PQBZ and Commissioner of Taxation (Taxation)

[2023] AATA 2984

PQBZ and Commissioner of Taxation (Taxation) [2023] AATA 2984 (10 August 2023)

Administrative Appeals Tribunal

ADMINISTRATIVE APPEALS TRIBUNAL	)
)	No: 2020/6671
TAXATION AND COMMERCIAL DIVISION	)	2020/6672
2020/6673
2020/6674

Re: PQBZ
Applicant

And: Commissioner of Taxation
Respondent

DIRECTION

TRIBUNAL:  Senior Member D K Grigg

DATE OF CORRIGENDUM:            13 September 2023

PLACE:           Brisbane

The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975 (Cth), to alter the text of the decision in these applications by amending paragraph 482 to read as follows:

482.   Based on the findings regarding the evidence the Tribunal is satisfied on the balance of probabilities that the Applicant’s actual taxable income for the Relevant Years is set out in Schedule B of Mr Thynne’s Addendum report. The Tribunal accepts the Applicant’s and other witnesses’ explanations, and that the Applicant had the assets, outflows and inflows, as set out in the Applicant’s Written Submissions dated 14 October 2022 at paragraphs [40]-[184].

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

Senior Member D K Grigg         

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):2020/6671-6674      

Re:PQBZ

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Senior Member D K Grigg

Date:10 August 2023

Place:Brisbane

The decision under review should be set aside and the Amended NOAs be reassessed in accordance with the law.

The decisions under review with respect to penalties are set aside and remitted to be determined in accordance with the findings above

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

Senior Member D K Grigg

CATCHWORDS

Catchwords

TAX – assessment of foreign citizen’s income tax - whether Applicant was a resident of Australia in the relevant income tax years – asset betterment calculation - burden of proof – extent of corroborating evidence required - decisions under review set aside.

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth)

The Agreement between Australia and the Independent State of PNG for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income [1989] ATS 37
Domicile Act 1982 (Cth)
Income Tax Assessment Act 1936 (Cth)
Income Tax Assessment Act 1997 (Cth)

Tax Administration Act 1953 (Cth)

CASES

Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1; (1983) 44 ALR 607

Anglo American Investments Pty Ltd (Trustee) v Commissioner of Taxation [2022] FCA 971
Applegate v Commissioner of Taxation [1978] 1 NSWLR 126; 8 ATR 372
Bosanac v Commissioner of Taxation [2019] FCAFC 116; 267 FCR 169
Bosanac v Commissioner of Taxation [2019] HCA 41; 93 ALJR 1327
Browne v Dunn (1893) 6 R 67
Comcare Australia (Defence) v O’Dea (1999) 87 FCR 451
Commissioner of Inland Revenue v Lysaght [1928] AC 234
Commissioner of Taxation v Cassaniti [2018] FCAFC 212; 266 FCR 385
Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836; 116 FCR 180
Commissioner of Taxation v Ross [2021] FCA 766; 174 ALD 77
Condon v Commissioner of Taxation [2023] FCA 561
Federal Commissioner of Taxation v Dalco [1990] HCA 3; 168 CLR 614
Commissioner of Taxation v Miller [1946] HCA 23; 73 CLR 93
Fox v Stirk; Ricketts v Registration Officer for the City of Cambridge [1970] 2 QB 463
Gashi v Federal Commissioner of Taxation [2013] FCAFC 30; 209 FCR 301
Gauci v Federal Commissioner of Taxation [1975] HCA 54; 135 CLR 81
Hafza v Director-General of Social Security [1985] FCA 164
Handsley and Commissioner of Taxation (Taxation) [2019] AATA 917
Harding v Commissioner of Taxation [2018] FCA 837; 108 ATR 137
Haritos v Commissioner of Taxation [2015] FCAFC 92; 233 FCR 315
Hofer v The Queen [2021] HCA 36; 95 ALJR 937
Le v Commissioner of Taxation [2021] FCA 303; 390 ALR 132
Levene v Inland Revenue Commissioners [1928] AC 217
Ma v Commissioner of Taxation [1992] FCA 530; 37 FCR 225
Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382
MJPV and Commissioner of Taxation [2020] AATA 1527
Precision Plastics Pty Ltd v Demir [1975] HCA 27; 132 CLR 362
Revenue and Customs Commissioners v Grace [2009] STC 2707
Robinson v Ware [2012] QCA 70
Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93; 226 FCR 555; 184 CLR 23

Trautwein v Federal Commissioner of Taxation [1936] HCA 77; 56 CLR 63

SECONDARY MATERIALS

Explanatory Notes on Amendments Contained in a Bill to Amend the Income Tax Assessment Act 1922-29 (Cth)

Practice Statement Law Administration 2014/4

Taxation Ruling TR 94/7 Income tax: tax shortfall penalties: guidelines for the exercise of the Commissioner's discretion to remit penalty otherwise attracted

REASONS FOR DECISION

Senior Member D K Grigg

# July 2023

INTRODUCTION

1. The Applicant is a citizen of Papua New Guinea (PNG).[1] The Applicant was born in Malaysia and first came to Australia in 1994. In 1997 the Applicant obtained a student visa. In 2000 he married an Australian citizen. The Applicant has three children.

   [1] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Applicant’s PNG passports, Agreed Bundle 1879-1924.

2. In 2003 the Applicant commenced working at his father’s business in PNG.

3. During the 2013 and 2016 financial years the Applicant spent time in both Australia and PNG.

4. This matter concerns income tax returns (ITRs) lodged by the Applicant for the financial years ended 30 June 2013, 30 June 2014, 30 June 2015 and 30 June 2016 (Relevant Years).

5. The ITRs were prepared by the Applicant on the basis that:

   (a)he was not a resident of Australia; and, therefore

   (b)certain receipts were not income and therefore not assessable.

6. It is not in dispute that the Applicant had failed to lodge his ITRs for the Relevant Years by their statutory due dates.

7. The Respondent disputes that the Applicant was not a resident of Australia and contends that certain receipts should have been included in the Applicant’s ITRs as assessable income.

   BACKGROUND & CLAIMS HISTORY

8. In March 2017, the Australian Taxation Office (ATO) decided to conduct an audit of the Applicant’s affairs which included conducting title and asset searches and obtaining information from financial institutions with which the Applicant has accounts.[2]

   [2] Exhibit 1, Agreed Bundle 279-579, No. 6, T11-T27, Correspondence relating to Bank Account Statements from 22 March 2017 to 3 May 2018, Correspondence relating to Property Searches from 27 April 2017 to 16 January 2018.

9. On 17 August 2018 the Applicant lodged his ITRs for the Relevant Years with the ATO.

10. In his ITRs the Applicant declared that:[3]

    (a)he was not an Australian citizen;

    (b)his postal address was a post office box in Springwood;

    (c)his home address was at Residential Property 2;

    (d)during the financial year ended 30 June 2013, he derived a net income of $23,178 from rent receipts and capital works deductions of $14,341;[4]

    (e)during the financial year ended 30 June 2014, he derived a net income of $42,020 from rent receipts and capital works deductions of $3,970 and other rental deductions of $15,356;[5]

    (f)during the financial year ended 30 June 2015, he derived a net income of $39,100 from rent receipts and capital works deductions of $3,970 and other rental deductions of $18,940;[6] and

    (g)during the financial year ended 30 June 2016, he derived a net income of $39,100 from rent receipts and capital works deductions of $3,970 and other rental deductions of $18,940.[7]

    [3] Exhibit 1, Agreed Bundle 163-262, No. 6, T3-T6, Income Tax Returns lodged for the 2013-2016 income years.

    [4] Exhibit 1, Agreed Bundle 163-183, No. 6, T3, Income Tax Return lodged for the 2013 income year.

    [5] Exhibit 1, Agreed Bundle 184-205, No. 6, T4, Income Tax Return lodged for the 2014 income year.

    [6] Exhibit 1, Agreed Bundle 206-233, No. 6, T5, Income Tax Return lodged for the 2015 income year.

    [7] Exhibit 1, Agreed Bundle 234-262, No. 6, T6, Income Tax Return lodged for the 2016 income year.

11. On 24 August 2018 the ATO issued notices of assessment (NOAs) for each of the Relevant Years based on the information provided in the ITRs by the Applicant.[8]

    [8] Exhibit 1, Agreed Bundle 263-278, No. 6, T7-T10, Notices of Assessment lodged for the 2013-2016 income years.

12. On 29 August 2018 the ATO advised the Applicant that it had completed its audit of his circumstances and determined that the net amount of tax payable for the Relevant Years was $3,314,793.02 plus shortfall and general interest charges. The ATO decided the Applicant was an Australia resident for tax purposes for the Relevant Years, and that it would issue amended NOAs.[9] In the Respondent’s view the Applicant had “significant deposit transactions through [his] bank account which were used to fund [his] lifestyle and acquire assets”.[10]

    [9] Exhibit 1, Agreed Bundle 30-57, No. 2, ATO Audit Decision dated 29 August 2018.

    [10] Exhibit 1, Agreed Bundle 30-57, No. 2, ATO Audit Decision dated 29 August 2018, Agreed Bundle 35.

13. The ATO’s position was:[11]

    [11] Exhibit 1, Agreed Bundle 30-57, No. 2, ATO Audit Decision dated 29 August 2018, Agreed Bundle 36.

    57.ATO Position: Yes. It is the Commissioner's view that you received income from known and unidentified sources, and the amounts shown in Table 1 form part of your assessable income under section 6-5 and 102-50) of the ITAA 1997.

Table 1 – Understated Income
Income year	Pre-audit taxable income ($)	Adjustment ($)	Post-audit taxable income ($)
2013	$23,178	$1,460,724	$1,483,902
2014	$42,020	$841,217	$883,237
2015	$39,100	$985,033	$1,024,133
2016	$35,992	$378,467	$414,459
Total	$140,290	$3,665,441	$3,805,731

1. The ATO used what is known as the “Asset Betterment” method to determine the Applicant’s income. The ATO explained the basis of the method in its Audit Reasons for Decision as follows:[12]

   25.This method is based on the principle that if your net assets (assets less liabilities) as at 30 June of a particular year are compared with your net assets as at 30 June of the previous year, the increase (or betterment) will represent your correct taxable income for that particular year, after adjustments have been made for Items which may have affected the increase, e.g. private expenditure, non-taxable receipts, capital gains or losses.

   [12] Exhibit 1, Agreed Bundle 30-57, No. 2, Audit of income tax affairs dated 29 August 2018, Agreed Bundle 39.

2. The ATO analysed the Applicant’s bank accounts, account transfers, assets (real estate holdings and motor vehicle holdings) and any capital gains/losses on asset sales.

3. In the Relevant Years, the ATO determined that significant deposits had been made into the Applicant’s accounts through international fund transfers. The Applicant says these amounts were primarily gifts from his father.

4. The ATO obtained information that during the Relevant Years the Applicant was the registered owner of four properties:

   (a)a first residential property (Residential Property 1);

   (b)a second residential property (Residential Property 2); and

   (c)two commercial properties (hereafter referred to as Unit 11 and Unit 12).

5. The ATO obtained information that during the Relevant Years the Applicant appeared to be the owner of the following motor vehicles and number plates:[13]

   [13] Exhibit 1, Agreed Bundle 30-57, No. 2, ATO Audit Decision dated 29 August 2018, Agreed Bundle 43.

   Motor Vehicles

   56.We obtained information about your motor vehicles you held during the audit period. The details of these motor vehicles are shown in Table 5 below:

Table 5 – Motor Vehicles owned
Make, Model, and Year	Registration	Purchase Date	Purchase Price	Sale date
Vehicles
Audi, Q7, 2010	E…T	28/04/2010	$93,275	15/03/2016
Porsche, Cayenne, 2010	O…Y	4/08/2010	$155,600	Still held
Lambhorgini, Gallardo, 2008	K…N	6/02/2012	$180,000	01/09/2014
Mercedes-Benz, C63 AMG, 2012	I…T	20/06/2012	$149,200	27/11/2015
Lambhorgini, Huracan, 2014	0…D	18/09/2014	$444,000	Still held
ForTwo, Smart Car, 2008	W…R	20/10/2014	$8,600	24/01/2016
Mini, Cooper S, 2011	Q…T	7/09/2015	$18,000	Still held
Landrover, Range Rover, 2011	Q…8	14/10/2015	$177,000	Still held
Cabo 10.6m, 2008, Speedboat	S…I	22/11/2012	$195,000	17/03/2013
Registrations
E…T	28/04/2010	$3,295	15/03/2016
O…Y	4/08/2010	$3,295	Still held
K…N	6/02/2012	$3,295	01/09/2014
I…T	20/06/2012	$2,395	27/11/2015
W…R	20/10/2014	$3,295	24/01/2016
Q…T	7/09/2015	$3,295	Still held
Q…8	14/10/2015	$3,295	Still held

1. The ATO also found:

   (d)the Applicant had made a capital gain on the sale of Residential Property 1 of $61,250;[14] and

   (e)funds in the Applicant’s bank accounts had been used for payments of personal expenses and to make loan repayments. The Commissioner considered those payments represented income from unidentified business activities and were therefore assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997).

   [14] Exhibit 1, Agreed Bundle 30-57, No. 2, ATO Audit Decision dated 29 August 2018, Agreed Bundle 51.

2. The ATO also found “private loans” of $504,540 comprised of $30,000 to YLX and $474,540 to the Applicant’s family.

3. The Commissioner concluded the Applicant:[15]

   (a)had not declared his “true income”;

   (b)“actively and knowingly omitted” his income from his ITRs without credible explanation; and

   (c)had engaged in “a blameworthy act or omission … best described as fraud or evasion” and therefore the Commissioner could amend his ITRs for the Relevant Years.

   [15] Exhibit 1, Agreed Bundle 30-57, No. 2, ATO Audit Decision dated 29 August 2018, Agreed Bundle 52, paragraphs [118]-[122].

