Addoug v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2007/5020)
Judgment date: 3 February 2010
Date published: 15 June 2010
Decision outcome: The decision under review was varied by reducing the penalty imposed in respect of the GST shortfall to 25%. In all remaining aspects, the decision under review was affirmed.

Summary of decision:
This case involves the question of whether the taxpayer has discharged the onus of proving that amended assessments of income tax and assessments for a net amount of GST were excessive, and whether administrative penalties imposed for assessed income tax and GST shortfalls were appropriate.

Overview of facts:
1. In August 2003 the Applicant entered into a contract for the purchase of a tobacco farm. | 2. An audit was undertaken of the Applicant's business activities. The audit considered the Applicant's compliance with A New Tax System (Goods and Services Tax) Act 1999 ("the GST Act") and income tax matters. | GST | 3. At the conclusion of the audit, the Respondent issued assessments of the Applicant's net amount for the period 1 January 2004 to 30 June 2005 and an assessment of administrative penalties ("the GST Assessments"). | 4. The applicant, by her Counsel in final submissions, conceded that she was liable to pay GST during the relevant periods. | Income Tax | 5. The review, for the purposes of income tax, was conducted in relation to the income years ended 2003, 2004 and 2005. | 6. At the conclusion of the audit, the respondent issued amended assessments in respect of income tax for the three years ("the Income Tax Assessments") and a notice of assessment and liability to pay penalty for the 2004 and 2005 years. | Issues decided by the court | The Tribunal affirmed the Commissioner's objection decision in respect of: • the amended income tax assessments for the 2003, 2004 and 2005 years, • the GST Assessments for the quarters ended 31 March 2004, 30 June 2004, 30 September 2004, 31 December 2004, 31 March 2005, and 30 June 2005, and • the penalty of 50% imposed with respect to the income tax shortfall. | • the amended income tax assessments for the 2003, 2004 and 2005 years, • the GST Assessments for the quarters ended 31 March 2004, 30 June 2004, 30 September 2004, 31 December 2004, 31 March 2005, and 30 June 2005, and • the penalty of 50% imposed with respect to the income tax shortfall. | The Tribunal, notwithstanding the doubts it expressed about the credibility of the taxpayer's evidence, accepted that she did receive advice from her accountant that she was not liable for GST. Consequently, the Tribunal decided to reduce the penalty imposed with respect to the GST shortfall to 25%.

Issues decided:
The Tribunal affirmed the Commissioner's objection decision in respect of: • the amended income tax assessments for the 2003, 2004 and 2005 years, • the GST Assessments for the quarters ended 31 March 2004, 30 June 2004, 30 September 2004, 31 December 2004, 31 March 2005, and 30 June 2005, and • the penalty of 50% imposed with respect to the income tax shortfall. • the amended income tax assessments for the 2003, 2004 and 2005 years, • the GST Assessments for the quarters ended 31 March 2004, 30 June 2004, 30 September 2004, 31 December 2004, 31 March 2005, and 30 June 2005, and • the penalty of 50% imposed with respect to the income tax shortfall. The Tribunal, notwithstanding the doubts it expressed about the credibility of the taxpayer's evidence, accepted that she did receive advice from her accountant that she was not liable for GST. Consequently, the Tribunal decided to reduce the penalty imposed with respect to the GST shortfall to 25%.

ATO view of decision:
The decision to reduce the GST penalty was open to the Tribunal on the particular facts and circumstances of this case. Therefore, it is considered that the decision will not have any impact on existing or future litigation matters.

Administrative treatment:
n/a

Legislative references: Taxation Administration Act (1953) 14ZZK 284-80 284-90(1)
Case references: Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 (1990) 20 ATR 1370 (1990) 90 ATC 4088 McCormack v Commissioner of Taxation (1979) 143 CLR 284 (1979) 9 ATR 610 (1979) 79 ATC 4111 Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 (1975) 5 ATR 672 (1975) 75 ATC 4257
Subject references: Income Tax Penalties Goods & Services Tax GST Default assessments Burden of proof Onus on taxpayer to prove assessments excessive