In the face of an amended assessment from the Commissioner of
Taxation, the taxpayer is 'guilty until proven innocent',
to put it bluntly. This is not due to the Commissioner's
belligerence, but rather how the tax laws are written. Therefore,
it is crucial that all taxpayers maintain sufficient evidence of
their revenue and expenses each year to support the information
provided in their annual income tax return.
Several recent cases in front of the Administrative Appeals
Tribunal (AAT) have highlighted the importance of keeping good
records. If called upon, taxpayers must be able to substantiate
claims made in their original lodgement, or alternatively to
disprove an assertion by the Commissioner that omitted amounts are
income, or amounts included are not expenses.
A recent AAT decision where the taxpayer was attempting to
disprove that the ATO's assessment was excessive highlighted
The Tax Administration Act places the onus of proof that the
assessment is excessive with the taxpayer.
'Excessive' means that the amount assessed exceeds what
it should be. It is up to the taxpayer to establish their
It is insufficient to show that the Commissioner made an error
or that the assessment may be wrong. Taxpayers must go further to
show what the correct position should be, or to show that they have
been assessed to a liability that the Assessment Acts do not
There is no onus on the Commissioner to support an assessment
with evidence. If the Commissioner fails to prove an assertion
regarding the taxpayer's assessable income, this does not mean
that the taxpayer has discharged their burden of proof to show the
assessment is excessive.
Furthermore, any 'self-serving evidence' will be
approached with a high level of critique, analysis and caution.
Self-serving evidence is that of witnesses who have an interest in
the evidence being accepted, such as sworn statements by the
taxpayer and their associates. Self-serving evidence needs to be
corroborated by external factual and objective evidence.
Keeping records consistent with the requirements of the Income
Tax Assessment Acts should be part of any sound business or
investment operation and not done hastily at the end of a financial
year. It's crucial to keep reliable and simultaneous records of
both business transactions and investments as part of the normal
course of operations. It's also important to be aware of record
keeping requirements above and beyond what may be considered
sufficient for internal purposes, such as for motor vehicle
deductions, travel deductions, CGT related transactions and
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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