4. The ATO contended that the Applicant had attempted to avoid tax through fraud or evasion and as a result it was empowered to amend the Applicant’s ITRs outside of the ordinary time allowed (two or four years) to do so under section 170 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936).

5. The ATO also imposed the following penalties pursuant to section 284-75(1) of the Tax Administration Act 1953 (Cth) (TAA) for having made false or misleading statements in his ITRs for the years ended 30 June 2013 to 30 June 2016:[16]

   [16] Exhibit 1, Agreed Bundle 732-747, No. 6, T42-T45, Notices of Assessment of Shortfall Plenty for the 2013-2016 income years. Table found at Exhibit 1, Agreed Bundle 30-57, No. 2, ATO Audit Decision dated 29 August 2018, Agreed Bundle 55, paragraph [146].

Table 11 – Total penalties
Year	Adjustment	Shortfall Amount	Base Penalty (75%)	Base penalty increase (20%)	Failure to lodge on time penalty	Total penalty
2013	$1,460,724	$642,223.05	$481,667.25	$0.00	$850	$482,517.25
2014	$841,217	$365,800.15	$274,350.10	$54,870.00	$850	$330,070.10
2015	$985,033	$447,919.01	$335,939.25	$67,187.85	$900	$404,027.10
2016	$378,467	$162,395.26	$121,796.40	$24,359.30	$900	$147,055.70
Total	$3,665,441	$1,618,337.47	$1,213,753.00	$146,417.15	$3,500	$1,363,670.15

1. The ATO imposed administrative penalties for failing to lodge his ITRs by the due date pursuant to section 286-75(1) of the TAA.[17]

   [17] Exhibit 1, Agreed Bundle 724-731, No. 6, T38-T41, Notices of penalty for failure to lodge documents on time for the 2013-2016 income years.

2. The ATO imposed Shortfall Interest Charge (SIC) under section 280-100 of the TAA for the unpaid tax for any of the income years ended 30 June 2013 to 30 June 2016.

3. As a result of its findings the ATO issued the following Amended NOAs for the Relevant Years on 4 September 2018.[18]

   [18] Exhibit 1, Agreed Bundle 708-723, No. 6, T34-T37, Notices of Amended Assessment for the 2013-2016 income years.

4. The Amended NOAs provided as follows:

Year ended	Previous Taxable Income	Amended Taxable Income	Tax Payable	Shortfall Interest Charge	Outcome
30 June 2013[19]	23,178	1,483,902	649,755.90	179,571.54	821,794,59DR
30 June 2014[20]	42,020	883,237	379,456.65	76,649.81	442,449.96DR
30 June 2015[21]	39,100	1,024,133	442,859.85	62,633.09	510,552.09DR
30 June 2016[22]	35,992	414,459	168,506.55	13,930.96	176,326.21DR

[19] Exhibit 1, Agreed Bundle 708-711, No. 6, T Documents, T34, Notice of Amended Assessment for the 2013 income year.

[20] Exhibit 1, Agreed Bundle 712-715, No. 6, T Documents, T35, Notice of Amended Assessment for the 2014 income year.

[21] Exhibit 1, Agreed Bundle 716-719, No. 6, T Documents, T36, Notice of Amended Assessment for the 2015 income year.

[22] Exhibit 1, Agreed Bundle 720-723, No. 6, T Documents, T37, Notice of Amended Assessment for the 2016 income year.

1. On 22 October 2018 the Applicant lodged an objection with the ATO in relation to the Amended NOAs for the Relevant Years (and also to the penalties and interest charges imposed).[23]

   [23] Exhibit 1, Agreed Bundle 58-78, No. 3, Objection to ATO Audit dated 22 October 2018.

2. The Applicant contended that the Amended NOAs for the Relevant Years were incorrect because, among other things: [24]

   (a)they were based on “incorrect assumptions and conclusions” and an “unqualified and improper application of the asset betterment test”;

   (b)the amounts in the ITRs were correct;

   (c)he is not domiciled in Australia for taxation purposes and therefore only needs to lodge ITRs in relation to income derived from Australia sources;

   (d)he resides in PNG;

   (e)during the Relevant Years he received monetary gifts from relatives which were not income; and

   (f)some of the funds received from relatives were used to purchase assets in Australia.

   [24] Exhibit 1, Agreed Bundle 58-78, No. 3, Objection to ATO Audit dated 22 October 2018.

3. The Applicant contends that he is not a resident of Australia because: [25]

   (a)he resides in PNG where he operates businesses originally established by his father;

   (b)the house in PNG in which he resides is owned by PNG Company 1. The Applicant provided a copy of a lease agreement of the property which shows the Applicant as tenant and PNG Company 1 as landlord;[26]

   (c)he meets his taxation obligations in PNG;

   (d)he maintains assets in Australia which are utilised by himself and family members when in Australia;

   (e)he intends to remain in PNG as a resident whilst he discharges his paid role in the family's business affairs;

   (f)he “remains connected to Australia but considers it to be a place of opportunity and security for his family to be raised”;

   (g)the statutory income attributed to him by the Respondent as being a Capital Gain arose from an asset (Residential Property 1) which was exempt from CGT as main residence pursuant to section 118-110 of the ITAA 1997; and

   (h)money received from his father (a citizen of Malaysia and resident of PNG) were either gifts or loans, not income.

   [25] Exhibit 1, Agreed Bundle 58-78, No. 3, Objection to ATO Audit dated 22 October 2018.

   [26] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Lease Agreement dated 9 March 2009, Agreed Bundle 1974-1984; Hearing transcript, page 28, 52.

4. The ATO requested more particulars from the Applicant of the loans and gifts, the Applicant’s family movements and companies the Applicant was involved in.[27]

   [27] Exhibit 1, Agreed Bundle 832-838, No. 6, T50, ATO Request for information dated 14 June 2019.

5. On 25 August 2020 the ATO advised the Applicant that his objections had not been allowed.[28]

   [28] Exhibit 1, Agreed Bundle 79-114, No. 4, ATO Decision on Objection dated 25 August 2020.

1. On 20 October 2020 the Applicant applied to this Tribunal for review of the ATO’s decision.[29] The Tribunal has jurisdiction to review the decision pursuant to section 25 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act), and Part IVC of the TAA.

   [29] Exhibit 1, Agreed Bundle 115-119, No. 5, Application for Review of Decision dated 20 October 2020.

2. The Applicant summarised his case as follows:[30]

   (a)The Commissioner’s assessments are excessive.

   (b)He has a reasonable explanation for his increase in wealth over the Relevant Years, primarily the gifts from his father.

   (c)The Vincents’ expert report sets out every transaction in his bank account and identifies where the money came from and where it went. To the extent that transactions remain uncategorised, there is sufficient evidence before the Tribunal as to the source of funds and the nature of his expenditure for it to conclude that none of those transactions were assessable income. The Applicant has therefore positively proved his “actual taxable income” and, in doing so, has identified the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer.

   (d)As all of the transactions have been identified and explained, the Applicant’s taxable income is as set out in his income tax returns for the Relevant Years.

   (e)That being so, the Applicant does not need to provide a further calculation to identify his assessable income for the Relevant Years. However, if (which is submitted would not be the case) the Tribunal is not satisfied in relation to one or more transactions and therefore determines that the funds represent assessable income, the Applicant provides an Excel spreadsheet that enables the Tribunal to add or deduct various items.

   [30] Exhibit 11, Applicant’s submissions dated 14 October 2022, paragraph [4].

   ISSUES FOR THE TRIBUNAL

3. The issue for determination by the Tribunal are whether:

   (a)in relation to the 2013 income year:

   (i)whether the Applicant was a “resident” of Australia, for income tax purposes within the meaning provided in section 6(1) of the ITAA 1936;

   (ii)whether the Applicant’s taxable income for the 2013 income year was $23,178; and

   (iii)whether the Applicant’s taxable income was less than $1,483,902 for the 2013 income year, being the amount assessed by the Commissioner in the Further Amended Assessment for the 2013 income year, rendering the assessment excessive;

   (b)in relation to the 2014 income year:

   (i)whether the Applicant was a “resident” of Australia, for income tax purposes within the meaning provided in section 6(1) of the ITAA 1936;

   (ii)whether the Applicant’s taxable income was $42,020 for the 2014 income year; and

   (iii)whether the Applicant’s taxable income was less than $883,237 for the 2014 income year, being the amount assessed by the Commissioner in the Further Amended Assessment for the 2014 income year, rendering the assessment excessive;

   (c)in relation to the 2015 income year:

   (i)whether the Applicant was a “resident” of Australia, for income tax purposes within the meaning provided in section 6(1) of the ITAA 1936;

   (ii)whether the Applicant’s taxable income was $39,100 for the 2015 income year; and

   (iii)whether the Applicant’s taxable income was less than $1,024,133 for the 2015 income year, being the amount assessed by the Commissioner in the Further Amended Assessment for the 2015 income year, rendering the assessment excessive; and

   (d)in relation to the 2016 income year:

   (iv)whether the Applicant was a “resident” of Australia, for income tax purposes within the meaning provided in section 6(1) of the ITAA 1936;

   (v)whether the Applicant’s taxable income was $35,992 for the 2016 income year; and

   (vi)whether the Applicant’s taxable income was less than $414,459 for the 2016 income year, being the amount assessed by the Commissioner in the Further Amended Assessment for the 2016 income year, rendering the assessment excessive; and

   (e)whether penalties and interest charges have been correctly applied.

4. Prior to the hearing the Respondent determined that the tax rates it applied were incorrect. As a result, the Respondent seeks an order that the decision under review be varied on the basis that:[31]

   (a)the Applicant is to be assessed as an Australian resident in the Relevant Years; and

   (b)the relevant administrative penalties and SIC amounts are to be recalculated accordingly.

   LEGISLATIVE BACKGROUND

   [31] Exhibit 12, Respondent’s submissions dated 28 October 2022, paragraphs [103]-[104].

   Power to issue default assessments

5. Section 166 of the ITAA 1936 provides the Commissioner must make an assessment of the taxable income of a taxpayer based on the ITRs and any other information in his possession.

6. “Assessment” is defined, relevantly in section 6, as follows:

   "assessment" means:

   (a)  the ascertainment:

   (i)  of the amount of taxableincome (or that there is no taxable income); and

   (ii)  of the tax payable on that taxable income (or that no tax is payable); and

   (iii)  of the total of a taxpayer's taxoffset refunds for a year of income (or that the taxpayer can get no such refunds for the year of income)

7. The Commissioner has the power to make default assessments 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 of the ITAA 1936 if (section 167, ITAA 1936):

   (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.

8. Amended assessments are taken to be “assessments” for the purposes of the ITAA 1936: section 173, ITAA 1936.

   Objections to Assessments

9. Section 175A of the ITAA 1936 sets out when a taxpayer can object to an assessment. It provides:

   1.A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.

   2.A taxpayer cannot object under subsection (1) against an assessment ascertaining that:

   (a)the taxpayer has no taxable income; or

   (b)the taxpayer has an amount of taxable income and no tax is payable.

   3.Subsection (2) does not prevent the taxpayer from objecting against an assessment if the taxpayer is seeking an increase in:

   (a)the taxpayer's liability; or

   (b)the total of the taxpayer's tax offset refunds.

   Burden of Proof

10. Section 14ZZK(b)(i) of the TAA provides that the Applicant has the burden of proving that the assessment is excessive or otherwise incorrect and what the assessment should have been. The reason for this, was recently explained by Logan J in Anglo American Investments Pty Ltd (Trustee) v Commissioner of Taxation [2022] FCA 971 (Anglo American), at [115], is that “the Commissioner, unlike a participant, is a stranger to transactions forming the taxable facts”.

11. In Trautwein v Federal Commissioner of Taxation [1936] HCA 77; (1936) 56 CLR 63 (Trautwein), Latham CJ found as a general rule:

    [2]. “…the taxpayer must… show, not only negatively that the assessment is wrong, but also positively what correction should be made in order to make it right or more nearly right.”

12. The High Court in Federal Commissioner of Taxation v Dalco [1990] HCA 3; 168 CLR 614 (Dalco) explained that where the Commissioner and taxpayer have not agreed on the assessment:[32]

    “… the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment … unless the [taxpayer] shows by evidence that the assessment is incorrect, [the default assessment] will prevail.”

    [32] (1990) 168 CLR 614, at 624, citing Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81, (44).

13. The Commissioner is under no obligation to tender evidence in support of its assessments, Mason J explained this in Gauci v Federal Commissioner of Taxation [1975] HCA 54; (1975) 135 CLR 81:

    [6]. “The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence.”

14. The Full Federal Court in Gashi v Federal Commissioner of Taxation [2013] FCAFC 30; 209 FCR 301 (Gashi) explained the taxpayer’s burden in relation to asset betterment assessments as follows:

    A taxpayer who seeks to establish that a s 167 assessment based on the asset betterment method of calculation is excessive 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: Dalco at 623-5 and Trautwein at 88.The taxpayer must show that the unexplained accumulated wealth was from non-income sources. The manner in which a taxpayer discharges that burden is not defined or specified – it varies with the circumstances: Dalco at 624.

    …

    65.… In addressing a s 167 assessment based upon an asset betterment  statement, a taxpayer must account for an unexplained increase in assets. The taxpayer must explain the source or sources of those assets and then identify whether that source, or those sources, are taxable. Put another way, if the disclosed “actual” taxable income does not explain the increase in assets, then the taxpayer is unlikely to have discharged the burden of establishing the assessment is excessive. And, of course, that unexplained increase in assets cannot be viewed in isolation – it must also take into account the expenditure during that period.

    66.Consistent with that view, even if a taxpayer was able to prove that an item in the asset betterment statement was wrong or should not have been included, but did not adequately explain the source or sources for the otherwise unexplained increase in wealth, the taxpayer would not discharge the onus under s 14ZZO of the TAA.

