Login
iscover
The Administrative Review Tribunal has determined that a taxpayer did not engage in tax evasion in a dispute involving millions of dollars of UK-sourced income.
Tribunal rules in favour of taxpayer in tax evasion case
13 May 2025
•
11 minute read
A taxpayer has successfully proven that amended income tax assessments by the Commissioner of Taxation were excessive in a decision last week, Kirtlan and Commissioner of Taxation (Taxation) [2025] ARTA 539.
The Administrative Review Tribunal set aside an objection decision by the Commissioner after concluding the taxpayer in the case had not engaged in tax evasion.
You’re out of free articles for this month
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
The applicant in the case, Robert Kirtlan, was located partly in Australia and partly in the UK. He lodged his Australian income tax returns on the basis that he was not a resident of Australia and his UK returns on the basis that he was not a UK resident.
Consequently, a significant amount of UK-sourced income was not brought to account in either jurisdiction.
The Commissioner of Taxation decided that Kirtlan was an Australian resident but would have been out of time to issue amended assessments unless of the opinion that there had been fraud or evasion.
The Commissioner formed the opinion that there had been evasion and issued amended income tax assessments along with assessments of administrative penalties.
Kirtlan challenged the income tax assessments on the single ground that the Commissioner should not have formed the opinion that there had been tax evasion.
The income tax assessments involved taxation liabilities for the 2006, 2007 and 2008 income years.
For 2006, Kirtlan included $74,710 as taxable income in his return. The Commissioner amended this to $742,960 to include his UK-sourced income and other income. The Commissioner calculated the tax shortfall as $320,283.40.
For 2007, Kirtlan included no taxable income in his return, with the Commissioner amending the taxable income in his return to $1,255,217. This resulted in a tax shortfall of $564,025.90.
For 2008, $42,395 was included as taxable income in the return, with the Commissioner amending this to $6,311,572.
The Commissioner issued a total of $1,895,545 in administrative penalties for the shortfalls over the three years.
Kirtlan objected to the income tax and penalty assessments. In September 2021, the Commissioner wholly disallowed the objection.
Senior member of the ART, Robert Olding, said it was not necessary for the tribunal to make a finding about whether Kirtlan was an Australian resident in this case.
However, Olding said the ART would need to determine whether Kirtlan had a credible explanation for lodging his Australian tax returns on the basis that he was not an Australian resident.
"The relatively high number of days Mr Kirtlan spent in Australia, in the latter two years spending more than half the year in total in Australia, would weigh against a conclusion that Mr Kirtlan was not an Australian resident," Olding said.
"However, there are various factors and contemporaneous documents that are consistent with Mr Kirtlan having an intention, when he left Australia in 2005, to live indefinitely in and make his home in the UK."
This included Kirtlan's evidence that he chose to move to the UK for business reasons. It also noted that there was correspondence with third parties in which said he had departed from Australia to reside in the UK indefinitely and referred to living in the UK for the foreseeable future, along with a 2006 letter referencing his earlier decision to reside permanently in the UK.
He also leased a home in London, which he considered to be suitable for himself, his wife and his daughter. His daughter was also enrolled in nursery school in the UK.
The ART also accepted that the explanation provided by Kirtlan for returning to Australia was not improbable, given the disruption and uncertainty caused by the global financial crisis at that time.
On the other hand, the Commissioner argued that Kirtlan had spent a considerable amount of time in Australia with this family and additionally, maintained a family home in Australia.
When leaving for the UK, the Kirtlans also left their car and pets with family members and retrieved them when his wife and daughter returned to Australia and retained some furniture.
The Commissioner argued that this suggested that the departure was temporary rather than permanent.
Senior member Olding said if the tribunal had been required to consider whether Kirtlan was an Australian resident at the relevant times, the factors raised by the Commissioner would have been a considerable hurdle for Kirtlan to overcome.
However, Olding explained that the tribunal instead needed to consider whether the Commissioner should not have been satisfied that there was evasion.
In its decision, the ART considered the evidence of Kirtlan's accountant, Kathal Spence.
Olding said the evidence of Spence regarding Kirtlan's tax residency was important in the context of his longstanding business relationship and friendship with Kirtlan and the fact that they had regular contact and discussions.
Spence said he had advised Kirtlan in around April 2005 that he would not be an Australian resident for tax purposes.
"As already noted, the Commissioner does not say that Mr Kirtlan’s evidence should not be believed. Mr Spence approved Mr Kirtlan’s Australian tax returns prepared on the basis that Mr Kirtlan was not an Australian resident at the relevant time. I accept this evidence," Olding said.
In his affidavit, Spence said he based his view on advice from Kirtlan that he and his family were moving to the UK permanently, his understanding from many conversations that Kirtlan was bored with living in Perth and Kirtlan’s previous living pattern of living overseas and not being settled in Perth.
Spence also referred to Kirtlan’s ‘three-prong’ business model, which included an investment fund based in Europe, that he intended to pursue to set himself up for the rest of his life in London before retiring to the south of France, as he had said on many occasions he wanted to do.
The accountant also recalled questioning Kirtlan about the acquisition of a property in Buckland Hill. Kirtlan said it was a good investment, being a large double block, and specifically confirmed that he had no intention of returning to Australia to live in the home.
The Commissioner argued that the affidavit by Spence did not set out every possible factor that might be taken into account in reaching a view regarding Kirtlan’s residency status.
However, the ART said it was clear that Spence was aware of key details such as the retention of the Mosman Park property and the acquisition of the Buckland Hill property.
"On the foundation of that evidence, especially in relation to their long friendship and many and regular conversations, I am prepared to infer that Mr Spence was well informed regarding the business and personal activities of Mr Kirtlan relevant to his residency status," Olding said.
"From that base of knowledge, which probably put Mr Spence in a superior position to many advisors in respect of their understanding of the factual context against which their advice to clients is formulated, Mr Spence provided advice to Mr Kirtlan regarding his view as to Mr Kirtlan’s tax residency status and prepared or approved tax returns for Mr Kirtlan’s signature. Mr Kirtlan acted on that advice and authorised the filing of his returns on that basis."
Based on those circumstances, Olding said the Tribunal was satisfied that Kirtlan had provided a credible explanation for filing his returns on the footing that he was not a resident of Australia at the relevant times.
"The returns may have been inaccurate, but they were prepared or approved by an accountant of long experience and in a very good position because of their business and personal relationship to understand Mr Kirtlan’s activities and intentions. I accept the returns were not attended by evasion."
You need to be a member to post comments. Become a member for free today!
