Sang Van Vo and and Commissioner of Taxation
[2015] AATA 359
•26 May 2015
[2015] AATA 359
Division TAXATION APPEALS DIVISION File Numbers
2014/2768
2014/2769
2014/2770
2014/2771
2014/27722014/2773
Re
Sang Van Vo
APPLICANT
And
Commissioner of Taxation
RESPONDENT
File Numbers
2014/2776
2014/2777
2014/2778
2014/2779
2014/2780
2014/27812014/2782
Re
Thi Mai Nguyen
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Deputy President P E Hack SC
Date 26 May 2015 Place Brisbane A. In the applications by Sang Van Vo:
(1) In the 2007 income year the objection decision is varied by reducing the applicant’s taxable income for that year by $41,500;
(2) In the 2009 income year the objection decision is affirmed;
(3) In the 2010 income year the objection decision is varied by reducing the applicant’s taxable income for that year by $9,500;
(4) In the 2011 income year the objection decision is varied by reducing the applicant’s taxable income for that year by $12,300;
(5) In the 2012 income year the objection decision is varied by reducing the applicant’s taxable income for that year by $2,500;
(6) The objection decision relating to shortfall penalty is varied to the extent necessary to give effect to the decisions in paragraphs (1) to (6) above.
(7) It is certified that the proceedings have terminated in a manner favourable to the applicant.
B. In the applications by Thi Mai Nguyen:
(1) In the 2009 income year the objection decision is varied by reducing the applicant’s taxable income for that year by $700;
(2) The objection decision relating to shortfall penalty is varied to the extent necessary to give effect to the decision in paragraph (1) above.
(3) The objection decisions are otherwise affirmed.
..........................[Sgd]..................................
Deputy President P E Hack SC
CATCHWORDS
TAXATION – assessment of income – income tax – default assessments – unexplained deposits –amounts treated as assessable income – burden of proof for excessive assessment – failure to show evidence of taxable income – credibility of witnesses – lack of reliability – evidence inherently unbelievable – evidence comprises broad assertion – objection decisions varied.
TAXATION – shortfall penalty – intentional disregard – evidence demonstrates avoidance of tax – conclusion of fraud or evasion amply justified – objection decisions varied.
LEGISLATION
Taxation Administration Act 1953 (Cth), Schedule 1 ss 284-75, 284-220
Income Tax Assessment Act 1936 (Cth), s 167
CASES
Commissioner of Taxation v Rigoli [2013] FCA 784; 2013 ATC 20-407
REASONS FOR DECISION
Deputy President P E Hack SC
26 May 2015
Introduction
There are before the Tribunal applications by Mr Sang Van Vo and Ms Thi Mai Nguyen to review income tax objection decisions made by the respondent, the Commissioner of Taxation. Mr Vo and Ms Nguyen are related – Mr Vo is married to Ms Tam Vo who is the daughter of Ms Nguyen. It is convenient to refer at this point to another important actor in the events in issue in these proceedings, Mr Da Tan Le. Mr Le was the husband of Ms Nguyen from 1997 up until about 2003 and he continues to have dealing with each of Mr Vo, Ms Vo and Ms Nguyen.
Those dealings are at the heart of the proceedings. It will suffice for present purposes to say that, on the cases propounded by Mr Vo and Ms Nguyen, Mr Le was the source of a significant part of the funds that informed the Commissioner’s default assessments which are in issue in these proceedings.
The proceedings arise from an audit undertaken by the Commissioner into the affairs of Mr Vo and Ms Nguyen as well as other members of their extended family. At an earlier time there were applications for review by other members of the family but those other matters have been resolved and are no longer in issue.
Procedural Background
Mr Vo
It is convenient to explain the matters in issue by reference to the audit, assessing and objection process and to concessions made thereafter. Whilst the applications of Mr Vo and Ms Nguyen were heard together it will be necessary to separately detail the relevant background.
In the case of Mr Vo the Commissioner undertook an analysis of Mr Vo’s bank statements (principally) for the 2007 to 2012 income years. In addition, the Commissioner had regard to AUSTRAC documents that showed that Mr Vo had transferred considerable funds to persons in Vietnam. It is relevant to note that Mr Vo did not lodge an income tax return for the 2007 income year but did for the 2008 to 2012 income years. On 2 August 2013, at the conclusion of the audit, the Commissioner made an assessment of Mr Vo’s taxable income for the 2007 income year and amended assessment for the remaining years assessing, or increasing, Mr Vo’s taxable income or amended taxable income. The adjustments made are explained in this table:
Year Salary/Wages Unexplained
DepositsAUSTRAC
TransactionsTotal Additional Income Taxable Income 2007
48,238
41,500
89,738
89,738
2008
8,398.80
8,398
53,348
2009
6,108.82
54,300
60,408
124,751
2010
18,594.80
27,400
45,994
111,454
2011
29,464.80
15,100
44,564
111,023
2012
51,376.84
45,400
96,776
162,161
Additionally, the Commissioner made an assessment of shortfall penalty for the 2008, 2009, 2010, 2011 and 2012 income years on the basis that the shortfall in those years resulted from intentional disregard warranting the imposition of penalty at 75% of the shortfall. In the 2009 and following years that penalty was increased by 20% i.e. to 90% by operation of s 284-220 of Schedules to the Taxation Administration Act 1953 (Cth) (the Administration Act). The Commissioner determined that the resultant penalty ought not be remitted.
In the 2007 income year, when Mr Vo had not lodged a return, the Commissioner imposed a penalty of 75% of the calculated tax liability in reliance on s 284-75(3) of Schedule 1 to the Administration Act. Again, the Commissioner declined to remit any of the penalties assessed.
Mr Vo objected to the assessment and the amended assessments and to the penalty assessments on 1 October 2013.
In April 2014 the Commissioner determined Mr Vo’s objection. The objection to the 2007 assessment was disallowed in full. The objection to the 2008 amended assessment was allowed in full, the Commissioner having accepted that the unexplained deposit of $8,398.80 had been properly explained. The objection to the 2009 amended assessment was allowed only to the extent of excluding the unexplained deposit of $6,108.82 with the Commissioner again satisfied with Mr Vo’s explanation. The position is the same with respect to the 2010 income year; the Commissioner allowed the objection only to the extent of $9,094.80. So far as the 2011 income year is concerned the Commissioner,
(a)excluded $9,094.80 from the unexplained deposits;
(b)excluded a further amount of $15,000 from the unexplained deposits on the basis that Mr Vo had satisfactorily explained that those funds were of a private or domestic nature and did not form part of Mr Vo’s assessable income;
(c)excluded another $3,070 from the unexplained deposits, having been satisfied by Mr Vo’s explanation of the source of those deposits;
(d)maintained the position that the balance of the unexplained deposits, an amount of $2,300, and all of the AUSTRAC transactions ($15,100) was Mr Vo’s assessable income.
