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14 Jan 099 AAT looks to (return) form, not substance - Steele

The AAT has held that the taxpayer (the former wife of a roofing contractor) was liable to tax in respect of partnership income, notwithstanding a finding of fact that she did not agree to a partnership with her ex-husband ("I accept that Mrs Steele did not agree to any partnership with her ex-husband, and without consent there can be no partnership" - para 19) and did not receive any "partnership" income (para 16). No partnership returns were lodged showing her as a partner.

The AAT based its decision solely on returns lodged by the taxpayer, prepared by a tax agent consulted by the taxpayer and her husband. The AAT said, at paras 20-1:

"In my view, Mrs Steele’s claims that she acted under dictation in lodging her returns and that she did not receive any partnership income do not discharge the onus of proof that she bears. It is difficult to understand why Mrs Steele allowed a return to be lodged in her name for 1997 when she was not actually working. As well, her failure to object to the assessments in 2001 and delaying until 2008 puts some doubt in my mind about her protestation that she was unaware that her husband might have instructed the tax agent to put some of his income in her name. Mrs Steele was reckless to sign a tax return without reading the contents as she admitted she may have done.

Although I am concerned that no copies of signed returns for Mrs Steele are in evidence and there are no copies of partnership returns naming her as a partner, these deficiencies do not justify a finding that Mrs Steele is not liable for income tax calculated on the amounts declared in her furnished tax returns. The taxpayer bears the onus of proving that the reviewable decision concerns an assessment which is excessive or should have been made differently. This onus is placed on the taxpayer under section 14ZZK of the Taxation Administration Act 1953...I find that Mrs Steele has not discharged this onus but has only cast doubt on whether the information in her returns is accurate."

Steele and FCT [2008] AATA 1143 (AAT, Hunt SM, 19 December 2008).

For a copy of the decision, go here.

TAXVINE COMMENT: In view of the AAT's findings of fact, it is hard to see how the taxpayer had not discharged the onus of proof. The decision also  appears to ignore the Commissioner's own stated view in TR 96/12, where it is said, at para 31: "A taxpayer may object against an assessment notwithstanding the fact that the assessment is in accordance with their own erroneous return". In other words, there should be no presumption against a taxpayer based on the contents of an incorrect return.

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