Appeal by Commissioner
7 The Commissioner has exercised the statutory right of appeal conferred by the TAA. In response, Ms Bazzo has raised a number of points of contention and has advanced a cross-appeal. The appeal and cross-appeal must be confined to questions of law: s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth). Where there is a right to appeal on a question of law, the existence of a question of law is both the qualifying condition for the application and its sole subject matter: Brown v Repatriation Commission (1985) 7 FCR 302 at 304; and Federal Commissioner of Taxation v Brixius (1986) 16 FCR 359 at 363-364. Further, the Court exercises original, not appellate, jurisdiction and does so in proceedings which are in the nature of judicial review: The Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue [2001] HCA 49; (2001) 207 CLR 72 at [15].
8 As the appeal must be on a question of law, the fact-finding function remains with the Tribunal. The fact-finding process undertaken by the Tribunal may be evaluated on appeal, but only for the purpose of determining whether it conformed to legal requirements as to the nature of the fact-finding task required to be undertaken by the Tribunal. As to these matters, see Haritos v Commissioner of Taxation [2015] FCAFC 92; (2015) 233 FCR 315 at [194] (Allsop CJ, Kenny, Besanko, Robertson and Mortimer JJ).
9 The Court also has discretionary authority to make findings of fact as to matters that were before the Tribunal as part of its adjudicatory task, but only where those findings are not inconsistent with those findings of fact made by the Tribunal which are not themselves infected by an error of law: s 44(7) of the Administrative Appeals Tribunal Act. In the present instance, neither party invited the Court to make factual findings. Rather, they claimed either that (a) if certain contentions were upheld, then different orders could be made by this Court on the basis that they followed as a matter of necessary logic from the Tribunal's findings; or (b) there would need to be remitter of limited aspects of the matter for reconsideration by the Tribunal. As to remitter, the ultimate position of both parties was that the terms of any remitter should be considered once the outcomes of the appeal and cross-appeal were known.
10 Before considering the issues raised by the appeal and the cross-appeal it is necessary to provide an overview of what was determined by the Tribunal.
Overview of Tribunal's reasoning
11 After dealing with the circumstances giving rise to the assessments and describing the competing contentions of the parties, the Tribunal began by considering the relevant law concerning an application for review under s 14ZZK(b)(i) of the TAA in a case where an assessment had been made under s 167 of the ITAA36 using an asset betterment statement.
12 The Tribunal was aided by a recent comprehensive review of the relevant authorities undertaken by Derrington J in Commissioner of Taxation v Ross [2021] FCA 766. The Tribunal quoted from key parts of the reasons in that decision. It referred to relevant passages to the effect that it was insufficient for a taxpayer to prove that an item in an asset betterment process was wrong or should not have been included. Rather, the ultimate question is whether the assessment is excessive and, as to that question, there is no burden placed upon the Commissioner. Further, absent agreement with the Commissioner to confine the issues for determination, the Commissioner is entitled to rely upon any deficiency in the taxpayer's proof of the excessiveness of the amount assessed in seeking to uphold the assessment. As to any such agreement: 'One might expect some clear expression of that agreement, involving as it does an abandonment of the advantages accorded to the Commissioner in s 167 in respect of defaulting taxpayers' (as quoted by the Tribunal from Ross at [48(10)]).
13 The Tribunal then noted that in the case before the Tribunal there was no agreement to the effect that the default assessment was a calculation of actual taxable income from which items might be challenged, leaving the remainder as the taxpayer's actual taxable income (para 68). The Tribunal then made clear that it well understood the purport of relevant authority as explained in the passages quoted from Ross by stating:
[Ms Bazzo] establishing that components or a component of the asset betterment calculation on which the [Commissioner] based the s 167 of the ITAA 1936 default assessment … should not have been included, could (potentially) establish that the assessment was not in the correct amount, but would not, of itself, establish that it was 'excessive or otherwise incorrect' for the purposes of s 14ZZK(b)(i) of the TAA. As a matter of logic, in order to establish that an assessment was excessive, it would be necessary to establish what it should have been, that is, establish what the actual taxable income was.
