The AAT has held that default assessments of income tax and GST issued to a taxpayer based on industry benchmarks was not excessive. It also affirmed the administrative penalties imposed by the Commissioner in relation to the shortfall.
The taxpayer traded regularly on eBay purchasing mostly coins and banknotes, which he considered to be valuable in the future. He purchased up to a thousand items at a time and later sold them individually or in smaller quantities. The majority of transactions were conducted through eBay with the payment received through PayPal. The taxpayer did not keep any records of the transactions and relied on “feedback” to keep track of which items he had bought and sold.
Subsequently, the Commissioner conducted an audit of the taxpayer based on data obtained from eBay. He then issued default income tax assessments for the 2009 and 2010 income years with an associated administrative penalty. In addition, the Commissioner also issued 8 assessments of GST net amounts for the periods 1 July 2008 to 30 June 2010 with an associated administrative penalty.
Broadly, the taxpayer contended that the default assessments were excessive and that the Commissioner did not take his personal circumstances into account.
The AAT found that it was appropriate for the Commissioner to assess the taxpayer’s income tax and GST liabilities during the relevant periods by reference to industry benchmarks since the taxpayer did not maintain adequate business records to verify the actual amount of sales and cost of goods sold. Further, it noted that this conclusion was particularly reinforced by reference to the fact that the taxpayer consistently failed over a number of years and quarters to comply with his obligations to keep business records that could enable his taxation liabilities to be readily ascertained.
Hence, the Tribunal held the taxpayer failed to discharge his burden of proof in demonstrating the default assessments were excessive and affirmed the Commissioner’s decision. It also held that the penalties imposed should not be remitted.
(AAT Case [2014] AATA 745, Re Cronan and FCT, AAT, Ref Nos 2013/4298-4300, Deutsch DP, 15 October 2014.)
[LTN 201, 17/10/14]