PQBZ and Commissioner of Taxation (Practice and procedure)
[2025] ARTA 868
•6 June 2025
PQBZ and Commissioner of Taxation (Practice and procedure) [2025] ARTA 868 (6 June 2025)
Applicant:PQBZ
Respondent: Commissioner of Taxation
Tribunal Number: 2020/6671
Tribunal:Senior Member R Olding
Place:Brisbane
Date:6 June 2025
Decision:1. In the re-hearing of the application for review:
(a) No further evidence or submissions regarding whether the applicant was a resident of Australia at relevant times is to be permitted.
(b) Cross-examination is to be limited to the fresh evidence adduced in the re-hearing in accordance with the orders of the Federal Court.
(c) The Statement and Further Addendum Report of John Thynne dated 13 November 2024 may be admitted into evidence with the exception of Section 3 and Attachment 5 of the report.
2. By close of business on 20 June 2025, the parties are to confer and provide agreed directions for programming the application for review to hearing as soon as possible or, failing agreement, each party is to provide their proposed directions.
3. By close of business on 20 June 2025, the applicant is to file in the Tribunal and copy to the respondent any submissions directed at further de-identification of the applicant in these reasons or advise the Tribunal in writing that no such submissions will be made.
4. These reasons are not to be published without the express written direction of a member of the Tribunal.
.........................[Sgnd]............................
Senior Member R Olding
Catchwords
PRACTICE AND PRACTICE – REMITTAL FROM FEDERAL COURT – where Federal Court remitted decision for re-hearing with limited fresh evidence – whether issue not the subject of the appeal to be re-agitated on re-hearing or Tribunal should adopt findings of Tribunal following the original hearing – extent of cross-examination to be permitted on re-hearing – extent of evidence permitted by the Court’s orders – whether expert report would exceed evidence permitted by the Court’s orders
Legislation
Administrative Review Tribunal Act 2024 (Cth), ss 9, 184
Taxation Administration Act 1953 (Cth), s 14ZZJ
Cases
Commissioner of Taxation v Tan [2024] FCA 406
John W Blackman v Commissioner of Taxation (1993) FCR 449
PQBZ and Commissioner of Taxation [2023] AATA 2984Statement of Reasons
WHAT ARE THESE REASONS ABOUT?
The Federal Court set aside a decision of a Senior Member of the former Administrative Appeals Tribunal (AAT) in relation to a review of taxation objection decisions and remitted the matter to the Tribunal for re-hearing according to law.
These reasons concern applications by both parties for directions concerning the issues and evidence to be considered in the re-hearing.
BACKGROUND
The application for review concerns assessments of the applicant’s income tax liabilities for the 2013 to 2016 income years and associated administrative penalties and interest charges.
The AAT set aside the Commissioner’s objection decisions and remitted them to the Commissioner for re-assessment in accordance with the Senior Member’s reasons. In relation to the primary tax assessments, the AAT determined that the applicant was a resident of Australia at relevant times. On that basis, the applicant would be liable for income tax on his worldwide income, not just his Australian-sourced income.
However, the AAT also decided the applicant had provided sufficient evidence to prove the assessments were excessive and the amounts that should have been assessed. It was on that basis that the AAT remitted the matter to the Commissioner for re-calculation of the applicant’s income tax liabilities, and penalties and interest, for the relevant years.[1]
[1] PQBZ and Commissioner of Taxation [2023] AATA 2984.
The Commissioner appealed the whole of the decision to the Federal Court, asserting that the AAT had erred in determining the applicant had discharged the burden of proving the amounts that should have been assessed.[2] The applicant cross-appealed in relation to penalties only and did not file a notice of contention challenging the finding that the applicant was a resident of Australia.
[2] The applicant bears the burden of proving the assessments are excessive and what amounts should have been assessed: Taxation Administration Act 1953 (Cth), s 14ZZK.