14 Driving the point home, the Tribunal then said (para 69):
As was the case in Ross, in the present case the parties correctly agreed that the effect of s 14ZZK(b)(i) of the TAA is that the taxpayer bears the burden of proving, on the balance of probabilities, both that the assessment is 'excessive' and, also, what the assessment should have been.
15 The Tribunal then quoted the following passage from Kitto J, the judge at first instance, in George v Federal Commissioner of Taxation (1952) 86 CLR 183 at 189:
… in order to carry that burden he must necessarily exclude by his proof all sources of income except those which he admits. His case must be that he did not derive from any source taxable income to the amount of the assessment. That will involve him, of course, in accounting for the increase in his assets, and it may well be that the commissioner will direct his efforts mainly or even wholly to endeavouring to meet the evidence the appellant adduces on this point. But the source of the increase in the assets is not the actual issue in the case; even if it were proved, for example, that that source consisted of winning bets on the racecourse, the issue would still be whether or not from any source the appellant derived as much taxable income as the assessment treats him as having derived.
16 The Tribunal then analysed the contents of the asset betterment statement relied upon by the Commissioner as the basis for the relevant assessments and the reasons for decision in relation to the objections by Ms Bazzo. The Tribunal's analysis in this regard assumes some significance because, as the Tribunal explained, the assessments were based to some extent upon an asset betterment analysis and to some extent upon identified 'other income'. As the Tribunal said, the relevant assessments 'had four components some of which would not ordinarily be described as asset betterment' (para 71). In particular, the Tribunal understood that the 'private expenses' identified in the asset betterment analysis were added to the identified asset position on the basis that the payment of those expenses from bank accounts and credit cards indicated the extent of undeclared taxable income (paras 82-85). In that regard, the Tribunal quoted from the Commissioner's reasons for the decision refusing Ms Bazzo's objection where the Commissioner referred to the unexplained expenses from the bank accounts in the following way (para 82):
The Commissioner considers that the funds in your bank accounts used to meet personal expenses or to repay loans used to acquire assets are assessable as ordinary income under section 6-5 of the [Income Tax Assessment Act 1997 (Cth)] as these funds represent income from unexplained sources or unidentified business activities.
17 Section 6-5 provides that a taxpayer's assessable income includes income according to ordinary concepts. Therefore, as to the monies used to meet personal expenses and to repay loans they were identified in the relevant assessments as income, not as unexplained assets. This distinction which the Tribunal identified in the early part of its reasons forms an important contextual aspect when considering later parts of the Tribunal's reasons.
18 After analysing the basis upon which the assessments had been issued, the Tribunal stated (para 86):
The core issue in the present case is, firstly, whether the assets on which the asset betterment calculation was made are, or were, the property of [Ms Bazzo] and, secondly, whether the amounts withdrawn from or paid into the accounts in the [Ms Bazzo's] name were, as she claims, not for her benefit. That second issue is also largely determined by whether the various properties in relation to which the payments were made were properties beneficially held by [Ms Bazzo], or were properties held by her on trust for others. As noted above, it was those issues which were the subject of the evidence and the submissions at the hearing.
19 The 'core issue' as described by the Tribunal had two parts. First, whether assets used by the Commissioner to make the asset betterment calculation were assets of Ms Bazzo. Second, whether amounts withdrawn from or paid into bank accounts in Ms Bazzo's name were, as she claims, not for her benefit. The second issue was identified as being connected with the first. However, the expression of the core issue did not allude to the further question whether payments made from Ms Bazzo's bank accounts that did not relate to the properties (that is, payments to meet personal expenses) were taxable income.
20 Given the preceding context in which (a) the obligation of the taxpayer to prove all sources of income was firmly emphasised; (b) there was an express finding that there was no relevant agreement that would allow Ms Bazzo to focus upon challenging items in the asset betterment statement; and (c) the Tribunal's express recognition that aspects of the relevant assessments depended upon the identification of monies used to meet personal expenses (rather than property-related expenses) as personal income, it is most unlikely that the above passage was intended to narrow the Tribunal's focus in a way that would be inconsistent with those statements. Rather, in my view, the Tribunal was directing its attention to the main issues that, in its view, were 'the subject of the evidence and the submissions at the hearing'. This indeed had been the case, a matter that is confirmed by regard to the materials before the Tribunal and the submissions advanced by the parties. They focussed principally upon issues in relation to the properties and the property-related expenses.