    (emphasis added)

15. The Full Federal Court in Gashi referred to Ma v Commissioner of Taxation [1992] FCA 530; 37 FCR 225 (Ma) at 230, where Burchett J said the burden may be discharged by:

    …providing acceptable evidence of how he spends his time, and demonstrates a reasonable explanation for any appearance of the possession of assets, he will generally discharge his burden of proof unless some positive reason is shown why he is to be disbelieved. …

    (emphasis added)

16. The standard of proof a taxpayer must meet is the civil standard of the balance of probabilities, not the criminal standard of beyond a reasonable doubt. The onus of proof was recently addressed by Derrington J in Condon v Commissioner of Taxation [2023] FCA 561 (Condon). This decision was handed down after this matter had been reserved. Derrington J explained it as follows:

    The standard of proof

    57.The standard of proof that the taxpayer must meet is the civil standard, being the balance of probabilities:  McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284 (McCormack v Federal Commissioner of Taxation) at 301 per Gibbs J.  However, there is no stipulation as to how the standard can be met.  That will no doubt vary with the circumstances of each case.

17. In Condon, Derrington J reiterated that it is not a legal requirement for the applicant taxpayer to prove matters only by reference to contemporaneous records. He also reiterated that not being able to “adduce every piece of evidence available in relation to each issue”.[33]

    58.A taxpayer is not required to prove matters by reference to contemporaneous primary documentation:  cf Commissioner of Taxation v Clark (2011) 190 FCR 206 at 225[64] – [66] per Edmonds and Gordon JJ. Nor are they required to adduce every piece of evidence available in relation to each issue: Commissioner of Taxation v Cassaniti (2018) 266 FCR 385 (Cassaniti) at 409[88] per Steward J (with whom Greenwood and Logan JJ agreed).

    [33] Citing Commissioner of Taxation v Cassaniti (2018) 266 FCR 385 (Cassaniti) at 409 [88] per Steward J (with whom Greenwood and Logan JJ agreed).  

18. Derrington J referred to Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1; (1983) 44 ALR 607 (Allied Pastoral Holdings) at 10 – 11, where Hunt J (as his Honour then was) considered that:

    … it is not obligatory for a taxpayer, before he can discharge his burden of proof, to call all the material witnesses and to produce all the material documents which support his evidence … It is certainly wiser for the taxpayer to do so in most cases so as to ensure that his own evidence is accepted, but even where he does not do so the tribunal of fact may nevertheless be sufficiently impressed with the taxpayer as a witness that his evidence is accepted without such corroboration or without the whole of such corroboration.

19. Derrington J then addressed the extent to which a taxpayer’s own evidence can be relied upon and the necessary precision in satisfying the civil standard of proof:

    59.Although a decision-maker will, in the evaluation of the evidence, be cautious of a taxpayer’s self-serving statements, they are not “prima facie unacceptable”: McCormack v Federal Commissioner of Taxation at 302: and the arbiter of fact is entitled to accept them where the taxpayer is regarded as truthful. Moreover, the taxpayer is not required to corroborate each piece of evidence that is adduced before it can be accepted: Cassaniti at 409 [88].

    60.Mathematical precision is not required in order to prove on the balance of probabilities what the correct assessment should have been. The Court is entitled to decide the appeal by reference to estimates upon inexact evidence: Allard v Commissioner of Taxation (1992) 24 ATR 493 at 499 per Hill J.  This approach was adopted by Burchett J in Ma at 233 in relation to an assessment based on the asset betterment method. His Honour said:

    Furthermore, the making of estimates upon inexact evidence, which is so much a feature of both judicial and administrative decision-making, cannot be uniquely excluded from appeals against betterment assessments.  To refuse to consider the credit, not only of the Applicant, but also of his independent and unchallenged witnesses, simply because the effect of the evidence was to support his accountant’s generalisations about double-counting rather than to hit upon a precise figure, was to fall into an error of law. 

    …

    72.… general evidence of a person’s financial dealings may be sufficient for the taxpayer to succeed in an appeal of an Objection Decision

    (emphasis added)

    Does the Applicant have to prove that every item in an asset betterment statement was incorrectly included as assessable income?

20. The Respondent contends that:[34]

    [I]t is insufficient for the Applicant to prove that some items should have been excluded from the assessment as non-taxable income and that he must prove that his taxable income is limited to the amount he alleges, which as a matter of practicality, means he must prove that all other amounts are not taxable income.

    [34] Exhibit 12, Respondent’s submissions dated 28 October 2022, paragraph [61].

21. The Respondent referred to Commissioner of Taxation v Ross [2021] FCA 766; 174 ALD 77 (Ross) at [48] where Derrington J said, in relation to asset betterment assessments:

    5.In order to establish that an assessment under s 167 is excessive, a taxpayer must positively prove their “actual taxable income” and, in doing so, must demonstrate that the amount of tax levied by the assessment exceeds their actual substantive liability: Gashi [63]; Dalco at 623-625; Trautwein at 88; Ma v Federal Commissioner of Taxation (1992) 37 FCR 225 (Ma) at 230; by, in effect, furnishing a return of actual income which involves establishing both

    …

    9.The manner in which the taxpayer can discharge the burden may vary with the circumstances but “absent agreement with the Commissioner to confine the issues for determination in a Pt IVC proceeding, the Commissioner is entitled to rely upon any deficiency in the taxpayer’s proof of the excessiveness of the amount assessed in seeking to uphold the assessment”: Gashi[61]. See also Dalco at 624.

    10.There may be cases where the amount of taxable income depends upon the legal complexion of known facts or upon specific factual questions.  In such a case, a taxpayer may successfully discharge the onus by establishing that the Commissioner included in their taxable income amounts which ought not to have been included:  Dalco at 624. However, such a situation would only arise where the Commissioner agrees to a process which is different to that described above by confining the scope of the dispute between him and the taxpayer to certain enumerated amounts. One might expect some clear expression of that agreement, involving as it does an abandonment of the advantages accorded to the Commissioner in s 167 in respect of defaulting taxpayers.

22. No agreement to confine issues, such as that referred to by Derrington J in Ross, has been reached here. Therefore the Respondent is entitled to rely on any deficiency in the Applicant’s proof of excessiveness.[35]

    [35] Exhibit 12, Respondent’s submissions dated 28 October 2022, paragraphs [58]-[59].

23. This issue was addressed in Condon. Derrington J said support for the “all or nothing” approach can be found in the decision of Nettle J in Bosanac v Commissioner of Taxation (2019) 374 ALR 425 (Bosanac (HC)). That case was also an asset betterment case. Derrington J rejected the applicant’s argument, which is the same argument that was put here, and said:

    [40] In the absence of any such agreement in this case, the Commissioner was correct to submit that Mr Condon’s onus required him to identify what was his contended actual taxable income, and to prove that the amount contended for was the full extent of his assessable income. In doing so, he was required to provide acceptable explanations and evidence to the effect that his monetary receipts (other than wages from the TPAIA) and increases in wealth during the Relevant Years were from non-taxable sources. If he was able to do so, and his evidence was accepted, then the onus would be discharged.

    …

    Mr Condon must prove what his income was in the Relevant Years

    [48] It follows that Mr Condon’s submission to the effect that he might “chip away” at the Commissioner’s assessments must be rejected. In the context of his appeal from the assessments under s 167, it was instead incumbent on him to prove what his income was in the Relevant Years and that his income, so proved, was less than that assessed by the Commissioner. If he failed in this endeavour, the assessments were to stand.

    Relevance of Residency for Income Tax Purposes

24. Residency status is relevant for tax purposes because it determines what “income” is to be included in a person’s assessable income.

    What income is assessable?

25. Section 6-5 of the ITAA 1997 provides:

    Income according to ordinary concepts (ordinary income)

    1.Your assessable income includes income according to ordinary concepts, which is called ordinary income .

    Note: Some of the provisions about assessable income listed in section 10-5 may affect the treatment of ordinary income.

    2.If you are an Australian resident, your assessable income includes the *ordinary income you *derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

    3.If you are a foreign resident, your assessable income includes:

    (a)the *ordinary income you *derived directly or indirectly from all *Australian sources during the income year; and

    (b)other *ordinary income that a provision includes in your assessable income for the income year on some basis other than having an *Australian source.

    4.In working out whether you have derived an amount of *ordinary income, and (if so) when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.

1. Section 6-10 of the ITAA 1997 provides:

   Other assessable income (statutory income)

   1.Your assessable income also includes some amounts that are not * ordinary income.

   Note: These are included by provisions about assessable income.

   
   

   For a summary list of these provisions, see section 10-5.

   2.Amounts that are not *ordinary income, but are included in your assessable income by provisions about assessable income, are called statutory income.

   Note 1: Although an amount is statutory income because it has been included in assessable income under a provision of this Act, it may be made exempt income or non-assessable non-exempt income under another provision: see sections 6-20 and 6-23.

   Note 2: Many provisions in the summary list in section 10-5 contain rules about ordinary income. These rules do not change its character as ordinary income.

   3.If an amount would be *statutory income apart from the fact that you have not received it, it becomes statutory income as soon as it is applied or dealt with in any way on your behalf or as you direct.

   4.If you are an Australian resident, your assessable income includes your *statutory income from all sources, whether in or out of Australia.

   5.If you are a foreign resident, your assessable income includes:

   (a)your *statutory income from all *Australian sources; and

   (b)other *statutory income that a provision includes in your assessable income on some basis other than having an *Australian source.

   What is a “resident” for income tax purposes

2. “Australian resident” is defined in section 995-1 of the ITAA 1997 to mean “a person who is a resident of Australia for the purposes of the [ITAA 1936]”.

3. “Resident or resident of Australia” is relevantly defined in section 6(1) of the ITAA 1936 as follows:

   resident or resident of Australia means:

   (a)a person, other than a company, who resides in Australia and includes a person [the residency test]:

   (i)     whose domicile is in Australia, unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia [the domicile test];

   (ii)    who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or [the 183 days test]

   (iii)   who is:

   (A)a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

   (B)an eligible employee for the purposes of the Superannuation Act 1976; or

   (C)the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B); [superannuation test][36]

   [36] The superannuation test is not relevant here.

   The ‘Ordinary Concepts’ or ‘Resides’ Test

4. Courts have held that in order to be taken to have resided in Australia one needs to consider “the nature, duration and quality of physical presence [of a person] in a particular place as well as [their] intention”.[37]

   [37] Stockton and Commissioner of taxation [2019] FCA 1679, Logan J at [23]. See also the Full Federal Court in Harding v Federal Commissioner of Taxation [2019] FCAFC 29 (Harding (Full Ct) (at [60]) which referred to Hafza v Director-General of Social Security [1985] FCA 201; 6 FCR 444 where Wilcox J considered that residence involved the question of a person’s physical presence in addition to a person’s intention to treat particular place as their home.

5. The following citations are from well-known authorities on the ordinary meaning of the word “resident”:

   ·in Levene v Inland Revenue Commissioners [1928] AC 217:[38]

   [38] Cited with approval in Gregory v Deputy Federal Commissioner of Taxation (1937) 57 CLR 774 (Gregory), 777 – 778 per Dixon J.

   oViscount Cave LC stated (at 222):

   [T]he word ‘reside’ is a familiar English word and is defined in the Oxford English Dictionary as meaning ‘to dwell permanently or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place.’

   (emphasis added)

   oLord Warrington stated (at 232):

   “if [the meaning of reside] has any definite meaning I should say it means according to the way in which a man’s life is usually ordered

   (emphasis added)

   ·A person who spends time in a country as part of the “ordinary course of his life” could be considered as “ordinarily resident” in that country: Commissioner of Inland Revenue v Lysaght [1928] AC 234, Lord Buckmaster (at 248);

   ·“in determining a person’s residence, the intention of that person may be vital”: Comcare Australia (Defence) v O’Dea (1999) 87 FCR 451, 455;

   ·Determination of a person’s residence is a “‘question of degree and …fact”: Federal Commissioner of Taxation v Miller [1946] HCA 23; 73 CLR 93, 103;

   ·Physical presence in a country is not determinative on its own,[39] “one must consider the amount of time that he spends in that place, the nature of his presence there and his connection with that place”: Revenue and Customs Commissioners v Grace [2009] STC 2707 (Grace), 2710;

   ·Residency incorporates “some degree of continuity or some expectation of continuity”: Grace, 2710;

   ·“a person is not entitled to claim to be a resident at a given town merely because he pays a short, temporary visit. Some assumption of permanence, some degree of continuity, some expectation of continuity is a vital factor which turns simple occupation into residence”: Fox v Stirk; Ricketts v Registration Officer for the City of Cambridge [1970] 2 QB 463, 477;

   ·“a person does not necessarily cease to be a resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place … together with an intention to return to that place and an attitude that the place remains “home”: Hafza v Director-General of Social Security [1985] FCA 201; 6 FCR 444 (Hafza) [14].

   [39] Re Iyengar and Federal Commissioner of Taxation (2011) 85 ATR 924, at 935 [62].

6. In Harding v Commissioner of Taxation [2018] FCA 837; 108 ATR 137 (Harding) (at [46]) the Court referred to topics that “constitute indicators or objective facts” which are often considered relevant “to the determination of the nature and quality of a person’s presence in or association with a particular location” such as:[40]

   (a)the person’s physical presence in Australia;

   (b)the person’s nationality;

   (c)the history of the person’s past residence and movements;

   (d)the person’s mode of life and habits;

   (e)the frequency, regularity and duration of the person’s visits to Australia;

   (f)the person’s purpose for visiting or leaving Australia;

   (g)the remaining family and business ties with Australia in comparison to any other foreign country; and

   (h)the maintenance of the place of abode.

