Federal Court of Australia McPartland v Commissioner of Taxation [2023] FCA 1260 Appeal from: McPartland v Commissioner of Taxation [2022] AATA 686 File number: SAD 70 of 2022 Judgment of: CHARLESWORTH J Date of judgment: 20 October 2023 Catchwords: TAXATION – appeal from decision of Administrative Appeals Tribunal on a question of law – Tribunal upholding an Objection Decision in relation to default assessments made under s 167 of the Income Tax Assessment Act 1936 (Cth) – Tribunal misunderstanding and failing to resolve two issues raised by the taxpayers – failures amounting to errors of law – taxpayers having onus to show that the assessments were excessive and what the assessed amounts ought to have been – material before the Tribunal material incapable of discharging the taxpayers' onus – no utility in remittal to the Tribunal – appeal dismissed Legislation: Administrative Appeals Tribunal Act 1975 (Cth) s 44 Income Tax Assessment Act 1936 (Cth) ss 166, 167, 190 Taxation Administration Act 1953 (Cth) ss 14AAK, 14ZZ, 14ZZK Cases cited: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Bosanac v Commissioner of Taxation [2019] HCA 41; 374 ALR 425 Commissioner of Taxation v Ross (2021) 174 ALD 77 Dennis Willcox Pty Ltd v Commissioner of Taxation (Cth) (1988) 79 ALR 267 Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 Ma v Commissioner of Taxation (1992) 37 FCR 225 McPartland v Commissioner of Taxation [2022] AATA 686 Rigoli v Federal Commissioner of Taxation (2014) 141 ALD 529 Waraich v Minister for Home Affairs (2021) 286 FCR 45 Waterford v Commonwealth (1987) 163 CLR 54 Division: General Division Registry: South Australia National Practice Area: Taxation Number of paragraphs: 142 Date of hearing: 12 and 15 December 2022 Counsel for the Applicants: Mr S Mitchell Solicitor for the Applicants: Bambrick Legal Counsel for the Respondent: Ms J Battiste Solicitor for the Respondent: Australian Taxation Office ORDERS SAD 70 of 2022 BETWEEN: DARRYL MCPARTLAND First Applicant KATHLEEN MCPARTLAND Second Applicant AND: COMMISSIONER OF TAXATION Respondent order made by: CHARLESWORTH J DATE OF ORDER: 20 OCTOBER 2023 THE COURT ORDERS THAT: 1. The appeal is dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT CHARLESWORTH J 1 This is an appeal from a decision of the Administrative Appeals Tribunal in relation to the taxation affairs of a married couple, Darryl and Kathleen McPartland (together the McPartlands) for the financial years ending 30 June 2015 (FY15), 30 June 2016 (FY16) and 30 June 2017 (FY17). 2 In those financial years, the McPartlands were the recipients of a Disability Support Pension and Carers Pension from Centrelink totalling about $24,000.00. They did not file tax returns because they claimed to have received no taxable income. 3 At relevant times the McPartlands were directors and shareholders of MacAttack Rentals Pty Ltd, a company that operated a business relating to (at least) the importation of motorcycles. Mr McPartland was also the director and shareholder of HD Downunder Pty Ltd, which undertook very little trade following its incorporation in September 2014. As discussed below, the financial records relating to the conduct of the motorcycle business and the personal financial affairs of the McPartlands were intermixed and dishevelled. The McPartlands operated a multitude of bank accounts, mostly in their personal names, into which their pensions and business revenue were paid, and from which both business and personal expenses in significant amounts were withdrawn. No contemporaneous reconciliation of business and personal expenditure was undertaken. 4 While conducting audits of the tax affairs of MacAttack and HD Downunder, the Commissioner of Taxation concluded that MacAttack had paid income to the McPartlands in the nature of director fees or allowances, equivalent to the amount of the personal expenditure drawn from the bank accounts. For the purposes of MacAttack's tax assessment, those payments were treated as deductible expenses of the company. 5 Part IV of the Income Tax Assessment Act 1936 (Cth) (ITAA) deals with tax returns and assessments. Section 166 provides for the making of an assessment of a person's tax liability where that person has filed a tax return. If a person does not file a tax return, and the Commissioner has reason to believe that the person has derived taxable income, the Commissioner may make a default assessment under s 167 of the ITAA "of the amount which in his or her judgment income tax ought to be levied". It is that amount that forms the basis of the assessment of the taxpayer's liability under s 166. 6 The Commissioner conducted audits of the personal tax liabilities of the McPartlands and issued default notices of assessments to the McPartlands under s 167 of the ITAA based on the audit findings. The auditors referred to the same banking records informing the companies' assessments, showing that the McPartlands had incurred and paid personal expenses from the intermixed accounts. The Commissioner assessed the McPartlands' taxable income in amounts equalling the total personal expenditure, specifically $328,533.28 in FY15, $364,963.76 in FY16 and $242,075.28 in FY17, divided equally between them. 7 The McPartlands objected to the default assessments on grounds that alleged (among other things) that their personal expenditure was less than that calculated in the audits and that the expenditure was funded from non-taxable sources of income, including money in the nature of repayments of a loan owed to them by MacAttack. 8 The Commissioner disallowed the objections including on the basis that the personal expenditure was no less than that identified in the audits and that there was no genuine loan agreement in existence between the McPartlands and either company (Objection Decision). 9 The McPartlands applied to the Tribunal for review of the Objection Decision under s 14ZZ(1)(a)(i) of the Taxation Administration Act 1953 (Cth) (TAA). In the exercise of its powers of review, the Tribunal was bound to apply s 14ZZK of the TAA. It relevantly provides: On an application for review of a reviewable objection decision: (a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and (b) the applicant has the burden of proving: (i) if the taxation decision concerned is an assessment—that the assessment is excessive or otherwise incorrect and what the assessment should have been; … 10 The Tribunal concluded that the McPartlands had not discharged the burden referred to in s 14ZZK(b)(i) and so affirmed the Objection Decision: McPartland v Commissioner of Taxation [2022] AATA 686. 11 An appeal lies to this Court from a decision of the Tribunal on a question of law: Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act), s 44. By their supplementary notice of appeal (SNOA) the McPartlands contend that two such questions arise. 12 The first is whether the Tribunal misunderstood and/or misapplied s 14ZZK(b)(i) of the TAA and so failed to discharge its fact finding task according to law. The first ground of appeal specifies the manner in which the Tribunal is said to have erred in that respect. 13 The second question is whether the Tribunal otherwise erred in the discharge of its fact finding functions in a manner giving rise to an error of law. It is alleged that the Tribunal failed to have regard to essential evidence and contentions advanced on the review, proceeded on the basis of conjecture, and made findings for which there was no proper foundation in the evidence, or that were otherwise irrational or legally unreasonable. The second ground of appeal alleges numerous such errors relating to five factual issues. 14 The McPartlands seek orders quashing the Tribunal's decision and remitting the matter to the Tribunal for further consideration. 15 Issues arise as to whether some of the errors alleged by the McPartlands may properly be characterised as raising questions of law. In addition, by a notice of contention the Commissioner submits that the application for review should not be remitted to the Tribunal because, on any view of the evidence and submissions, the Tribunal was bound to conclude that the McPartlands had not discharged their onus under s 14ZZK(b) of the TAA. 16 As explained below, I have concluded that the appeal should be dismissed for four reasons. First, the Tribunal did not commit some of the errors alleged in the second ground of appeal. Second, to the extent that some errors have been identified, the errors are not errors of law and so cannot form a basis for the grant of relief on the appeal. Third, it has not been shown that the Tribunal misunderstood or misapplied s 14ZZK of the TAA, as alleged in the first ground of appeal. Fourth, notwithstanding the errors of law I have identified, it has not been shown on this appeal that the material before the Tribunal was capable of supporting a finding as to what the assessments ought to have been. Accordingly, remittal of the application for review to the Tribunal would be futile. 17 It follows that the appeal must be dismissed. The taypayer's onus 18 In Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614, Brennan J explained the burden on the taxpayer on an appeal governed by s 190 of the ITAA. It provided: (a) the taxpayer shall, unless the … court otherwise orders, be limited to the grounds stated in his objection; and (b) the burden of proving that the assessment is excessive shall lie upon the taxpayer. 19 His Honour said that in cases where the Commissioner and taxpayer agree to confine the appeal to a specific point of law or fact on which the amount of the assessment depends, it will be enough for the taxpayer to succeed on that point. 20 That was not the case here. The Commissioner in the review proceedings put the McPartlands to proof both on the question of whether the assessment was excessive and on the question of what the assessment should have been, being the two questions referred to in s 14ZZK(b) of the TAA. The Commissioner conceded no factual issues. Nor did the Commissioner accept that the McPartlands had disclosed the full extent of their financial affairs whether at the objection stage or in the proceeding before the Tribunal. In accordance with the authorities discussed below, it could not suffice for the McPartlands to show that the default assessments were erroneous. 