On the eve of the hearing of the appeal, the parties agreed the appeal should be allowed, the cross-appeal dismissed, and the matter remitted to the Tribunal for re-hearing. However, the parties did not agree regarding whether further evidence should be permitted in the re-hearing.
A hearing held before his Honour Justice Derrington canvassed what, if any, fresh evidence should be permitted to be adduced in the re-hearing. The applicant submitted that he should be permitted to adduce further evidence, being his foreign bank statements, and explanations for entries in those statements, and for the report of the applicant’s expert, Mr Thynne, who had provided evidence in the AAT hearing, to be amended to take into account the fresh evidence. The Commissioner submitted the matter should be remitted for re-hearing without further evidence.
The Court made the orders set out immediately below.
THE ORDERS OF THE FEDERAL COURT
Derrington J ordered that:
1. The applicant’s appeal be allowed.
2. The respondent’s cross-appeal be dismissed.
3. The decision of the Administrative Appeals Tribunal … be set aside.
4. The [matters] be remitted to the Administrative Appeals Tribunal for re-hearing according to law with the respondent . . . [the Taxpayer] being permitted to adduce further evidence at the re-hearing limited to:
(a) the Taxpayer’s foreign bank statements;
(b) the Taxpayer’s evidence (by way of statement or affidavit) about those foreign bank statements; and
(c) alterations to the Taxpayer’s forensic accountant’s report limited to matters (a) and (b) above.[3]
[3] Commissioner of Taxation v Tan [2024] FCA 406, Orders 1-4.
Additionally, his Honour noted that:
The [AAT] Decision is set aside on the bases identified in Questions 1, 3 and 4 and Grounds 1, 3 and 4 of the Amended Notice of Appeal, being that the Tribunal failed to:
(a) correctly apply the requirements of s 14ZZK(b) of the Taxation Administration Act 1953 (Cth) (TAA);
(b) correctly apply s 170 of the Income Tax Assessment Act 1936 (Cth) or s 284-90 of the TAA; and
(c) correctly apply ss 284-75 and 284-90 of Schedule 1 of the TAA.[4]
[4] Commissioner of Taxation v Tan [2024] FCA 406, Note 7.
Ground 1 asserted that the AAT should have held that the applicant had failed to discharge the burden of proving the amounts that should have been assessed because the AAT:
(a)based its finding only on the applicant’s Australian-sourced income;
(b)failed to consider the difference between the applicant’s income as returned and relied on as his actual income and Schedule B to the Addendum report of the applicant’s expert, Mr Thynne; and
(c)found there were unexplained, uncategorised amounts received in the relevant years.
ISSUES TO BE DETERMINED
The issues to be determined are:
(a)The residency issue: whether the Tribunal should adopt the findings of the AAT on the residence issue or consider the evidence before the AAT and make findings on that basis.
The applicant says the Tribunal should make its own assessment of the evidence and reach its own conclusion on whether the applicant was a resident (or perhaps, more accurately, has proved that he was not).
The Commissioner says the Tribunal should adopt the AAT’s findings without considering the evidence.
(b)The cross-examination issue: what cross-examination should be permitted at the re-hearing?
The applicant says cross-examination should be limited to the fresh evidence to be filed in accordance with the Court’s orders.
The Commissioner says the applicant’s evidence-in-chief should comprise the witness statements filed on behalf of the applicant in the AAT; an additional statement of the applicant filed in this Tribunal concerning entries in his foreign bank accounts to which the Commissioner does not object; and, if permitted, Mr Thynne’s Further Addendum Report discussed below. All of this evidence, the Commissioner submits, should be subject to cross-examination.
(c)The expert report issue: whether, as the applicant submits, the Further Addendum Report of Mr Thynne should be received into evidence, or, as the Commissioner submits, it should not be; or alternatively, Part 3 of the report (outlined below) should not be received as evidence in the re-hearing.
