Assessable income increased by $25m following Liechtenstein bank info Print E-mail

The AAT has affirmed amended assessments issued to a taxpayer for the 1999 to 2007 income years which increased his assessable income by some $25m and imposed shortfall penalties of some $11m. The information on which the amended assessments were based was on illegal information obtained from a former employee of a Liechtenstein bank which indicated that the taxpayer had established a "Foundation" account at the bank in which he originally contributed US$3m and which he controlled from Australia, and of which he was the primary beneficiary: AAT Case [2012] AATA 557, Re Murray and FCT (No 3) (AAT, Ref Nos 2009/4786, 2009/5888-5894, 2011/5622, Hack DP, 24 August 2012).


The AAT stated that the taxpayer had established a complex net of trusts and companies, some incorporated overseas (including his dealings with the Liechtenstein bank), through which his financial affairs had been managed. The taxpayer lodged tax returns "disclosing modest amounts of taxable income" in each of the years between 1999 and 2003. He did not lodge returns in the 2004, 2005, 2006 and 2007 income years. The returns as lodged did not disclose any income attributable to the investments with the Liechtenstein bank or income arising from the Foundation.

Before the AAT, the taxpayer argued that he was not presently entitled to any of the income of the Foundation during any of the income years in issue, the assessments for each of the years were excessive and that, from the 2007 income year, he was a resident of Singapore and thus not liable to pay income tax on foreign source income in that year.


In affirming the Commissioner's amended assessments, the AAT first dismissed the taxpayer's argument that he was not presently entitled to any of the income of the Foundation during the years in issue. It did so essentially on the basis of finding that in terms of the evidence and, in particular, the taxpayer's failure to provide relevant documentary material (or even appear at the hearing) that it defied logic to think that the taxpayer would confer enormous financial benefit on the Foundation without retaining the capacity to control the trustee about the use to which those funds were to be put in terms of the standard agency agreement that applied to such investments.

The AAT then dismissed the taxpayer's claim that the assessments were excessive. While acknowledging the assessments were calculated on a fairly "unsophisticated basis" and that it was certain that the assessments were not correct (especially in terms of the extraordinary increase in the funds over the relevant period), the AAT emphasised that it was not enough for a taxpayer to show error in the Commissioner's assessment. Rather, it said that the taxpayer must also show what the actual taxable income was and that in this case the taxpayer had not done so.

Finally, the AAT dismissed the taxpayer's claim that he was not a resident of Australia in the 2007 year and therefore was not assessable on the foreign source income for that year. Again, the AAT found that the taxpayer had not discharged the burden of showing that he was not a resident of Australia during that year. In doing so, the AAT noted the following:

  • the taxpayer appeared to accept that prior to that time he was a resident of Australia, and all that changed after that time were notations made on passenger cards on entering Australia and the fact of the acquisition of a residential property in Singapore;
  • the taxpayer occupied a residential property in Australia for five months of that year in exactly the same way that he had during the period when he accepted that he was a resident of Australia;
  • the taxpayer's continuing business activities in Australia; and
  • documents concerning his business affairs continued to be addressed to him at the Australian residence and described his Australian address as his residence.

Accordingly, the AAT affirmed the assessments and the decision under review.


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