21 As Brennan J said in Dalco (at 624) an objection decision is not to be regarded as a pleading confining the issues on any appeal, and the Commissioner is not precluded from putting the taxpayer to proof of the true amount of his taxable income. In a case where the issues on an appeal are not confined by agreement, the Commissioner is entitled on an appeal to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment, though the taxpayer is limited to the grounds of his objection. Thus, even before the enactment of s 14ZZK of the TAA in its present form, the burden of showing that an assessment is excessive could not be discharged by pointing to some error of fact or law affecting the methodology of the assessment. 22 In Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 Bennett, Edmonds and Gordon JJ discussed the discharge of the burden in a case where a default assessment made under s 167 of the ITAA had been based on a taxpayer's accumulation of assets. Their Honours observed: 63 A taxpayer who seeks to establish that a s 167 assessment based on the asset betterment method of calculation is excessive must positively prove his or her 'actual taxable income' and, in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer: Dalco at 623-625 and Trautwein at 88. The taxpayer must show that the unexplained accumulated wealth was from non-income sources. The manner in which a taxpayer discharges that burden is not defined or specified —it varies with the circumstances: Dalco at 624. 64 So, for example, in Ma v Federal Commissioner of Taxation (1992) 37 FCR 225 at 230, Burchett J said that, in seeking to establish that an assessment under s 167 was excessive, that burden may be discharged: … [I]f a taxpayer denies any undisclosed source of income, provides acceptable evidence of how he spends his time, and demonstrates a reasonable explanation for any appearance of the possession of assets, he will generally discharge his burden of proof unless some positive reason is shown why he is to be disbelieved. 23 As the Full Court explained in Rigoli v Federal Commissioner of Taxation (2014) 141 ALD 529, s 14ZZK modifies the task ordinarily undertaken on a review by the Tribunal in accordance with the AAT Act. In that case, the taxpayer had sought to identify some errors in the Commissioner's approach and to have the matter remitted on the basis that the errors warranted reconsideration by the Commissioner. The Full Court said: 25 … This is the very picking and choosing which the authorities make clear is impermissible. The taxpayer's choice is to pay tax according to the commissioner's assessment under s 167 or to establish, as a matter of evidence, what was 'the amount upon which ... income tax ought to be levied'. An intermediate course, which involves elements of the commissioner's calculations and facts which the taxpayer chooses to lead in evidence, is not an available option. 26 The contention that the authorities should not apply to a merits review by the AAT as distinct from judicial review cannot be accepted. It is an argument which ignores or gives no effect to the fundamental provisions of s 14ZZK of the Administration Act. This issue was considered recently by the Full Court per Jessup, Jagot and Nicholas JJ in Rawson Finances Pty Ltd v Commissioner of Taxation (2013) 296 ALR 307; 133 ALD 39; [2013] FCAFC 26. Jagot J, (with whom Nicholas J agreed), observed (at [89]-[90]) that s 14ZZK is a modification of the AAT Act because, but for s 14ZZK, a taxpayer would not have the burden of proving that an assessment is excessive. However, where s 14ZZK applies, the only state of satisfaction that the AAT is required to reach is whether, on the facts as found by the AAT, the taxpayer has proved that the assessment is excessive. If that state of satisfaction cannot be reached, the application for review must be dismissed. Her Honour went on to note that, as the authorities made clear, the taxpayer does not discharge this burden of proving that the assessment is excessive by demonstrating some error in the commissioner's judgment under s 167 of the amount upon which income tax ought be levied: see Dalco per Brennan J (at CLR 625; ALR 347) and Toohey J (at CLR 634; ALR 353) and Gashi at [66]-[67]. 24 To similar effect, in Bosanac v Commissioner of Taxation [2019] HCA 41; 374 ALR 425, the Commissioner had made a concession that some income amounts included in a default assessment were not taxable. As Nettle J explained, the taxpayer could not discharge his onus by simply deducting the conceded amounts from the assessment: 29 … The onus remained on the plaintiff to adduce evidence sufficient to establish on the balance of probabilities the true amount of his taxable income (of course, making such forensic use as could be made of the Commissioner's concession that the conceded amounts were not assessable income) and thereby that the amount of taxable income as determined by the Commissioner exceeded the true amount. The plaintiff was not entitled to proceed on the basis that the conceded amounts could simply be deducted from the amount of taxable income that the Commissioner had determined in the relevant year of income. 30 That reasoning was correct. As has been seen, although the Commissioner and a taxpayer may agree to confine an appeal to a specific point of law or fact – and where that occurs, the taxpayer might succeed in the appeal by demonstrating that he or she is entitled to succeed on that point – in the absence of such an arrangement, the Commissioner is entitled to rely on any deficiency in the taxpayer's proof of the excessiveness of the amount assessed in order to uphold the assessment. Equally, if all the facts are known, and the amount of taxable income in dispute depends only on the legal complexion of the established facts, the taxpayer may succeed by demonstrating on the balance of probabilities that the amount in question does not bear that legal complexion. But where, as here, an appeal proceeds on the basis that not all of the material facts are known, either because the taxpayer has been less than forthcoming in making disclosures to the Commissioner or for some other reason, the taxpayer cannot succeed by showing only that the basis of the Commissioner's assessment was in some respect erroneous; since for all that can be told, unless and until the taxpayer proves to the contrary, there may be other income of which the Commissioner was not aware and which the Commissioner has not taken into account. In order to succeed in such a case, the taxpayer must discharge the burden of demonstrating on the balance of probabilities the true amount of the taxpayer's taxable income and thus that the amount determined by the objection decision is excessive. Here, that required the kind of wide survey and exact scrutiny of the plaintiff's business activities to which the primary judge referred and which was conspicuously absent from the plaintiff's presentation. (emphasis added, footnotes omitted) the default assessments 25 To understand the McPartlands' arguments on this appeal it is helpful to first summarise the basis for the default assessments made under s 167 of the ITAA. 26 The auditors reviewed records relating to 11 bank accounts (including an overdraft facility discussed later in these reasons) as well as immigration records evidencing the McPartlands' travel history. The auditors concluded that the McPartlands had drawn on the bank accounts to meet a wide range of personal expenses, including repayments on a home loan, personal travel (including multiple trips overseas), handbags, rates and bank transfers in the nature of repayments on credit cards held in personal names. Significantly, the auditors did not have in their possession bank statements showing expenses charged to the credit cards themselves. 27 In written statements following the conclusion of the audit, the Commissioner made the following remarks: The Commissioner considers that the funds used to purchase assets and personal consumables and pay everyday expenses including the repayments of loans used to acquire assets, would be assessable as ordinary income under section 6-5 of the ITAA 1997. This finding also applies to the funds used to make transactions identified in you [sic] bank accounts. As a director, the company may pay you a salary, wages or director's fees, but you cannot simply withdraw money as 'personal drawings' from the company funds and use them for personal expenses. Company funds must be used for appropriate company purposes. Even if you own the company (as a shareholder), the money a company earns belongs to the company. Anything you receive from the company as an individual must be shown on your individual tax return. For each year we analysed your bank accounts and assets plus the accounting records of your related entities. This analysis identified payments to you that we consider to be ordinary income. 28 In respect of each financial year, the auditors said that audits of the tax affairs of the companies had established that neither of the McPartlands had provided any capital funds to the companies, and that no director loan facilities were in place. 29 The default assessments equated the total amount of personal expenditure with taxable income in the nature of directors' payments or allowances, with the resulting assessment for Mr McPartland calculated as follows: Description 2014/15 2015/16 2916/17 Directors Payments/Allowance $164,266.00 $182,482.00 $121,037.00 Tax free Disability Support Pension $11,903.00 $13,615.00 $13,118.00 Total Income $164,266.00 $196,097.00 $134,155.00 Deductions 0 0 Taxable Income $164,266.00 $182,482.00 $121,037.00 Tax on taxable income $48,725.42 $55,663.90 $32,415.69 Medicare Levy/Surcharge $5,749.31 $6,436.51 $3,933.70 Budget Repair Levy 0 $49.64 0 Tax offset/credits 0 0 0 Shortfall Amount $54,474.73 $62,150.05 $36,349.39 30 The figures with respect to Mrs McPartland are the same, save for a minor difference in the amount of her Centrelink payment. 