LEGAL FRAMEWORK RELEVANT TO THESE ISSUES
The terms of Derrington J’s orders make it clear that it is the whole of the decision of the AAT that has been remitted for re-hearing. Therefore, Tribunal re-hearing the matter must determine all questions of law and fact relevant to the review.[5]
[5] John W Blackman v Commissioner of Taxation (1993) FCR 449, per Gray J (with whom Keely J agreed), [14].
However, the Tribunal need not re-hear all the evidence and make fresh determinations based on that evidence.
In relation to matters remitted by the Federal Court to the Tribunal, section 184 of the Administrative Review Tribunal Act 2024 (Cth) (ART Act) states:
Tribunal may rely on previous proceedings
184. The Tribunal may have regard to:
(a) any record of the proceeding in the Tribunal prior to the appeal (including a record of any evidence taken in the proceeding); and
(b) any document or thing relating to the proceeding given to the Tribunal prior to the appeal;
unless doing so would be inconsistent with the directions of the court.
Additionally, the parties agreed that the Tribunal may consider, for instance, whether to adopt the findings of the AAT in relation to particular issues, or to consider the evidence relating to those issues and make its findings on that basis.
FURTHER CONTEXT – NATURE OF THE MATTER AND THE TRIBUNAL’S OBJECTS
In his Honour’s reasons for judgement, Derrington J stated:
This matter is a complex one. That is revealed by the large volume of evidence, as well as the extensive decision of the Tribunal which exceeds some 500 paragraphs. In that decision the Tribunal member was required to deal with many difficult issues. Despite the fact that some errors have arisen, one might say that is not surprising given the complexity and size of the matter.[6]
[6] Commissioner of Taxation v Tan [2024] FCA 406, [5].
That statement substantially mirrors comments of his Honour in the course of argument concerning the appropriate remittal orders:
I’m happy to listen to all the arguments for and against, of course. It’s just that the – I mean, it was a complex matter, very difficult, obviously a vast amount of material. Complex reports. So I can well feel sorry for the members of the [AAT] to have to deal with that and juggle it with their otherwise very heavy case load, so I can understand how, you know, these things arise perfectly.[7]
[7] Transcript, P-5.
The complexity of the matter is also reflected in the number of hearing days consumed by the AAT hearing – over two weeks. It is also reflected in the long journey of the application – which was lodged in the AAT on 20 October 2020 – towards final resolution of the dispute which relates to the 2013 to 2016 income years.
Against that background, I remind myself of the statutory command set out in s 9 of the ART Act that:
The Tribunal must pursue the objective of providing an independent mechanism of review that:
(a) is fair and just; and
(b) ensures that applications to the Tribunal are resolved as quickly, and with as little formality and expense, as a proper consideration of the matters before the Tribunal permits; and
(c) is accessible and responsive to the diverse needs of parties to proceedings; and
(d) improves the transparency and quality of government decision‑making; and
(e) promotes public trust and confidence in the Tribunal.
THE RESIDENCY ISSUE
I have considered whether the Tribunal should adopt the findings of the AAT in relation to whether the applicant has proved that he was not an Australian resident at the relevant time rather than considering the evidence before the AAT and reaching its own conclusion on the basis of the evidence.
There are several factors favouring the former approach.
First, this is not a case where the AAT decided the residence issue against the applicant on the basis that he failed to discharge the burden of proof. The AAT made a positive finding that the applicant was an Australian resident.
Secondly, the applicant did not agitate the residence issue in the appeal proceedings, nor point to any specific alleged error in the Tribunal’s reasoning regarding the residence issue in the course of the current interlocutory application. The orders sought by the applicant and those ultimately made by the Court were predicated upon the applicant being an Australian resident at the relevant times as the AAT held.
Thirdly, it is apparent from the transcript of the appeal proceedings and Derrington J’s published reasons that the remittal arose because of errors concerning the AAT’s approach to whether the applicant discharged the burden of proof rather than any issues related to the residence question which was decided in favour of the Commissioner.
