Rigoli v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (VID 475 of 2015)
Judgment date: 14 March 2016
Date published: 12 August 2016

Summary of decision:
Outlines the ATO's response to this case which concerns whether the taxpayer discharged his burden of proving that default assessments were excessive and whether the Tribunal discharged its review function.

Overview of facts:
During the 1994 to 2001 income years, the taxpayer carried on business in partnership. The partnership did not keep business records. The taxpayer did not lodge income tax returns for any of those years, and the Commissioner made default assessments under section 167 of the Income Tax Assessment Act 1936 (ITAA 1936) of the amount upon which, in his judgment, income tax ought to be levied for each year. The taxpayer objected to the assessments on the simple ground that he had 'no taxable income'. | The taxpayer applied for review of the objection decision by the Administrative Appeals Tribunal (Tribunal). The Tribunal's decision was the subject of two appeals reported as Commissioner of Taxation v Rigoli [2013] FCA 784 and Rigoli v Commissioner of Taxation [2014] FCAFC 29 before being remitted to the Tribunal for further hearing. | Before the Tribunal on remitter, the taxpayer sought to discharge his burden of proof under section 14ZZK Taxation Administration Act 1953 by relying (in part) on the affidavit of an accountant (the Kompos report). The Commissioner had produced the Kompos report to show the basis on which he formed a judgment about the amounts on which income tax ought be levied for the purpose of making the default assessments. | The Tribunal concluded that the taxpayer did not discharge his burden of proof and affirmed the Commissioner's objection decisions. In doing so, the Tribunal found that the Kompos report 'was not intended to and did not establish, even on the basis of an estimate, the actual taxable income of Mr Rigoli from all sources for the income years in question.' | The taxpayer appealed to the Federal Court. The decision of the primary judge is reported as Rigoli v Commissioner of Taxation [2015] FCA 803. The primary judge dismissed the appeal. | The taxpayer then appealed to the Full Court. | Issues decided by the court | The issues decided by the Full Court were: • Whether the primary judge erred by declining to hold that the Tribunal had erred in excluding consideration of the Kompos report per se because it was not evidence led by the taxpayer; and • Whether the primary judge erred by declining to hold that the Tribunal had erred in concluding that the Kompos report did not provide a sufficient probative evidentiary basis for findings as to the taxpayer's actual taxable income. • The Full Court affirmed the decision of the primary judge and dismissed the appeal. | • Whether the primary judge erred by declining to hold that the Tribunal had erred in excluding consideration of the Kompos report per se because it was not evidence led by the taxpayer; and • Whether the primary judge erred by declining to hold that the Tribunal had erred in concluding that the Kompos report did not provide a sufficient probative evidentiary basis for findings as to the taxpayer's actual taxable income. • The Full Court affirmed the decision of the primary judge and dismissed the appeal.

Issues decided:
The issues decided by the Full Court were: • Whether the primary judge erred by declining to hold that the Tribunal had erred in excluding consideration of the Kompos report per se because it was not evidence led by the taxpayer; and • Whether the primary judge erred by declining to hold that the Tribunal had erred in concluding that the Kompos report did not provide a sufficient probative evidentiary basis for findings as to the taxpayer's actual taxable income. • The Full Court affirmed the decision of the primary judge and dismissed the appeal. • Whether the primary judge erred by declining to hold that the Tribunal had erred in excluding consideration of the Kompos report per se because it was not evidence led by the taxpayer; and • Whether the primary judge erred by declining to hold that the Tribunal had erred in concluding that the Kompos report did not provide a sufficient probative evidentiary basis for findings as to the taxpayer's actual taxable income. • The Full Court affirmed the decision of the primary judge and dismissed the appeal.

ATO view of decision:
The Court's decision is consistent with the Commissioner's view of the Tribunal's decision and with the Commissioner's view on what is required by a taxpayer to discharge the burden of proving that an assessment issued under section 167 of the ITAA 1936 is excessive.

Administrative treatment:
Implications for impacted ATO precedential documents (Public Rulings, Determinations, ATO IDs) | None. | Implications for impacted Law Administration Practice Statements | None.

Legislative references: Administrative Appeals Tribunal Act 1975 44 Income Tax Assessment Act 1936 167 Taxation Administration Act 1953 14ZZK
Case references: Commissioner of Taxation v Dalco (1990) 168 CLR 614 (1990) 20 ATR 1370 90 ATC 4088 Commissioner of Taxation v Rigoli [2013] FCA 784 2013 ATC 20-407 George v Federal Commissioner of Taxation [1952] HCA 21 (1952) 86 CLR 183 (1952) 9 ATD 421 5 AITR 360 Kimche v Federal Commissioner of Taxation [2004] FCA 1108 (2004) 57 ATR 28 Ma v Commissioner of Taxation [1992] FCA 359 (1992) 37 FCR 225 (1992) 23 ATR 485 Martin v Federal Commissioner of Taxation [1993] FCA 621 (1993) 27 ATR 282 93 ATC 5200 Rigoli v Commissioner of Taxation [2014] FCAFC 29 2014 ATC 20-446