21 Nevertheless, as will emerge, a number of the issues in the appeal to this Court concerned whether the Tribunal had become distracted in some way from a proper understanding of what Ms Bazzo was required to demonstrate in order to succeed before the Tribunal by focussing upon what it described as the 'core issue', being (a) whether certain properties in her name were held on trust; and (b) whether certain payments said to have been made in relation to those properties were from, or otherwise indicated, undisclosed income. It will be necessary to return to this aspect. However, in addressing that aspect of the case, the submission for the Commissioner to the effect that the passage quoted above manifested some narrowing by the Tribunal of its understanding of what Ms Bazzo had to establish to succeed should not be accepted. Other submissions advanced by the Commissioner to support the claim of error by the Tribunal in allegedly narrowing its approach to its task are dealt with separately below when addressing the issues in the appeal.
22 Returning to the Tribunal's reasoning, the Tribunal next undertook a lengthy analysis of the evidence in relation to the properties that Ms Bazzo claimed were not her property because they were held by her on trust. The analysis commenced with the heading 'The Properties claimed by the Applicant to be held on trust for other entities'. In the course of that analysis, the Tribunal referred to evidence about the land development activities in which Ms Bazzo and her partner were involved and the way in which various holding costs relating to those activities were met by way of direct debit from the NAB Flexi Account in Ms Bazzo's name. The Tribunal dealt in detail with the 'eight properties in question'. In that regard, the Commissioner's original assessment had been made on the basis that there had been some 230 properties registered in the name of Ms Bazzo that formed part of her unexplained wealth, but by the time of the proceedings before the Tribunal the Commissioner had accepted that all but eight of those properties were indeed not beneficially owned by Ms Bazzo.
23 In its reasons, the Tribunal dealt with the evidence concerning the properties and the payments from the NAB Flexi Account in considerable detail (paras 87-239). Those paragraphs included the consideration of evidence from Mr Bay (in the form of two reports) and 'DCW' (in the form of two affidavits) each of whom had undertaken analysis of various accounting records (paras 214-239).
24 Having completed its detailed consideration of the evidence as to the properties and the payments from the NAB Flexi Account, the Tribunal then commenced a section of its reasons headed 'Closing submissions'. It began as follows (para 240):
As noted earlier, the parties made oral closing submissions as well as providing written closing submissions. The [Commissioner's] closing submissions were to the following effect:
(a) [Ms Bazzo] is required to positively prove her actual taxable income. In doing so, she must demonstrate that the amount of tax levied by the assessment exceeds her actual substantive liability. In the context of a s 167 of the ITAA 1936 assessment based on the asset betterment method, [Ms Bazzo] must prove that the identified unexplained accumulated wealth was derived from non-income sources.
(b) The evidence that [Ms Bazzo] has adduced in support of her applications is not capable of discharging the burden of proving that the assessments are excessive, or otherwise incorrect, and what the assessments should have been.
25 Significantly, the Tribunal began by directing attention to submissions by the Commissioner which reinforced the nature of the burden faced by Ms Bazzo (as correctly stated by the Tribunal in its earlier analysis of the law).
26 Thereafter, the Tribunal summarised (over the course of seven pages) the submissions advanced for the Commissioner as to the credibility of Ms Bazzo and witnesses called by Ms Bazzo to support her application. The Tribunal then summarised (over the course of five pages) the submissions advanced for Ms Bazzo as to the credibility of those witnesses.
27 The Tribunal then made findings as to credibility of the witnesses. The Tribunal accepted Ms Bazzo's evidence that the eight properties were held on trust by her for the benefit of third parties (para 256). The Tribunal also found that there were reasons not to accept the evidence of Ms Bazzo's partner (referred to by the Tribunal as A) and concluded (para 258):
If I were having to rely solely on A's evidence to find that [Ms Bazzo] held properties in the land developments on trust, or that her bank accounts, in particular the ANZ Flexi Account [sic], were used to facilitate those developments, [Ms Bazzo] would most likely fail. However, that is not the case. A's evidence about the practices that he, [Ms Bazzo] and others followed in undertaking these developments, is consistent with the evidence of [Ms Bazzo], Mr Bay, DCW and with the documentary evidence. That documentary evidence is not just the deeds of trust and the accounts kept by [Ms Bazzo] and A's companies, but is also the bank statements, settlement statements and tax returns which are substantially consistent with [Ms Bazzo] and A's evidence.
