A taxpayer has been partially successful before the AAT in arguing that amended assessments for the 2009 to 2012 income years were excessive.

The AAT heard the taxpayer is a citizen of China and became a resident of Australia in 2005. It also heard the taxpayer had business dealings in Australia, China and Malaysia. The taxpayer had reported income from his Australian business interests in his tax returns for the 2009 to 2012 income years, but those returns did not disclose any income from his overseas business interests. Following information received from AUSTRAC and an audit of the taxpayer’s affairs, the Commissioner issued amended assessments plus penalties to the taxpayer for the 2009 to 2012 income years.

Before the AAT, the Commissioner agreed to confine the matter to 3 particular issues. The AAT noted the taxpayer had the burden of proof of showing that:

  • deposits totaling AUD$505,837 made in October 2008 and June 2009 were transfers of savings originally held in China;
  • deposits totaling AUD$678,150 made between October 2011 and March 2012 represented the taxpayer’s share of profits from a business venture in China, and that those profits were derived prior to the taxpayer becoming an Australian resident; and
  • his salary from a Chinese company was RMB18,000 per year rather than the RMB2.2m shown in a salary certificate provided to a bank for the purposes of applying for a home loan.

The AAT did not accept the taxpayer’s submissions concerning the first 2 issues above.

However, it did accept the taxpayer’s evidence concerning his salary from the Chinese company. In doing so, the AAT noted there was corroboration of the taxpayer’s evidence of the actual level of his remuneration from the Chinese company in the bank statements annexed to his witness statement. It also noted that: “It is not outside the bounds of human experience for borrowers to exaggerate their earnings (and assets) to obtain a loan.” As a result, the AAT was satisfied the taxpayer’s assessments were excessive in this regard.

The AAT noted that based on its conclusions the parties have agreed that the taxpayer’s taxable income for the relevant income years should be: $509,147 for the 2009 income year, id=”mce_marker”02,594 for the 2010 income year, $437,287 for the 2011 income year; and $370,342 for the 2012 income year.

The AAT also affirmed the assessment of shortfall penalty at 50% for each of the income years with no remission in the circumstances.

(Re Wu and FCT [2015] AATA 78, AAT, File Nos: 2014/1949; 2014/1950; 2014/1951; and 2014/1952, Hack DP, 13 February 2015.)

[LTN 30, 16.2.15]