Recent tribunal cases and what we should learn

Two recent tribunal cases are worth mentioning this week one for its frivolity and ballsiness and the other illustrates the fight you are up against to displace the Commissioner’s default assessments.

The first case involved a Peter Paalvast and a Mr Phillip Atkinson who, when presented with a statement of account from the ATO for an outstanding liability of $112,500, promptly sent back the statement of account after affixing a number of stamps, handwritten notes and a document titled bill of exchange for $1. It appears they tried to argue, that their actions converted the statement of account into a bill of exchange and in presenting it back to the ATO cancelled out the liability owed.

I suppose anything is worth a try, but the Tribunal dismissed the argument and awarded costs against Mr Atkinson. Surprisingly the Tribunal member still dealt with the matter with some degree of seriousness and stepped through the arguments for why it didn’t work, But did finish with a warning to Mr Paalvast, who had, it appeared, instigated a number of these attempts with other creditors.

The second case involved a Robert Agius, who appears to have been involved in Vanuatu tax schemes and was charged and imprisoned for defrauding the Commonwealth over these matters. Mr Agius was investigated under the joint taskforce Project Wickenby and as a result default income tax assessments were issued to him for the years 1997 to 2006. During that time Mr Agius was a partner in the PKF/Moore Stephens Vanuatu practice and argued that he was a not a resident of Australia. The Commissioner argued that he resided in Australia as he had dealings and family here and maintained connections.

The tribunal agreed with Mr Agius, that all times, since as early as 1981, he was not a resident of Australia. However, although he was not a resident of Australia, as a non-resident who has earned Australian sourced income he must lodge a tax return to include that income and pay tax accordingly.

The Australian sourced income was from a number of Australian business dealings and therefore had it’s source here. The Tribunal then addressed the taxpayer’s burden or onus of proof especially when the Commissioner has issued a default assessment. The tribunal highlighted that it is not enough for the taxpayer to show the Commissioner’s assessment is wrong but that it is excessive. The Tribunal also stated that as part of showing the assessment is excessive the taxpayer must first show what the correct taxable income is. In this case Mr Agius didn’t include a number of transactions in his income and therefore failed to show the correct income. Therefore, the Tribunal decided the Commissioner’s assessments stand along with the automatic 75% penalty (for default assessments).