For the 2012 income year the Commissioner,
(a)excluded $9,094.80 from the unexplained deposits on the basis that it was part of a salary sacrifice package;
(b)excluded a further $7,500 on the basis that the deposits were collected from others, and then paid out, in connection with a church trip;
(c)excluded another $1,300 on the basis that the deposits were collected from others, and then paid out, in connection with another church trip;
(d)excluded another $11,670 on a similar basis (the church trip to Israel);
(e)excluded a further $5,655 on a similar basis (the youth centre trip);
(f)accepted Mr Vo’s explanations that a further $3,657.04 represented gifts to him by family members or was a reimbursement of other expenses;
(g)was not satisfied with Mr Vo’s explanations of the remaining $2,500 and the AUSTRAC transactions of $45,400.
The penalty assessments were adjusted to give effect to the reduced quantum of shortfall but the rate of penalty remained the same.
These proceedings were commenced on 29 May 2014. The Commissioner has made further concessions in the course of the pre-hearing processes. In particular,
(a)the Commissioner now accepts that the unexplained deposit of $41,500 in the 2007 income year is now explained satisfactorily and is not Mr Vo’s assessable income;
(b)the Commissioner now accepts Mr Vo’s explanations for the remaining $9,500 of unexplained deposits in the 2010 income year;
(c)the Commissioner now accepts Mr Vo’s explanations for the remaining $2,300 of unexplained deposits in the 2011 income year; and,
(d)the Commissioner now accepts Mr Vo’s explanations for the remaining $2,500 of unexplained deposits in the 2012 income year.
As a result of those further concessions what remains in issue are the amounts described as AUSTRAC transactions – $54,300 in 2009, $27,400 in 2010, $15,100 in 2011 and $45,400 in 2012. All involve transactions where Mr Vo remitted money to Vietnam, in some cases he says, for the benefit of family members there and, in the other cases, he says, for the ultimate benefit of a tractor repair company in Vietnam. The funds remitted to family members were collected from family members in this country. Mr Le was the source of the other funds remitted to the tractor repair company. The particular transactions, and the evidence concerning them, are detailed in paragraph 21 and following below.
Ms Nguyen
The audit of Ms Nguyen was undertaken using the assets betterment method. The detail and methodology of that process need not be considered. No issue is taken with either; Ms Nguyen takes issue with some of the amounts taken into account in that process and treated, in effect, as assessable income. I return to that aspect shortly. In the meantime, I note that the result of the Commissioner’s audit can be explained best by this table:
Income Years Reported Taxable Income Additional Taxable Income Amended Taxable Income 2006 25,340 14,076 39,416 2007 26,044 52,236 78,280 2008 23,421 202,678 226,099 2009 32,760 157,793 190,553 2010 28,110 68,809 96,919 2011 26,651 166,016 192,667 2012 41,221 122,099 163,320 On 2 August 2013, the Commissioner made amended assessments, evidenced by notices bearing that date, of Ms Nguyen’s taxable income as set out above. In addition, assessments of shortfall penalty were made on the basis that the shortfalls resulted from intentional disregard of the tax laws warranting a penalty of 75% of the shortfall. In the 2007 and later income years that penalty was increased by 20% by operation of s 284-220 of Schedule 1 to the Administration Act.
Ms Nguyen objected to the amended assessments and penalty assessment on 1 October 2013 and thereafter provided further information to the Commissioner. On 1 April 2014 the Commissioner determined the objections. Ms Nguyen’s amended taxable income was reduced by $800 to $96,919 in the 2010 income year but in all other respects the objections were disallowed. The shortfall penalties continued to be calculated on the same basis. The Commissioner declined to exercise the discretion to remit the shortfall penalties.
Ms Nguyen’s case is that the amounts identified by the Commissioner as her assessable income do not have that character.[1] She identifies four categories of transactions. First, she contends that some 82 deposits in the period between October 2005 and October 2011 were either “general contributions” made to her by her former husband Mr Le to assist her in meeting her mortgage liabilities and living expenses, repayments by Mr Le to her of loans from her to him, monetary gifts by Mr Le to her, and the proceeds of sale of a nail business known as “Marvellous Nails”. Then she says that an amount of $700 sent by her to Vietnam was money gifted to a relative. Next she says that seven amounts totalling in excess of $42,000 and remitted to Vietnam were monies given to her by Mr Le to be remitted for the ultimate benefit of a tractor repair business in that country, Lucky Co. Finally, she identifies some 97 deposits for which she puts forward explanations consistent with those monies not being assessable income. Again, it will be necessary to examine the detail of these various transactions, and Ms Nguyen’s explanation for them. That examination commences at paragraph 35 below.
[1]As articulated in her Statement of Facts, Issues and Contentions, Exhibit 25.
The applicable legal principles
Before considering the particular transactions it is necessary to make mention of the applicable legal principles. They are not in dispute and only a brief explanation is necessary.
The starting point is s 167 of the Income Tax Assessment Act 1936 (The ITAA 1936). Where, relevantly, a person makes default in furnishing a return or the Commissioner is not satisfied with the return furnished the Commissioner may make an assessment, generally called a default assessment,
… of the amount upon which in his or her judgment income tax ought to be levied …
As recent cases have emphasised,[2] an assessment under s 167 of the ITAA 1936 is fundamentally different to one made under s 166 of that Act. An assessment under s 167 reflects the Commissioner’s judgement about the amount on which income tax ought be levied.
[2] See e.g. Commissioner of Taxation v Rigoli [2013] FCA 784; 2013 ATC 20-407 at [8]; Gashi v Commissioner of Taxation (2013) 209 FCR 301; [2013] FCAFC 30 at [53] – [55].
