Stealth Enterprises Australia Pty Ltd and Commissioner of Taxation (Taxation)
[2021] AATA 4600
•10 December 2021
Stealth Enterprises Australia Pty Ltd and Commissioner of Taxation (Taxation) [2021] AATA 4600 (10 December 2021)
Division: TAXATION AND COMMERCIAL DIVISION
File Numbers: 2018/2755-2757
Re: Stealth Enterprises Australia Pty Ltd
APPLICANT
And Commissioner of Taxation
RESPONDENT
DECISION
Tribunal: Mr P W Taylor SC, Senior Member, N Gaudion, Member
Date: 10 December 2021
Place: Sydney
The Commissioner’s 20 March 2018 objection decision is affirmed.
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Mr P W Taylor SC, Senior Member, N Gaudion, Member
CATCHWORDS
TAXATION – income tax and GST amended assessments – where applicant failed to declare assessable income and under-stated taxable supplies – where inconsistent evidence – whether the Commissioner’s amended assessments were excessive – onus to prove assessment was excessive and what taxable income should have been – administrative penalty – decision under review affirmed
LEGISLATION
Income Tax Assessment Act 1936 (Cth) Taxation Administration Act 1953 (Cth)
CASES
Agius v Commissioner of Taxation [2015] FCA 707 Bailey v FCT (1977) 136 CLR 214 at 217
Bosanac v Commissioner of Taxation [2019] FCAFC 116
Commissioner of Taxation v Rigoli [2013] FCA 784
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614
Gashi v Commissioner of Taxation [2013] FCAFC 30
George v Federal Commissioner of Taxation [1952] HCA 21; (1952) 86 CLR 183
Ma v Federal Commissioner of Taxation (1992) 37 FCR 225; (1992) 27 ALD 601
McCormack v FCT [1979] HCA 18; 143 CLR 284
Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26 Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243 Rigoli v Commissioner of Taxation (2014) 141 ALD 529 ; [2014] FCAFC 29
Trautwein v FCT (1936) 56 CLR 63
Zappia v Commissioner of Taxation [2017] FCAFC 185
REASONS FOR DECISION
Mr P W Taylor SC, Senior Member, N Gaudion, Member 10 December 2021
1.At the time of its February 2009 incorporation Stealth Enterprises Australia Pty Limited (“Stealth”) included the name of a Canberra bordello business in its registration details. Six months later, in August 2009, Stealth formally contracted to purchase the business,1 and thereafter renovated the leased premises in which the business was located.2 After that work had been completed, from about April 2010 until January 2012, Stealth operated a similar business, under the name “The Gentlemens Club”, on and from the renovated premises. The business came to an end after the contents of the premises were badly damaged, on New Years Day 2012, in a fire started by unknown arsonists.
2.Prior to the January 2012 fire (and indeed for several years thereafter) Stealth’s only shareholders were two brothers, Baris and Fidel Tukel. In that period Baris had been Stealth’s sole director, and had some responsibility for marketing and promotion of the business. However, only Fidel had been actively involved in the renovation process, and in the administration of the business, including interaction with the various managers of its day to day activities. Some years after the January 2012 fire a company wholly owned by Fidel became Stealth’s only shareholder. Fidel then replaced Baris as Stealth’s only director.
3.Apart from Stealth’s contention that all of the brothel workers (including the managers) were subcontractors, whom it typically paid from clients cash payments, the precise manner and extent of the operation of the business is unclear. More particularly, the income Stealth derived from the business is in contest in these review proceedings. That contest arose, following an audit of Stealth’s tax affairs, from amended income tax and GST assessments, and related penalty assessments, the Commissioner issued on 27 September 2017. The audit conclusion was that Stealth had substantially understated both its gross revenue, and its taxable income. That conclusion led to the Commissioner’s amended income tax assessments (default assessments under Income Tax Assessment Act 1936 - “ITAA36” - s 167) for each of the 2010, 2011 and 2012 tax years. Those assessments were based on the Commissioner’s judgment of “the amount upon which … income tax ought to be levied”. They resulted in total tax liabilities of $746,703 (comprised of tax shortfall, shortfall interest and penalties) for the 2011 and 2012 tax years. Stealth’s asserted income
1The contract appears to have been negotiated, and may in fact have been substantially performed, many months earlier. The stated completion date in the original contract typescript was 27 March 2009. In the executed contract, that date had been altered (by hand) to 4 May 2009.
2The renovated premises had seven “client” rooms. Five rooms were to service individual clients. The other two rooms were larger, and could accommodate multiple clients.
understatements, and the effect of the Commissioner’s default and penalty assessments, are readily apparent from the first schedule to these reasons:- see Schedule 1 - Stealth Enterprises - income assessment and penalty summary:- columns C, D & G, H, K to O.
4.The amended GST assessments covered the quarterly periods from 1 April 2010 to 31 December 2011. They involved GST shortfall and penalty liabilities amounting to
$522,237:- see Schedule 2 – Stealth Enterprises - BAS assessment and penalty summary:- columns I, J, K & L.
5.The Commissioner’s 20 March 2018 objection decision upheld the September 2017 assessments (including the penalty assessments). It did so on the basis that Stealth had failed to provide evidence to contradict the audit findings, and had failed to support the proposition that its income, and its taxable supplies, were less than the Commissioner had assessed. The objection decision is the subject of Stealth’s review application in these proceedings.3
THE BASIS OF STEALTH’S INCOME TAX RETURNS AND BUSINESS ACTIVITY STATEMENTS
6.Schedules 1 & 2 to these reasons record that Stealth lodged its 2010 and 2011 tax returns, and its Business Activity Statements (up to the quarter ended September 2011), on various dates in December 2010, and in February and October 2011. The income and sales declared in those returns and BAS were derived from, and reflected only, amounts (exclusive of GST) that had been credited to Stealth’s bank account in each of those tax years. The declared income was simply the adjusted4 (GST exclusive) total of the various deposits (cash, credit card, cheque and EFT Settlements). The GST liability reported in the BAS was the corresponding (1/11th) fraction of the total of those adjusted deposits in each quarterly period.
7.That derivation of the declared income, and the reported taxable supplies, is readily apparent from bank reconciliations that had been prepared by Stealth’s accountants, in
3Stealth did not dispute that, for the purposes of ITAA 36 s 170(1) Table Items 2 & 5, Commissioner’s September 2017 amended assessments were within time:- see paragraph 28 below.
4 The income declared in Stealth’s 2010 & 2011 income tax return also excluded various deposits,
$111,711 (2010: $55,100 & 2011: $56,611)) that were classified as “Directors Loan” in the Stealth’s accountant’s bank reconciliations:- see Schedule 3 cells B4 & D4.
August 2010 and July 2011. The essential details of those reconciliations, and details of bank account debit schedules that had been prepared as part of the reconciliation process, are set out in Schedule 3 – “Stealth Enterprises - Bank reconciliations - deposits and debits”. The correlation between the reconciliation amounts and the income tax returns is apparent from comparison of Schedule 1 cells C2 & C3 with Schedule 3 cells B10 & D10.
8.Schedule 3 also contains the essential details of a further bank reconciliation carried out by Stealth’s accountants in July 2012. The July 2012 reconciliation indicated taxable supplies of $66,989 in the September 2011 quarter. Consequently, on the assumption that the reconciliation had been preceded by an earlier similar exercise, it perhaps provides a partial explanation for that taxable supply amount reported in the September 2011 BAS Stealth lodged in October 2011. However, the July 2012 reconciliation provides no explanation for the December 2011 “nil” taxable supplies amount that Stealth reported when it lodged that quarterly BAS in November 2012:- see Schedule 2 row 16, columns A to F. Nor does the reconciliation explain the taxable income of $60,989 that Stealth reported in the 2012 income tax return that it lodged in mid 2014. That amount, being 10/11ths of the “taxable supplies” total, was consistent with the contents of the September 2011 BAS. However, the July 2012 reconciliation detailed (GST exclusive) income (comprising “Deposits” and “Business income”) of $93,151 to 27 October 2011, including $32,252 in the period from 1 to 27 October 2011. Consequently, the reconciliation contradicts both the December 2011 BAS and the 2012 income tax return. When one adds to that proposition the evidence that Stealth continued to operate the business until about 22 December 2011 (ie., the start of the usual Xmas holiday period), there is simply no explanation for the readily demonstrable understatement in Stealth’s December 2011 BAS, and in its 2012 income tax return.
9.A particularly notable aspect of Schedule 3 is the treatment of “Labour hire” expenses in each of the 2010, 2011 and 2012 bank reconciliations:- Schedule 3 row 21 columns B, D & F. No such expense was recorded in the 2010 reconciliation. In the 2011 reconciliation, the first such bank account debit was not made until 11 January 2011. That debit, and all subsequent similar debits (including in the 2012 tax year), were identified in Stealth’s bank account as “wages Fidel & Baris”. That description in the bank accounts indicates that none of the labour hire debits to Stealth’s bank account reflected the cash payments it made to its sex workers.
10.Stealth ultimately conceded the inevitable - that each of its 2011 to 2012 income tax returns understated its income:- see paragraphs 17 to 26 below. That concession necessarily involved a corresponding admission that the BAS Stealth had lodged understated the value of its “taxable supplies”, and its GST liability.
THE BASIS OF THE COMMISSIONER’S AMENDED / DEFAULT ASSESSMENTS
11.The circumstances of the January 2012 fire had been thoroughly investigated by Stealth’s insurer, in response to Stealth’s property damage and business interruption claim. The Commissioner’s 2017 assessments were substantially based on the contents of the investigator’s 20 March 2012 report to Stealth’s insurer. Most specifically the Commissioner relied on information the investigator reported having obtained in recorded interviews, in early February 2012, with the two principal on-site managers of Stealth’s Gentlemens Club business. They were a Ms Tuckwell and a Ms Pauu. The information set out in the investigator’s report was to the following effect:-
(a)Mr Baris Tukel rarely attended the Gentlemens Club, and had no involvement with, or knowledge of, the operation of the business.
(b)Mr Fidel Tukel attended the Canberra premises only about once or twice a month, and relied on the two managers to operate the business.
(c)Ms Tuckwell (Monday to Thursday) and Ms Pauu (Friday to Sunday) managed the day to day operation of the business
(d)The Gentlemen’s Club’s operating hours were from 3:00pm to midnight (Sunday to Wednesday), 3:00pm to 3:00am (Thursday) and 3:00pm to 5:00am (Friday and Saturday) ie., 7 days & 76 hours per week
(e)The combined takings from the Monday to Thursday trading, would reflect an average of between 50 and 60 “sessions” per week
(f)Takings for Friday to Sunday trading would reflect an average of between 120 and 150 “sessions” per weekend
(g)The average gross weekly business takings approximated $40,000 (ie., 200 “sessions” @ $200 each).
(h)During a 4 day “Summer Nats” motor sports festival (from 6 to 9 January 2011) daily takings varied from $30,000 to more than $40,000.
12.Based on that information, the Commissioner’s amended assessments
(a)assumed an average gross weekly (GST inclusive) income of $40,000 (ie., 200 sessions per week at an average session cost of $200)5
(b)assumed continuous trading throughout the period from 1 May 2010 to 31 December 20116
(c)increased the total annual income (derived from the “average” weekly income) by about $120,000, to take account of increased trading over the four day, “Summer Nats” period
(d)adjusted the assumed gross annual income to exclude GST
(e)had regard to the industry average wage cost as a proportion of sales (52.23%), and correspondingly increased the “wages” expense included in Stealth’s income tax returns
(f)otherwise accepted the expenses claimed in the income tax returns lodged
(g)(perhaps somewhat inconsistently with the adjustment for the “Summer Nats” period) apportioned the assumed gross income evenly over Stealth’s quarterly BAS accounting periods from April 2010 to December 2011.
13.The integers, and the effect, of the Commissioner’s assumptions about Stealth’s gross trading income are set out in the following table:-
Year Annual - "ordinary" trading "Summer Nats" - add'nl Total Sessions Weeks $ Total Daily Days $ GST exc pw
@ $
ps
$
additional
Sch 1:col G
2010 200 200 8 320,000 na na na 290,909 2011 200 200 52 2,080,000 35,000 4 117,143 1,997,403 2012 200 200 26 1,040,000 na na na 945,455
14.The practical effect of those income assumptions, in contradicting Stealth’s quarterly Business Activity Statements, is indicated in Schedule 2 – “Stealth Enterprises - BAS assessment and penalty summary”:- see columns D & I. The corresponding effect of the
5The actual number of weekly sessions was the subject of different estimated ranges – from 50 to 60 for Monday to Thursday, and 120 to 150 (or as much as 210) for trading from Friday to Sunday. Those different estimates combine to give a total weekly “sessions” estimate range from a total of 170 (50 + 120), to 210 (60 + 150), to 270 (60 + 210). The insurer’s investigator variously described the $40,000 weekly gross turnover as both the “average” and the “maximum”:- see Tribunal Book pages 170, 197 & 661.
6The assumption of continuous trading is contrary to information indicating that the business typically closed over the Xmas period – from about 23 December 2010 to 4 January 2011 (Tribunal Book page 785) and after 21 December 2011 (Tribunal Book pages 198, 545, 677 & 713).
income assumptions, and the Commissioner’s related expense adjustments, on Stealth’s gross (GST exclusive) annual income, and its taxable income, is indicated in Schedule 4 – “Stealth Enterprises - income adjustments - per ATO Decision reasons”:- see columns C, G & K.
