A taxpayer has been unsuccessful in seeking a stay of proceedings brought by the ATO to recover a $14m tax liability pending a determination of the objections to the assessments.

The facts were these.

  • The taxpayer did not lodge income tax returns for the years ending 30 June 2008 to 30 June 2010 as she contended that she was not an Australian tax resident.
  • The ATO began a covert audit of the taxpayer.
  • After she entered into a contract to sell her Mosman home for $17.5m, the ATO required her to attend an interview where she was asked about overseas bank accounts with HSBC Jersey and HSBC UK.
  • The ATO issued default assessments totalling $14m (including interest and penalties) for the years 2008 to 2016.
  • The taxpayer objected to the assessments on the basis that certain amounts were “loans” and the ATO did not apply a cost base in respect of certain shares and structured products.
  • The assessed amounts were conclusively payable under tax law, meaning that the defendant had no defence (and hadn’t entered one).

The Court refused to grant a stay of the recovery proceedings after saying:

  • that the Court had no basis of assessing the merits of objections given that they were objecting to default assessments and the Commissioner alleged that source of the money, used to buy the investments was unknown and may have been unassessed income.
  • The ATO also maintained that it was insufficient for the taxpayer to explain deposits in her bank account by merely saying that she received them from her former spouse.
  • In terms of hardship, the Court did not regard the entry of a judgment itself as creating any particular hardship.

(DCT v Doyle [2018] NSWSC 1704, NSW Supreme Court, Adamson J, 8 November 2018.)

FJM 28.11.18

[LTN 218. 12/11/18; Tax Month – November 2018]

 

CPD questions (answers available)

  1. About how much was the DCT trying to collect?
  2. Was it conclusively payable?
  3. What did the Defendant seek?
  4. Could the Court assess the merits of her objections?
  5. Did the Defendant establish that she would suffer the relevant level of hardship without the stay?
  6. Did she get the stay?

 

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