Federal Court of Australia

Buzadzic v Commissioner of Taxation [2023] FCA 954

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The applicant pay the respondent’s costs of the appeal, as agreed or taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

TABLE OF CONTENTS

REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

1    The applicant, Mr Danny Buzadzic, appeals on a question of law pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) from a decision of the Administrative Appeals Tribunal (the Tribunal): Buzadzic and Commissioner of Taxation (Taxation) [2021] AATA 4820. The proceedings in the Tribunal related to assessments made by the respondent (the Commissioner) in respect of both Mr Buzadzic and his wife, Mrs Leisa Buzadzic, pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) (the ITAA 1936). The assessments related to the years of income ended 30 June 2007 to 30 June 2013 (the 2007 to 2013 Years). In the proceedings relating to Mr Buzadzic, the Tribunal affirmed the decisions under review. In the proceedings relating to Mrs Buzadzic, the Tribunal set aside the decisions under review and allowed the objections. There is no appeal in relation to Mrs Buzadzic.

2    The questions of law and grounds of appeal on which Mr Buzadzic relies are set out in his amended notice of appeal dated 8 August 2022 (the notice of appeal). There is an issue whether all of the questions in the notice of appeal are, in truth, questions of law. That will be discussed later in these reasons. In any event, it is clear that the notice of appeal does raise at least some questions of law.

3    The notice of appeal contains 10 questions and 16 grounds. Further, attached to the notice of appeal is a schedule (Schedule A) comprising 18 pages of, essentially, submissions about the evidence before the Tribunal. Mr Buzadzic’s contentions can be summarised as follows:

(a)    that the Tribunal applied the wrong test for burden of proof under s 14ZZK(b)(i) of the Tax Administration Act 1953 (Cth) (the Administration Act) and/or that the Tribunal’s decision that Mr Buzadzic had not discharged the burden of proof was unreasonable (Grounds 1 and 2);

(b)    that the Tribunal misconstrued and/or misapplied s 6-5 of the Income Tax Assessment Act 1997 (Cth) (the ITAA 1997) (Ground 3);

(c)    that the Tribunal erred by failing to exclude deposits, credit entries and other amounts that were explained or shown to be erroneous, from the assessments (Ground 4);

(d)    that the Tribunal misconstrued and/or misapplied item 5 of s 170(1) of the ITAA 1936 (which relates to the amendment of an assessment if the Commissioner is of the opinion there has been fraud or evasion) and/or that the Tribunal applied the wrong test for burden of proof in connection with that provision and/or that the Tribunal made an unreasonable finding in relation to that provision (Grounds 5, 6 and 7);

(e)    that the Tribunal misconstrued and/or misapplied the penalty provisions and/or that the Tribunal made unreasonable findings in relation to penalties (Grounds 8, 9, 10, 11 and 12);

(f)    that the Tribunal failed to consider certain grounds of objection and submissions (Ground 13);

(g)    that the Tribunal made certain unreasonable findings of fact and/or that there was no evidence or proper basis for certain findings (Grounds 14 and 15); and

(h)    that the Tribunal failed to afford Mr Buzadzic procedural fairness in that it failed to properly consider the evidence tendered by Mr Buzadzic and/or to give it proper weight (Ground 16).

4    For the reasons that follow, I have concluded that none of these grounds is made out. The appeal is therefore to be dismissed.

Background facts

5    The following is a summary of the background facts and some of the evidence that was led during the Tribunal proceedings, based on the Tribunal’s reasons. In this section, I have not drawn on parts of the Tribunal’s reasons that are the subject of direct challenge in the notice of appeal.

6    During the 2007 to 2013 Years, Mr and Mrs Buzadzic were associated with at least 16 companies and three trusts (the Associated Entities). Details of the Associated Entities are set out in Annexure A to the Tribunal’s reasons. In these reasons, I will adopt the definitions used by the Tribunal as set out in Annexure A to its reasons. Accordingly, the Buzadzic Group refers to:

(a)    three family trusts, being the D & L Buzadzic Trust, the Buzadzic Cubby Trust and the Buzadzic Family Trust; and

(b)    the Western General Bodyworks group of companies (the WGBW Group).

7    The trustees of the three family trusts were:

(a)    Buzadzic Pty Ltd (trustee of the D & L Buzadzic Trust);

(b)    Buz Cubby Pty Ltd (trustee of the Buzadzic Cubby Trust); and

(c)    Delrich Arch Pty Ltd (trustee of the Buzadzic Family Trust).

8    During the relevant Years, through various group entities he controls, Mr Buzadzic operated panel beating workshops and other related businesses (including towing and car rental businesses) owned by the WGBW Group. For part of the relevant period, through entities he controlled, Mr Buzadzic was also involved in two nightclub businesses and a tattoo business.

9    Mr Buzadzic and/or his assistants employed in the Buzadzic Group directed all financial matters for his family. He controlled all bank accounts that were in his name or in Mrs Buzadzic’s name and directed the deposits to be made into those accounts and the funds to be transferred from those accounts to other entities in the Buzadzic Group.

10    During the relevant Years, there were at least 26 bank and credit card accounts in the name of Mr Buzadzic and Mrs Buzadzic (including four in the name “D. Buzadzic Western General Body Works Pty Ltd”).

11    Private and business-sourced money was extensively intermingled over an extensive period: Tribunal’s reasons, [61].

12    Western General Bodyworks Pty Ltd (WGBW) generated significantly more revenues than the other entities.

13    Mr Buzadzic directed that cash be lent by WGBW to the other entities Mr Buzadzic controlled as needed. Mr Buzadzic also directed that cash that was not required for immediate use in the business operations of each entity be transferred to a home loan account to reduce the interest being incurred on that account.

14    Mr Buzadzic used personal credit cards (some issued in his name and some in Mrs Buzadzic’s name, but in respect of which he exercised control) to pay personal and business expenses in order to accrue maximum credit card reward points. Use of credit cards for this purpose was extensive. From time to time, Mr Buzadzic also drew down on his home loan account to provide funds to the businesses in which he or the Buzadzic Group held an interest.

15    Transactions between Mr Buzadzic and the Associated Entities were generally recorded in ledger asset and liability accounts, generally titled “loan account” in the accounting records of the Associated Entities. Advances from the Associated Entities to Mr Buzadzic resulted in increases in those account balances owed and the transfer of funds from Mr Buzadzic, or at the direction of Mr Buzadzic, to those accounts, resulted in decreases in the account balances owed as shown in those accounts. No evidence was provided to the Tribunal of written agreements recording the terms on which these advances were made.

16    There was a ledger account in the accounting records of Logistic Car Rentals Pty Ltd entitled Loan Account – L Buzadzic. Increases and decreases in this ledger account reflected funds transferred at the direction of Mr Buzadzic. The Tribunal found that the balances recorded in this account were amounts advanced to Mr Buzadzic, irrespective of whether amounts were deposited in bank accounts or credit card accounts in his name or in Mrs Buzadzic’s name.

17    Prior to 2013, Mr Buzadzic engaged bookkeepers to maintain the accounting records of the WGBW Group. Those bookkeepers were reliant upon the information provided to them by Mr Buzadzic.

18    Mr Buzadzic led very limited evidence in the Tribunal proceedings as to the bookkeeping practices or arrangements employed by the Buzadzic Group in 2007. Mr Buzadzic’s evidence was that bookkeeping responsibilities in that Year were performed by his personal assistant, Ms Suzana Jankovic. Ms Jankovic was not called as a witness. Mr Buzadzic led no evidence otherwise explaining the basis on which credits were made to his loan accounts or explaining the deposits in his bank accounts (including the bank accounts in Mrs Buzadzic’s name that he directed and controlled). External accounting services were provided to the Buzadzic Group by Mr Bozyk of Douglas Clark Associates. Mr Bozyk did not give evidence in the Tribunal proceedings.

19    Between 2008 and 2013, a MYOB business accounting system was used to maintain the accounting records of the entities in the Buzadzic Group. The MYOB system was not used to record the transactions in the personal bank accounts or personal credit card accounts in the name of Mr Buzadzic. Accounts were not prepared for Mr Buzadzic in his personal capacity.

20    Mr Stirling provided bookkeeping services to the Buzadzic Group from about March 2008. Mr Stirling generally worked from home and attended the WGBW Group premises in Maribyrnong and Geelong two to three days each week to record transactions in the MYOB system. Mr Stirling did not provide bookkeeping services to the three trustee companies.

21    Mr Stirling posted entries in the MYOB system to reflect transactions made by the WGBW Group during the Year based on source documents provided to him, generally in the form of invoices and sales receipts.

22    Mr Stirling did not perform banking duties that involved attending a bank branch, such as depositing funds into the bank accounts of Mr or Mrs Buzadzic. However, Mr Stirling did perform internet banking activities at the direction of Mr Buzadzic, such as transferring funds into the credit card accounts or home loan accounts of Mr or Mrs Buzadzic. It was not part of Mr Stirling’s role to deposit moneys into the personal bank accounts of Mr and Mrs Buzadzic except on the instructions of Mr Buzadzic. He transferred funds from the WGBW Group entities to credit card accounts or home loan accounts in their names when he was instructed to do so by Mr Buzadzic. When he transferred funds to these personal accounts, he posted increases (debits) to the director’s loan account with the WGBW Group entity.

23    Mr Stirling posted decreases (credits) to the director’s loan account if he was informed that Mr Buzadzic had paid an expense on behalf of that entity out of personal funds (whether that be on a personal credit card in Mr or Mrs Buzadzic’s name or from his home loan account). Mr Stirling relied upon the information provided to him by Mr Buzadzic or Mr Buzadzic’s personal assistants.

24    Mr Stirling’s evidence was that he became more aware of the need to personally sight invoices or source documents after he completed his Certificate IV in bookkeeping in about 2012 or 2013.

25    Nothing in this process required Mr Stirling to identify from where Mr Buzadzic had obtained the funds to pay invoices or expenses for the WGBW Group entities.

26    Mr Stirling admitted under cross-examination in the Tribunal proceedings that there were instances where amounts were transferred from the WGBW Group entity bank accounts to Mr Buzadzic’s personal bank or credit card account without any entry appearing in Mr Buzadzic’s loan account.

27    Mr Stirling did not have access to or review the bank account statements for the personal bank accounts of Mr Buzadzic (including the home loan account). Although Mr Buzadzic testified in the Tribunal proceedings that his bookkeeper had full access to his personal credit card statements, Mr Stirling’s evidence was that he did not have a practice of reviewing the credit card statements issued to Mr Buzadzic, although on occasion he would see a copy of them when trying to see if a supplier invoice had been paid.

28    Some of the entities in the WGBW Group had their own bank accounts. Mr Stirling performed a weekly bank reconciliation for these entities’ bank accounts whereby he checked that the balance of each WGBW Group entity’s bank account as recorded by the bank reconciled to the balance recorded in the relevant MYOB ledger account. As part of this process, Mr Stirling was able to identify transactions in the WGBW Group entity’s bank account which had not been recorded in the MYOB ledger. If a deposit into those accounts was identified as having come from Mr Buzadzic, a decrease (credit) was recorded in the MYOB system against Mr Buzadzic’s loan account balance (recording a reduction in the amount owed by Mr Buzadzic to the entity). Mr Stirling did not know from where Mr Buzadzic had sourced the funds for these deposits and loan account reductions.

29    Mr Buzadzic’s two personal assistants, neither of whom was called to give evidence in the Tribunal proceedings, also entered transaction data into the MYOB system.

30    At the end of each financial year, Mr Stirling sent a copy of the MYOB system files to the external accountant who then had responsibility for preparing the end-of-year financial statements and tax returns. Mr Stirling had no involvement in the process or recording of dividend declaration or trust distributions made by the entities in the Buzadzic Group.

31    Mr Hadded is a principal of a firm called “The Practice”, which acted as external accountants and tax agents for Mr and Mrs Buzadzic and for the Buzadzic Group between 2008 and 2011 and from July 2013.

32    Mr Hadded’s firm never asked for, and was not provided with, the personal bank statements or credit card statements for Mr Buzadzic and was unaware of the amounts deposited into those accounts. Mr Hadded’s evidence in the Tribunal proceedings was that his firm generally had a practice of sending a checklist to its clients of information that, if relevant, the firm would require. He testified that he did not recall whether that was sent to Mr Buzadzic.

33    Insofar as the Buzadzic Group entities were concerned, each Year Mr Hadded’s firm was provided with the MYOB ledger accounts maintained by the Buzadzic Group bookkeeper recording the day-to-day transactions. Mr Hadded’s firm used this information together with information retained in their records to produce finalised accounts. This process entailed:

(a)    starting with the relevant entity’s finalised accounts from the previous Year as recorded in the external accountant’s system;

(b)    using the closing balances as recorded in those accounts as the opening balances for the current Year;

(c)    transferring the entries for the daily transactions entered into during the Year as recorded by the Buzadzic Group bookkeeper in the MYOB records provided to Mr Hadded’s firm;

(d)    posting year-end adjustments to reflect transactions of which the internal staff of the Buzadzic Group were unaware, for example dividends paid and trust distributions and entries to consolidate the intragroup loans in WGBW;

(e)    calculating the closing balances for each ledger account and using those closing balances to prepare the finalised financial statements for the relevant entity; and

(f)    advising the Buzadzic Group of the entries to be posted to the Buzadzic Group accounting system so as to align the accounting records maintained by the Buzadzic Group with those maintained by the external accountants (alignment entries).

34    Between 2 February 2012 and 19 July 2013, Mr Kane was an external accountant who provided accounting services to the Buzadzic Group. He prepared financial statements for the group entities and their tax returns, as well as Mr Buzadzic’s personal tax returns. Mr Kane never sought and was not provided with personal bank statements or personal credit card statements. Mr Kane posted year-end adjustments to the MYOB ledger accounts provided to him by Mr Stirling prior to preparing the finalised financial statements. Mr Kane did not have cause to examine the individual transactions posted to the director loans ledger accounts over the Year, except to the extent to which he posted year-end adjustments. It was not part of his engagement to verify or audit each record posted to the ledger. Mr Kane testified in the Tribunal proceedings that he prepared working papers as part of the end-of-year process. The Tribunal was not provided with copies of those working papers.

35    From January 2013, Mr Buzadzic engaged Mr Evans to act as the financial controller for the Buzadzic Group.

36    Mr Evans testified in the Tribunal proceedings that during the course of a financial year, entries were posted to the ledgers in the MYOB system maintained by the Buzadzic Group to record day-to-day transactions, although he did not himself post such entries.

37    During the time Mr Evans was employed by the Buzadzic Group:

(a)    Mr Stirling was responsible for ensuring that during the Year all supplier invoices, all sales receipts and all cash movements in the entity bank accounts were posted into the MYOB accounting system;

(b)    at the end of the Year, the internally maintained ledgers were provided to the external accountants to post year-end adjustments; the adjusted accounts were used to prepare the financial statements, and the tax returns, for each of the entities; and

(c)    Mr Kane (and later Mr Hadded’s firm) was responsible for preparing Mr Buzadzic’s personal income tax return.

38    Mr Evans’s evidence in the Tribunal proceedings was that if any of the businesses had a cash shortfall, Mr Buzadzic drew on the home loan account and provided that cash to the business, whether by depositing that cash in the bank account of the entity requiring the funds or by paying the creditors of that entity directly. Mr Evans concluded, from his review of the ledger accounts, that cash transfers from the bank accounts of the Buzadzic Group entities to an account in the name of Mr or Mrs Buzadzic were recorded by posting a credit entry to the entity’s ledger account for cash at bank and debiting another account. If the cash transfer was a reimbursement for an expense paid for the business on a credit card issued in the name of Mr Buzadzic, the debit may have been either to the entity’s expense account (a profit and loss account) or to the entity’s director loan asset account which recorded the balance owed by Mr Buzadzic to the entity. The Tribunal stated in its reasons that it assumed that the difference in the debiting treatment would depend on whether the expense had previously been recognised with a corresponding debit to the director’s loan account. The amounts reimbursed were often rounded up or down, and in those cases the reimbursement would not match perfectly the amount shown on the personal credit card statement.