15.Several features of Schedule 4 are noteworthy:-
(a)the Commissioner’s expense adjustments related only to the “wages” expense, and addressed the cash payments made to sex workers:- Schedule 4 row 25, columns C, G & K
(b)the expenses Stealth claimed in its 2011 ITR differ from the debit total in the 2011 bank reconciliation. In particular, they appear to exclude payments (coded as “Labour hire” in the bank reconciliations) that (from January 2011) had been made regularly to Baris & Fidel Tukel:- Schedule 3 cells D21, D31 & Schedule 4 cells F24, F25, F27
(c)conversely, the expenses Stealth claimed in its 2012 ITR appear to coincide with the debit total in the 2012 bank reconciliation, and thus include the “Labour hire” payments that had been made to Baris & Fidel Tukel:- Schedule 3 cells F21, F31 & Schedule 4 cells J18, J27
(d)Stealth’s 2011 ITR expenses appear to include the $250,089 amount that was classified as “drawings” in the 2011 bank reconciliation:- Schedule 3 cells D16, D29,
D31 & Schedule 4 cells F18, F27
(e)Stealth’s 2012 ITR expenses appear to include the $9,028 amount that was classified as “drawings” in the 2012 bank reconciliation:- Schedule 3 cells F16, F29,
F31 & Schedule 4 cell J27
(f)the deposits recorded as Directors loan in the 2010 and 2011 bank reconciliations were much less than the total of the various debits recorded as “Drawings” and “Labour hire”:- Schedule 3 cells B4, D4 & B16, D16 & D21.
STEALTH’S OBJECTION GROUNDS
16.Stealth’s’ December 2017 objection, its 31 October 2018 statement of issues and contentions, the evidence it lodged in the review proceedings, and written submissions it submitted in November 2019 and early February 2020, essentially involved the following five propositions:-
(a)The income amount assessed by the Commissioner was impossible for it to have achieved, having regard to the number of rooms and workers that would have been required.
(b)Alternatively, the assessed income amount, though possible, was improbable.
(c)The improbability of the assessed income was corroborated by the contents of the limited available contemporaneous “SMS” and email communications from Stealth’s managers
(d)Stealth’s income tax returns (and, implicitly, also the BAS statements) were in fact accurate.
(e)If it failed in its objections to the Commissioner’s primary assessments, Stealth could not articulate any meaningful challenge to the penalty assessments.
STEALTH’S CONCESSIONS IN THE REVIEW PROCEEDINGS
17.The accuracy of the income Stealth declared in each of its 2010, 2011 and 2012 returns was espoused in affidavits Stealth lodged to support its review application. The affidavits were those of both Mr Fidel Tukel and Mr Khalil. (Mr Khalil was the tax agent / accountant who had supervised the various bank reconciliations, and been responsible for the preparation and lodgement of the 2010, 2011 and 2012 tax returns.)
18.In his March 2019 affidavit Mr Tukel said nothing about Stealth’s record keeping practices, other than that he had instructed the business managers to send him SMS messages of the daily takings. In his July 2019 affidavit, he asserted that he had prepared a job sheet template, copies of the template were kept in the Gentlemen’s Club office, and the managers were expected to use them. The template provided for recording (i) the date, (ii) the “jobs” performed, (iii) the sex worker involved and, (iv) the client payment received. The job sheets were completed on a daily basis and then kept in the office at the premises. Mr Tukel said he would periodically collect the job sheets, bank statements, tax invoices Stealth’s sex workers issued to it, and other records, and provide them to his accountants in Sydney, for them to prepare Stealth’s income tax returns and Business Activity Statements. He said the accountants would retain the records he provided.
19.In his July 2019 affidavit Mr Khalil acknowledged his involvement in the preparation and lodgement of Stealth’s income tax returns and business activity statements. He asserted having received from Mr Tukel (i) “sales notebook” pages detailing Stealth’s daily sales, and
the payments made to its sex workers, (ii) information that Stealth paid its sex workers 50% of client payments and, (iii) information that those payments were typically made in cash, from the cash amounts paid by clients. Mr Khalil also said that he often obtained invoices from Stealth’s sex workers, and that he kept all of the invoices and sales records.
20.Mr Khalil said that the usual procedure involved in the submission of any of Stealth’s business activity statements or income tax returns was that he instructed his office staff to
(i) record all Stealth’s sales, (ii) record all the invoice payments to the sex workers and, (iii) prepare a bank reconciliation. When the reconciliation had been done, Mr Khalil said his routine was to check the reconciliation, look at the primary sales and payment records, and satisfy himself that they accorded with “the spreadsheet” that had been prepared by his staff members.
21.In apparent consistency with that version of events, Mr Khalil attached to his affidavit a “Gross Profit Report” that he said he had prepared in August 2014, at Mr Tukel’s request. The narrative in that report retained the income and expense totals contained in Stealth’s 2011 income tax return. It also identified Stealth’s major expenses as (i) advertising, (ii) rent and, (iii) labour hire. It explicitly described the latter as “the payments made to sex workers”. Given that explicit acknowledgement, it seems appropriate to conclude that before he provided his July 2019 affidavit Mr Khalil knew that Stealth made such payments. (That appearance is strengthened by the content of a cash flow forecast Mr Khalil said he had prepared. It projected “labour hire’ payments of $173,306 in the 2011 tax year. That same information is repeated in a summary of financial information, attributed to Mr Khalil, included in the 27 September 2017 audit decision reasons.)
22.However, as we remarked earlier, the only “labour hire” payments that had been identified in the July 2011 bank reconciliation were the “wages” paid to Baris and Fidel Tukel:- see paragraph 9 above. Furthermore, towards the end of the hearing Stealth conceded that it could provide no explanation for, or substantiation of, the $173,306 amount. Finally, as is made arithmetically obvious from the debit details in Schedule 3, those “labour hire” payments identified in the 2011 bank reconciliation had apparently not been included in Stealth’s operating expenses for the 2011 tax year:- see paragraph 1515(i) above.
23.This combination of (i) Mr Khalil’s apparent knowledge of Stealth’s sex worker payment practices, (ii) his submission of incorrect income tax returns, based on bank reconciliations
that clearly failed to take those practices into account and, (iii) the unsubstantiated $173,306 “labour hire” amount, all cause us to have no confidence in the reliability of any aspect of Mr Khalil’s affidavit evidence.
24.As is readily apparent from the information set out in Schedules 1 & 3, the objective facts established that the income and taxable supply amounts contained in Stealth’s (2010 & 2011) income tax returns, and its (pre December 2011) BAS, had been derived solely from the details in the reconciliation, and thus from Stealth’s bank account statements. That unarguable fact made Mr Khalil’s affidavit claims about the details of his involvement in, and the nature of, the reconciliation process demonstrably unreliable and, for that reason, surprising. The demonstrable unreliability of the affidavit assertions became even more apparent in the course of Mr Khalil’s oral evidence. There Mr Khalil agreed with the proposition that the sales details included in the reconciliation accorded with the instructions Mr Tukel had given him. He specifically agreed that no “notebook” or “invoice” sales information had been taken into account in either the reconciliations or the income tax returns he had prepared. Mr Khalil further agreed with the proposition that if he had been given any notebook or hand written information by Mr Tukel that disclosed different or additional sales, he would not have lodged the income tax returns (or the BAS) with the information that they in fact contained. Having made those acknowledgments, Mr Khalil ultimately disclaimed having any reliable recollection of having received any notebook sales and expense payment information.
25.Long before Mr Khalil’s belated disclaimer, Stealth’s initial, and long adhered to, assertion about the accuracy of the income declared in its tax returns, based on the asserted reliability of the bank reconciliations, was untenable. This was because both Mr Tukel and Mr Khalil acknowledged awareness that the women who provided the Gentlemen’s Club’s clients with their personal services (a) were paid 50% of what Stealth charged the clients7 and, (b) were paid in cash.8 That information dictated the inescapable conclusion that the declared
7This evidence establishes that the “wages” expense was actually 50% of the total of the client payments (ie., the GST inclusive, business turnover). However, the Commissioner’s amended assessment calculated the wage expense as a percentage of the GST exclusive turnover. That was also the calculation basis Stealth ultimately proffered in its Statement of Position. It is reflected in Schedule 3
– row 25.
8In his 22 July 2019 affidavit Mr Tukel had explained Stealth’s practice in paying its sex workers. He said that Stealth and the sex workers “shared the takings 50% / 50%”, and the sex workers were always paid in cash, typically at the end of a shift . In order to facilitate that being done, Stealth’s practice was often to retain cash from previous days takings, in addition to maintaining a $300 to $400 cash “float ”.
“income” amount, which reflected only the amount of the actual deposits to Stealth’s bank account, could not be an accurate statement of Stealth’s actual assessable income.
26.In the course of a hearing that started on 18 February 2020 (but which was adjourned the following day), the Tribunal pointed out the apparent inevitability of that conclusion. The Tribunal also pointed out that if, as Mr Tukel had asserted in his March 2019 affidavit, the majority of Stealth’s clients paid in cash, any adjustment to Stealth’s declared income to take account of the payments made to the workers might still significantly understate Stealth’s actual income. On the following day, Stealth conceded that its tax returns were in fact inaccurate and had understated its income.
27.Shortly after the adjournment of the February 2020 hearing, and in compliance with the Tribunal’s direction, Stealth provided the first version of the “Statement of Position” addressed later in these reasons:- see paragraph 29 below. Subsequently, at the outset of his oral evidence at the resumed hearing in May 2020, Mr Tukel expressly abandoned his previous adherence to the accuracy of Stealth’s declared income. Instead he described the inaccuracy of Stealth’s tax returns as “plain as black and white”. He also resiled from the assertion, in his July 2019 affidavit, that the majority of Stealth’s clients paid in cash:- see paragraph 41 below. In addition, when the course of the hearing later focussed attention on Stealth’s 2012 tax return (see paragraph 8 above) Stealth conceded that it could not explain (and thus could not justify) the income amount that had been declared.
28.The preceding course of events resulted in Stealth conceding, at the review hearing, that it could not discharge its burden of proof in challenging the Commissioner’s findings in relation to “fraud and evasion” (one of the threshold criteria permitting amended of assessments) concerning the contentious income tax returns it had lodged:- see Income Tax Assessment Act 1936 s 170(1) Table Items 2, 5 & 6. Stealth also conceded it could not discharge its burden of proof in challenging either the assessments relating to shortfall interest, or the basis on which the Commissioner had imposed shortfall penalties. The practical effect of these concessions, which the evidence indicates were inevitable, was to leave the only controversial matters as (i) whether the Commissioner’s amended assessments were nevertheless excessive and, (ii) the probable amount of Stealth’s assessable income in the 2011 and 2012 tax years.
STEALTH’S INCOME CONTENTION AT THE REVIEW HEARING
29.Stealth’s February 2020 “Statement of Position” document espoused the following propositions:-
(a)Stealth had understated its taxable supplies and its assessable income;
(b)Stealth had also understated its business expenses, and in particular, had omitted the cash payments it made to both its sex workers and to the business managers;
(c)(contrary to the assertion in Mr Tukel’s July 2019 affidavit) most clients paid by credit card / Electronic Funds Transfer (”EFTPOS” / “EFT”) transactions;
(d)the overall ratio of client “EFT” to “cash” payments was “60 / 40”;
(e)Stealth’s bank account records accurately recorded all the client credit card and EFT payments;
(f)Stealth’s gross income (and total “taxable supplies”) in each contentious tax year were sufficiently accurately quantified as 1.66 (ie 1/0.6) times the amount of those credit card and EFT payments;
(g)all Stealth’s sex workers were paid 50% of the amount of any client payment (and were paid in cash – typically, but not exclusively, at the end of trading session);
(h)Stealth’s probable taxable income could be accurately derived by adding, to the expenses disclosed in its income tax returns, a “wage” cost equivalent to 50% of its total (GST exclusive) sales revenue.
30.The February 2020 statement of position document included a summary table. The table reflected an assumption that Stealth’s gross income in each contentious tax year was a multiple of 1.66 times the (GST exclusive) income reported in Stealth’s tax returns. The table then deducted GST from that calculated total and asserted that the amount of the cash income that Stealth had concededly omitted from its tax returns could be derived by further deducting the amount of its declared income.
31.Some inconsistencies in the content of the February 2020 statement of position confound its accurate re-presentation. However, its ultimate practical effect is indicated in Schedule 4 - “Stealth Enterprises - income adjustments - per ATO Decision reasons”:- see columns D, H & L. The Schedule indicates that Stealth asserted:-
(a)its (GST exclusive) total gross income in the 2011 and 2012 tax years was $545,680 and $155,253:- see Schedule 4 cell H8 & L8;
(b)the amount of its asserted (GST exclusive) cash payments to sex workers in each of those years was $272,840 and $77,626:- see Schedule 4 cell H25 & L25;
(c)it had no taxable income (indeed, had operated at a loss) in the 2011 tax year, and a modest taxable income in the 2012 tax year:- see Schedule 4 cells H31 & L31.
32.The 60 / 40 “EFT / cash” ratio calculation in the February 2020 “Statement of Position” table was incorrect because it was based on the adjusted total of the bank account deposits that had been classified as income in the bank reconciliations, and declared in Stealth’s income tax returns for the 2010 & 2011 tax years. Those income deposit totals in fact included not only EFT deposit transactions but also cash and internet deposits.
33.Unsurprisingly, in view of the preceding observations, on the morning of the second day of the May 2020 review hearing Stealth provided an amended version of its “Statement of Position” document. This version contained the same narrative as its predecessor, and adhered to the propositions summarised earlier:- see paragraph 29 above. The accompanying table was, however, an amended version which
(a)in postulating the amount of Stealth’s gross income applied the “60/40 ratio” only to the “EFT” (rather than to the total of all) deposits to the bank account
(b)in the 2012 tax year, took into account the “EFT” deposits that had been made after 27 October 2011:- see paragraph 8 above;
(c)(other than in relation to “wages”) retained the expenses that had been included in Stealth’s 2012 income tax return, and apparently did not take into account any expenses that had been incurred after 27 October 2011;
(d)(incorrectly) calculated Stealth’s asserted net income for the 2012 tax year by deducting the expenses from the postulated GST inclusive total income.