28 The 'ANZ Flexi Account' appears to in fact be a reference to the NAB Flexi Account. Therefore, the Tribunal not only accepted that all the properties were held by Ms Bazzo on trust for third parties, but also found that the NAB Flexi Account was used to facilitate the development of those properties.
29 The Tribunal then dealt with the evidence of Mr Bay and DCW (para 259ff). As to their evidence, the Tribunal said (para 260):
I appreciate that the [Commissioner] bears no burden of proof in such matters, however, in my view it takes more than each of Mr Bay or DCW accepting the somewhat self-evident general proposition that accounts are only as good as the information that is put into them (see [232] above) to render their reports and their evidence given at the hearing of no, or significantly diminished, probative value. As noted earlier, neither of them was cross-examined on any particular transactions referred to in their reports or their conclusions to illustrate that their reliance on certain records rendered their analysis and conclusions invalid.
(emphasis added)
30 The Tribunal then reasoned (para 261):
However, having made the above observations, there is a distinction between the reports of Mr Bay and DCW. As set out in [259] above and in the more detailed description of Mr Bay's reports (see [214]-[233] above), Mr Bay was able to rely on third-party records and documentation to a greater extent than DCW. Further, Mr Bay was an independent consultant accountant specialising in forensic analysis with considerable experience and qualifications. Prior to his being approached to prepare the reports, he had had no contact with [Ms Bazzo] or any of her associated entities. For those reasons I accept the conclusions reached by Mr Bay in his reports (see [223] above). I am, however, unable to accept DCW's conclusions on the balances of [Ms Bazzo's] loan accounts, which were largely reliant on the financial statements and journals for [Gucce] Holdings Pty Ltd, prepared by others. Also, unlike Mr Bay, DCW had an historical relationship with [Ms Bazzo], having worked for [Ms Bazzo's] group of companies (see [235] above) and with A, through his employment by M Nominees Pty Ltd. Accordingly, he cannot be considered to be independent. Further, DCW's conclusions in relation to the balances of the loan accounts relied significantly on his assessment of the nature of transactions as either being personal expenses or being related to development of properties. That exercise must necessarily involve a degree of subjectivity.
(footnotes omitted)
31 The following should be noted about the reasoning in the above paragraph:
(1) The Tribunal accepted in an unqualified manner the evidence of Mr Bay.
(2) The Tribunal did not accept the evidence of DCW.
(3) As to Mr Bay, the Tribunal had earlier explained the nature of his two reports. The key finding as to his evidence is expressed in terms that 'I accept the conclusions reached by Mr Bay in his reports', that is both of Mr Bay's two reports. There is no indication that the Tribunal is taking a different view as to matters that bear upon one report rather the other. The reasoning as to why Mr Bay's reports should be accepted does not indicate that any distinction is being drawn between them.
(4) The cross-reference to para 223 is to a conclusion reached by Mr Bay in his first report to the effect that 'amounts deposited to the NAB [Flexi] Account represent deposits made to facilitate payments to multiple lenders and on behalf of multiple entities and beneficiaries'. Mr Bay's second report (summarised at para 229ff) deals with the separate matter of the loan account shown in the accounts of Gucce Holdings Pty Ltd.
(5) I accept the submission for Ms Bazzo that the reference to para 223 is a typographical error and it should be read as referring to para 233 (which comes at the end of the consideration of both reports of Mr Bay) and is expressed in the following terms:
The above represents, in effect, the entire cross-examination of Mr Bay. He was not cross-examined on any particular aspect of either of his reports or challenged on any of the analysis or conclusions contained in his reports.
(6) Therefore, it is clear that the Tribunal accepted both reports by Mr Bay.
