Youssef Said Abdelbari (Taxation) - [2024] AATA 1978

Youssef Said Abdelbari (Taxation) [2024] AATA 1978 (24 June 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2022/7366-67
Re:Maged Youssef Said Abdelbari
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION
Tribunal:Senior Member G Lazanas
Date: 24 June 2024
Place:Sydney

The decision under review with respect to the income tax assessments is affirmed.
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Senior Member G Lazanas
CATCHWORDS

TAXATION – whether four transfers of money from overseas to applicant are assessable income – where three transfers made by a company that applicant was previously a partner of – where three transfers described as payment of salary – where one transfer made by applicant’s son and described as family support – where applicant signed special power of attorney appointing son as attorney in relation to company – whether four transfers of money are from applicant’s son pursuant to a loan agreement – whether loan exists – periodicity of payments – burden of proof – failure to adduce reliable evidence – objection decision affirmed

LEGISLATION
Income Tax Assessment Act 1936 (Cth) s 166
Income Tax Assessment Act 1997(Cth) ss 4-15, 6-5, 51-30, 51-50

Taxation Administration Act 1953 (Cth) ss 14ZZK, Schedule 1, 284-75, 284-80, 284-85,284-90, 284-220, 298-220

CASES
Commissioner of Taxation v Firth (2002) 120 FCR 450
Commissioner of Taxation v Radilo Enterprises Pty Ltd (1997) 72 FCR 300
Commissioner of Taxation v Rawson Finances Pty Ltd (2012) 89 ATR 357
Federal Commissioner of Taxation v Dixon (1952) 86 CLR 540
Gauci v Commissioner of Taxation (1975) 135 CLR 81
Hart v Commissioner of Taxation [2018] FCAFC 61
Liang v Commissioner [2024] FCA 535
REASONS FOR DECISION
Senior Member G Lazanas
24 June 2024
INTRODUCTION

Mr Maged Youssef Said Abdelbari, the applicant, has applied to the Tribunal seeking review of the decision made by the respondent, the Commissioner of Taxation (the Commissioner) on 24 August 2022 to not allow Mr Abdelbari’s objection to the Commissioner’s assessments (the Objection Decision) for the income years ended 30 June 2019 and 30 June 2020 (the Relevant Years). The Commissioner had issued assessments on the basis that Mr Abdelbari had received a total of $232,506.33 in foreign source income from the United Arab Emirates (UAE) that he had not declared in his income tax returns for the Relevant Years.
This case is about whether four transfers of money received from the UAE between 16 January 2019 and 5 February 2020 totalling $232,506.33 were assessable income of Mr Abdelbari. Mr Abdelbari asserted these transfers of money represented a loan from his son who was living in the UAE. The Commissioner argued that Mr Abdelbari had not discharged his burden of proof under s 14ZZK of the Taxation Administration Act 1953 (Cth) (TAA), namely, to prove that the amounts were not his assessable income.
As these reasons will explain, I have decided that Mr Abdelbari failed to discharge the burden of proof and, therefore, the transfers were correctly included in his assessable income in the Relevant Years.

THE…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] AATA 1978
Decision Date: 24 June 2024

CaseChat Overview and Summary

The Administrative Appeals Tribunal considered a dispute between Youssef Said Abdelbari and the Commissioner of Taxation concerning the assessability of four overseas money transfers. Mr. Abdelbari sought a review of the Commissioner's objection decision, which had affirmed the assessments of income tax for the relevant years. The core of the dispute revolved around whether these transfers constituted assessable income or were loans as claimed by Mr. Abdelbari.

The Tribunal was required to determine whether the four transfers of money from overseas to Mr. Abdelbari were assessable income. Specifically, it needed to ascertain if three of these transfers, originating from a company of which Mr. Abdelbari was a former partner, were indeed salary payments as initially described, or if they, along with a fourth transfer from his son, represented a loan. The Tribunal also had to consider the burden of proof in establishing the nature of these transactions.