39    Mr Evans’s evidence was that when he was financial controller, he instructed, and it was his understanding, that at the end of each financial year the external accountants would arrange for the declaration and payment of dividends, at times through trusts, to Mr and Mrs Buzadzic in amounts equal to the loan balances recorded in each entity’s accounts as owing by them to the respective entity. Where the shareholder in these Associated Entities was a trustee of one of the Buzadzic trusts, the dividend was subsequently distributed as part of a trust distribution, ultimately to Mr and Mrs Buzadzic as beneficiaries. Beyond this instruction, Mr Evans was not directly involved in the process by which dividends and trust distributions were resolved and paid.

The tax returns, the audit and the amended assessments

40    Mr and Mrs Buzadzic lodged income tax returns for the 2007 to 2013 Years, which included trust distributions and salaries paid by the Associated Entities. Details of these amounts are set out in Table 1 of the Tribunal’s reasons.

41    The Australian Taxation Office (ATO) undertook an audit of the affairs of Mr and Mrs Buzadzic. During the course of the audit, Mr Evans provided information to the ATO. The Tribunal stated in its reasons that it was apparent that the audit process was not without difficulty, as perceived by at least Mr Evans, if not the auditors as well. The Tribunal stated that, in frustration, Mr Evans provided MYOB ledgers to the ATO that were incomplete. The records provided did not include, for example, non-trading transactions such as dividends paid to shareholders.

42    Following the audit, the Commissioner identified amounts that he considered were evidence of, or represented, unreported income. For Mr Buzadzic, the following categories were identified by the Commissioner:

(a)    deposits or credits to bank accounts or credit card accounts in Mr Buzadzic’s name (Unexplained Deposits);

(b)    unexplained or unverified credit entries to Mr Buzadzic’s loan accounts as recorded in the books of the Associated Entities (Unverified Credit Entries);

(c)    interest on a term deposit that had been paid to him in the 2008 and 2009 Years;

(d)    a capital gain made by Mr Buzadzic on realisation of a share investment in the 2010 Year; and

(e)    what the Commissioner said was a deemed dividend under Div 7A of the ITAA 1936 on account of balances owing to related companies that were not paid in the prescribed time.

43    The Commissioner formed the opinion that there had been fraud and/or evasion. On this basis, he amended Mr and Mrs Buzadzic’s 2007 to 2013 Year assessments and included additional amounts in their taxable income.

44    Mr Buzadzic accepted that the undeclared interest amounts and the undeclared capital gain on the disposal of shares were assessable, but said that those amounts had been omitted from his tax return in error. Mr Buzadzic submitted that that error did not amount to a blameworthy act that could sustain an opinion that there had been fraud or evasion.

45    The Commissioner imposed penalties in respect of Mr Buzadzic as follows:

(a)    at the 75% rate in respect of the Unexplained Deposits, the Unverified Credit Entries and the capital gain;

(b)    at the 50% rate in respect of the deemed dividends;

(c)    at the 25% rate in respect of the interest income;

(d)    the base penalty amounts in relation to the 2008 to 2013 Years were increased by 20% on the basis that there had already been a prior imposition of a penalty.

46    The Commissioner also imposed a shortfall interest charge (SIC).

47    The following table (which is Table 4 in the Tribunal’s reasons) sets out the adjustments made to Mr Buzadzic’s taxable income and the penalties and SIC imposed:

48    The additional amounts assessed to Mr Buzadzic had five general categories, which are set out in the following table (reflecting Table 5 in the Tribunal reasons):

49    The Unexplained Deposits had three general categories, as set out in the following table (which is Table 6 in the Tribunal’s reasons):

50    The Unverified Credit Entries comprised two categories: unverified credit entries and loan balance mismatches that were treated as unverified credits. The following table (which is Table 7 in the Tribunal’s reasons) identifies these amounts:

51    The following table (which is Table 8 in the Tribunal’s reasons) contains a breakdown of the “Unverified Credit Entries” column in Table 7:

52    The Unexplained Deposit amounts (from Associated Entities) and the Unverified Credit Entries (to related-entity loan accounts) were those deposits and credits of $1,000 or more that: (a) were not reflected in increases to Mr Buzadzic’s loan account with the Associated Entity; (b) were not reflected in the Associated Entity’s accounts as repayments of loans made to the Associated Entity or distributions of income by the Associated Entity already included in Mr Buzadzic’s assessable income; and (c) did not on their face appear to be reimbursements of business expenses that the Commissioner was able to identify as having been paid by Mr Buzadzic on his personal credit cards or from his personal bank accounts. Approximately $3.5 million of reimbursements were identified and accepted by the Commissioner. The credits for these reimbursements were not included in the totals assessed.

53    The “Loan balance mismatches treated as unverified credits” column in Table 7 comprised instances where the opening balance of Mr Buzadzic’s loan account with an Associated Entity for a Year recorded an amount less than the closing balance in that account for the preceding Year as disclosed in the financial records provided to the Commissioner. Details of these amounts were set out in Table 9 in the Tribunal’s reasons.

54    The outstanding loan balances at the relevant lodgement date which were assessed as deemed dividends under Div 7A of the ITAA 1936, and the applicable distributable surpluses, were as set out in Table 10 in the Tribunal’s reasons.

55    Through the objection and subsequent disputation processes, the Commissioner conceded that a small number of assessed amounts had been adequately explained. They were as set out in Table 11 in the Tribunal’s reasons.

56    The following table (which is Table 13 in the Tribunal’s reasons) provides details of the number of Unexplained Deposits and Unverified Credit Entries in relation to Mr Buzadzic:

The Tribunal proceedings

57    The following witnesses gave evidence and were cross-examined during the hearing before the Tribunal: Mr Evans; Mr Stirling; Mr Kane; Mr Hadded; Mrs Buzadzic; Mr Buzadzic; and Mr Vasudevan, a partner of the firm Pitcher Partners, who was engaged to provide forensic accounting evidence.

58    During the Tribunal proceedings, the Commissioner conceded that certain specific amounts had been adequately explained. However, the Commissioner’s position was that Mr Buzadzic had nevertheless not discharged his onus, which required him to establish (on the balance of probabilities) the true amount of his taxable income, relying on Bosanac v Federal Commissioner of Taxation [2019] HCA 41; 374 ALR 425 (Bosanac) at [29]-[30] per Nettle J (set out below).

59    As noted in the Tribunal’s reasons at [32], through the course of Mr Evans’s and Mr Hadded’s evidence, it became apparent that Mr and Mrs Buzadzic’s representatives had provided incomplete accounting records to the ATO in the course of the audit. It also became apparent that:

(a)    records that were supplied to the ATO during the course of the audit were supplied after there had been something of a breakdown in the relationship between Mr and Mrs Buzadzic’s representatives and the ATO’s audit team;

(b)    the financial records provided to the audit team did not include all of the transactions entered into between Mr and Mrs Buzadzic and the various entities in the Buzadzic Group during the relevant years or the year-end adjusting entries that potentially affected directors’ loan account balances processed by the Buzadzic Group’s external accountants; and

(c)    working papers (and/or records) asserted to have been maintained by the Buzadzic Group’s external accountants would probably be available and would probably contain information that would explain year-end adjusting entries and other entries posted and included in the year-end finalised accounts.

60    When this situation became apparent in December 2018, the Tribunal indicated that it would be greatly assisted by a forensic accountant’s report. Mr and Mrs Buzadzic accepted this invitation, which was not opposed by the Commissioner. Mr and Mrs Buzadzic then engaged Mr Vasudevan as an independent expert. Issues were later raised by the Tribunal and the Commissioner as to the form of questions provided to Mr Vasudevan. However, the form of the questions remained unaltered. Mr and Mrs Buzadzic filed a report prepared by Mr Vasudevan that purported to address the questions framed by Mr and Mrs Buzadzic.

61    During a resumed hearing before the Tribunal in November 2019, Mr Vasudevan was extensively cross-examined. As the Tribunal stated at [40] of its reasons, the cross-examination revealed that the report filed could not be relied upon to provide substantive support for Mr and Mrs Buzadzic’s cases.

62    At the continuation of the hearing on 17 December 2019, counsel for Mr and Mrs Buzadzic re-examined Mr Vasudevan in a manner that took the form of a cross-examination. At the conclusion of this re-examination, counsel for Mr and Mrs Buzadzic submitted that Mr Vasudevan had failed to do what he was asked to do when he was engaged as an expert and requested leave to obtain and file a report from another expert. Given the history of the matter, the Tribunal refused this application.

63    As the Tribunal noted at [102] of its reasons, ultimately, Mr and Mrs Buzadzic did not seek to rely upon Mr Vasudevan’s report except to the extent that it confirmed that, in the finalised accounts, there was no discrepancy between the closing balance in the account as at the end of one Year and the opening balance in that account at the commencement of the following Year.

The Tribunal’s reasons

64    In the introductory section of its reasons, the Tribunal provided a summary of what it considered Mr and Mrs Buzadzic needed to show in order to succeed, and of its conclusions:

19.    For the Applicants to succeed in relation to the disputed primary tax assessments, they need to demonstrate what their taxable incomes were for the 2007 to 2013 Years. To do this the Applicants must, as a minimum, demonstrate that the amounts that comprise the totals that remain disputed are not income or otherwise assessable or have already been included in their assessable income. The Applicants could also succeed by showing that there was no fraud or evasion or that the fraud or evasion opinion should not have been formed.

20.    For the Applicants to succeed in relation to penalty and SIC they need to show that there was not a tax shortfall, or, if there was a shortfall, the penalty and SIC have been inappropriately imposed or should be remitted.

21.    As explained below:

(a)    the uncontradicted evidence before the Tribunal was that Mrs Buzadzic was a stay-at-home mother whose involvement in the Buzadzic Group was limited to acting at the direction of Mr Buzadzic and his employees and that the amounts deposited in the accounts of Mrs Buzadzic belonged to Mr Buzadzic. As a result, the Tribunal has set aside the Commissioner’s objection decision in relation to Mrs Buzadzic; and

(b)    except for a small minority of instances, Mr Buzadzic did not explain the sources of the moneys which resulted in the deposits in the bank accounts in his name or the credits to his director loan accounts. By moneys, the Tribunal refers not just to cash, but also to set-offs, payments by direction and other forms of fund transfers. The credit entries and deposits remained very substantially unexplained. As a consequence, Mr Buzadzic did not discharge his onus of proving what his correct taxable income was. The evidence of the distributions made to him and how funds flowed to him from his related entities that he provided was not sufficient to conclude that the amounts of money reflected in the entries the Respondent has identified were not income or otherwise assessable and that his taxable income was the amount he had returned. Having provided evidence that the amounts in the accounts of Mrs Buzadzic belonged to him, he provided no explanation for the deposits made into those accounts which could be accepted by the Tribunal as demonstrating that those amounts were not his income. It follows from this conclusion that the Tribunal does not have a sufficient foundation to conclude that the fraud or evasion opinion formed or held by the Commissioner ought not to have been formed or held, or to conclude that the penalty decision should have been made differently. As a result, notwithstanding that the Tribunal has found that the Commissioner had erroneously assessed some deposits and credits as unexplained, the objection decisions in relation to Mr Buzadzic have been affirmed.

(Italics in original; bold emphasis added.)

65    After setting out the background facts and key details relating to the tax returns, the audit and the amended assessments, the Tribunal identified, at [103], six general considerations that were particularly relevant to the proceedings. These were:

(a)    intermingling of money;

(b)    the reasonableness of proof required;

(c)    the assistance s 1305 of the Corporations Act 2001 (Cth) provides;

(d)    the assistance a double-entry accounting system provides;

(e)    the usefulness of estimates; and

(f)    the relevant burden of proof.

66    In relation to “intermingling of money”, the Tribunal made the following observations at [104]:

The first general consideration concerns intermingling of various entities’ money. Using available funds and credit cards and intermingling of various entities’ money (including personal money) as has occurred in the present matter is not of itself improper. There may be various reasons for managing money this way. Using readily available cash to service the most pressing need, using private credit cards for business expenditures to secure airline loyalty points, and moving cash to and from home loan accounts so as to minimise interest accruals on a home loan might well be some of those reasons. However, if that type of activity is undertaken, the records kept of it need to allow the appropriate unmingling to be effected with a degree of confidence that the unmingling process is accurate, and the financial statements and balances produced are also accurate, and not merely a speculative end product of antecedent speculation.

(Emphasis added.)

67    In relation to “reasonableness of proof required/lack of documents”, the Tribunal stated at [109]:

… the obligation and expectation to retain a document does not exist in a vacuum. Much depends on the nature of the transaction and whether it is of a kind that would result in retention of documents in the circumstances. This is not a case where a taxpayer has been assessed because they have failed to produce a supporting record in respect of a single isolated deposit which might have been explained by private transactions some time ago for which records are inherently unlikely to have been retained, and are potentially unobtainable when the time comes to establish their character and provenance some years after the event. The evidence, or lack of it, in the present matter needs to be seen in the context of the pattern of conduct, the manner in which Mr Buzadzic conducted his affairs, the number of discrepancies, the size of the discrepancies (bearing in mind that the Commissioner did not seek explanations for and did not question transactions of less than $1,000) and the period over which the discrepancies were identified. The present circumstances include three trusts and 16 companies with which Mr Buzadzic was associated, repeated intermingling of [a] substantial volume and value of business transactions with private arrangements, repeated intermingling of funds of separate businesses and their owners and an apparent reluctance to do what the group’s external accountants usually ask of their clients. The deposits and credits to loan accounts that have been the subject of scrutiny were all in excess of $1,000 and were all unexplained. Most of the credits and deposits had their origins in entities that Mr Buzadzic controlled or was significantly associated with which carried on businesses. That of itself suggests that the transactions might not be explained away as private transactions for which records ought not be expected. To the contrary, those circumstances suggest that there might be expected to be a business record or trail that sets out the provenance of the deposits and credits and thus throw light on whether the deposits and credits reveal, or are the produce of, an undisclosed source of income.

(Emphasis added.)

68    In relation to s 1305 of the Corporations Act, the Tribunal stated at [116]-[117]:

116.    Section 1305 of the Corporations Act provides very limited assistance to the Applicants. The section provides that such books are prima facie, but not conclusive evidence of the matters recorded in them. The Commissioner was entitled to interrogate the accounts. He has interrogated the accounts and, after accepting that there had been reimbursements of business expenditure in excess of $3.5 million, asked questions of particular items. In the scheme of the business operations of the group of Associated Entities comprising three trusts and 16 companies over a period of 7 years, the number of items that remain unexplained, was not an overwhelming number.

117.    It was clear from the evidence led that the basis for the entries made in the accounts that are under review were not all explained, and that the Tribunal could not be satisfied that all of the entries made were an accurate reflection of the underlying transactions. The accuracy of the records depended on the accuracy and completeness of the information provided to the bookkeeper. The Tribunal is not satisfied that all information relating to Mr Buzadzic’s dealings with the WGBW Group was accurately provided to the bookkeepers.

(Emphasis added.)

