The AAT has affirmed the Commissioner’s decision to issue amended income assessments to husband and wife taxpayers as well as amended GST assessments in relation to a partnership for the 2002 to 2006 income years. In addition, it also held that the taxpayers were liable to a shortfall penalty of 50% for recklessness and that no remission was warranted.
The husband and wife taxpayers conducted a partnership, which was audited by the Commissioner in relation to the 2002 to 2006 income years. At the conclusion of the audit the Commissioner determined that the partnership had a GST shortfall, and the husband and wife taxpayers had income tax shortfalls for the relevant years. Amended assessments were issued and a shortfall penalty of 50% was imposed for the relevant years. Broadly, the taxpayers sought to discharge the onus of proving the Commissioner’s assessments were excessive by preparing rival T-Accounts, which indicated that the taxpayers’ table incomes were significantly less than the figures at the conclusion of the audit.
The AAT found that the factual assumptions underpinning the rival T-Accounts prepared by an expert on behalf of the taxpayers were not proved on the balance of probabilities by either the taxpayers or the expert. It said “simply demonstrating that the Commissioner had made significant errors in his T-Accounts did not prove, on the balance of probabilities, that the amount assessed by the Commissioner was wrong”. Therefore, the AAT held that the taxpayers did not satisfy the burden of proof.
In relation to penalties, the Tribunal affirmed the 50% shortfall penalty imposed as it found the taxpayers had acted “recklessly” in the conduct of their tax affairs and were solely responsible for the errors and omissions made. As such, it refused to exercise discretion for the remission of penalties.
(AAT Case [2013] AATA 569, AAT, Ref Nos 2011/2873-77 and 2011/2879-88, Fice SM, 14 August 2013.)
[LTN 158, 16/8/13]