   [40] Endorsed as correct in Harding v Commissioner of Taxation [2019] FCAFC 29; 269 FCR 311, at [24].

7. Derrington J said these factors are not a “rigid formula for the determination of whether a person is a resident”.[41]

   [41] [2018] FCA 837; 108 ATR 137 (at [46]).

8. A person can have two residences concurrently.[42]

   [42] Gregory v Fed Cmr Taxation (1937) 4 ATD 397; Pike v Commissioner of Taxation[2019] FCA 2185, at [52].

   The ‘Domicile and Permanent Place of Abode’ Test

9. Section 10 of the Domicile Act 1982 (Cth) provides:

   The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his home indefinitely in that country

10. The expression a ‘place of abode’ “has been equated with the concept of home or residence”: Harding, at [124]. In Harding, at [34], Derrington J said:

    “the concept of ‘continuity of association’ is an evaluative tool to be applied…to ascertain whether a person has a retained usual place of abode in a place or ‘lives’ where he is not usually located”

11. In Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836; 116 FCR 180, 197-198 [78] Emmett J explained:

    When comparing two places of abode of a particular person, in order to determine whether one is the usual place of abode, it is necessary to examine the nature and quality of the use to which the person makes of each particular place of abode. It is then possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the usual place of abode.

    (emphasis added)

    The ‘183 Day’ Test

12. While an applicant may have been in Australia for more than half of a financial year, this will not be sufficient to satisfy the 183-day test, when their usual place of abode is outside Australia and where they have no intention to take up residence in Australia.

13. The Explanatory Notes on Amendments Contained in a Bill to Amend the Income Tax Assessment Act 1922-29 (Cth) (the Income Tax Assessment Bill 1930 (Cth)), provided that this qualification was enacted “in order that there may be no danger of treating as residents persons who are purely visitors”.[43]

    [43] Explanatory Notes on Amendments Contained in a Bill to Amend the Income Tax Assessment Act 1922-29 (Cth) (the Income Tax Assessment Bill 1930 (Cth)), p 11.

14. In Harding (Full Ct) Davies and Steward JJ said (at [39]) that the 183-day test:

    … is, initially, concerned with a person who is physically present in Australia for most of a given year of income. The exception to it probably applies to a person who is physically present in Australia for the required number of days but who would not be considered to be an Australian [resident] because he or she is only a temporary visitor of this country for a period of time. That period might even extend to a term of years.

    (emphasis added)

15. Davies and Steward JJ referred, with approval, to the judgment of Sheppard J in Applegate v Commissioner of Taxation [1978] 1 NSWLR 126; 8 ATR 372 where he said (at 134):

    … “place of abode” may mean the house in which a person lives or the country, city or town in which he is for the time being to be found. I am of the view that the latter is the meaning of the expression used in s 6(1) of the Act.

    Tax treaty with PNG

16. Australia has a tax treaty with PNG for the avoidance of double taxation.[44]

    [44] International Tax Agreements Act 1953 (Cth), section 3AAA.

17. The Agreement between Australia and the Independent State of PNG for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income [1989] ATS 37 (PNG Agreement) came into force on 29 December 1989.

18. The PNG Agreement sets out when a person is a “resident” of Australia or PNG relevantly as follows:

    Article 4:

    Residence

    1.For the purposes of this Agreement, a person is a resident of one of the Contracting States:

    (a)in the case of Australia, if the person is a resident of Australia for the purposes of Australian tax; and

    (b)in the case of PNG, if the person is a resident of PNG for the purposes of PNG tax.

    2.A person is not a resident of a Contracting State for the purposes of this Agreement if the person is liable to tax in that State in respect only of income from sources in that State.

    3.Where by reason of the preceding provisions of this Article a person, being an individual, is a resident of both Contracting States, then the status of the person shall be determined in accordance with the following rules:

    (a)the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person;

    (b)if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State in which the person has an habitual abode;

    (c)if the person has an habitual abode in both Contracting States, or if the person does not have an habitual abode in either of them, the person shall be deemed to be a resident solely of the Contracting State with which the person's personal and economic relations are the closer.

    4.Where by reason of the provisions of paragraph 1 a company is a resident of both Contracting States, then its status shall be determined in accordance with the following rules:

    (a)it shall be deemed to be a resident solely of the Contracting State in which its place of central management and control is situated;

    (b)if its place of central management and control is not situated in either Contracting State, it shall be deemed to be a resident solely of the Contracting State in which it was incorporated.

    PROCESS OF HEARING

19. The Applicant was represented at the hearing by Ms D A Skennar KC and Ms F Chen of Counsel. The Respondent was represented by Ms C J Conway of Counsel.

20. All witnesses provided witness statements in addition to their oral evidence.

21. The following witnesses gave evidence on behalf of the Applicant (in the following order):

Name	Statement Date	In person/video
Applicant[45]	Consolidated statement - June 2022, exhibits 1 to 100	By video
Applicant’s Father[46]	9 June 2022, exhibits 1 to 29	By video
Applicant’s Sister[47]	7 July 2022, exhibit 1	In person
LLBH[48]	8 June 2022, exhibit 1-9	In person
PLN[49]	6 June 2022, exhibits 1-2	By video
Mr T[50]	8 June 2022, exhibits 1-5	By video
Ian George Libby[51]	9 June 2022	In person
KBL[52]	9 June 2022, exhibit 1-2	By video
John Thynne[53]	Expert report – 28 July 2021	In person
Addendum Report – 27 September 2022

[45] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022.

[46] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022.

[47] Exhibit 1, Agreed Bundle 1507-1512, No. 13, Statement of Applicant’s Sister dated 7 June 2022.

[48] Exhibit 1, Agreed Bundle 1513-1517, No. 14, Statement of LLBH dated 8 June 2022.

[49] Exhibit 1, Agreed Bundle 1634-1641, No. 16, Statement of PLN dated 6 June 2022.

[50] Exhibit 1, Agreed Bundle 1642-1675, No. 17, Statement of Mr T dated 8 June 2022.

[51] Exhibit 1, Agreed Bundle 1676-1677, No. 18, Statement of Ian George Libby dated 9 June 2022

[52] Exhibit 1, Agreed Bundle 1585-1633, No. 15, Statement of KBL dated 9 June 2022.

[53] Exhibit 1, Agreed Bundle 1372-1506, No. 12, Statement of John Thynne dated 28 July 2021, attaching Expert Report dated 27 July 2021.

1. No witnesses were called by the Respondent.

   DEPOSITS IN ISSUE

2. The major issue between the parties concerns deposits (referred to by the parties as “inflows”) of $2.6 million the Applicant received from his father. The Applicant says the reason for the increase in the Applicant’s wealth was a result of the acquisition of Residential Property 2 in 2013. The Applicant also purchased Unit 11 in that financial year. Residential Property 2 was purchased for $2.9 million. $1,141,335 of the purchase price was contributed by the Applicant’s father to the Applicant as a gift.[54]

   [54] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, paragraphs [112]-[117], [388]-[392].

3. The Applicant contends:[55]

   (a)he receives deposits into his personal bank account that constitute gifts from his father;

   (b)the gifts from his father are “towards the expenditure associated with the need to ensure the safety of the most vulnerable members of the family, prior to their eventual return to PNG;

   (c)the gifts from his father “were not in consideration for goods or services the Applicant provided”;

   (d)he earns income in PNG which is “derived wholly outside of Australia and is subject to the income tax regime of PNG”.

   [55] Exhibit 1, Agreed Bundle 1050-1056, No. 7, Applicant’s Statement of Facts, Issues, and Contentions dated 30 April 2021, paragraphs [24.2]-[24.4].

4. The Applicant’s father explained that while the size of the monetary gifts given to his children seems like a lot of money to most people, he had the financial capacity to do so.[56]

   [56] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, paragraph [134].

5. Mr John Thynne, director in the forensic division of Vincents Accountants, was instructed by the Applicant to conduct an analysis of the Applicant’s accounts. Mr Thynne prepared two reports for the purpose of this hearing.[57]

   [57] Exhibit 1, Agreed Bundle 1373-1506, No. 12, Vincents Expert Report dated 27 July 2021; Exhibit 9, Addendum Report of Mr J Thynne dated 30 September 2022.

6. Schedule D to Mr Thynne’s Report sets out a summary of the receipts in the Relevant Years.

7. Based on instructions from the Applicant, Mr Thynne recorded the following inflows for the 2013 financial year:

   (a)gifts from the Applicant’s father - $1,176,115;

   (b)the Applicant had other inflows into his account, including:

   (i)a transfer of savings - $92,718;

   (ii)interest in rent - $31,000; and

   (iii)international money transfers from JC - $285,000.

8. The Applicant contends that these inflows were not assessable income.

9. The Applicant contends that net asset position for 2013, which impacts the other years, is primarily the purchase of Residential Property 2 and Unit 11.

10. Schedule D of Mr Thynne’s Report sets out that most of the money has come in from overseas into his bank account, all of which the Applicant says was non‑assessable income.

11. The Applicant says his net asset position in the subsequent years does not vary greatly.

    (a)2014 – his net asset position increased by approximately $95,000;

    (b)2015 – his net asset position increased by approximately $172,000; and

    (c)2016 – his net asset position decreased by approximately $460,000.

12. The Applicant submitted that “in a broad sense the change in asset position in those years is explained by the Applicant making additional loans to friends and receipt of money by way of the sale of motor vehicles”. The Applicant says he also continued to receive significant gifts from his father: $829,000 in 2014, $501,000 in 2015, and $95,000 in 2016.[58]

    [58] Hearing transcript, pages 7-8.

    THE EVIDENCE

13. A chronology prepared by the Respondent is set out in Annexure A to this Decision. The Applicant agreed with the chronology other than with respect to item A39.[59] The Tribunal accepts the uncontradicted facts.

    [59] Hearing transcript, page 25.

    The Applicant

14. The Applicant gave evidence via video link from Singapore.

15. The Applicant was born in Malaysia and his passport was issued by PNG.[60] The Applicant has three sisters.

    [60] Exhibit 1, Agreed Bundle 842-852, No. 6, Applicant’s Resident Return Visa Applications.

16. The Applicant went to school in PNG. In 1990 he went to Singapore to complete his schooling. He visited Australia for the first time in 1988 to attend World Expo in Brisbane and again during the 1994 holidays.[61]

    [61] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, paragraphs [1]-[7]; Hearing transcript, page 21.

17. In 1997 the Applicant came to Australia on a student visa to undertake an English language skills course. He then continued tertiary studies at a Queensland university enrolling in a Bachelor of Business Management.

18. In 2000 the Applicant met his wife, an Australian citizen of Chinese heritage.

19. Between 1997 and 2003 the Applicant spent an average of 324 days per financial year in Australia.[62]

    [62] Exhibit 1, Agreed Bundle 1057-1078, No. 8, Respondent’s Statement of Facts, Issues, and Contentions dated 25 June 2021, paragraph [14].

    Family responsibilities

20. The Applicant gave evidence that as part of his being the eldest son in a Chinese family he attends to his parents’ personal and business affairs as and when requested.[63] For example, he arranges to pay their bills, organises their travel and so on. The Applicant says it is common practice in his family for his father to give money to him and his sisters in order to maintain their lifestyles. The Applicant says this could include gifts to purchase property, cars, or money to spend at their own discretion.

    [63] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, paragraph [70].

    PNG Business

1. In 2003 the Applicant began working in his father’s businesses which are headquartered in PNG.

2. The family businesses in PNG are operated by PNG Company 1 and PNG Company 2. PNG Company 2 is owned and controlled by the Applicant’s father.[64] The Applicant says he has always “been groomed to take over the family businesses in PNG”.[65] This was confirmed by the Applicant’s father.[66]

   [64] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, paragraph [1].

   [65] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, paragraph [25].

   [66] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, paragraph [67].

3. PNG Company 2 manages assets in PNG. PNG Company 1 focuses on the retail sector owning and operating a supermarket and department store in PNG.

4. As part of his role as general manager of the family businesses in PNG, he oversees the daily operations of PNG Company 1 and is required to travel to other countries regularly. His income is paid for by PNG Company 1. At the hearing the Applicant confirmed that PNG Company 1’s remuneration covers of the cost of his and his family’s accommodation, transport, travel, and other living expenses.[67]

   [67] Hearing transcript, page 29.

5. The Applicant provided a copy of the salary and wages statements of earnings from PNG Company 1 for the calendar years 2013 through 2017.[68] PNG Company 1 also makes superannuation contributions on the Applicant’s behalf into a superannuation fund in PNG. The Applicant provided a copy of his superannuation fund’s member annual statement for 2014, 2016 and 2017.[69]

   [68] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-8, Salary and Wages Statement of Earnings 2013-2017.

   [69] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-10, Statements from National Superannuation Fund 2014, 2016 and 2017.

   Personal Life

6. The Applicant continued his relationship with his wife who remained in Australia after he returned to PNG in 2003. The Applicant married in November 2004 after his wife committed to relocating with the Applicant permanently in PNG.

7. The Applicant is currently married and has three children under 18 years of age.

8. In November 2004 the Applicant and his wife lived at Residential Property 1.[70] In August 2005, after the birth of his first child the Applicant’s wife relocated to live with the Applicant in PNG. Prior to the birth of his other two children, in 2008 and 2015, the Applicant’s wife relocated to Australia to be closer to family.

   [70] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-2, Historical Title Search for Residential Property 1 dated 16 January 2018.

9. In 2005 the Applicant applied for spousal visa so that he could more easily visit Australia with his wife. The Applicant contends that it is difficult as a PNG citizen to obtain a holiday visa to Australia. The Applicant was granted an Australian spousal visa at the end of 2008.

10. In May 2008 after the birth of their second child the Applicant’s wife again returned with the two children to live with the Applicant in PNG.