34.Stealth corrected the latter error in a third version of the Statement of Position. That version correctly used Stealth’s postulated GST exclusive total income in calculating its trading result for the 2012 tax year. That third version of Stealth’s Statement of Position effectively asserted that
(a)Stealth’s assessable income in each of the 2011 and 2012 tax years was $471,622 and $172,975:-- see Schedule 4 – cells I8 & M8;
(b)the amount of its asserted cash payments to sex workers in each of those years was
$259,392 and $95,136:- see Schedule 4 - cells I25 & M25;
(c)Stealth had no taxable income (and operated at a loss) in the 2011 tax year, but had a small taxable income in the 2012 tax year:- see Schedule 4 - cells I31 & M31.
35.Stealth’s Statement of Position necessarily involved a concession that the “cash” deposits to its bank account were significantly less than the “cash” business payments it actually received from clients. The Statement of Position indicated that the amount of the difference could be quantified as the “total income not declared”:- see Schedule 4 cells E14, I14 & M14. However that indication was contradicted, and the apparent extent of the difference (between cash business payments received and those actually banked) was exacerbated by Mr Tukel’s oral evidence about the character of some of the cash (and other) “deposits” recorded in Stealth’s bank account. When taken to about 12 of these deposits in the 2011 tax year, Mr Tukel denied they were in fact income attributable to the Gentlemen’s Club business. He proffered that denial notwithstanding each of the “deposits” had been so categorised in the bank reconciliations, and thus included in the tax return income, which he had previously asserted was correct:- see paragraph 17 above.
36.Mr Tukel’s evidence about these deposits logically warranted some degree of further discrimination by Stealth in order to obtain an accurate categorisation of the “deposit” transactions recorded in Stealth’s bank account that were attributable to the business. But rather than taking such an approach, and ultimately asserting that none of these other deposits should be taken into account as part of its income, Stealth adopted the position that (a) the total of the bank account EFT deposits should be accepted as correct, (b) the total of Stealth’s total cash business receipts could be derived, with sufficient accuracy for assessment purposes, merely by applying the ““60 / 40” EFT to cash” ratio to the total of the EFT deposits to its bank account and, (c) in order to avoid “double counting” in the process of quantifying Stealth’s assessable income, the total of the cash (and other) “deposits” recorded in the bank account should be ignored.
37.Notwithstanding the “double counting” logic underlying the position adopted in the amended “statement of position” document Mr Tukel was cross examined on the basis that Stealth had abandoned all of the bank account “deposits” as having a business income source. His diffident response to that questioning was that “it must be my position, I’m not sure but it must be my position”. The logic of that diffident concession was inexorable (in the absence of evidence showing that the cash deposits reflected episodic variations in the ratio of “cash” and “EFT” client payments). This was because the asserted 60 / 40 ratio of EFT / cash
receipts postulated a client cash payment total that was not sufficient to fund the 50% amounts assertedly paid to the sex workers. That proposition can be illustrated by the following details extracted from Schedule 4:-
Schedule 4 Items 2011 2012 Schedule 4 Schedule 4 Income - Sales / Turnover Cash received (inc GST) 207,514 cell I5 76,109 cell M5 Sex worker payments = 50% of (GST exc) sales 235,811 cell I25 86,487 cell M25 "Cash" receipts shortfall 28,297 10,379
38.The “cash” receipts shortfall thus indicated is itself understated, for a number of reasons. First of all the “cash received” total does not take into account any of the cash takings that Mr Fidel Tukel received, but did not bank:- see paragraph 42 below. Second, it does not take into account the bank account cash deposits whose character as business income Mr Tukel did not dispute. Third, Mr Tukel’s evidence disputing the character of some deposits was unpersuasive. (In Schedule 5 we have listed those disputed deposits, together with their corresponding bank account details, and details of subsequent, apparently related withdrawals from the bank account. None of those deposits seem to reflect an injection of capital necessary to fund the business. None was so treated in the bank reconciliations. Furthermore, some of the deposits were explicitly identified in the bank statements as related to “wages” paid to Mr Tukel and his brother.) Fourth, the shortfall does not take into account the cash amounts that were paid to the business managers, or used by them to pay for business expenses. (Mr Tukel’s evidence quantified the payments to the managers as being in the vicinity of $100,000.9) Nevertheless the indicated shortfall suffices to question and, when added to the factors suggesting its understated extent, tends to contradict, both the utility of the 60 / 40 ratio and the accuracy of the assessable income asserted in Stealth’s Statement of Position.
THE QUESTIONABLE ACCURACY OF THE 60 / 40 “EFT” / “CASH” PAYMENTS RATIO
39.Mr Tukel’s own evidence (about the cash payments to Stealth’s sex workers and managers) tends to underscore the doubtful utility of the “60 / 40” ratio and the accuracy of Stealth’s
9A more detailed calculation of the overall cash payment shortfall for the 2011 tax year (assuming the “60 / 40” ratio was otherwise accurate) is set out in Schedule 7.2 to these reasons:- see paragraph 0 below.
Statement of Position. This is because it is implicit in those aspects of Mr Tukel’s evidence that more than half of Stealth’s business income was received in cash. That implication is consistent with Mr Tukel’s statement, in his July 2019 affidavit, that when he was at the premises most clients paid in cash. (In his March 2019 affidavit Mr Tukel had said that he spent “many an evening” at the premises) throughout the time it operated.) The further implication is that it was common for Stealth to have “surplus” cash on hand at the end of a business day. Indeed, again in his July 2019 affidavit Mr Tukel said that, after making its cash payments to the sex workers and managers, Stealth had surplus cash. It was that surplus cash that was deposited to the Stealth bank account. That banking was done either by the managers and, occasionally, by himself.
40.In the context of the totality of Mr Tukel’s affidavit evidence, he asserted that most of Stealth’s Gentlemen’s Club revenue came from cash payments made by clients. This assertion was prefaced by his asserted personal knowledge of the business, based on regular presence at the premises (at least in the period to December 2010) his regular contact with the business managers, and his possession of / access to all the business records, including daily takings sheets.
41.Against that background it is difficult to accept as credible Mr Tukel’s subsequent disavowal of the statement in his July 2019 affidavit, that the majority of Stealth’s clients paid in cash. That disavowal came when Mr Tukel came to give oral evidence at the review hearing in May 2020. In seeking to explain the justification for that disavowal Mr Tukel asserted that he had neither read nor signed what had been presented as his July 2019 affidavit. (He claimed he had given it to his wife, and asked her to get one of their acquaintances to “witness” his purported signature on the document.) However, he did ultimately affirm the accuracy of the contents of the affidavit, except that particular statement about cash payments.
42.Mr Tukel’s self interested disavowal of the cash payments statement in the July 2019 affidavit document is quite unpersuasive. Part of the difficulty in accepting it arises from the fact that the disavowal came only after the Tribunal had expressed its scepticism about the then asserted accuracy of the income tax returns:- see paragraph 26 above. A second part of the difficulty is that Mr Tukel implicitly acknowledged that he was the source of instructions for the contents of the affidavit. Consequently, the credibility of his disavowal depends on acceptance of one or other of two underlying, but alternative, propositions. The
first proposition is that Mr Tukel gave the instructions reflected in the affidavit, but was mistaken in so doing. The second proposition is that the affidavit drafter, who otherwise accurately included all of Mr Tukel’s instructions, mistakenly attributed to him a wrong statement about the typical manner of client payments. Each of those explanations, whilst possible, is implausible. The first proposition, that Mr Tukel mistakenly gave the cash payment instruction, is implausible because of his asserted supervision of the business and his familiarity with its operations. Furthermore, the likelihood of both the fact, and the accuracy, of his cash payment instruction is enhanced by what he told the insurance investigator in an interview on 13 January 2012, ie., less than a fortnight after the fire.
43.In that interview the investigator positively suggested to Mr Tukel that most of the client payments were EFTPOS transactions. However, Mr Tukel immediately replied “… oh no its mostly cash … the bank only deals with most of my Eftpos, it doesn’t deal with my cash”. That spontaneous contradiction of the “majority EFTPOS” payment proposition is telling. It gains additional significance from other aspects of what Mr Tukel told the insurance investigator. They were that (a) the managers used to give him “all the cash” from the business, (b) despite being given the cash he originally never banked any of it and, (c) he only started banking the cash after his accountants complained about the absence of any cash deposits.
44.Consistent with Mr Tukel’s January 2012 statement that most of Stealth’s clients paid in cash, and its substantial repetition in the July 2019 affidavit, nowhere in Stealth’s grounds of objection, in its pre February 2020 submissions, nor in Mr Tukel’s affidavits, had Stealth placed any reliance on the assertion of an overall 60 / 40, EFT to cash, ratio of client payments. Nevertheless, in the February 2020 statement of position document Stealth undertook to demonstrate that (a) most client payments involved EFTPOS transactions and,
(b) the ratio of electronic to cash payments was 60 / 40. That undertaking was based on the parts of the contents of the insurer’s investigator’s February 2012 interviews with two of Stealth’s business managers. One of the managers had said that the business’ EFTPOS transactions were “probably” a greater percentage of the business takings than cash. However, she was not sure of the actual comparative percentages. Moreover, confirming the idea that the business generated “surplus” cash even after the payments made to the sex workers, she also said that each week Fidel Tukel came and collected the cash takings. The other manager estimated that about 40% of the business takings were cash, but she
also added that (i) the sex workers were paid in cash and, (ii) that the business maintained a cash float that was used for other expenses, such as maintenance, supplies and alcohol.
45.Neither of Stealth’s onsite managers gave evidence in the review proceedings. Consequently, their respective estimates of the relative proportions of cash and EFT client payments were untested. Furthermore, they were of questionable accuracy. This was partly because both managers disavowed any accurate understanding of the total turnover of the business. It was also partly because each manager’s interview responses confirmed the idea that the business regularly had “surplus” cash, that was provided to Mr Tukel. A third reason to question the reliability of the manager’s estimate is the difficulty of reconciling the EFT payments recorded in Stealth’s bank account with their impressions of the extent of Stealth’s typical business activities. (The Commissioner’s amended assessments were substantially based on the managers accounts of the typical business volume.10 The amended income assessments, even if notionally apportioned “60 / 40” between EFT and cash payments, point to the likelihood of EFT sales substantially greater than the EFT deposits recorded in the bank statements:- see Schedule 4 and compare cells C34 & E4, G34 & I4, K34 & M4.) For these reasons, we do not regard the manager’s untested interview statements as reliably probative of the 60 (EFT) / 40 (cash) ratio proposition
46.After disavowing the statement in part of his July 2019 that the majority of clients paid in cash, Mr Tukel embraced the estimated 60 / 40 ratio that underlay the February 2020 statement of position document. He first explained that the basis for this approach was “the text messages and emails we received”. That was, in part, a reference to SMS messages he said he had recovered from his phone in late 2017, after being notified of the Commissioner’s amended assessments. (He had said - in his March 2019 affidavit - that he had instructed Stealth’s two managers to message him daily, so that he could keep track of how the business was performing.) Later, when taken to the transcript of part of the insurance investigator’s February 2012 interviews with Stealth’s two managers, he agreed with their reported estimates that “most” or “about 40% maybe” of the takings were in cash. Later still he expressed a subjective view that, whilst the relative proportions of EFT and cash payments was variable, their broad overall ratio was 60 / 40.
10The factors involved in the Commissioner’s amended assessments, and the manager’s various trading volume estimates, are outlined earlier in these reasons:- see paragraph 12 above.
47.In so far as Mr Tukel advanced the “60 / 40” ratio as his own estimate of the composition of the EFT / cash component of Stealth’s takings, he placed firmly in issue the reliability of his evidence. Resolution of that issue, in a way favourable to Stealth, was confounded by (a) his belated disavowal of the accuracy of Stealth’s tax returns and, (b) the incredibility of the reasons he advanced for his disavowal of the proposition that most clients paid in cash.
48.In explaining his disavowal of the accuracy of Stealth’s tax returns Mr Tukel asserted that their contents did not reflect the information and instructions he had given to his accountants. He said he had approved the returns without examining them and had simply expected that they would have been prepared in reliance on the “paperwork” he claimed to have provided. Mr Tukel’s explanation for the inaccuracy of the tax returns involves (i) an assertion that he provided the accountants with all of Stealth’s relevant books and records,
(ii) the proposition that the accountants simply ignored any information about the business revenue that was not reflected in the bank reconciliations.
49.Mr Tukel’s evidence about the existence of “job sheets”, and their provision to the accountants, was initially partly corroborated, but ultimately contradicted, by Mr Khalil:- see paragraph 24 above. Although the evidence Mr Khalil gave in his July 2019 affidavit was consistent with Mr Tukel’s claims, it cannot be accepted as reliably probative of what actually occurred in the preparation of Stealth’s various tax returns and business activity statements. This is because the reconciliations Mr Khalil had prepared, and the documents he lodged, reflect only the deposits to (and the payments from) Stealth’s bank account. They do not reflect either the amount of the sales, or the cash payments to Stealth’s various workers, assertedly recorded in the records referred to in his affidavit. Four possible alternative consequences follow from that reality. The first possible consequence is that Mr Khalil was mistaken in his recollection of the nature and extent of the information he had been given by Mr Tukel. The second possible consequence is that the documents and information he received were wholly consistent with the returns and statements that he lodged. The third possibility is that Mr Khalil was mistaken in his recollection of the work he undertook and that he and his office staff, relying only on the bank statements, had paid no regard to the additional records and information Mr Tukel had provided. The fourth possibility is that Mr Khalil was knowingly party to the lodgement of false returns and statements.
