Judgment summary
This judgment concerns an interlocutory application by the applicant, Sergio Peter Laureti, for summary judgment against the Commissioner of Taxation in a proceeding appealing an objection decision that disallowed objections to 11 administrative penalty assessments (paragraph 1).
Justice Perry dismissed the application for summary judgment, finding that the Commissioner's position on the proper construction of the statutory framework governing default assessments and administrative penalties was arguable, and that the applicant had not discharged, and could not on this application be shown to have discharged, his onus of proving the assessments excessive or not the result of intentional disregard of a taxation law (paragraphs 53 to 60).
The Court ordered the Commissioner to file an amended appeal statement identifying with particularity the taxation law alleged to have been intentionally disregarded by the applicant, and ordered the applicant to pay the Commissioner's costs of the application (Orders).
Background
The applicant furnished income tax returns for the financial years ending 30 June 2001 to 30 June 2011, declaring a total taxable income of $695,429. During those years he was a director and shareholder of Laureti Management Services Pty Ltd (LMS), a company incorporated in Australia in 1985 (paragraph 3).
On 25 May 2012, the Commissioner advised the applicant of an audit into his tax affairs. The audit identified that a total of $16,126,798 had been credited to a loan account with LMS, which the applicant had not included as taxable income (paragraph 4).
The credited amounts were reviewed by the National Fraud or Evasion Panel, which concluded there had been evasion by the applicant, issuing its evasion opinion on 30 June 2022 (paragraph 5).
On 5 July 2022, the Commissioner provided the applicant with an audit position paper stating that the credited amounts had the characteristics of ordinary income under section 6-5 of the ITAA 1997, that the applicant had committed tax evasion, and that he was liable to an administrative penalty of 75% of the tax shortfall (paragraphs 6 to 8). The applicant responded on 12 September 2022, disputing the findings (paragraph 9). The Commissioner issued an audit completion letter and Reasons for decision on 13 October 2022 (paragraph 10).
On 25 October 2022, the Commissioner notified the applicant of default amended income tax assessments issued under section 167 of the Income Tax Assessment Act 1936 (Cth) for each income year, together with administrative penalty assessments totalling $5,735,998.09, being 75% of the tax shortfall amount and Medicare levy (paragraphs 11 to 14). The Commissioner declined to remit any part of the penalty under section 298-20 of Schedule 1 to the Tax Administration Act 1953 (Cth) (paragraph 15).
The applicant lodged an objection to the penalty assessments on 20 December 2022 (paragraph 15). On 15 August 2025, the Commissioner issued an objection decision, allowing in part the objection for the 2002, 2005 and 2011 income years (resulting in a nominal change), disallowing the objection for the remaining years, and maintaining the finding of evasion (paragraph 16).
The applicant lodged a Notice of Appeal on 10 October 2025 under section 14ZZ of the Tax Administration Act 1953 (Cth) (paragraph 17). The Commissioner filed his appeal statement on 26 February 2026, seeking dismissal of the appeal and affirmation of the objection decision (paragraph 18).
Core dispute
By interlocutory application dated 28 April 2026, the applicant sought summary judgment against the Commissioner under rule 26.01(1) of the Federal Court Rules 2011 (Cth) and section 31A of the Federal Court of Australia Act 1976 (Cth) (paragraph 19).
The applicant argued that there was no 'shortfall amount' within the meaning of section 284-80(1) Item 1 because the default assessments were made by the Commissioner forming a judgment under section 167 of the 1936 ITAA, rather than by the method statement process in section 4-15(1) of the 1997 ITAA (paragraph 20).
The applicant further contended there was no statement false or misleading in a material particular within the meaning of section 284-75(1)(b) or Item 1 of section 284-80(1), that a default assessment under section 167 could not retrospectively render tax return statements false or misleading, and that, unlike a default assessment, there is no power to render a penalty assessment based on a guess (paragraph 20).
The Commissioner disputed each of these propositions, submitting that the shortfall amount is properly identified by tracing through sections 284-80, 250-10(2), 5-5, 4-10 and 4-15 of the relevant Acts, including the special method in section 4-15(2) applicable where the Commissioner makes a default assessment under section 167 (paragraphs 39 to 41).