11. In August 2008 the Applicant was granted permanent residency in Australia.[71]

    [71] Exhibit 1, Agreed Bundle 120-1049, No. 6, T Documents, T54, Letter from the Applicant’s representative to the Respondent, AB 1029.

12. The Applicant says he has lived in the same apartment in PNG since 2009. The apartment is his home and is large enough to accommodate his entire family.

13. In 2005, there were disputes between his father and some cousins, in relation to a joint venture in PNG which resulted in the Applicant’s father being sacked from the joint venture. The Applicant’s father commenced court proceedings against his nephews.[72]

    [72] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, paragraphs [25]-[27].

14. In 2010, as a result of the father’s family dispute, there was an assassination attempt on his father’s life in PNG.[73] His father was shot and transported by medivac to Australia for treatment. As a result of these events the Applicant’s parents, his wife and children fled PNG for Australia. The Applicant said as the only son, the burden to remain in PNG to operate the businesses, despite the personal risks, fell on him.

    [73] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, paragraphs [28]-[35], Annexure AF-3, News articles; Hearing transcript, page 30.

15. The extended family dispute culminated in the Applicant’s father being paid the amount of PGK 30,000,000 (which is the equivalent of AUD$12,700,000 today) (Settlement Funds) on 29 July 2010 in return for his share in the investment company.[74] This settlement was recorded in an agreement entitled “Share Sale Agreement, Release and Indemnity”.[75]  The Applicant says his father loaned the Settlement Funds to PNG Company 1 and PNG Company 2. The Applicant’s father states that he invested most of the money into the companies which enabled PNG Company 1 to pay down some loans with the bank, and that he also used some of the money to help out his children with “houses and things”.[76] The Applicant’s father says when he withdraws money from PNG Company 2 and PNG Company 1, he treats the withdrawals as repayment of his loans.

    [74] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-14, Cheque paid to Applicant’s father; Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, Annexures AF-4 and AF-5, Cheque dated 29 July 2010 and Share sale agreement dated 31 May 2010.

    [75] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, Annexure AF-5, Share sale agreement dated 31 May 2010, AB 1713-1719.

    [76] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, paragraph [41].

16. In 2011, once his father had recovered from the assassination attempt, the Applicant’s parents and family, including his two children moved to Singapore.[77]

    [77] Exhibit 1, AB 1028-1032, No. 6, T Documents, T54, Applicant correspondence to Respondent dated 17 July 2019, AB 1029.

17. The Applicant explained to the ATO that the reason for his family moving from Australia to Singapore was because:[78]

    In 2009, there was an assassination attempt on the Taxpayer’s father in PNG. As a result, the Taxpayer’s father, mother and his direct dependants temporarily moved to Australia which was a safe haven for the family and for his father to receive ongoing medical treatment for his bullet wound.

    This was a very turbulent time for the family and the threat of assassination was ongoing.

    As such, with the taxpayer’s parents being non-Australian citizens, the Taxpayer organised for his parents to move to Singapore with the Taxpayer’s wife and children in 2011.

    The Taxpayer then organised for his mother to obtain residency in Singapore and become the guardian for their two grandchildren [PQBZ’s son and daughter] in order for them to attend school in Singapore and gain respect for their Asian heritage and culture.

    During this entire period, the Taxpayer continued to reside in PNG to manage his Father’s business interests whilst visiting the family from time to time.

    [78] Exhibit 1, AB 1028-1032, No. 6, T Documents, T54, Applicant correspondence to Respondent dated 17 July 2019, AB 1030.

18. In 2012, the family decided that the parents, his wife, and children would move to Australia where both families could help with his children’s upbringing, and where they could be involved with the Applicant’s sisters and his sisters’ children. At this time, it was still unsafe for his family to return to live with him in PNG. At the hearing the Applicant said there were still safety and security risks, such as risks of abduction and ransom demands, to his family if they came to PNG.[79]

    [79] Hearing transcript, page 31.

19. The Applicant says he stayed longer in Australia in the 2013 financial year due to a skiing accident in Victoria which resulted in his having to have an operation and physiotherapy treatment is Australia.

20. The Applicant says he joined his wife and children where possible in school holidays and between his work commitments in PNG.

21. In June 2013, with the assistance of his father the Applicant purchased Residential Property 2 for $2,880,000.[80]

    [80] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-15, Contract of Sale and Settlement Statement dated 27 April 2013, AB 2016-2020.

22. It was intended that the Applicant’s wife and children would reside in Residential Property 2 which would allow his children to go to school in Australia pending their reuniting with the Applicant in PNG. The Applicant said he had no intention of making Residential Property 2 his primary residence.

23. The Applicant says he spent longer in Australia during the 2015 financial year due to his wife and children returning to reside in Australia. The Applicant said his wife suffered from postnatal depression after the birth of the third child and as a result he travelled to Australia more frequently to support her.

24. On 13 July 2015 the Applicant re-entered Australia with the intention of moving his family back permanently to Australia from Singapore. [81]

    [81] Exhibit 1, Agreed Bundle 1028-1032, No. 6, T Documents, T54, Applicant correspondence to Respondent dated 17 July 2019, AB 1029.

25. The Applicant says since 2016 he has continued to visit Australia for the purpose of visiting his immediate and extended family, to attend business meetings and assist his father in maintaining his business interests. The Applicant said he still intends for his family to move back to PNG when it is safe.

26. It is not in dispute that the Applicant spent the following days in and out of Australia in the Years of Income:[82]

    [82] Hearing transcript, page 23.

Year of Income	Days in Australia	Days out of Australia
2013	126	239
2014	161	204
2015	189	176
2016	206	160

1. It is not in dispute that during the Relevant Years:

   (a)when the Applicant returned to Australia, the Applicant would stay at the family home;[83]

   (b)when the family were absent from Australia their residential properties were not rented out;[84]

   (c)the Applicant owned multiple motor vehicles registered in Queensland;[85]

   (d)the Applicant owned investment Property 3;[86]

   (e)the Applicant owned two commercial properties in Brisbane;[87]

   (f)the Applicant was a director of 10 Australian proprietary companies.[88]

   [83] Exhibit 1, Agreed Bundle 860-1027, No. 6, T Documents, T53, Applicant’s incoming and outgoing passenger cards, AB 860, 878, 924.

   [84] Exhibit 1, No. 9, Supplementary T Documents, ST36, Rental Property details of Residential Property 2, AB 1186-1188; Exhibit 1, Agreed Bundle 1050-1056, No. 9, Applicant’s Statement of Facts Issues and Contentions dated 30 April 2021, paragraph [25.3]; Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, paragraphs [38], [422]; Exhibit 12, Respondent’s submissions dated 28 October 2022, paragraph [36](d).

   [85] Exhibit 1, No. 9, Supplementary T Documents, ST40, Extract of QLD Motor Vehicle Register, AB 1239-1241.

   [86] Exhibit 1, No. 9, Supplementary T Documents, ST23, Rental property schedule for Property 3 for year ending 30 June 2013, AB 1159-1160.

   [87] Exhibit 1, Agreed Bundle 569-576, No. 6, T Documents T23-24, Core Logic RP Data Report for Units 11 and 12 at 16 January 2018.

   [88] Exhibit 1, No. 9, Supplementary T Documents, ST10-19, Historical extracts of ASIC company records, AB 1112-1151.

2. The transactions are elaborated on further below.

   Purchase of Residential Property 1

3. The Applicant said that his father assisted him to purchase Residential Property 1 in November 2004 as part of a wedding gift which is traditional within his family.[89] The Applicant said it is also part of his culture to show a wife’s family that he would be a suitable husband. Residential Property 1 was purchased for the Applicant in his wife’s name.[90]

   [89] Exhibit 1, Agreed Bundle 1678-1824, No. 19, Statement of Applicant’s Father dated 9 June 2022, paragraph [78].

   [90] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-2, Historical title search for Residential Property 1 dated 16 January 2018.

4. Residential Property 1 was purchased on 4 November 2004 for $715,000 and was sold on 28 February 2014 for $960,000.

   Purchase of Residential Property 2

5. The Applicant organised through KBL, a credit and mortgage broker, to obtain a LowDoc Loan to assist with the purchase of Residential Property 2. KBL also gave evidence at the hearing (see paragraphs ‎326-‎342 below).

6. The Applicant said KBL recommended this loan because of the difficulty obtaining supporting and verifying documents from PNG.[91]

   [91] Hearing transcript, page 40.

7. The LowDoc Loan Application dated 22 April 2013 was for $1,800,000 to purchase Residential Property 2 (which the Applicant represented was worth approximately $3,000,000).

8. The Loan Application recorded the Applicant’s:[92]

   [92] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-17, Letter from Bendigo and Adelaide Bank with annexures dated 24 January 2018, AB 2022-2067.

   (a)annual income as $650,000 gross;

   (b)principal residence as Residential Property 1;

   (c)net worth as nearly $58,000,000;

   (d)motor vehicles as:

   (i)a Lamborghini Gallardo worth $400,000;

   (ii)Mercedes C65 worth $150,000;

   (iii)Audi Q7 worth $100,000

   (iv)Porsche Cayenne worth $155,000;

   (e)Australian bank balance of $1,290,000;

   (f)Overseas bank balance of $2,000,000;

   (g)Investment Property 3 worth $800,000;

   (h)Investment Unit 11 and Unit 12 as worth $250,000 each;

   (i)Employment as self-employed at Company P;

9. This information was declared to be correct by the Applicant.

10. The Applicant says he provided his asset information to KBL for the purposes of his loan application. He says it was not a complete asset and liability statement.

11. The Applicant says he does not recall ever saying he received $650,000 in income.[93] He says it did not occur to him that he was attesting to all of his actual income but rather his anticipated income. He also says his anticipated income included all anticipated receipts of funds, such as gifts from his father, not just receipts that were assessable. The Applicant said it was a reference to how much money he could consolidate.[94] During re-examination the Applicant said the money from his father was not income but gifts or loans.[95]

    [93] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, paragraph [146].

    [94] Hearing transcript, page 41. 48

    [95] Hearing transcript, page 67.

12. Residential Property 2 was purchased on 27 April 2013 for $3,030,542 and was still held as at 30 June 2016.[96] The Applicant paid for the property in the following instalments:

    ·$200,010 on 26 April 2013;

    ·$88,010 on 29 April 2013;

    ·$138,960 on 30 May 2013;

    ·$1,163,712 on 7 June 2013;

    ·$1,439,850 on 11 June 2013 by way of bank advance.

    [96] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, para 550, Annexure PQBZ-55, Title search for Residential Property 2, AB 3145.

    Loan Application – Investment Unit 11

13. In 2013 the Applicant purchased a small commercial property, Unit 11, for $202,500. The Applicant says he applied for finance in the amount of $121,500 and ultimately received $108,000. He says he had a meeting with a broker, KBL, to establish a basis for which he could seek funding. The Applicant says he also had acquired investment Property 3.

14. Unit 11 was purchased on 28 February 2013 for $221,650 and was still held as at 30 June 2016.

    Investment Unit 12

15. On 6 September 2012 there is a transaction in the Applicant’s account for $108,000 with the description "DRAW DOWN NETT ADVANCE". The Applicant says this transaction is a drawdown of a loan from Sandhurst Trustees relating to the purchase of the Unit 12.[97] The Applicant says he initially purchased Unit 12 using the cash available in his bank accounts. He subsequently applied for a NoDoc loan using the Unit 12 property to secure the loan and was advanced the amount of $108,000 on 6 September 2012 (see paragraph ‎342).[98]

    [97] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-98, Sandhurst Trustees account bank statement dated 6 September 2012, AB 3370-3371.

    [98] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-17, Letter from Bendigo and Adelaide Bank with annexures dated 24 January 2018, AB 2022-2067.

16. The Applicant said KBL recommended this loan because of the difficulty obtaining supporting and verifying documents from PNG.[99]

    [99] Hearing transcript, page 40.

17. Unit 12 was purchased on 20 January 2012 for $222,750 and was still held as at 30 June 2016.

    Australian companies

18. During the Relevant Years the Applicant was a director and/or shareholder of 10 Australian companies.[100] The Applicant says he did not derive any income from those companies.

    [100] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, paragraphs [206]-[218]; Annexures PQBZ-31 – PQBZ-41.

19. The Applicant was the sole director and/or shareholder of the following Australian companies:

    ·Company A

    ·Company B

    ·Company C

    ·Company D

    ·Company F

    ·Company H

    ·Company I

    ·Company J

    ·Company K

    ·Company L

20. At one stage the Applicant also a director of Company P which had become a supplier of goods to the PNG companies in 2009.[101] An ASIC company search indicates that the Applicant was a director, together with his sister and father, between 2002 and 2017.[102]

    [101] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-18, ASIC Historical Extract for Company P as at 7 June 2022, AB 2068-2084.

    [102] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-18, ASIC Historical Extract for Company P as at 7 June 2022, AB 2068-2084.

21. The Applicant said at the time the companies were registered, the registration application form stated that an Australian company must have at least one director resident in Australia. As he had residency status in Australia, he understood that he satisfied that requirement. He did not understand that meant he had a permanent place of abode in Australia.

    Registration of Company A and Company B

22. The Applicant says Company A and Company B were registered in October 2013 on behalf of his father who wanted to invest in Australia. He thought it be easier for the companies to be registered in the Applicant’s name as he had a spousal visa. The Applicant says the companies were not successful as he was not able to invest sufficient time in Australia to make them successful because he continued to live and work in PNG in the family businesses.

23. An ASIC company search of Company B indicates that:[103]

    (a)it was incorporated in October 2013;

    (b)the Applicant was the sole director; and

    (c)it was deregistered in October 2020.

    [103] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-40, ASIC Historical Company Extract for Company B as at 26 June 2019, AB 2799-2810.

24. An ASIC company search of Company A indicates that:[104]

    (a)it was incorporated in October 2013; and

    (b)the Applicant was, and remains, the sole director.