Fourthly, as indicated above, the matter is complex and has a long history. Allowing for further argument regarding the residence issue would inevitably add to what has already been a long and costly process for the parties and the Tribunal.
However, Ms Skennar, who appeared with Ms Chen for the applicant, submitted that evidence relevant to the residence question may arise in the re-hearing. Nevertheless, Ms Skennar conceded that the applicant is unable to point to any particular prospective evidence that could be relevant in that regard, other than in general terms that evidence regarding foreign income could prove to be relevant. The further evidence to be adduced in relation to foreign income – relating only to the foreign bank account entries – is confined by the orders of Derrington J.
Having regard to the nature of the matter as set out above, on balance I am persuaded that the objects of the Tribunal would not be best promoted by allowing further argument regarding the residence issue on the re-hearing. It seems unlikely that the limited further evidence permitted concerning the foreign bank accounts would impact on the residence question and the applicant had a full opportunity to adduce evidence and make submissions on the issue in the course of the AAT hearing.
To permit further submissions in relation to the residence issue at this point would only add to the cost of the hearing and the time taken to deliver a decision and reasons. There is no reason to think this Tribunal is any better placed to reach the correct decision on that issue than the AAT, which was constituted by an experienced senior member who heard the evidence and submissions over many days, with the benefit of the assistance of counsel, including senior and junior counsel for the applicant. As already noted, no error has been identified in the AAT’s decision in regard to the residence issue.
THE CROSS-EXAMINATION ISSUE
The Commissioner submitted that, because the Tribunal would be required to consider the credit of the applicant, the Commissioner should be permitted to cross-examine him on all the applicant’s evidence-in-chief.
I am not persuaded that this is necessary or would best promote the Tribunal’s objects. The applicant’s evidence was traversed extensively in the AAT hearing and the Senior Member’s reasons. The limits on the ability of a tribunal of fact to determine the truthfulness of a witness based on demeanour are well known. Further, it will be open to the Commissioner to highlight any alleged inconsistencies or other deficiencies in the evidence (in the AAT or in the re-hearing) or other reasons why the applicant’s evidence should not be accepted.
Additionally, the Tribunal will have an opportunity to observe the applicant under cross-examination in relation to the further evidence contained in the additional affidavit he has filed for the remittal hearing.
Further, to permit cross-examination beyond the new evidence permitted by the Court’s orders would run the real risk of additional new evidence emerging in the course of the hearing relating to matters other than the applicant’s bank statements for foreign accounts. That would be contrary to the remittal orders.
THE EXPERT REPORT ISSUE
The applicant filed in the AAT two reports compiled by Mr Thynne, the second being an addendum to the first.
It is clear from those reports that, in accordance with his instructions, Mr Thynne sought to re-work the Commissioner’s asset betterment calculations using information made available to him. On that basis, Mr Thynne opined that the Commissioner’s assessments were excessive. Mr Thynne did not, in those reports, seek to quantify the applicant’s taxable income. In contrast, Mr Thynne’s Further Addendum Report filed in this Tribunal, in accordance with his instructions, sought to calculate the applicant’s worldwide taxable income and the Australian income tax payable on that income.
Section 2 of the report summarises Mr Thynne’s analysis of details from two overseas bank accounts with the Bank of South Pacific Limited (BSP) and the applicant’s related comments which are referenced in an attachment to the report. That material is consistent with the Court’s orders.
In Section 3 of the report, Mr Thynne “reconsidered the allocation of cashflows” undertaken in the Addendum Report filed in the AAT and then set out calculations of the applicant’s worldwide income and Australian income tax payable premised on four different scenarios. The calculations and assumptions underpinning those scenarios are detailed in Section 3.
Additionally, there are various attachments to the report:
(a)Attachment 1 – Mr Thynne’s Qualifications and Experience;
(b)Attachment 2 – Sources of Information;
(c)Attachment 3 – Summary Bank Statements, comprising Schedules 3.1 and 3.2 which list entries in the respective BSP accounts;
(d)Attachment 4 – Categorised Transactions, comprising 12 schedules said to be sourced from the BSP accounts and including the applicant’s comments regarding the entries.
