Federal Court of Australia

Laureti v Commissioner of Taxation [2026] FCA 1086

ORDERS

THE COURT ORDERS THAT:

1.    The applicant’s application for summary judgment is dismissed.

2.    By 4:00pm on 17 August 2026, the respondent is to file and serve an amended appeal statement identifying the precise taxation law which is alleged to have been intentionally disregarded by the applicant when furnishing his tax returns.

3.    The applicant is to pay the respondent’s costs of the application as agreed or assessed.

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

REASONS FOR JUDGMENT

PERRY J:

1.    INTRODUCTION

1    By way of interlocutory application filed on 28 April 2026, the applicant seeks summary judgment against the Commissioner of Taxation in relation to an appeal from an objection decision disallowing objections to 11 assessments of administrative penalty made pursuant to Div 298 in Sch 1 of the Tax Administration Act 1953 (Cth) (TAA).

2    For the reasons that follow, the application for summary judgment should be dismissed.

2.    BACKGROUND

2.1    The Commissioner’s audit into the applicant’s furnished tax returns

3    The applicant furnished income tax returns for the financial years ending 30 June 2001 to 30 June 2011 inclusive (income years). Across the income years, the applicant declared a total taxable income of $695,429. During the income years, the applicant was a director and shareholder of Laureti Management Services Pty Ltd (LMS), a company incorporated in Australia in 1985.

4    On 25 May 2012, the Commissioner advised the applicant that he would be conducting an audit into the applicant’s tax affairs and related entities for the income years. During the audit, the Commissioner identified that the applicant had a loan account with LMS. Across the income years, a total of $16,126,798 had been credited to LMS. In working out his income tax pursuant to s 4-10 of the Income Tax Assessment Act 1997 (Cth) (1997 ITAA), the applicant did not include the credited amounts as part of his taxable income.

5    The credited amounts were the subject of a review by the National Fraud or Evasion Panel, which concluded that there had been evasion by the applicant. It issued its opinion on 30 June 2022 (evasion opinion).     

6    On 5 July 2022, the Commissioner provided the applicant with a copy of the Commissioner’s audit position paper, including the Commissioner’s position that there was tax evasion during the income years. The position paper was intended to provide the applicant with the opportunity to review the proposed adjustments as a result of finalising the audit and provide any counter arguments before amended assessments were issued. In the position paper, the Commissioner considered first with respect to the applicant that:

the increase of funds in your loan account have the characteristics and elements consistent with the concept of ordinary income pursuant to section 6-5 of the ITAA 1997 and that credits to your loan account for the income years 30 June 2001 through to 30 June 2011 inclusive represent an application of funds from an unidentified source and should form part of your assessable income.

7    Secondly, the Commissioner found that there was tax evasion:

It is the Commissioner's view that by failing to declare the amounts in your loan account as income, you made false representations, avoided tax, and committed a blameworthy act or omission. The Commissioner considers that you have satisfied the threshold of evasion and therefore the Commissioner may amend your income tax assessments at any time.

8    Thirdly, the Commission found as a result that the applicant was liable to an administrative penalty of 75% of the tax shortfall.

9    The applicant provided his response to the Commissioner’s position paper on 12 September 2022. In his response, the applicant, among other things, set out his reasons for taking issue with the Commissioner’s finding of evasion and conclusion that the applicant is liable to pay administrative penalties.

10    On 13 October 2022, the Commissioner issued an audit completion letter and Reasons for decision.

2.2    The amended assessments and penalty assessments

11    On 25 October 2022, the Commissioner notified the applicant of the default amended income tax assessments issued pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) (1936 ITAA) for each of the income years (default assessments). The Commissioner also notified the applicant of the administrative penalty assessments. With respect to the default assessments, s 167 relevantly provided that, if the Commissioner is not satisfied with the return furnished by a person, “the Commissioner may make an assessment of the amount upon which in his or her judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166 [of the 1936 ITAA]”.