32 The Tribunal then dealt with submissions advanced by the Commissioner concerning the application of the principle in Jones v Dunkel, whether deeds of trust concerning the properties were shams, the formalities required for deeds, the provisions of the Stamp Act 1921 (WA) and the failure by Ms Bazzo to provide documents in response to requests (paras 262-289). Each of those passages, like the submissions they addressed, were concerned with matters relating to the properties. They were all points that had been raised by the Commissioner.
33 The Tribunal then commenced a section of reasoning that dealt with Ms Bazzo's income more broadly. It was set out under the heading 'Sources of income'. The reasoning is from paras 290-294. It will be necessary in due course to address the detail of those paragraphs because they assumed significance for the Commissioner's case on appeal. At this stage, it is sufficient to note that the reasoning began in the following way:
At paras 167-79 of his written closing submissions, the [Commissioner] referred to a lack of evidence led by [Ms Bazzo] as to how she earned her income, and what corporate structure she had in place to do so. The [Commissioner] claimed that '[i]n the absence of clear evidence concerning the sources of [Ms Bazzo's] wealth, she has not discharged her onus'
34 The balance of the Tribunal's reasons followed the same structure as the Commissioner's written closing submissions. They next deal with 'Bank accounts'. As to the NAB Flexi Account, the Tribunal found that the relevant monies in the account were amounts relating to loans for the purchase of properties that were not beneficially held by Ms Bazzo and were not her monies (paras 295-300).
35 As to the separate claim concerning monies in an Investec Account, the Tribunal was 'not satisfied that [Ms Bazzo discharged her onus of establishing that the moneys passing through [the] account were not for her benefit or should not be treated as income' (para 306).
36 As to two Bendigo Bank accounts, the Tribunal found that Ms Bazzo had discharged her onus on the basis that the amounts in those accounts, like those in the NAB Flexi Account, concerned the properties and were not amounts for her benefit (paras 310, 313).
37 The next matter addressed was the loan to Gucce Holding Pty Ltd. As to that matter, the Tribunal did not accept that Ms Bazzo had established an explanation as to why the payment of $1,000,000 (said to have been received by Ms Bazzo as repayment of a loan) should not be treated as income (para 318).
38 The Tribunal then summarised the competing contentions of the parties as to penalties (paras 319-323) and indicated that they would be addressed at the end of the reasons. It then dealt with the issue about the validity of the amended assessments for the years 2009 and 2010 under s 170(1) of the ITAA36 (paras 324-325). Section 170(1) of the ITAA36 provides for the circumstances in which the Commissioner may amend an assessment, one of which being where the Commissioner forms the opinion that there has been fraud or evasion.
39 The Tribunal then addressed what it described as the issues for determination. It began by saying: 'I am satisfied that [Ms Bazzo] has established, on the balance of probabilities, that each of the 2009, 2010 and 2011 default assessments and the 2016 special assessment was excessive or otherwise incorrect' (para 326). It recorded again its finding that Ms Bazzo held the eight properties on trust for others (para 327). It also recorded its acceptance that the NAB Flexi Account and the two Bendigo Bank accounts were not held for her benefit and that the funds that passed through those accounts should not be treated as her income (para 328).
40 The necessary consequence of these findings was that, as to those aspects, it had been established by her, to the satisfaction of the Tribunal, that the properties were not her assets and that the monies passing through the accounts were borrowings made as trustee. Consequently, there was no need to demonstrate sources of those funds that were not her taxable income. It meant that much of the force of the Commissioner's case had fallen away.
41 Then, having reached that conclusion, the Tribunal returned to what Ms Bazzo had to prove under s 14ZZK(b)(i) and said (para 329):
As the [Commissioner] correctly points out, a finding that the assessments were excessive or otherwise incorrect is only half the requirement of s 14ZZK(b)(i) of the TAA. [Ms Bazzo] must also establish, on the balance of probabilities, what the assessment should have been: in other words, what her actual taxable income was for each of the years. She does not do that by starting with the assessments issued by the [Commissioner] and deducting from the assessments items which are shown to have wrongly been included. The steps necessary to satisfy this element of s 14ZZK(b)(i) of the TAA are described by Derrington J in Ross at [47] as set out in [66] above.