Court findings
Justice Perry summarised the well-established principles governing summary judgment applications under section 31A of the Federal Court of Australia Act 1976 (Cth) and rule 26.01(1) of the Federal Court Rules 2011 (Cth), including that the moving party bears the onus of persuading the Court that the application has no reasonable prospects of success (paragraphs 21 to 32).
Her Honour held that under section 167(b) of the 1936 ITAA, the Commissioner may exercise an evaluative judgment as to taxable income, including through an indirect audit methodology, and that this levied amount becomes the taxpayer's taxable income under section 166 (paragraphs 33 to 35).
The Court found that the Commissioner's appeal statement did not specify with particularity the false or misleading material particular contrary to rule 16.42 of the Federal Court Rules 2011 (Cth), but held that this deficiency was curable by amendment and not a deficiency warranting summary judgment (paragraphs 36 to 37).
The Court accepted that it is well established that the applicant bears the onus under section 14ZZO of the Tax Administration Act 1953 (Cth) to prove that the default assessments should not have been made or should have been made differently, or that the shortfall amount did not result wholly or partly from intentional disregard of a taxation law (paragraphs 22 to 32).
Her Honour found that the parties' positions on the proper construction of the statutory framework were completely at odds, that the Commissioner's position was arguable if not compelling, and that this question of statutory construction was not appropriate for determination by way of summary judgment (paragraph 54).
The Court further held that the applicant's submission sought to circumvent his own burden of proof, that it did not follow from the Commissioner reaching a different view of taxable income that the applicant's returns were not the result of intentional disregard of a taxation law, and that it would be inappropriate to take 'a considerable leap' to summary judgment where the applicant had not been put to proof of his own case (paragraph 57).
Her Honour also noted numerous factual issues spanning some ten years and involving a large number of loans, which required lay and expert evidence and cross-examination, and that the amounts in dispute were significant (paragraphs 58 to 59). The Court found the Commissioner's appeal statement was set out in a coherent manner and that the Commissioner had reasonable prospects of successfully defending the proceeding, save for the need for further specificity as to which taxation law was allegedly intentionally disregarded (paragraph 60).
Outcome
The applicant's application for summary judgment was dismissed (Order 1; paragraph 61).
The Commissioner was ordered to file and serve, by 4:00pm on 17 August 2026, an amended appeal statement identifying the precise taxation law alleged to have been intentionally disregarded by the applicant when furnishing his tax returns (Order 2; paragraph 62).
The applicant was ordered to pay the respondent's costs of the application, as agreed or assessed (Order 3).
Major issues / areas of contention
- Whether the Commissioner has no reasonable prospect of successfully defending the proceeding for the purposes of rule 26.01(1) of the Federal Court Rules 2011 (Cth) and section 31A of the Federal Court of Australia Act 1976 (Cth).
- Whether a 'shortfall amount' within the meaning of section 284-80(1), Item 1 of Schedule 1 to the Tax Administration Act 1953 (Cth) can be worked out by reference to a default assessment made under section 167 of the Income Tax Assessment Act 1936 (Cth), rather than the method statement in section 4-15(1) of the Income Tax Assessment Act 1997 (Cth).
- Whether the applicant's omissions in his furnished tax returns constituted a statement false or misleading in a material particular within the meaning of section 284-75(1)(b) of Schedule 1 to the Tax Administration Act 1953 (Cth).
- Whether a default assessment made under section 167 of the Income Tax Assessment Act 1936 (Cth) after lodgment of a tax return can retrospectively render statements in that return false or misleading.
- Whether the applicant discharged the onus under section 14ZZO of the Tax Administration Act 1953 (Cth) of proving that the assessments were excessive or that the shortfall amount did not result from intentional disregard of a taxation law.
- Whether the Commissioner's appeal statement adequately particularised the taxation law alleged to have been intentionally disregarded, as required by rule 16.42 of the Federal Court Rules 2011 (Cth).