Guilty until proven innocent

Well, here we are: the final edition of the Smart Tax Bulletin for the tax year.

If you have been thinking of pushing the boundaries with what you can claim as a deduction, or whether or not something is assessable income or a capital gain…

If you have you been thinking about claiming deductions without having the right records, or changing the nature of what you have done without having the supporting documentation…

Think again.

The tax law is about the only law where you are guilty until proven innocent.

If you can’t back up your claim for a deduction or if you can’t prove your point of view, you are automatically treated as being guilty unless you can prove you are innocent, even if you are innocent.

It is not good enough just to show that the ATO is wrong – that will not save you. You actually have to show what the right answer is.

I recently acted as an expert witness in a tax case before the Federal Court where the judge said that it is not sufficient to poke holes in the ATO’s argument; you have to prove what the right answer is.

In this case, the ATO issued assessments based on asset betterment statements prepared by the ATO, even though asset betterment statements are known to be an unreliable way to calculate a taxpayer’s assessable income. Those assessments nevertheless were valid and the onus was on the taxpayer to prove what his real taxable income was, not just to prove that the asset betterment statements were unreliable.

As the judge noted, it was very difficult for the taxpayer to prove his correct taxable income, because he had not maintained the records and information necessary to do so.

Will you be able to justify your claims if the ATO subjects you to a review?

………………………………………………………Advertisement………………………………………………………………………

……………………………………………………………………………………………………………………………………………………

Tags: Record Keeping, Tax Reporting, Tax Return