Next, what might be regarded as the ordinary time for the Commissioner to amend an assessment is within two years after the day on which the Commissioner gives notice of the assessment to an individual taxpayer. But that restriction does not apply where the Commissioner is of the opinion there has been fraud or evasion. In such a case the Commissioner may amend at any time.
Where, as here, an applicant seeks to review a reviewable objection decision the applicant has the burden of proving that the assessment is excessive.[3] In Rigoli,[4] Pagone J, after reference to the decision of the High Court in Commissioner of Taxation v Dalco,[5] said of the task of proving that an assessment is excessive:
[9]… It is clear from these passages that the combined effect of s 167 and the legal burden of proof falling upon the taxpayer is that for a taxpayer to succeed in establishing the excessiveness of an assessment under s 167 (absent agreement between the Commissioner and the taxpayer concerning the conduct of the proceeding) requires the taxpayer to establish not that the amount assessed by the Commissioner under s 167 of the 1936 Act was wrong but, rather, by establishing what the actual amount was. How that may be achieved will no doubt vary from case to case but it cannot be done as the Tribunal proceeded, namely, by assuming that what was in contention in the proceeding before the Tribunal was only part of the Commissioner’s assessment.
[10]A taxpayer seeking to challenge an assessment under s 167 will not succeed merely by proving error by the Commissioner: George v Federal Commissioner of Taxation (1952) 86 CLR 183; Dalco. The task for the taxpayer on objection is not to prove that the Commissioner erred but to prove, albeit on the balance of probabilities (see Ma v Commissioner of Taxation (1992) 37 FCR 225), the correct amount upon which tax should be levied. The subject matter of challenge to an assessment under s 167 of the 1936 Act is “the amount” upon which the Commissioner has determined tax ought to be levied. The subject matter of challenge in such cases is not to the individual elements of assessable income and deductions which together would have made up taxable income to the assessment if it had been made under s 166.
Mr Vo’s case
[3] See s 14ZZK, Taxation Administration Act 1953 (Cth).
[4] [2013] FCA 784 at [9] – [10].
[5] (1990) 168 CLR 614.
It is now necessary to consider more closely the matters that remain in issue, the amounts in the 2009, 2010, 2011 and 2012 income years described in the material as AUSTRAC transactions. Mr Vo says that none of those amounts was income in his hands; some was money collected from family members in Australia and remitted to other family members in Vietnam, the balance comprised funds of Mr Le remitted to Vietnam at Mr Le’s request for purposes connected with Mr Le’s business.
For the 2009 income year $54,300 was remitted overseas in nine separate transactions. Mr Le says that $17,500 of these funds, comprising payments of $5,200 on 3 November 2008, $1,500 on 15 January 2009, $800 on 4 March 2009 and $10,000 on 1 April 2009, were collected from family members and sent to family members and that the balance of $36,800, comprising payments of $9,900 on 26 September 2008, $9,900 (again) on 11 October 2008, $7,000 on 25 October 2008, $5,000 on 8 May 2009 and $5,000 (again) on 23 June 2009, were monies received from Mr Le and remitted at his request.
The pattern was similar in later years. In 2010, $27,400 was remitted in four transactions – $9,900 on 14 September 2009 (Mr Le’s business), $9,000 on 12 November 2009 (Mr Le’s business), $6,000 on 30 November 2009 (Mr Le’s business) and $2,500 on 15 April 2010 (family members). In 2011, $15,100 was remitted – $4,000 on 1 April 2011 said to be for Mr Le’s business and amounts of $1,200 on 13 October 2010, $2,400 on 29 January 2011, $1,200 on 29 January 2011, $500 on 22 March 2011, $1,800 on 24 April 2011 and $4,000 on 18 June 2011, all said to be from family members for family members. In 2012, there were 10 transfers totalling $45,400 – $9,900 on 16 December 2011, $9,950 on 14 February 2012 and $9,950 on 15 February 2012, all said to relate to Mr Le’s business, and payments of $1,500 on 7 September 2011, $2,000 on 24 September 2011, $800 on 14 October 2011, $1,200 on 2 November 2011, $1,600 on 16 November 2011, $7,000 on 14 December 2011 and $1,500 on 15 April 2012, again collected from family members for family members.
The evidence concerning all of these transactions can be sufficiently considered by examining the evidence relating to payments in the 2009 income year – $36,800 for Mr Le’s business and $17,500 for family members.
In his affidavit,[6] Mr Vo said this of the payments for Mr Le’s business:
[6] Exhibit 20 at [9] – [11].
[9] From time to time, Mr Le has asked me to remit funds via international money transfer businesses to Vietnam. I was aware that Mr Le operated a tractor import business. The first time he asked me to send funds to Vietnam, he said words to the effect:
The money is to pay for tractors in Vietnam for my business.
[10] Mr Le would provide me the funds to me in an envelope with instructions as to who in Vietnam it was to be sent to.
[11] I have never participated in the Mr Le’s tractor importing business.
Thereafter his affidavit made reference to the dates, amounts and beneficiaries of the various transfers in each year. The evidence is exemplified by that relating to the 2009 income year which reads:
Financial Year Ended 30 June 2009
[14]In this financial year, and on or before the dates set out below, at the request of Mr Le I sent the following amounts to Vietnam for Mr Le’s business:
Date
Amount
Person Receiving
26 September 2008
$9,900.00
Le Van Quang
11 October 2008
$9,900.00
Le Thi Thanh Van
25 October 2008
$7,000.00
Le Van Quang
8 May 2009
$5,000.00
Chau Thi Dieu
23 June 2009
$5,000.00
Huynh Mai Thu Thao
In his cross-examination, Mr Vo confirmed that the monies from Mr Le were all provided in cash and taken by him to a money transfer centre, not a bank.[7] He first met Mr Le in 2003 and thereafter got to know that Mr Le was running a tractor business.[8] He was asked about his discussions with Mr Le and said:[9]
Right. So when Mr Le approached you in 2008 and asked you to make the first of these transfers, what was that discussion?---What was the discussion? Mr Le - as I said what I said in the affidavit, paragraph 9, Mr Le just approached me and asked me that the moneys to pay for the tractor in Vietnam for his business.
And that’s all he said?---Yes, that’s all he said.
And was that at the same time that he handed you an envelope full of cash?---Yes.