50.The last of these possibilities was never put to Mr Khalil, is perhaps improbable (given Mr Khalil’s professional responsibilities as a tax agent) and, in the absence of either a clear concession or reliable evidence of the contents of the information provided by Mr Tukel in 2010 and 2011, is a proposition that, for the purpose of the present proceedings, ought properly be put aside. The third alternative explanation, though inherently improbable, is one that Mr Khalil recognised as a possibility, emphasising that, given the passage of time, he simply could not recall. The first possibility is less improbable, and Mr Khalil acknowledged the possibility that he was mistaken about the nature and extent of the information he had received. He said that he recalled having received some handwritten notes, but could not recall any actual details of what they were, or the periods to which they related. Despite that general infirmity of recollection, Mr Khalil comfortably embraced the second proposition - that the returns and business activity statements he lodged were entirely consistent with the information Mr Tukel gave him. He emphasised that his usual practice would have been to compare the contents of the return with the information he had been given, and to rely on the latter, where it provided a basis for correcting any error in the draft of the return or statement. In particular, Mr Khalil acknowledged that he had prepared, at least the 2011 income tax return, from the bank statements and the bank reconciliation. He agreed that if he had been given any information to indicate additional income that was not evident in the reconciliation, he would have taken it into account in Stealth’s income tax return. He then endorsed the proposition that it was appropriate to be comfortably satisfied that any information Mr Tukel may have given him (including any handwritten notes of sales) would have been completely consistent with the GST exclusive income of $360,149 declared in Stealth’s 2011 income tax return. The same was true, he said of the income tax returns for 2010 and 2012.
51.As we have previously noted, there is an unexplained discordance between the income indicated in the July 2012 bank reconciliation and the income declared in the 2012 income tax return Stealth submitted in July 2014:- see paragraph 8 above. That unexplained discordance cautions against uncritical acceptance of the whole of Mr Khalil’s oral evidence without some reservation about the details of the process involved in the preparation of Stealth’s income tax returns. But the proposition, asserted by Mr Tukel, that the “plain as black and white” error in the income tax returns (see paragraph 26 above) was wholly the result of Mr Khalil and his staff ignoring the content of the information that Mr Tukel had provided is too incredible to accept. It casts a significant doubt over the reliability of Mr
Tukel’s evidence. It disinclines us from accepting his belated, and self interested, subjective endorsement of the 60 / 40 ratio proposition.
52.It follows that the reliability of the 60 / 40 ratio depends on the assessment of the managers’ “text messages” (and emails) themselves, and on the weight properly to be accorded to them – notwithstanding our reservations about the related assertions by Mr Tukel, and those attributed to Stealth’s managers in the transcripts of their February 2012 interviews.
THE MANAGERS’ EMAILS
53.Stealth belatedly provided a number of emails that Stealth’s managers sent to Mr Tukel, between 18 October 2010 and 19 December 2011. These emails were said to be consistent with the 60 / 40 ratio, demonstrate many instances of cash shortfalls, and contribute to the view that Stealth’s income was much less than the amount assessed by the Commissioner.
54.We have reviewed each of the emails. They do indicate some instances where Stealth’s manager reported an inability to pay the sex workers from the daily cash takings. On the other hand, they in fact give rise to the overall impression that those instances were atypical. There are, for example, comments about EFTPOS “getting the better of petty cash”, a “high amount of eftpos transactions …” and “a large amount of eftpos transactions … lately”. In mid October 2011, the manager commented that “clients of late are comfortable to use their cards”. That comment suggests a notable aberration in clients’ usual payment practices. It thus contributes to satisfaction about the likely accuracy of Mr Tukel’s statements (in both his January 2011 interview statement and his July 2019 affidavit) that most clients paid in cash. Consistent with that impression, we note that in the 2 December 2011 email the manager referred to occasional instances of being unable to pay the sex workers from the cash receipts. Also consistent with that overall impression, in the last of the emails (dated 19 December 2011) the manager forecast a future change in procedures “so we are not faced with (shortfall) … when EFTPOS far exceeds cash”. The manager went on to hypothesise that the principal reason for the level of EFTPOS transactions was client requests for “extras”. Typically, clients tended to use EFTPOS to pay for “extras”, but in future they were all to be “BY CASH ONLY”.
55.Another aspect of the email contents is their uncertain correlation with the EFT transaction credits in Stealth’s bank account. The 19 December 2011 email lists daily Eftpos totals for six days between 1 and 16 December 2011. However, only two of the daily totals
correspond with same dated entries in the bank account. One total is similar to (but not the same as) a following day EFT credit to the bank account. Three of the Eftpos totals have no (even arguably) corresponding credit entry in Stealth’s bank account statement. Those discrepancies contribute to a lack of confidence that the available bank account statements are in fact complete: see paragraph 45 above. Mr Tukel emphatically asserted that they were. But his general assertions have a clearly demonstrated general unreliability, and the comparison of the email details with the bank account details detract from satisfaction with the completeness of the available banking records.11
THE MANAGERS’ SMS MESSAGES
56.The (approximately 77) text messages on which Stealth relied spanned the six month period from May to November 2010. There were only two messages in May 2010, and six messages in the 10 days between 18 and 27 June 2010. In the 2011 tax year there were text messages in July (8), September (14), October (29) and November (13).
57.In his July 2019 affidavit, Mr Khalil had attempted an analysis of the then available messages. He expressed the view that the differences between the gross revenue that could be derived from the messages, and the amounts credited to Stealth’s bank account, could be accounted for by timing differences. The view he expressed in his affidavit was that analysis of the text messages supported the accuracy of the income reported in Stealth’s tax returns. That surprising view is clearly untenable, and was ultimately disavowed by Mr Khalil.
58.In its submissions at the conclusion of the review hearing Stealth submitted that analysis of the text messages, at least for the month of October 2010, tended to support the proposition that Stealth’s client payments did indeed typically conform to the 60 / 40 ratio of EFT / cash transactions. This submission relied on the contents of a spreadsheet, on the accuracy of
11After the oral review hearing in May 2020, we drew the parties attention to the apparent discordance between the bank account entries and the contents of the various email entries. We invited submissions as to whether that apparent discordance bore upon the accuracy of the bank account entries as indicative of Stealth’s actual EFTPOS revenue. Stealth never responded to the Tribunal’s invitation. The Commissioner’s email submissions of 27 July 2020 firmly embraced the proposition that, the apparent discrepancies, given the absence of detailed information about banking and merchant practices in relation to the processing of EFTPOS transactions, precluded satisfaction that the available bank account statements provided a reliable indication of Stealth’s total EFTPOS revenue.
whose contents the parties had substantially agreed. The spreadsheet reproduced the credit entries in Stealth’s bank account, and segregated them into “cash deposit”, “EFT”, “credit card” and other categories. The spreadsheet also contained a calculation, on which the parties also agreed, of the gross revenue indicated in each of the text messages. (Despite that calculation consensus, the Commissioner did not agree that the text messages correlated with Stealth’s bank account entries, or were otherwise relevantly probative of Stealth’s actual total income.)
59.Based on the agreed spreadsheet information, we have reproduced at Schedules 6 and 7, the monthly and quarterly totals for the various credit entries, and the agreed totals of the text message revenue. We have then added the following columns to those extracts from the spreadsheet provided by the parties:-
(a)Column A:- missing days – the number of days on which there was no bank account credit entry
(b)Column B:- EFT / CC days – the number of days on which there was either an EFT settlement entry or a credit card credit payment
(c)Column C:- “Cash” days – the number of days on which there was a cash deposit to the bank account
(d)Column D:- “SMS” days – the number of days on which there was an available SMS message
(e)Column K:- EFT + CC - % of previous SMS – the total of the EFT and credit card credit entries, expressed as a percentage of the calculated text message revenue (ie, the revenue indicated in column L).
(f)Column M:- Jobs “n” – the number of “jobs” indicated in the text messages.
60.That reproduction of the modified agreed spreadsheet appears in the following Schedules to these reasons:-
(a)Schedule 6.1 – “Exhibit 22R - 2010 extract - Month, Quarter and Year - deposits and SMS messages”
(b)Schedule 7.1 - Exhibit 22R - 2011 extract - Month, Quarter and Year - deposits and SMS messages.
61.The information summarised in Schedule 6.1 clearly reveals the limited extent of the SMS messages relating to the 2010 tax year:- Schedule 6.1 cells A:1 to D:4. It also tends to highlight the justification for scepticism about the completeness and accuracy of Stealth’s
records. The six SMS message days suggest an approximate $4,000 daily revenue. If, as Stealth’s reliance on the SMS messages implied, those messages provided a basis for quantifying its actual total receipts, they suggested a total monthly revenue of about
$120,000, and monthly EFT revenue of about $72,000 (60% of total revenue). However, the actual EFT bank account credits amounted to less than $40,000. Furthermore, as we observe in the Notes to Schedule 6.1, when regard is had to individual SMS messages, there is a lack of apparent correlation between them and entries in Stealth’s bank account statement.
62.The information summarised in Schedule 7.1 also clearly reveals the absence of text messages for most of the tax year. However, it does show that there were text messages on most days in October 2010:- see Schedule 7.1, cell D6. Furthermore, the total of the EFT and credit card deposits to Stealth’s bank account in October 2010 did reflect about 59% of the gross revenue suggested by the content of the text messages:- see Schedule 7.1, M6. However, we are not satisfied that this information provides a satisfactory basis from which to reach any conclusion about the probable amount of Stealth’s assessable income for either of the contentious tax years.
63.Part of the reason for that dissatisfaction derives from our review of particular text messages, including some of the text messages in other months of the 2011 tax year. That review reveals difficulties of correlation, similar to those we have noted in Schedule 6.2, with the Stealth bank account statement details. As illustrations of those difficulties, we make the following observations:-
(a)Seven of the eight SMS messages in July 2010 occurred in the nine day period between 9 and 17 July. They involved a total calculated revenue approximating
$15,800. The total EFT bank account credits in that period (including days on which there was no text message) approximated only $7,600. Although that did reflect about 48% of the calculated text message revenue, the actual EFT daily deposit amounts varied between 22% and 106% of the calculated text message revenue for the same day. Arguably consistent with that wide percentage range, in the same period, but on days where there was no corresponding text message, there were additional cash deposits totalling $12,500. The combined EFT and cash deposits ($7,600 + $12,500 = $20,100) therefore substantially exceeded the SMS based revenue of about $15,800. Furthermore, the $20,100 bank account credit total does include any allowance for cash amounts paid to the sex workers from the cash
income. Regard to those cash payment amounts suggests that (i) the total business revenue ought to have approximated $40,000 (ie., $20,100 x 2) and, (ii) the corresponding EFT bank account deposits reflected only about 19% of that total revenue during this period.
(b)Nine of the of the 14 SMS text messages in September 2010 occurred between 18 and 26 September. The calculated text message revenue (the revenue for two days was not calculated in the agreed spreadsheet) approximated $19,000, whereas there were no cash deposits and EFT bank account credits were only about $8,600 (or approximately 45% of the calculated revenue total).
(c)In October 2010, five of the SMS text messages occurred between 7 and 11 October. They suggested a revenue total approximating $8,485. In the same period there were no cash deposits, the total EFT deposits were only $2,847 (or about 33% of the suggested total revenue). Whilst October 2010 included the most days with SMS text messages, the individual daily EFT deposits had no readily discernible correlation with the revenue suggested by the SMS text messages. For example, there was an EFT deposit on Wednesday 13 October 2010 of $2,650. The previous EFT deposit was on Monday 11 October 2010. Therefore, the EFT deposit of $2,650 would have been expected to have arisen from amounts charged to clients between Monday 11 and Wednesday 13 October 2010. However, the SMS text message based revenue was only $150 for Monday 11 October, $540 for Tuesday 12 October and $540 for Wednesday 13 October, being a total of $1,230. It follows that the EFT deposit was more than double the total revenue suggested by the apparently relevant SMS text messages.
(d)In November 2010, six of the SMS messages occurred between 9 and 14 November. In that period the messages suggested a total revenue of about $9,230, whereas the EFT transactions credited to the bank account totalled only about
$3,400 (or about 36% of the suggested total revenue). (The amount of the individual EFT credit transactions again failed to exhibit any discernible correlation with the daily revenue suggested by the SMS messages.12)
12We recognise that the October and November 2010 periods to which we have referred are quite short, and that some variation in the EFT percentage of daily takings should be taken into account. However, the degree of variation apparent from comparison of the SMS messages and the bank account records in each of these periods is quite extreme, and not demonstrably accounted for by variations in the timing of the processing of the EFT deposit transactions. The considerable variation in the apparent EFT percentage of the indicated SMS revenue itself contributes to our dissatisfaction with both the
64.We have also prepared the following two additional schedules, being Schedule 6.2 and 7.2. They attempt to test the potential reliability of the “60 / 40” ratio, in the light of (a) the expenses Stealth likely met in cash, (b) the likely available “cash” client payments (assuming the accuracy of the ratio) and, (c) the actual “banking” recorded in Stealth’s bank statements. Those two additional schedules further quantify the cash shortfall necessarily implicit in Stealth’s 60 / 40 ratio hypothesis:- see paragraph 38 above. The two Schedules are as follows:-
(a)Schedule 6.2 – “2010 Scenario based on "60 / 40" ratio”
(b)Schedule 7.2 – 2011 Scenario based on "60 / 40" ratio.
