The AAT has affirmed amended assessments issued by the Commissioner to husband and wife taxpayers outside the 4-year amendment period as it determined there had been fraud or evasion.
The taxpayers conducted a number of businesses including a tobacco supply and snack bar business in a partnership. The AAT said they reported “modest income” from the businesses for the 2001 to 2004 income years, however, from 1998 to 2003, they had acquired around $3.6m in investment properties. Following an audit and asset betterment analysis, the Commissioner issued amended assessments and imposed administrative penalties. The taxpayers argued there was no fraud or evasion in this case, hence the Commissioner was unable to issue amend the assessments for the periods which were outside the 4-year amendment period. Broadly, the taxpayers contended that they purchased the properties relying on a combination of bank borrowings, credit provided by a range of individuals in cash, and through a series of syndicates called Huis.
The AAT held that while the Commissioner’s asset betterment analysis was open to criticism, it was satisfied that it proceeded on a rational basis. It said given the lack of objective evidence regarding the taxpayers’ accounts and income, the asset betterment analysis provided a legitimate basis for the assessments.
In relation to whether there had been fraud or evasion, the AAT held that the evidence presented by the taxpayers was not believable and that they must have known they were not reporting their income correctly. Hence, it held that the taxpayers had engaged in fraud or evasion, and that the Commissioner was entitled to issue amended assessments for the periods.
In addition, the Tribunal held that the Commissioner was entitled to impose a 75% administrative penalty with a 20% uplift, and that the penalties were not excessive, nor was there a basis for remission.
(AAT Case  AATA 942, Re PNGR & Anor and FCT, AAT, Ref Nos: 2012/4668-4676, McCabe SM, 23 December 2013.)
[LTN 3, 7/1/14]