12    In the present case, the Commissioner issued the default assessments on the basis that the credits to LMS had not been declared as taxable income. The Commissioner considered that this assessable income had the characteristics of ordinary income pursuant to s 6-5 of the 1997 ITAA. On that basis, the Commissioner issued the default assessments pursuant to s 167(b) of the 1936 ITAA. In the Commissioner’s Appeal Statement at [15], the Commissioner pleads that “[t]here was a shortfall amount as a result of a statement described in s 284-75(1) of Sch 1 to the TAA for the Relevant Income Years resulting from intentional disregard of taxation law by the applicant or their agent”.

13    As a consequence of the Commissioner’s finding, and by operation of s 284-75(1), the Commissioner contends that the applicant became automatically liable to administrative penalties under s 284-75(1) of Sch 1 to the TAA for each of the income years in the base penalty amount, being 75% of the tax shortfall amount and Medicare levy, amounting to a total of $5,735,998.09 (penalty assessments).

14    The Commissioner declined to exercise his discretion to remit any part of the penalty assessment under s 298-20 of Sch 1 to the TAA.

15    On 20 December 2022, the applicant lodged an objection to the penalty assessments.

2.3    Objection decision

16    On 15 August 2025, the Commissioner issued an objection decision to the applicant. By that decision, the Commissioner:

(1)    allowed in part the applicant’s objection to the income tax assessments in respect of the income tax years ending 30 June 2002, 30 June 2005 and 30 June 2011 (which resulted in a nominal change);

(2)    disallowed the objection to the income tax assessments in respect of the income tax years ended 30 June 2001, 30 June 2003, 30 June 2004, 30 June 2006, 30 June 2007, 30 June 2008, 30 June 2009 and 30 June 2010; and

(3)    maintained the finding of evasion,

(Objection Decision).

17    On 10 October 2025, the applicant lodged a Notice of Appeal in this Court appealing against the Objection Decision pursuant to s 14ZZ of the TAA.

18    On 26 February 2026, the Commissioner filed his appeal statement pursuant to r 33.03 of the Federal Court Rules 2011 (Cth) (FCR). In short, the Commissioner seeks that the applicant’s appeal be dismissed and the Objection Decision be affirmed.

2.4    The applicant’s application for summary judgment against the Commissioner

19    By his interlocutory application dated 28 April 2026, the applicant seeks summary judgment against the Commissioner pursuant to r 26.01(1) of the FCR and s 31A of the Federal Court of Australia Act 1976 (Cth) (FCA Act). As the respondent submits, the applicant’s application for summary judgment is predicated on the following propositions:

(1)    There is no “shortfall amount” within the meaning of s 284-80(1) Item 1 because the default assessments were made by the Commissioner by the formation of a judgment under s 167 of the 1936 ITAA, and not by the process described in s 4-15(1) of the 1997 ITAA by which a taxpayer works out their assessable income (that is: first, by adding up all their assessable income; secondly, by adding up all their deductions; and thirdly, by subtracting the deductions from their assessable income).

(2)    There is no statement that is false or misleading in a material particular within the meaning of s 284-75(1)(b) or Item 1 of s 284-80(1).

(3)    An assessment made by the Commissioner under s 167 of the 1936 ITAA after a taxpayer has furnished their tax return cannot retrospectively render statements in the tax return false or misleading within the meaning of s 284-75(1) or Item 1 of s 284-90(1) because the taxpayer could not, at the time of lodging their tax return, have known what view the Commissioner would later form as to the taxpayer’s taxable income under s 167.

(4)    Unlike a default assessment, there is no power to render a penalty assessment based on a guess.

20    In support of his contention that the Commissioner cannot issue a “default” penalty assessment, the applicant relies upon the contextual proposition that facts which may expose a taxpayer to an administrative penalty for intentional disregard of a tax law may also give rise to a criminal offence. The applicant therefore contends that, as a criminal charge against the applicant in the present case would be summarily rejected, it follows that he cannot be assessed for an administrative penalty.

3.    LEGAL PRINCIPLES

21    Rule 26.01(1)(e) of the FCR provides that an applicant may apply to the Court for an order for summary judgment against a respondent because the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding.