69    The Tribunal gave detailed consideration to the issue of the burden of proof at [122]-[158]. At [122], the Tribunal stated that it is for the applicant to establish that the amount assessed exceeds their actual liability, and this requires the applicant to demonstrate what their actual taxable income is. The Tribunal, at [123], set out an extract from the judgment of Nettle J in Bosanac at [29]-[30] in support of those propositions (set out later in these reasons). The Tribunal then reasoned as follows:

125.    In this matter, there were clear deficiencies in the records provided to the Tribunal. The basis for accounting entries remained unexplained. The manner in which funds flowed between the entities was not explained except in the form of generalisations. The distributions included in Mr Buzadzic’s income tax returns were not reconciled to either the bank account statements (which was not unexpected given that the evidence was that the distributions were not paid in cash) or to the amounts recorded as owed to the various entities by Mr Buzadzic. It was not at all clear how trust distributions returned as being made to Mrs Buzadzic could be used to reduce amounts owed to the Associated Entities by Mr Buzadzic. The source and provenance of identified deposits and credit entries (and in particular the transactions which had given rise to the deposits or credit entries) remained unexplained.

126.    The burden of proving a negative is not easily discharged. In the present case it requires the Tribunal to be satisfied that not only have all the sources of the taxpayer’s income been disclosed but also that the earnings from those sources have been correctly returned. The Tribunal is unable to determine whether all of the deposits and credit entries were the product of transactions that had given rise to the derivation of assessable income by Mr Buzadzic or whether all sources of income have been brought to account.

127.    Aside from the amounts which the Commissioner concedes as explained (including the deposits which the Commissioner conceded were debited to the director’s loan ledger accounts) and the money received on the sale of heritage number plates, the Tribunal is not satisfied that Mr Buzadzic has shown what the source or sources of money reflected in the disputed deposits and credits (including credits to eliminate apparent opening and closing loan account balance mismatches) was or were, and as a consequence has not shown that:

(a)    the deposits from the Associated Entities and the unexplained credits were not attributable to amounts of undeclared income derived by Mr Buzadzic; and

(b)    the deposits from the non-associated entities and unknown persons were not attributable to amounts of undeclared income derived by Mr Buzadzic from an unidentified source.

128.    In a case such as the present where the Commissioner has assessed a taxpayer on the basis of unexplained deposits and unexplained sources for reductions in their liabilities, to the extent that the taxpayer contends that their income is sourced from distributions and dividends, it is incumbent on the taxpayer to lead evidence that explains how those distributions and dividends were paid (whether in cash or book entry), how the distributions had been reflected in their taxable income as returned and how those dividends and distributions explain decreases in personal liabilities.

129.    Mr Buzadzic appeared to assert that the deposits to his bank accounts from his Associated Entities were to be explained on the basis that they were:

(a)    reimbursements to him of outgoings he incurred on behalf of those entities (as a result of his decision to use his personal credit cards or home mortgage offset account to pay outgoings for his Associated Entities);

(b)    the proceeds of loans made to him by the Associated Entity; and

(c)    the proceeds of distributions made to him and which had been included in his assessable income.

130.    Mr Buzadzic did not lead sufficient evidence to detail the structure of the various trusts, how the relevant companies declared divided income to those trusts, and how the income from those trusts was distributed each Year.

131.    The Tribunal is unable to be satisfied that the amounts deposited into Mr Buzadzic’s bank accounts and credit card accounts from the Associated Entities were not assessable, for example by being the proceeds of distributions made to him and which had already been included in his assessable income.

132.    The Tribunal is similarly unable to be satisfied that any of the reductions recorded in Mr Buzadzic’s loan accounts with the Associated Entities were referable to distributions made to him and which had already been included in his assessable income. Although Mr Buzadzic’s income tax returns disclosed some amounts of assessable income referable to trust distributions, the evidence led did not explain how the distributions were made or applied, or the manner in which dividend payments were made by other Buzadzic Group companies to those trusts. The evidence led did not show how the dividends and distributions flowed from the entities in the Buzadzic Group to the accounts of each of Mr and Mrs Buzadzic and how those dividends and distributions were to be reconciled to the deposits in the bank accounts and the Buzadzic loan account reductions recorded in each entity’s accounts. The forensic accountants report that had been suggested might have addressed these matters but failed to do so.

133.    In the absence of any contemporaneous evidence (whether in the form of bank records, invoices or receipts) and a forensic analysis of the ledger accounts of the Associated Entities, the Tribunal is not satisfied that the identified deposits into Mr Buzadzic’s accounts from the Associated Entities can be explained as reimbursements of expenses incurred by Mr Buzadzic for the business operations where no corresponding expense can be identified from the credit card statements for Mr Buzadzic’s credit card accounts. Nor can the deposits be readily explained as the proceeds of loans made to Mr Buzadzic where there is no corresponding debit entry to Mr Buzadzic’s loan account with the Associated Entities.

134.    Aside from the generalised assertion that the deposits from the Associated Entities were reimbursements of unidentified expenses, no specific explanation was proffered by Mr Buzadzic for most of the deposits.

…

150.    The Tribunal does not accept the unsupported explanations for the deposits proffered by Mr Buzadzic. The Tribunal considers Mr Buzadzic’s oral evidence concerning the deposits to be speculative and unreliable.

151.    Only one of the explanations, concerning the sale of heritage number plates, could be accepted.

(Footnote omitted; emphasis added.)

70    The balance of the Tribunal’s reasons is structured under the following headings:

(a)    Unverified Credit Entries – Mr Buzadzic;

(b)    Discrepancies between opening and closing balances;

(c)    Unexplained Deposits and Unverified Credit Entries purporting to be in Mrs Buzadzic’s favour;

(d)    Division 7A;

(e)    Fraud or Evasion;

(f)    Penalties.

71    In relation to “Unverified Credit Entries – Mr Buzadzic”, the Tribunal stated:

159.    The Unverified Credit Entries remain substantially unverified and unexplained. The evidence provided to the Tribunal did not adequately explain the reasons for these credit entries to show that they were not income, or amounts representing income, or whether these amounts had otherwise already been included in the taxable income returned by Mr Buzadzic.

160.    In this regard, the Tribunal cannot determine whether the amounts credited to Mr Buzadzic’s director’s loan account reflected the repayment of loans made by Mr Buzadzic to the Mynt or Cubby House businesses (whether such loans were made and if so how they were made, whether directly out of a bank account controlled by Mr Buzadzic or indirectly by Mr Buzadzic drawing down on his loan account with WGBW and directing WGBW to transfer funds to Mynt or Buz Cubby) or whether the credit entries reflected distributions made to Mr Buzadzic at the direction of the Trustee of the Buz Cubby Trust and if so, whether such a distribution had already been included in the assessable income returned by Mr Buzadzic or whether the credit entries reflected funds otherwise applied for Mr Buzadzic’s benefit.

161.    On the evidence provided, and absent the assistance of a forensic examination of the journals and ledgers for each entity tracing the provenance and origin of the credits, the Tribunal is not satisfied that the decreasing movements in Mr Buzadzic’s loan accounts with each entity or the identified deposits are to be explained by the distributions made to him by the WGBW Group which were otherwise included in the taxable income he returned. This inability to be so satisfied is not assisted by the fact that the sum of the decreases in the balances owed by Mr Buzadzic exceeded the sum of the distributions he received. The Tribunal is not satisfied that Mr Buzadzic has discharged his onus of demonstrating that these amounts did not represent amounts of his assessable income.

(Emphasis added.)

72    In relation to “Discrepancies between opening and closing balances”, the Tribunal stated in part:

165.    The Tribunal concludes that there was no discrepancy between the opening balance of the director’s loan account as properly recorded in each entity’s accounts as at the beginning of the Year and the closing balance as at the end of the previous Year (based on the finalised complete books of account maintained by the external accountants). The Commissioner was in error in assuming such a discrepancy existed. However, to show error in the Commissioner’s process of assessment is not sufficient to discharge the Applicant’s burden of showing the amended assessments to him were excessive. Even if these balances in the finalised accounts are accepted, the entries made that led to those balances need to be explained if they are challenged, as is the case presently.

166    The evidence led suggests that to align the external accountants’ records with Buzadzic Group records year-end adjustments had been made to reflect at least three matters:

(a)    Distributions declared and paid at year end. The distributions involved dividend declarations by the companies to their shareholders and trust distributions by the trustees of the family trusts. Mr Evans did not prepare the documents to effect the distributions. Year-end distributions were not paid in cash but effected by book entries. Where the distributions were applied on behalf of Mr Buzadzic to reduce his liability to WGBW, the effect of the distribution was to reduce the balance of Mr Buzadzic’s director loan account in WGBW’s ledger.

(b)    Entries made to reflect transactions at year end to consolidate the director loan account balances into one entity – [WGBW]. Because the other entities in the group tended to suffer cash shortfalls, during the Year, from time to time, Mr Buzadzic advanced moneys to those other entities by drawing on his home loan. In the accounts of these entities, the director loan account was a liability. At the same time, [WGBW] did generate surplus cash and Mr Buzadzic drew on those surplus cash funds from time to time to fund his family’s living expenses or direct WGBW to repay his home loan. In WGBW, the director loan account was an asset. Having many inter-entity loans made, in the words of Mr Kane, it is difficult to ascertain the amount of money that was owed between entities because this one owed this one so much, and this one owed this one so much. It was very difficult to control and understand which entities were supporting the other entity with regard to its own cash flows. As part of tidying up the accounts, the external accountants processed entries which had the result of transferring from Mr Buzadzic to [WGBW] the liability owed by the other group entities (and instead of those entities owing moneys to Mr Buzadzic, those entities owed moneys to WGBW, thereby creating an asset in the accounts of WGBW and WGBW recording a decrease in the amount owed to it by Mr Buzadzic).

(c)    Missed prior year adjustments. If these adjustments had not been properly made to the ledgers maintained by the client as at the end of the prior year, the prior year adjustments would also need to be processed.

167.    To the extent that the adjustments related to the second and third of the above matters, the adjustments would not necessarily relate to, be sourced in or be explained by Mr Buzadzic contributing funds to the entities from undeclared sources of income. In particular, the missed prior year adjustments would not be referable to undeclared sources of income in the year of income in which the adjustments were in fact processed. Whether adjustments made to loan account balances as a result of Mr Buzadzic advancing funds to entities suffering a cash shortfall were referable to undeclared sources of income of Mr Buzadzic would depend on identifying Mr Buzadzic’s source for those funds. If those funds were sourced by Mr Buzadzic borrowing from another party (for example, by drawing down on his home loan) those funds would not be sourced by Mr Buzadzic from any undeclared income. If however those funds were sourced by Mr Buzadzic as a result of other transactions, those funds might have been sourced by Mr Buzadzic from undeclared income.

168.    The difficulty is that based on the evidence before it, the Tribunal cannot ascertain the extent to which the entries made to the director’s loan accounts related to any of the three matters. The Tribunal was provided with alignment journal entries which listed the total debits and credits the external accountants instructed be made to the Buzadzic Group’s internally maintained ledgers at the end of each Year. However the Tribunal was not provided with an explanation for the basis on which those debit and credit amounts had been determined and in particular how the debit adjustments to the director loan accounts had been calculated or evidence of the transactions which they were intending to reflect.

…

170.    No attempt had been made to demonstrate how any of the year-end adjustments were reflected in or reconciled with the amounts included in Mr Buzadzic’s tax returns. Although it is likely that at least some of the year-end adjustments (and thus some of the differences between the closing balances recorded in the accounting files provided to the Commissioner and the opening balances recorded in the following year’s financial statements) may be explained by the distributions of income that were included in Mr Buzadzic’s income tax return, the Tribunal does not have a sufficiently reliable basis on which to quantify or ascertain the connection, if any, between the reductions in the loan account balances and the distributions made to Mr Buzadzic that may have been satisfied by an entry reducing his loan account balance. It may be accepted that the balance shown in the accounts of the entities properly disclose the balance owed by Mr Buzadzic and disclose the extent of that entity’s claim against Mr Buzadzic. However, the year-end accounts do not of themselves explain the reasons for or the sources of the reductions recorded against Mr Buzadzic’s loan account. The balance in the ledger account does not identify whether the source of the reduction recorded in that ledger account is to be found in a non-assessable receipt or entitlement or an assessable entitlement or receipt that has already been brought to account.

171.    Having provided incomplete information to the ATO during the course of the audit, to discharge his onus, it was incumbent on Mr Buzadzic to provide the Tribunal with evidence of the transactions which supported the adjusting entries made to his loan account and to demonstrate why those transactions did not involve or reflect amounts that were assessable to him, or if they were, that those amounts had been included in the taxable income he had returned. In this case the Tribunal was not provided with an adequate explanation of the manner in which the quantum of the adjustments had been determined. The Tribunal considers it possible, potentially even likely, that there exists an explanation for some if not all of the discrepancies identified by the Commissioner between opening and closing balances and it is possible that such an explanation might demonstrate that the adjustment made to align those balances reflected transactions that were not attributable to undeclared income. However, on the evidence before it, the Tribunal does not have a sufficient basis on which it might estimate the extent to which the adjustments made to align the opening and closing balances reflected or were sourced in such transactions.

…

173.    The Tribunal accepts that the finalised financial statements for each entity do not disclose a difference between the closing balance of one Year and the opening balance of the next Year. But whilst the Tribunal accepts that the final accounts of the entities show that the closing balances match the opening balances of the following Year, the evidence led does not demonstrate that the entries giving rise to the closing balances were properly made or, identify the nature of the transactions that those entries were intended to record, or to the extent they were, demonstrate that those entries were referable to dividends declared or distributions of net income of trust made to or on behalf of Mr Buzadzic, that had been included in the assessable income returned by Mr Buzadzic.

(Italics in original; footnote omitted; bold emphasis added.)

73    In relation to Div 7A, the Tribunal, at [191], stated that, having regard to its earlier findings, there was no occasion for the consideration of Div 7A in respect of the deposit amounts. Further, having regard to its earlier findings, the Tribunal found that, for the purpose of applying Div 7A, the outstanding loan balances as at year end were the amounts disclosed in the finalised accounts for each entity: at [195]. Because the Tribunal had no evidence to show that those amounts were repaid prior to the lodgement date, the Tribunal found that the amounts set out in Table 14 in the Tribunal’s reasons were assessable to Mr Buzadzic and ought to be included in his amended assessable income. These amounts totalled $21,446. The Tribunal, at [196], declined to exercise the discretion under s 109RB of the ITAA 1936.

74    The Tribunal considered fraud or evasion at [197]-[208]. There being no dispute that the Commissioner had formed the opinion that there had been evasion, the issue before the Tribunal was whether it was satisfied that the taxpayer has discharged the onus of showing that the opinion should not have been formed: see the Tribunal’s reasons at [199]. The Tribunal reasoned in part:

200.    Evasion for these purposes means more than the mere withholding of information or the mere furnishing of misleading information. Some blameworthy act or omission on the part of the taxpayer or those he is responsible for is required.

201.    As a practical matter, a taxpayer may demonstrate that there was no fraud or evasion by showing that there was no amount omitted from taxable income; for example, by showing that the amounts included in their assessable income were not assessable. Alternatively a taxpayer could demonstrate that the amounts, while assessable, were not included in assessable income returned for a reason that shows that while there was a shortcoming, it was a shortcoming that fell short of a blameworthy act in the Denver Chemical [Manufacturing Co v Commissioner of Taxation (NSW) [1949] HCA 25; 79 CLR 296] sense. That is, even if the Tribunal finds that the amounts not disclosed by the taxpayer were assessable, there will be no fraud or evasion if the taxpayer can show a reasonable excuse for omitting the amounts from his assessable income.

