Mr Gu disclosed $20,800 in salary and wages in his 2013 tax return. His salary and wage occupation was disclosed as shop manager. He returned salary and wages in the amount of $20,800 from a related entity, M&M Gu Pty Ltd, which operated a small café business. He did not disclose any other income from any source.
Following an ATO audit, the ATO identified unreported sales by the company and undisclosed income by Mr Gu personally. The ATO also noted that Mr Gu had several rental properties, but none were disclosed in his tax return. The Commissioner issued amended assessments, which increased Mr Gu’s personal tax liability by approximately $29,000. The Administrative Appeals Tribunal heard evidence that the company rarely banked any of its takings. This was because he claimed most of its sales were in cash, and the cash takings were used to pay for the purchase of supplies for the business.
However, the ATO provided evidence that Mr Gu’s personal bank accounts received deposits of between $1,000 and $2,300 every 3 to 4 days. Mr Gu rejected the asserted level of income, and claimed that his parents had travelled from China to see him, and they had both brought $70,000 in cash with them. His parents provided statutory declarations to this effect. However, the Tribunal did not accept this claim because it was not consistent with the evidence, and it was also inconsistent with the disclosures made by his parents on the inbound passenger card provided to Customs.
The Tribunal concluded that Mr Gu had not discharged the burden of proving the assessments were excessive. The Tribunal also held that the Commissioner had correctly imposed administrative penalties at the rate of 50% for recklessness.
This article appeared in our August 2017 newsletter.