry to look after the family’s interests. He described himself as “the CEO in the family” in the course of his evidence (transcript at p 194).
Harry conducted the proceedings before the Tribunal. He acted on behalf of all the taxpayers. He instructed Mr Stephen Haines, a tax agent, to prepare an analysis of their affairs in order to reveal the correct position in an attempt to discharge the obligation under s 14ZZK of the TA Act. Harry also gave evidence and was cross-examined at length. During that cross-examination, he had difficulty offering coherent or convincing explanations for all that had transpired. He was unable to explain many of the transactions recorded in the bank accounts (although that was hardly surprising given the passage of time) and some of his evidence about the use of the properties acquired by family members raised more questions than it answered. He was also confronted with examples of documents that appear to have been falsified in the course of obtaining finance. There were even questions about wrongly claiming the First Home Owner Grant.
After taking Harry through the evidence about apparently falsified documents in
cross-examination, counsel for the Commissioner, Mr Brennan, asked Harry if he were “prepared to lie in order to obtain a financial advantage”. After a lengthy pause, and with a perplexed look, Harry asked Mr Brennan to “define the word ‘lie’…”.
It was an awful moment. Mr Brennan continued (transcript at p 283):
BRENNAN: Tell an untruth? ---
TAXPAYER: But I always pay. I’ll pay the repayment of the loan. I’ll pay for what I have to pay. Like, I’m not – can I – yes.
BRENNAN: Is that a “yes” or a “no”?---
TAXPAYER: No, I think I’m mistaken or overlook things. I’m not a liar. I don’t lie.
BRENNAN: I’ll ask the question again and you can try and answer “yes” or “no”. I put it to you that you are a person who will lie for financial gain. What do you say to that?---
TAXPAYER: Well, I don’t lie, but for financial gain – no, no. I don’t lie, but maybe I’ve ticked the wrong thing or done the wrong thing and I apologise.
BRENNAN: Is that the best answer you’re going to give me even if I ask you again?---(No audible response)
BRENNAN: Is that the answer you’re going to give me if I ask you again?---
TAXPAYER: Mr Brennan, you’re talking about a $7,000 home grant. I know it’s irrespective of the amount or whatever, but no I’m not – I don’t lie.
That exchange came at the end of Harry’s lengthy cross-examination. I accept he had been in the witness box for a long time by that point, and he was undoubtedly stressed by the experience of giving evidence and representing the family in the face of significant tax liabilities. But even allowing for all that, his response neatly illustrated the problems with his credibility – problems that are ultimately fatal in a case where the taxpayers’ success rests on whether I accept Harry’s evidence as an accurate explanation of the true position.
After hearing all the evidence, I am not persuaded the taxpayers have discharged their onus of proof. While even the Commissioner concedes the amounts referred to in the amended and default assessments are likely to be inaccurate in light of the admitted flaws of the asset betterment analysis, the taxpayers have not been able to satisfy me of a superior alternative conclusion. In those circumstances, the Commissioner’s objection decisions – flawed though they may be – must stand. I will expand on my reasons for that conclusion below. I will begin with a brief overview of the taxpayers’ affairs before considering the evidence provided by each witness. I will then address the question of penalties.
THE TAXPAYERS’ AFFAIRS: AN OVERVIEW
The story begins with Patrick, the patriarch of the taxpayer family, and his wife, Patricia. Patrick came to Australia from Lebanon in 1969 and married Patricia in 1973. Before retiring in 1998, he worked as a labourer and taxi driver and conducted a number of small businesses, including a supermarket, a bakery, a takeaway shop and fruit shops. He was asked about his business career in the course of cross-examination. While he obviously worked hard and provided for his family, there is nothing in his evidence suggesting any of the businesses which he conducted were especially successful or profitable. Indeed, his evidence at the hearing suggested only one of the businesses – a fruit shop in Inala – made any real money. He lost money on his last two ventures: transcript at pp 300-301. When he retired, he said he had some savings in an account but his home was mortgaged. He had no superannuation and was eligible to receive the age pension. It appears that he was not well-off.
Patrick had two sons and two daughters. They are all parties to these proceedings along with their father and Harry’s wife, Monica. Patrick explained in his statement (exhibit 19) that he and his wife Patricia developed a practice of accumulating savings when he was still in the workforce so they were in a position to assist each of their children and, in due course, their grandchildren to make a start in life – most obviously by providing financial assistance when the family members bought real estate. Patrick said he and Patricia maintained a range of accounts where they and other family members deposited their not inconsiderable savings: exhibit 19, p 3. Deposits continued even after Patrick’s retirement because members of the family would occasionally leave surplus cash with their mother and father, either by way of repayment for earlier assistance, or in order to benefit other family members out of a sense of familial duty and affection: exhibit 19,
p 2.Harry is the eldest son. He married Monica in 1999 in Lebanon. Harry said he shared his father’s values and commitment to family as well as his entrepreneurial spirit.
Harry explained in his oral evidence that he entered into a partnership with his brother, John, and one of his sisters, Maria, to conduct a fruit shop between 2001 and 2006. John was still studying and played a minimal role in the business. Maria occasionally helped out but did not play a role in the management of the business. (She was also employed by an airline at the time.) Harry says he ran the operation. The business bank account was opened in the names of Harry and John.The business struggled. Harry said in evidence that he reported minimal assessable income in the first few years of the business, although he agreed in cross-examination that he took money out of the till on a regular basis for living expenses:
transcript, pp 203-204. (That concession alone is enough to provide a basis for a finding of fraud and evasion, which justifies the issue of amended assessments against Harry as early as 2001 pursuant to s 170(2) of ITAA36.) He denied having any other sources of income before 2003. He also said he lived at home with his parents and wife and survived on very little so he had the opportunity to save – although it is not clear how he could save anything given how little income he was supposedly earning.But Harry was ambitious for more, he explained in his oral evidence. He wanted to be a wholesaler. He thought he had his chance to develop the elements of a wholesale business when he made contact with Mr G, the principal of a business that imported apples into the United Kingdom. Mr G asked Harry to send a trial shipment of a single container of apples to the United Kingdom in 2003. Harry said he told Mr G he was not in a position to fund the trial but insisted he was keen to establish a relationship.