202.    In this particular case, to discharge the onus regarding fraud and evasion, Mr Buzadzic needed to provide evidence as to the sources of the amounts deposited into the bank accounts. Based on the evidence before it, the Tribunal does not accept the explanations proffered by Mr Buzadzic for the deposits. The character of the amounts deposited remain unexplained and he has not proven the amounts to be non-assessable. In the absence of an accepted explanation for the amounts, Mr Buzadzic has failed to demonstrate the omission of these amounts from his assessable income were not attributable to a blameworthy act. Approached differently, the Tribunal has nothing on which it can evaluate the seriousness of any shortcoming, there is nothing on which the Tribunal can rest a conclusion that there was not such a blameworthy act.

…

205.    For the reasons set out above, the Tribunal concludes that Mr Buzadzic received amounts (in the form of the deposits to the bank accounts in his name and in the name of Mrs Buzadzic) and received the benefit of amounts which were credited to his loan accounts. These amounts were not included in his returns, and aside from some isolated exceptions, were omitted without explanation. Having been assessed and having failed to demonstrate that he should not have been, the Tribunal has no basis on which it can be satisfied that the shortfall in his taxable income was not attributable to a blameworthy act. Accordingly the Tribunal is not satisfied that the Applicant has demonstrated that the Commissioner should not have formed the view that there had been fraud or evasion.

(Italics in original; footnotes omitted.)

75    The Tribunal also stated, at [206], that once a fraud or evasion opinion is formed, the entire assessment is open for amendment, not just a single particular, relying on Denver Chemical Manufacturing Co v Commissioner of Taxation (NSW) [1949] HCA 25; 79 CLR 296 (Denver Chemical) at 315.

76    The Tribunal considered the issue of penalties at [209]-[215]. After stating that it did not propose to increase the penalty imposed in respect of the interest, the Tribunal reasoned:

213.    In so far as the balance of the amounts assessed to Mr Buzadzic are concerned, Mr Buzadzic’s predicament resulted from the complex manner in which he conducted his and his entities’ affairs – mixing business expenditure and personal expenditure on credit cards, moving moneys between his personal accounts and around the accounts of the Buzadzic Group entities and not always telling his bookkeeper and accountant of all amounts deposited into his personal accounts. He accessed moneys as he chose and appears to have assumed that service providers would clean up after him based on the information he gave to them. Mr Buzadzic’s most significant service provider, Mr Hadded/The Practice, failed to make inquiries that they knew they should have: Mr Hadded admitted his firm had a practice of sending out a questionnaire to its clients to complete but did not send one to Mr Buzadzic because they were of the view that Mr Buzadzic would not respond. Mr Buzadzic provided no explanation for his conduct. The Tribunal is not satisfied that he has discharged his onus of proving on the balance of probabilities that his conduct in respect of the balance of the shortfall assessed to him was not attributable to an intentional disregard of the law. Because the taxpayer has provided no explanation for the amounts assessed to him that has been accepted by the Tribunal, and has provided no reason for excluding those amounts from his assessable income, the Tribunal is unable to be satisfied that the Commissioner’s assessment of the taxpayer’s conduct has resulted in a penalty assessment that is excessive. In these circumstances the Tribunal can be left with no option but leave the pre-existing basis on which penalty has been imposed undisturbed.

214.    Because it is not satisfied that the shortfall was not attributable to repeated culpable conduct the Tribunal does not consider it appropriate to remit the 20% uplift imposed under … s 284-220(1)(c) of Schedule 1 of the Administration Act.

215.    The Tribunal is not satisfied that the penalty assessments issued to Mr Buzadzic are excessive.

The appeal

77    Mr Buzadzic appeals on a question of law, or questions of law, to this Court. I have summarised Mr Buzadzic’s contentions in the Introduction to these reasons.

78    The material before the Court comprises the documents in Parts A and C of the Appeal Book, which were provided electronically. Part C comprises documents under 22 numbered tabs, in addition to the parties’ outlines of submissions and chronologies.

79    In the course of the hearing, Mr Buzadzic sought to rely on a number of additional documents. I ruled that the following additional documents should be received by the Court:

(a)    items 1 to 6 in an index of documents provided by Mr Buzadzic during the hearing – these documents comprised Mr Buzadzic’s income tax returns for the 2007 and 2009 to 2013 Years;

(b)    item 8 in that index, which was a bundle of documents marked exhibit R6 in the Tribunal proceedings;

(c)    the document marked T60 in the Tribunal proceedings, being Mr Buzadzic’s notice of objection dated 16 June 2016;

(d)    the document marked T89 in the Tribunal proceedings, being a spreadsheet headed “Danny and Leisa Buzadzic – Summary of Net Income and Distributions”; and

(e)    the document marked T90 in the Tribunal proceedings, being the Commissioner’s fraud or evasion opinion dated 28 April 2016.

80    Further, in the course of the hearing it became apparent that it may be useful for me to receive, and I gave leave to the parties to provide, the following documents:

(a)    Mr Buzadzic’s statement of facts, issue and contentions in the Tribunal proceedings;

(b)    Mr and Mrs Buzadzic’s submissions in the Tribunal proceedings dated 20 February 2020 (including Annexures A, B and C to those submissions);

(c)    the Commissioner’s closing submissions in the Tribunal proceedings dated 21 April 2020 (including the annexure to those submissions); and

(d)    Mr and Mrs Buzadzic’s reply submissions in the Tribunal proceedings dated 8 September 2020.

Applicable principles relating to “question of law”

81    The principles relating to what constitutes a “question of law” for the purposes of s 44 of the AAT Act were considered by the Full Court of this Court in Haritos v Federal Commissioner of Taxation [2015] FCAFC 92; 233 FCR 315 (Haritos). The Full Court (Allsop CJ, Kenny, Besanko, Robertson and Mortimer JJ) set out a summary of its conclusions in relation to s 44 at [62] of its reasons, including:

(a)    the subject matter of the Court’s jurisdiction under s 44 is confined to a question or questions of law;

(b)    the statement of the question of law with sufficient precision is a matter of great importance to the efficient and effective hearing and determination of appeals from the Tribunal;

(c)    any requirements of drafting precision concerning the form of the question of law do not go to the existence of the jurisdiction conferred on the Court by s 44(3), but to the exercise of that jurisdiction;

(d)    whether or not the appeal is on a question of law is to be approached as a matter of substance rather than form; and

(e)    the expression “may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal” in s 44 should not be read as if the words “pure” or “only” qualified “question of law”; not all so-called “mixed questions of fact and law” stand outside an appeal on a question of law.

82    The Full Court in Haritos, at [192], stated that:

(a)    the right of appeal under s 44 does not extend to “mere questions of fact”;

(b)    as French CJ, Gummow and Bell JJ emphasised in Osland v Secretary to the Department of Justice [2010] HCA 24; 241 CLR 320 at [19], the Court “should not usurp the fact-finding function of the AAT”, quoting Repatriation Commission v O’Brien [1985] HCA 10; 155 CLR 422 at 430 per Gibbs CJ, Wilson and Dawson JJ; and

(c)    the right of appeal under s 44 does not extend to mixed questions of fact and law where, in order to decide the question of law, the Court must positively determine a question of fact itself, rather than judicially review the Tribunal’s fact finding.

83    In the same paragraph, the Full Court in Haritos set out with approval the following passage from the judgment of Brennan J in Waterford v Commonwealth [1987] HCA 25; 163 CLR 54 at 77:

A finding by the A.A.T. on a matter of fact cannot be reviewed on appeal unless the finding is vitiated by an error of law. Section 44 of the A.A.T. Act confers on a party to a proceeding before the A.A.T. a right of appeal to the Federal Court of Australia “from any decision of the Tribunal in that proceeding” but only “on a question of law”. The error of law which an appellant must rely on to succeed must arise on the facts as the A.A.T. has found them to be or it must vitiate the findings made or it must have led the A.A.T. to omit to make a finding it was legally required to make. There is no error of law simply in making a wrong finding of fact. …

84    At [194], the Full Court in Haritos stated:

As the High Court said in Owens, the purpose of limiting an appeal to a question of law is to ensure that the merits of the case are dealt with not by the Federal Court but by the Tribunal. This distribution of function is critical to the correct operation of the administrative review process. See also O’Brien at 430 where Gibbs CJ, Wilson and Dawson JJ said that on an appeal under s 44 the appellate body should not usurp the fact-finding function of the Tribunal. But such fact finding is an entirely different exercise from the evaluation of the fact-finding process of the Tribunal (as fact-finder) to decide upon its legality.

(Emphasis added.)

85    The question whether the Tribunal has failed to provide procedural fairness raises a question of law: see Haritos at [202].

86    Further, the question whether the Tribunal has made a decision that is “so unreasonable that no reasonable decision-maker could have come to it” raises a question of law: Sharp Corporation of Australia Pty Ltd v Collector of Customs [1995] FCA 707; 59 FCR 6 (Sharp Corporation) at 12-13 per Davies and Beazley JJ (with whom Hill J agreed), approved in Haritos at [126], [200]; see also Haritos at [202] (referring to jurisdictional error).

87    If the decision-maker adopts a wrong approach to the task, this too raises a question of law: Sharp Corporation at 12-13, approved in Haritos at [126], [200]. In this regard, it was stated in Sharp Corporation at 12-13:

This may occur if the decision-maker has not applied the well-understood ordinary meaning of a term but has given to it a meaning or qualification of his or her own or if, in the application of terms such as “income”, “capital” and “incurred” which appear in the Income Tax Assessment Act 1936 (Cth) and the term with which we are now concerned, “essential character”, all of which have been the subject of exposition in reasons of courts, the decision-maker adopts a meaning contrary to that which has been established by legal decisions.

Grounds 1 and 2 (burden of proof)

88    It is convenient to consider these grounds together, consistently with the approach taken in Mr Buzadzic’s submissions. Grounds 1 and 2 are as follows:

1.    On the evidence before the Tribunal and the findings of fact made by the Tribunal (including but not limited to the facts and findings in schedule A [to the notice of appeal] but save and except facts challenged below), the Tribunal erred in law in finding that the Applicant failed to discharge the burden cast upon him by section 14ZZK(b)(i) of the Taxation Administration Act 1953 that the assessments were excessive. The Tribunal was obliged in law to conclude that the Applicant has discharged the burden of proof cast upon him by section 14ZZK(b)(i) of the Taxation Administration Act 1953.

2.    The Tribunal adopted a process of reasoning that was so illogical, irrational or lacking a basis in findings or inferences of fact supported on logical grounds that its reasoning was affected by errors of law and has made a decision that was so unreasonable that no reasonable decision maker would have made, in that, despite the findings it made and evidence before it (see schedule A [to the notice of appeal]), the Tribunal was not satisfied that the Applicant has discharged the burden of proof cast upon him by section 14ZZK(b)(i) of the Taxation Administration Act 1953 on the balance of probabilities.

89    The questions of law in the notice of appeal relevant to these grounds are:

1.    Whether, the Tribunal misconstrued and/or failed to apply or misapplied the correct legal test and principles governing the onus of proof under section 14ZZK(b)(i) of the Taxation Administration Act 1953?

2.    Whether, on the evidence before the Tribunal and on the facts as found, the Tribunal was obliged in law to conclude that the Applicant has discharged the onus of proof in section 14ZZK(b)(i) of the Taxation Administration Act 1953?

…

9.    Whether the Tribunal’s decision was so unreasonable that no reasonable decision maker could have made [it]?

I accept that the above questions raise questions of law for the purposes of s 44 of the AAT Act.

90    Section 14ZZK of the Administration Act provides:

14ZZK    Grounds of objection and burden of proof

On an application for review of a reviewable objection decision:

(a)    the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and

(b)    the applicant has the burden of proving:

(i)    if the taxation decision concerned is an assessment—that the assessment is excessive or otherwise incorrect and what the assessment should have been; or

(ii)    in any other case—that the taxation decision concerned should not have been made or should have been made differently.

91    Mr Buzadzic’s submissions in relation to grounds 1 and 2 are, in summary, as follows:

(a)    Section 14ZZK(b)(i) provides that on an application for review, an applicant has the burden of proving that the assessment is excessive or otherwise incorrect and what the assessment should have been. It is established that the standard of proof is on the balance of probabilities: Evans v Federal Commissioner of Taxation (1988) 19 ATR 1784. In addition, Mr Buzadzic must prove on the balance of probabilities that there has been no fraud or evasion.

(b)    In taxation matters, there are several statements of principle that bear on the manner in which the burden may be discharged. Mr Buzadzic relies on Imperial Bottleshops Pty Ltd v Federal Commissioner of Taxation [1991] FCA 352; 22 ATR 148 (Imperial Bottleshops) at 155 per Hill J; and Federal Commissioner of Taxation v Cassaniti [2018] FCAFC 212; 266 FCR 385 (Cassaniti) at [87]-[88] per Steward J.

(c)    In general, the civil standard is not treated as a mathematical standard but as a reasonable attempt to find the facts in the circumstances of the particular case. The issue is whether the Tribunal was satisfied that it was more probable than not that the facts necessary to establish the case for Mr Buzadzic existed.

(d)    Disbelief of the case presented by Mr Buzadzic does not necessarily permit the Tribunal to conclude that the case for the Commissioner is correct. The principles stated by the High Court in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; 67 ALJR 170 (Neat Holdings) at 170-171 apply equally to taxation cases. Two points are of particular relevance: (1) the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to be proved; and (2) in instances where there are serious allegations, the requirements of the standard should reflect a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct, and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. In Henderson v Queensland [2014] HCA 52; 255 CLR 1 at [98], Gageler J said that the judge should have given weight to “the conventional perception that persons do not ordinarily engage in criminal conduct”.

(e)    Consistent with Neat Holdings, the Tribunal should have, on the evidence, found that Mr Buzadzic did not engage in fraud or evasion so as to permit the Commissioner to assess outside the prescribed statutory time limits. What was required was that the Tribunal be satisfied that Mr Buzadzic had proved his case on the balance of probabilities. Insistence on corroboration and contemporaneous evidence, and the rejection of extensive evidence put before the Tribunal by Mr Buzadzic, elevated the standard of proof to beyond any doubt. That is not what is mandated by s 14ZZK(b)(i). Indeed, s 164 of the Evidence Act 1995 (Cth) provides that it is not necessary that evidence on which a party relies be corroborated.

(f)    Here, as a result of the effluxion of time and statutory record-keeping requirements, there were some gaps in the evidence. It should have been sufficient that the circumstances raised a more probable inference in favour of what was alleged by Mr Buzadzic. The Tribunal should have taken into account the following:

(i)    In relation to Unexplained Deposits: (1) taxpayers are not required to maintain documentary records of private transactions – the record-keeping requirements in s 262A of the ITAA 1936 and Div 900 of the ITAA 1997 are limited to transactions that occur in carrying on a business and to work-related expenses; (2) such record-keeping requirements are limited to five years; and (3) certain transactions, like dealings between friends and family members and sales of private chattels, do not lend themselves to the creation of a record. It is unrealistic to expect taxpayers to create records of all dealings and to hold them for an indefinite period of time.

(ii)    In relation to Unverified Credit Entries, Mr Buzadzic engaged accountants and bookkeepers to attend to accounting matters. It was unreasonable to expect Mr Buzadzic with limited education and no accounting skills to question the sufficiency and/or correctness of accounting records and financial statements prepared by the bookkeeper and accountants.

(iii)    Small family businesses normally involve dealings between related entities on the basis that the bookkeeper and accountants will account for those transactions. That necessarily involves moving funds between entities to ensure the financial viability of the group. It should be noted that the Buzadzic Group was substantial by 2013, when the financial controller was engaged, but it was a small business in the initial years when Mr Buzadzic commenced in the panel beating business. Those years form the subject of the assessments in issue.