22    Section 31A of the FCA Act relevantly provides as follows:

31A Summary judgment

(1)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is prosecuting the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.

23    The principles relating to summary judgment are well-established. I summarised those principles in Przybylowski v Australian Human Rights Commission (No 2) [2018] FCA 473 at [7] as follows:

(1)    The respondent as the moving party bears the onus of persuading the Court that the application has no reasonable prospects of succeeding: Australian Securities and Investments Commission v Cassimatis [2013] FCA 641; (2013) 220 FCR 256 (Cassimatis) at 271 [45] (Reeves J).

(2)    With respect to the scope of s 31A, French CJ and Gummow J explained in Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 (Spencer) at [22], that the section:

… will apply to the case in which the pleadings disclose no reasonable cause of action and their deficiency is incurable. It will include the case in which there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment. It will include the class of case in the long-standing category of cases which are “frivolous or vexatious or an abuse of process”. The application of s 31A is not, in terms, limited to those categories.

(3)    Section 31A sets a lower threshold than the previous test for summary dismissal which required that the claim be “manifestly groundless” or “hopeless”: Spencer at [52]–[53] (Hayne, Crennan, Kiefel and Bell JJ). Nonetheless, the discretion must still be exercised with caution (Spencer at [24] (French CJ and Gummow J) and [60] (Hayne, Crennan, Kiefel and Bell JJ)).

(4)    An assessment of whether a proceeding has no reasonable prospects of success for the purposes of s 31A involves the making of value judgments in the absence of a full and complete factual matrix and argument, with the result that the provision vests a discretion in the Court: Kowalski v MMAL Staff Superannuation Fund Pty Ltd [2009] FCAFC 117; (2009) 178 FCR 401 (Kowalski) at [28] (the Court).

24    Further, Reeves J in Australian Securities and Investments Commission v Cassimatis [2013] FCA 641; (2013) 220 FCR 256 explained the application of these principles at [47]-[48] as follows:

Accepting there can be no “hard and fast” rule about this, as a general principle, these authorities show that the moving party on an application for summary dismissal of the present kind is likely to succeed on its persuasive onus if it is able to demonstrate to the Court that the applicant’s success in the proceedings relies upon a question of fact that can be truly described as fanciful, trifling, implausible, improbable, tenuous or one that is contradicted by all the available documents or other materials. Conversely, as a general principle, it is unlikely to succeed where, on a critical examination of all the available materials, the Court is satisfied that there appears to be a real question of fact to be determined between the parties. This is more likely to be the case where the available materials include pleadings that raise factual disputes that can be truly described as significant, substantial, plausible or weighty. A real question of fact is also more likely to exist where the question/s of fact concerned is/are complex, eg involving numerous different events or transactions over a long period of time.

Similarly, as a general principle, the moving party on an application for summary dismissal is likely to succeed on its persuasive onus if it is able to demonstrate to the Court that the applicant’s success in the proceedings relies upon a question of law that is straightforward and confined, or is trite in the sense that it is well settled on authority, such that the question can be resolved summarily without the necessity for a full trial. On the other hand, the moving party would be unlikely to succeed if the Court is satisfied that the applicant’s success in the proceedings relies upon a question of law that is serious or important, or is difficult and therefore likely to require lengthy argument for its resolution, or involves conflicting authority, or is apparently arguable, yet novel.

25    Finally, in Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 the High Court stated at [26] that, where an application for summary judgment “requires consideration of apparently complex questions of fact”, the observations of Lord Hope in Three Rivers District Council v Bank of English [No 3] [2003] 2 AC 1 at [95] are relevant:

… it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, … that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.

(Emphasis added.)