Mr G’s business agreed to fund the purchase and the shipment was arranged
(transcript, pp 132-133). It was a success, and Harry says he proceeded to arrange for the export of about 89 containers over the course of the next year, and many more before the relationship ended in 2008. He described himself as a “buyer’s agent” for Mr G’s business in his statement: exhibit 15 at p 10.Harry said Mr G’s business funded the operation as Harry did not have enough funds of his own. He said Mr G would remit payments to Harry as containers were prepared for export. Harry would then pay the amounts from one of his accounts to the individual growers with whom he was establishing good relationships. Harry said these relationships were the valuable thing from his point of view: if he had good relations with the growers, he explained, he had much better prospects of building a successful wholesaling business of his own. He explained in evidence that he did make a small amount of profit under a profit share arrangement with Mr G during the relevant years of income, but these amounts were comparatively modest: he claimed he only made around $55,000 (or perhaps as little at $37,500) out of the relationship (transcript at p 228), although when pressed in cross-examination he agreed there might have been other amounts that flowed to him as a consequence of a profit split arrangement. He also acknowledged there was no written agreement.
Harry acquired a wholesaling business with a presence at a major fruit market in 2006. He explained in his oral evidence that he was aware the new business had significant losses which he thought might be useful for tax purposes. There were also some fleeting references in the material to other business opportunities that Harry considered, including a proposal to import limestone into Australia from Lebanon and a furniture importing business (transcript at p211), but Harry said these came to nothing at the time. He moved to Lebanon in 2008 to join his wife who had returned there, although he regularly returns to Australia. He claimed many of the primary records in relation to his various businesses were lost in the 2011 Brisbane floods. He explained that his tax agent (and the Commissioner, for that matter) had to try and reconstruct the earnings of the family members by looking at bank statements and a few other documents that survived the floods.
UNEXPLAINED CASH TRANSACTIONS
There were many bank accounts held by members of the family. Harry had access to most of them, apart from accounts with Suncorp controlled by Patrick that were trust accounts. Harry said in his oral evidence that he knew what was happening with each account, even those held by his father. The Commissioner says there are large flows of cash through the accounts and suspects many of the expenditures (in particular transfers of funds to people in Lebanon in 2006) should actually be regarded as assessable income.
The accounts controlled by Patrick include a number of transactions that were not explained in advance of the hearing. I have already noted the questions over how Patrick – a struggling small businessman who has been receiving the age pension since 1998 – could accumulate significant surpluses. Patrick had an opportunity to explain deposits and expenditures at the hearing. He conspicuously failed to do so.
Patrick had a poor grasp of English, which I took into account, but I am satisfied he understood what he was being asked at the hearing. He was unable to explain the source of a number of large deposits, including a deposit of $110,000 referred to in exhibit 1
at p 372. It would be surprising if someone on the age pension could not recall such a large deposit, but Patrick had nothing to say. He previously suggested in a letter
(exhibit 1 at p 106) to the Commissioner that one stream of deposits into the trust account might have been rent collected in relation to properties owned by his children – but he changed his mind in the course of his oral evidence and claimed a real estate agent was collecting the rent. That change of mind occurred after Harry interjected to make that suggestion from the bar table: transcript, pp 311-312. He then suggested some of the deposits and expenditures related to his gambling at the casino, but that explanation struck me as fanciful and inconsistent with the steady pattern of deposits. He was vague in response to questions about money he spent while he was in Lebanon, and he did not recall a cheque for $52,000 drawn on 19 December 2003, or a cheque for $27,000 drawn in favour of Man Financial on the same date: exhibit 1, p 416. When pressed about the sources and destinations of cash payments, he repeatedly responded “I don’t remember nothing”.
He did say one source of the deposits was other family members, although it is unclear from their evidence how any of them were earning enough to be giving money in large or regular amounts to their father.
The problems associated with Patrick’s evidence were best illustrated by the following exchange between Patrick and Mr Brennan in the course of cross-examination.
Mr Brennan was asking Patrick about one of the accounts in his name as trustee for a number of family members. Patrick agreed his only income at the time was his Centrelink benefits – yet there was a deposit in the amount of $24,000:
transcript at p 325. Mr Brennan wanted to know where the money came from. He asked:BRENNAN: Do you recall opening an account like this in 1999?
TAXPAYER: No.
BRENNAN: You don’t recall opening an account like this?
TAXPAYER: No, I don’t.
BRENNAN: So you don’t recall this account at all? You can’t tell me anything about this account?
TAXPAYER: Look, I don’t know. I don’t know. I cannot recall when I opened this account but from what I can see here, it must be true.
BRENNAN: Okay. I want to give you the opportunity to comment on this account and where the money came from to go into this account?
TAXPAYER: Don’t give me no opportunity because I cannot recall where the money came from.