31 There were six assessments upheld in the Objection Decision and forming the subject of the Tribunal's review, one for each of the McPartlands in each of the three financial years. Their onus under s 14ZZK(b) of the TAA was to show not only that each assessment was excessive but also what the taxable income was for each of the three financial years in question. In all of their dealings with the Commissioner, they maintained that their taxable income in each financial year was nil. Pproceedngs in the Tribunal 32 The McPartlands appeared self-represented at the hearing of their application for review. 33 At a prehearing conference on 29 September 2021, the Tribunal granted them leave under s 14ZZK(a) of the TAA to raise issues on their application for review that had not been raised in their original objection to the assessments. The scope of that leave is regrettably uncertain. The McPartlands had until that time corresponded with the Commissioner's solicitor, the Australian Government Solicitor (AGS) in terms that suggested that they may wish to introduce three topics that had not expressly been raised at the objection stage, and to rely on documents not previously provided to the Commissioner. Those topics are broadly described at [7] of a letter from AGS to the McPartlands in the following terms: We note that during the course of these proceedings you have raised a number of other grounds in discussions with us, relating to: 7.1 The ANZ Business Credit Facility Account; 7.2 The lending of monies by both of you to the Companies during the 2015, 2016 and 2017 income years by use of Kathleen's Earth Black credit card; and 7.3 The sale of personal assets during the 2015, 2016 and 2017 income years. 34 The Tribunal gave the McPartlands leave to rely on the issues referred to in that paragraph, without requiring them to articulate the arguments they wished to raise in relation to the broad topics. 35 By its amended statement of facts, issues and contentions (SFIC), the Commissioner stated that the new issues had not been clearly articulated. Based on communications from the McPartlands, the Commissioner described "new grounds" (at [43] of the SFIC) as follows: a. A ground to the effect that because the ANZ Business Credit Facility Account is in the name of 'D & K McPartland' with an ABN for a family partnership in that name, separate tax returns for 'D & K McPartland' and Mac-Attack ought to have been filed; further that Mac-Attack never owned the stock nor paid 'D & K McPartland' back for the stock thus the income is not Mac-Attack's income; and they propose to prepare tax returns for 'D & K McPartland' and seek to have the Companies' tax returns re-adjusted and have the Companies' deregistered for GST and that all allegations against the Applicant and his wife be dropped; b. A ground that the Applicant and his wife lent monies to the Companies from time to time during the audit period by using their credit cards (in particular, the Applicant's wife's Earth Black card) for company expenses; and c. A ground that the Applicant's [sic] had some income from sale of personal assets during the three relevant income years (footnotes omitted) 36 The McPartlands did not take issue with the articulation of the new grounds in that way. I proceed on the basis that the Tribunal made an order under s 14ZZK(a) of the TAA to pursue them. 37 At the prehearing stage the McPartlands had the assistance of a lawyer who prepared a written submission titled "Submissions to the Commissioner of Taxation in 2020/1921 and 2020/1924" and marked "without prejudice", together with annexures marked "Annexure A" through "Annexure H". That document was provided by way of correspondence to the Commissioner. It was not lodged with the Tribunal by the McPartlands. However, it was included in a bundle of material provided to the Tribunal by the Commissioner (together with the annexures) and the bundle was marked "Exhibit 3". I will refer to that bundle as the Exhibit 3 Submission. 38 The Exhibit 3 Submission positively asserts that a business for the importation and sale of motorcycles was carried on by MacAttack and that it was that company that was said to have paid money to the McPartlands in each financial year by way of loan repayments. Those payments were said in the Exhibit 3 Submission to constitute non-taxable income that explained (at least in part) the significant personal expenditure drawn from the bank accounts. 39 The McPartlands did not ask the Tribunal to treat the Exhibit 3 Submission as encapsulating their case on the review. They did not lodge any statement of facts, issues or contentions and did not otherwise directly provide the Tribunal with any written submissions. 40 In his examination-in-chief (assisted by the Tribunal member) Mr McPartland pressed a case that was inconsistent with aspects of the Exhibit 3 Submission and at times asserted ignorance about the content of some of its annexures. He claimed that a business for the importation and sale of motorcycles was never operated by MacAttack, but instead by a partnership between himself and Mrs McPartland. I will refer to that as the Partnership case. The Tribunal drew Mr McPartland's attention to the Exhibit 3 Submission and asked him whether the things he had told the Tribunal on that topic were set out in the document or whether he was advancing a "different story". Mr McPartland confirmed that he was advancing a different case on the basis of his own understanding of the structure and ownership of the business. Mrs McPartland wholly adopted the case presented by Mr McPartland. 41 With respect to the "Earth Black" Credit Card, the McPartlands tendered bank statements showing that the credit card had been used to meet expenses of the business. They claimed that whilst the credit card was held in Mrs McPartland's name it was in fact utilised in the operation of the business. They submitted that the auditors were therefore wrong to treat bank transfers for the repayment of the debt owing on that card as being in the nature of personal expenditure, because they were in fact made to pay down business related debt. 42 In addition, the McPartlands adduced evidence and made submissions about income received from the sale of assets said to have been owned by Mr McPartland personally. 43 Against that background I will deal first with the Tribunal's factual findings that are said to be affected by errors of law (Ground 2) before considering whether it erred in misapplying s 14ZZK(b) of the TAA (Ground 1). Ground 2 44 Ground 2 alleges multiple errors affecting the Tribunal's fact finding function in relation to five topics. Each error is said to involve an "error of law". 45 As Brennan J explained in Waterford v Commonwealth (1987) 163 CLR 54 (at 77): A finding by the A.A.T. on a matter of fact cannot be reviewed on appeal unless the finding is vitiated by an error of law. Section 44 of the A.A.T. Act confers on a party to a proceeding before the A.A.T. a right of appeal to the Federal Court of Australia 'from any decision of the Tribunal in that proceeding' but only 'on a question of law'. The error of law which an appellant must rely on to succeed must arise on the facts as the A.A.T. has found them to be or it must vitiate the findings made or it must have led the A.A.T. to omit to make a finding it was legally required to make. There is no error of law simply in making a wrong finding of fact. (emphasis added) 46 See also Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 356. 47 The two errors identified below are readily characterised as errors of law in accordance with the authorities. Loan 48 The Tribunal summarised (at [10]) the McPartlands' contention that they had "funded the companies including by a loan recorded in the balance sheet of Mac-Attack for the year ending 30 June 2014 in the sum of $447,328.02", and that the subsequent withdrawals from bank accounts were repayments of that loan and therefore not taxable income. No issue is taken with the Tribunal's summary of that argument. 49 The Tribunal's findings with respect to the alleged loan were expressed as follows: 17 I reject the applicants' contention that they received no assessable income because payments received by them were repayments of a loan made to Mac-Attack. Evidence for this alleged loan is said to be found in Mac-Attack's balance sheet as at 30 June 2014. This balance sheet was prepared by the accountants who are currently being sued by the applicants for negligence and Mr McPartland in his oral evidence expressed doubts as to its accuracy. The applicants contended that this same accountant said that they could use their personal accounts for expenses relating to Mac-Attack and that he would treat these as loans by them to Mac-Attack. 18 The applicants have failed to provide satisfactory evidence of a loan agreement. There is no written loan agreement nor is there any record of the loan being repaid. There was no evidence from the applicants about the circumstances of entry into this alleged loan agreement except for the statement from their accountant that he would treat payments relating to Mac-Attack as loans. Further, there is no evidence of the establishment of the proposed loan. The accountant was not called to give evidence about the terms of any loan or that a loan was ever created. There is no contemporaneous record of the loan except in the balance sheet. Further, I note that the loan is not consistent with the applicants' alternate case that the business was conducted via the applicants' family partnership. (footnote omitted) 50 Earlier in its reasons the Tribunal had observed that the McPartlands had not discharged their onus, including because the case they presented lacked clarity. The lack of clarity included uncertainty in their case about whether the business was carried on by MacAttack, HD Downunder or a partnership. 