This article provides an update on key developments in taxation law for accountants and participants in the tax advice industry for early June. This update in summary covers:
- How the ART does not have power to stay an imposition of GIC
- ART found Home Office and Car Expenses Deductible
- Taxpayer hit with $4m debt, under s 167 ITAA36, and unable to prove that reassessed amounts were excessive
- Further Convictions found under the ATO's Operation Protego
1 – Mason v Federal Commissioner of Taxation [2025] ARTA 567 – ART does not have the power to stay imposition of General Interest Charge
The Administrative Review Tribunal ("ART") has outlined that they do not have the power to freeze the imposition of GIC. Around June 2024, the taxpayer applied to the AAT for a review of penalty assessments. A week later, the taxpayer also applied for an order under section 32 of the ART Act that the interest be frozen while the review comes to a conclusion.
The taxpayer sought a "freeze" on the GIC under section 32 of the ART Act. However, Subsections 14ZZB(5) and 14ZZB(6) of the Taxation Administration Act 1953 in conjunction with section 5-15 of the Income Tax Assessment Act 1997 outlines that GIC is automatically added to the principal debt and is not part of the reviewable objection decision before the ART.
As such, the ART concluded by stating that the provisions outlined beforehand indicates that the ART does not have the power to stay the imposition of GIC.
2 – Hall v Federal Commissioner of Taxation [2025] ARTA 600 – Home Office and Care Expenses Deductible
A taxpayer required to work from home during the Covid-19 pandemic was found by the ART to be entitled to deductions for home office and car expenses.
The taxpayer was a presenter for the ABC whose role had two main aspects:
- Production of the ABC Sport Digital Radio station; and
- Production of the ABC live sports broadcasts for NRL football.
Due to the Covid-19 restrictions, the taxpayer had to perform his digital role at home, using a spare bedroom in his rental premise as a home office. His workweek consisted of working from home digitally on Monday and Friday and a mix of digital work followed by live broadcasts at the studio from Thursday to Sunday for the NRL Season. Off-season, the taxpayer had a mix of digital and live work, depending on the assignments.
The key issue here the ART had to determine was whether the taxpayer could claim the home office deductions based on a portion of his rent of ($5,878) due to approximately 16% of the apartment being used as an office and car expenses of ($1,148) for driving between his home and studio on days he had to broadcast live.
The ART decided that in regard to the home office expenses, that for the year when the taxpayer had to perform his digital role, the second bedroom was his workplace and was a necessary and required party of his work. The car expenses were also deductible due to the fact that when he drove to his workplace at Southbank studios or AAMI Park, he was at work the whole time and his travel was therefore on work as were his return journey.
3 – ZFPR v Federal Commissioner of Taxation [2025] ARTA 572 – Taxpayer hit with $4m ATO Debt unable to prove that reassessment was excessive
A taxpayer was recently assessed under section 167 ITAA 1936 with a $3.66m increase in his assessable income was unable to prove to the ART that the reassessment was excessive.
It is noted that s167 ITAA assessments can be made by the Commissioner where no returns have been lodged or where the Commissioner believes the returns are not sufficient are not necessarily involving an assets betterment which is commonly done by the Commissioner , but on any basis upon which its judgment income tax ought to be levied.
The taxpayer had moved to Australia in 2004 and had established several businesses in mining and shipping. From 2009 to 2017, his main declared income was as a director and shareholder of an Australian iron ore trading company with his salary being $900,000 for that period.
The taxpayer was involved in several offshore companies consisting of:
- M Co – an Investment vehicle for his China-based relatives and friends of which he was a director and shareholder;
- S Co – whom he was a director and shareholder of and involved in share trading.
- G Co – Of which he was a director and shareholder and whose business was conducted mainly in Hong Kong.
Following an ATO audit, the ATO issued default assessments for the taxpayers for the 2008, 2010 to 2012 and 2014 to 2016 income years under section 167 ITAA36 and section 170(1) ITAA36, increasing his assessable income by nearly $3.66m, and resulting in:
- Tax Shortfall – $1.7m
- Penalties – $1.53m
- Interest (SIC) – $781,000
The ATO categorised the declared income as:
- $1.47m in house construction payments by M Co for the taxpayer's Perth home;
- $289,000 in personal expenses paid by M Co; and
- Just under $1.9m in payments from L Co.
As a reminder, in respect of a section 167 ITAA 36 assessment , the onus is on the taxpayer to show that the Commissioner's assessment is excessive per section 14ZZK of the Taxation Administration Act 1953. The taxpayer failed to establish the following which was detrimental to his case that the payments were received through home loan repayments and as gifts:
- There was no evidence provided by the taxpayer that the funds paid to him were repayments of loans he had made to L Co for his home renovation;
- The taxpayer failed to identify or provide any documentation for individuals who gave him gifts or investment funds;
- There was inconsistent use of terminology by the taxpayer referring to funds at different times as gifts or investments;
- Claims that M Co's payments were loan repayments for the house renovations were unsubstantiated by documentation or independent verification; and
- The salary records were unclear, suggesting that declared salary amounts may have been arbitrarily assigned.
As noted in Commissioner of Taxation v Liang [2025] FCA 535:
As a general rule, a taxpayer proves an amount is not assessable as income under ordinary concepts by proving what the amount represents and demonstrating that what the amount represents is not ordinary income. It would be a very rare instance where a taxpayer was able to prove an amount was not income under ordinary concepts without positively establishing the source and character of the amount. As a matter of logic, it is difficult to prove a negative by proving a series of other negatives unless those other negatives represent the entire universe of possibilities.
4 – Further Convictions in the ATO's Operation Protego
The ATO has issued its latest release for Operation Protego with 3 convictions found for individuals committing GST fraud. For your information, Operation Protego is an ATO-led investigation into large-scale GST fraud that was promoted on social media, especially on Tik Tok which involved individuals:
- Creating a fake business;
- Lodging fraudulent Australian business number applications; and
- Submitting fictitious business activity statements to attempt to gain a false GST refund.
The latest convictions consisted of:
- A man sentenced to 2 years and 6 months imprisonment for obtaining a financial advantage by deception, and 2 years for attempting to obtain a financial advantage by deception. He had reactivated an ABN for a road freight transport operation and lodged 37 false BAS statements between February and October 2022 obtaining $167,690 in GST refunds. He has been ordered to pay $167,690.
- A woman sentenced to 3 months in jail after fraudulently obtaining $25,147 in GST refunds. She had obtained an ABN, claiming to be running a retail business. An ATO search warrant was executed at her residence where no evidence was found. However an ATO audit and internet search concluded that she was not operating a business at all and was not entitled to any GST refunds. The ATO has begun reclaiming the funds obtaining initially through freezing her bank account and further funds recovered through her income tax returns.
Another woman was sentenced to 9 months imprisonment after being charged with one count of dishonestly obtaining a financial gain. She obtained an ABN for a business she claimed had provided beauty and salon service and obtained $49,700 in GST refunds. She has been ordered to pay the amount of $49,700.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