That evidence is problematic for the taxpayers because they claim the accounts controlled by Patrick were one of the principal sources of funds for the various property transactions that occurred in their various names. It is also inconsistent with the way in which Harry portrayed Patrick’s role as patriarch and trustee of the funds for other family members. In the course of his cross-examination, Harry made it clear he would consult with his father about potential property purchases. Harry’s evidence (transcript at p 195) indicates Patrick was across the details of the various accounts and was aware of their balances, and presumably the sources of any funds deposited into those accounts. That is not how Patrick presented in the witness box.
The Commissioner was also particularly interested in transactions in accounts connected with Harry’s export of apples to Mr G and his firm in the United Kingdom. The evidence about the flows of money from Mr G’s business is confusing. Harry identified several accounts with HSBC and the Commonwealth Bank that were used to bank the advances he said were remitted by Mr G. Mr G apparently preferred to use HSBC accounts because it is a global bank with a presence in Australia and the United Kingdom, but Harry developed a practice of transferring some or most of the amounts he received into other accounts under his control. He suggested that was for reasons of convenience, but also because he thought the various banks would be impressed if they saw large quantities of money moving through the accounts – and might be more inclined to loan the family money to undertake property transactions: transcript at p 161. Harry said at the hearing that Mr G’s business paid over 3.17 million pounds to him over the life of the arrangement between 2003 and 2008: transcript, p 139. Harry initially insisted in his statement (exhibit 15 at pp 10-12) and at the hearing (transcript at p 137) that the money was all from the one source and was only used for the purpose of preparing containers of apples for export, but he offered more detail after the issue was revisited in
cross-examination. That evidence suggested the monies in the various accounts connected with the export business might have been used for other purposes that were not necessarily related to the exports to Mr G and his firm: transcript at p 161. Harry agreed he would access the monies remitted by Mr G’s business and use them for his own purposes: transcript at p 240. Some of the monies were transferred to his new wholesaling business that he acquired in 2006 (exhibit one at p 622) – although he insisted those monies were used to reimburse the wholesale business for expenses it had incurred on behalf of Harry as buying agent. He also agreed there were amounts paid to his sister and another family friend in Lebanon (see exhibit one at p 615-616; see also transcript at pp 232, 240). He insisted significant amounts of cash coming in from
Mr G’s business on a constant basis were all referable to the apple exports Harry was arranging as a buyer’s agent.I was given the impression of a relaxed and trusting relationship between Mr G’s business and Harry in which Mr G’s business would pump money into Harry’s accounts constantly to fund the steady flow of containers destined for the United Kingdom.
I should say at this point that Mr G gave evidence by video-link. He told a more nuanced story of the relationship with Harry. While Mr G confirmed Harry was acting as a buying agent with a view to obtaining stock from the southern hemisphere that could be distributed in the off-season by Mr G’s business, he denied he routinely paid in advance for each container. He said he took an active role in approving the price paid for each shipment – he required Harry to supply quotes he obtained from growers – and insisted Harry break down the costs he was incurring in respect of each shipment. He added that monies would not be advanced to Harry in respect of a container of apples until he was provided with proof the container had been loaded onto a ship. The balance was not paid until delivery. He agreed the total payment for each consignment included an amount in respect of profit for Harry. That last evidence in particular does not accord with that given by Harry, who claimed he made little profit out of the venture.There is no doubt Mr G and his firm paid a relatively large amount to Harry, and that payments were made on a reasonably regular basis. But it is unclear how many of those payments were made, or in what amounts. There must also be some doubt over whether the payments from Mr G’s firm were the only ones received by Harry into the accounts: we only have his word for that. It is also unclear how much profit Harry actually made out of the relationship. He says a small amount, but the evidence from Mr G suggests larger profits were possible, or even likely, given the volume of sales and the fact each transaction was structured, on Mr G’s evidence, so there would be a profit margin for Harry. There does seem little doubt that Harry used funds in these accounts for his own purposes. Mr G’s evidence confirms the funds he paid were not held on trust. They were payments for services rendered and goods supplied when the services were rendered and once the goods were supplied.
I do not propose to rehearse the evidence in relation to each transaction in each account in these reasons. Suffice to say Patrick was quite unable to explain many of the transactions in accounts he controlled when asked about them in cross-examination. Harry made a more robust attempt to recall the purpose of particular transactions but he inevitably had trouble offering a convincing explanation for particular transactions after (in some cases) over a decade. The evidence from Harry and Mr G left me with the clear impression that Harry is likely to have derived greater profits than he has reported from each fruit consignment he organised for export. At the same time, the inconsistencies between the evidence given by Harry and Mr G about their relationship (and about the terms on which Mr G’s firm made payments) suggest the real possibility that the cash from Mr G’s firm was not quite as regular and uncontrolled as Harry claimed – which raises the question as to whether monies from other sources were also flowing through the accounts.
PROPERTIES ACQUIRED BY THE FAMILY
Members of the family acquired a number of properties (or interests in properties) during the years of income in question. All of the properties were funded in part by loans obtained from financial institutions. Some of them were subsequently sold during the years of income in question. Harry claims the deposits for each property were scraped together from the family trust, savings and other legitimate sources and the rest of the purchase price would be funded by debt. He said the properties then appreciated in value and might be sold in due course at a profit – which would then be put back into the family accounts to fund the next purchase: transcript at pp 156ff.
Harry purchased (or acquired an interest in) at least the following properties:
·A house in Cook St, Oxley in 2001. He claimed in his statement (exhibit 15, p 13 at [137]ff) it was financed using debt and an advance from his father;
·A property purchased jointly with his wife, Monica, in Strauss Pl, Mt Ommaney in 2002. Harry said it was financed by an advance from the trust controlled by his father. He subsequently built a house on the property. He said he did most of the work himself using funds realised from the sale of another property in Oxley owned by his wife in 2006: exhibit 15, p 14 at [143]ff.