51 The grounds of appeal allege that contrary to the assertion in [18] about the lack of evidence, the Tribunal failed to address extensive evidence and contentions advanced by the McPartlands about how the loan first came into existence: SNOA, [2.1.1]. They also allege that the Tribunal set out observations, conclusions or inferences about the alleged loan that were irrelevant or not open on the material "so as to be relevantly illogical or irrational or otherwise relevantly unreasonable so as amount to an error of law": SNOA, [2.1.2]. 52 The evidence said to have been ignored includes evidence about the circumstances in which MacAttack allegedly came to be indebted to the McPartlands and the amount of the indebtedness at the commencement of FY15. It included oral and written evidence to the effect that the McPartlands had personally paid GST expenses amounting to $310,000.00 with respect to the purchase of motorcycles prior to FY15 in the mistaken belief that the entity operating the business could later claim an input credit and then reimburse them. It was submitted that the evidence was capable of supporting a finding that the entity that operated the business was a creditor of the McPartlands at least in the amount of the GST they had personally paid. It was submitted that whilst the McPartlands had advanced the Partnership case, by the conclusion of the review hearing they had abandoned that case and embraced a case that it was MacAttack that operated a business for the sale of motorcycles and MacAttack that made the loan repayments to them in amounts sufficient to explain a large proportion of the personal expenditure. 53 The Tribunal's reasons focus on whether there was "satisfactory" evidence of a "loan agreement". It found there was no evidence of the loan being repaid. 54 The Tribunal was entitled to place great weight on the absence of contemporaneous records and the absence of evidence from the accountant on those topics. The Tribunal identified that Mr McPartland had expressed doubts about the accuracy of the balance sheet and that he had discredited the accountant who had prepared it. In light of what follows, those findings were open on the material before the Tribunal. 55 In his oral evidence in the review hearing, Mr McPartland had said that he did not stand by a balance sheet recording a loan as a liability of MacAttack. He persisted with the Partnership case, asserting that there was no loan required with MacAttack because it was not the entity that conducted the business for the sale of motorcycles. He then asserted that there was a loan in the amount of $310,000.00 and added "that's the only thing that we can verify". He could not say when the balance sheet was prepared. As the Tribunal correctly observed he attacked the competency and credit of the person who prepared it. 56 It was not until closing submissions that Mr McPartland advanced an alternate case and asserted that the $447,000.00 figure was accurate and that MacAttack operated the business. He had not previously given oral evidence substantiating the whole of that amount, nor did he take the Tribunal to documents to verify the whole of it, other than the balance sheet. 57 In the circumstances described, it was open to the Tribunal to give the balance sheet no weight and to place little store on the advice said to have been given by the McPartlands' former adviser. These are matters going to weight. They do not give rise to irrationality or unreasonableness. 58 Contrary to their submissions on this appeal, the Tribunal did not ignore Mr McPartland's evidence about the advice given by the accountant. On a fair interpretation of its reasons, the Tribunal may be understood to have concluded that the evidence was not sufficient to persuade it as to the actual existence of a loan to MacAttack that was later repaid. 59 The Tribunal was concerned with the practical matter of whether in reality there existed a loan that was in fact repaid in the manner contended for. It was not concerned with the theoretical question of whether the drawing of funds for personal expenditure could later be characterised by an accountant as loan repayments made by MacAttack to the McPartlands. The Tribunal expressly referred to the advice Mr McPartland claimed he had received from the accountant, but whether the companies and the McPartlands had acted in accordance with that advice was a different question. 60 Nor did the Tribunal err by placing particular emphasis on the absence of documentation evidencing the existence of a loan agreement, its terms and its actual repayment. It was correct to identify that there was an absence of contemporaneous evidence showing that the asserted indebtedness was in fact repaid. It was entitled to focus upon the absence of contemporaneous records about what in fact occurred, rather than on how an accountant might retrospectively treat the transactions. 61 There is nothing illogical or unreasonable in that approach. It guards against the mischief that a taxpayer may wait years before explaining transactions by way of post-construction, so as to treat past transactions in a way that suits his or her circumstances at a later time. 62 It is true that the Tribunal did not refer in its reasons to the circumstances alleged by the McPartlands to give rise to the initial indebtedness prior to FY15. But the Tribunal's rejection of the loan repayment case did not depend on the existence or otherwise of facts giving rise to a debt owing to the McPartlands by either company per se. It approached the question in a different way. The Tribunal's reasons must be understood in a factual context in which proof of a debt owed to the McPartlands does nothing more than to prove that they were creditors of the relevant debtor. Whether drawings from the resources of the debtor should be understood as being in the nature of loan repayments is a different question. Here, drawings by the McPartlands from resources of the business may be explained by a variety of alternatives, including loan repayments, directors' payments, dividend or partnership distributions. Accordingly, the existence of a debt did not answer the question of whether drawings from the business were loan repayments. The absence of reference to an initial indebtedness does not disclose error. 63 The Tribunal was otherwise correct to observe that the McPartlands had also advanced the Partnership case, a scenario which denied the existence of a loan between them and MacAttack altogether. The inconsistency introduced a lack of clarity as to what had in fact happened at the relevant time, as shown by this evidence given by Mr McPartland: WITNESS: I'm just trying to build a case for either way, you know. It doesn't fuss me either way which way it goes, there's no income for me and my wife. And this: MS BATTISTE: Just to confirm, do you maintain any alternative, there was a loan between the companies and yourself and your wife? A: Well that all depends on which scenario you go through. 64 Earlier in cross-examination, it had been put to Mr McPartland that it was MacAttack that was running the business for the sale of motorcycles. He replied "Was it? Ok, if you say so.". The Tribunal appropriately warned Mr McPartland that his answer was flippant, given the seriousness of the issue. 65 In addition, when Mr McPartland was specifically questioned about the Exhibit 3 Submission insofar as it referred to the alleged loan, he expressly disavowed reliance upon it: DEPUTY PRESIDENT: Then there's a reference in paragraph 12 to you being advised that you could use your personal bank accounts for expenses relating to Mac-attack. WITNESS: I don't know what you're talking about there. It's not Macattack. It's personal – I don't understand what you're saying there. DEPUTY PRESIDENT: I think what it's basically saying is that you use your personal bank account for company affairs. WITNESS: Yes, well, I mean - - - DEPUTY PRESIDENT: That's what your accountant said you'd been doing. WITNESS: Yes, he was saying that we can use the D & K McPartland bank account - - - DEPUTY PRESIDENT: Yes, yes. WITNESS: - - - for Mac-attack's affairs and then he would call that a loan account. DEPUTY PRESIDENT: Yes, yes. WITNESS: Because he wasn't allowed to do the tax separate. DEPUTY PRESIDENT: But was that the structure that was put in place? WITNESS: There was no physical loans drawn up, as such, because I still wanted to run that separate side of things, you know, because I didn't want to get involved with Mac-attack because, you know, we just wanted to buy the bikes and supply them to our son to comply them, you know. That's what our intentions was. 66 I do not accept the submission that the McPartlands later expressly abandoned the Partnership case. The most that could be said is that they posited inconsistent factual scenarios as to how the business was operated and by whom. That is a further reason for the Tribunal to consider the evidence on the topic of the loan to be unsatisfactory and to place no store on the MacAttack balance sheet. 