65.Schedules 6.2 and 7.2 suggest that, if the 60 / 40 ratio corresponded with reality, Stealth would have had a cash shortage of $30,000 in the 2010 tax year:- see Schedule 6.2 cell L8. In the 2011 tax year the cash shortage would have approximated $148,000:- see Schedule 7.2 cell N43. However, in each of those years, Stealth made cash deposits to its bank account. It also treated the total of those cash deposits as income, both in its bank reconciliations and in its tax returns. The incongruity of the “60 / 40” scenario with the bank account and tax return information tends strongly against satisfaction that resort to the ”60
/ 40” scenarios is a reliable way of determining the amount of Stealth’s income.
66.Another reason for our dissatisfaction relates to the available information about the revenue that Stealth derived during the 6 to 9 January 2011 “Summer Nats” period. Mr Tukel told the insurer’s investigator that Stealth’s revenue in that period was between $40,000 and
$50,000. In his oral evidence at the review hearing he said that the amount was actually only $30,000. Whichever of those amounts is the more correct, Stealth’s bank account recorded EFT and credit card deposits totalling only about $11,500 (ie., between approximately 23% and 38%) for the same period:- see Schedule 8 - Exhibit 22R - Spreadsheet / bank account entries relating to January 2011 "Summer Nats" - cell D14. Mr Tukel sought to explain this significant departure from the hypothesised “60 / 40” ratio on the basis that Stealth’s clients during the Summer Nats period were abnormally sensitive about using EFTPOS transactions. But this explanation was, in our view, rather probative of the likelihood that both Stealth and its clients typically preferred to deal in cash. That
reliability of the “60 / 40 ratio” proposition, and the completeness of Stealth’s banking and revenue evidence.
proposition is consistent with both (a) what Mr Tukel told the insurance investigatory in January 2010 and, (b) the tenor of the comments in the emails to which we have already referred:- see paragraphs 43 & 54 above.
67.Mr Tukel sought to justify the 60 /40 hypothesis underlying Stealth’s Statement of Position with assertions that (a) Stealth’s business was not profitable and, (b) he had made up cash shortfalls by periodic payments from his own accounts. We do not accept either of those propositions.
68.The assertion that the business was not profitable was not supported by any reliable accounting assessment. Mr Khalil’s 7 August 2014 gross profit report, and his financial statements for the 2012 tax year, did suggest a lack of profitability. But both the report and the financial statements used the income and expenses contained in the (concededly inaccurate) income tax returns. Furthermore, Mr Tukel’s current assertions about Stealth’s unprofitability are contradicted by what he told the insurer’s investigator in January 2012. In the course of his interview with the investigator, Mr Tukel had said that “at your worst” you would be breaking even, and at your best you would be “partying somewhere on the … Gold Coast …”.
69.Mr Tukel’s belated forensic assertions (consistent with his claim that Stealth was unprofitable) of having contributed to the business to make up for periodic cash shortfalls is not a proposition supported by any reliable evidence. As we have pointed out in Schedule 3 (at row 4), the only deposit amounts included in the bank reconciliations as “director’s loans” totalled about $112,000. About half of that total ($55,100) related to costs incurred in relation to the (2009) acquisition of the business and the (pre April 2010) renovation of the premises. In addition, a substantial portion of the “director’s loans” recorded in the 2011 bank reconciliation related to the expenses of another one of Mr Tukel’s business ventures. Furthermore, as Mr Tukel told the investigator, there was a substantial period in which he did not bank any of the business takings:- see paragraph 43 above. Whatever was involved in those unbanked amounts, it is also apparent from the bank account reconciliation details in Schedule 3, that Mr Tukel and his brother were paid “wages” in an amount that exceeded
$106,000:- see Schedule 3 row 21. Finally, there is the bank reconciliation item “drawings”. The total “drawings” amount approximates about $350,000:- see Schedule 3 row 16. That amount is treated in the bank reconciliation as additional to all the other business expenses, and the explanatory statements in the February Statement of Position document necessarily
involve a concession that the “drawings” do not include any moneys paid to either the sex workers or to Stealth’s managers.
MR TUKEL’S EVIDENCE ABOUT THE EXTENT OF TRADE
70.In his March 2019 affidavit, in the context of asserting the accuracy of Stealth’s tax returns, Mr Tukel gave a very truncated and pessimistic account of the level of activity at the Gentlemen’s Club. He said that during the winter months there were usually two people working with clients, but on some nights there were no customers at all. His described summer trading as busier, but asserted that even on the busiest of weekends, there were never more than 25 customers on a weekend night. He asserted that Stealth’s Gentlemen’s Club business, because it had neither “the capacity, rooms or number of staff”, was simply incapable of producing the income assessed by the Commissioner.
71.Mr Tukel’s abbreviated and pessimistic version of the level of activity at the Gentlemen’s Club is undermined by his subsequent repudiation of Stealth’s tax returns. It also contrasts rather markedly with the versions Ms Tuckwell and Ms Pauu gave to Stealth’s insurer’s investigator in their 2012 interviews. Unlike them, he gave no meaningful account of the typical level of weekday (we assume Monday to Thursday) activity throughout the year, and his observation that on “some” winter nights there were no customers at all is eloquent in pointing to the likelihood that “no customers” was a significant aberration, even in winter. Moreover, Mr Tukel’s assertion that the busiest summer weekends never produced more than 25 customers per weekend night is completely irreconcilable with the accounts of both Ms Tuckwell or Ms Pauu. (They gave different estimates of the level of weekend activity, but even Ms Pauu’s lower estimate was almost double that of Mr Tukel.) His assertion is also inconsistent with (the limited) contemporaneous correspondence:- see paragraph 73 below.
72.In addition, Mr Tukel’s assertion that the Gentlemen’s Club had neither the rooms nor the staff to be able to achieve the level of income assessed by the Commissioner is a merely argumentative assertion, and one that is far from compelling. It is at least arithmetically possible, given the Gentlemen’s Club’s no of rooms, hours of operation and charge rates, for Stealth to have achieved an annual gross income of the order involved in the Commissioner’s assessment. (For example, the assessed income of about $2m for the 2011 tax year reflects an average of only about 2.5 sessions per hour during Stealth’s typical
76 hours of weekly operation:- see paragraph 11 above.) The feasibility of that arithmetic possibility is consistent with the managers’ statements (in their January 2012 interviews) that there were between six and eight sex workers at the club “at any time”. Furthermore, both Ms Tuckwell and Ms Pauu’s estimates of Stealth’s usual volume of trade (see paragraph 11 above) can be extrapolated to suggest an annual gross income approximating the amount assessed by the Commissioner.
73.It is also material to have regard to the evidence Mr Tukel gave when he was specifically challenged about the reliability of his assertion that “there were never more than 25 customers on a weekend night”. This challenge was made against the background of the 12 June 2011 email from one of Stealth’s managers. In this email the manager noted that EFTPOS transactions had “got the better of petty cash”, even though all the sex workers had in fact been paid most of their 50%. The cross examiner relied on the contents of this email evidenced about 34 “jobs” for a single night, and served as a potent contradiction of Mr Tukel’s claim that Stealth’s winter month trading was very subdued. Mr Tukel countered with the supposition that the email related to several days trading. This, patently self serving supposition, was quite inconsistent with a proper understanding of the contents of the email. That email stated that the “Saturday Night” EFT total was $5,040 and had involved 16 one hour client sessions. Only $1,060 was owing to the sex workers for the Saturday night. It follows that the total “Saturday Night” sales approximate $9,020 (ie., $5,040 x 2 less
$1,060). That total would 33 Saturday clients, assuming they were all one hour sessions at (the standard) $270 each). Alternatively if, as the email stated, there were only 16 one hour sessions, and the balance were half hour sessions, the revenue total would indicate a 43 client attendances on the Saturday Nights (ie. 16 @ $270 & 27 @ $170). It follows that Mr Tukel’s suppositious explanation, in downplaying the turnover reported by Stealth’s manager, had no apparent basis in the content of the manager’s email. It also follows that a proper understanding of the EFTPOS total, against the background of Stealth’s standard charge rates, tends to suggest that the email may have actually understated the number of client attendances. However, whether or not that particular conclusion is justified, we do not consider that Mr Tukel’s vague generalisations provide any basis for an informed conclusion about the level of Stealth’s income.
REASONS TO QUESTION THE ACCURACY OF THE COMMISSIONER’S ASSESSMENT
74.Despite ultimately conceding, as the details outlined in Schedule 3 reveal, that its lodged returns significantly understated its assessable income, Stealth nevertheless contended that the Commissioner’s assessments were excessive. This contention ultimately had to rely on the following:-
(a)The unlikelihood that the non-cash deposits to Stealth’s bank account were significantly understated
(b)The likelihood that the non-cash deposits to Stealth’s bank account represented about 60% of its total assessable income.
(c)The evidence of Mr Tukel about the average / range of patronage of the Gentlemen’s Club business
(d)The partial corroboration of Mr Tukel’s evidence by approximately contemporaneous SMS and email communications between Mr Tukel and Stealth’s onsite managers
(e)The proposition that the untested “average takings” estimated by Stealth’s managers ought not be preferred to the evidence of Mr Tukel, and the probabilities suggested by the volume of non-cash deposits to the bank account.
75.There are reasons to question the accuracy, and perhaps even the reasonableness, of the Commissioner’s assessment. Those reasons include
(a)The assumption that the business operated without any holiday period breaks.
(b)The absence of apparent regard to seasonal variation in the volume of business, despite the indications (from Mr Tukel, Ms Tuckwell and Ms Pauu) that the level of activity was significantly reduced in the winter months
(c)The extrapolation that Stealth’s total revenue in the 2011 tax year might have been only about $780,000 (IF the $311,271 of EFT deposits to the bank account in that year were, (i) the totality of Stealth’s client EFT payments and, (ii) represented only 40% of its total client payments.)
(d)The supposition that if (ii) the Commissioner’s (approximately $2m) 2011 gross income assessment were correct income and, (ii) clients’ EFT payments comprised only 20% of its total client payments, the total of Stealth’s bank account EFT credits should have approximated $400,000 (rather than the $311,000 actual total recorded in Schedule 4)
(e)The calculation that Stealth’s average daily revenue, reflected in the available SMS text messages in the 2011 tax year, approximated only about $2,000, and was potentially consistent with a total annual gross revenue of about $730,000
(f)The calculation that, if the SMS text messages for October 2010 were complete and accurate, they indicated an average daily gross revenue approximating $1,500, and were consistent with a gross annual revenue approximating only about $540,000.
76.Because of the matters alluded to in the preceding paragraph, at the conclusion of the oral hearing we invited the parties to provide further written submissions. Those submissions were to address the combined contingencies that (i) we regarded the Commissioner’s 2011 assessments as likely overstating the most likely amount of Stealth’s assessable income but, (ii) we were not satisfied that Stealth’s evidence had not affirmatively established the probable amount of its assessable income. The Commissioner, but not Stealth, accepted that invitation.
STEALTH’S BURDEN OF PROOF IN THE REVIEW PROCEDINGS
77.The Commissioner’s post hearing submissions emphasised that the Tribunal’s jurisdiction to review the Commissioner’s objection decision (conferred by the Taxation Administration Act 1953 (“TAA”) s 14ZZ(1)(a)(i)) was subject to the limitations contained in TAA Part IVC, Division 4. The specifically relevant limitation imposed by Division 4 is that the taxpayer review applicant has the dual “burden of proving … that the assessment is excessive or otherwise incorrect and what the assessment should have been”:- see TAA s 14ZZK(b)(i). The Commissioner submitted that, given the explicit wording of the statutory “dual burden”, the Tribunal’s general review function to make the “correct and / or preferable decision” did not authorise it to set aside or alter the objection decision, unless it was affirmatively satisfied as to “what the assessment should have been”. Consistent with that submission, the Commissioner also emphasised that mere doubts about the reasonableness or accuracy of the contentious assessments were not sufficient to permit the Tribunal to alter
the objection decisions. The Tribunal’s only relevant powers, in relation to the objection decision, are subject to the dual burden limitation. It has no other power to vary an assessment the Commissioner had made.
78.The words “and what the assessment should have been” were added to TAA s 14ZZK(b)(i) by legislative amendment that took effect in July 2013. 13 Even before that amendment however, the dual burden proposition had a history of judicial endorsement:- Trautwein v FCT (1936) 56 CLR 63 at 87-88; George v Federal Commissioner of Taxation [1952] HCA 21; (1952) 86 CLR 183.
79.The 2013 amendment, as paragraphs 7.36 to 7.38 of the Explanatory Memorandum make clear, was intended to ensure the continued application of the decision in Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614. The words added to TAA 14ZZK(b)(i) in 2013 required an objecting taxpayer to establish the amount of their liability. In Dalco the taxpayer had “completely disregarded corporate structures and entitlements or used them purely for convenience in the lending of money and the claiming of expenses” but, nevertheless established that the Commissioner’s default assessment of his personal income included income properly attributable to other entities. The Federal Court of Australia had concluded that, in so doing, the taxpayer had demonstrated that the Commissioner’s assessment was “excessive” (for the purpose of the onus provision then contained in ITAA 1936 s 190(b)). But there was a complementary finding that the taxpayer had not established the amount of his assessable income (and thus had not established that it was less than the assessment). The subsequent High Court decision held that the statutory requirement to show the assessment was excessive meant the taxpayer had to establish the amount of their assessable income. The following passage from the judgment of Brennan J (with whom Mason CJ, Deane, Dawson, Gaudron and McHugh JJ agreed) puts the position clearly:-
The majority of the Full Federal Court in the present case treated the error which they held to infect the Commissioner’s assessment of the amount of the taxpayer’s taxable income as concluding the question whether that amount was excessive. It did not. If this were a case where all the material facts were known and the amount of taxable income depended on the legal complexion of those facts, the taxpayer would succeed upon establishing that the Commissioner erroneously included in the assessed taxable income an amount which, on those facts, ought not to have been included. But where, as here, the taxpayer has not proved that his actual taxable income is less than the amount assessed, the court does not
13Tax and Superannuation Laws Amendment (2013 Measures No. 1) Act No 88 of 2013 Schedule 5, Part 2, Division 3, Item 25.
know all the material facts and it cannot find that the amount assessed is wrong. A taxpayer who shows on the facts that are known a mere error by the Commissioner in assessing the amount of the taxpayer’s taxable income does not show that his objection should have been allowed or that the appeal against the assessment must be allowed. If it were not for s 190(b), the process of assessment might have to be repeated whenever on appeal an error affecting the amount assessed were found. But s 190(b), coupled with s 200, brings to finality the ascertainment of the taxpayer’s liability in respect of the income period to which the assessment relates. Unless the amount of the assessment is found to be excessive in the sense of being greater than the taxable income on which tax ought to have been levied, the taxpayer fails on his appeal.