·A share in a property in Oldfield Rd, Sinnamon Park, acquired in 2003 and sold in 2004. Harry claimed it was financed by a loan from the family trust controlled by his father, and by a bank loan. He said the family lived in this house for a period while the property in Strauss Pl was being built: exhibit 15, p 14 at [152]ff.
·Shares (with brother John) in two properties located in Mine St, Redbank, in 2003. Harry said these properties were purchased using funds obtained from the family trust controlled by his father and bank loans: exhibit 15, p 15 at [160]ff.
I note the Commissioner has identified at least 11 properties owned by family members during the years of income in question. Harry (and perhaps his father, although it was hard to be sure from Patrick’s evidence) played a central role in most if not all of those dealings. While the properties were in the names of individual family members, it is doubtful from the evidence of the other siblings whether all the individual owners were entirely aware of what Harry was doing in their names. The evidence of Maria was illustrative: she had an interest in a property in Harrington St, Darra that was acquired in 2001. In her oral evidence, she recalled the acquisition but said she never lived in the property and was not aware if she still owned it. She also had no idea whether it was rented out while it was in her name. She was sure she did not pay for the property herself: she said the purchase was funded out of the family business, which could be a reference to the partnership (which was reporting meagre earnings at the time) or to the family trust (which had access to funds that have not been adequately explained). I will have more to say about the evidence of Maria and the other witnesses in due course.
The first three properties acquired by Harry (referred to above) were acquired in the period between 2001 and 2005 while the fruit shop partnership was in operation. (The arrangement with Mr G’s business commenced in the latter half of that period but Harry insisted he derived only a small amount of assessable income out of the relationship, so there was not much to report.) Harry declared little if any assessable income during those years of assessable income but he (initially) denied having other undeclared sources of income. It is difficult to see how he could fund the acquisition of the properties in those circumstances even if one assumes he had little equity in the assets. I have already expressed my doubts as to whether the funds controlled by Patrick in the trust accounts have been properly accounted for. Harry’s claim that he relied on bank loans is not wholly convincing either: banks do not ordinarily lend to people who are not making enough money to service their loans. A glimmer of an explanation for what might have transpired emerged during cross-examination when Harry was asked about documents he supplied to his finance broker and bank in connection with the purchase of one of those properties: exhibit one at p 877. The document includes information that Harry admitted was false. Harry tried to defend the misleading conduct by saying, in effect, it was necessary if one was to obtain finance – as if that justified the behaviour: transcript
at p 210; see also transcript at p 212. It also appears likely he provided false information to the relevant authorities to secure the First Home Owner Grant when he was not entitled to receive it: transcript at pp 212-215, 282. But even if he was able to obtain extra access to funds from these legitimate sources through illegitimate means, a question remains as to whether that adequately explains all that occurred.During cross-examination, Harry claimed he had access to other legitimate sources of money, including monies provided as wedding gifts and gifts or loans from other family members: transcript at p 281. “Everyone helps each other out”, he explained: transcript at p 213. But these interfamily transfers and other payments are largely unverified. He also admitted taking money from the fruit shop till on a regular basis during those years (transcript, p 203), and agreed he effectively “lived out of” the business which allowed him to save more aggressively: transcript, p 181.
It was also unclear how the various properties were used once they were acquired. Harry claimed one of the properties he purchased in Cook St, Oxley near the fruit shop remained vacant for a long period. He said he would visit it occasionally and sleep there in the empty house when he was tired after working in the shop. He agreed he did not live there. He claimed that property was not tenanted. That is surprising given there were substantial repayments that had to be met out of his limited income – although I note Harry confirmed he applied for and received the First Home Owners’ Grant in relation to that property, which would have precluded renting it out: transcript at pp 205-206.
A number of the other properties were occupied by paying tenants. Harry admitted he did not declare the rents that were collected from the rental properties in which he had an interest as part of his assessable income: transcript at pp 206 and 282. The confusing evidence from Patrick about the collection of rental monies adds to the mystery.I do not propose to rehearse here all of the evidence in relation to the family members’ purchases of properties. This much is clear: none of the family members reported earning significant amounts of assessable income during the years under review, yet they collectively managed to acquire a large number of properties in that period. A careful analysis of the evidence suggests Harry and perhaps his father were closely involved in all of the purchases. At the same time, all of the family members say they earned meagre amounts of assessable income, if they were reporting any at all, which tends to suggest they would have had difficulty funding the acquisition of the properties. Harry suggests the purchases were possible because the family could call on bank finance and rely on transfers from the family trust, controlled by Patrick, and on monies available from other members of the family, or from wedding gifts. Those other sources of cash are undocumented or (in the case of the funds accumulated in the trust accounts) not satisfactorily explained. It follows the taxpayers’ case depends crucially on the credit of the individual taxpayers.
THE CREDIT OF THE INDIVIDUAL TAXPAYERS
I have already noted Patrick was an unsatisfactory witness. He offered several unlikely explanations for the funds he accumulated in the accounts he controlled, and – when pressed – repeatedly claimed he remembered nothing. He was evasive and unforthcoming. His evidence is wholly unpersuasive.
The bulk of the evidence advanced on behalf of the taxpayers was given by Harry.