67 It was not for the Tribunal to choose between the two inconsistent factual scenarios posited by the McPartlands according to which produced the most favourable outcome for them when it came to explaining their significant personal expenditure. In the circumstances described, there was no need for the Tribunal to embark on a factual enquiry as to whether the McPartlands had personally paid MacAttack's business expenses in the nature of GST or otherwise. Sale of personal assets 68 In the course of his evidence before the Tribunal Mr McPartland made extensive reference to his prior ownership of personal assets that had been sold in FY15 and FY16. The assets are said to include eight motorcycles with a total value of $198,000.00 (inc GST), three motor vehicles and a jet ski. On this topic, Mr McPartland specifically drew the Tribunal's attention to Annexures G1 and G2 within the Exhibit 3 Submission. Annexure G1 is a document said by Mr McPartland to have been prepared by an accountant, Mr Robert Veitch, titled "Sale of personally held motor bikes". It commences with the words "[Mr McPartland] has purchased bikes in his personal name, which have now been sold. The ATO have requested to put … the bikes through the business based on them being used for testing purposes. A previous adviser suggested to perhaps sell the bikes to the company and then show proceeds through sales". Eight motorcycles are then described together with their prices. The document states that a "journal" was to record the transactions as the purchase of trading stock sold to the business by Mr McPartland and there is then a reference to a "Loan" in the amount of $198.000.00. Annexure G2 comprises documents said to evidence the original purchase of the motorcycles by Mr McPartland personally. Mr McPartland also gave oral evidence about his sale of three motor vehicles and a jet ski. 69 The Tribunal's reasons contain a single sentence on the topic of the personal asset sales, as follows (at [22]): … The applicants further contended that income from the sales of non-business business bikes and vehicles should not be included in their income, but that assumes incorrectly that such income was included which it was not. 70 In the context of Ground 1, I will deal separately with an argument that the above passage evidences a misunderstanding by the Tribunal of the nature of its fact finding task. 71 By [2.2] of the SNOA the McPartlands contend that the Tribunal failed to address extensive evidence and contentions advanced by them in connection with the personal asset sales. They contend that the Tribunal failed to consider an argument that the proceeds of the sale were a significant source of "non-income funds", a phrase that I take to mean a source of non-taxable income. They submit that the passage at [22] shows that the Tribunal misunderstood the case they had presented on the question. They contend that the passage sets out conclusions about the issue that are irrelevant or not open on the material before the Tribunal or otherwise irrational or unreasonable: SNOA, [2.2.3]. 72 The passage at [22] plainly does not deal with the topic of whether the sale of the personal assets might have provided a non-taxable source of income to explain a significant part of the personal expenditure, and that topic is not dealt with elsewhere by the Tribunal. 73 The Commissioner submits that the McPartlands did not advance a "substantial clearly articulated argument" based on the proceeds of the sale of the personal assets that was "worthy of serious consideration": see Dennis Willcox Pty Ltd v Commissioner of Taxation (Cth) (1988) 79 ALR 267, Jenkinson J, Woodward and Foster JJ agreeing (at 276) and Waraich v Minister for Home Affairs (2021) 286 FCR 45, Bromberg, Katzmann and Cheeseman JJ (at [35]). Accordingly, it was submitted, the absence of any reference to the argument in the Tribunal's reasons does not indicate any error of law. 74 I do not accept that aspect of the Commissioner's submissions. The transcript of the Tribunal hearing shows that Mr McPartland advanced three arguments founded on the sale of the personal assets with sufficient clarity. 75 First, Mr McPartland submitted that the Commissioner had wrongly assessed the amount of personal income because it had simply treated all income deposited into the various accounts as being personal income in the McPartlands' hands. He expressed that part of the case as follows: MR McPARTLAND: Because the only way they could work it out that they were getting such a huge figure is all the income going into D & K McPartland they classified as income to ourselves. 76 It was open to the Tribunal to interpret those submissions to include a complaint that the Commissioner had treated the proceeds of sale of the personal assets as personal income in the McPartlands' hands. The Tribunal may be understood to have rejected that part of the McPartlands' closing submissions when it said (correctly) that the auditors had not treated income from the sale of personal assets as income in the McPartland's hands. That part of the reasons does not disclose an error in the nature of a misunderstanding of a submission advanced by Mr McPartland. 77 Second, in his closing submissions, Mr McPartland said: MR McPARTLAND: … And also, you know, some of our income might have been generated from the sale of these personal vehicles. I mean, we're allowed to have $250,000 in the bank on Centrelink before it affects your payments. So what we're saying is that over time as we've sold some of our personal assets, you know, which just went into D & K – you know, we've used that for our own personal uses. … 78 That argument refers to the proceeds of the sale of personal assets as a direct source of income deposited into an overdraft bank account, described in more detail in the next section of these reasons. The argument is not dealt with in the Tribunal's reasons. 79 Third, Mr McPartland said this: .. And that is what they're coming back with to us. But we - Robert Veitch - has put all the income that went into D & K McPartland, Mac-attack and any other bank account and put it into his tax returns, which the ATO have agreed to the amounts of sales. So, from those sales, obviously they got the company - or D & K have to pay for stock and pay for, you know, all the costs of getting those bikes here and the GST and the like, which once again was clarified in Robert Veitch's returns. And this: Now, either way, if they don't want to accept the personal assets as been sold, as personal, they're saying they're part of the company, well the company has to acquire them from us, because there's no purchase of those vehicles. So, at the end of the day, they've still got to purchase the vehicles to sell them, whether it's D & K McPartland or Mac-attack. You just can't accumulate stock from nowhere and sell it to get – generate an income. So, what Robert Veitch is saying is the company has to reimburse us for those sales, because they've put them through as on request with the ATO that they went through as personal sales. 80 Those submissions aligned with the material contained in Annexure G1, to which the Tribunal was taken. It amounts to a clearly articulated argument to the effect that (at least) MacAttack should be regarded as having acquired the assets from Mr McPartland, so giving rise to a debt owing to him. When read in connection with the material prepared by Mr Veitch, it amounts to a sufficiently clear contention concerning an alleged source of non-taxable income that could conceivably explain some of the personal expenditure. 81 I do not consider that the issues were of such a peripheral nature that the Tribunal may be understood to have considered it unnecessary to deal with them in its reasons. The better inference is that the arguments pointing to a source of non-taxable income based on the personal asset sales were overlooked. 82 On this appeal, Counsel for the McPartlands said that the submissions about the significance of the personal asset sales were also contained in the body of the Exhibit 3 Submission so obliging the Tribunal to refer to and resolve the argument there articulated. I do not accept that submission. On my reading of the whole of the transcript, the McPartlands did not at any time wholly embrace the content of the written submission and in some respects disavowed reliance upon it. It was not for the Tribunal to scour the document in search of a clearer articulation of any arguments orally raised by the McPartlands at the hearing. The Tribunal was nonetheless obliged to have regard to annexures to which its attention was drawn, which for present purposes clearly included Annexure G1. The present ground of appeal does not depend on the content of the Exhibit 3 Submission in any event. The argument about the additional non-taxable income source was plainly raised orally by Mr McPartland. 83 The Commissioner otherwise submits that the omission of any reference to the submission in the Tribunal's reasons is a reflection of the issue being of no real significance. I do not accept that submission. A finding that MacAttack was indebted to the McPartlands in an amount that included the proceeds of the sale of the personal assets was plainly a relevant enquiry that the McPartlands had urged upon the Tribunal. Evidence on the topic of the sales consumed a significant part of the hearing and Mr McPartland was cross-examined on multiple documents relating to it. It may well be open to the Tribunal to reject the argument on the evidence, or to form the view that the argument took the McPartland's case nowhere, but the reasons of the Tribunal do not evidence any such reasoning processes. The proper inference is that the argument and associated evidence were overlooked. There was a constructive failure on the part of the Tribunal to undertake its fact finding task, amounting to an error of law. 84 The consequences of that conclusion for the disposition of the appeal will be dealt with at the conclusion of these reasons. Credit facility 85 The McPartlands contend that the Tribunal erred by failing to understand and resolve an issue they had raised about their use of an ANZ credit facility numbered 2035-77723: SNOA, [2.3]. I will refer to that account as the Overdraft Facility. Bank statements relating to it were before the auditors and the Tribunal. 