Horrocks and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2009/2865, 4347-4355)
Judgment date: 29 April 2010
Date published: 30 June 2010
Decision outcome: Partly adverse

Summary of decision:
Outlines the Tax Office's response to this case which concerned whether the taxpayer was a resident of Australia during the relevant years, whether he was taxable on income the Commissioner claimed he had derived, and whether penalties imposed should be reduced.

Overview of facts:
As a result of an audit conducted in April 2005 into the taxpayer's income tax affairs, default assessments for the 1993, 1994, 1997 and 1999 to 2005 income years were issued to the taxpayer in September 2006 (no returns lodged). The taxpayer sought review by the Tribunal of decisions which disallowed objections to the assessments for the 1993, 1994, 1997, 1999 and 2000 years. | The taxpayer purchased a property in Victoria and paid a deposit of $20,000 in May 1993, and the balance of $12,000 in May 1994. He was assessed to those amounts for the 1993 and 1994 years, respectively. As at October 1996, the improved value of the property had increased by $60,000. The increase in value was assessed to the taxpayer for the 1997 year. The assessments for the 1999 and 2000 years included unexplained deposits to an Australian bank account. | The taxpayer claimed that he was not assessable to the amounts assessed because, between 1990 and 1999, he was a resident of NZ, and a non-resident of Australia, deriving income solely from sources in NZ. | Issues decided by the tribunal | Given the inconsistencies in the taxpayer's oral evidence about the dates of his residency in NZ, and the lack of objective evidence to support a ten year stay in NZ, the Tribunal was not able to be satisfied that he was residing in NZ during the relevant period and, therefore, that he was a non-resident of Australia during the years in dispute (paragraph 10). | Accordingly, the Tribunal found that, in respect of the 1993, 1994, 1999 and 2000 years, the taxpayer had not discharged the burden of proving under section 14ZZK of the Taxation Administration Act 1953 the assessments were excessive (paragraphs 12 and 13). | In respect of the 1997 year, the Tribunal found that only $6,000 was assessable to the taxpayer, on the basis that it accepted the taxpayer's oral evidence that he only spent that amount during the year in improving the value of the property acquired (paragraph 15). | For the 1999 and 2000 years, the Tribunal held that it was not appropriate to remit the late lodgement penalties which were imposed on the taxpayer. For the 1993 and 1994 years, the Tribunal remitted the penalty from the default rate of 200% to 50%. For the 1997 year, the Tribunal remitted the penalty imposed by 50% (paragraphs 16 and 17).

Issues decided:
Given the inconsistencies in the taxpayer's oral evidence about the dates of his residency in NZ, and the lack of objective evidence to support a ten year stay in NZ, the Tribunal was not able to be satisfied that he was residing in NZ during the relevant period and, therefore, that he was a non-resident of Australia during the years in dispute (paragraph 10). Accordingly, the Tribunal found that, in respect of the 1993, 1994, 1999 and 2000 years, the taxpayer had not discharged the burden of proving under section 14ZZK of the Taxation Administration Act 1953 the assessments were excessive (paragraphs 12 and 13). In respect of the 1997 year, the Tribunal found that only $6,000 was assessable to the taxpayer, on the basis that it accepted the taxpayer's oral evidence that he only spent that amount during the year in improving the value of the property acquired (paragraph 15). For the 1999 and 2000 years, the Tribunal held that it was not appropriate to remit the late lodgement penalties which were imposed on the taxpayer. For the 1993 and 1994 years, the Tribunal remitted the penalty from the default rate of 200% to 50%. For the 1997 year, the Tribunal remitted the penalty imposed by 50% (paragraphs 16 and 17).

ATO view of decision:
The Tax Office accepts that it was open to the Tribunal to accept the oral evidence of the taxpayer as to the expenditure incurred in the 1997 year on improving the property acquired, and to remit the penalties on the bases decided. The case was decided on its own particular facts.

Administrative treatment:

Legislative references: Taxation Administration Act 1953 14ZZK Income Tax Assessment Act 1936 163B 163C 222(1)
Subject references: Non-resident Onus of proof Unexplained deposits Penalties