(g)    The Tribunal appears to have elevated the standard to a level far higher than the balance of probabilities in concluding (at [92]) that it was “not impossible” for Associated Entities’ cash amounts to be deposited directly in Mr Buzadzic’s accounts and that “not fully traceable amounts could be received” from customers. That finding is irrational, unreasonable and contrary to evidence. In addition, on the uncontradicted evidence, such cash receipts were very small and irregular.

(h)    There are other problematic evaluations of the evidence: (1) in relation to Unexplained Deposits, at [88], [117], [119], [124], [125], [127], [130], [144], [145], [149], [150], [152]-[158] of the Tribunal’s reasons; (2) in relation to Unverified Credit Entries, at [159]-[161]; and (3) in relation to discrepancies between opening and closing balances, at [163], [165], [168]-[173]. The conclusions reached by the Tribunal are all the more problematic because it found that “it [is] possible, potentially even likely, that there exists an explanation for some if not all of the discrepancies identified by the Commissioner between opening and closing balances and it is possible that such an explanation might demonstrate that the adjustment made to align those balances reflected transactions that were not attributable to undeclared income” (at [171]).

(i)    In relation to discrepancies between opening and closing balances, the evidence-in-chief and in cross-examination was consistent that:

(i)    The adjustments to the ledger were only made after the bookkeeper (Mr Stirling) was provided with an invoice or documents that sustained the adjustment. Both external accountants (Mr Hadded and Mr Kane) had no reason to suspect that the adjustments were inappropriate and both were available to be consulted to ensure that the adjustments were appropriately made.

(ii)    Mr Hadded, Mr Kane, Mr Stirling, Mr Evans and Mr Vasudevan gave consistent evidence that: (1) the ledgers and the accounts were incomplete and required end-of-year adjustments; (2) the final accounts were consistent and contained no errors; and (3) there was no discrepancy between opening and closing balances between years in the adjusted end-of-year accounts. Section 1305 of the Corporations Act provides that the final accounts are admissible in evidence and are prima facie evidence of any matter stated or recorded in them.

(j)    The Tribunal should have accepted that evidence and found that the Unverified Credit Entries were the product of the Commissioner relying on incomplete accounts that were not adjusted by the accountants – as mandated by ordinary accounting standards and practices. In the alternative, the Tribunal should have drawn an inference that Mr Buzadzic had explained the deposits. Mr Buzadzic relies on Annexures A, B & C to the submissions for the applicants dated 20 February 2020 filed in the Tribunal proceedings. Annexure A shows that various companies in the group distributed dividends to the shareholder Buzadzic Pty Ltd atf the D & L Buzadzic Trust. Annexure B shows that Buzadzic Pty Ltd atf the D & L Buzadzic Trust distributed the net income of the trust to Mr and Mrs Buzadzic and to Delrich Arch Pty Ltd atf the Buzadzic Family Trust. Delrich Arch Pty Ltd atf the Buzadzic Family Trust distributed its net income to in the main Mr and Mrs Buzadzic. Buz Cubby Pty Ltd atf the Buzadzic Cubby Trust distributed its net income for the 2013 Year to Mr and Mrs Buzadzic. Annexure C shows adjustments to the director loan accounts over the years in issue.

(k)    Both Mr Evans and Mr Hadded gave evidence to the effect that none of these distributions (dividend and trust) were made by way of cash payments; rather, all were effected by appropriate accounting and book entries. Indeed, the Commissioner has not suggested otherwise. That evidence then provided the basis for an inference that the dividends that came to be trust distributions were the source of the adjustments in the director loan accounts. It follows that none of these adjustments were assessable to Mr Buzadzic.

(l)    It follows from the foregoing statements made by the Tribunal, and the evidence before the Tribunal, including that particularised in Schedule A to the notice of appeal that: the Tribunal either misconceived or misapplied the correct test and legal principles that govern the onus of proof; further or alternatively, the Tribunal’s decision that Mr Buzadzic failed to discharge the burden of proof was unreasonable.

92    I note that there is some overlap between grounds 1 and 2, on the one hand, and some of the later grounds of appeal, on the other. For example, the issue of fraud or evasion is raised both in grounds 1 and 2 and in grounds 5, 6 and 7. The thrust of grounds 1 and 2 is the contention that the Tribunal applied too high a standard of proof, while the other grounds, to the extent that they overlap, have a different emphasis.

93    In my view, Mr Buzadzic has not established that the Tribunal fell into error by adopting or applying too high a standard of proof. In my view, it is clear from the Tribunal’s reasons that it correctly understood that: (a) Mr Buzadzic bore the burden of proof; (b) this required him to show that the assessments in issue were excessive; and (c) the standard of proof was the balance of probabilities. Further, Mr Buzadzic has not demonstrated that the Tribunal erred in the way that it applied these principles. That is to say, Mr Buzadzic has not established that the Tribunal applied too high a standard of proof in the course of deciding the case.

94    The principles relating to burden of proof in the context of an assessment under s 167 of the ITAA 1936 were helpfully summarised by Derrington J in Federal Commissioner of Taxation v Ross [2021] FCA 766; 174 ALD 77 (Ross) at [46]-[48].

95    At the commencement of the section of its reasons dealing with the burden of proof, the Tribunal stated (at [122]):

The sixth general consideration concerns the relevant burden of proof. The Applicant bears the onus of proving that the amended assessment is excessive. Unless the Commissioner agrees to narrow the issues, this burden is not discharged by showing error in the basis on which the amended assessments were issued. Rather, it is for the Applicant to establish that the amount assessed exceeds their actual liability. This requires the Applicant to demonstrate what their actual taxable income is.

96    In support of these propositions, the Tribunal set out, at [123], the following passage from the judgment of Nettle J in Bosanac at [29]-[30]:

29    … As the primary judge recorded, although the Commissioner conceded that the two amounts totalling $600,000 were not taxable income, the Commissioner “did not otherwise admit the underlying factual foundation alleged by the [plaintiff]”. Thus, as both the primary judge and the Full Court reasoned, in effect, the position remained that the amount of taxable income for which the Commissioner contended was the amount shown in the Objection Decision. In substance, the only effect of the Commissioner’s concession was that the plaintiff was relieved of the necessity of negativing the inference, otherwise available, that the two amounts totalling $600,000 were taxable income. The onus remained on the plaintiff to adduce evidence sufficient to establish on the balance of probabilities the true amount of his taxable income (of course, making such forensic use as could be made of the Commissioner’s concession that the conceded amounts were not assessable income) and thereby that the amount of taxable income as determined by the Commissioner exceeded the true amount. The plaintiff was not entitled to proceed on the basis that the conceded amounts could simply be deducted from the amount of taxable income that the Commissioner had determined in the relevant year of income.

30    That reasoning was correct. As has been seen, although the Commissioner and a taxpayer may agree to confine an appeal to a specific point of law or fact – and where that occurs, the taxpayer might succeed in the appeal by demonstrating that he or she is entitled to succeed on that point – in the absence of such an arrangement, the Commissioner is entitled to rely on any deficiency in the taxpayer’s proof of the excessiveness of the amount assessed in order to uphold the assessment. Equally, if all the facts are known, and the amount of taxable income in dispute depends only on the legal complexion of the established facts, the taxpayer may succeed by demonstrating on the balance of probabilities that the amount in question does not bear that legal complexion. But where, as here, an appeal proceeds on the basis that not all of the material facts are known, either because the taxpayer has been less than forthcoming in making disclosures to the Commissioner or for some other reason, the taxpayer cannot succeed by showing only that the basis of the Commissioner’s assessment was in some respect erroneous; since for all that can be told, unless and until the taxpayer proves to the contrary, there may be other income of which the Commissioner was not aware and which the Commissioner has not taken into account. In order to succeed in such a case, the taxpayer must discharge the burden of demonstrating on the balance of probabilities the true amount of the taxpayer’s taxable income and thus that the amount determined by the objection decision is excessive. Here, that required the kind of wide survey and exact scrutiny of the plaintiff’s business activities to which the primary judge referred and which was conspicuously absent from the plaintiff’s presentation.

(Footnotes omitted; emphasis added.)

97    Mr Buzadzic does not take issue with the principles stated in the above passage. The emphasised parts of the above passage make clear that the applicable standard of proof is the balance of probabilities. The Tribunal set out the above passage at the beginning of the section of its reasons dealing with the burden of proof. In light of these matters, I consider that the Tribunal correctly understood that the standard of proof was the balance of probabilities.

98    It seems that Mr Buzadzic’s real complaint is not so much the Tribunal’s statement of principles, but the way in which it applied those principles. In other words, the way in which it went about the task of considering the evidence and reaching the conclusion that it was not satisfied that Mr Buzadzic had discharged the burden of proof. I have set out extensive extracts from the Tribunal’s reasons earlier in these reasons. The Tribunal provided clear and logical reasons for reaching the conclusion that Mr Buzadzic had not demonstrated what his taxable income was, and therefore had not shown that the amounts in the assessments in issue were excessive. In particular, the Tribunal relied on the following matters and reached the following conclusions:

(a)    there were clear deficiencies in the records provided to the Tribunal; the basis for accounting entries remained unexplained; the manner in which funds flowed between the entities was not explained except in the form of generalisations (at [125]);

(b)    the source and provenance of identified deposits and credit entries (and, in particular, the transactions that had given rise to the deposits or credit entries) remained unexplained (at [125]);

(c)    the Tribunal was not satisfied that Mr Buzadzic had shown what the source or sources of money reflected in the disputed deposits and credits (including credits to eliminate apparent opening and closing loan account balance mismatches) was or were, and as a consequence had not shown that: the deposits from the Associated Entities and the unexplained credits were not attributable to amounts of undeclared income derived by Mr Buzadzic; and the deposits from the non-associated entities and unknown persons were not attributable to amounts of undeclared income derived by Mr Buzadzic from an unidentified source (at [127]); and

(d)    the Tribunal did not accept the unsupported explanations for the deposits proffered by Mr Buzadzic; the Tribunal considered Mr Buzadzic’s oral evidence concerning the deposits to be speculative and unreliable (at [150]).

99    It was open to the Tribunal to rely on these matters and reach these conclusions. These matters and conclusions do not suggest that the Tribunal applied too high a standard of proof.

100    I note that, at [126], the Tribunal stated that “[t]he burden of proving a negative is not easily discharged”. A footnote to that sentence cited Hines v Federal Commissioner of Taxation (1952) 5 AITR 305 at 318, a judgment of the High Court. This statement acknowledges the difficulties facing an applicant in the position of Mr Buzadzic; it does not suggest that the Tribunal applied too high a standard of proof.

101    At [129] of its reasons, the Tribunal set out what appeared to be Mr Buzadzic’s explanations for the deposits to his bank accounts. In the paragraphs that followed ([130]-[134]), the Tribunal explained why it did not accept these explanations. I do not consider that these paragraphs demonstrate, or even suggest, that the Tribunal applied too high a standard of proof. In these paragraphs, the Tribunal explained why it did not accept the explanations put forward by Mr Buzadzic. In my view, it was open to the Tribunal not to be satisfied with the explanations provided by Mr Buzadzic, for the reasons that it gave. The Tribunal also provided a more detailed analysis of the evidence relating to deposits into bank accounts at [135]-[149].

102    I have set out, above, extracts from the sections of the Tribunal’s reasons dealing with “Unverified Credit Entries – Mr Buzadzic” and “Discrepancies between opening and closing balances”. In each of these sections, the Tribunal provided clear and logical reasons for reaching the view that Mr Buzadzic had not demonstrated what his taxable income was, and therefore had not shown that the amounts in the assessments in issue were excessive. The way in which the Tribunal approached its task in these sections was consistent with the applicable standard of proof being the balance of probabilities. I do not consider that it applied too high a standard of proof.

103    In relation to fraud or evasion, the Tribunal, at [201], referred to different ways in which a taxpayer may be able to demonstrate that there was no fraud or evasion, or that the Commissioner should not have formed the view that there was fraud or evasion. The Tribunal referred, at [203], to certain submissions made by Mr Buzadzic. At [204], the Tribunal explained why it rejected those submissions. The Tribunal concluded, at [205], that Mr Buzadzic had not discharged the burden of showing that there was no fraud or evasion. The Tribunal stated that, in circumstances where Mr Buzadzic had been assessed and had failed to demonstrate that he should not have been assessed, the Tribunal had no basis on which it could be satisfied that the shortfall in his taxable income was not attributable to a blameworthy act. It was open to the Tribunal to reach this view on the basis of the matters to which it referred in the section of its reasons dealing with fraud or evasion. There is no suggestion that the Tribunal did not correctly appreciate that the applicable standard of proof was the balance of probabilities.

104    Insofar as Mr Buzadzic relies on Imperial Bottleshops, I do not consider there to be any inconsistency between the approach outlined by Hill J in the relevant passage and the way in which the Tribunal in the present case approached its task. In the relevant passage, Hill J stated (at 155):

A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If he goes into the witness box and swears that he has incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such a statement, like statements of purpose, or object or state of mind must, however, be “tested most closely, and received with the greatest caution”: Pascoe v FCT (1956) 6 AITR 315; 11 ATD 108 at 111. It would, of necessity, be a rare case indeed where a taxpayer, claiming to have expended a very large sum of money on trading stock and other business expenses, would succeed in satisfying the burden of proving that the assessment is excessive. Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed. It must, however, be borne in mind that the evidence of a taxpayer is not to be regarded as “prima facie unacceptable”, cf McCormack v FCT (1979) 143 CLR 284 at 302 per Gibbs J; 9 ATR 610; 23 ALR 583.

105    Indeed, in the above passage, Hill J stated that, in the circumstances described, “[s]ome other corroborative evidence would normally be required which makes it more probable than not that [the taxpayer’s] sworn testimony is to be believed”.

106    Insofar as Mr Buzadzic relies on the judgment of Steward J (with whom Greenwood J agreed) in Cassaniti, I do not consider there to be any inconsistency between the principles there stated and the approach taken by the Tribunal. In that case, Steward J stated at [87]-[88]:

87    I should finally address a more general submission made by the Commissioner that the evidence “was insufficient”. The Commissioner relied upon the fact that the respondent had failed to call any other witness to corroborate her claims …

88    Contending that evidence was “insufficient” in the face of three sworn affidavits of the respondent, together with the exhibits attached thereto, and her answers in cross-examination, may suggest that a taxpayer bears a special burden of proof. However, other than the necessity to scrutinise evidence given by the taxpayer him or herself with care, no such special burden exists. This is a case in which the taxpayer seeks declarations. The following propositions, derived from the judgment of Hunt J in Allied Pastoral, apply equally to a tax appeal made to this Court pursuant to s 14ZZ of the TAA as well as to other forms of revenue proceedings, such as here, the seeking of declarations against Commissioner:

(1)    first, where the onus is on the taxpayer (whether pursuant to s 14ZZO of the TAA or otherwise) the degree or standard of proof required is that which ordinarily applies in civil proceedings. The direction given to a jury in civil cases aptly describes that onus by reference to a pair of scales and to the arguments of each party being placed at each end. As Hunt J said in Allied Pastoral:

… if the plaintiff succeeds … in weighing down those scales ever so slightly in his favour then he has discharged the burden he carries …

(2)    secondly, for that purpose it is not obligatory for a taxpayer, in order to discharge his burden of proof, to call all material witnesses and to produce all material documents which support her or his or its position;

(3)    [thirdly], there is no requirement that evidence can only be accepted as admissible and probative if it is corroborated;

(4)    [fourthly], the tribunal of fact is free to accept the evidence of the taxpayer alone if it finds the taxpayer to be truthful;

(5)    finally, it would usually be prudent to corroborate the evidence of a taxpayer. It is also prudent to adduce contemporaneous objective evidence. But prudence should not be confused with the requirements of the law.