(emphasis added)
42 Here the Tribunal, in its own language, clearly and correctly states the burden that Ms Bazzo was required to discharge.
43 The Tribunal then quoted particular passages from Ross to the effect that a taxpayer must prove positively their actual taxable income, including the statement that: 'The taxpayer must account for the unexplained increase in assets by explaining the source of those assets and identifying that those sources are not taxable'. Significantly, at this point the Tribunal again correctly states that Ms Bazzo does not discharge her onus 'by starting with the assessments issued by the [Commissioner] and deducting from the assessments items which are shown to have wrongly been included'. The quotes from Ross reinforce that the Tribunal understood that Ms Bazzo, as the taxpayer, must positively prove her actual taxable income and account for the unexplained accumulated wealth the subject of the asset betterment method.
44 However, as has been mentioned, the extent of that unexplained increase had substantially diminished by reason of the findings as to the eight properties and the monies in the NAB Flexi Account and the two Bendigo Bank accounts. That is part of the circumstances that pertain when it comes to considering the Tribunal's approach to whether Ms Bazzo had proven positively the extent of her taxable income. The Tribunal found that the eight properties and the monies in the bank accounts were in Ms Bazzo's name as trustee, not for her personal benefit.
45 As to Ms Bazzo's income, the Tribunal then said (para 330):
[Ms Bazzo's] basic contention is that her actual income was as declared in the returns that she lodged for each of the years in question. At paras 528-671 of her affidavit dated 8 November 2017 [Ms Bazzo] set out what she said were the sources of her income for each of the years in question. These included:
(a) director's fees paid by [Gucce] Holdings Pty Ltd;
(b) salary paid to her by M Nominees Pty Ltd;
(c) dividend payments; and
(d) interest generated on bank accounts.
46 As the reference to the paragraphs in the affidavit of Ms Bazzo indicates, her evidence as to these matters was long and detailed. It was given by reference to the entries in bank statements for her accounts, all of which were produced.
47 The Tribunal accurately described the nature of that evidence in the next paragraph of its reasons (para 331) as follows:
In these paragraphs [Ms Bazzo] sets out the assets that she held in each of the relevant years, the living expenses (including holiday expenses) that she incurred in each of the years and sought to explain the flow of funds through her many bank accounts and credit cards. At para 635 of her affidavit of 8 November 2017, [Ms Bazzo] referred to the $1,000,000 payment that she received from [Gucce] Holdings Pty Ltd in February 2011 which she claimed was repayment of a loan. For the reasons set out at [316]-[318] above, I do not accept [Ms Bazzo's] explanation of this payment.
(emphasis added)
48 Then the Tribunal said (para 332):
In the present case, it being a ITAA 1936 s 167 assessment based on the asset betterment method in each year, [Ms Bazzo], as described by Derrington J at [47(6)] of Ross, must demonstrate that the identified unexplained accumulated wealth was derived from non-income sources and further in this case, to explain the transactions, and why the funds passing through accounts and credit cards in her name that have been identified by the [Commissioner] should not be treated as income. As stated above, I accept that [Ms Bazzo] has, on the balance of probabilities, established that the eight properties were not held beneficially by her and that she has explained why the funds going through the NAB Flexi Account and the two Bendigo Bank accounts referred to in [328] above, were, as Derrington J described it at [47(6)] of Ross, 'derived from non-income sources'. I do not accept that she has discharged that onus in respect of the other bank accounts and credit cards identified by the [Commissioner]. In relation to those other accounts and credit cards, we have little more than [Ms Bazzo's] assertion that the funds were not used by her for her benefit. Unlike the NAB Flexi Account, there was no detailed analysis based on bank statements or other third-party documents provided by [Ms Bazzo].
