The Federal Court has made orders concerning income tax assessments and penalties issued to husband and wife taxpayers for the 2000 to 2006 income tax years inclusive.
The matter concerned default assessments (including 75% penalty with the 20% uplift for most years) issued by the Commissioner to the taxpayers following an audit in March 2010. A number of returns had not been lodged and most of returns lodged declared only “modest” amounts. The Commissioner assessed each taxpayer’s tax liability at $1.6m and calculated penalties amounting to $1.4m for the years in question. The Commissioner utilised the “asset betterment” method to estimate the combined incomes of the taxpayers and assessed them equally on the basis that they were in a partnership.
The Court held the husband did not discharge the onus of proving the assessments were excessive. It found the husband did not establish what his taxable income was in any of the 2000 to 2006 income years. Accordingly, the husband’s appeal was dismissed (although the Court allowed some concessions for penalties for the 2002 and 2003 year). However, the Court found there was no partnership. The Court accepted the wife’s evidence that she was a “housewife only”. The Court accepted new evidence of the wife’s assessable income presented before it, but noted earlier returns lodged after the audit declaring smaller amounts.
In conclusion, the Court ordered the wife’s assessments be amended to reflect the new amounts, but upheld the imposition of penalties (including 75% penalty and the 20% uplift for the 2002 to 2006 years).
(Gashi & Anor v FCT [2012] FCA 638, Federal Court, Jessup J, 22 June 2012.)
[LTN 120, 25/6]