Told the bank it was income. Told the ATO it was loan repayments.
The Tribunal accepted neither version.
Endycott and Commissioner of Taxation [2026] ARTA 214 is a study in how inconsistent accounts unravel. It is also a reminder that the safe harbour is not available to a taxpayer who withheld information from the tax agent.
The facts
Mr Endycott ran a commercial painting business turning over $6M+ annually through a complex group structure involving multiple trusts and entities [2], [9].
He intermingled personal and business funds freely, used personal credit lines instead of a business overdraft because it was ‘too expensive’ and received multiple streams of periodic payments from group entities [81], [191]. Payments he privately treated as salary but did not declare for tax purposes [427(i)].
When applying for a NAB home loan, Mr Endycott declared those payments as income. In his tax returns, they were loan repayments [192], [427(j)]. His returns showed taxable income of $13,170 (2015) and $20,000 (2016) [18,20].
The ATO assessed income of $610,605 and $318,597 [348].
The Tribunal’s findings
- Mr Endycott failed to discharge his onus under s 14ZZK of the TAA 1953. He could not show the assessments were excessive or what his correct income should have been [350]-[351].
- His expert forensic accountant’s report was rejected. The expert relied on unreliable records and was instructed to assume certain transactions were not income [169], [188].
- He blamed his former accountant, Mr Cullen, for the entire mess but did not call him as a witness. The Tribunal drew an adverse inference, concluding Mr Cullen was unlikely to have corroborated Mr Endycott’s version of events [91].
- Safe harbour was denied. The conduct was found to be intentional disregard, not mere lack of reasonable care [430]-[431]. And even if it were, Mr Endycott could not prove he gave Mr Cullen all relevant taxation information [432].
- The 75% base penalty for intentional disregard was upheld for both years, with a 20% uplift for 2016. No remission [443], [457].
The practitioner takeaway
1. The bank and the ATO cannot be told different things. Inconsistent representations will be found and relied upon.
2. If you blame the accountant, call the accountant. Failure to do so invites an adverse inference.
3. The safe harbour requires that all relevant taxation information was given to the agent. Without proof of that, there is no protection.
4. An expert report is only as good as the records beneath it.
5. Intermingling personal and business funds does not just create an accounting problem. It creates a tax exposure with penalty consequences.
6. The onus under s 14ZZK is real. Chipping away at individual items is not enough. The taxpayer must prove both limbs: that the assessment is excessive and what the correct figure is.
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.