The T-documents were a mess and the Tribunal said so. It did not help the taxpayer at all.
Your client is challenging a default assessment. The Commissioner’s T-documents are a mess - missing bank statements, penalty material not filed, evidence buried in annexures. The Tribunal is frustrated and calls the filing “not satisfactory”.
Surely that helps your client? It does not. Fan and Commissioner of Taxation [2026] ARTA 875.
What happened
Mr Fan was a chef at a Chinese restaurant. The Commissioner issued default assessments under s 167 ITAA36 for 2018-2020, increasing his assessed income by between $59,000 and $125,000 per year based on unexplained bank deposits, below-award wages, and a lack of everyday spending in his accounts [11, 32].
Mr Fan said the deposits were loan repayments from a friend, a family money-go-round to avoid bank fees, proceeds from Chinese property sales, and gifts. He said his income was what he returned.
The burden
Under s 14ZZK of the TAA, Mr Fan had to prove two things: that the assessments were excessive, and what his income actually was. For a s 167 default assessment, finding an error in the Commissioner’s work is not enough [21]. The burden of proof requires the taxpayer to demonstrate what his income was in the relevant years [22].
The Tribunal accepted the T-documents were deficient. Bank statements were missing and material was filed as annexures rather than where it belonged [35]. None of that shifted the burden.
His daughter’s explanation for $2,000 deposits was raised for the first time on re-examination without notice [39]. His friend’s loan evidence was credible, but no bank statements showed the $20,000 leaving his account [47]. Chinese bank receipts did not reconcile in dates or amounts to Australian deposits [51(d)]. His wife did not testify. No evidence came from his employer.
“It is not sufficient for Mr Fan to simply pick at bits and pieces of the Commissioner’s estimates and assessments” [69(g)].
Why this matters
Here is what should keep practitioners up at night. The Tribunal said it “may well have accepted” the loan explanation if complete evidence had been given [69(a)]. Same for the daughter’s deposits [69(b)]. The explanations were not implausible. The evidence was just incomplete.
That is the difference between winning and losing a default assessment challenge. Not better arguments, but better evidence. Bank statements showing the money leaving. Reconciliations matching dates and amounts. Witnesses who can be cross-examined may not be enough; there needs to be documentary corroboration [25, 46-47].
And if your client deals in cash, the Tribunal was blunt: that makes meeting the burden “very difficult” and the approach is “simply not workable in the Australian context” [65-66].
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.