Satisfying the taxpayer’s burden of proof in challenging a default assessment - the modern labours of sisyphus?

It is well established that pursuant to Taxation Administration Act 1953 (Cth) ss 14ZZK(b)(i) and 14ZZO(b)(i), a taxpayer seeking to challenge an ATO income tax assessment before the AAT or Federal Court respectively bears the burden of proving that the ATO's assessment is excessive and also of proving 'what the assessment should have been'. While this task may be approached in various ways, depending on the circumstances, it is clear that it requires the taxpayer to do more than merely show that the ATO made an error in the assessment process. The taxpayer must establish positively the alteration which needs to be made to render the assessment correct and show that this correct amount is less than the amount assessed. Under the 'normal' assessment pursuant to under s 166 ITAA 36, where the taxpayer has lodged a return and the assessment is based upon that return, the ATO will generally proceed by determining the taxpayer's assessable income and subtracting allowable deduction and other amounts in order to determine the taxpayer's taxable income. However, where the taxpayer has not lodged a satisfactory return, the ATO may make a 'default' assessment under s 167 ITAA 36. This section provides that if 'any person makes default in furnishing a return; or … the Commissioner is not satisfied with the return furnished… [then] the Commissioner may make an assessment of the amount upon which in his or her judgement income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166'. A s 167 default assessment therefore does not involve calculation of the taxpayer's assessable income and allowable deductions, but rather an estimation of the taxpayer's 'taxable income' based on asset betterment, T account, industry benchmarks or other bases which will almost inevitably not be precisely correct in any particular case. Nevertheless, the taxpayer's task is still to demonstrate that the assessment is excessive, and to satisfy this burden of proof, the case-law makes it clear that the taxpayer must avoid the 'fatal flaw' of merely demonstrating that the ATO may have made an error in the assessment process, and must instead establish positively what their taxable income was, and demonstrate that this amount was less than the amount assessed by the ATO. Given the clarity and simplicity of the principles involved, it is puzzling that taxpayers continue to attempt merely to challenge elements of the ATO's calculations — a 'fatal flaw' which condemns them to almost certain failure. The lessons from the past are crystal clear, and a recent series of decisions in Gashi, Rigoli and Mulherin demonstrate that taxpayers and their advisers ignore these lessons at their peril. As has been said, those who do not learn from history are doomed to repeat it.