107    In the present case, the Tribunal’s statements about the deficiencies in the evidence led by Mr Buzadzic (including due to the lack of corroborative evidence and/or contemporaneous documentary evidence) do not suggest that the Tribunal incorrectly considered there to be a legal requirement that Mr Buzadzic provide corroborative material; rather, those statements explained why, in the circumstances of this case, Mr Buzadzic had not discharged his burden of demonstrating what his taxable income was, and therefore that the amounts in the assessments in issue were excessive.

108    Insofar as Mr Buzadzic relies on the principles stated by the High Court in Neat Holdings, I do not consider that these assist in the present context. It is important to note that the Tribunal did not make findings to the effect that Mr Buzadzic had engaged in fraudulent or evasive conduct. Rather, the Tribunal concluded that it was not satisfied that Mr Buzadzic had discharged his burden of proof, including that he had not discharged the burden of showing that the shortfall in his taxable income was not attributable to a blameworthy act (at [205]).

109    Some of Mr Buzadzic’s submissions in relation to grounds 1 and 2 appear to be an invitation to this Court to engage in a process of merits review, that is, a review of the merits of the factual findings or conclusions reached by the Tribunal. In particular, the submissions that the Tribunal “should have accepted” certain evidence, and that the Tribunal “should have drawn an inference” to a particular effect, appear to have this character. Consistently with the principles relating to what constitutes a “question of law”, discussed above, if the submissions are intended in this way, they would go beyond the scope of an appeal on a question of law for the purposes of s 44 of the AAT Act. I will, therefore, treat such submissions as contending that the relevant findings or conclusions were unreasonable in the sense that no reasonable decision-maker could have made or reached them, or that they otherwise lacked an evident and intelligible justification. The principles of legal unreasonableness in administrative decision-making have been considered by the High Court in a number of recent cases, particularly in the migration context: see, eg, Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332; and Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; 264 CLR 541 (SZVFW). In the latter case, Kiefel CJ stated at [10]-[11]:

10    In the joint judgment in Minister for Immigration and Citizenship v Li it was explained that a decision made in the exercise of a statutory power is unreasonable in a legal sense when it lacks an evident and intelligible justification. That may be so where a decision is one which no reasonable person could have arrived at, although an inference of unreasonableness is not to be drawn only where a decision appears to be irrational. None of these descriptions could be applied to the Tribunal’s decision in the present case.

11    Statements such as that made in the Wednesbury case [Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 at 230], that a decision may be regarded as unreasonable if no reasonable person could have made it, may not provide the means by which a conclusion of unreasonableness may be arrived at in every case. But it serves to highlight the fact that the test for unreasonableness is necessarily stringent. And that is because the courts will not lightly interfere with the exercise of a statutory power involving an area of discretion. The question is where that area lies.

(Footnotes omitted.)

110    I am not satisfied that any of the findings or conclusions that are challenged by Mr Buzadzic in his submissions in relation to grounds 1 and 2 are unreasonable in the sense described above. In my view, it is not shown that any of those findings or conclusions (including the conclusion that Mr Buzadzic had failed to discharge the burden of proving that the assessments in issue were excessive) lacked an evident and intelligible justification. To the contrary, the findings and conclusions appear to be clear and logical and open on the evidence before the Tribunal.

111    For these reasons, grounds 1 and 2 are not made out.

Ground 3 (income)

112    Ground 3 is as follows:

3.    The Tribunal erred in law in concluding and/or presuming that “unexplained” bank deposits, “unverified” credit entries to loan accounts and discrepancies in closing and opening balances of loan accounts (to the extent that there are any) are income on ordinary concepts within section 6-5 of the Income Tax Assessment Act 1997 unless shown to be of a non-income character.

113    The questions of law in the notice of appeal relevant to this ground are:

4.    Whether the Tribunal misconstrued and/or misapplied section 6-5 of the Income Tax Assessment Act 1997 in concluding and/or presuming that “unexplained” bank deposits and “unverified” credit entries were income on ordinary concepts unless shown to be of non-income character?

5.    Whether the Tribunal effectively adopted a meaning of “income” in section 6-5 of the Income Tax Assessment Act 1997 that was contrary to that which has been established by legal decisions?

I accept that these are questions of law for the purposes of s 44 of the AAT Act.

114    Mr Buzadzic’s submissions in relation to ground 3 can be summarised as follows:

(a)    Section 6-5 of the ITAA 1997 provides that assessable income includes income according to ordinary concepts, which is called ordinary income. No further guidance is provided as to the meaning of the word “income”. It is established that, in general, the three main categories of ordinary income are: (1) income from rendering services such as employment income; (2) income from carrying on business; and (3) income from property such as rent, interest and dividends.

(b)    The deposits in Mr Buzadzic’s bank accounts were of a private or domestic nature and were not made in consideration for the provision of services or any other income-producing activity. To that end, Mr Buzadzic relies on Federal Commissioner of Taxation v Montgomery [1999] HCA 34; 198 CLR 639; Federal Commissioner of Taxation v Stone [2005] HCA 21; 222 CLR 289; and Federal Commissioner of Taxation v McNeil [2007] HCA 5; 229 CLR 656. This proposition also applies to, and indeed is more compelling in the case of, the so-called Unverified Credit Entries. These accounting entries were fictitious and did not possess the essential attributes of income.

(c)    The approach adopted by the Commissioner, namely that, unless Mr Buzadzic established that a deposit was not income, the “unexplained” deposit would be assessable as income according to ordinary concepts, conflated the operation of s 6-5 as a charging provision with s 14ZZK(b)(i) as a procedural provision. An amount must possess the character of income within s 6-5 before it forms a part of the assessable income of a taxpayer. On the Commissioner’s approach, if a taxpayer receives a gift of $100 from a relative, or receives a refund of an amount they paid in another transaction, or deposits a cash amount they received from (for example) gambling or a non-taxable trust distribution or a gift from overseas relatives, then many years later the Commissioner can demand that the taxpayer explain those amounts and, if the taxpayer is unable to do so (no documents or effluxion of time), the taxpayer would be assessed on what is unequivocally not assessable.

(d)    The Commissioner’s approach would also create: (1) a presumption of taxation which would usually be irrebuttable because taxpayers are unlikely to have contemporary and corroborative documents to establish what those amounts were; and (2) an obligation on taxpayers to document every transaction and keep the records indefinitely – otherwise they risk an assessment that they cannot prove is erroneous.

(e)    While the burden of proof rests with Mr Buzadzic, it is not enough for the Commissioner simply to assess Mr Buzadzic on deposits that he is unable to explain or on so-called Unverified Credit Entries. The Commissioner must show that a particular deposit or accounting entry possesses the essential attributes of income before Mr Buzadzic as a taxpayer can be put to proof of the contrary.

(f)    Further or in the alternative, the deposits made in Mr Buzadzic’s accounts cannot be said to be “unexplained”, because he explained a significant proportion of them and the Tribunal should have inferred that the other deposits were also not income according to ordinary concepts. Further:

(i)    To the extent that the deposits were refunds of expenses paid, such deposits did not confer a benefit on him. To that extent, the deposits from Associated Entities were not income according to ordinary concepts. Mr Buzadzic gave compelling evidence that the deposits were refunds of expenses incurred on his credit cards and home loan facility. That evidence was corroborated by the evidence of Mr Hadded, Mr Kane, Mr Stirling and Mr Evans.

(ii)    To the extent that deposits were offset by distributions made by trusts within the Buzadzic Group, which were made up of dividends received by the trusts from corporate entities within the group, such deposits were not income according to ordinary concepts.

115    In my view, these submissions are inconsistent with accepted principles regarding the burden of proof in taxation proceedings. It is established that, in a case such as this, the onus is on the taxpayer to adduce evidence sufficient to establish (on the balance of probabilities) the true amount of their taxable income. In Bosanac v Federal Commissioner of Taxation [2019] FCAFC 116; 267 FCR 169 (Bosanac FFC), Greenwood, Burley and Colvin JJ stated at [64]:

In submissions before the primary judge, counsel for the Commissioner accepted that two amounts totalling $600,000 did not form part of … Mr Bosanac’s income for the 2009 year. It was a concession that might have been deployed together with other evidence to demonstrate that the Amended Assessments were excessive. However, the burden remained upon Mr Bosanac to demonstrate that the amounts in which each of the Amended Assessments had been issued was excessive. As we have said, in the circumstances of the case, he had to demonstrate the nature and extent of his income. The trial judge found that he failed to do so. In that context, the concession made by the Commissioner went nowhere in the appeal to the primary judge.

(Emphasis added.)

116    This proposition was approved by Nettle J in the passage from Bosanac set out above.

117    It is inconsistent with those principles to contend, as Mr Buzadzic does in the submissions summarised above, that it is incumbent on the Commissioner to show that particular items (that he has included in the taxpayer’s taxable income) are income according to ordinary concepts, before the taxpayer is put to proof to the contrary. Mr Buzadzic has not cited any authority for this proposition. In my opinion, if it were correct, it would have the effect of placing the burden of proof on the Commissioner, which would be contrary to the text and purpose of s 14ZZK of the Administration Act.

118    Insofar as question of law 5 raises the issue whether the Tribunal effectively adopted a meaning of “income” in s 6-5 of the ITAA 1997 that was contrary to that established by legal decisions, this issue was not developed in Mr Buzadzic’s outline of submissions (which are summarised above). The thrust of those submissions was the contention that the Commissioner needed to show that the relevant amounts (eg, the deposits) were income according to ordinary concepts before the taxpayer was put to proof to the contrary. I have dealt with that contention above. In any event, Mr Buzadzic has not demonstrated that the Tribunal adopted a meaning of “income” that was contrary to established authority.

119    Insofar as Mr Buzadzic submits that he explained a “significant proportion” of the deposits, this is not supported by any finding of the Tribunal. While the Tribunal accepted that some deposits were explained, it did not make a finding to the effect submitted by Mr Buzadzic.

120    Insofar as Mr Buzadzic submits that the Tribunal “should have inferred” that certain deposits were not income according to ordinary concepts, this is in substance an invitation to the Court to engage in merits review, which is outside the scope of an appeal on a question of law under s 44 of the AAT Act.

121    For these reasons, ground 3 is not made out.

Ground 4 (whether objections should have been allowed in part)

122    Ground 4 is as follows:

4.    The Tribunal failed to set aside the objection decisions under review and erred in [not] allowing the objections in full; alternatively, failed to exclude from the assessments in issue deposits and credit entries and other amounts that were explained and shown to be erroneous.

123    The question of law in the notice of appeal relevant to this ground is:

3.    Whether the objection decisions under review should have been set aside and the objections allowed in full? Alternatively, whether the objections to the assessments that formed the subject of the objection decisions under review should have been allowed in part – that is whether the Tribunal failed to exclude from the assessments in issue deposits and credit entries and other amounts that were explained and/or shown to be erroneous?

124    The first part of ground 4, and of question of law 3, simply challenge the outcome reached by the Tribunal, and do not appear to raise a question of law beyond that raised by other grounds. I accept that the second part of ground 4, and of question of law 3, do raise a question of law, namely whether the Tribunal adopted a wrong approach in that it did not allow the objections in part, to the extent that the deposits, credit entries and other amounts had been explained.

125    Mr Buzadzic’s submissions in relation to the second part of ground 4 can be summarised as follows:

(a)    Mr Buzadzic explained a significant number of the bank deposits and credit entries, but the Tribunal did not allow the objections in part to the extent of such explanations. To that end, Mr Buzadzic relies on the following evidence: (1) the evidence-in-chief of Mr Buzadzic at [22]-[47]; (2) the evidence-in-chief of Mr Evans at [5]-[19]; (3) the evidence-in-chief of Mr Kane at [10]-[17]; (4) the evidence-in-chief of Mr Stirling at [5]-[15]; and (5) the evidence-in-chief of Mr Hadded at [12]-[34].

(b)    Further, the Commissioner admitted that certain deposits and credit entries were explained (see the Tribunal’s reasons at [124]).

(c)    The Tribunal nevertheless concluded that it was unable to be satisfied that the explanation was sufficient (at [125]-[133]). This is inconsistent with the approach adopted by the Full Federal Court in Haritos at [235]-[236], where the Court accepted that a partial explanation is sufficient and rejected the all-or-nothing approach.

(d)    It follows that the objections should have been allowed to the extent of the explanations provided.

126    It is correct to say that certain of the deposits, credit entries and other amounts in question were either conceded by the Commissioner to be incorrect or accepted by the Tribunal to have been explained by Mr Buzadzic: see the Tribunal’s reasons at [17] (conceded amounts); [146] (conceded amounts); and [151]-[152] (regarding heritage number plates, in respect of which the explanation was accepted).

127    The difficulty with Mr Buzadzic’s submissions is that they are inconsistent with the established principle that, in a case such as this, it is incumbent on the taxpayer to demonstrate the true amount of their taxable income: see Bosanac FFC at [64]; and Bosanac at [29]-[30]. Thus, it was not enough for Mr Buzadzic to explain some of the relevant deposits or credit entries; he needed to demonstrate the true amount of his taxable income, in order to demonstrate that the amounts in the assessments in issue were excessive. The reason for this was explained by Nettle J in the passage from Bosanac: “since for all that can be told, unless and until the taxpayer proves to the contrary, there may be other income of which the Commissioner was not aware and which the Commissioner has not taken into account”.

128    The passage from Haritos at [235]-[236], upon which Mr Buzadzic relies, deals with a different situation. In that passage, the Full Court stated:

235    … The appellants submitted that even if Mr Haritos’ evidence was correctly rejected, they had nevertheless established subcontractor expenses of at least a certain amount. The Tribunal was not entitled to adopt what the appellants described as an “all or nothing” approach. If an “at least” figure was established on the evidence, then the Tribunal should have made a finding in accordance with that evidence.

236    We think that proposition is correct. If a taxpayer claims his or her expenses were $10, but fails to prove that fact because their evidence is rejected, this does not prevent the Tribunal from finding that the expenses were $5 where there is other satisfactory evidence establishing expenses of at least that amount. In our opinion, the burden of proof section does not dictate a different conclusion.

129    The Full Court was dealing with a situation where the taxpayer and the Commissioner had agreed to limit the scope of the issues in dispute: see Ross at [57]. That is different from a situation, such as the present, where not all the material facts were known and the total amount of the taxpayer’s taxable income was in issue. In such a case, the principle expressed by the Full Court in Bosanac FFC and by Nettle J in Bosanac applies. The approach adopted by the Tribunal reflected that principle.

130    For these reasons, ground 4 is not made out.

Grounds 5, 6 and 7 (fraud or evasion)

131    It is convenient to deal with these grounds together, consistently with the approach taken in Mr Buzadzic’s submissions. These grounds are as follows:

5.    The Tribunal erred in the construction and application of section 170 (item 5 of the table in section 170(1)) of the Income Tax Assessment Act 1936 in treating a defective formation of the fraud and evasion opinion as sufficient to sustain the formation of the requisite opinion for the purposes of section 170(1) of the Income Tax Assessment Act 1936 and to open the entire assessments in issue for amendment and not just a single particular. The Tribunal should have found that the assessments in issue were not authorised and the Commissioner was not empowered by section 170(1) of the Income Tax Assessment Act 1936 to make the assessments because the Commissioner failed to properly form the requisite opinions and/or there was no evidence to sustain the formation of the requisite opinions. Alternatively, the Tribunal should have found that the assessments were open to amendment only to the extent of the subject matter of the opinions purportedly formed under section 170(1) of the Income Tax Assessment Act 1936.

