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The Full Court of the Federal Court (Edmonds, Griffiths and Pagone JJ) has dismissed the taxpayer's appeal from the decision of the AAT in Murray and FCT (No 3) [2012] AATA 557.

The AAT held that the taxpayer, a resident of Australia from 1999 to 2007, was presently entitled to the income of a Foundation established in Liechtenstein in 1995. Further the AAT held that the taxpayer had failed to discharge the onus of proof that the Commissioner's estimate of the amount of that income ($25,927,521) was excessive. The Commissioner also imposed shortfall penalties of $11,282,207.29.

The information about the taxpayer's financial affairs came to the ATO's attention after an employee (Witness A) of LGT Bank in Liechtenstein AG, a financial institution in Liechtenstein, unlawfully took an electronic copy of a great number of records of a subsidiary of that bank, LGT Treuhand AG in November 2002. Witness A provided the Commissioner with three compact discs that contained information about LGT Treuhand's procedures and financial and other information that related to Australian residents, one of whom was the taxpayer.

The taxpayer currently resides in Singapore, and failed to give oral evidence before the AAT. Prior to the AAT hearing, the taxpayer had made three applications to give evidence other than in person. All three applications were refused. Virtually no evidence was provided to the AAT about the establishment of the Foundation or its financial affairs.

Before the Full Court, the taxpayer argued that the AAT should have held that the taxpayer was not presently entitled to any of the income of the Foundation. The Full Court held that this ground of appeal was not competent, being a question of mixed fact and law. Under the rules of the Federal Court, a question of mixed fact and law will not suffice to ground the Court's jurisdiction on appeal.

The taxpayer then argued that if he was presently entitled to the income of the Foundation, the AAT erred in finding that he had not discharged the onus of proof, because he had not shown "what his taxable income actually was". Instead, so it was argued, the AAT should have found, on the balance of probabilities, the taxpayer’s income was less than that assessed by the Commissioner.

This ground of appeal was also rejected, on the basis that decided cases such as FCT v Dalco [1990] HCA 3 and Gashi v FCT [2012] FCA 638 clearly establish that it is not enough for a taxpayer to establish that the Commissioner’s estimate of the taxpayer's assessable income is mistaken or erroneous in some or even many respects. It is necessary for the taxpayer to go further and establish what their taxable income actually is.

Other grounds of appeal relating to the AAT's refusal to allow the taxpayer to give evidence other than in person and the AAT's finding that the taxpayer was resident in Australia in one of the years in question were also dismissed.

Mulherin v FCT [2013] FCAFC 115 (Full Federal Court; Edmonds, Griffiths and Pagone JJ; 23 October 2013).

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