Commissioner's evasion assessments upheld
2011 case note - plaintiff was unable to prove that amounts paid into bank accounts were not his income. The plaintiff was liable for evasion shortfall penalties.
Income Tax Act 1994, Income Tax Act 2004
The plaintiff was unable to prove that various amounts paid into bank accounts which he controlled were not his income. The Commissioner of Inland Revenue established that the plaintiff was liable for evasion shortfall penalties.
Impact of decision
There are no particular implications for the Commissioner. The case turns largely on its own facts.
The Commissioner assessed the plaintiff for income tax (plus evasion shortfall penalties) on the basis that he failed to return income amounts paid into various bank accounts which he controlled. The funds were received into the accounts pursuant to a complex interrelationship between a number of companies and trusts for which the plaintiff worked, or was in some way involved. The plaintiff challenged the assessments on the basis that the amounts were either money held on trust for others or loans to him, which he has not been able to repay.
The Court found the plaintiff's evidence to be not credible and was unreliable on important points in the case. The Court found that the plaintiff's account of what occurred to be so unlikely that it could be rejected. For example, the Court did not accept the plaintiff's evidence that while he was employed at very senior positions in a company he was paid no salary.
The plaintiff was also unable to produce a signed trust deed with respect to any of the trusts he claimed he borrowed money from. As well, no credible reason was advanced as to why the trusts would grant him interest-free loans. In general the Court found the plaintiff's evidence to be inaccurate and at times untrue. Accordingly, in respect of all except one transaction, the Court found that the plaintiff had failed to discharge his onus.
In respect of one transaction - the sale of a commercial property in Brisbane - the Court found that the plaintiff had discharged his onus by proving that the proceeds of the sale were capital. This finding was made even though the plaintiff had not advanced his case on the basis that the payment was capital; the plaintiff's case was that it was a loan.
In respect of the evasion shortfall penalty the Court found that the plaintiff had gone to great lengths to conceal his taxable income from the Commissioner. Accordingly the Court found that the Commissioner had proved that the plaintiff intentionally evaded the payment of tax and was liable for evasion shortfall penalties.