If at first you don't succeed ... read the rules

Where a taxpayer seeks to challenge an Australian Taxation Office ('ATO') default assessment in the AAT or Federal Court, ss 14ZZK(b)(i) and 14ZZO(b)(i) of the Taxation Administration Act 1953 (Cth) ('TAA') effectively reverse the onus of proof1 and impose on the taxpayer the burden of proving that the Commissioner's assessment is excessive, and what the assessment should have been.2 It is well established that in order to satisfy this burden, it is not sufficient3 for a taxpayer merely to show that the ATO has made a mistake in the process of making its assessment the taxpayer must instead establish definitively what their taxable income was, and demonstrate that this is less than the amount assessed by the ATO. These legislative requirements are clear and are supported by equally clear guidelines provided by court decisions over many years. Surprisingly, however, despite their simplicity and clarity, taxpayers continue to disregard these guidelines, and to follow the very path that the courts have identified as doomed to failure. This article discusses the process of making a default assessment, and analyses recent decisions in order to highlight the obvious but common error made by the taxpayers in those cases -- the 'fatal daw' which doomed their efforts.