26    Few cases have considered the principles of seeking summary judgment in the context of a taxation dispute. In McDonald’s Australia Ltd v Federal Commissioner of Taxation [2008] FCA 37, Gyles J held that the taxpayer’s application for summary judgment in respect of amended GST assessments issued by the Commissioner was premature. His Honour made this finding on the basis that the application was brought before evidence had been admitted, formal pleadings exchanged and, critically, in circumstances where the taxpayer bears the onus of proving that the assessment is incorrect under s 14ZZO of the TAA. His Honour explained at [12] that while the bar for summary judgment may be lower than it once was, “it still requires a considerable leap.” His Honour went on to state at [13]:

Section 14ZZO of the TAA provides that the applicant has the burden of proving that the declaration should not have been made or should have been made differently. An application for summary judgment by a party which bears the burden of proof can be properly described as ambitious, particularly where the proceeding is at an early stage – no evidence has been filed, there has been no discovery, no subpoenas have been issued and where there are no formal pleadings. It must also be borne in mind that the Commissioner has no first hand knowledge of the underlying facts and circumstances.

(Emphasis added.)

27    Gyles J’s reasons were endorsed on appeal by Buchanan J in McDonald’s Australia Ltd v Federal Commissioner of Taxation (No 2) [2008] FCA 395 at [9]-[12].

28    Picking up on the point made by Gyles J in McDonald’s at [13], it is well established that the onus lies upon the applicant of proving that the penalty assessments are excessive under s 14ZZO(b)(i). In Hart v Federal Commissioner of Taxation (2003) 131 FCR 203, Hill and Hely JJ observed in the context of the former regime for additional tax at 213 that:

The onus is on the appellant to prove that the assessment of additional tax by way of penalty was excessive. The taxpayer could discharge that onus by proof that the factual circumstances which are necessary preconditions to the operation of s 226H, or any other section in Part VII of the Act did not exist: BRK (Bris) Pty Ltd v Commissioner of Taxation (Cth) (1999) 42 ATR 409.

29    The above observation was endorsed by Steward J in Bosanac v Commissioner of Taxation [2018] FCA 946 at [132] as having equal applicability to penalties imposed by Div 284 of Sch 1 of the TAA by virtue of s 14ZZO of the TAA.

30    It follows, as the Commissioner contends, that there is no onus on the Commissioner to demonstrate that the penalty assessments were correctly calculated. The Commissioner is entitled to rely upon any deficiency in the applicant’s proof in seeking to uphold the assessments: Bosanac at [89] and [131]-[132] (Steward J); Bosanac v Federal Commissioner of Taxation (2019) 276 FCR 169 at [128] (Bosanac FC).

31    Further, in Commissioner of Taxation v Huang [2025] FCA 1314, and in the context of an appeal pursuant to s 14ZZO of the TAA (as is the case here), Feutrill J observed at [71]-[74]:

…The correctness of the means by which the Commissioner made his assessments of the shortfall penalty was not the issue. The taxpayer had to demonstrate that the assessment should not have been made or should have been made differently: s 14ZZK(b)(ii); or that the assessment was excessive or otherwise incorrect and what the assessment should have been: s 14ZZK(b)(i): Bosanac FCAFC at [56], [65], [73], [98], [128] (Greenwood, Burley and Colvin JJ). Therefore, the taxpayer had to positively prove the absence of recklessness.

It follows that there is force in the Commissioner’s submission that the Tribunal misconstrued or misapplied s 284-75 and s 284-90 of Sch 1 in considering, in effect, that the Commissioner had made a decision to impose the shortfall penalties rather than make a decision concerning an assessment of the penalties imposed by the legislation. Further there is also force in the Commissioner’s submission that the Tribunal erred when expressing the view that the logical starting point for determining whether the Commissioner’s assessments of the administrative penalties should not have been made or should have been made differently was the Commissioner’s objection decisions and reasons for the decisions... There is ample authority for the proposition that there is no onus on the Commissioner to demonstrate the assessments were correctly made and the Commissioner is entitled to rely upon any deficiency in the taxpayer’s proof in seeking to uphold the assessment: Gashi v Federal Commissioner of Taxation [2013] FCAFC 30; 209 FCR 301 at [61]-[67] (Bennett, Edmonds and Gordon JJ); Bosanac FCAFC at [56]-[57]; Federal Commissioner of Taxation v Dalco [1990] HCA 3; 168 CLR 614 at 624 (Mason CJ, Brennan, Deane, Dawson, Gaudron and McHugh JJ agreeing).

