Over $2 million said to be available for living expenses. No bank statements showing the funds and no evidence of outgoings.
The ATO issues Part IVA determinations. Your client says there was no tax benefit - absent the scheme, income would never have reached them personally.
How do you prove that?
The ART in Collie and Commissioner of Taxation (12 March 2026) sets out the evidentiary burden with unusual clarity.
The burden
Under s 14ZZK TAA 1953, the taxpayer bears the onus. For s 177C(1)(a) ITAA 1936, before the 2013 amendments, that usually means establishing a counterfactual that is sufficiently reliable to be regarded as reasonable.
The Tribunal applied five principles [21]. Facts may be found on oral evidence alone. Self-serving statements should be closely scrutinised. Where funds received or costs incurred are not clearly or fully explained in contemporaneous records, satisfying the burden without corroboration may become a challenge. But oral evidence is not prima facie unacceptable. The standard remains balance of probabilities: tipping the scales ever so slightly is enough.
Where relevant evidence that could be expected is not produced, that is a factor for the Tribunal to consider [21].
Where Collie fell short
Ian Collie, a solicitor involved in the NVI scheme, argued IET income would have flowed to trusts with losses and then to companies in his group, never to him personally.
The Tribunal accepted elements. The Tarragunda Trading Trust losses reduced the 1997 tax benefit to nil. Collie’s litigation history created genuine asset protection concerns [242].
But the counterfactual failed at the critical point. Collie said he had over $2M in trust funds for living expenses [263]. Yet he produced no bank statements showing those balances or entries evidencing access [265], [282]. No evidence of outgoings [274], [284]. No complete documentary trail showing how trust funds were deployed [269], [272]. For a sophisticated practitioner sheltering millions with an acrimonious ATO history, meticulous records were expected [270], [279].
Asset protection did not require zero personal income [290]. Income spent on goods and services at arm’s length would not have been vulnerable to creditors. Minimal or no taxable income over five years while generating around $3.5M through related entities made a nil-income counterfactual less compelling [243], [249].
The practitioner lesson
This decision is a roadmap for Part IVA counterfactual evidence.
First, document contemporaneously. Contemporaneous documentation is far more probative than mere assertions [24]. Records proving the counterfactual need to exist before the dispute arises.
Second, prove the funding. If your client claims they did not need scheme income, produce bank statements, trust accounts and evidence of outgoings.
Third, do not overreach. Asset protection is legitimate. But a counterfactual requiring zero personal income over years attracts intense scrutiny. Partial receipt may be more defensible than none.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.