NGFZ and Commissioner of Taxation (Taxation)

The Administrative Appeals Tribunal considered a dispute between the applicants, Mr and Ms Applicant, and the Commissioner of Taxation concerning amended income tax assessments and associated penalties. The Commissioner had issued these amended assessments, which were otherwise out of time, on the basis that the applicants had engaged in fraud or evasion by failing to disclose significant income. The applicants sought to have these assessments and penalties set aside.

The primary legal issues before the Tribunal were whether the applicants had discharged their onus of proof to demonstrate that the Commissioner's amended assessments were incorrect, and if so, to establish the correct amount of their taxable income. This involved determining whether the applicants had access to an indeterminate amount of undeclared income, particularly from cash sales of their business's produce, syndicated loan arrangements, gambling winnings, and undocumented loans. The Tribunal also had to consider the application of section 14ZZK of the *Taxation Administration Act 1953* (Cth), which governs the burden of proof in such reviews, and whether the penalties imposed for intentional disregard of taxation law were appropriate.

Deputy President Bernard J McCabe applied the principles established in cases such as *Commissioner of Taxation v Trautwein* and *Commissioner of Taxation v Dalco*, affirming that the applicants bore the burden of proving on the balance of probabilities that the Commissioner's assessments were wrong and establishing the correct taxable income. The Tribunal considered the applicants' direct evidence, including statements and oral testimony, in light of common sense and the credibility of the witnesses. While acknowledging that taxpayers are not always strictly required to rely on contemporaneous documentary evidence, the Tribunal emphasised that it must be persuaded by cogent evidence. The Deputy President found that while the applicants were able to discharge their burden of proof in some respects, leading to variations in the assessments for individual years, they largely failed to persuade the Tribunal that the Commissioner's overall assessment of their affairs was incorrect.

The Tribunal concluded that the applicants had not demonstrated sufficient reason to disturb the Commissioner's objection decision with respect to the penalties imposed. Consequently, the rate of penalty was not reduced, and the penalties were not remitted. The parties were directed to propose orders giving effect to the decision.