Tribunal: Deputy President Bernard McCabe
A decision was made by the Commissioner of Taxation to issue amended tax assessments and impose administrative penalties on the applicant of 75% for making false statements in her assessments. On 5 February 2018, the Administrative Appeals Tribunal affirmed the decision.
The Commissioner of Taxation questioned whether the applicant disclosed all of her assessable income in returns filed in respect of the financial years ending 30 June 2014 and 30 June 2015. The Commissioner was suspicious because the applicant reported a relatively modest income as a beauty technician yet she had an unexpectedly high volume of money passing through her accounts. After analysing the applicant’s bank statements and other records the Commissioner made the above decision.
The applicant claimed her pay varied from week to week to reflect the number of hours she worked and that she was always paid in cash and did not recall receiving pay slips. She was an extensive gambler and devoted significant time to that activity. She claimed this was the explanation for the money ‘sloshing’ through her accounts. She claimed that the gambling was a pastime rather than a business endeavour, so it did not qualify as assessable income. The applicant’s declared income in her return for the financial year ended 30 June 2014 was $27,940 yet the Commissioner’s analysis of bank accounts, records of international money transfers and data provided by casinos suggests the applicant spent $40,446. Her income in the following year was $61,482 but the Commissioner says she spent $107,328.
Section 14ZZK(b) of the Taxation Administration Act 1953 (Cth) provides that the assessment made by the Commissioner will stand unless the applicant is able to demonstrate that the assessment was excessive. The applicant must do more than establish that the commissioner’s estimate was wrong; the applicant must instead establish what the correct figure is.
The Tribunal was not satisfied the commissioner’s assessments were excessive. This conclusion was based on the applicant’s evidence not being persuasive and not supporting her income and expenditure. The Tribunal stated the applicant’s explanations for the fluctuations in her bank accounts did not ring true. The applicant did not provide sufficient corroborating evidence and the absence of such evidence, including witnesses and relevant documents, was problematic as aspects of her story seemed unlikely. The applicant gave further evidence about her track-record at the casino during cross-examination. She repeated the claim she won more than she lost, but she confirmed she did not keep records of her winnings, nor was there any evidence of her keeping a running total. Her claim that she was attempting to establish a record of transactions that would impress the bank so she could be granted a loan did not survive cross-examination. She was ultimately unable to explain why she was moving money through her accounts so actively.
The Tribunal therefore affirmed the objection decisions relating to tax in the two years of income under review and was satisfied the administrative penalty was properly imposed at the rate of 75%.
Read the full written decision on Austlii.
 Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614;  HCA 3 at  per Brennan J and  per Toohey J.