In reaching its decision, the Tribunal found that Mr. Abdelbari failed to discharge the burden of proving that the assessments were excessive. The Tribunal accepted that the transfers, particularly those described as salary, were made by a company from which Mr. Abdelbari had resigned as a partner and had no further involvement. Furthermore, the Tribunal applied the principle established in *Dixon*, finding that the periodic nature of the payments and Mr. Abdelbari's reliance on them for daily expenditure indicated that they were income according to ordinary concepts. Consequently, the Tribunal affirmed the Commissioner's objection decision.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

On 8 September 2022, Mr Abdelbari lodged an application for review with the Tribunal with respect to the Objection Decision.THE EVIDENCE As stated above, Mr Abdelbari swore an affidavit on 12 April 2023 which attached a number of documents.[22] In his affidavit, he stated that between the years of 2008 and 2018, he was a partner of Delma Laboratory holding a 49% share and, on 9 May 2018, he stepped down from the Company and his son, Yousif, replaced him as partner of Delma Laboratory and his share was transferred to Yousif. This decision was made on account of Mr Abdelbari and his family leaving Abu Dhabi to live in Sydney. [22] Exhibit A2. Mr Abdelbari’s oral evidence was that from the date of the Special Power of Attorney in August 2017, Yousif had control of Delma Laboratory and Mr Abdelbari had nothing further to do with that company. However, Mr Abdelbari also stated that he stepped down from his role on 9 May 2018 and, it was from that date that he was no longer making decisions in relation to Delma Laboratory, nor was Yousif making decisions on behalf of Mr Abdelbari, in relation to Delma Laboratory’s business activities. While there was some confusion as to the effective date of Mr Abdelbari no longer exercising control with respect to Delma Laboratory, I accept that by 9 May 2018, at the latest, Mr Abdelbari no longer had any control or authority in respect of Delma Laboratory and there were relevantly two partners in Delma Laboratory at all relevant times. Mr Abdelbari also stated that there were times where he struggled with finances in relation to supporting his family in Australia and he relied on Yousif to assist him and the family of nine with funds while he was setting up as a sole trader in the fruit and vegetable industry. This general statement was supported by the numerous other transfers of monies from Yousif to Mr Abdelbari after the Relevant Years that were reported in the AUSTRAC report (see [20] above), as well as in Mr Abdelbari’s NAB account statements, which were variously described as “Family Needs”, “Family Support”, “Family Maintenance”. Mr Abdelbari did not directly reference any of these later transfers, although they were variously described as “Family Needs”, “Family Support” and “Family Maintenance”. Almost all of those transfers were made by Yousif, and none were made by Delma Laboratory. With respect to the arrangement with Yousif regarding the four transfers in issue in these proceedings, Mr Abdelbari’s evidence was that there was a loan for the sum of those four transfers. However, he did not canvass the position with respect to the numerous other transfers to him from Yousif, as referred to immediately above. Mr Abdelbari stated, as follows in his affidavit: 7. Conversations between Yousif and I confirmed that the funds provided to me would be on a loan basis, and that I would pay back the funds in time. A loan agreement with Yousif’s conditions were drafted – Annexure B [the Second Loan Agreement].8. On 16/01/2019, 06/03/2019, 23/07/2019 and 05/02/2020, Yousif assisted me by transferring a total of $232,506 from his Company and Personal account to my personal account – Annexure C [AUSTRAC report]. 9. This transfer was completed through a third party exchange, whereby they had accidentally put the description as payment of salary, when I have no interest in the Company.10. After I stepped down from the Company, I had never become an employee nor attended to any further work for the Company, therefore it could not have been a salary.11. When it came to my attention that the third party exchange company had put “salary” as the description, I tried to amend the issue, but the exchange company had closed down, thus I could not get it changed. 12. There is no evidence that since my resignation I was ever an employee of the Company or had provided any more work to the Company.13. The transfer was a loan for the purposes of supporting our transition from Abu Dhabi to Australia. …16. Further conversations between Yousif and I to establish that the funds transferred were a loan, a loan agreement was drafted and signed by all parties – Annexure D. 17. On 01 May 2023, I will be transferring my first payments back to Yousif to ensure that the first steps to the Loan Agreement have been actioned. 18. Again, the funds transferred are not foreign income as I had no interest in the Company at the time of the transfers, and I confirm that they are a loan for the purposes of supporting myself and my family during our transition from Abu Dhabi to Australia.

Decision

Reasons for decision

Mr Abdelbari failed to discharge the burden of proving that the assessments issued to him by the Commissioner in respect to income tax for the Relevant Years were excessive. Moreover, in accordance with Dixon, the transfers to Mr Abdelbari were periodic payments on which he relied to fund his daily expenditure and, therefore, income according to ordinary concepts. DECISION The Objection Decision with respect to the income tax assessments is accordingly affirmed.

Ratio Decidendi

Legal Principle Established

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