The taxpayers have appealed to the Full Federal Court against the decision in FCT v Bosanac [2016] FCA 448. In that case, the Commissioner had been successful in his application for summary judgment against husband wife taxpayers for amounts of $15m for assessments issued to the taxpayers for the 2006 to 2013 income years (being $9.3m for the husband and $5.6m for the wife). The taxpayers sought to oppose the Commissioner’s application on the basis that the assessment process was “infected” by “conscious maladministration” on the part of the Commissioner in relation to raising assessments against the wife, while it was the husband who was the businessman and entrepreneur.

[LTN 89, 11/5/16]

Catchwords from first instance decision

ADMINISTRATIVE LAW – whether notices of assessment affected by jurisdictional error – whether conscious maladministration established – whether grounds of jurisdictional error closed – whether a corrupt exercise of statutory power or the exercise of that power with deliberate disregard to the scope of the power in the assessment process – relevant state of mind of the decision-maker

TAXATION – whether notices of amended assessment affected by conscious maladministration – treatment of unexplained income as ordinary income – allegedly incorrect tax treatment of properties sold on adjacent land – relevance of failure to file income tax returns and actively participate in tax audit

DISCOVERY – relevance of objection to producing documents pursuant to notice to produce in relation to claim of conscious maladministration – whether documents sought a fishing exercise

CONSTITUTIONAL LAW – constitutional right to contestability of amended tax assessments – whether summary judgment makes the amended assessments incontestable and outside the power of the Commonwealth where likely to cause bankruptcy – role of trustee in bankruptcy in contesting an assessment

PRACTICE AND PROCEDURE – summary judgment – whether reasonable prospects of success – summary judgment granted

TAXATION – application for stay of judgment delivery pending objection decision – respondents seek leave to adduce fresh evidence of imminent objection decision – whether evidence of imminent objection decision would impact ruling as to conscious maladministration – orders in relation to Mrs Bosanac not entered to enable parties to seek to vary the judgment pursuant to r 39.04 Federal Court Rules 2011 (Cth)

Extract from reasons for first instance decision

  1. The Commissioner of Taxation seeks summary judgment, having commenced proceedings against the respondents (the Bosanacs) by originating application on 17 June 2015. He seeks declarations of amounts due and payable by the Bosanacs and judgment against each of the Bosanacs in respect of their liability for income tax, administrative penalties, shortfall interest charge and general interest charge. The Commissioner’s application was accompanied by an ex parte interlocutory application for freezing orders. Freezing orders were granted and remain in place until further order of the Court.
  2. The application is supported by an affidavit of Mr George Khouri sworn on 21 October 2015, an Australian Taxation Office (ATO) officer, and an earlier affidavit of Mr Khouri sworn on 16 June 2015. The Bosanacs also rely on affidavits in response supporting their arguments discussed in these reasons.