He was cross-examined over several days. I accept he was unfamiliar with the procedure of the Tribunal and the law. I also accept he was struggling under the burden of representing the other family members in the face of significant liabilities. The stakes were large, and he was undoubtedly daunted. Even allowing for all that, he was an unsatisfactory witness. I have already referred to instances where he admitted he provided false information to financiers. He also appears to have been, at a minimum, careless about the truth in connection with applications for the First Home Owner Grant. He also admitted to taking money out of the till which he did not declare as assessable income: transcript at p 203-204. He was often evasive and blustered in response to uncomfortable questions. In the course of his evidence, he would make assertions that he would be forced to retract in cross-examination. He would even make a concession in response to one question before denying the proposition he had just conceded, only to then reluctantly concede the same point when challenged immediately thereafter: see, for example, transcript at p 203 where he agreed he took money from the till, then denied it, but then agreed he had done so – albeit with the explanation that he did not like using that expression. His evidence in relation to the relationship with Mr G’s business was contradicted in important respects by Mr G, who appeared to be a credible witness without any interest in the outcome of the proceedings. Harry was not a reliable or convincing witness, and I am not inclined to give much weight to his explanations of the source of the monies that passed through his accounts. That is a problem for all the other taxpayers as their individual cases turn to a significant extent on Harry’s ability to explain what transpired.That conclusion also points to a problem in the evidence given by Mr Haines, the tax agent. Mr Haines gave evidence and presented an analysis of what he concluded was the taxpayers’ real assessable income during the years under review. But Mr Haines’s analysis was inevitably based on instructions that ultimately came from Harry, and Harry’s explanations are incredible. (The Commissioner pointed out in his written submissions (p 14 at [59]) that Mr Haines conceded he did not even discuss the evidence with Raelene, Monica or Maria on whose behalf he prepared statements (see transcript,
p 24). That is unsatisfactory although in fairness it did not necessarily detract from his evidence given those individuals professed to know very little about their own affairs.)
It is simply impossible to be satisfied how much money Harry was taking out of the fruit shop partnership, or how much he made from the relationship with Mr G.
Mr Haines assumed Harry did not make anything out of the relationship with Mr G because, as Harry explained in his written submissions (p 7 at [28]), the arrangement was “effectively revenue neutral”. I am not satisfied that is so. Mr Haines also assumed the transactions in the accounts most closely connected with the export business were all on Mr G’s account, and should not be counted as part of Harry’s assessable income. But I have already concluded Harry used those monies for his own purposes. There is no reason to leave them out of account. Mr Haines also failed to account for monies in accounts controlled by Patrick when he examined Patrick’s affairs: he simply accepted they were trust accounts and did not count the funds in them. I have explained there are serious questions over the funds in those accounts – the source of the funds was certainly not explained. I am not satisfied they should be treated as trust funds. These shortcomings call into question all of Mr Haines’s analysis. It is ultimately of little assistance.The Commissioner also criticised Mr Haines for using the asset betterment method to generate estimates of the taxpayers’ income (Respondent’s Written Submissions,
pp 12-13). I agree it is not an especially reliable way of assessing a taxpayer’s income at the best of times, given it focuses on expenditure. It is one thing for the Commissioner to use that method to help him identify potential under-reporting and make an assessment in the first place – the Commissioner has no choice but to make an informed guess and then put the taxpayer to proof. More should be expected of a taxpayer, even one who has lost records in a flood. In this case, the Commissioner says Mr Haines has started with the Commissioner’s asset betterment analysis that everyone agrees may be inaccurate. It was unhelpful to merely point out the flaws in the Commissioner’s effort.
Harry sought to build on Mr Haines’s work and the work of Ms Reynolds, an accountant, by referring in oral submissions to industry benchmarks that would enable me to divine how much profit would be made on given cash-flows. The submissions were made in conjunction with exhibit 28, which was titled “Correct Amount of Taxable Income for [Taxpayer] Family 2001-2008”. The document included a range of spreadsheets that sought to explain the financial affairs of the taxpayers together with an industry report prepared by a consultant discussing trading conditions in the fruit and vegetable wholesaling industry. Harry presented the document during submissions after his evidence was complete. The Commissioner objected to the admission of that document, but as it happens I do not think it assists. To begin with, even Ms Reynolds (an accountant who gave evidence on behalf of the taxpayers) agreed in her oral evidence that benchmarking was not the usual way one determined income (transcript, p 471).
The benchmarking process is most useful when trying to determine deviations from an industry norm. The process is not a useful guide to the profits of a particular business. It also appears the spreadsheets and figures in the document were prepared by Harry himself, who is not an expert on these matters. He is certainly not possessed of the expertise required to explain clearly how the data he provided in conjunction with the benchmarks is a more reliable guide to the outcome than the earlier efforts of the Commissioner. Harry is positing an alternative explanation that is at best plausible provided I accept a range of assumptions. In doing so, he piles assumption on assumption to achieve an outcome that he says is closer to the true position. It is essentially speculative. It also fails to come to grips with the key flaw in the taxpayers’ case: in the absence of appropriate records, their claims turn on the credit of Harry and, to a lesser extent, Patrick – and I am not satisfied they are reliable or persuasive witnesses.The other individual taxpayers added little to the evidence. Monica, Harry’s wife, testified she knew nothing of her own financial affairs or those of her husband. She was not employed while she lived in Australia. She said Harry took care of everything while she stayed at home and minded the children (transcript, p 419). She signed whatever he told her to sign (transcript, p 418). As far as she was aware, properties she and her husband had purchased were funded by bank loans and gifts.
It is difficult to rely on Monica’s evidence in circumstances where she disavowed all knowledge and insisted she trusted her husband. On its face, her evidence does nothing to persuade me of what the Commissioner’s assessment should have been.