And did you ask him any questions as to why he was giving you an envelope full of cash?---I have no reason why to ask Mr Le because I’m aware that he’s running a business, and in our culture, it not - I would stop short at saying it’s common - it’s not unusual for the adults to ask the younger in this family to send money back to Vietnam or to their relative in Vietnam. So I know that Mr Le’s work hard, he’s running a business, so I believe that he can provide a cash.
And what did you know about his business and the cash it generated?---I don’t know anything about his business. Never participate. We don’t have discussion about his business. I don’t interfere with his life, he doesn’t interfere with my life. That’s where we stop at.
But you knew he was successful?---I know that he run a business, but in terms of successful, I don’t know because we don’t have any business discussion.
Mr Vo believed the beneficiaries of the transfers to be Mr Le’s relatives in Vietnam.[10]
[7]Transcript, page 22, line 45 – page 23, line 12.
[8]Transcript, page 24, lines 20 – 27.
[9]Transcript, page 24, line 36 – page 25, line 16 (obvious misspellings of Mr Le’s name in the transcript have been corrected).
[10]Transcript, page 26, line 40.
Mr Le also gave evidence. He operated his business, at least in part, through two companies LCI Australia Pty Ltd and TG & C Pty Ltd. Mr Le is and has been the only director and member of LCI Australia Pty Ltd from its incorporation in July 2003. Ms Vo was the only director and member of TG & C Pty Ltd from its incorporation in August 2007 until March 2013. Despite that Mr Le controlled TG & C Pty Ltd and Ms Vo had no involvement in its business operations.[11] Through those companies, Mr Le ran a business importing refurbished tractors from Vietnam into Australia. He said this of the payments made by Mr Vo (and others) on his behalf:
[11] Exhibit 27, paragraph [13].
[17]Lucky Co Ltd is a Vietnamese company controlled by my sister Le Thi Thanh Van (also known as Van Le) which refurbishes tractors in Vietnam for import into Australia. As at 15 December 2010, and as a result of my business dealings with Lucky Co, I owed that company approximately $463,938. I refer to the document at pages 7-17 of the Bundle.
[18]From time to time, I would ask family members to send funds via Western Union to Lucky Co to pay for the purchase of tractors for my business and associated refurbishment costs. The first time I asked Mrs Nguyen and Mr Vo to send funds, I said words to the effect:
It’s to help pay for tractors in Vietnam for my business
[19]My sister Van Le would advise me over the telephone who the funds were to be sent to. I would then provide the funds to Mrs Nguyen and Mr Vo in an envelope with instructions as to the person who it was to be sent to in Vietnam.
[20]I asked Mrs Nguyen and Mr Vo to send funds to Vietnam because I had been informed by employees of Western Union that I was only allowed to perform one transaction per month and it could not be more than $10,000. I used Western Union rather than international transfer via LCI or TG & C because the funds sent were sourced from cash sales. I also used Western Union because the currency conversion rate was better than the major banks.
[21]The amounts that I asked Mrs Nguyen and Mr Vo to send to Vietnam were sourced from cash sales of tractors. I refer to my statutory declaration sworn on 16 December 2014 and the annexed documents.
Later paragraphs of his affidavit give details of the transactions and the recipients of the payments as follows:
Financial Year Ended 30 June 2009
…
[37]In this financial year, and on or before the dates set out below, I gave the following amounts to Mr Vo for him to send to Lucky Co in Vietnam for the purchase of tractors for my business:
Date
Amount
Receiving Customer
26 September 2008
$9,900.00
Le Van Quang, my father
11 October 2008
$9,900.00
Le Thi Thanh Van, my sister
25 October 2008
$7,000.00
Le Van Quang, my father
8 May 2009
$5,000.00
Chau Thi Dieu, my mother
23 June 2009
$5,000.00
Huynh Mai Thu Thao, the wife of a friend
…
Financial Year Ended 30 June 2010
…
[41]In this financial year, I gave the following amounts to Mr Vo to send to Lucky Co in Vietnam for the purchase of tractors for my business:
Date
Amount
Receiving Customer
14 September 2009
$9,900.00
Nguyen Thi Mai, the wife of my uncle
12 November 2009
$9,000.00
Chau Thi Dieu, my mother
30 November 2009
$6,000
Nguyen Ha Giang, my sister in law
…
Financial Year Ended 30 June 2011
…
[46]In this financial year, and on or before the date set out below, I gave the following amount to Mr Vo for him to send to Lucky Co in Vietnam for the purchase of tractors for my business:
Date
Amount
Receiving Customer
1 April 2011
$4,000.00
Le Van Quang, my father
…
Financial Year Ended 30 June 2012
…
[49]In this financial year, and on or before the dates set out below, I gave the following amounts to Mr Vo for him to send to Lucky Co in Vietnam for the purchase of tractors for my business:
Date
Amount
Receiving Customer
16 December 2011
$9,900.00
Huynh Mai Thu Thao, wife of my fiend [sic]
14 February 2012
$9,950
Bui Quang Phuc, son of the above
25 October 2008
$9,950
Le Van Quang, my father
In cross-examination, Mr Le acknowledged that he did not discuss his business affairs with any of Mr Vo, Ms Vo or Ms Nguyen. The source of the cash funds was the sale of tractors for cash.
As appears from the extracts from Mr Le’s affidavit, the various payments, despite being for the ultimate benefit of Lucky Co Ltd, were not remitted directly to that company; they were, instead, remitted to various relatives or friends of Mr Le. Moreover, between September 2010 and May 2012, LCI Australia Pty Ltd (on some 46 occasions) remitted funds overseas using the more conventional mechanism of transfer from the bank account of the Australian company to the bank account of the overseas company.[12] In excess of $730,000 was remitted in this way over that period, much of it to Lucky Co Ltd. Mr Le explained the matter in this way:[13]
[12] Exhibit 28.
[13]Transcript, page 135, line 15 – page 136, line 25.
DEPUTY PRESIDENT: Can I try and understand this business of sending money to Lucky Company? Can I take you to paragraph 37? You speak of giving money to Mr Vo to send to Lucky Company for the purchase of tractors. Can you explain to me what actually happened?
INTERPRETER: The money that I owed Lucky Co they would send me a monthly statement telling me how much I owe them that month. Therefore any time that I could sell things for cash, I got cash to pay, I would have to pay them back through those - to that way to pay back to them.
DEPUTY PRESIDENT: Why were you paying money to your father, your sister, your mother, the wife of a friend rather than directly to Lucky Co?