In the context of an assessment under s 167 of the 1936 Assessment Act, the taxpayer does not discharge the burden of proving that the assessment was excessive by simply showing that the Commissioner formed a judgment about the amount of taxable income on a wrong basis. The taxpayer must positively prove the amount of the taxpayer’s taxable income: Rigoli v Federal Commissioner of Taxation [2014] FCAFC 29; 63 AAR 152 at [12]-[13] (Edmonds, Jessup and McKerracher JJ).

In substance, the taxpayer submits that the Tribunal correctly understood that he had the onus of proving that the false or misleading statements in his tax returns were not reckless or careless and that the Tribunal found on the balance of probabilities that the taxpayer had discharged that onus. While the Tribunal had focussed on the Commissioner’s reasons for assessing the administrative penalties on the basis that the taxpayer’s statements were made recklessly, part of the Tribunal’s consideration of the evidence included the evidence of the taxpayer and Mr Hollyock about the manner in which sales data was collected and recorded in the trustee’s MYOB records and that data was used to prepare the trust financial statements and tax returns that were, in turn, the foundation for the trust distributions and the taxpayer’s false or misleading statements. The taxpayer submits that the Tribunal understood and applied the correct test of recklessness to the facts found on that question… Further, on the facts found the Tribunal understood and applied the correct test to the question of carelessness... Accordingly, the taxpayer submits no error has been demonstrated in the Tribunal’s conclusions about recklessness or carelessness.

32    It follows that the applicant bears the onus under s 14ZZO of the TAA to prove that the shortfall amounts, or part thereof, did not result from intentional disregard of a taxation law. In other words, the taxpayer must prove that the default assessments should not have been made, or should have been made differently, or that the assessment was excessive or otherwise incorrect and what the assessment should have been: Huang at [71]; Bosanac FC at [56], [65], [73], [98], [128] (the Court).

4.    DOES THE COMMISSIONER HAVE NO REASONABLE PROSPECT OF SUCCESSFULLY DEFENDING THE PROCEEDING?

4.1    The evaluative judgement to be exercised under s 167(b) of the Income Tax Assessment Act 1936 (Cth)

33    The starting point is s 167(b) of the 1936 ITAA which provides that:

167    Default assessment

If:

(a)    any person makes a default in furnishing a return; or

(b)    the Commissioner is not satisfied with the return furnished by any person;

(c)    the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income;

the Commissioner may make an assessment of the amount upon which in his or her judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.

34    As the Commissioner submits, s 167(b) enables the Commissioner to exercise his or her judgement as to the amount to be levied. In determining that amount, the Commissioner can use the indirect audit methodology, as was the case here. An indirect methodology enables the Commissioner to infer what the taxpayer’s taxable income is by other indicia (cf. asset betterment methodology which looks at the taxpayer’s asset position). The levied amount determined by the Commissioner through that methodology becomes the taxpayer’s taxable income under s 166 of the 1936 ITAA by force of s 167.

35    In the present case, the Commissioner inferred that the “unexplained deposits” (being the amounts credited to LMS) must have been funded by assessable income derived by the applicant. Those amounts, in the Commissioner’s view, had the characteristics of ordinary income pursuant to s 6-5 of the 1997 ITAA. It follows in the Commissioner’s submission that such amounts were treated as forming part of the applicant’s assessable income and thus increased the taxable income for the income years.

36    On the other hand, the applicant contends that there is no material false or misleading particular; nor has the Commissioner identified a false or misleading particular in the appeal statement contrary to the requirement in r 16.42 of the FCR. Rule 16.42 provides:

A party who pleads fraud, misrepresentation, unconscionable conduct, breach of trust, wilful default or undue influence must state in the pleading particulars of the facts on which the party relies.

37    The Commissioner accepts that the appeal statement does not specify this. This deficiency is not, in my view, a deficiency of the kind in r 26.01(1) of the FCR. This is a deficiency that is curable by amendment.

