13 Apr 12 On ATO letters re foreign income
MEMBER 86 writes:
“In regards to MEMBER 84’s comments last week (2012 TaxVine No 11 (5 April 2012)), my client too has received a letter from the ATO advising that: ‘Our records indicate we did not receive a response from you. We have reviewed the (foreign sourced) payments and have determined these funds to be assessable income’.
I called the ATO and asked in which account the money was received (I did this as my client had no recollection at all about receiving the money). The paraphrased response was: ‘Well, it was paid into the joint account of X bank’. I therefore asked how they determined that it was THIS particular taxpayer of said joint account who would be assessed as the recipient of the money. ‘Well, we need to allocate the income to someone … Yeah, I guess the system is a bit flawed’.
Well, I guess the system is a bit flawed (indeed). It turns out that the client’s husband (thank your deity they didn’t go through an acrimonious divorce) received the amounts as expense reimbursements. Guess what, the (husband) client never expected to be assessed on these amounts (as they aren’t), and forwarded all original expense receipts (as you do) to the remitting employer. Said employing business was subsequently disbanded and no longer exists.
Good fun, no fee, what a waste of time.”
MEMBER 87 writes:
“Member 84 (2012 TaxVine No 11 (5 April 2012)) is quite right. Letter issued (February 2010) asking taxpayer to review records to ascertain whether or not foreign income was correct declared. ‘If you do this and have nothing further to disclose, you can disregard this letter’. And then, correspondence relating to the 2008 income tax return to say that ‘our records indicate that we did not receive a response from you. We have reviewed the payments and determined these funds to be assessable income.’ (February 2012). The speed at which this government bureaucracy (read administrative nightmare) acts is astonishing!
I thought that the period of review for an individual taxpayer was two years – 2008 assessment issued in October 2008; two years passed nearly two years ago, unless excluded (eg, fraud/evasion/avoidance).
In this case, the receipt of foreign funds was an inheritance from a deceased parent’s estate. I would like to know how in the world the ATO determined those funds to be assessable income! And how in the world it can justify its implied assertion that an exclusion applies to the review period.
Is it now the case that the ATO is stretching the boundaries, and interpreting exclusions to time limitations as broadly as possible? If so, we are in for one heck of a ride!
I thought wide net fishing was illegal! It is time for a parliamentary enquiry; the Courts are doing their job in rejecting the ATO’s over-zealous claims; IGOT and/or our parliament now need to do their job and require the ATO to cease its abuse of power!”