INTERPRETER: Lucky Co, if I send money through a bank Lucky Co could only see the money in dollars, but they would have to take that money out of the bank in Vietnamese Dong and that is not very good for them, so they don’t want to do that. What they want to do is getting hard cash in dollars in their hands, so that’s why they want me to pay them through this way, so that they can get receive cash in dollars.
DEPUTY PRESIDENT: Why couldn’t he pay the $9,900 on 26 September in exactly the same way by having Mr Vo pay Lucky Company, rather than Le Van Quang?
INTERPRETER: Lucky Co being a company, they are not allowed to receive cash, they got to - everything sent to them got to go through the bank account. So I had to send it through the father of - well, this person, so that way they can receive cash. And my father’s - Van - my sister, she’s the Director of a company, it’s a family company.
DEPUTY PRESIDENT: Why then did you need to give the money to Mr Vo or to Mrs Nguyen? Why couldn’t you do this yourself?
…
INTERPRETER: Thank you. The money senders in Inala, they don’t receive more than four times - from one person four times a month, and they don’t send things more than $10,000 at a time. That’s why.
DEPUTY PRESIDENT: Well, that doesn’t seem to answer why you sent one amount of money in September 2008, one in August 2008.
INTERPRETER: That is correct, four times in a month.
DEPUTY PRESIDENT: Well, do you have some statement of account from Lucky Company that shows these payments being received by them?
INTERPRETER: Yes. Yes, I have given that to my lawyer because my - my company is a family company. I owe a lot of money to them. They will - they give me a statement monthly showing me how much I owe them.
Pages of documents were produced that appeared to be evidence of purchases from Lucky Co Ltd, and other documents were produced[14] that were described as the Lucky Co Ltd ledger;[15] but no attempt was made to reconcile any of the cash payments in issue in Mr Vo’s case to that ledger.
[14] Pages 7-17 of the bundle annexed to Exhibit 27.
[15] See Exhibit 29.
The other category of payments, those to family members, was explained by Mr Vo on the basis of the closeness of his extended Vietnamese family, both in Australia and Vietnam. He said:[16]
[16]Exhibit 20, paragraphs [6] – [7].
[6]I was born in Vietnam on… 1984 and I have an extended Vietnamese family, both in Australia and in Vietnam. In Vietnamese culture, and in our family, it is not unusual for us to lend, borrow or gift funds within our immediate and extended family. It has also been a custom in our family to send funds to our extended family in Vietnam, and I have been the person responsible for collecting money from family in Australia to send it to family in Vietnam
[7]Funds were collected and sent to Vietnam for a number of reasons including for wedding gifts, New Year gifts, medical expenses and general financial assistance.
I do not propose to examine all of the “family” transfers given that the evidence is relevantly identical; it will suffice to look at the evidence relating to the 2009 transfers. Mr Vo said of the payments in that year:[17]
[17]Exhibit 20, paragraphs [15] – [18].
[15]On 3 November 2008, I sent the amount of $5,200.00 to my Uncle Vo Van Tai in Vietnam for reasons including those referred to in paragraph 7. I personally gave $520.00 and collected the balance of the funds from the following family members:
Amount
Collected From
$520.00
Ngu Van Vo, Grandfather
$520.00
Hiep Vo, Father
$520.00
Thanh Van Vo, Uncle
$520.00
Hoa Vo, Brother
$520.00
Qui Vo, Brother
$520.00
Qua Van Vo, Uncle
$520.00
Thao Van Vo, Cousin
$520.00
Son Van Vo, Brother
$520.00
Hoang Van Vo, Brother
[16]On 15 January 2009, I sent the sum of $1,500.00 to my Aunty Vo Thi Tuyet Nga in Vietnam for reasons including those referred to in paragraph 7. I personally gave $150.00 and I collected the balance of the funds from the following family members:
Amount
Collected From
$150.00
Ngu Van Vo
$150.00
Hiep Vo
$150.00
Thanh Van Vo
$150.00
Hoa Vo
$150.00
Qui Vo
$150.00
Qua Van Vo
$150.00
Thao Van Vo
$150.00
Son Van Vo
$150.00
Hoang Van Vo
[17]On 4 March 2009, I sent the sum of $800.00 to Vo Van Tai in Vietnam for reasons including those referred to in paragraph 7. I collected the funds from the following family members:
Date
Amount
Collected From
4 March 2009
$200.00
Ngu Van Vo
4 March 2009
$200.00
Hiep Van Vo
4 March 2009
$200.00
Thanh Van Vo
4 March 2009
$200.00
Qua Van Vo
[18]On 1 April 2009, I sent the sum of $10,000.00 to Vo Thi Tuyet Nga in Vietnam for reasons including those referred to in paragraph 7. I personally gave $1,000.00 and I collected the balance of the funds from the following family members:
Amount
Collected From
$1,000.00
Ngu Van Vo
$1,000.00
Hiep Vo
$1,000.00
Thanh Van Vo
$1,000.00
Hoa Vo
$1,000.00
Qui Vo
$1,000.00
Qua Van Vo
$1,000.00
Thao Van Vo
$1,000.00
Son Van Vo
$1,000.00
Hoang Van Vo
Mr Vo points to evidence which he says corroborates that account of events. It is best explained by reference to the transfer of $5,200 made on 3 November 2008. Mr Vo relies on nine affidavits, one from each of the family members from whom money was said to have been collected. The text of each affidavit is relevantly identical. That provided by Ngu Van Vo, Mr Vo’s grandfather, was in these terms:[18]
[18] Exhibit 11.
1.I am the Grandfather of the Applicant.
2.In the past, the Applicant has collected monies from me and other relatives to send as a lump sum to our extended family in Vietnam.
3.As Vietnamese people living in Australia, it has been our family’s custom to regularly send money home to Vietnam for such reasons as weddings, birthdays and to provide general financial assistance.
4.On the following dates, I gave the Applicant the following amounts to send to family in Vietnam:
4.1On or before 3 November 2008 - $520;
4.2On or before 15 January 2009 - $150;
4.3On or before 4 March 2009 - $200;
4.4On or before 1 April 2009 - $1,000;
4.5On or before 15 April 2010 - $250;
4.6On or before 13 October 2010 - $120;
4.7On or before 29 January 2011 - $240;
4.8On or before 7 September 2011 - $150;
4.9On or before 24 September 2011 - $200;
4.10On or before 16 November 2011 - $160; and
4.11On or before 15 April 2012 - $150.