(e)Attachment 5 – Australian Rental Inflows Transaction List, which is said to be sourced from Schedule C to the Addendum Report filed in the AAT.
The Court’s orders, set out above, are very specific in relation to what is permitted. That is consistent with the following statements in the Court’s reasons for judgement:
15. In the circumstances, it is appropriate to allow the taxpayer to adduce further evidence on the rehearing of the matter before the Tribunal, limited to the bank statements in relation to his foreign bank accounts and his evidence about the contents of those statements.
16. Ms Chen, counsel for the taxpayer, indicated that adducing such evidence may require some consequent alterations to a forensic accountant’s report that was previously prepared concerning the taxpayer’s financial affairs. Whilst that should be permitted, it would go beyond the bounds of what was asked of the Court were the report to be entirely rewritten. So, whilst additional expert evidence may be adduced, it must be limited to the matters raised in the bank statements and the taxpayer’s evidence about those statements.
(Emphasis added.)
Given the precise terms of the Court’s orders, and unequivocal explanation in the Court’s reasons, I am unable to see how the Tribunal could admit the Further Addendum Report in its entirety. It clearly expresses new opinions which go beyond referring to matters relating to the applicant’s foreign bank accounts.
On the other hand, despite the Commissioner’s submissions on this issue, I am not troubled by the Further Addendum Report being in the form of a further report rather than, for instance, a marked-up version of the earlier report. The latter approach would not be feasible, or at least would be cumbersome and inefficient, since the Addendum Report filed in the AAT itself sought to amend Mr Thynne’s first report and references material in it.
Accordingly, I consider the appropriate course is to exclude from evidence Section 3 of the Further Addendum Report, along with Attachment 5 which is not concerned with the foreign bank accounts.
For completeness, I note that the applicant referred to two errors in the earlier reports that were said to be corrected by the Further Addendum Report – one having the effect of reducing what would otherwise be the calculation of the applicant’s taxable income and the other having the effect of increasing it. I also note that, while it might be unfortunate that the Tribunal will not have the benefit of an expert opinion on the calculation of the applicant’s taxable income for the income years (which could be tested in the usual way), that is the effect of the Federal Court orders. The orders were, in turn, consistent with the submissions put to the Court on the applicant’s behalf. It is, of course, open to the applicant to produce, by way of submissions, calculations of his taxable income referenced to evidence before the Tribunal, including the remaining parts of the Further Addendum Report that will be in evidence, and to seek to correct errors in the earlier reports by reference to evidence before the Tribunal.
IDENTIFICATION OF THE APPLICANT
The applicant exercised the right to a private hearing conferred by s 14ZZE of the Taxation Administration Act 1953 (Cth). Therefore, in accordance with s 14ZZJ of that Act, the Tribunal “must ensure, as far as practicable, that its decision and the reasons for it are framed so as not to be likely to enable identification of [the applicant].”
As the applicant is identified by the published reasons of the Federal Court, and my decision and these reasons are directly concerned with matters raised in the Court’s reasons, it is difficult to see how it would be practicable for the Tribunal to frame reasons in a way that does not enable identification of the applicant.
However, for the abundance of caution, I will direct that this decision and these reasons are not to be published without the written permission of a Tribunal member and allow time for the applicant to file any submissions he may wish to make in that regard.
CASE MANAGEMENT
As the orders giving effect to these reasons will influence the parties’ preparation for the hearing of the remittal, I will allow time for the parties to confer and provide proposed further programming directions to advance the matter to a hearing as soon as possible.
Date of hearing: 9 April 2025 Counsel for the Applicant: D Skennar KC with F Chen Solicitors for the Applicant: Morgan Conley Solicitors Counsel for the Respondent:
Solicitors for the Respondent:
C Conway
Hall & Wilcox
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