The Administrative Appeals Tribunal (AAT) has upheld tax
assessments of over $36 million, despite finding that the
assessments were clearly incorrect. The case is Murray and
Commissioner of Taxation (No 3)  AATA 557.
The case clearly illustrates that, in a dispute with the ATO,
the taxpayer must:
not only prove the Commissioner's assessments are excessive
but also establish the correct amount of tax that should have been
raise all relevant grounds of appeal in the initial objection
or run the risk of not being allowed to raise them at a later
In our experience, objections are often unsuccessful because the
initial objection does not cover all relevant grounds and
insufficient attention is given to proving the correct amount of
Dr Murray had a complex net of entities in Australia and
overseas. He appealed the Commissioner's decision to disallow
objections for income tax assessments for nine years that related
to income from a trust established in Liechtenstein.
The ATO's assessments were based on information provided by
a whistle-blower from a Liechtenstein bank that managed the
The Commissioner's evidence showed that from 1999 to 2001,
the assets of the trust had grown by 51% and extrapolated this data
to apply a yearly growth rate of 25% to support assessments from
1999 to 2007.
Dr Murray led evidence to show that the correct growth rate over
those income years would have been only 7.23%, but did not provide
any documents showing the actual growth in the value of trust
The taxpayer has the burden of proof, but what does this
The legislation states that the taxpayer must prove that an
assessment is excessive.
The High Court's view is that, in showing that the
Commissioner's assessment is excessive, the taxpayer must also
show what the correct assessment should have been; it is not enough
to just show that the Commissioner got it wrong (Commissioner
of Taxation v Dalco (1990) 168 CLR 614).
In Murray the AAT noted:
It is certain that the
respondent's assessments are not correct. But... it is not
enough for a taxpayer to show error in the respondent's
assessment; the taxpayer must also show what the actual taxable
income was. That was a burden that the applicant here did not
Dr Murray did not provide any evidence as to the correct amount
of taxable income. As a result, his application to the AAT
Drafting notices of objection – why you need to get
it right from the start
Dr Murray also tried to raise other arguments after the initial
hearing regarding the application of the Australia-Singapore Double
The AAT refused to allow Dr Murray to raise the alternate
argument because no explanation was given as to why these arguments
were not raised earlier in the proceedings.
When preparing a notice of objection for clients, advisers need
to ensure that all alternative grounds are covered, including
arguments dealing with penalty assessments.
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