Some of the nine affidavits deposed to additional matters that had earlier been in dispute but on this aspect of the case they were all in identical terms except, in most cases, the relationship between the deponent and Mr Vo.
None of these deponents were required for cross-examination by Mr Coveney, counsel for the Commissioner.
Mr Vo gave further explanation of the process in the course of his cross-examination.[19]
[19] Transcript, page 28. line 26 – page 29, line 39.
Now, throughout your affidavit, there’s a series of payments, and an example of which is at paragraph 15. And as I understand, there are several tables throughout the affidavit. We needn’t go to each of them separately, but they will say the same thing?---M’mm.
Which is on certain dates you collected money from certain family members to remit to Vietnam for the purposes articulated in paragraph 7?---Just give me one sec. Yes.
And so by way of example, paragraph 15 is one such example?---Correct.
Paragraph 16 is another example?---Correct.
As are in fact 17 and 18?---Correct.
So take me through, if you will, how it is you come to be the conduit for what you say are collections made locally and then remitted to Vietnam?---Well, my aunty, as you can see from most of the paragraph, my aunty and my uncle, they would ring our family. My family being the oldest of the family, they would ring our family, ask for assistance, depending on the different assistance that they need, as I have outlined in paragraph 7. Then we find out what they want, so that’s the amount that they need. Then I represent my parents. Why am I represent my parents to collect the money? Because I’m young. I’m capable, fluent English, better driving on the road. I don’t want my parents in their old age to drive around. Let’s say there’s 10 family there. I don’t want my parents to drive to 10 different location to ask for money when I’m young, I’m capable, better with roads, better with maps, job would finish quicker, things will get done quicker. Now, my parents risked their life floating in the sea for weeks.
All right. Perhaps we can just stay on the topic---Yes.
So you say that it was better for you to drive around and do these pick-ups from the various family and friends?---Family.
Family. Relatives. Relatives. Now, you’re a radiation therapist?---Correct.
You’re employed at the PA Hospital?---Correct.
Full time?---Correct.
Your parents, do they work?---My mum is a housewife and my dad, he’s on a pension disability.
All right. And that was the case, wasn’t it, back in 2009?---I believe so.
Right. Now, you say that you went to each of these people and they gave you cash?---Yes, they did.
Did they ever get tired of you coming around?---They don’t have any choice. Do they get tired? I don’t know if they get tired but they happily – we outline, we rang, we talk with them, I come over and collect the money.
So when you got there, would they have known why they were giving money over?---Correct.
Right. And you were going there, you knew the reason you were making a collection?---Correct.
So it was no mystery to you on any of those occasions throughout your affidavit why you were collecting the money?---No mystery at all.
I should also say that Mr Vo did not give evidence in either his affidavit or orally that set out in an affirmative way what his taxable income for the various years was, not even for the extent of a bold assertion that his taxable income for the years in which he lodged a return was as disclosed in his returns. That, as it seems to me, is a significant omission.
Ms Nguyen’s case
Ms Nguyen came to Australia from Vietnam in 1996 when she was aged 31 years. She describes her understanding of English as “minimal”.[20] She became Mr Le’s domestic partner in Vietnam before emigrating and sponsored his immigration to Australia in 1999. She and Mr Le have two children now aged 12 and 17.[21] She and Mr Le separated permanently in 2003. But she says that, despite that separation, Mr Le promised that he would continue to assist her financially. Her evidence is that around the time of the separation Mr Le said words to this effect to her:[22]
I will still help you to pay your mortgage and living expenses. I will help you to buy a house so you and your family …
(I interpolate to say that Mr Le gave evidence of conversation in exactly the same terms.[23])
[20] Exhibit 24, paragraph [4].
[21] Transcript, page 103, lines 1 – 4.
[22] Exhibit 24, paragraph [7].
[23] Exhibit 27, paragraph [9].
Ms Nguyen’s evidence of her employment is, to say the least, vague.[24] In the 2006 and 2007 income years she was employed by LCJ Australia Pty Ltd (Mr Le’s company) and “performed some cleaning tasks at an office in Wacol”. She may have continued to work for that company in the following financial year and in the 2009 to 2011 income years performed cleaning tasks at the office in Wacol in the employment of TG & C Pty Ltd, Mr Le’s other company.
[24] Exhibit 24, paragraphs [9] – [13].
Ms Nguyen was aware that Mr Le ran a business importing tractors into Australia from Vietnam but never participated in the business, although, from time to time, Mr Le would ask her to remit funds via international money transfer to businesses in Vietnam. On the first such occasion Mr Le said words to the effect,[25]
The money is to pay for tractors in Vietnam for my business.
Mr Le, according to Ms Nguyen, would provide funds to her in an envelope with instructions as to who in Vietnam it was to be sent.
[25] Exhibit 24, paragraph [15].
Ms Nguyen’s affidavit details a series of matters to explain the appearance of unexplained wealth that the Commissioner’s audit might be thought to demonstrate.
First, she explains that in most years Mr Le’s parents would come to Australia for a holiday and would leave with Ms Nguyen any surplus cash they had left over before returning to Vietnam.[26] This money, according to Ms Nguyen, was kept by her in her house and was used for various purposes such as paying for groceries, fuel and other general expenses. The amounts concerned were quite large – approximately $5,000 in each of the 2008 and 2009 income years and approximately $10,000 in each of the 2010, 2011 and 2012 income years. A document in the way of a statement was produced signed, apparently, by Ms Nguyen’s parents-in-law, which corroborated Ms Nguyen’s evidence on this aspect of the matter. Dieu Thi Chau, Ms Nguyen’s mother-in-law, gave evidence by telephone from Vietnam. She said:[27]
INTERPRETER: Yes. Yes, I did give her money but I cannot tell you exactly how much and altogether. And when - when they need money and I - when I think they need money I would give them at the time $20,000/$30,000. When they don’t need money or when they come to visit me or I visit her I would give her $5,000 or $10,000 at a time. A lot - a lot like that. I can’t remember. I can’t - I don’t have any record but.
[26] Exhibit 24, paragraphs [16] – [18].
[27] Transcript, page 114, lines 36 – 41.