80.Brennan J’s discussion in Dalco recognised that the Commissioner’s contentious assessment, specifically a default assessment under ITAA 1936 s 167, may involve some elements of approximation and surmise. But His Honour emphasised that, consistent with the earlier High Court decision in George v FCT (1952) 86 CLR 183 at 204 the Commissioner’s bona fide “judgment” (to use the expression in ITAA 1936 s 167) of the amount on which income tax ought be levied, was conclusive of the validity of the assessment. However, recognising that there was some potential ambiguity in the concept of error in the assessment, Brennan J alluded to the statement of Barwick CJ in Bailey v FCT (1977) 136 CLR 214 at 217. There the former Chief Justice had said “if some step in that process which affects the amount of tax lacks the authority of the Act the assessment is ‘excessive’. Brennan J said this about that statement (we have added the emphasis):-
It may be that his Honour had in mind a case where all the material facts were known and the only question was the legal complexion to be attributed to them: cf his observations in Henderson v FCT (CLR) at 648. But if his Honour did not intend the cited passage to be so understood, I must respectfully disagree with it. Since McAndrew’s case it has been generally accepted that “excessive” refers to the amount of the assessment, not to any unauthorised step in the process of its calculation.
81.Despite the conceptual distinction between error in the Commissioner’s “judgment” and error in calculating the amount of the taxpayer’s actual liability, in Dalco both Brennan J and Toohey J recognised the potential for the overlapping reasoning in the circumstances of particular cases. Brennan J said:-
The manner in which a taxpayer can discharge that burden varies with the circumstances. If the Commissioner and a taxpayer agree to confine an appeal to a specific point of law or fact on which the amount of the assessment depends, it will suffice for the taxpayer to show that he is entitled to succeed on that point. Absent such a confining of the issues for determination, the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment, though the taxpayer is limited to the grounds of his objection.
82.In a similar vein Deane J said:-
In a case where the only issue between a taxpayer and the Commissioner is whether a particular item of income which the Commissioner has treated as assessable
income of the taxpayer was derived by the taxpayer or by someone else, the onus which the Act imposes upon the taxpayer will commonly be discharged if the taxpayer establishes, on the balance of probabilities, that the relevant income was derived by the other person.
83.Toohey J (with whom the other members of the Court also agreed) approached the matter in a slightly different way. The last sentence of the following extract (to which we have added emphasis) explains the potential overlap between the tasks of establishing error in the assessment and establishing that it was excessive:-
… a taxpayer will generally discharge that onus by satisfying the court or tribunal that his or her true taxable income is less than that appearing in the assessment. He or she may also do so by pointing to some error of computation or … by showing non-compliance with statutory conditions precedent to the imposition of liability … . A taxpayer does not necessarily discharge the onus of showing that an assessment is excessive, merely by showing that moneys treated by the Commissioner as income are in truth not the income of the taxpayer, though that may be a step in demonstrating his or her taxable income to be less than the assessment.
84.The “step” alluded to by Toohey J may be determinative of the onus question where the Commissioner confines the review proceedings to the particular contested issue, or where the proceedings result in the particular point being the only contestable issue:- see Dalco per Brennan and Deane J – as set out above). The first possibility may apply where the Commissioner’s assessment involved specific determination (under ITAA 36 ss 166 & 168) of the taxpayer’s assessable and taxable income:- see Commissioner of Taxation v Rigoli [2013] FCA 784 at [4]). (It will not apply, even in the case of such an assessment, if the Commissioner expressly or impliedly puts the taxpayer to proof of their assessable and taxable income:- Bosanac v Commissioner of Taxation [2019] FCAFC 116 at [57].
85.That is typically the position that applies to “default” assessments under ITAA 36 s 167 involving the Commissioner’s “judgment” of the amount to be treated as taxable income). The second possibility will apply if the taxpayer can establish that the contentious receipts
(i) are the only ones that could possibly be income:- Ma v Federal Commissioner of Taxation (1992) 37 FCR 225; (1992) 27 ALD 601 and, (ii) that they are not “in truth” income. Where the taxpayer’s evidence does not satisfactorily exclude the likelihood of other receipts, the onus obligation requires the taxpayer to establish both that they were not of an income character (merely equivocal evidence about their character will not suffice:- McCormack v FCT [1979] HCA 18; 143 CLR 284 at 303; Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243 at 247 & 258) and the probable amount of their taxable
income:- Commissioner of Taxation v Rigoli [2013] FCA 784; Rigoli v Commissioner of Taxation (2014) 141 ALD 529 ; [2014] FCAFC 29).
86.Neither of the possibilities recognised in the preceding paragraph will apply, in a challenge to an objection decision involving a “default” assessment under ITAA 36 s 167, where the taxpayer seeks to rely on either error or improbability in the calculations or reasons underlying the assessment:- Gashi v Commissioner of Taxation [2013] FCAFC 30 at [35]- [36], [59]-[67]. In order to establish that the assessment is excessive, the taxpayer will have to establish the factual and legal basis for the assessment outcome for which they contend. That basis cannot be derived (at least not in the absence of agreement) from flaws in the Commissioner’s reasons and findings of fact. Nor can it be established by a mere absence of evidence about the proper character and purpose of receipts and payments:- see Zappia v Commissioner of Taxation [2017] FCAFC 185 at [3]. The point is made abundantly clear in the following passage from the reasons for judgment of Jagot J in Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26 at [111] & [112]:-
[111] …. The review process in a case to which s 14ZZK(b)(i) applies does not necessarily include the tribunal in reaching any state of satisfaction that there is a proper basis for deciding that the facts as found by the tribunal give rise to the amount of the liability in the impugned decision. The only state of satisfaction that the tribunal is required to reach in a review subject to s 14ZZK(b)(i) is whether on the facts as found the applicant has proved that the assessment is excessive. If that state of satisfaction cannot be reached, the application for review must be dismissed irrespective of the tribunal being satisfied or not satisfied that the facts as found by the tribunal give rise to the amount of the liability in the impugned decision.
[112] The two tasks (on the one hand, being satisfied on the facts as found that the applicant has proved that the assessment is excessive and, on the other hand, being satisfied on the facts as found as to the amount of the liability in the impugned decision) are conceptually different. The statute consigns the first task only to the tribunal. It may be accepted that, in performing the first task, the tribunal may consider and/or resolve the second task. No doubt in a case where the tribunal can satisfy itself, in accordance with the second task, that the facts as found by the tribunal give rise to the amount of the liability in the impugned decision the tribunal can also discharge the first task with a high degree of confidence and conclude that the applicant has not proved that the assessment was excessive. Provided the tribunal’s consideration of the second task does not distract it from the task which the statute requires to be performed there will be no question of law capable of vitiating the tribunal’s decision. But the second task cannot be substituted for the first task. There may well be cases where the tribunal cannot satisfy itself on the facts as found that the amount of the liability is the amount in the impugned decision and yet the applicant also cannot satisfy the tribunal that the amount is excessive. In such a case, the application must be dismissed by reason of s 14ZZK(b)(i) of the TA Act.
87.The decision in Rawson Finances Pty Ltd v Commissioner of Taxation preceded the July 2013 legislative amendment, and addressed the effect of TAA s 14ZZK(b)(i) when it only required a taxpayer applicant to establish that the Commissioner’s assessment was
excessive. Neverthless, it had the practical consequence that (in the absence of a consensual limitation of issues) a taxpayer would fail in their objection decision review if they either (i) merely establish (or accept the Commissioner’s concession about) an inaccuracy in the components the amount assessed (see Bosanac at [64]-[69]), (ii) fail to provide reliable evidence of the amount of their income or, (iii) despite providing generally reliable of evidence of the income they assert, fail satisfactorily to exclude the likelihood or possibility of other income:- see Gashi at [75] to [78]; Bosanac at [77]-[84].14 In each of those cases the review applicant taxpayer would not have discharged the statutory onus and would have failed to provide a basis for a favourable alteration of the Commissioner’s assessment:- Agius v Commissioner of Taxation [2015] FCA 707 at [55] to [62].15
THE STATE OF STEALTH’S EVIDENCE
88.A taxpayer who is able to provide a factual basis for a satisfactory estimate of its income, may discharge their statutory burden of proof, even in the absence of certainty about the accuracy of the estimate:- see Ma v Federal Commissioner of Taxation (1992) 37 FCR 225; (1992) 27 ALD 601; Commissioner of Taxation v Rigoli [2013] FCA 784 at [10]. That possibility is, however, of no assistance to Stealth in these review proceedings.
89.Stealth’s, belatedly articulated, assertion was that a reasonable estimate of its assessable income could be derived from the application of the 60 / 40 ratio to the EFT credits recorded in its bank account. We have examined that hypothesis as thoroughly as the available material permits. For the reasons we have set out earlier in these reasons, we are far from satisfied of the accuracy of the 60 / 40 ratio. Nor are we satisfied that the available information admits of any more accurate estimate of the ratio of the “cash” and “EFT” payments Stealth received from its clients. Apart from suppositious reliance on some such ratio, there was no reliable basis for making any informed estimate of the probable amount
14Bosanac (in the paragraphs referenced) illustrates a situation where unexplained deposits to a taxpayer’s bank account may result in the taxpayer’s failure to discharge the onus, even where the taxpayer has otherwise attempted to account for their income sources. A later passage in Bosanac (at [98]) explains that even demonstration that particular deposits were not income receipts would not discharge the objection review onus if the taxpayer had not otherwise adequately established the amount of his taxable income.
15In Ma Burchett J contemplated that the taxpayer’s success in demonstrating that the assessment amount was likely to be excessive, could permit setting aside the decision, and remitting the assessment to the Commissioner for reconsideration to establish the taxable income amount. It is unnecessary to express a view as to whether the possibility of remittal, merely for the purpose of establishing the taxable income amount, has survived the 2013 amendment of TAA s 14ZZK(b), and the addition of the words “and what the assessment should have been” as part of the taxpayer’s onus.
of Stealth’s income. The same applies to any assessment of the amount of its taxable supplies.
90.Accordingly, the Commissioner’s objection decision is affirmed.
I certify that the preceding 90 (ninety) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member, N Gaudion, Member
.....................................[sgd]...................................