4.2    How does a default assessment made pursuant to s 167(b) inform the application of the penalty assessment provisions under the Taxation Administration Act 1953 (Cth)?

38    As earlier explained, the Commissioner issued the amended assessments on the basis that he was not satisfied with the completed returns of the applicant for the purposes of s 167(b) of the 1936 ITAA. The penalty assessments were thereby issued pursuant to s 284-75(1) of Sch 1 of the TAA, which relevantly provides:

284-75 Liability to penalty

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

…

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

(Emphasis added.)

39    In the present case, the Commissioner has proceeded on the basis that the “false or misleading material particular” was the applicant’s omission in his furnished assessments during the income years of the credited amounts to LMS. The applicant’s alleged omissions formed “a significant part of [the applicant’s] assessable income”. This, the Commissioner submits, is pleaded at [15], [39]-[40] of the Appeal Statement which provide:

[15]    There was a shortfall amount as a result of a statement described in s 284-75(1) of Sch 1to the TAA for the Relevant Income Years resulting from intentional disregard of taxation law by the applicant or their agent.

…

[39]    Credits to the loan account with LMS Pty Ltd were $16,126,803.59 from the 2001 to 2011 income years.

[40]    The amounts credited to the applicant’s personal loan account with LMS Pty Ltd (save for a small number of credits due to refunds form the ATO which recognised on objection) amounted to assessable income during the Relevant Income Years but the applicant did not include that income in his personal tax return for the Relevant Income Years.

40    The Commissioner stated in the Reasons:

Applying the law to your circumstances

94.    In respect to issue one, you lodged your income tax return for the income years ended 30 June 2001 to 30 June 2011 that were not correct which led to your net income, and consequently your tax liability, being less that it ought to have been.

95.    You made statements to the Commissioner which omitted a significant part of your assessable income. You therefore made statements that were false and misleading in a material particular.

41    If, as the Commissioner asserts, the applicant’s omissions to his furnished assessments constitute a false or misleading material particular under s 284-75(1)(b), then, the Commissioner argues, the next step is to determine the administrative penalty to be imposed under s 284-85 of the TAA.

4.3    Imposing an administrative penalty for a false or misleading material particular

42    Section 284-85 of the TAA provides that the base penalty amount is “work[ed] out” under s 284-90. That penalty is determined according to the different levels in s 284-90 (multiplied by percentage increases or decreases). The provision provides that the base penalty amount is worked out by a percentage of the shortfall amount which percentage is determined by reference to the level of culpability including with the percentage for intentional disregard of a taxation law being set at 75%, for recklessness being set at 50%, etc.

43    The applicant contends that a shortfall amount within the meaning of s 284-80(1), item 1, cannot be “worked out” by reference to an assessment made pursuant to s 167 of the 1936 ITAA because that assessment does not follow the method statement in s 4-15(1) of the 1997 ITAA. Section 4-15(1) provides that a taxpayer is to work out their taxable income for an income year by the Method Statement, i.e., “Taxable income = Assessable income – Deductions”.

44    In the Commissioner’s view, however, it follows from s 284-85 of the TAA that it is necessary to identify the shortfall amount. That amount is identified pursuant to s 284-80 which provides:

284-80    Shortfall amounts

(1)    You have a shortfall amount if an item in this table applies to you. That amount is the amount by which the relevant liability, or the payment or credit, is less than or more than it would otherwise have been.

(Emphasis in original.)

45    The provision then sets out a table of items with differing situations as to when a person has a shortfall amount. In the present case, the relevant item is item 1, which provides:

A *tax-related liability of yours for an accounting period … worked out on the basis of the statement is less than it would be if the statement were not false or misleading.