    [104] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-38, ASIC Current Company Extract for Company A as at 26 June 2019, AB 2793-2796.

    Gifts from his father

1. The Applicant was physically present in Australia in the Relevant Years as follows:

Year of Income	Days present in Australia	Days out of Australia
2013	126	239
2014	161	204
2015	189	176
2016	206	160

Applicant’s purpose for visiting or leaving Australia

1. During the Relevant Years the evidence indicates that the Applicant:

   (a)Invested and was involved in several businesses (Company G and Company E);[311]

   [311]  Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, paragraphs [121], [126], [328], and [546], AB 1837, 1856, 1876.

   (b)was the sole director of several Australian companies;[312]

   [312] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-32, ASIC Current Extract Company C, AB 2761-2762; Annexure PQBZ-32, ASIC Current Extract Company C; Annexure PQBZ-37, ASIC Current Extract Company D; PQBZ-38, ASIC Current Extract Company A; Annexure PQBZ-40, ASIC Historical Extract Company B. Regarding section 1.5.5 Corporations Act 2001 and Form 201 application for registration as an Australian company: Exhibit 1, Agreed Bundle, No. 6, T Documents, T54, Letter from Applicant’s representative to Respondent dated 17 July 2019, AB 1031-1032.

   (c)completed a Company Directors Course with the Australian Institute of Company Directors;[313]

   [313] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-20, Applicant’s Company Directors Course certificate, AB 2088.

   (d)in loan documentation for the purchase of Residential Property 2 stated:[314]

   [314] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-17, Letter from Bendigo and Adelaide Bank with annexures dated 24 January 2018, AB 2022-2067.

   (i)he was an Australian resident;

   (ii)an employee of Australian companies (Company P, Company G and Company E);

   (iii)he earned $650,000 as an employee of Australian companies;

   (e)lived with his family at the family residence at Residential Property 1, and later Residential Property 2;

   (f)was the joint owner of Residential Property 1 in February 2014;

   (g)owned and operated a number of bank accounts in Australia;

   (h)was responsible for the mortgage over Residential Property 1 to which a concessional rate of stamp duty was applied as the property was purchased as the Applicant’s principal place of residence;[315]

   (i)recording Residential Property 2 as his address for the purpose of government records with the ATO, ASIC, banks, Department of Home Affairs, Queensland Transport;

   (j)recorded himself as an Australian resident returning home on incoming passenger cards completed when entering Australia;

   (k)from 2013 to 2016 the Applicant spent more time in Australia after the birth of his third child here.

   (l)the Applicant’s children attend school in Australia;[316] and

   (m)his family were covered by Medicare over the period 2013 to 2016.

   [315] Hearing transcript, page 22.

   [316] Exhibit 1, Agreed Bundle, No. 6, T Documents, T48, Applicant’s residency questionnaire, AB 802.

2. The Tribunal accepts that the authorities provide that statements on immigration forms are relevant but not “definitive of their truth and these facts must be placed in the context of the rest of the evidence”.[317] The Applicant submits that he has explained the reason for his answers on the passenger cards, and they were not in relation to declaring his actual residency, and therefore no weight should be placed on this evidence.

   [317] Re Kenneth Dudley Taylor Ex parte: Natwest Australia Bank Limited (1992) 37 FCR 194 at [24]; cited with approval in Stockton and Commissioner of Taxation [2019] FCA 1679; (2019) 110 ATR 772 per Logan J; see also Dempsey v Commissioner of Taxation [2014] AATA 335; Full Court of the Federal Court in Commissioner of Taxation v Addy (2020) 382 ALR 68, at [119]; [2020] FCAFC 135; Harding v Federal Commissioner of Taxation [2019] FCAFC 29.

   Other indicators

3. The Respondent states the has held private health insurance with Medibank Private since 2015.[318] The Tribunal notes the Applicant appears to have held insurance with Medibank since 2010. A copy of his Medibank private card issued in January 2010 was submitted with his Low Doc Loan Application.[319]

   [318] Exhibit 1, Agreed Bundle, No. 6, T Documents, T48, Applicant’s residency questionnaire, AB 804.

   [319] Exhibit 1, Agreed Bundle 1825-3382, No. 20, Statement of Applicant dated 9 June 2022, Annexure PQBZ-17, Letter from Bendigo and Adelaide bank with annexures dated 24 January 2018, AB 2022-2067.

4. The Applicant is the registered owner of several motor vehicles registered in Australia.[320]

   [320] Exhibit 1, Agreed Bundle, No. 6, T Documents, T2, Respondent’s reasons for decision, paragraph [203], AB 161.

5. The Applicant had a valid driver’s licence.[321]

   The remaining family and business ties with Australia in comparison to any other foreign country

   [321] Exhibit 1, Agreed Bundle, No. 6, T Documents, T48, Applicant’s residency questionnaire, AB 803

6. The Applicant has no family in PNG. The majority of his family reside in Australia. His wife and children reside in Australia. His sisters reside in Australia.[322] The Applicant’s father resides in Singapore.

   [322] Hearing transcript, page 22.

7. Limited evidence was provided by the Applicant to indicate that he had any connection with PNG other than for business reasons during the Relevant Years. No particulars, photos, or other evidence of his life in PNG was proffered.

8. In addition to the family ties with Australia the Applicant also has significant business ties and relationships. 

9. Primarily the Applicant repeatedly returned to Australia visit and resided with his family.

   Maintenance of the place of abode

10. As referred to in paragraphs ‎104-‎126 above, the Applicant has maintained a family residence in Australia since 2004. The residential properties were never rented out.

    State of mind – intention

11. The Applicant said the intention was his family to come to PNG when it was safe.

12. The Applicant has been working in PNG since 2003. In all that time there has been no move to PNG. There was no evidence given by his wife. No evidence from any other witness to support the contention that his family would move to PNG. His father gave evidence at the hearing but did not address this issue. The Applicant’s wife was not called to give evidence. There was no evidence from any associate in PNG.

13. The Respondent points to the fact that throughout the objection process the Applicant has maintained that he is entitled to CGT exemption on the sale of Residential Property 1 on the basis that it was his main residence. The Applicant’s children have been enrolled in school here. These factors also point to the Applicant’s state of mind. The Applicant provided the Respondent copies of rates notices, utility bills, a home insurance policy and a Brisbane City Council animal registration notice for the family dog, to support his residence claim.[323]

    [323] Exhibit 1, Agreed Bundle, No. 6, T Documents, T48, pages 686 to 696; AB 812-822.

    Conclusion

14. Based on the above, the Tribunal finds that the Applicant was a resident of Australia under ordinary concepts during the Relevant Years.

15. Given this finding it is unnecessary to consider whether the Applicant satisfies the other residency tests.

    Tax Treaty Impact

16. The Applicant contends that pursuant to Article 4 of the PNG Agreement he ought to be deemed resident solely of PNG because:[324]

    (a)his permanent home and habitual abode is in PNG;

    (b)he had a permanent dwelling in PNG at all continuous times;

    (c)although his family does not reside with him, this is because of safety concerns;

    (d)he has strong social relations and friendships in PNG and is actively involved in the community;

    (e)he has clear business and employment ties with PNG;

    (f)he resides in PNG and has no intention of moving elsewhere.

    [324] Exhibit 11, Applicant’s submissions dated 14 October 2022, paragraphs [263]-[273].

17. The Respondent contends that the Applicant was an Australian resident for tax purposes.

18. The Tribunal has found that the Applicant is an Australian resident for tax purposes. The Respondent has not assessed any income the Applicant may have earned in PNG as part of its Amended NOAs. Only Australian sourced “income” has been targeted by the Respondent.

19. There is no risk of any double taxation. The Treaty is not relevant for the purpose of this decision.

    ARE THE AMENDED NOA EXCESSIVE/HAS THE APPLICANT DEMONSTRATED HIS ACTUAL INCOME?

20. The Applicant submits he has discharged his onus on the basis that:[325]

    (a)He is able to prove his actual taxable income;

    (b)He is able to prove that he did not have any other sources of assessable income;

    (c)He is able to prove a reasonable explanation for any appearance of the possession of assets;

    (d)He is able to explain the unexplained deposits and withdrawals which are nonassessable income; and

    (e)He is able to prove that the capital receipts and non-assessable income he received during the Relevant Years exceeded the increase in wealth across the relevant years.

    [325] Exhibit 11, Applicant’s submissions dated 14 October 2022, paragraph [286].

21. The Applicant says the assessment carried out by Vincents Accountants represents the correct position in relation to his asset position.

22. As outlined above, Mr Thynne has opined that the Respondent’s Amended NOAs are excessive. The Tribunal accepts this evidence.

23. Based on the findings regarding the evidence the Tribunal is satisfied on the balance of probabilities that the Applicant’s actual taxable income for the Relevant Years is set out in Schedule B of Mr Thynne’s reports. The Tribunal accepts the Applicant’s and other witnesses’ explanations, and that the Applicant had the assets, outflows and inflows, as set out in the Applicant’s Written Submissions dated 14 October 2022 at paragraphs [40]-[184].

24. As was stated by Burchett J in Ma at 230, in seeking to establish that an assessment under s 167 of the ITAA 1936 was excessive, that burden may be discharged:

    … [I]f a taxpayer denies any undisclosed source of income, provides acceptable evidence of how he spends his time, and demonstrates a reasonable explanation for any appearance of the possession of assets, he will generally discharge his burden of proof unless some positive reason is shown why he is to be disbelieved.

    Conclusion

25. There is no hard and fast rule dictating how a taxpayer must discharge their burden of proof.

26. In Condon, Derrington J referred to the decision in Haritos v Commissioner of Taxation [2015] FCAFC 92; 233 FCR 315, at 392 ([234]) where it was accepted that “in performing its review function, the Tribunal may be required to make an estimate upon inexact evidence, and it cannot avoid its responsibility to make findings by relying on the burden of proof section”. Derrington J held that (at [62]):

    If the appellant can, by any means, demonstrate his actual taxable income and show the assessments are excessive, he is entitled to seek relief:  Ma at 232.

27. The Tribunal finds that the Applicant has shown, on the balance of probabilities, his accumulated wealth was from non-income sources.[326]

    [326] Gashi, at [63].

28. On the balance of probabilities, the Tribunal finds that the Applicant has provided a “reasonable explanation for any appearance of the possession of assets”. The Tribunal accepts that this was largely due to the gifts of money and assets from his father. No “positive reason” has been demonstrated for why his explanation should not be accepted or why he should be disbelieved.[327]

    [327] Ma, at [230].

29. The Applicant has provided sufficient evidence to explain his possession of assets and the inflows and outflows from his various accounts. These transactions have been scrutinized and analysed by Mr Thynne.

30. The Tribunal finds that the Applicant has established what his actual taxable income was for each of the Relevant Years, and that the Commissioner’s Amended NOAs were excessive.

    INTEREST AND PENALTIES

    Legislation

31. Administrative penalties can be imposed pursuant to section 284–75(3) of Schedule 1 to the TAA in the following circumstances:

    284-75   Liability to penalty

    (3)    You are liable to an administrative penalty if:

    (a)you fail to give a return, notice or other document to the Commissioner by the day it is required to be given; and

    (b)that document is necessary for the Commissioner to determine a * tax-related liability (other than one arising under the * Excise Acts) of yours accurately; and

    (c)the Commissioner determines the tax-related liability without the assistance of that document.

    Note:    You are also liable to an administrative penalty for failing to give the document on time: see Subdivision 286-C.

32. The base administrative penalty is 75% of the relevant tax related liability.[328] The base penalty is increased by 20% if the taxpayer “took steps to prevent or obstruct the Commissioner from finding out about a shortfall amount, or the false or misleading nature of a statement, in relation to which the base penalty amount was calculated”.[329]

    [328] Section 284–90, Schedule 1, TAA.

    [329] Section 284-220(1), Schedule 1, TAA.

33. Pursuant to section 298–20 of Schedule 1 of the TAA the Commissioner has the power to remit all, or part of the penalty amount calculated.

34. The ATO issues practice statements pursuant to authority of the Commissioner. These practice statements are used by the ATO to provide instructions on the way in which the tax law should be administered. Practice Statement Law Administration PSLA 2014/4 (PS 2014/4) explains the circumstances in which an entity will become liable to a penalty pursuant to section 284-75(3) of the TAA and how that penalty is assessed including any remission.

35. Pursuant to paragraph 27 of PS 2014/4 a relevant matter for the remission of a penalty includes “a major objective of the penalty regime is to promote a consistent treatment by reference to specified rates of penalty” and that this objective could be compromised if penalties are omitted without just cause or as a matter of course.

36. Paragraph 28 of PS 2014/14 goes on to provide that the discretion to remit penalties should be approached in a fair and reasonable way and sets out that a remission, either in full or in part will generally occur, as follows:

    ·an entity has a genuine, yet mistaken, belief that lodgment was not required as opposed to an indifference to, or a rejection of, their obligation

    ·an entity understood their obligation to lodge but circumstances beyond their control affected their ability to lodge

    ·the amount of penalty imposed by law causes an unjust result

    ·there were credits available to offset the amount of the tax-related liability payable, or

    ·there was extraordinary cooperation during an examination.

37. The Commissioner has also issued a ruling, Taxation Ruling TR 94/7 Income tax: tax shortfall penalties: guidelines for the exercise of the Commissioner's discretion to remit penalty otherwise attracted (TR 94/7). TR94/7 provides relevantly:

    The discretion to remit penalty otherwise attracted under a shortfall section should be exercised in only those exceptional cases where, having regard to all of the circumstances, the application of a particular shortfall section and/or the rate of penalty prescribed under that section would provide a clearly unreasonable or unjust result.

