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03 Apr 12 Tax evasion and fraud; assessments confirmed - Re Confidential

The Administrative Appeals Tribunal has confirmed the Commissioner’s assessments and amended assessments issued to a private company in its capacity as the trustee of a family trust which operated an independent supermarket. The Commissioner found that the taxpayer was engaged in tax evasion.

The issues were whether:

  • there was understated income for the relevant income years including net profit from the supermarket business, rental income, goods applied to own use, and unexplained income (loans to related entities)
  • deductions were correctly disallowed including superannuation contributions on behalf of employees, and various other deductions
  • there was an understatement of income due to a failure to correctly record goods applied to own use
  • the taxpayer was properly assessed under s 99A and s 97(1) ITAA 1936
  • the taxpayer failed to lodge returns for the income years 1993 and 1994, 1996 and 1997, and 1999 and 2000, and whether subsequent assessments were made outside the time limitations set out in ITAA 1936
  • the taxpayer was liable to administrative penalties and, if so, whether those penalties were correctly assessed at 75%, and
  • the penalties should be remitted.

The Tribunal found that the documentary and oral evidence presented by the taxpayer in support of its contentions in this case was wholly unsatisfactory. It was contradictory, vague, and at times implausible. The families involved in the business of the trustee took goods and received benefits from the business which were either not recorded in its accounts or not accurately recorded. Financial statements provided to banks were deliberately false and deceptive.

As to failure to lodge returns, the Commissioner had no record of the returns being lodged. In the absence of objective evidence of lodgment, the Tribunal found the taxpayer failed to discharge the onus of proving lodgment.

The Commissioner was correct in disallowing deductions for superannuation contributions because the so-called employees, who were all family members, were not employees for the purposes of s 82AAC ITAA 1936. As for the other expenses, there were either obvious errors in the accounts or there was no evidence that the expenses were in fact incurred as claimed.

The taxpayer was correctly assessed under s 99A and s 97(1) ITAA 1936 because, on the evidence, no beneficiary was presently entitled to income of the trust in any of the first group of income years and the taxpayer, in its own right as a beneficiary of the trust, was so entitled in each of the second group of income years.

The Tribunal also confirmed the penalties imposed by the Commissioner.

Re Confidential and FCT [2012] AATA 178 (Administrative Appeals Tribunal, Egon Fice, Senior Member, 23 March 2012).

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