46    It follows, in the Commissioner’s view, that it is necessary to then work out the “tax-related liability” in item 1. The Commissioner submits that this is identified in the table in s 250-10(2) of the TAA being, relevantly, item 37 of that table which provides that income tax is a tax-related liability under s 5-5 of the ITAA 1997. The liability is then worked out under s 4-10 of the ITAA 1997 as, in effect, taxable income multiplied by the applicable tax offset, minus tax offset. The amount of income tax payable is worked out under s 4-10 of the 1997 ITAA by applying the applicable income tax rates minus tax offsets. Taxable income in turn is worked out under s 4-15 of the 1997 ITAA. Section 4-15 provides two methods by which one can work out their taxable income:

(1)    the method statement (sub-section 4-15(1)); or

(2)    in some cases, methods by which taxable income is worked out in a “special way” (sub-section 4-15(2)) which include, relevantly, where the Commissioner makes a default or special assessment of taxable income under ss 167 and 168 of the 1936 ITAA (item 5 of the table in s 4-15(2)).

47    It follows, in the Commissioner’s submission, that the making of a default assessment under s 167 of the 1936 ITAA is a way to work out taxable income which then feeds into the determination of the shortfall amount.

48    The Commissioner’s submission is that the shortfall amount is determined by assessing the difference between: (a) the assessable income determined by the Commissioner pursuant to s 167 of the 1936 ITAA; and (b) the taxable income declared by the applicant when he furnished his tax returns for the income years, i.e., by subtracting the latter from the former, as pleaded by the Commissioner in his appeal statement at [15] and [16]:

[15]    There was a shortfall amount as a result of a statement described in s 284-75(1) of Sch 1to the TAA for the Relevant Income Years resulting from intentional disregard of taxation law by the applicant or their agent.

[16]    The applicant was liable to an administrative penalty under s 284-75(1) of Schedule 1 to the TAA for the Relevant Income Years in the base penalty amount set out in column D below:

49    This accords with the method identified at [87] of the Reasons, which states that:

87.    The shortfall amount is the difference between the correct tax liability and the tax liability previously worked out using the information you provided, that is, your lodged tax returns.

50    Paragraph [16] of the Commissioner’s appeal statement sets out the administrative penalty through a table, which is reproduced below:

4.4    Base penalty amount

51    Once the shortfall amount has been determined, the next step in the Commissioner’s submission is to identify the base penalty amount in the table in s 284-90 of the TAA. In the present case, the Commissioner concluded that item 1 of the table was the applicable item which prescribes a base penalty of 75% of the shortfall amount, because the shortfall was a result of the applicant’s intentional disregard of a taxation law: s 284-90(1) (Item 1). Thus, the Commissioner pleads in his appeal statement at [56]-[58]:

56.    The Commissioner formed the view at audit, which was maintained on objection, that the facts and circumstances of the case support the inference that the applicant had intentionally disregarded the requirement to disclose the income that was credited to the applicant’s loan account with LMS Pty Ltd.

57.    The applicant is liable to an administrative penalty pursuant to s 284-75 of Sch 1 to the TAA and had shortfall amounts pursuant to s 284-80 in the Relevant Income Years.

58.    The shortfall amounts resulted from intentional disregard of a taxation law by the applicant or their agent and a base penalty amount of 75% applied in relation to the applicant’s shortfall amounts pursuant to s 284-90 Item 1 of Sch 1 to the TAA.

52    The Commissioner also set out his basis for this conclusion in the Reasons at [97] which relevantly stated:

97.    In our position paper dated 5 July 2022 we expressed our view that your level of culpability is that of intentional disregard and you would be subject to an administrative penalty of 75% of the shortfall amount for the income years ended 30 June 2001 to 30 June 2011. Our view was based on the following reasons:

(a)    The quantum of total unreported taxable income ($16,126,798) is significant compared to the amount reported ($695,429).

(b)    The behaviour in underreporting your income was more than an isolated error or inadvertent mistake given it occurred over numerous years.

(c)    You have been unable to provide any evidence for the omission of such a large amount of your income.

(d)    You made uncorroborated statements about your loan account to the Commissioner, that you knew or ought to have known were false or misleading.