6.    On the evidence before the Tribunal and the findings of fact made by the Tribunal (including but not limited to the facts and findings in schedule A [to the notice of appeal] but save and except facts challenged below) the Tribunal erred in law in finding that the Applicant failed to discharge the onus that there was no fraud or evasion within section 170(1) of the Income Tax Assessment Act 1936.

7.    On the evidence before the tribunal and findings of fact made by the Tribunal (including but not limited to the facts and findings in schedule A [to the notice of appeal] but save and except facts challenged below), it was unreasonable and irrational for the Tribunal to find that that the Applicant has failed to demonstrate that the omission of amounts from his assessable income (that formed the subject of the assessments under review) were not attributable to a blameworthy act.

132    The questions of law in the notice of appeal relevant to these grounds are:

6.    Whether the Tribunal erred in the construction and application of section 170(1) (item 5) of the Income Tax Assessment Act 1936 in treating a defective formation of the fraud and evasion opinion as sufficient for the purposes of that provision and to open the entire assessments in issue for amendment?

…

9.    Whether the Tribunal’s decision was so unreasonable that no reasonable decision maker could have made [it]?

I accept that these are questions of law for the purposes of s 44 of the AAT Act.

133    Section 170 of the ITAA 1936 relevantly provides:

170    Amendment of assessments

(1)    The Commissioner may amend an assessment as follows:

134    Mr Buzadzic’s submissions in relation to grounds 5, 6 and 7 are, in summary, as follows:

(a)    On the uncontradicted evidence before the Tribunal, as set out in Schedule A to the notice of appeal and Mr Buzadzic’s outline of submissions at [30], the Tribunal erred in finding (at [197]-[208]) that: (1) the requisite blameworthiness existed so as to permit the formation of the opinion; and (2) once the opinion is formed in relation to a single particular of the assessment, the entire assessment is open to amendment.

(b)    The Tribunal misconceived the test in s 170(1). It was unreasonable for the Tribunal to conclude that there was the requisite blameworthiness so as to warrant the formation of the opinion under s 170(1) and that Mr Buzadzic had failed to discharge the burden cast upon him to show that there was no fraud or evasion.

(c)    In relation to the onus of proof, the Tribunal placed reliance on Binetter v Federal Commissioner of Taxation [2016] FCAFC 163; 249 FCR 534 (Binetter) at [93]. In that case the Court held that:

(i)    the taxpayer bears the onus of showing that the opinion that there was fraud or evasion should not have been formed; and

(ii)    the formation of the fraud or evasion opinion is a statutory condition that must be satisfied before the power to amend is available to Commissioner.

(d)    Proposition (i), which places the onus of proof on an applicant, is incorrect. The proposition operates oppressively and renders the statutory time limits to amend assessments effectively redundant – or, at least, redundant in cases involving “unexplained” deposits and credit entries.

(e)    Mr Buzadzic relies on proposition (ii). It is clear from a fraud or evasion submission prepared by the ATO (exhibit A2) and the fraud or evasion opinion (document T90) that the Commissioner formed the opinion that there was an avoidance of tax and that avoidance was due to fraud and evasion. That conclusion was based on: (1) failure to include deposits in personal bank accounts as income according to ordinary concepts – as particularised in [50] of the decision on objection; and (2) failure to include certain interest and capital gains on sales of shares in assessable income.

(f)    The fraud and evasion opinion is defective because: (1) it did not extend to unverified credit entries referred to in [52] of the reasons for decision on objection (document T2); (2) the shortfall was significantly less than the amount assessed to Mr Buzadzic – see [228] of the reasons for decision on objection; (3) it refers to the 2007-2013 Years, but does not particularise what was the blameworthy act in each Year; and (4) it assumes facts and draws conclusions by reference to such misconceived assumptions.

(g)    The uncontradicted evidence shows that Mr Buzadzic had limited education and managed a panel beating business. He employed persons to undertake the tasks needed to comply with his taxation obligations – the bookkeeper and external accountants. Later, he employed a financial controller. In these circumstances: (1) how could Mr Buzadzic, in his circumstances, have understood that s 6-5 may have applied to the deposits that were made in his bank accounts?; (2) how could Mr Buzadzic have understood that unverified credit entries (comprising discrepancies in loan accounts with various companies and discrepancies between closing and opening balances of some loan accounts) were assessable as ordinary income?

135    Insofar as Mr Buzadzic challenges the Full Court’s judgment in Binetter, this is a formal challenge, and he accepts that, as a single Judge, I am bound by the Full Court’s judgment. In that case, Perram and Davies JJ (Siopis J agreeing) stated at [93]:

In cases where the amendment power depends on the formation of an opinion by the Commissioner of fraud or evasion, the difference between merits review by the Tribunal and an appeal to the Court is that the Tribunal re-considers whether, on the evidence before it, there was an avoidance of tax due to fraud or evasion, whereas the Court will only interfere with the Commissioner’s exercise of the amendment power if the Commissioner did not form the requisite opinion or the Commissioner’s opinion that there was fraud or evasion is vitiated by some error of law: s 43 of the AAT Act; Shell Company of Australia Ltd v Federal Commissioner of Taxation (1930) 44 CLR 530 at 544-545; Jolly v Federal Commissioner of Taxation (1935) 53 CLR 206 at 212-214; Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 360. Although the Tribunal re-examines whether, on the evidence before it, there was an avoidance of tax due to fraud or evasion, and is able to substitute its opinion for that of the Commissioner, the issue for the Tribunal is whether the taxpayer has discharged the onus of showing that the opinion that there was fraud or evasion should not have been formed, and therefore, that the statutory condition for the power to amend is not satisfied. Unless the taxpayer discharges that onus, the assessments are not shown to be excessive and the effect of s 14ZZK is that the Tribunal must affirm the amended assessments, such assessments having been made by the Commissioner in compliance with the statutory requirements: McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284 at 303; Millar v Federal Commissioner of Taxation (2015) 101 ATR 827. In Millar Griffiths J correctly held that on a merits review before the Tribunal, the onus of proof imposed by s 14ZZK places on the taxpayer the burden of disproving fraud or evasion.

(Emphasis added.)

136    See also Binetter at [94] and Nguyen v Federal Commissioner of Taxation [2018] FCA 1420; 265 FCR 355 at [115], [122], [130], [132] per Kenny J. As set out in the above passage, it is established that, in a proceeding before the Tribunal, the taxpayer bears the onus of showing that the opinion that there was fraud or evasion should not have been formed. I am bound by that proposition. I reject Mr Buzadzic’s challenge to that proposition.

137    Insofar as Mr Buzadzic submits that the Tribunal erred in finding that “the requisite blameworthiness existed”, this submission misstates the finding of the Tribunal. The Tribunal did not make a finding to that effect. Rather, it was not satisfied that Mr Buzadzic had demonstrated that the shortfall in his taxable income was not attributable to a blameworthy act (at [205]).

138    Mr Buzadzic’s submissions include the proposition that the Tribunal erred in finding that, once the fraud or evasion opinion is formed in relation to a single particular of the assessment, the entire assessment is open to amendment. However, the approach of the Tribunal was consistent with and reflected established authority: see Denver Chemical at 314-315. It follows that the further submissions of Mr Buzadzic that depend on that proposition must also be rejected.

139    To some extent, Mr Buzadzic’s submissions in support of these grounds amount to an invitation to the Court to engage in merits review, which is outside the scope of an appeal on a question of law.

140    Insofar as Mr Buzadzic’s submissions refer to his limited education and particular circumstances, the Tribunal’s reasons make clear that it considered such contentions in the evaluation of the evidence: see [203]-[204] of the Tribunal’s reasons. No unreasonableness is shown in the Tribunal’s treatment of these contentions. Nor is unreasonableness established in relation to the Tribunal’s conclusion (at [205]) that Mr Buzadzic had not demonstrated that the Commissioner should not have formed the view that there had been fraud or evasion. The Tribunal provided clear and logical reasons for reaching that conclusion. The conclusion was open on the evidence.

141    For these reasons, grounds 5, 6 and 7 are not made out.

Grounds 8, 9, 10, 11 and 12 (penalties)

142    Consistently with Mr Buzadzic’s submissions, I will deal with these grounds together. They are in the following terms:

8.    The Tribunal erred in the construction and application of sections 284-75(1) and 284-90 [of Sch 1 to the Administration Act] in failing to be satisfied that the penalty assessments were excessive.

9.    On the evidence before the Tribunal and the findings of fact made by the Tribunal (including but not limited to the facts and findings in schedule A [to the notice of appeal] but save and except facts challenged below) the Tribunal erred in the construction and application of sections 284-75(1) and 284-90 in failing to be satisfied that the Applicant has discharged the onus of proving on the balance of probabilities that his conduct in respect of the balance of the shortfall assessed was not attributable to an intentional disregard of the law.

10.    On the evidence before the tribunal and findings of fact made by the Tribunal (including but not limited to the facts and findings in schedule A [to the notice of appeal] but save and except facts challenged below), it was unreasonable and irrational for the Tribunal to find that that the Applicant has not discharged the onus of proving on the balance of probabilities that his conduct in respect of the shortfall assessed was not attributable to an intentional disregard of the law.

11.    The Tribunal erred in the construction and application of sections 284-220 of schedule 1 to the Taxation Administration Act 1953 that there were no bases for the imposition of the 20% penalty uplift.

12.    On the evidence before the tribunal and findings of fact made by the Tribunal (including but not limited to the facts and findings in schedule A [to the notice of appeal] but save and except facts challenged below), it was unreasonable and irrational for the Tribunal not to remit the 20% penalty uplift.

143    The questions of law relevant to these grounds are:

7.    Whether the Tribunal erred in the construction and application of sections 284-75(1), 284-90 and 284-220 of schedule 1 to the Taxation Administration Act 1953?

…

9.    Whether the Tribunal’s decision was so unreasonable that no reasonable decision maker could have made [it]?

I accept that these are questions of law for the purposes of s 4 of the AAT Act.

144    Sections 284-75(1), 284-90 and 284-220 of Sch 1 to the Administration Act, as they stood in 2013, provided in part:

284-75     Liability to penalty

(1)    You are liable to an administrative penalty if:

(a)    you make a statement to the Commissioner or to an entity that is exercising powers or performing functions under a *taxation law (other than the *Excise Acts); and

(b)    the statement is false or misleading in a material particular, whether because of things in it or omitted from it.

Note: This section applies to a statement made by your agent as if it had been made by you: see section 284-25.

…

284-90    Base penalty amount

(1)    The base penalty amount under this Subdivision is worked out using this table and section 284-224 if relevant:

…

284-220    Increase in base penalty amount

(1)    The *base penalty amount is increased by 20% if:

…

(c)    the base penalty amount was worked out using item 1, 2 or 3 of the table in subsection 284-90(1) and a base penalty amount for you was worked out under one of those items previously; or

…

145    Mr Buzadzic’s submissions in support of these grounds can be summarised as follows:

(a)    Intentional disregard requires actual knowledge that the statements were false and misleading. The evidence must show that Mr Buzadzic understood the effect of the legislation and how it operated in respect of his tax affairs and then made a deliberate choice to ignore the law: see Brown v Federal Commissioner of Taxation [2001] FCA 596; 47 ATR 178; Price Street Professional Centre Pty Ltd v Federal Commissioner of Taxation [2007] FCA 345; 66 ATR 1 (Price Street). Such knowledge and understanding must involve dishonesty so as to separate intentional behaviour from lack of reasonable care and recklessness.

(b)    On the evidence before the Tribunal, it was clear that Mr Buzadzic acted honestly and relied entirely on the bookkeeper and accountants. Further, “unexplained” deposits and “unverified” credit entries have never been accepted as income according to ordinary concepts or as taxable on any basis – how then can it be said that Mr Buzadzic understood the effect of the legislation and how it operated in respect of his tax affairs and that he made a deliberate choice to ignore the law? It clearly cannot.

(c)    It also follows that there was no occasion for the imposition of a penalty uplift and, if and to the extent that any penalties are payable, the Commissioner and, on review, the Tribunal, should have exercised the powers under Subdiv 298-A of Sch 1 to the Administration Act to remit the 20% uplift penalty.

146    There are a number of difficulties with these submissions. Insofar as Mr Buzadzic submits that, on the evidence before the Tribunal, he acted honestly, this fails to engage with the burden of proof and the conclusion reached by the Tribunal that Mr Buzadzic had not discharged his onus of proving that his conduct in respect of the shortfall was not attributable to an intentional disregard of the law (at [213]). Further, there is no indication in [213] of the Tribunal’s reasons that it misconstrued the notion of “intentional disregard of a taxation law”. The Tribunal appears to have correctly understood that this refers to actual knowledge that the statement made was false: see Price Street at [43]. In reaching this conclusion, it was open to the Tribunal to have regard to the conduct of Mr Buzadzic’s agents: see Weyers v Federal Commissioner of Taxation [2006] FCA 818; 63 ATR 268 at [165]-[168]. Insofar as Mr Buzadzic contends that the Tribunal’s conclusion was unreasonable, I do not accept that contention. The Tribunal provided clear and logical reasons for its conclusion. I consider that the Tribunal’s conclusion was open on the evidence.

147    Insofar as Mr Buzadzic challenges the Tribunal’s conclusion (at [214]) that it was not appropriate to remit the 20% penalty uplift, I am not satisfied that any error has been shown in this regard. In light of the Tribunal’s conclusion at [213], it was open to the Tribunal to reach the conclusion that it did in relation to the 20% penalty uplift. I am not satisfied that this was unreasonable in the sense discussed in the authorities referred to above.

148    For these reasons, grounds 8, 9, 10, 11 and 12 are not made out.

Ground 13 (failure to consider)

149    Ground 13 is as follows:

13.    The Tribunal failed to consider at all these grounds of objection and submissions made by the Applicant:

a.    There was no shortfall amount because the Applicant and his tax agent took reasonable care in connection with the making of any statement within section 284-75(5) [of Sch 1 to the Administration Act] and section 284-215 (to the extent that a statement was made prior to June 2010) and hence was not liable to administrative penalties.

b.    The Applicant was not liable to administrative penalties because within section 284-75(6) [of Sch 1 to the Administration Act] the Applicant engaged and gave a registered tax agent all relevant information to ensure compliance with the taxation legislation.

c.    The Respondent should remit any penalties payable under subdivision 298-A [of Sch 1 to the Administration Act] in whole or part because at all relevant times the Applicant acted reasonably and took all steps necessary and expected of any taxpayer to ensure proper compliance with the taxation legislation.

150    The questions of law in the notice of appeal that are potentially relevant to this ground are:

8.    Whether the Tribunal (i) failed to make findings of material fact that it was required to make (ii) failed to make inferences of fact it ought to have made or [made inferences] which were not permissible (iii) made findings of fact that were not supported by admissible, relevant or probative evidence or were contrary to the evidence (iv) made findings of fact that were manifestly unreasonable?

…

10.    Whether the Tribunal denied the Applicant procedural fairness?

It is not clear that all aspects of question 8 raise questions of law for the purposes of s 44 of the AAT Act. However, I accept that at least sub-paragraphs (i) and (iv) of question 8 raise questions of law. Further, I accept that question 10 raises a question of law.

151    Section 284-75(1) of Sch 1 to the Administration Act has been set out above. Sections 284-75(5) and (6) (as in force in 2013) provided exceptions to s 284-75(1) as follows:

(5)    You are not liable to an administrative penalty under subsection (1) or (4) for a statement that is false or misleading in a material particular if you, and your *agent (if relevant), took reasonable care in connection with the making of the statement.

