Waters and Commissioner of Taxation (Taxation)

The case of *Waters and Commissioner of Taxation* concerned an appeal by Mr and Mrs Waters against decisions of the Commissioner of Taxation regarding their tax liabilities, penalties, and shortfall interest charge. The proceedings were heard by Deputy President Bernard J McCabe of the Administrative Appeals Tribunal. The core of the dispute revolved around the applicants' failure to satisfy the onus of proof required under section 14ZZK(b) of the *Taxation Administration Act 1953* (Cth).

The legal issues before the Tribunal were whether the applicants had discharged their burden of proving that the Commissioner's assessments of their taxable income were incorrect, and whether they had positively established their correct taxable income on the balance of probabilities. Furthermore, the Tribunal was required to determine if penalties and shortfall interest charges were necessary and appropriate. The onus rested on the taxpayers to demonstrate that the Commissioner's assessments were wrong and to provide evidence establishing their true taxable income and the appropriate penalty amounts.

Deputy President McCabe reasoned that the applicants had failed to meet the evidentiary burden imposed by section 14ZZK(b). Despite the logistical challenges faced by Mr Waters due to his detention and the COVID-19 pandemic, and the limited experience of the tax agent representing the applicants, the Tribunal found the evidence presented to be insufficient. Mr Waters' own testimony was of limited assistance as he could not recall or explain many transactions, and his claims of undocumented loans were considered unlikely. The analysis provided by the tax agent was deemed incomplete and given limited weight due to his lack of first-hand knowledge. Crucially, the Tribunal noted the absence of key witnesses who could have provided valuable explanations for transactions, and this failure was not adequately explained. Consequently, the Tribunal was unable to conclude that Mr Waters had discharged his onus for any of the years under review, and there was no evidence to suggest the Commissioner's opinion of fraud or evasion was unfounded.

Accordingly, the Tribunal affirmed the Commissioner's objection decisions concerning Mr Waters' substantive tax liability and the imposition of administrative penalties.