…

5.    THE APPLICATION FOR SUMMARY JUDGMENT MUST BE DISMISSED

53    Having regard to the Commissioner’s case, this is a clear case where summary judgment is not appropriate.

54    First, the parties’ respective positions with respect to the proper construction of the statutory framework are completely at odds, as a result of which the Court is required to determine novel and important questions in relation to the imposition of administrative penalties in circumstances where the Commissioner issues a default assessment pursuant to s 167(b) of the TAA. For example, the applicant contends that a shortfall amount within the meaning of s 284-80(1), item 1, cannot be “worked out” by reference to an assessment made pursuant to s 167 of the 1936 ITAA following the formation by the Commissioner of a judgement as to the taxpayer’s taxable income because that assessment does not follow the method statement in s 4-15(1) of the 1997 ITAA. In the Commissioner’s view, however, it follows from 284-85 of the TAA that it is necessary to identify the shortfall amount pursuant to s 284-80(1) and Item 1 of the table to that provision. It is plain that the Commissioner’s position is arguable, if not compelling. As such, the question of statutory construction is not appropriate for determination by way of summary judgment, where the Court has not had the benefit of comprehensive written and oral submissions as to the operation of the various statutory frameworks.

55    Secondly, that being so, before I could be satisfied that this may be an appropriate case for summary judgment against the Commissioner, I would need to be satisfied that the applicant has discharged his onus of proof of demonstrating that:

(1)    the amended assessments are excessive (i.e., the credits to LMS do not reflect amounts of assessable income) and, thus, there is no shortfall amount; or

(2)    the shortfall amount was not wholly or partly a result of intentional disregard of a taxation law.

56    The applicant’s case in this regard appears to be predicated on the basis that the shortfall amount arising by reason of the default assessments issued under s 167(b) of the 1936 ITAA cannot be the result of the applicant having intentionally disregarded a taxation law. This is because, in the applicant’s submission, he could not have intentionally failed to include in his tax returns an amount that was determined via a subsequent exercise of the Commissioner’s evaluative judgement under s 167(b).

57    The applicant’s submission on its face seeks to circumvent the burden of proof on him to establish that the shortfall amounts are either excessive or do not arise wholly or partly from an intentional disregard of a taxation law: see Huang at [71]; Bosanac FC at [56], [65], [73], [98], [128] (the Court). That is, at the least, an ambitious submission. It is difficult to see how the fact that the Commissioner has issued a default assessment which is not worked out by applying the Method Statement in s 4-15(1) of the 1997 ITAA effectively displaces this burden on the applicant. As the Commissioner asserts, it does not follow from the fact that the Commissioner has reached a view that the applicant’s taxable income should have been different that the applicant’s furnished returns were not the result of an intentional disregard of a taxation law. Given this, it would be entirely inappropriate for the Court to take “a considerable leap” and order summary judgment in favour of the applicant in circumstances where he has not even been put to proof of his own case: McDonald’s at [12] (Gyles J). This argument therefore fails.

58    Thirdly, there are numerous factual issues that span across a lengthy period of some ten years and involve a large number of different loans. The Court is not in a position to make any findings of facts of this nature without the benefit of lay and expert evidence that has been the subject of cross-examination and a documentary tender contextualising these issues: see McDonald’s at [13] (Gyles J).

59    Fourthly, the consequences of any such determination are significant and involve a significant amount of money.

60    Finally, the Commissioner has set out his case in his appeal statement in a coherent manner. I am far from satisfied that the Commissioner has no reasonable prospects of successfully defending the proceeding. The only aspect of the appeal statement that requires further specificity is the taxation law the Commissioner asserts was intentionally disregarded by the applicant. I consider it appropriate to afford the Commissioner an opportunity to amend the appeal statement to address this issue.

6.    CONCLUSION

61    For the reasons set out above, the applicant’s application for summary judgment must be dismissed.

62    In my view, it is appropriate to afford the Commissioner an opportunity to amend the appeal statement in light of my decision so as to specify with particularity the taxation law it is said the applicant had intentionally disregarded in furnishing his tax returns for the income years.

Associate:

Dated:    10 August 2026