John, the younger brother, said he earned very little in the years prior to 2007. He worked in the fruit shop partnership but did not draw a regular wage, he said. He was also studying. When he began working as a carpenter, he said in his oral evidence he was making as little as $20 per hour (transcript, p 373). He said he did not declare all of that income (transcript, p 360). (That amounts to fraud for the purposes of s 170(2) of ITAA36, which means the amended assessments can be issued when they would otherwise be out of time.) He recalled doing odd jobs for cash. He agreed in
cross-examination that his tax returns in at least the 2003, 2004 and 2005 years of income were not accurate (transcript, pp 360-361). It is likely the return in 2002 was also inaccurate as it only included as assessable income his one-third share of the fruit shop’s declared partnership income. Given the absence of verification and the evidence from Harry about the way in which he regularly accessed funds in the business, there must be serious doubts over the precise amount the partnership made. John also failed to account for any income received on the properties he owned jointly with his brother. His only other return was filed in 2008 (there were no returns filed in respect of the 2006 and 2007 years of income). That return reported assessable income derived from his construction business. John was unable to clearly explain in his evidence how that business worked or give coherent answers about the sources of his income. I am not satisfied John was a reliable or knowledgeable witness, and there was nothing in his evidence that persuaded me he had discharged his onus under s 14ZZK of the TA Act to identify what the assessment should have been.Maria revealed she earned money from work she did at Virgin Blue and in a call centre while she was a partner in the fruit shop. That income was not included in her assessable income. There was no explanation as to why information about these earnings was not (or did not have to be) included in her assessable income. She must have known she was obliged to declare that income, yet she failed to do so. I am satisfied that evidence suggests she engaged in fraud for the purposes of s 170(2) of ITAA36, which means the Commissioner is entitled to amend the earlier assessments. Maria was unable to offer coherent explanations during cross-examination for deposits or withdrawals in her accounts, or for payments that were made to her while she was in Lebanon in 2006:
she said I should ask Harry about the transactions as she did not know (transcript, p 425). She said she did recall receiving some money as a wedding gift. Importantly, she also said she approached her brother whenever she needed money. Sometimes he would put it in her account, she explained, and sometimes he would give it to her in cash
(transcript, p 431). That evidence raises more questions than it answers.I am not persuaded Maria gave evidence that is capable of discharging the onus under
s 14ZZK of the TA Act. I would reach the same conclusion in relation to Raelene’s evidence. She has not lived in Australia since 1996, apart from a brief period in 2001 when she stayed here. She recalled working in her father’s shop years ago but she did not work thereafter. She had some funds that were given to her on her wedding but she was not aware of the detail of any of the transactions that were being conducted in her name. She said she was told on at least one occasion that a house had been acquired for her; she said she left it to Harry to deal with the property and knew nothing about it
(transcript, p 431). She certainly did not know the source of the funds used to pay out the mortgage on the property. Harry “controlled everything” in Australia, she explained in evidence. He had access to all her accounts and used them as he saw fit in her absence (transcript, p 431).DID THE TAXPAYERS DISCHARGE THEIR ONUS?
I have already explained the task that lay before the taxpayers as a consequence of
s 14ZZK of the TA Act. They have failed individually and collectively to discharge that obligation. Notwithstanding a hearing that went for many days, the taxpayers were unable to explain the source of all of the money that was sloshing through their accounts. Raelene, Maria and Monica disavowed any specific knowledge of their financial affairs; Patrick claimed he could not remember much in the way of useful details. Harry, John and Maria acknowledged they did not accurately report their income in at least a number of their original returns. John, Monica, Maria and Raelene bought houses (or had houses bought and sold in their name) without being clear how the acquisitions were funded. None of this evidence helped their cause. But the evidence of Harry and Patrick was ultimately fatal. Harry did know what was going on with the other family members’ finances, because he was at the centre of the family. His evidence on the amount of income he was deriving was unreliable. While I acknowledge the amended and default assessments are probably inaccurate in light of the acknowledged shortcomings of the asset betterment methodology, it is impossible on the current state of the evidence to conclude that a different assessment would be more appropriate. In those circumstances, the objection decisions must be affirmed.PENALTIES
The Commissioner says he is entitled to impose administrative penalties against the taxpayers in this case on a variety of bases. I will deal with the arguments in relation to each taxpayer separately.
The penalties imposed on Harry
I have already indicated the Commissioner’s objection decisions in relation to Harry must be affirmed. That means there is a tax shortfall in each of the years in question.
The Commissioner says a shortfall penalty should be imposed under sub-section 284-75 of Schedule 1 to the TA Act for the income tax years ended 30 June 2001-30 June 2005 because the amount of the shortfall is the result of a false or misleading statement in the returns furnished with respect to those years of income. The Commissioner says the administrative penalty is properly calculated at the rate of 75% of the amount of the shortfall because the shortfall has arisen because of the taxpayer’s (or his agent’s) intentional disregard of a taxation law: see item 1, sub-section 284-90(1) of Schedule 1. For reasons that will be apparent from my discussion of the evidence above, I am satisfied Harry did intentionally disregard his obligations under the income tax legislation. By his own admission, he did not report income he derived from the partnership during this period, yet he filed returns during these years reporting minimal income. There is no doubt he knew he was not telling the truth about his income on his returns. I am satisfied his failure to explain his true level of income is explained by an intentional disregard of his legal obligations.
The Commissioner contends the base penalty is subject to a 20% uplift where the penalty in a given year is worked out with reference to item 1 in sub-section 284-90(1) and a penalty has been imposed with reference to the same item in previous accounting periods. Given Harry made the same errors across three years of income, the uplift provision must surely apply here.