    Contentions

38. The Applicant submits that he should not be liable for administrative penalties pursuant to section 284-75(1) of Schedule 1 to the TAA for the Relevant Years or that the discretion to remit the administrative penalty under section 298-20(1) of Schedule 1 to the TAA ought to be exercised in his favour.[330]

    [330] Exhibit 1, Agreed Bundle, No. 7, Applicant’s Statement of Facts, Issues, and Contentions dated 30 April 2021, AB 1055-1056; Exhibit 11, Applicant’s submissions dated 14 October 2022, paragraph [304].

39. The Tribunal has found that the Amended NOAs are excessive, and that the Applicant has demonstrated his actual income. As a result, the Amended NOAs will be set aside. As a result, there has been no finding of fraud or evasion.

40. The Applicant submitted: [331]

    [331] Exhibit 1, Agreed Bundle, No. 7, Applicant’s Statement of Facts, Issues, and Contentions dated 30 April 2021, AB 1055-1056.

    26. The imposition of the decision maker to impose administrative penalties should be set aside and replaced with a decision to remit the amount given that:

    26.1. The Respondent's decision does not accord with the facts, law and rights in existence.

    26.2. The Applicant has always complied with lodgement obligations concerning income derived in Australia.

    26.3. An additional factor in relation to the remission of penalties is the reasonable care exercised by the Applicant, which included seeking professional advice, before the lodgement of the returns.

    26.4 The Respondent did not conduct an audit or any enquiry raising issues of concern with the affairs reported by the Applicant through its ordinary lodgement regime before issuing the amended assessments for the Relevant Years to the Applicant.

    26.5 The Applicant co-operated with the Respondent in providing information and complying with requests for more information, in particular responding to the following:

    a) Letter from the ATO dated 17 April 2019 (see T Doc 47 and 48); and

    b) Letter from the ATO dated 14 June 2019 (see T Doc 49, 54 and 55).

    26.6 The allegation that the funds deposited into the bank accounts of the Applicant constitute income is unfounded, without substance including evidence or particulars of the allegations, has been made on incorrect assumptions and has been rebutted on the evidence and explanation of the Applicant.

    26.7 The Applicant did not engage in any act, or make a statement to the Respondent, that was:

    a) False or Misleading;

    b) Lacking in reasonable care;

    c) Deliberate with the intent of evading income tax;

    d) Reckless;

    e) An intentional disregard of the law;

    f) Made on the basis of an unarguable position; or

    g) Had a dominant purpose of avoiding tax.

    26.8. There has been no evasion in the Applicant reporting his affairs and the Respondent should, in the circumstances, remit any administrative penalty as well as the SIC pursuant to section 298-20 of Schedule 1 to the Taxation Administration Act 1953.

41. The Respondent submitted penalties and interest imposed should remain. As the Tribunal has found in favour of the Applicant the basis for the Respondent’s submissions are no longer relevant. In these circumstances the penalties and interest decisions are set aside and remitted and recalculated to reflect the decision.

    Conclusion on Penalties

42. The decisions under review with respect to penalties are set aside and remitted to be determined in accordance with the findings above.

    DECISION

43. The decision under review should be set aside and the Amended NOAs be reassessed in accordance with the law.

44. The decisions under review with respect to penalties are set aside and remitted to be determined in accordance with the findings above.

I certify that the preceding 503 (five hundred and three) paragraphs are a true copy of the reasons for the decision herein of Senior Member D K Grigg

..............................[Sgd].......................................

Associate

Dated: 10 August 2023

Date/s of hearing	27-30 September 2022; 17 October 2022; and 14 November 2022
Reserved date:	14 November 2022
Counsel for Applicant	Ms D A Skennar KC and Ms F Chen
Solicitors for the Applicant	Morgan Conley Solicitors
Counsel for the Respondent	Ms C J Conway
Solicitors for the Respondent	Hall & Wilcox

ANNEXURE A: CHRONOLOGY (PREPARED BY THE RESPONDENT)[332] WITH THE APPLICANT’S COMMENTS

[332] AB1071-1078

Event

Applicant’s Evidence

A1. In 1997, the Applicant contends he arrived in Australia to study a foundation course at Queensland University of Technology to improve his English skills. The Commissioner understands that the Applicant actually arrived in July 1997. The Applicant contends he then

enrolled in a Bachelor of Business Management degree at Central Queensland University.[333]

A2. In the income years ending 30 June 1998, 30 June 1999 and 30 June 2000, the Applicant spent a large majority of his time in Australia. An average of 81 per cent of his days in these

years were spent in Australia.

A3. In 2000, the Applicant contends he met his wife while studying.[334]

A4. In the income years ending 30 June 2001, 30 June 2002 and 30 June 2003, the Applicant spent almost all his time in Australia. An average of 97 per cent of his days in a year were spent in Australia.[335]

I spent most of my time in Australia in the 2001, 2002 and 2003 income years, which are not the Relevant Tax Years, because I was residing in Australia as a student

A5. On 11 November 2002, the Applicant was appointed as a director of an Australian proprietary company, Company P.[336]

A6. In 2002, the Applicant contends he forgot to renew his student visa and was requested by Border Force to depart Australia.[337]

A7. In 2003, as a result of his visa situation, the Applicant contends he returned to PNG to work in his father’s business. The Applicant contends he continued a long-distance relationship with his wife.[338]

A8. In the income year ending 30 June 2004, the Applicant spent 65 days in Australia.[339]

A9. On 4 November 2004, Residential Property 1 was purchased for $715,000 in the name of the Applicant and the Applicant’s wife. The Applicant and his family resided at the home whenever they were in Australia[340]

A10. On or around 21 November 2004, the Applicant and the Applicant’s wife married.[341]

A11. On 5 May 2005, the couple’s first child was born in Australia, PQBZ’s son. The Applicant was in Australia for the birth.[342]

A12. In 2005, the Applicant applied for a spouse visa.[343]

I applied for a spouse visa as it is difficult for Papua New Guinea citizens to obtain travel visas to Australia. Obtaining a spouse visa made it easier to visit Australia

A13. In the income year ending 30 June 2005, the Applicant spent 253 days in Australia. His wife spent 294 days.[344]

A14. In the income year ending 30 June 2006, the Applicant spent 135 days in Australia. His wife spent 135 days.[345]

A15. In the income year ending 30 June 2007, the Applicant spent 22 days in Australia. His wife spent 41 days.[346]

A16. In April 2008, the Applicant and his wife purchased Property 3 for $770,000. The Applicant declared rental income in relation to the property for all the Years of Income.[347]

A17. On or about 15 May 2008, the Applicant was issued a Marine Licence by the Queensland Government.[348]

I obtained the marine licence in Australia after undertaking a course on marine rules and safety. No such courses were available in PNG at the time

A18. On 21 May 2008, the couple’s second child was born in Australia. The Applicant was in Australia for the birth.[349]

A19. In the income year ending 30 June 2008, the Applicant spent 102 days in Australia. His wife spent 204 days.[350]

A20. On 28 August 2008, the Applicant’s application for permanent residence in Australia was approved. He was granted a Partner (Residence) Visa (Class BS) (Subclass 801).[351]

A21. In the income year ending 30 June 2009, the Applicant spent 57 days in Australia. His wife spent 87 days.[352]

A22. On 2 January 2010, the Applicant contends that his father was the victim of an assassination attempt due to an escalating family dispute. The Applicant contends he was flown for urgent treatment in Australia. The Applicant contends that his parents, wife and children fled PNG for

Australia.[353]

A23. On 28 April 2010, the Applicant purchased an Audi Q7 for approximately $93,275. The vehicle was registered in Queensland.[354]

A24. In the income year ending 30 June 2010, the Applicant spent 85 days in Australia. His wife spent 179 days.[355]

A25. On 4 August 2010, the Applicant purchased a Porsche Cayenne for approximately $155,600. The vehicle was registered in Queensland.[356]

I note that my wife was in a car accident at this time and her car was written off. We received an insurance payout which was used to purchase the Porsche Cayenne

A26. In the income year ending 30 June 2011, the Applicant spent 109 days in Australia. His wife spent 210 days.[357]

, I note that in the 2010/11 income year, while my father was in Australia recovering from his gunshot wound, I was required to travel more often to visit him to obtain advice on business operations in PNG and to have him sign documents to enable his PNG company to conduct its affairs

A27. On 6 February 2012, the Applicant purchased a Lamborghini Gallardo for approximately $180,000. The vehicle was registered in Queensland.[358]

A28. On 20 June 2012, Unit 12 was purchased by the Applicant for $222,750. The property is a commercial property.[359]

A29. Also on 20 June 2012, the Applicant purchased a Mercedes-Benz C63 AMG for approximately $149,200. The vehicle was registered in Queensland.[360]

A30. On 24 June 2012, an animal registration reminder noticed was issued to the Applicant by the Brisbane City Council. The notice states that PQBZ’s dog is usually kept at Residential Property 1. The registration was seemingly paid on 9 October 2012.[361]

A31. On 26 June 2012 and 9 July 2012, the Applicant signed loan documents with Sandhurst Trustees and Merchant Mortgages for $108,000 in relation to Unit 12. Subsequently, on 1 August 2012, the Applicant’s wife signed the loan documents.[362]

A32. In the income year ending 30 June 2012, the Applicant spent 110 days in Australia. His wife spent 200.[363]

A33. On 4 July 2012, it appears from the Applicant’s diary that he watched the State of Origin at ‘PQBZ’s Cousin’s Place’. The Applicant was in Australia at the time.[364]

I was in Australia at the time and my cousin invited all family members to watch the State of Origin game at his house. State of Origin is a big event in PNG which I follow wherever I am at the time

A34. In July and August 2012, it appears from the Applicant’s diary that he sought medical treatment in Australia for a knee injury, including surgery at Brisbane Private Hospital on 1 August 2012.[365]

I tore my anterior cruciate ligament in my knee while on a skiing holiday at Mt Bulla. I had the operation to fix my knee in Australia and I attended physiotherapy in Australia. This was a consequence of where the accident which caused the injury occurred

A35. In August 2012, it appears from the Applicant’s diary that he travelled to Singapore to be with his family while their children started school.[366]

A36. Between August and November 2012, utility bills were sent to the Applicant and his wife at Residential Property 1.[367]

A37. On 6 November 2012, it appears from the Applicant’s diary that he attended a Melbourne Cup lunch at Jellyfish restaurant on Brisbane’s riverside. His wife was in Australia for the same period of time on this trip.[368]

I often attend networking events when I am in Australia on behalf of my PNG employer in order to foster and maintain business relationships with clients, suppliers and other stakeholders

A38. On 21 November 2012, it appears from the Applicant’s diary that the Applicant and his wife celebrated their eight-year wedding anniversary. They both arrived in Australia on that day and

stayed about a week.[369]

A39. On 22 November 2012, the Applicant purchased a Cabo Speedboat for approximately $195,000. The vehicle was registered in Queensland.[370]

The Cabo boat was purchased by a friend of mine. It was registered in my name because I have an Old CRN which allowed the vessel to travel through Australian waters to PNG where it was handed over to the new owner

A40. On 28 February 2013, Unit 11 was purchased by the Applicant for $221,650. The property is a commercial property and is next door to Unit 12 purchased by the Applicant in June 2012.[371]

A41. On 17 March 2013, it appears from the Applicant’s diary that he attended the Brisbane Super Car Club Open Day at Sirromet Wines in Queensland. The Applicant and his wife were in Australia at the time.[372]

I have an interest in cars and I attended the event because it coincided with my holiday in Australia

A42. On 5 April 2013, it appears from the Applicant’s diary that he attended to a number of tasks including picking up business cards, RSVPing for an Aventador drive day, and paying speeding fines. The Applicant and his wife were in Australia at the time. [373]

A43. On 6 April 2013, it appears from the Applicants diary that he attended an open house at Musgrave Road. Witness Statement of PQBZ, Annexure L

A44. On 22 April 2013, the Applicant signed a loan application with Bendigo and Adelaide Bank seeking a loan about of $1,800,000 to purchase a property.[374]

A45. On 27 April 2013, the Applicant purchased Residential Property 2. The purchase price for the property was $2,880,000. The Applicant took out a mortgage to purchase the property with Bendigo and Adelaide Bank.[375]

A46. On 9 May 2013, it appears from the Applicant’s diary that he attended the Lamborghini Aventador Track Day. The Applicant was in Australia at the time.[376]

A47. On 5 June 2013, there is a note in the Applicant’s diary about State of Origin, Game 1. The Applicant was not in Australia at the time.[377]

I note that the State of Origin is an event widely followed in PNG. I otherwise repeat my response to paragraph A33

A48. On 12 and 13 June 2013, there is a note in the Applicant’s diary about the last day of school for his children PQBZ’s son and daughter. Between then and mid-August, a period coinciding with northern hemisphere school holidays, the Applicant and his family spent a significant amount of time in Australia.[378]

my wife and children spend much of the children's school holidays traveling and visiting family. I join them in order to spend time with my children whenever it is possible to do so between my work commitments in PNG

A49. On 26 June 2013, there is a note in the Applicant’s diary about State of Origin, Game 2. The Applicant arrived back in Australia the day of the game[379]

A50. In the income year ending 30 June 2013, the Applicant spent 126 days in Australia. His wife spent 138 days.[380]

A51. On 16 and 17 July 2013, there is a note in the Applicant’s diary about State of Origin, Game 3. The Applicant arrived back in Australia the day before the game, and it appears from the Applicant’s diary that he visited Sydney for the game.[381]

Company O, a major supplier of goods to PNG Company 1, invites all their major distributors (approximately 15 people) to fly to Australia to attend the final State of Origin game in the series. They pay for all flights and accommodation. This was an industry networking event associated with my employment in PNG

A52. On 7 October 2013, Comminsure sent the Applicant and his wife a renewal notice and certificate of insurance in respect of Residential Property 1.[382]

