Stone v Federal Commissioner of Taxation

This case concerned an appeal by Joseph Ernest Stone against an amended income tax assessment made by the Federal Commissioner of Taxation for the year ending 30 June 1916. Stone initially returned a taxable income of £519, but following an investigation by the Commissioner, his income was reassessed at £2,124. Stone objected to this amended assessment, arguing that a sum of £974 3s. 3d. attributed to his "English business" should have been an expense of his "Australian business," and that further expenses totalling approximately £900, disallowed by the Commissioner, should have been allowed.

The central legal issue before the High Court was whether the taxpayer, Stone, had discharged the onus placed upon him by section 32 of the *Income Tax Assessment Act 1915-1916* to establish that the Commissioner's amended assessment was excessive. This required the court to determine if Stone had provided sufficient evidence to prove that the Commissioner's disallowance of certain expenses and the attribution of the £974 3s. 3d. sum were incorrect.

Isaacs J. emphasised that section 32 of the Act places the burden of proof squarely on the taxpayer. The Commissioner's assessment is presumed to be made after careful consideration and with practical business knowledge, rendering it final unless the taxpayer can affirmatively demonstrate its excess. Regarding the £974 3s. 3d., the court found that the available records provided no clear indication of whether this expenditure related to the English or Australian business. Despite the taxpayer's assertions and the evidence of his accountant, no light was shed on the matter, and the court concluded that Stone had failed to "establish" the alleged inaccuracy. The court also addressed the disallowed expenses totalling approximately £900, allowing a portion of these amounting to £299 12s. 6d., with a further adjustment for a related sum.

Consequently, the court ordered that the Commissioner's assessment be reduced by the net amount allowed in Stone's favour, resulting in a final assessed taxable income of £1,891 6s. 10d.