The Commissioner has also imposed an administrative penalty under
sub-section 284-75(3) of Schedule 1 in light of Harry’s failure to lodge returns in the subsequent years of income in circumstances where the Commissioner was required to make an assessment without the assistance of the taxpayer. The amount of the base penalty is 75% of the shortfall that is identified: item 7, s 284-90 of Schedule 1. The base penalty is also subject to an uplift of 20% where the taxpayer is liable for a penalty under the same provision in previous accounting periods: sub-section 284-220(1)(e) of Schedule 1. Given the evidence establishes Harry did not file returns in a timely way in the years of income in question, there is no reason why the uplift should not apply as the Commissioner contends.I was also told the Commissioner has imposed an administrative penalty under
sub-section 286-75(1) in respect of the taxpayer’s failure to lodge his returns on time. The decision to impose the penalty cannot be reviewed by this Tribunal, although I am authorised to review a decision not to remit the penalty.As it happens, I can see no basis for remitting any part of any of the penalties imposed against Harry. I do not think the loss of records in the 2011 floods makes any difference in this case: while it has made Harry’s task in these proceedings harder, the problems might have been avoided if he had complied with his obligations in a timely way. I did not learn of anything in the taxpayer’s family or other circumstances that would suggest remittal of all or part of the penalties would have been appropriate.
I would add there is no basis for discounting the penalty under s 284-225 of Schedule 1 of the TA Act. A 20% reduction of the penalty is potentially available to a taxpayer who voluntarily discloses useful information about his or her affairs to the Commissioner if the disclosure “can reasonably be estimated to have saved the Commissioner a significant amount of time or significant resources in the examination”: s 284-225(1). While Harry in particular provided a welter of information to the Commissioner, it did not save the Commissioner time or resources.
The penalties imposed on Patrick
Patrick did not file returns as required in relation to the years of income ending
30 June 2000-30 June 2007. The Commissioner was forced to prepare assessments without reference to returns. He imposed an administrative penalty under
sub-section 284-75(3) of Schedule 1 to the TA Act in relation to the years ending 30 June 2001 through 30 June 2007 as a consequence. The penalty was set at 75%:
item 7, s 284-90 of Schedule 1. The base penalty was also subject to an uplift in subsequent years of income given a similar penalty had already been imposed:
sub-section 284-220(1)(e) of Schedule 1.There is no basis for imposing the penalty at a different rate. The taxpayer clearly failed to file his returns in a timely way which forced the Commissioner to undertake his own assessment. There is no error in the Commissioner’s approach. There is no basis for remitting all or part of the penalties either. While I accept Patrick qualified for the aged pension – and may still do – and has limited assets, there is nothing unusual, harsh or inappropriate about being fixed with these penalties in the circumstances. I am also satisfied there is no basis for discounting the penalty pursuant to s 284-225 of Schedule 1 of the TA Act for the same reasons I discussed in relation to Harry.
The penalties imposed on Monica
Monica did not lodge returns for the income tax years ended 30 June 2001-30 June 2008 within the time required. The Commissioner proceeded to assess her income without the assistance of a return. He imposed an administrative penalty on the shortfall in the years of income ending 30 June 2002 through 30 June 2008 at the rate of 75%. This was then increased by 20% pursuant to sub-section 284-220(1)(e) of Schedule 1 to the TA Act. There is no basis for imposing the penalty at a different rate. The base penalty should be uplifted by 20% (so that the total penalty is 90% of the tax shortfall) in the years ended 30 June 2003-2008 in light of the fact the taxpayer had become, in effect, a repeat offender by 2003. (I note the Commissioner conceded in his Statement of Facts, Issues and Contentions at [178] there was an error in his assessments: the penalty in the year ending 30 June 2002 should not have been uplifted as that was the first year in which he had imposed a penalty for having to complete assessments that identified a shortfall without being provided with a return. The objection decision in relation to the year of income ended 30 June 2002 is varied to that extent.)
Monica claimed she knew little of what her husband was doing in relation to her affairs. She made it clear in her evidence that she did as he asked. But that does not absolve her of her responsibility under the law, which includes a responsibility to file returns if she has derived income. I have already accepted (because Monica has not displaced) the Commissioner’s view that she derived assessable income during the period, so she was obliged to file returns containing a proper account of her assessable income. She chose to leave her affairs in the hands of her husband; she therefore took the chance his stewardship of her affairs was not all it should have been. I do not think there is anything in the evidence that suggests the imposition of the penalty would be harsh, unusual or inappropriate in the circumstances, so there is no basis for it to be remitted either wholly or in part. I would also decline to discount the penalty under s 284-225 of Schedule 1 of the TA Act for the same reasons I gave in relation to Harry.
The penalties imposed on Raelene
The Commissioner issued default assessments with penalties with respect to the 2001, 2002, and 2004 through 2008 years of income. (There was no notice of assessment issued in respect of the 2003 year of income.) An administrative penalty was imposed at the rate of 75% pursuant to sub-section 284-75(3) of Schedule 1 to the TA Act, with a 20% uplift pursuant to sub-section 284-220(1)(e) of Schedule 1 in the 2002 and 2004-2008 years of income. Raelene claimed in her brief oral evidence she knew little of what her brother was doing. She trusted him to look after her affairs. Her evidence was wholly uninformative and did nothing to displace the Commissioner’s conclusions in the default assessments. She relied on the evidence of Harry and, to a lesser extent, Patrick to provide a superior alternative explanation to that offered by the Commissioner. For reasons I have explained, that was ultimately an unsuccessful strategy.