86 The Overdraft Facility was a loan account held jointly by the McPartlands and secured against their family home. In addition, the McPartlands had a home loan facility, also secured against their family home. I will refer to that as the Home Loan. 87 The bank statements show that payments in reduction of the Home Loan were made by way of transfers from the Overdraft Facility. The Overdraft Facility was also drawn upon by the McPartlands for the payment of other personal expenses. There is no dispute that it was also used in the conduct of the business and that revenue from the sale of motorcycles was deposited into it. 88 The bank statements for the Overdraft Facility show that its balance (being a debt) increased in FY15 by $64,235.90, increased again in FY16 by $73,837.81 and decreased in FY17 by $64.08. The cross-examination of Mr McPartland on this topic included the following: MS BATTISTE: … And, again, your position is that you were living entirely off Centrelink income for those periods? WITNESS: ---Yes but we used to use the D & K McPartland that was a - we used to (indistinct) have a look in the document, like, as a reverse mortgage type of thing, the overdraft. The accountant said we could use that as, like, a reverse mortgage and once the house sold we paid the debt back, and that's what we've done, so - - - MS BATTISTE: It's also the case, for instance, as we said before for the 2017 financial year, you actually reduced the amount of the overdraft a small amount, and that was despite having over $30,000 in expenses associated with that account in interest and fees? WITNESS: ---What are you trying to say? DEPUTY PRESIDENT: Well, I think what she's trying to say is that you were saying that you were effectively running down your mortgage and increasing your debt level by - to finance your lifestyle? WITNESS: ---M'mm. MS BATTISTE: But the records show that, in fact, in 2017 your overdraft was actually reduced, it didn't get bigger. That's what's being said? WITNESS: ---Yes, because of sales of bikes. 89 In its reasons the Tribunal said (at [20]): Mr McPartland gave oral evidence that they drew down money from a mortgage facility, but the banking records show that the mortgage was being repaid and not drawn down. The records show that the applicants were using funds generated by the companies to pay for their personal living expenses including their mortgage. 90 The McPartlands submit that that the Tribunal erred in law by proceeding on the basis that there was a single "mortgage" (that is, a single loan account) with a decreasing balance. It was submitted that the Tribunal had accordingly misunderstood their argument that they had met their personal expenses (at least in part) by drawing on the Overdraft Facility secured against their family home, being a further source of non-taxable income. 91 I accept that the Tribunal misinterpreted the materials in that way. Mr McPartland's evidence was to the effect that money had been drawn from the Overdraft Facility, including for the purposes of paying down the Home Loan. As traversed in cross-examination, the indebtedness on the Overdraft Facility had increased in FY15 and FY16. His oral evidence on the question was otherwise to the effect that the personal expenses paid from the Overdraft Facility were sourced from a non-taxable source of income, being a loan secured against the family home. The clarity of that argument did not depend on the content of any written submission to the same effect. 92 The Tribunal accordingly overlooked or misunderstood evidence that, if accepted, was capable of supporting a finding that there existed a source of non-taxable income that could explain some part of the personal expenditure, at least in FY15 and FY16. The Tribunal's finding that the "mortgage was being repaid and not drawn down" is correct with respect to the Home Loan, but it has no foundation in the evidence with respect to the Overdraft Facility in FY15 and FY16. The McPartlands did not claim to have funded their personal expenditure by increasing the Home Loan. 93 The Tribunal did not recognise the increase in the Overdraft Facility in FY15 and FY16 and so did not consider its significance to the McPartlands' case. That amounts to a further failure to address and resolve the case put before it, and may properly be characterised as an error of law. 94 In due course it will be necessary to consider whether that error warrants remittal of the review application to the Tribunal. Capital contributions and directors' loans 95 Paragraph 2.4 of the SNOA alleges that the Tribunal erred in its observation (at [19]) that audits of the McPartlands' personal tax affairs had "established" certain facts, and hence erred by accepting those facts. The impugned passage is as follows: I note that the respondent through the audit process considered the available evidence of the numerous bank statements of the applicants and the expenditure shown therein. In addition, there was evidence of regular overseas travel in the relevant period. The personal income tax audits established, and I accept, that: (a) the applicants used business bank accounts and credit cards for non-business purposes to fund their personal living expenses and lifestyle; (b) the applicants did not provide any capital funds to the companies; (c) the applicants did not have any director loans in places [sic] with the companies; and (d) the applicants' personal expenses, paid from their personal bank accounts, exceeded their only income from Centrelink. 96 It is submitted that the personal tax audits did not "establish" those facts. Rather, the personal audits had themselves proceeded on "an assumption or conjecture arising from the result of the related entity audits". 97 It was submitted that the Tribunal had therefore misapprehended what the personal audits had established" and so made factual findings of its own that lacked evidentiary support. 98 This ground rises no higher than a complaint about errors of fact, based on an asserted misunderstanding of evidence. I am not satisfied that an error of the kind complained of can amount to an error of law. The argument is rejected on that basis alone. 99 If I am wrong in that conclusion, I would nonetheless reject the argument on its substantive merits. 100 The argument involves a complaint that the Tribunal relied upon the findings of the audit as evidence providing a foundation for its own findings. That is not a fair reading of [19] of the reasons. Whether there were director loans in place and whether the McPartlands had provided any capital funds to the companies were questions that should be understood as having been answered (rightly or wrongly) on the basis of the material before the Tribunal, and not on the basis of factual findings or assumptions on which the auditors proceeded. 101 In addition, with respect to the question of directors' loans the Tribunal should be understood to refer to the absence of loans made by the companies to the McPartlands as directors. It formed no part of the McPartlands' case on the application for review that they drew money from the companies in the nature of directors' loans. Rather, they alleged (at least in the alternative) that they advanced money by way of loans to the companies, the repayment of which provided a source of non-taxable income. To the extent that they based their review case on any loan, that case was rejected on the substantive merits. It is unrelated to the question of whether there was an absence of loans to directors. Any error in the finding that there were no directors' loans can take the case nowhere in the absence of a positive case that loans of that kind existed. 102 On this appeal, it has not been established that there was any evidentiary basis for the Tribunal to find that the McPartlands had provided "capital funds" to the business. The case about the sale of Mr McPartlands' personal assets did not amount to an argument that there had been a monetary contribution of capital funds to either company. Rather, it was an argument that MacAttack had become indebted to the McPartlands in amounts equivalent to the proceeds of the sale of stock (being the personal assets), or alternately that the sale proceeds were directly a source of personal non-taxable income. 103 The argument at [2.4] of the SNOA cannot assist the McPartlands in circumstances where they can point to no evidence to support a positive finding that they contributed funds in the nature of capital to either company and no evidence that they drew money from the companies in a way referable to any such contribution. Survival on Centrelink payments 104 By [2.5] of the SNOA the McPartlands allege that the Tribunal erred "in reaching [its] ultimate conclusion, that the Applicants' taxable income exceeded their Centrelink payments" in that the conclusion was based on an inference founded on a fundamental misunderstanding of their case. The error is said to manifest at [20] of the Tribunal's reasons, where it said: … This lifestyle of regular overseas travel and high credit card expenditure is entirely inconsistent with the case of the applicants that they received no taxable income and that they survived on their Centrelink payments. … 105 It is submitted that the McPartlands never alleged that they had survived on their Centrelink payments, but rather had sought to explain the personal expenditure by reference to non-taxable sources of income. It is submitted that by approaching the case in the way disclosed at [20], the Tribunal fundamentally misunderstood and ignored the issues raised by the McPartlands about those income sources, and so asked itself the wrong question. 106 This ground ignores the manner in which the McPartlands ran a part of their case before the Tribunal. They presented a prevaricating case that was not confined in its subject matter to the sources of non-taxable income, but included outright denials that the personal expenditure exceeded the amount of the Centrelink payments. By way of example, after a lengthy exchange in which Mr McPartland denied specific expenses charged to Mrs McPartland's credit card (later paid down by cash payments and drawings from other accounts), the following exchange occurred with respect to FY17: MS BATTISTE: That calculates your personal expenditure for the 2016/2017 financial year, looking across all the bank accounts and credit cards, as being a combined amount of $242,000? WITNESS: ---What, in one year? We must have been living like kings. MS BATTISTE: Well, I put it to you that's the amount you spent that year on personal expenditure? WITNESS: ---We totally deny that. MS BATTISTE: I put to you that was well in excess of the amount you say you - the amount that you were receiving from Centrelink for that year? WITNESS: ---We deny it. DEPUTY PRESIDENT: Where do we see that figure? MS BATTISTE: It's on the bottom of the page, the bottom of 657. So there's - - - DEPUTY PRESIDENT: 657, yes. MS BATTISTE: So it's the amounts being split equally between Darryl and Kathleen, so $121,037.64 each. DEPUTY PRESIDENT: Do you see those numbers there, Mr McPartland? WITNESS: ---Yes, that's ludicrous. 