(emphasis added)
49 Then, in the next paragraph (para 333), the Tribunal said:
While the above represent my findings on those issues, my role is to review the objection decision …
50 Therefore, it is apparent that the Tribunal intended, by that point, to have recorded its findings on whether Ms Bazzo had established the extent of her income. The Tribunal had already addressed the detailed submissions of the Commissioner concerning the credibility of the account given by Ms Bazzo. In this part of its reasons, where it recorded its findings as to Ms Bazzo's income, the Tribunal stated the respects in which it did not accept the evidence of Ms Bazzo as to the extent of her income. It did so by the emphasised passages quoted above. If there had been other respects in which that evidence was not accepted then it would be expected to be found at this point. There are two respects in which the evidence was not accepted, namely:
(1) the $1,000,000 said to have been a loan from Gucce Holdings Pty Ltd; and
(2) the amounts 'passing through' the bank accounts and credit cards (a description that appears to include the Investec Account which had been found not to be conducted as trustee) but excluding only the NAB Flexi Account and the two Bendigo Bank Accounts.
51 It will be necessary to return to these aspects of the Tribunal's decision. However, it is important to observe that the Tribunal deals separately with 'the other bank accounts and credit cards'. The Tribunal recognised that there was a separate question to the issue of unexplained wealth and that concerned whether the funds 'passing through' those accounts was taxable income of Ms Bazzo.
52 The use of the expression 'passing through' received some attention in submissions. In my view, considered in context, it reflects the way the Commissioner raised the assessments and Ms Bazzo had sought to challenge them. On the Commissioner's case all the funds that had been received into all the bank accounts in Ms Bazzo's name and then expended should be treated as her income. On the Tribunal's findings, only the monies 'passing through' the NAB Flexi Account and the two Bendigo Bank Accounts were not Ms Bazzo's money and were expended by her as trustee. Which left the amounts 'passing through' the other bank accounts. As to those monies the Tribunal recognised that the burden upon Ms Bazzo was to show that it should not be treated as her income, that is as money that indicated the extent of undeclared taxable income.
53 Returning to the sequence of the Tribunal's reasoning, the Tribunal then considered whether the matters on which Ms Bazzo had succeeded were matters that had been raised in her objection decision because of the operation of s 14ZZK(a) of the TAA, which limits the grounds of review that can be agitated by Ms Bazzo. The Tribunal concluded that the matters agitated before it were consistent with the matters raised by way of objection (paras 333-335).
54 The Tribunal then dealt with the matter of penalties and whether there had been a valid exercise by the Commissioner of the power to amend the assessments for the 2009 and 2010 assessments on the basis of fraud or evasion at the time of original assessment.
55 As to penalties, part of the Tribunal's reasons concerned the interpretation and application of s 284-220(1)(c) of Schedule 1 to the TAA. It provides for one of the circumstances in which a base penalty amount will be increased by 20%. It applies in cases where a base penalty has been worked out under particular items 'previously'. The Tribunal found that the reference to 'previously' should be interpreted to mean 'on a previous occasion' as distinct from 'in respect of a previous accounting period'. On the basis of that interpretation, the Tribunal determined that the 20% additional penalty that had been imposed by the Commissioner for the 2010 and 2011 assessments had been imposed incorrectly 'because at the time that the penalties were worked out in respect of those years, a penalty had not 'previously' been applied in respect of the 2009 year' (para 345).
56 The Tribunal then found that the amended assessments for the 2009 and 2010 years were validly issued (paras 355-360).
57 Finally, as to matters presently relevant, the Tribunal expressed its conclusion in the following terms (paras 361-363):
For the reasons set out above, I have found that the properties listed in [87], which were included by the [Commissioner] in the 2009 and 2010 default assessments, were not beneficially owned by [Ms Bazzo]. Accordingly, the correct or preferable decision is to vary the objection decision in relation to the 2009 and 2010 default assessments to allow the objection to the inclusion of those properties in the default assessments.
Further, for the reasons set out above, I have found that the moneys passing through the NAB Flexi Account and the Bendigo Bank accounts…were not for the benefit of [Ms Bazzo]. Accordingly, the correct or preferable decision is to vary the objection decision in relation to the 2009, 2010 and 2011 default assessments to allow the objection to the inclusion of money passing through those accounts as [Ms Bazzo's] income…
Further, for the reasons set out above, I have found that neither s 284-220(1)(a) nor s 284-220(1)(c) applies. Accordingly, the correct or preferable decision is to vary the objection decision in relation to the 2010 and 2011 default assessments to allow the objection to the 20 per cent uplift to the penalties under s 284-220 of the TAA.