(6)    You are not liable to an administrative penalty under subsection (1) or (4) if:

(a)    you engage a *registered tax agent or BAS agent; and

(b)    you give the registered tax agent or BAS agent all relevant taxation information; and

(c)    the registered tax agent or BAS agent makes the statement; and

(d)    the false or misleading nature of the statement did not result from:

(i)    intentional disregard by the registered tax agent or BAS agent of a *taxation law (other than the *Excise Acts); or

(ii)    recklessness by the agent as to the operation of a taxation law (other than the Excise Acts).

152    I will deal first with grounds 13(a) and (b), and then separately with ground 13(c).

153    The matters set out in ground 13(a) and (b) of the notice of appeal were raised in Mr Buzadzic’s notice of objection (at paragraph 3(E)(ii) and (iii)), in Mr Buzadzic’s statement of facts, issues and contentions in the Tribunal proceedings (at paragraphs 8(G), 17(B) and (C)), and in the applicants’ written submissions in the Tribunal proceedings (at paragraphs 80(b) and (c)). For example, paragraphs 17(B) and (C) of the statement of facts, issues and contentions stated:

17.    In relation to the penalty assessments for the years 2007-2013, the Applicant claims that:

…

B.    Further and alternatively, if he did make a statement that was false or misleading in a material particular, which is expressly denied, there was no shortfall amount as a result of making that statement because the Applicant and his agent took reasonable care in connection with the making of the relevant statement within section 284-75(5) (and section 284-215 to the extent that a statement was made prior to June 2010) and hence is not liable to administrative penalties.

C.    Further and alternatively, the Applicant is not liable to administrative penalties because, within the terms of section 284-75(6) he engaged and gave a registered tax agent all relevant taxation information to ensure the proper preparation of his returns and compliance with taxation legislation. The registered tax agent made the statements in the returns and, to the extent that the statements were false or misleading, which is denied, that did not result from failing to take reasonable care, recklessness or intentional disregard by his agent as to the operation of the relevant taxation laws.

154    The Tribunal did not deal expressly with these contentions and provisions in its reasons.

155    It is established that a decision-maker may fall into jurisdictional error if he or she “ignored, overlooked or misunderstood relevant facts or materials or a substantial and clearly articulated argument” (footnotes omitted): Plaintiff M1/2021 v Minister for Home Affairs [2022] HCA 17; 400 ALR 417 (Plaintiff M1/2021) at [27] per Kiefel CJ, Keane, Gordon and Steward JJ.

156    In the present case, the Tribunal’s core reasoning in relation to the issue of penalties is at [213] (set out at [76] above). Although the Tribunal did not expressly refer to the above contentions or provisions, I consider that its findings and conclusions encompass findings and conclusions on those contentions and provisions. It is implicit in the Tribunal’s findings and conclusions that it considered that Mr Buzadzic had not established the elements of either s 284-75(5) or (6). Accordingly, I am not satisfied that the Tribunal failed to consider these matters.

157    In relation to ground 13(c), this matter (remission of penalty) was raised in Mr Buzadzic’s notice of objection and in subsequent documents in a way that may have given the impression that it related only to the 20% penalty uplift. For example, in the notice of objection, the matter is raised in paragraph 3(E)(vi). That paragraph contends that the Commission should remit “the said penalty”. It follows immediately after a paragraph dealing with the penalty uplift. Similarly, in paragraph 17(F) of Mr Buzadzic’s statement of facts, issues and contentions, the contention is that the Commissioner should have remitted “the said penalty” and this paragraph follows immediately after a paragraph dealing with the penalty uplift. The same is true of paragraph 80(g) of the applicants’ written submissions in the Tribunal proceedings. (See also paragraph 6(h) of the applicants’ written submissions in the Tribunal proceedings.) In light of the way these documents were presented it is understandable that the Tribunal referred to the issue of remission only in the context of the penalty uplift (at [214] of its reasons). In my view, having regard to the way the issue of remission was presented, the Tribunal considered the issue. Accordingly, no error is established.

158    For these reasons, ground 13 is not made out.

Grounds 14 and 15 (unreasonable findings and conclusions)

159    I will deal with these grounds together, consistently with the approach taken in Mr Buzadzic’s submissions. These grounds are as follows:

14.    The Tribunal made these erroneous and unreasonable findings and conclusions of fact:

a.    The facts and conclusions at paragraph 21(b).

b.    The facts and conclusions at paragraph 86.

c.    Attaching no weight to Mr Hadded’s assertions of belief at paragraph 88.

d.    The facts and conclusions at paragraph 92.

e.    That most of the relevant credits and deposits had their origins in entities that the Applicant controlled or was significantly associated with which carried on businesses. That of itself suggests that the transactions might not be explained away as private transactions for which records ought not be expected. To the contrary, those circumstances suggest that there might be expected to be a business record or trail that sets out the provenance of the deposits and credits and thus throw light on whether the deposits and credits reveal, or are the produce of, an undisclosed source of income. [109]

f.    The evidence was that the alignment journal entries that needed to be posted so that the records reflected the balances in the records maintained by the external accountants were not always made resulting in the MYOB records deviating from the finalised records maintained by the external accountants and failing to accurately replicate the finalised books of account. [115]

g.    The facts and conclusions at paragraph 117.

h.    The facts and conclusions at paragraph 125.

i.    The facts and conclusions at paragraph 130.

j.    The facts and conclusions at paragraph 132.

k.    The facts and conclusions at paragraph 133.

l.    The facts and conclusions at paragraph 160.

m.    The facts and conclusions at paragraph 161.

n.    The facts and conclusions at paragraph 168.

o.    The facts and conclusions at paragraph 170.

p.    The evidence led does not demonstrate that the entries giving rise to the closing balances were properly made or, identify the nature of the transactions that those entries were intended to record, or to the extent they were, demonstrate that those entries were referable to dividends declared or distributions of net income of trust made to or on behalf of the Applicant, that had been included in the assessable income returned by the Applicant. [173]

q.    The Applicant has failed to demonstrate the omission of these amounts from his assessable income were not attributable to a blameworthy act. Approached differently, the Tribunal has nothing on which it can evaluate the seriousness of any shortcoming, there is nothing on which the Tribunal can rest a conclusion that there was not such a blameworthy act. [202 & 205]

r.    The facts and conclusions at paragraph 213.

15.    Further or alternatively, there was no evidence to support these findings and conclusions and no bases on which the Tribunal was able to draw any inferences or conclusions or alternatively these findings and conclusions were contrary to available evidence and inferences available from the evidence.

160    The questions of law in the notice of appeal potentially relevant to these grounds are:

8.    Whether the Tribunal (i) failed to make findings of material fact that it was required to make (ii) failed to make inferences of fact it ought to have made or [made inferences] which were not permissible (iii) made findings of fact that were not supported by admissible, relevant or probative evidence or were contrary to the evidence (iv) made findings of fact that were manifestly unreasonable?

9.    Whether the Tribunal’s decision was so unreasonable that no reasonable decision maker could have made [it]?

As noted above, it is not clear that all aspects of question 8 raise questions of law for the purposes of s 44 of the AAT Act. However, I accept that at least sub-paragraphs (i) and (iv) of question 8 raise questions of law. Further, I accept that question 9 raises a question of law for the purposes of s 44.

161    Ground 14 challenges a long list of factual findings and other conclusions of the Tribunal. The difficulty with many aspects of ground 14 is that they amount to no more than taking issue with the Tribunal’s findings or conclusions by pointing to evidence that Mr Buzadzic contends supports a contrary finding or conclusion. This does not appear to raise a question of law and is therefore outside the scope of an appeal on a question of law. Further, insofar as Mr Buzadzic relies on Schedule A to the notice of appeal, which sets out a summary of evidence led in the Tribunal proceeding, the Commissioner responded to that document in Annexure 2 to his outline of submissions (a replacement version of Annexure 2 was handed up during the hearing). By that document, the Commissioner submits that, in respect of many paragraphs of Schedule A, there are inconsistent and/or relevant findings of the Tribunal. Mr Buzadzic’s submissions do not grapple with these matters.

162    Insofar as Mr Buzadzic contends that the relevant findings/conclusions are unreasonable in the sense that they lack an evident and intelligible justification (see SZVFW at [10]-[11]), including because they are so unreasonable that no reasonable decision-maker could have made them, having reviewed each of the findings/conclusions referred to in ground 14, I am not satisfied that any of them is unreasonable. I note in particular:

(a)    Paragraph 21(b) of the Tribunal’s reasons contains an overall summary of its conclusions in relation to Mr Buzadzic’s case. The Tribunal explained why it concluded that Mr Buzadzic had not discharged his burden of proof. It was open to the Tribunal to reach that conclusion on the material before the Tribunal.

(b)    Paragraph 86 of the Tribunal’s reasons contains findings about Mr Hadded’s role. The second sentence (“Mr Hadded did not know if the alignment entries were in fact posted by the Buzadzic Group to their accounting system records”) was challenged during Mr Buzadzic’s oral submissions during the appeal hearing. It was said that it did not make sense. However, all the Tribunal is saying is that Mr Hadded did not himself know if the alignment entries were posted in the accounting system maintained by the Buzadzic Group. This finding does not appear to be surprising or contrary to the evidence. In any event, it does not appear to be material.

(c)    Paragraph 88 of the Tribunal’s reasons includes a statement that the Tribunal attaches no weight to Mr Hadded’s assertion of belief in certain matters. It was open to the Tribunal to attach no weight to that belief, for the reasons it gave.

(d)    Paragraph 92 of the Tribunal’s reasons contains a statement that it was “not impossible” for Associated Entities’ cash amounts to be deposited directly in Mr Buzadzic’s accounts without having been first deposited in an entity’s bank account or otherwise recorded. The assessment of the possibility of this occurring was a matter for the Tribunal to determine. I am not satisfied that any error is shown.

(e)    Paragraph 109 of the Tribunal’s reasons (see [67] above) contains a number of statements by the Tribunal about the context and facts and circumstances that were relevant to its consideration of the sufficiency of the proof provided by Mr Buzadzic. I see no error in the Tribunal’s approach. It was open to the Tribunal to regard these matters in the way that it did.

(f)    Paragraph 115 of the Tribunal’s reasons includes a statement that the alignment journal entries that needed to be posted were not always made. In oral submissions during the appeal hearing, Mr Buzadzic contended that this was incorrect. However, the Tribunal’s statement is consistent with the fact that the MYOB ledgers initially provided to the ATO contained discrepancies between opening and closing balances (see the Tribunal’s reasons at [163]). In any event, the statement made by the Tribunal does not appear to be material in the context of the Tribunal’s reasons as a whole, given that the Tribunal considered the issue of discrepancies between opening and closing balances in detail elsewhere in its reasons (see [163]-[173]).

(g)    Paragraphs 117, 125, 130, 132 and 133 of the Tribunal’s reasons contain conclusions that the basis for entries in the accounts was not explained, the Tribunal could not be satisfied that all of the entries were an accurate reflection of the underlying transactions, and there were clear deficiencies in the records provided to the Tribunal (and other similar conclusions). It was open to the Tribunal to reach these conclusions, for the reasons it gave.

(h)    Paragraphs 160 and 161 of the Tribunal’s reasons contain a conclusion that the Tribunal could not determine whether the amounts credited to Mr Buzadzic’s loan account reflected the repayment of loans made by Mr Buzadzic or whether the credit entries reflected distributions made to Mr Buzadzic at the direction of the trustee of one of the trusts (and, if so, whether or not the distribution had already been included in the assessable income returned by Mr Buzadzic). It was open to the Tribunal to reach this conclusion, having regard to the state of the evidence.

(i)    Paragraph 168 of the Tribunal’s reasons contains a conclusion that, on the evidence before it, the Tribunal could not ascertain the extent to which the entries made to the director’s loan accounts (namely, the entries referred to in [165]) related to any of the three matters relied on by Mr Buzadzic set out in [166]. The Tribunal provided, in [168]-[173], a clear and evident justification for this conclusion.

(j)    Paragraph 170 of the Tribunal’s reasons contains a conclusion that no attempt had been made to demonstrate how any of the year-end adjustments were reflected in or reconciled with the amounts included in Mr Buzadzic’s tax returns. The Tribunal accepted that “it is likely that at least some of the year-end adjustments … may be explained by the distributions of income that were included in Mr Buzadzic’s income tax return”, but said that “the Tribunal does not have a sufficiently reliable basis on which to quantify or ascertain the connection, if any, between the reductions in the loan account balances and the distributions made to Mr Buzadzic that may have been satisfied by an entry reducing his loan account balance”. It was open to the Tribunal to evaluate the evidence in this way.

(k)    Paragraph 173 of the Tribunal’s reasons contains a conclusion that “the evidence led does not demonstrate that the entries giving rise to the closing balances were properly made or, identify the nature of the transactions that those entries were intended to record, or to the extent they were, demonstrate that those entries were referable to dividends declared or distributions of net income of trust made to or on behalf of Mr Buzadzic, that had been included in the assessable income returned by Mr Buzadzic”. It was open to the Tribunal to reach this conclusion, given the state of the evidence.

(l)    Paragraphs 202 and 205 of the Tribunal’s reasons relate to the fraud or evasion issue. In summary, the Tribunal concluded that Mr Buzadzic had failed to demonstrate that the omission of amounts from his assessable income was not attributable to a blameworthy act. It was open to the Tribunal to reach this conclusion, for the reasons it gave.

(m)    Paragraph 213 of the Tribunal’s reasons relates to penalties. The Tribunal concluded that it was not satisfied that Mr Buzadzic had discharged the onus of proving that his conduct in respect of the balance of the shortfall assessed to him was not attributable to an intentional disregard of the law. It was open to the Tribunal to reach this conclusion, for the reasons it gave.

163    Insofar as Mr Buzadzic contends that there was no evidence to support, or no proper basis for, the above findings, I consider that the evidence before the Tribunal did provide a proper basis for the findings.

164    For these reasons, grounds 14 and 15 are not made out.

Ground 16 (procedural fairness)

165    Ground 16 is as follows:

16.    The Tribunal failed to afford the Applicant procedural fairness in failing to properly consider or at all the evidence tendered by the Applicant (including but not limited to the facts and findings in schedule A [to the notice of appeal] but save and except facts challenged in this notice of appeal) and/or in failing to give such evidence proper weight.

166    The question of law in the notice of appeal relevant to this ground is:

10.    Whether the Tribunal denied the Applicant procedural fairness?

As indicated above, I accept that this is a question of law for the purposes of s 44 of the AAT Act.

167    I am not satisfied that the Tribunal failed to consider relevant evidence. The Tribunal’s reasons demonstrate that it had regard to the evidence before it, and carefully considered whether the evidence was sufficient to discharge Mr Buzadzic’s burden of proof. It was open to the Tribunal to conclude that Mr Buzadzic had not discharged his burden of proof (both in relation to primary tax and in relation to the fraud/evasion and penalties issues).

168    Insofar as ground 16 includes a contention that the Tribunal failed to give evidence “proper weight”, the weight to be given to evidence is a matter for the Tribunal. This contention seeks to have the Court engage in merits review, and is beyond the scope of an appeal on a question of law.

169    For these reasons, ground 16 is not made out.

Conclusion

170    It follows that the appeal is to be dismissed. There is no apparent reason why costs should not follow the event. Accordingly, I will also make an order that Mr Buzadzic pay the Commissioner’s costs of the appeal.

Associate:

Dated:    16 August 2023