Cooper Grace Ward tax partner Fletch Heinemann is helping accountants manage issues around ATO findings of ‘fraud’ or ‘evasion’ following recent decisions by the Full Federal Court and Administrative Appeals Tribunal.

‘If the ATO passes down an opinion of ‘fraud’ or ‘evasion’, the two or four year periods it usually has to amend an income tax assessment no longer apply,’ Mr Heinemann warns.

‘Essentially the taxpayer has the onus of disproving fraud or evasion, while the ATO does not have to prove or provide evidence to support their ‘opinion’, he said.

And particular problems arise for unexplained deposits, which the ATO often identifies as deposits in a taxpayer’s bank account that are assumed to be income – unless there is a credible explanation for why the amounts are not income.

‘Hopefully common-sense prevails so that a relatively small deposit received many years ago does not support an amended assessment issued following an opinion of ‘evasion’. Otherwise, this type of amended assessment would effectively be unchallengeable if the taxpayer cannot recall what the deposit was for,’ Mr Heinemann said.

‘Taxpayers’ circumstances will vary significantly and it would not be unusual to see taxpayers receiving sums of money outside the four year amendment period that the taxpayer cannot explain. The further into the past, the more likely that the taxpayer’s memory will be fallible and that corroborating evidence will be unavailable.

‘We often see a taxpayer or their advisers not provide a comprehensive response in the first instance. If evidence is later provided, the ATO often looks at it sceptically – particularly if the ATO earlier invited the taxpayer or adviser to provide evidence and they chose not to for some reason.

‘Providing corroborating evidence is critical for the taxpayer.

‘There is currently a special leave application before the High Court, so we might be seeing more developments in this space.’