Next, Ms Nguyen explained, she was a regular participant in various forms of gambling.[28] Her winnings were paid in cheque or cash. Included within her affidavit for each of the 2007, 2008, 2009, 2010 and 2011 income years are paragraphs that comprise, or include, details of those winnings, variously described as “pokie winnings”, “keno winnings” or “lottery winnings” together with an amount identified by reference to a bank statement. When asked how she had identified the source of the deposit she described it as a “guess”.[29] She had made no enquiry to ascertain whether records existed to demonstrate the source of the deposits. Certainly, there seemed to be nothing in the various bank records produced to confirm the source of funds.
[28] Exhibit 24, paragraph [19].
[29] Transcript, page 103, line 15.
Ms Nguyen’s relationship with Mr Le was one where, not only did he give her money in cash or cheque to assist her financially, there were seven occasions when Ms Nguyen lent Mr Le money. By reference to her bank statements, Ms Nguyen identified withdrawals of
·$40,010 on 10 September 2007
·$108,861 on 12 March 2008
·$35,000 on 22 July 2008
·$55,000 on 20 April 2009
·$48,000 on 27 September 2010
·$40,000 on 1 November 2010, and
·$17,000 on 3 June 2011,
as monies withdrawn for the purpose of obtaining a bank cheque to facilitate a loan to Mr Le. It is one of many curiosities of the case that the sums lent to Mr Le came from a loan account of Ms Nguyen, an account on which Ms Nguyen was paying interest ranging from 5.21% to 9.01%. Despite that, it seems not to be suggested in her evidence that Mr Le paid her interest to compensate her for the quarter interest burden she had to bear. There were no documents produced that otherwise recorded these loans.
Mr Le gave evidence along similar lines,[30] however, he did not exhibit his bank statements showing the receipt of funds, he exhibited copies of Ms Nguyen’s statements showing the withdrawals.
[30] Exhibit 27, paragraph [23].
Consistently with her evidence of Mr Le’s promised support, Ms Nguyen identified, by reference to her bank statement, various monetary gifts said to have been made to her by Mr Le – $13,100 in five payments in the 2006 income year, $11,700 in eight payments in the 2007 income year,[31] $344,000 in four payments in the 2008 income year, $57,400 in 14 payments in the 2009 income year, $16,600 in eight payments in the 2010 income year and $3,000 in two payments in the 2011 income year.
[31] Seven payments, amounting to $6,700, were paid in one week in November 2006.
Additionally, Ms Nguyen identified various amounts deposited to her bank accounts as being repayments by Mr Le of particular loans from her to him. Ms Nguyen’s affidavit attributes particular repayments to particular loans. That shows, on Ms Nguyen’s evidence,
·a total of $41,000 repaid between 26 September 2007 and 7 March 2008 on the loan of $40,000 made on 10 September 2007;
·a total of $103,000 repaid between 18 March 2008 and 23 May 2008 on the loan of $108,861 made on 12 March 2008;
·a total of $34,000 repaid between 19 August 2008 and 1 December 2008 on the loan of $35,000 made on 22 July 2008;
·a total of $57,500 repaid between 5 May 2009 and 3 November 2009 on the loan of $55,000 made on 20 April 2009;
·a total of $39,600 repaid between 27 September 2010 and 11 October 2010 on the loan of $48,000 made on 27 September 2010;[32] and
·a total of $13,000 repaid between 1 November 2010[33] and 8 July 2011 on the loan of $17,000 made on 3 June 2011.
[32] The first repayment of $1,000 was made on the same day as the loan was made.
[33] The first repayment of $1,000 was made, according to Ms Nguyen, seven months before the loan was made.
Ms Nguyen’s affidavit deals with two deposits made to her bank account xxxx9607 of $15,100 on 22 March 2007 and $20,000 on 30 March 2007. These deposits represented the proceeds of sale of a business that her daughter Ms Tam Vo sold called Marvellous Nails. Ms Vo “gifted” the proceeds to Ms Nguyen. Ms Vo’s affidavit[34] refers to receiving $15,100 on 22 March 2007 and having gifted this “first instalment” to Ms Nguyen on that day and a similar “gift” of the second instalment paid on 30 March 2007. Ms Vo produced a business sale contract for the sale and purchase of the business. It is dated 20 April 2007, and it shows a purchase price of $25,000 payable by a deposit of $2,500 and a balance of $22,500 and a completion date of 4 May 2007. It bears an endorsement that duty has been paid on the contract price of $25,000. It is simply not possible to reconcile the contract and the evidence of Ms Nguyen and Ms Vo.
[34] Exhibit 21.
Ms Nguyen’s affidavit also details various payments made by her to persons in Vietnam at the request of Mr Le for the benefit of Lucky Co. These funds, she said, had been received from Mr Le in cash in envelopes. Mr Le gave similar evidence.
Again it must be noted that neither in her affidavit nor in her oral evidence did Ms Nguyen assert that she had disclosed her true taxable income in her returns as lodged.
Consideration
The cases establish that it is not enough for Mr Vo or Ms Nguyen to show error in the conclusions reached by the Commissioner; they must each show what their actual taxable income was. In my view they have each failed utterly to do either.
The task of demonstrating error on the part of the Commissioner might have been achieved, in part at least, had I concluded that their evidence, and the other evidence relied on by them, was credible and reliable. I regret to say that I am well short of being satisfied that was the case. Expressed broadly, I have come to the conclusions that the evidence relied on was so vague, and inherently unbelievable, as to be unworthy of belief even when not directly contradicted by other evidence. Allied to that is the fact that much of the evidence comprises broad assertion, unsupported by evidence that might be thought ought be readily available to corroborate the broad assertion.
I do not propose to deal with every aspect of the evidence of Mr Vo and Ms Nguyen; I propose to give examples of why I find their evidence unsatisfactory and entirely unconvincing.