107 The Tribunal was entitled to understand this aspect of Mr McPartlands' evidence as amounting to a denial of personal expenditure exceeding the Centrelink payments. 108 Further, in their closing submissions before the Tribunal, the McPartlands positively submitted that the auditors had wrongly characterised all the income of the companies as personal income. That too could fairly have been understood by the Tribunal as further reinforcement for a case that denied the existence of any income (whether taxable or not) over and above the Centrelink payments. 109 The Tribunal did not err in understanding that aspect of the case. It was plainly open to the Tribunal to reject it as implausible. Its remark at [20] may be fairly understood as dealing with a wholly unconvincing aspect of Mr McPartland's evidence. 110 It is apparent from the reasons as a whole that the Tribunal did not ignore the McPartlands' principal argument that the personal expenditure could be explained by reference to non-taxable sources of income. The case of the applicants in that respect is fairly summarised by the Tribunal at [10] – [14] of its reasons in words that are not the subject of challenge on this appeal. As explained above, the Tribunal addressed and rejected the critical contention that the monies drawn from the bank account could or should be treated as repayments by MacAttack of a debt owed to the McPartlands. The passage at [20] does not support a conclusion that the Tribunal misunderstood the other aspects of the case presented to it. Ground 1 111 The first ground of appeal alleges an error of law affecting the whole of the Tribunal's approach involving a misunderstanding and misapplication of s 14ZZK(b) of the TAA. The error is said to manifest in two ways in the reasons of the Tribunal. 112 The Tribunal said: 2 The issue for the Tribunal is to determine whether the applicants have discharged their onus of demonstrating that the assessments for 2015 to 2017 income years were excessive and/or incorrect and, if so, what the correct taxable income for each income year should be and whether the penalties imposed should be remitted. … 15 In order to address the applicants' contentions it is necessary to make some findings of fact bearing in mind the ultimate issue is whether the applicants can establish that the amount of the default assessments and penalty assessments are excessive and, if so, what the correct assessments should be. (emphasis added) 113 It was submitted that the words "if so" in these passages incorrectly assumes that the onus imposed by s 14AAK(b)(i) involves a two stage process, whereby a taxpayer must first establish that the assessment is excessive as a precondition to the Tribunal considering the question of what the assessments should have been. It was further submitted that the passages involve an impermissible focus on the factual basis for the default assessment, an approach inconsistent with the principles established by the authorities cited earlier in these reasons. 114 Read as a whole, I do not consider the Tribunal to have understood or approached its task in that way. The passages do no more than to state the obvious, namely that the taxpayer cannot in any case succeed on an application for review without establishing that the assessments are excessive. That onus must be discharged in all cases. It is not a task that focusses on the identification of error in the factual basis for a default assessment, but refers instead to an excess in the outcome of the assessment, as a matter of arithmetic. The passages recognise that it will not be sufficient for the taxpayer to show that their taxable income is less than the assessed amount, without also showing precisely by how much. 115 I consider this aspect of the first ground of appeal to focus on semantics in the passages complained of, without regard to the whole of the Tribunal's reasons, including this (at [3]): The notices of assessment were based on findings of an audit dated 6 December 2018. The applicants had numerous bank accounts either in individual or joint names. The auditor calculated the total amount of personal expenditure from these accounts for each financial year and then equated that expenditure with income for the purposes of the notices of assessment. The respondent submitted that the audit did not include business expenses or transfers between accounts unless paying off a credit card or the home loan and that it accurately reflected the income of the applicants for the relevant years. This is not to suggest that the role of the Tribunal is to review the accuracy of the audit and its findings – s 14ZZK(b)(i) of the Taxation Administration Act 1953 (Cth) (the TAA) places the onus on the applicants to prove that the amount of default assessments and penalty assessments are excessive and what the correct assessments should be. Authority for this proposition is the decision of the Full Court of the Federal Court in Rigoli v Commissioner of Taxation (2014) 141 ALD 529: 25. The task Mr Rigoli sought to carry out was to simply identify some errors in the Commissioner's approach so that the matter might be remitted on the basis of those errors for reconsideration by the Commissioner. This is the very picking and choosing which the authorities make clear is impermissible. The taxpayer's choice is to pay tax according to the Commissioner's assessment under s 167 or to establish, as a matter of evidence, what was 'the amount upon which ... income tax ought to be levied'. An intermediate course, which involves elements of the Commissioner's calculations and facts which the taxpayer chooses to lead in evidence, is not an available option. 26. The contention that the authorities should not apply to a merits review by the AAT as distinct from judicial review cannot be accepted. It is an argument which ignores or gives no effect to the fundamental provisions of s 14ZZK of the Administration Act. This issue was considered recently by the Full Court (Jessup, Jagot and Nicholas JJ) in Rawson Finances Pty Ltd v Federal Commissioner of Taxation [2013] FCAFC 26; (2013) 296 ALR 307. Jagot J, (with whom Nicholas J agreed), observed (at [89]-[90]) that s 14ZZK is a modification of the AAT Act because, but for s 14ZZK, a taxpayer would not have the burden of proving that an assessment is excessive. However, where s 14ZZK applies, the only state of satisfaction that the AAT is required to reach is whether, on the facts as found by the AAT, the taxpayer has proved that the assessment is excessive. If that state of satisfaction cannot be reached, the application for review must be dismissed. Her Honour went on to note that, as the authorities made clear, the taxpayer does not discharge this burden of proving that the assessment is excessive by demonstrating some error in the Commissioner's judgment under s 167 of the amount upon which income tax ought be levied (see Dalco per Brennan J (at 625) and Toohey J (at 634) and Gashi (at [66]-[67])). (original emphasis) 116 That is a correct statement of principle. The words "if so" at [2] and [15] of the reasons do not support an inference that the Tribunal misunderstood or misapplied s 14ZZK(b) of the TAA. 117 The McPartlands further submitted that the following passages disclose error in the practical application of s 14ZZK(b): 16 One example of this lack of clarity is whether the business was conducted by the corporate vehicles of Mac-Attack and HD Downunder or through the family partnership between the applicants. The respondent contends that no finding of this nature is required in order to affirm the decision in favour of the respondent because the onus upon the applicants has not been made out. The respondent contends that it does not make any difference whether the business was conducted through a corporate vehicle or personally because the audit established an amount of personal income based upon personal expenditure by the applicants as recorded in their banking records. The applicants contend that their personal income was no greater than their Centrelink payments but I consider that the banking records show a much higher level of personal expenditure which corresponds with the findings of the audit. For the reasons that follow, the applicants have failed to establish that their income, assessed by the respondent in this way, is excessive. … 22 The applicants contended that some of the expenditure identified in the audit was not personal but, even if one were to accept that was the case (which I do not), the applicants did not establish that the default assessments were excessive and what the correct assessments should be. The applicants further contended that income from the sales of non-business bikes and vehicles should not be included in their income but that assumes incorrectly that such income was included which it was not. (emphasis added) 118 It was submitted that the emphasised passages support a finding that the Tribunal approached its task by asking whether the default assessments were correctly calculated and so asked itself the wrong question. 