While I accept Raelene may have been ignorant of some of the things done in her name, I am not satisfied there was anything in the circumstances of the taxpayer suggesting it would be harsh or inappropriate to impose the penalty. There is no basis for remitting the penalty either wholly or in part. I also declined to apply the discount under s 284-225 of Schedule 1 of the TA Act for the same reasons I gave in relation to Harry.
The penalties imposed on Maria
Maria was issued with amended assessments in respect of the years of income ending
30 June 2003 through 30 June 2005 with penalties assessed at the rate of 75% in light of what I was told was her intentional disregard of the taxation laws. There was also a 20% uplift in the amount of the penalty in the years of income ending 30 June 2004
and 30 June 2005 under sub-section 284-220(1)(c) of Schedule 1 to the TA Act.While Maria was an unhelpful witness who appeared to know little of what was going on in relation to her business affairs, she did concede she routinely asked her brother for money which was not reported to the Commissioner. It is also unclear how much she earned from her work in the airline during this period. She does not appear to have taken seriously her obligations to report her assessable income. On the evidence, I am satisfied she has simply ignored those obligations – perhaps because she assumed her brother was attending to them. The evidence suggests the penalty was imposed at the appropriate rate, and there is no basis for concluding the imposition of the penalty would be harsh or unreasonable in all the circumstances. The penalties in respect of those years of income should not be remitted wholly or in part.
Penalties were also imposed at the rate of 75% in respect of default assessments that were issued in the tax years ended 30 June 2006 through 30 June 2008, with a 20% uplift in respect of the 2007 and 2008 years. I see no basis for disturbing that conclusion. I am not satisfied there was anything in the evidence suggesting the imposition of the penalties would be harsh or inappropriate in all the circumstances. The penalties should not be remitted wholly or in part. I also have no basis for applying a discount to the penalty pursuant to s 284-225 of Schedule 1 of the TA Act for the same reasons I gave in relation to Harry.
The penalties imposed on John
The Commissioner issued amended assessments in respect of the income tax years ending 30 June 2002 through 30 June 2005 and the year ending 30 June 2008. He also issued default notices for the income tax years ended 30 June 2006 and 30 June 2007.
Administrative penalties were imposed at the rate of 75% in the 2002-2005 and 2008 years of income on the basis there had been intentional disregard. The penalties in
2002-2005 relate to the period during which the partnership operated. It is apparent from my conclusions (above) that I do not accept the partnership returns – which formed the basis of John’s returns in those years – accurately stated the true level of assessable income. I accept John was a young man and a student at the time, and had a limited role in the business conducted by the partnership and no apparent role in the management of its affairs. But John accepted in his evidence (transcript at p 360) that he was paid monies out of the partnership on a regular basis. Those payments were not reflected in his returns. His evidence on this point is worth quoting, as it illustrates the problems with his evidence. The transcript records the following exchange between John and I at p 349:SENIOR MEMBER: So, did you at any point, while you worked for the fruit shop, have regular wages?
TAXPAYER: No.
When I returned to the issue some time later in the course of his evidence, the following exchange occurred (transcript at p 357):
SENIOR MEMBER: You worked at the fruit shop, but you weren’t really paid?
TAXPAYER: I wasn’t really paid. Look, I was making a living through working there, earning an income, working as a family. But to say that I used to sit there and get a set wage every week: no.
John’s first answer might have been technically correct, but the second exchange confirmed the first answer was misleading.
John also gave evidence he received additional income in the form of rent and from various building jobs during this period.
I was invited to conclude John was an unwitting passenger on a voyage charted by his older brother. He explained in the course of his evidence (transcript at p 360):
My income, my family affairs were handled by [Harry] during those times. Whether they were declared we used to use his accountant, money - that income used to go into my account. I was guided by my brother, [Harry]. He used to declare my income during those years. I don’t know.
While I am prepared to accept John might not have been aware of his brother’s conduct in relation to the partnership, that does not excuse his own failure to report income he was receiving – from odd jobs, and from rentals, and from the business itself.
I am satisfied John actively disregarded his obligation to report other income he was making at the time. An administrative penalty at the rate of 75% is clearly appropriate, as is the 20% uplift in respect of the 2003-2005 years of income.
John reported assessable income of $52,304 in the 2008 year of income. I have already noted John’s evidence during the hearing – especially his evidence given in
cross-examination – does not adequately explain his affairs, even though he was by this time running his own construction business. The Commissioner says John has underreported his income during that period. John’s evidence was such that I am not persuaded a different view is appropriate. It appears he has disregarded his obligations under the law to accurately report his assessable income. I have no reason for doubting that failure was intentional. It follows an administrative penalty at the rate of 75% with a 20% uplift is properly imposed.The Commissioner also issued default assessments in respect of the 2006 and 2007 years of income. The penalty calculated at the rate of 75% (with a 20% uplift in respect of the 2007 year of income) was properly imposed.
I am not aware of any evidence suggesting it would be harsh or inappropriate to impose the penalties on John. There is no basis for remitting the penalties wholly or in part. There is also no basis for applying a discount to the penalties pursuant to s 284-225 of Schedule 1 of the TA Act.
CONCLUSION
The penalty decision for Monica in relation to the 2002 year is to be varied so that the 20% uplift pursuant to sub-section 284-220(1)(e) of Schedule 1 to the TA Act is not applicable. The objection decisions are all otherwise affirmed.
I certify that the preceding 75 (seventy-five) paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.
....................................................................Associate
Dated 31 July 2014
Dates of hearing 18 November 2013;
25 November 2013;
26 November 2013;
27 November 2013;
28 November 2013;
3 December 2013;
12 December 2013Date final submissions received 7 May 2014 Applicant In person Counsel for the Respondent Mr V Brennan
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