There were two aspects of Mr Vo’s case – the collection of cash from family members in Australia for the benefit of relatives in Vietnam, and the receipt of cash from Mr Le to be sent to persons in Vietnam in connection with Mr Le’s tractor business. What is remarkable about the account of the first type of transaction by both Mr Vo and his supporting witnesses is the complete absence of any degree of particularity about the circumstances under which money was collected in cash from the various relatives. According to Mr Vo, it was his task to drive to 10 locations on each occasion (other than on the 4 March 2009 occasion) to collect cash from his relatives. At least at the time of swearing their affidavits, those relatives lived at Inala, Jamboree Heights, Richlands, South Hedland (WA), Carina, North Perth (WA) and Middle Park. It is unclear on the evidence where Mr Vo’s brothers, now living in Western Australia, were living at the time of the payments. Even if they had been living in the suburbs of Brisbane, between November 2008 and April 2012, it seems an extraordinary proposition that on each of some 17 occasions Mr Vo drove to 10 different locations throughout Brisbane, that on each of those occasions he collected cash from his relatives, and that on each of those occasions the funds collected were remitted to family members in Vietnam by Mr Vo.
I find it impossible to accept this evidence. It offends common sense and defies logic to think that on no occasion was it regarded as more efficient to transfer funds directly to Mr Vo’s bank account by internet banking. It is apparent from the bank statements exhibited to Mr Vo’s affidavit that he undertakes Internet banking and is familiar with the processes involved in it. And it defies logic to think that neither Mr Vo nor any of the relatives whose affidavits are relied upon could recall any matter associated with any particular transaction beyond the bald fact of that transaction. It was not necessary for the Commissioner to cross-examine the family deponents to demonstrate their evidence as being unreliable. The complete absence of any detail and the “boilerplate” nature of those affidavits is sufficient testament to their lack of reliability.
The same degree of incredulity attends the second aspect of Mr Vo’s case, the payments he says were made to individuals in Vietnam for the benefit of Lucky Co from cash provided by Mr Le. There are some documents in the material seemingly emanating from Lucky Co, yet no attempt was made to seek to demonstrate the receipt by that company of any of these funds which ought to demonstrate the nature of the relationship between that company and Mr Le’s company in Australia.
There is an air of unreality about the evidence of Mr Vo (and that of Mr Le and Ms Nguyen). It is obvious that Mr Vo had access to considerable cash funds. The Commissioner need not point to the source of those funds and I need not decide what that source was. It is enough to say that I find myself unable to accept the evidence of Mr Vo.
Ms Nguyen’s case has more elements to it but it is no more credible. Her evidence regarding the sale of the business in early 2007 demonstrates the point. She says that the sale was evidenced by a contract dated 20 April 2007 yet, on her case, the proceeds of sale were paid on 22 March 2007 and 30 March 2007, some weeks before the contract of sale. The contract of sale shows the purchase price to be $25,000, a deposit of $2500 and the balance of $22,500 payable on completion on 4 May 2007. The contract was stamped, and duty-paid, on the purchase price of $25,000. Despite that, Ms Nguyen says that the purchase price for the business was $35,100, the amounts received on 22 March 2007 and 30 March 2007.
I found Ms Nguyen’s explanations for these discrepancies to be unconvincing.
Equally unconvincing was her evidence about the funds paid in cash to her by Mr Le’s parents. Even accepting the difficulties of translation, there were significant discrepancies between the evidence of Ms Nguyen and of her parents-in-law. The evidence of Ms Chau, for example, was that money was given when “they” (presumably Ms Nguyen and Ms Le) visited her in Vietnam or when she visited them in Australia. Ms Nguyen did not give any evidence of receiving money on her visits to Vietnam.
Other improbabilities in the evidence of Ms Nguyen, and in the evidence of Mr Le in support of it, are evident from the earlier recitation of her evidence.
The evidence relied upon by each of Mr Vo and Ms Nguyen leaves me well short of being satisfied that their explanations for the various transactions are accurate and reliable. But beyond that, neither attempted to show what their taxable income actually was, even by adopting the expedient of swearing to, or affirming, the correctness of their various tax returns. They were represented throughout the proceedings by solicitors with considerable experience and expertise in revenue matters. I could not conclude that the absence of any attempt to establish what their true taxable income was an accidental oversight. Thus, even had I been satisfied that the evidence demonstrated errors in the Commissioner’s approach, they did not establish the amount on which income tax ought to be levied.
The issue of the imposition of penalties arose somewhat belatedly. The level at which shortfall penalty was imposed – 75% on the basis of intentional disregard – was not an issue agitated in the Statement of Facts, Issues and Contentions of either Mr Vo or Ms Nguyen. They each raised that issue in their final submissions. Despite the Commissioner’s objection, I propose to allow them to argue the point as well as the second argument seeking remission of the 20% uplift. The Commissioner does not suggest any prejudice to him or that the case would have been conducted differently had the arguments been raised earlier.
The arguments can, in any event, be disposed of simply. I am satisfied that the shortfalls that have arisen are the result of intentional disregard on the part of Mr Vo (for all years except 2007) and Ms Nguyen. My complete lack of satisfaction with their evidence allows me to readily conclude that they made a conscious choice to not return their true assessable income. The evidence supports the inference, which I draw, that they each chose to keep the true extent of their financial dealings from the Commissioner. In the 2007 year, Mr Vo did not lodge an income tax return. The statute imposes the penalty of 75% of the shortfall in such a case.
The 20% uplift was imposed by operation of s 284-220(1) of Schedule 1 to the Administration Act on the second and subsequent years when Mr Vo and Ms Nguyen had shortfalls. They submit it ought be remitted because their behaviour “was not an intentional disregard of the tax law”. I have reached a contrary view. No basis is shown for remission.
I should add that neither Mr Vo nor Ms Nguyen put in issue the Commissioner’s power to make amended assessments, in some cases outside the ordinary time of three years. The evidence amply demonstrates that there was an avoidance of tax and that the conclusion of fraud or evasion was amply justified.
In the result, the objection decisions will be varied to take into account concessions made by the Commissioner prior to the hearing (with similar reduction in the quantum of shortfall penalty) but the decisions will otherwise be affirmed.
I certify that the preceding 64 (sixty-four ) paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC .......................[Sgd].............................
Associate
Dated 26 May 2015
Dates of hearing 16, 17 & 27 February 2015 Date final submissions received 13 March 2015 Counsel for the Applicant Mr AJ Anderson Solicitors for the Applicant Cleary Hoare Counsel for the Respondent Mr G Coveney Solicitors for the Respondent ATO Review and Dispute Resolution
Key Legal Topics
Areas of Law
-
Taxation Law
Legal Concepts
-
Assessment of Income
-
Causation
-
Compensatory Damages
-
Unexplained Deposits
-
Penalties
-
Intentional Disregard
0
7
0