119 As the authorities discussed earlier in these reasons make plain, on an application for review it will not be sufficient for a taxpayer to show that the impugned assessment is wrong. However, a taxpayer may seek to demonstrate that an assessment is excessive by pointing to a portion of the assessed income amount that ought not to have been included. Plainly enough, identification of an error of that kind will not be sufficient to succeed. However, that does not mean that identification of error in the assessment cannot partially assist in the enquiry as to whether the assessment is excessive or in the enquiry as to what the assessment ought to have been. 120 The reasons of the Tribunal at [16] and [22] must be understood in light of the case presented by the McPartlands. In those passages the Tribunal was dealing with two submissions that had been made by the McPartlands that complained of the methodology underpinning the assessments. The submissions respectively complained that the auditors had calculated the McPartlands' income by equating it to their personal expenditure, and that the auditors had incorrectly characterised some expenditure as personal. It was not illegitimate for the McPartlands to raise those issues as an aspect of their case because success on those issues might, in conjunction with other evidence, assist them to discharge the onus. Considered in that context, the Tribunal's reasons for rejecting the arguments do not demonstrate any misconstruction or misapplication of s 14ZZK(b) of the TAA. 121 The first ground of appeal included an additional argument that the Tribunal failed to discharge its obligation to consider the McPartland's case as to what the assessments ought to have been because of its misunderstanding of their onus. As I understood it, that submission involved a repetition of some of the submissions raised in connection with Ground 2 alleging a misunderstanding on the part of the Tribunal about the case that had been presented. I do not consider that either of the two errors I have identified arose by reason of any misunderstanding on the part of the Tribunal as to the meaning of the onus under s 14ZZK, or as to its practical application. 122 The first ground of appeal must accordingly fail. 123 It is convenient to deal with the claim for relief and an aspect of the Commissioner's alternate contention together. Remittal 124 In light of the errors I have identified it is necessary to consider whether the application for review should be remitted to the Tribunal. 125 The McPartlands submitted that the evidence before the Tribunal was capable of supporting a finding both that the assessments were excessive and what they ought to have been in relation to each of the financial years. At the Court's request, the submissions on that topic were distilled by Counsel into the following table: Date Event Audit amount Non-Income source Running Balance FY 2015 1/07/2014 Loan Balance: As at 1 July 2014 $447,328.02 Personal Assets: 29/09/2014 Personal Car- 1955 Chevy Belair, $30,000.00 $30,000.00 29/09/2014 Personal Car- 1968 Chevy Camaro, $34,500.00 $34,500.00 08/10/2014 Personal Jet Ski- Personal Jet Ski, $19,000.00 $19,000.00 To 30/06/2015 Centrelink: Darryl McPartland $11,903.00 $11,903.00 To 30/06/2015 Centrelink: Kathleen McPartland $13,006.00 $13,006.00 To 30/06/2015 Personal Collection of Bikes: $198,000.00 $198,000.00 To 30/06/2015 Credit Facility: Increase for FY201510 $64,235.90 Subtotal of non- income Sources FY15 $817,972.92 $817,972.92 Audit of Personal Expenditure FY15 ($328,533.28) $489,439.64 FY 2016 25/08/2015 Personal Car: 1948 Chevy, $24,000.00 $24,000.00 To 30/06/2016 Centrelink: Darryl McPartland $13,625.00 $13,625.00 To 30/06/2016 Centrelink: Kathleen McPartland $13,615.00 $13,615.00 To 30/06/2016 Credit Facility: Increase for FY2016 $73,837.81 Subtotal of non-income Sources FY16 $125,077.81 $614,517.45 Audit of Personal Expenditure FY16 ($364,963.76) $249,553.69 FY 2017 To 30/06/2017 Centrelink: Darryl McPartland $13,118.00 $13,118.00 To 30/06/2017 Centrelink: Kathleen McPartland $14,331.00 $14,331.00 Subtotal of non-income Sources FY17 $27,449.00 $277,002.69 Audit of Personal Expenditure FY17 ($242,075.28) $34,927.41 126 The purpose of the table was to show that there were sufficient sources of non-taxable income to explain the personal expenditure upon which the assessments were based. It was submitted that upon remittal to the Tribunal, there was sufficient evidence capable of supporting a finding that the McPartlands had discharged their onus under s 14ZZK(b), given the observations of Burchett J in Ma v Commissioner of Taxation (1992) 37 FCR 225, as cited in Gashi (see [22] above). 127 The table refers to three alleged sources of non-taxable income, namely the Loan monies owed to the McPartlands by MacAttack at the commencement of FY15, the proceeds of the sale of personal assets, and the overall increase in the McPartlands' indebtedness in the Overdraft Facility. 128 I have concluded that the Tribunal's conclusions with respect to the alleged loan were unaffected by error. However, that is not a reason to disregard evidence with respect to the alleged loan for the purpose of asking whether remittal of the review application would be an exercise in futility. I proceed on the basis that upon remittal, it would be open to a differently constituted Tribunal to make different and more favourable findings with respect to the alleged loan on the basis of the same evidentiary material. For present purposes it is appropriate to proceed on the basis that evidence with respect to all asserted sources of non-taxable income should be taken at its highest. 129 The difficulty with the figures presented in the table is that they ignore a critical aspect of the evidence before the Tribunal, or more aptly, the evidence that was not before it. 130 As I mentioned at the outset of these reasons, the Commissioner did not concede that the extent of the McPartlands' personal expenditure was limited to that identified in the course of the audits. 131 On the evidence before the Tribunal it was not open to conclude that the McPartlands' actual personal expenditure equated to (or was no more than) the amounts underpinning the impugned assessments. There was evidence before the Tribunal that the calculations of personal expenditure performed at the audit stage did not include (at least) cash and cheque payments reducing the balance of a credit card held in Mrs McPartland's name, known as the Earth Black Credit Card. 132 The McPartlands adduced the bank statements for the Earth Black Credit Card for the purpose of showing that it had been used to pay significant expenses of the business. Their argument was that repayments of the balance of the credit card debt that had been transferred from the Overdraft Facility should not be characterised as payments in the nature of personal expenses. The Earth Black Credit Card is indeed capable of showing that it had been used to pay business expenses over the relevant period, and in considerable amounts. But it is otherwise destructive of the McPartlands' case. 133 The remaining transactions on the credit card statements had been redacted by the McPartlands with a black marker. In his evidence, Mr McPartland acknowledged that the redacted portions of the statement related to "personal stuff" that Mrs McPartland had charged to the card. 134 The amount spent on the asserted business expenses in FY15 exceeded $95,00.00. The amount spent on "personal stuff" in the same financial year exceeded $92,000.00. 135 The statement also showed that in the relevant period, significant cash and cheque deposits had been made on the credit card, so as to reduce the debt owing. Those repayments far exceeded the amounts of repayments made by bank transfer, that had been identified by the auditors for the purposes of the assessments. Repayments on the credit card in FY15, for example, totalled $106,500.00. When given the opportunity to explain the source of the funds used to make the additional repayments, Mr McPartland said "Where the funds come from, I don't know. It might have come out of one of the other accounts. We haven't cross-referenced anything …". 136 The additional repayments are plainly in the nature of personal expenses, at least in a proportion reflecting the amount of personal expenditure charged to the credit card. Mr McPartland adduced no evidence and made no submission before the Tribunal capable of supporting a different finding. 137 As I have mentioned, the personal expenditure identified for the purposes of the assessments did not include cash and cheque repayments from the Earth Black Credit Card. In addition, the material before the auditors and before the Tribunal did not include bank statements for a number of other credit cards known to be held by the McPartlands or either of them. The true extent of the transactions on those cards remains unknown. 138 The table prepared by Counsel is based on the wrong assumption that the McPartlands needed only to provide an explanation for only that personal expenditure that had come to light in the audits, and that all of the facts were otherwise known. Those assumptions are wrong. Nothing said in Ma could assist the McPartlands in that regard. 139 In the absence of any conceded fact, it was for the McPartlands to satisfy the Tribunal that they had put forward all of the material relevant to the calculation of their taxable income, including the totality of their personal expenditure in excess of the amount of their Centrelink payments, and the non-taxable sources of income capable of explaining the whole of it. The actual amount of personal expenditure was not a fact conceded by the Commissioner on the review. To the contrary, the Commissioner pointed to the Earth Black Credit Card as evidence that the McPartlands had not disclosed all relevant facts and so could not discharge their onus under s 14ZZK(b) of the TAA. That submission was unassailable at the review stage and is unassailable now. It follows that upon remittal to the Tribunal the only conclusion able to be drawn is a conclusion that the onus has not been discharged. 140 I uphold the Commissioner's notice of alternate contention to the extent that it is based on the absence of sufficient evidence capable of supporting a finding as to what the assessments ought to have been. It is unnecessary to address any further contentions. Outcome 141 Notwithstanding the two errors identified earlier in these reasons, the appeal will be dismissed on the basis that remittal of the review application to the Tribunal would be futile: cf Commissioner of Taxation v Ross (2021) 174 ALD 77. 142 The parties will be heard as to costs. I certify that the preceding one hundred and forty-two (142) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Charlesworth. Associate: Dated: 20 October 2023