Associate
Dated: 10 December 2021
Datesofhearing: 17 - 18 February 2020
25 - 27 May 2020
Datefinalsubmissionsreceived:
24 June 2020
SolicitorsfortheApplicant:
Mr C. Koyuncu, MCK Lawyers
CounselfortheRespondent:
Mr S. Richardson
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | |
| Schedule 1 Stealth Enterprises - income assessment and penalty summary Reasons paragraphs 3, 6, 7, 24 | |||||||||||||||
| Lodged Returns | Assessments - September 2017 | ||||||||||||||
| Tax Year | Date | Income | Tax | Income | Tax | PAYG | Tax S'fall | S'Fall int | Penalty | Total | |||||
| Declared | Taxable | Assessable | Taxable | (credit) | % | Amount | $ | ||||||||
| T6-47 | T6-48, 60 | T6-48 | T6-77 | T6-54, 60 | T6-56, 84, 88 | T6-77, 84, 88 | T6-84, 88 | T6-77, 84, 88 | T6-84, 88 | T7-77, 92 | |||||
| 1 | |||||||||||||||
| 2 | 2010 | 17-Dec-10 | 44,634 | -127,357 | 0 | 290,909 | -31,413 | 0 | 0 | 0 | 0 | 0 | |||
| 3 | 2011 | 17-Oct-11 | 360,149 | 0 | 0 | 1,997,403 | 742,040 | 222,612 | 0 | 222,612 | 75,832 | 90% | 200,351 | 498,795 | |
| 4 | 2012 | 2-Jul-14 | 60,899 | -7,601 | 0 | 945,455 | 383,144 | 114,943 | 596 | 114,943 | 29,516 | 90% | 103,449 | 247,908 | |
| 5 | |||||||||||||||
| 6 | Totals | 465,682 | -7,601 | 0 | 3,233,767 | 1,125,184 | 337,555 | 337,555 | 105,348 | 303,800 | |||||
| 7 | Total net shortfall, shortfall interest and penalties | 746,703 | 746,703 | ||||||||||||
[File]1_Assessments_income
| A | B | C | D | E | F | G | H | I | J | K | L | |
| Schedule 2 Stealth Enterprises - BAS assessment and penalty summary Reasons paragraphs 4, 6, 8, 14 | ||||||||||||
| BAS period | Date | BAS - taxable supplies | GST (BAS as lodged) | Assessment | Difference | Penalty | Total Liability | |||||
| Date lodged | as lodged | Assessed | payable | net | GST payable | net | shortfall | 75% | 90% | |||
| T6-47.1 | T6-49, 78 | T6-54, 60, 78 | T6-49, 78 | T7-49, 94 | T6-60, 78 | T6-78.1 | T6-78, 78.1, 94 | T7-78, 96 | T7-78, 96 | T6-78 | ||
| 1 | 2010 Tax Year | |||||||||||
| 2 | 30-Jun-10 | 17-Dec-10 | 49,097 | 320,000 | 4,463 | -4,614 | 29,091 | 20,013 | 24,627 | 18,470 | 43,097 | |
| 3 | ||||||||||||
| 4 | Total 2010 | 49,097 | 320,000 | 4,463 | -4,614 | 29,091 | 20,013 | 24,627 | 18,470 | 43,097 | ||
| 5 | ||||||||||||
| 6 | 2011 Tax Year | |||||||||||
| 7 | 30-Sep-10 | 17-Dec-10 | 111,742 | 549,286 | 10,158 | 1,618 | 49,935 | 41,395 | 39,777 | 35,799 | 75,576 | |
| 8 | 31-Dec-10 | 26-Feb-11 | 91,629 | 549,286 | 8,330 | -868 | 49,935 | 40,737 | 41,605 | 37,445 | 79,050 | |
| 9 | 30-Mar-11 | 17-Oct-11 | 79,628 | 549,286 | 7,239 | 508 | 49,935 | 43,204 | 42,696 | 38,426 | 81,122 | |
| 10 | 30-Jun-11 | 17-Oct-11 | 113,166 | 549,286 | 10,288 | 1,490 | 49,935 | 41,137 | 39,647 | 35,682 | 75,329 | |
| 11 | ||||||||||||
| 12 | Total 2011 | 396,165 | 2,197,144 | 36,015 | 2,748 | 199,740 | 166,473 | 163,725 | 147,353 | 311,078 | ||
| 13 | ||||||||||||
| 14 | 2012 Tax Year | |||||||||||
| 15 | 30-Sep-11 | 17-Oct-11 | 66,989 | 520,000 | 6,090 | 637 | 47,272 | 41,819 | 41,182 | 37,064 | 78,246 | |
| 16 | 31-Dec-11 | 22-Nov-12 | 0 | 520,000 | 0 | 298 | 47,272 | 47,570 | 47,272 | 42,545 | 89,817 | |
| 17 | ||||||||||||
| 18 | Total 2012 | 66,989 | 1,040,000 | 6,090 | 935 | 94,545 | 89,389 | 88,454 | 79,609 | 168,063 | ||
| 19 | ||||||||||||
| 20 | Totals | 512,251 | 3,557,144 | 46,568 | -931 | 323,376 | 275,875 | 276,806 | 18,470 | 226,961 | 522,237 | |
| 21 | Total penalty | 245,431 | ||||||||||
| 22 | Total GST shortfall difference and penalties | 522,237 | 522,237 | |||||||||
Schedules to reasons.xlsx2_GST-BAS - abridged
| A | B | C | D | E | F |
| Schedule 3 Stealth Enterprises - Bank reconciliations - deposits and debits Reasons paragraphs 7, 8, 9, 15, 22, 24, 69 | |||||
| 2010 | 2011 | 2012 | |||
| TrBk ~374 | TrBk ~380 | TrBk ~750 | |||
| 1 | Reconciliation Preparation Date | 11-Aug-10 | 10-Jul-11 | 10-Jul-12 | |
| 2 | |||||
| 3 | Deposits | ||||
| 4 | Directors loan | 55,100.00 | 56,611.00 | 0.00 | |
| 5 | Interest | 0.19 | 1.90 | ||
| 6 | Deposits | 62,616.82 | 39,863.64 | ||
| 7 | Business income | 44,633.56 | 297,532.12 | 53,287.84 | |
| 8 | Total deposits | 99,733.75 | 416,761.84 | 93,151.48 | |
| 9 | |||||
| 10 | Total receipts (excluding Dr loans) | 44,633.75 | 360,150.84 | 93,151.48 | |
| 11 | |||||
| 12 | Debits | ||||
| 13 | Accounting | 1,500.00 | |||
| 14 | Advertising | 32,160.00 | 5,400.00 | ||
| 15 | Bank Fees | 120.40 | 188.20 | 19.00 | |
| 16 | Drawings | 91,099.60 | 250,089.07 | 9,028.46 | |
| 17 | Elecricity | 582.61 | |||
| 18 | Gas | 335.45 | 36.37 | ||
| 19 | General expenses | 1,474.95 | 2,904.89 | 665.45 | |
| 20 | Interest | 0.12 | 3.09 | ||
| 21 | Labour hire (F & B Tukel "wages") | 73,522.23 | 33,363.64 | ||
| 22 | Merchant | 316.96 | |||
| 23 | Purchase | 2,821.54 | 3,241.63 | ||
| 24 | Rent | 44,800.00 | 17,264.00 | ||
| 25 | Rubbish removal | 16,794.96 | 62.25 | ||
| 26 | Staff amenities | 117.55 | |||
| 27 | Telephone | 400.27 | 4,412.07 | 739.79 | |
| 28 | Travel | 8,272.73 | |||
| 29 | Total debits | 96,569.29 | 437,125.40 | 68,042.59 | |
| 30 | |||||
| 31 | Total debits (excl F& B Tukel "wages") | 96,569.29 | 363,603.17 | 34,678.95 | |
Schedules to reasons.xlsx3_Reconciliations
| A | B | C | D | E | F | G | H | I | J | K | L | M | |
| Schedule 4 Stealth Enterprises - income adjustments - per ATO Decision reasons Reasons paragraphs 14, 15, 31, 34 35, 45, 74 | |||||||||||||
| 2010 | 2011 | 2012 | |||||||||||
| lodged | Assessed | Stealth Stmnt of Pos'n | lodged | Assessed | Stealth Stmnt of Pos'n | lodged | Assessed | Stealth Stmnt of Pos'n | |||||
| T6-48 | T6-54, 56, 60 | 20-Feb-20 | 26-May-20 | T6-48 | T6-54, 56, 60,77 | 20-Feb-20 | 26-May-20 | T6-48 | T6-56, 60 | 20-Feb-20 | 26-May-20 | ||
| ~376 | Sch 1 col H | Trib Bk 30A | Trib Bk 30B | ~389 | Sch 1 col H | Trib Bk 30A | Trib Bk 30B | Sch 1 col H | Trib Bk 30A | Trib Bk 30B | |||
| Tcpt ~133 | ~389, 747.2 | Tcpt ~133 | ~751 | Tcpt ~133 | |||||||||
| 1 | Income - Sales / Turnover | ||||||||||||
| 2 | SGB a/c deposits - "business income" | 44,634 | 49,096 | 297,532 | 327,285 | 58,617 | |||||||
| 3 | SGB a/c deposits - "deposits" | 62,617 | 68,879 | 43,850 | |||||||||
| 4 | SGB a/c - EFT & credit card deposits | 39,414 | 311,271 | 114,163 | |||||||||
| 5 | Cash (or Cash not deposited) (inc GST) | 25,292 | 26,276 | 204,084 | 207,514 | 68,311 | 76,109 | ||||||
| 6 | Total received (inc GST) | 320,000 | 74,389 | 65,691 | 2,197,143 | 600,248 | 518,785 | 1,040,000 | 170,778 | 190,272 | |||
| 7 | less GST | 0 | 29,091 | 6,763 | 5,972 | 199,740 | 54,568 | 47,162 | 94,545 | 15,525 | 17,297 | ||
| 8 | Total (exc GST) | 44,634 | 290,909 | 67,627 | 59,719 | 360,149 | 1,997,403 | 545,680 | 471,622 | 60,899 | 945,455 | 155,253 | 172,975 |
| 9 | |||||||||||||
| 10 | Add ATO - assessment adjustments | ||||||||||||
| 11 | Fines | 581 | 4,221 | ||||||||||
| 12 | Labour hire (sex workers) | 173,306 | |||||||||||
| 13 | Total income | 44,634 | 291,490 | 67,627 | 59,719 | 360,149 | 2,174,930 | 545,680 | 471,622 | 60,899 | 945,455 | 155,253 | 172,975 |
| 14 | Total income not declared | 246,857 | 22,993 | 15,085 | 1,814,781 | 185,531 | 111,473 | 884,556 | 94,354 | 112,076 | |||
| 15 | |||||||||||||
| 16 | Expenses | ||||||||||||
| 17 | Depreciation | 9,966 | 9,966 | 9,966 | 9,966 | 17,436 | 17,436 | 17,436 | 17,436 | 13,950 | 13,950 | 13,950 | 13,950 |
| 18 | Expenses (other) | 95,954 | 95,954 | 95,954 | 95,954 | 275,606 | 275,606 | 275,606 | 275,606 | 41,750 | 41,750 | 41,750 | 41,750 |
| 19 | Fines (not allowable deduction) | ||||||||||||
| 20 | Interest | 1 | 1 | 1 | 1 | 1 | 1 | ||||||
| 21 | Motor vehicle | 6,618 | 6,618 | 6,618 | 6,618 | 3,750 | 3,750 | 3,750 | 3,750 | 0 | 0 | ||
| 22 | Rent | 56,749 | 56,749 | 56,749 | 56,749 | 61,440 | 61,440 | 61,440 | 61,440 | 12,800 | 12,800 | 12,800 | 12,800 |
| 23 | Repairs & Maintenance | 1,674 | 1,674 | 1,674 | 1,674 | ||||||||
| 24 | Sub-contractors | 1,030 | 0 | 0 | |||||||||
| 25 | Wages / (Wages 50% of (GST exc) sales) | 0 | 151,942 | 33,814 | 29,859 | 1,043,244 | 272,840 | 235,811 | 493,811 | 77,626 | 86,487 | ||
| 26 | |||||||||||||
| 27 | Expenses (Total) | 171,991 | 322,903 | 204,775 | 200,820 | 358,233 | 1,401,477 | 631,073 | 594,044 | 68,500 | 562,311 | 146,127 | 154,988 |
| 28 | |||||||||||||
| 29 | Carried forward losses | -1916 | -31,413 | -34,093 | -34,093 | ||||||||
| 30 | |||||||||||||
| 31 | Taxable income (-loss) | -127,357 | -31,413 | -137,148 | -141,102 | 0 | 742,040 | -119,486 | -156,515 | -7,601 | 383,144 | 9,125 | 17,986 |
| 32 | Taxable income not declared | na | na | na | na | 742,040 | na | na | na | 383,144 | 9,125 | 17,986 | |
| 33 | Reasons paragraphs 12, 20, 23, 24 & 27 | ||||||||||||
| 34 | Notional 60% EFT proportion of income | 192,000 | 1,318,286 | 624,000 | |||||||||
Schedules to reasons.xlsx4_Gross income
| A | B | C | D | E | F | G | H | I | |
| Schedule 5 Stealth Enterprises - Bank reconciliations - "business income" deposits disputed by Mr Tukel Reasons paragraph 38 | |||||||||
| Date | Amount | ||||||||
| Actual | Type | in reconciliation | Bank a/c | ||||||
| GST inc | total | declared income | prior bal'nce | ||||||
| GST exc | |||||||||
| 1 | 12-Jul-10 | 7,500 | Deposit | 6,818.18 | 6,818.18 | 4,943.28 | |||
| 2 | 15-Jul-10 | 5,000 | Deposit | 4,545.45 | 4,545.45 | 6,276.26 | |||
| 3 | 23-Jul-10 | 3,550 | Deposit | 3,227.27 | 3,227.27 | 288.76 | |||
| 4 | 16-Sep-10 | 7,000 | Deposit | 6,363.64 | 6,363.64 | 8,320.79 | |||
| 5 | 25-Oct-10 | 1,200 | Cash Deposit | 1090.91 | 1090.91 | 5896.24 | |||
| 6 | 25-Nov-10 | 5,000 | Internet Deposit | 1,090.91 | 1,090.91 | 34,930.18 | |||
| 7 | 7-Feb-11 | 1,500 | Cash Deposit | 1,363.64 | 1,363.64 | 4,305.72 | |||
| 8 | 27-Apr-11 | 2,550 | Internet Deposit | 2,318.18 | 2,318.18 | 2,748.56 | |||
| 9 | 2-May-11 | 2,200 | Cash Deposit | 2,000.00 | 2,000.00 | 7,489.51 | |||