A53. In October 2013, the Applicant was appointed as the sole director of the newly registered Australian proprietary companies Company A and Company B. In the applications for registration, the Applicant’s address was recorded as Residential Property 1.[383]

the companies were registered on behalf of my father who wanted to invest in Australia. They were registered in my name as I had a spouse visa and we thought this would be easier. If any income was derived from these companies, it would be declared in Australia. I otherwise receive no undeclared benefit from these business interests

A54. On 5 November 2013, there is a note in the Applicant’s diary about Melbourne Cup. The Applicant was not in Australia on this day.[384]

as with State of Origin, the Melbourne Cup is a usual corporate event in PNG, and I diarise the event for my records

A55. On 18 November 2013, a reminder notice sent to the Applicant and his wife from Brisbane City Council showed there was $850.53 of rates due in respect of Residential Property 1.[385]

A56. In late November 2013, it appears from the Applicant’s diary that he participated in the M Rally, a car rally that runs from Sydney to Brisbane. The Applicant and his wife were in Australia over this period.[386]

, I took annual leave to attend this event in Australia as my holiday because I have a keen interest in cars

A57. On 14 December 2013, there is a note in the Applicant’s diary that ‘Wife/kids arrive Brissy. Wife Birthday’. The Applicant’s wife and children did arrive in Australia on that day. The Applicant arrived the day before on 13 December 2013.[387]

A58. On 6 January 2014, there is a note in the Applicant’s diary that school starts. The Applicant’s wife and children leave Australia on 5 January 2014.[388]

A59. On 3 February there is a note in the Applicant’s diary that school starts again after ‘CNY’, presumably Chinese New Year. The Applicant and his wife are in Australia for a very short period before departing on what appears to be a holiday in New Zealand, returning to Australia

on 10 February. Upon returning to Australia, the Applicant appears to have attended the wedding of J and C on 15 February, had ‘dinner with in-laws’ on 16 February and attended the preview the Lamborghini Huracan that has landed in Brisbane.[389]

the trip to New Zealand was a business trip funded by BB as PNG Company 1 is a major customer in PNG. There are no direct flights from PNG to NZ and therefore I used Australia as a transit hub

A60. On 28 February 2014, the Applicant and his wife sold their home at Residential Property 1 which they had held for almost 10 years. The sale price was $960,000.[390]

A61. On 28 February 2014, the Applicant was appointed as the sole director of the newly registered Australian proprietary company, Company C. In the application for registration, the Applicant’s address was recorded as Residential Property 2.[391]

A62. On 17 March 2014, the Applicant sold his Cabo Speedboat[392]

this is incorrect as I did not sell the Cabo boat. I did not own the Cabo Boat. The Australian registration on the boat had expired and did not require renewal as the boat was already in PNG. The actual owner had no intention of returning the boat to Australia and he therefore allowed the registration to expire

A63. In March 2014, the Applicant was appointed as a director of the newly registered Australian proprietary companies Company F and Company H. In the applications for registration, the Applicant’s address was recorded as Residential Property 2.[393]

A64. From 1 to 7 May, it appears from notes in the Applicant’s diary that he completed an Australian Institute of Company Directors course.[394]

, I note that I completed the director's course at the request of my father and to further my knowledge in the area. It was completed in Australia because no such course exists in PNG

A65. On 22 May 2014, it appears from the Applicant’s diary that he arrived in Australia to attend the Sanctuary Cove Boat Show on the Gold Coast.[395]

I did not attend the boat show. It was merely noted in my diary that the show was on in case I got an opportunity to attend, which I did not.

A66. On 11 June 2014, it appears from the Applicant’s diary that school holidays started. Between then and mid-August, a period coinciding with northern hemisphere school holidays, the Applicant and his family spent a significant amount of time in Australia.[396]

my wife and children spend much of the children's school holidays traveling and visiting family. I join them in order to spend time with my children whenever it is possible to do so between my work commitments in PNG

A67. In the income year ending 30 June 2014, the Applicant spent 161 days in Australia. His wife spent 159 days.[397]

A68. In July 2014, the Applicant and his family obtained private health insurance through Medibank[398]

due to frequent visits to Australia, and because my wife is a citizen, we maintain an appropriate level of health cover in Australia as our PNG medical insurance does not provide sufficient cover in Australia

A69. On 19 August 2014, the Applicant was appointed as a director of the newly registered Australian proprietary Company J. In the application for registration, the Applicant’s address was recorded as Residential Property 2.[399]

A70. On 18 September 2014, the Applicant purchased a Lamborghini Huracan for approximately $444,000. The vehicle registered in Queensland[400]

A71. On 20 October 2014, the Applicant purchased a ForTwo Smart Car for approximately $8,600. The vehicle was registered in Queensland.[401]

A72. The Applicant arrived in Brisbane at the end of January 2015 ahead of the birth of his third child in order to set up Residential Property 2.[402]

A73. During this time, the Applicant contends he undertook an Australian Institute of Company Directors course.[403]

A74. On 14 February 2015, it appears from the Applicant’s diary that he attended a wedding in Hobart.[404]

, I attended the wedding of a friend from PNG which took place in Hobart

A75. On or about 3 March 2015, the couple’s third child was born in Australia, PQBZ’s son. The Applicant was in Australia for the birth.[405]

A76. On 24 March 2015, it appears from the Applicant’s diary that he attended an awards presentation hosted by the Australian Institute of Company Directions.[406]

A77. In April 2015, the Applicant contends that he, his wife and newborn flew to Singapore to be with their older children while they completed the school term in Singapore.[407]

A78. On 27 May 2015, it appears from the Applicant’s diary that he recorded a note to watch State of Origin, Game 1, at his home. The Applicant was in Australian at this time.[408]

A79. On 31 May 2015, the Applicant was appointed as a director of the newly registered Australian proprietary company, Company L. In the application for registration, the Applicant’s address was recorded as Residential Property 2.[409]

A80. On 15 June 2015, the Applicant was appointed as the sole director of the newly registered Australian proprietary company, Company D. In the application for registration, the Applicant’s address was recorded as Residential Property 2.[410]

A81. In June 2015, the Applicant returned to Singapore to assist with his family’s relocation to Australia.[411]

A82. In the income year ending 30 June 2015, the Applicant spent 189 days in Australia.[412]

A83. On 21 June 2015, the Applicant, his wife and children arrived in Australia. The Applicant’s wife and children had a consistent presence in Australia throughout the 2016 income year with limited travel outside Australia.[413]

A84. The Applicant contends the children attended ………….. School[414]

A85. On 31 July 2015, the Applicant was appointed as a director of the newly registered Australian proprietary company, Company I. In the application for registration, the Applicant’s address was recorded as Residential Property 2.[415]

A86. In 2015, the Applicant was charged for driving without a Queensland driver’s licence.[416] On 7 August 2015, the Applicant obtained his first Queensland driver’s licence.[417]

A87. On 7 September 2015, the Applicant purchased a Mini Cooper for approximately $18,000. The vehicle was registered in Queensland[418]
A88. On 14 October 2015, the Applicant purchased a Landrover Range Rover for approximately $177,000. The vehicle was registered in Queensland.[419]
A89. On 3 November 2015, it appears from the Applicant’s diary that he attended a Melbourne Cup event in Melbourne.[420]	I was invited to the Melbourne Cup event by SP Brewery which is a part of the Heineken Group. SP Brewery invited their main PNG wholesalers to the event and all costs were covered by them. This was a networking event I attended in my capacity as Managing Director of PNG Company 1. Attached hereto and marked JT1 is an email invitation from SP for the event
A90. On 27 November 2015, the Applicant sold his Mercedes-Benz C63 AMG.[421]
A91. On 15 March 2016, the Applicant sold his Audi Q7.[422]
A92. On 20 June 2016, the Applicant and his wife sold their investment Property 3 for $655,000.[423]
A93. In the income year ending 30 June 2016, the Applicant spent 206 days in Australia. His wife spent 336 days in Australia.[424]	I spent longer in Australia during this income year due to my wife and children returning to reside in Australia. My wife also suffered from post-natal depression after the birth of our 3rd child and I travelled to Australia more frequently to support her and our children during this time, particularly as they transitioned from residing in Singapore where they had access to more help from my parents

[333] Witness Statement of PQBZ, paragraphs 13-15

[334] Witness Statement of PQBZ, paragraph 16.

[335] ST41 – Travel Records; T2, page 13.

[336] ST10 – MASCOT.

[337] Witness Statement of PQBZ, paragraph 19

[338] Witness Statement of PQBZ, paragraphs 19 and 22

[339] ST41 – Travel Records; T2, page 13

[340] T48, page 672

[341] Witness Statement of PQBZ, paragraph 23

[342] Witness Statement of PQBZ, paragraphs 28 and 39; ST41 – Travel Records

[343] Witness Statement of PQBZ, paragraph 30.

[344] ST41 and ST43 – Travel Records (x2); T2, pages 13 and 32

[345] ST41 and ST43 – Travel Records (x2); T2, pages 13 and 32

[346] ST41 and ST43 – Travel Records (x2); T2, pages 13 and 32

[347] ST37 – RPData; ST26, ST29, ST32 – rental schedules

[348] ST39 – Bendigo Loan material - Marine licence used as ID

[349] Witness Statement of PQBZ, paragraphs 38 and 39

[350] ST41 and ST43 – Travel Records (x2); T2, pages 13 and 32

[351] ST39 –Loan material - Letter from Immigration attached to Sandhurst loan docs; Witness Statement of PQBZ, paragraph 30

[352] ST41 and ST43 – Travel Records (x2); T2, pages 13 and 32

[353] Witness Statement of PQBZ, paragraphs 64-66

[354] ST40 - TMR

[355] ST41 and ST43 – Travel Records (x2); T2, pages 13 and 32

[356] ST40 - TMR.

[357] ST41 and ST43 – Travel Records (x2); T2, pages 13 and 32

[358] ST40 - TMR

[359] T24

[360] ST40 - TMR

[361] T48, page 686

[362] ST39 - Loan docs

[363] ST41 and ST43 – Travel Records (x2); T2, pages 13 and 32

[364] Witness Statement of PQBZ, Annexure L; ST41 – Travel Record

[365] Witness Statement of PQBZ, Annexure L

[366] Witness Statement of PQBZ, Annexure L

[367] T48

[368] Witness Statement of PQBZ, Annexure L; ST41 and ST43 – Travel Records (x2).

[369] Witness Statement of PQBZ, Annexure L; ST41 and ST43– Travel Records (x2).

[370] ST40 - TMR

[371] T23

[372] Witness Statement of PQBZ, Annexure L; ST41 and ST43 – Travel Records (x2).

[373] Witness Statement of PQBZ, Annexure L; ST41 and ST43 – Travel Records (x2).

[374] ST39 – loan documents.

[375] Para 92 and 95, 96 witness statement. Table 6 in Audit decision

[376] Witness Statement of PQBZ, Annexure L; ST41 – Travel Record

[377] Witness Statement of PQBZ, Annexure L; ST41 – Travel Record

[378] Witness Statement of PQBZ, Annexure L; ST41-ST44 – Travel Records (x4) – all but Jetson.

[379] Witness Statement of PQBZ, Annexure L; ST41 – Travel Record.

[380] ST41 and ST43 – Travel Records (x2).

[381] Witness Statement of PQBZ, Annexure L; ST41 – Travel Record.

[382] T48

[383] ST15 and ST16 – MASCOT; ST1 and ST2 – ASIC applications

[384] Witness Statement of PQBZ, Annexure L; ST41 – Travel Record

[385] T48

[386] Witness Statement of PQBZ, Annexure L; ST41 – Travel Record

[387] Witness Statement of PQBZ, Annexure L; ST41-44 – Travel Record (x4).

[388] Witness Statement of PQBZ, Annexure L.

[389] Annexure L to Witness Statement – Diary

[390] T22

[391] ST14 – MASCOT; ST3 – ASIC application

[392] T2, page 35

[393] ST17 and ST19 – MASCOT; ST4 and ST5 – ASIC application

[394] Witness Statement of PQBZ, Annexure L

[395] Witness Statement of PQBZ, Annexure L

[396] Witness Statement of PQBZ, Annexure L; ST41-44 – Travel Record (x4).

[397] ST41 and ST43 – Travel Record (x2).

[398] ST20 and ST21 – PHI forms

[399] ST12 – MASCOT; ST6 – ASIC application

[400] ST40 - TMR

[401] Table 5 Audit paper. Underlying source Queensland Department of Transport and Main Road data

[402] Witness Statement of PQBZ, paragraph 106

[403] Para 107 witness statement. Annexure L – witness statement 1 May 2014.

[404] Witness Statement of PQBZ, Annexure L.

[405] Witness Statement of PQBZ, paragraphs 38, 39 and 109; ST41– Travel records

[406] Witness Statement of PQBZ, Annexure L

[407] Witness Statement of PQBZ, paragraph 115; T48

[408] Witness Statement of PQBZ, Annexure L; ST41 – Travel records

[409] ST18 – MASCOT; ST9 – ASIC application

[410] ST13 – MASCOT; ST7 – ASIC application

[411] Witness Statement of PQBZ, paragraphs 115

[412] ST41 – Travel records

[413] ST41-45 – Travel records

[414] T48

[415] ST11 – MASCOT; ST8 – ASIC application

[416] Witness Statement of PQBZ, paragraph 33

[417] Witness Statement of PQBZ, paragraphs 34 and 35; T48

[418] ST40 – TMR

[419] Supplementary T-Documents ST40, pg 155-154

[420] Witness Statement of PQBZ, Annexure L

[421] T2, page 35

[422] T2, page 35

[423] ST35 – RPDATA.

[424] ST41 and ST43 – Travel records

for purchase of Residential Property 2.

Neilson Investments Pty Ltd [2007] NSWCA 3; (2007) 69 NSWLR 120 at 135 [96]; Ellis v Wallsend District
Hospital (1989) 17 NSWLR 553 at 586-8.