| 10 | 27-Jun-11 | 22,000 | Cash Deposit | 0.00 | 0.00 | 2,974.06 | |||
| 11 | 27-Jun-11 | 2,500 | Cash Deposit | 0.00 | 0.00 | 24,974.06 | |||
| 12 | 28-Jun-11 | 2,000 | Cash Deposit | 0.00 | 0.00 | 10,260.36 | |||
| 13 | Total | 62,000 | 28,818.18 | 28,818.18 | |||||
| 14 | Total "non EFT" deposits 2011 | 62,616.82 | |||||||
| 15 | Undisputed "non-EFT" (ie., including "Cash" deposits | 33,798.64 | |||||||
| ||||||||||||||||||||||||||||||||||
C:\Draft judgments\Stealth Enterprises v CoT - May 2019\Reasons\Schedules to reasons.xlsx
| A | B | C | D | E | G | H | I | J | K | L | M | |
| Schedule 6.1 Exhibit 22R - 2010 extract - Month, Quarter and Year - deposits and SMS messages Reasons paragraphs 58 to 62 | ||||||||||||
| Missing Days ('n") | EFT /CC days | "Cash" days | SMS days | DATE | AMOUNT | Cash Deposit | EFT | Credit Card | EFT +CC % of SMS rev | ATO Text Message Calculation | Jobs "n" | |
| FY2010 Q4 | ||||||||||||
| 1 | 21 | 8 | 1 | 0 | SUBTOTAL - April 2010 | $ 9,939.24 | $ 2,550.00 | $ 6,820.00 | $ 569.24 | 0 | ||
| 2 | 18 | 11 | 2 | 2 | SUBTOTAL - May 2010 | $ 14,922.00 | $ 2,850.00 | $ 12,072.00 | $ - | $ 5,240.00 | ||
| 3 | 10 | 14 | 1 | 6 | SUBTOTAL - June 2010 | $ 27,943.68 | $ 7,000.00 | $ 19,446.00 | $ 511.16 | 83% | $ 24,075.00 | 94 |
| 4 | 49 | 33 | 4 | 8 | FY2010 Q4 TOTAL | $ 52,804.92 | $ 12,400.00 | $ 38,338.00 | $ 1,080.40 | $ 29,315.00 | 94 | |
| Note 1:- | In May 2010 the calculated revenue for the text message on 27 and 28 May was $5,240. There were no EFT credits to the Stealth bank account on that day. There was an EFT credit of only $840 on Saturday 29 May 2010, but no related text message. Even if it were correct to assume that this EFT credit related to the two text messages, it represented only 16% of the calculated SMS message revenue. There was a further $1,410 EFT credit to the bank account on Monday 31 May 2010, but no text messages between 29 and 31 May 2010. | |||||||||||
| Note 2:- | In the ten day period from 18 to 27 June 2010 Stealth's $24,075 revenue indicated by the six text messages resulted in no cash deposits, and EFT credits of only $6,993 for the whole of the 10 day trading period. Those credits (even assuming they only related to the text messages) reflected only about 30% of the calculated text message revenue. | |||||||||||
| Schedule 6.2 - 2010 Scenario based on "60 / 40" ratio Reasons paragraps 64 & 65 | ||||||||||||
| EFT + credit Card | "ratio" revenue | "ratio" cash | Cash | |||||||||
| {Column I + J) | {(I +J) ÷ 0.6} | {revenue *0.4} | Expenses | Surplus | Banked | |||||||
| sex workers | managers | |||||||||||
| {revenue *0.5} | {Cash - expenses} | {actual} | ||||||||||
| 5 | SUBTOTAL - April 2010 | $ 7,389.24 | $ 12,315.40 | $ 4,926.16 | $ 6,157.70 | $ 8,000.00 | -$9,231.54 | $ 2,550.00 | ||||
| 6 | SUBTOTAL - May 2010 | $ 12,072.00 | $ 20,120.00 | $ 8,048.00 | $ 10,060.00 | $ 8,000.00 | -$10,012.00 | $ 2,850.00 | ||||
| 7 | SUBTOTAL - June 2010 | $ 19,957.16 | $ 33,261.93 | $ 13,304.77 | $ 16,630.97 | $ 8,000.00 | -$11,326.19 | $ 7,000.00 | ||||
| 8 | Total - 2010 year | $ 39,418.40 | $ 65,697.33 | $ 26,278.93 | $ 32,848.67 | $ 24,000.00 | -$30,569.73 | $ 12,400.00 | ||||
| A | B | C | D | E | G | H | I | J | M | N | O | |
| Schedule 7 .1 Exhibit 22R - 2011 extract - Month, Quarter and Year - deposits and SMS messages Reasons paragraphs 58 - 64 | ||||||||||||
| Missing Days ('n") | EFT /CC days | "Cash" days | SMS days | DATE | AMOUNT | Cash Deposit | EFT | Credit Card | EFT +CC % of SMS rev | ATO Text Message Calculation | Jobs "n" | |
| FY2011 Q1 | ||||||||||||
| 1 | 6 | 22 | 3 | 8 | SUBTOTAL - July 2010 | $ 36,402.00 | $ 16,050.00 | $ 20,352.00 | $ - | 93% | $ 21,910.00 | 88 |
| 2 | 9 | 22 | 2 | 0 | SUBTOTAL - August 2010 | $ 31,094.94 | $ 1,353.00 | $ 29,376.00 | $ 365.94 | $ - | 0 | |
| 3 | 5 | 23 | 2 | 14 | SUBTOTAL - September 2010 | $ 40,536.79 | $ 8,000.00 | $ 30,907.50 | $ 1,629.29 | 143% | $ 22,740.00 | 149 |
| 4 | 20 | 67 | 7 | 22 | FY2011 Q1 TOTAL | $ 108,033.73 | $ 25,403.00 | $ 80,635.50 | $ 1,995.23 | $ 44,650.00 | 298 | |
| 5 | FY2011 Q2 | |||||||||||
| 6 | 10 | 21 | 2 | 28 | SUBTOTAL - October 2010 | $ 28,394.63 | $ 2,300.00 | $ 24,316.00 | $ 319.47 | 59% | $ 41,700.00 | 208 |
| 7 | 5 | 24 | 5 | 14 | SUBTOTAL - November 2010 | $ 82,237.25 | $ 10,646.50 | $ 25,889.00 | $ 6,067.75 | 124% | $ 25,700.00 | 106 |
| 8 | 8 | 17 | 2 | 0 | SUBTOTAL - December 2010 | $ 34,036.96 | $ 1,775.00 | $ 32,018.00 | $ 243.96 | $ - | 0 | |
| 9 | 23 | 62 | 9 | 42 | FY2011 Q2 TOTAL | $ 144,668.84 | $ 14,721.50 | $ 82,223.00 | $ 6,631.18 | $ 67,400.00 | 106 | |
| 10 | FY2011 Q3 | |||||||||||
| 11 | 10 | 21 | 3 | 0 | SUBTOTAL - January 2011 | $ 27,929.69 | $ 2,065.00 | $ 25,673.00 | $ 191.69 | $ - | 0 | |
| 12 | 6 | 21 | 6 | 0 | SUBTOTAL - February 2011 | $ 26,628.95 | $ 6,225.00 | $ 20,099.00 | $ 304.95 | $ - | 0 | |
| 13 | 11 | 20 | 4 | 0 | SUBTOTAL - March 2011 | $ 28,078.16 | $ 4,875.00 | $ 22,692.00 | $ 511.16 | $ - | 0 | |
| 14 | 27 | 62 | 13 | 0 | FY2011 Q3 TOTAL | $ 82,636.80 | $ 13,165.00 | $ 68,464.00 | $ 1,007.80 | $ - | 0 | |
| 15 | FY2011 Q4 | |||||||||||
| 16 | 8 | 23 | 2 | 0 | SUBTOTAL - April 2011 | $ 30,310.79 | $ 4,970.00 | $ 25,157.82 | $ 182.97 | $ - | 0 | |
| 17 | 10 | 22 | 5 | 0 | SUBTOTAL - May 2011 | $ 31,593.17 | $ 6,000.00 | $ 25,188.50 | $ 404.67 | $ - | 0 | |
| 18 | 7 | 22 | 6 | 0 | SUBTOTAL - June 2011 | $ 48,659.47 | $ 29,280.00 | $ 18,932.21 | $ 447.26 | $ - | 0 | |
| 19 | 25 | 67 | 13 | 0 | FY2011 Q4 TOTAL | $ 110,563.43 | $ 40,250.00 | $ 69,278.53 | $ 1,034.90 | $ - | 0 | |
| 20 | 95 | 258 | 42 | 64 | FY2011 TOTAL | $ 445,902.80 | $ 93,539.50 | $ 300,601.03 | $ 10,669.11 | $ 112,050.00 | 0 | |
| 21 | ||||||||||||
| 22 | Note:- | Paragraph 64 of the Reasons contains observations about the lack of correlation between the SMS message information and Stealth's bank account entries. | ||||||||||
| 23 | Schedule 7.2 - 2011 Scenario based on "60 / 40" ratio Reasons paragraphs 65 & 65 | |||||||||||
| 24 | ||||||||||||
| 25 | ||||||||||||
| 26 | EFT + credit Card | "ratio" revenue | "ratio" cash | Cash | ||||||||
| 27 | {Column I + J) | {(I +J) ÷ 0.6} | {revenue *0.4} | Expenses | Surplus | Banked | ||||||
| 28 | sex workers | managers | ||||||||||
| 29 | {revenue *0.5} | {Cash - expenses} | {actual} | |||||||||
| 30 | ||||||||||||
| 31 | SUBTOTAL - July 2010 | $ 20,352.00 | $ 33,920.00 | $ 13,568.00 | $ 16,960.00 | $ 8,000.00 | -11,392.00 | $ 16,050.00 | ||||
| 32 | SUBTOTAL - August 2010 | $ 29,741.94 | $ 49,569.90 | $ 19,827.96 | $ 24,784.95 | $ 8,000.00 | -12,956.99 | $ 1,353.00 | ||||
| 33 | SUBTOTAL - September 2010 | $ 32,536.79 | $ 54,227.98 | $ 21,691.19 | $ 27,113.99 | $ 8,000.00 | -13,422.80 | $ 8,000.00 | ||||
| 34 | SUBTOTAL - October 2010 | $ 24,635.47 | $ 41,059.12 | $ 16,423.65 | $ 20,529.56 | $ 8,000.00 | -12,105.91 | $ 2,300.00 | ||||
| 35 | SUBTOTAL - November 2010 | $ 31,956.75 | $ 53,261.25 | $ 21,304.50 | $ 26,630.63 | $ 8,000.00 | -13,326.13 | $ 10,646.50 | ||||
| 36 | SUBTOTAL - December 2010 | $ 32,261.96 | $ 53,769.93 | $ 21,507.97 | $ 26,884.97 | $ 8,000.00 | -13,376.99 | $ 1,775.00 | ||||
| 37 | SUBTOTAL - January 2011 | $ 25,864.69 | $ 43,107.82 | $ 17,243.13 | $ 21,553.91 | $ 8,000.00 | -12,310.78 | $ 2,065.00 | ||||
| 38 | SUBTOTAL - February 2011 | $ 20,403.95 | $ 34,006.58 | $ 13,602.63 | $ 17,003.29 | $ 8,000.00 | -11,400.66 | $ 6,225.00 | ||||
| 39 | SUBTOTAL - March 2011 | $ 23,203.16 | $ 38,671.93 | $ 15,468.77 | $ 19,335.97 | $ 8,000.00 | -11,867.19 | $ 4,875.00 | ||||
| 40 | SUBTOTAL - April 2011 | $ 25,340.79 | $ 42,234.65 | $ 16,893.86 | $ 21,117.33 | $ 8,000.00 | -12,223.47 | $ 4,970.00 | ||||
| 41 | SUBTOTAL - May 2011 | $ 25,593.17 | $ 42,655.28 | $ 17,062.11 | $ 21,327.64 | $ 8,000.00 | -12,265.53 | $ 6,000.00 | ||||
| 42 | SUBTOTAL - June 2011 | $ 19,379.47 | $ 32,299.12 | $ 12,919.65 | $ 16,149.56 | $ 8,000.00 | -11,229.91 | $ 29,280.00 | ||||
| 43 | Total - 2011 year | $ 311,270.14 | $ 518,783.57 | $ 207,513.43 | $ 259,391.78 | $ 96,000.00 | -147,878.36 | $ 93,539.50 | ||||
| A | B | C | D | E | F | G | J | K | L |
| 1 | Schedule 8 - Exhibit 22R - Spreadsheet / bank account entries relating to January 2011 "Summer Nats" Reasons paragraph 66 | ||||||||
| 2 | |||||||||
| 3 | EFT + credit Card | "ratio" revenue | "ratio" cash | Cash | |||||
| 4 | total $ | {(EFT etc) ÷ 0.6} | {revenue *0.4} | Expenses | Surplus | Banked | |||
| 5 | sex workers | managers | |||||||
| 6 | {revenue *0.5} | {Cash - expenses} | {actual} | ||||||
| 7 | Ex 22R spreadsheet entries | ||||||||
| 8 | Wednesday, 5 January 2011 | $ 660.00 | $ 1,100.00 | $ 440.00 | $ 550.00 | $ 200.00 | -310.00 | $ - | |
| 9 | Thursday, 6 January 2011 | $ - | $ - | $ - | $ - | ||||
| 10 | Friday, 7 January 2011 | $ 1,032.00 | $ 1,720.00 | $ 688.00 | $ 860.00 | $ 200.00 | -372.00 | $ - | |
| 11 | Saturday, 8 January 2011 | $ 3,885.00 | $ 6,475.00 | $ 2,590.00 | $ 3,237.50 | $ 200.00 | -847.50 | $ - | |
| 12 | Sunday, 9 January 2011 | $ - | $ - | $ - | $ - | ||||
| 13 | Monday, 10 January 2011 | $ 5,940.00 | $ 9,900.00 | $ 3,960.00 | $ 4,950.00 | $ 200.00 | -1,190.00 | $ - | |
| 14 | Total | $ 11,517.00 | $ 19,195.00 | $ 7,678.00 | $ 9,597.50 | $ 800.00 | -2,719.50 | $ - | |
| 15 | |||||||||
| 16 | Tukel oral evidence | Tcpt ~90 & 121 | {rev - EFT} | ||||||
| 17 | per Tukel evidence Tcpt 90 & 121 | $ 11,517.00 | $30,000.00 | $18,483.00 | $ 15,000.00 | $ 800.00 | 2,683.00 | $ - | |
| 18 | |||||||||
| 18 | Tribunal Bk ~506 | ||||||||
| 19 | per Tukel January 2011 interview | $ 11,517.00 | $ 45,000.00 | $ 33,483.00 | $ 22,500.00 | $ 800.00 | 10,183.00 | $ - | |
Exhibit 22R - Trbnl Book Tab 22 Spreadsheet - with Job n column & non SGN entry days.xlsx2011_Qrtrs compressed
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