HARVEY v FC of T

Members:
MD Allen SM
SE Frost M

Tribunal:
Administrative Appeals Tribunal, Sydney

MEDIA NEUTRAL CITATION: [2008] AATA 457

Decision date: 3 June 2008

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MD Allen and SE Frost (Senior Member, Member)

Introduction

1. Taxpayers are entitled to claim, as a deduction from their assessable income, expenditure they incur for managing their tax affairs.

2. This case is about a taxpayer, Ian Stuart Harvey, who paid $250,000 to a solicitor and claimed that all but $450 of that amount was properly characterised as a cost of managing his tax affairs. The question we have to consider is how much, if any, of the $250,000 that Mr Harvey paid is deductible. The year of income in issue is the year ended 30 June 1999.

3. The Commissioner disallowed the claim for deduction and then affirmed that decision by disallowing the taxpayer's objection. It is that objection decision that is under review here.

The legislation

4. The relevant legislation is s 25-5 of the Income Tax Assessment Act 1997 ("the Act"). At the time, s 25-5 provided:

• "(1) You can deduct expenditure you incur to the extent that it is for:
  • (a) managing your *tax affairs; or
  • (b) complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the *tax affairs of an entity;

  …

• (2) You cannot deduct under subsection (1):

  …

  • (e) a fee or commission for advice about the operation of a *Commonwealth law relating to taxation, unless that advice is provided by a *recognised tax adviser.

  …

• (4) You cannot deduct capital expenditure under subsection (1). However, for this purpose, expenditure is not capital expenditure merely because the tax affairs concerned relate to matter of a capital nature."

5. The expression "tax affairs" was not then defined, but "tax" was defined to mean:

• "(a) income tax imposed by the Income Tax Act 1986, as assessed under this Act; or
• (b) income tax imposed as such by any other Act, as assessed under this Act."

6. A "recognised tax adviser" included a legal practitioner.

7. The matter is before the Tribunal under Part IVC of the Taxation Administration Act 1953 ("the Administration Act"). In accordance with s 14ZZK of the Administration Act, the taxpayer bears the burden of proving that the assessment involved is excessive.

The issues

8. The issues identified in the "Applicant's Outline of Submissions on Legal Issues" filed with the Tribunal on 29 February 2008 were:

• (i) whether the amount of $249,550 is, in whole or part, "expenditure … for managing [Mr Harvey's] tax affairs" within the meaning of s 25-5(1)(a) of the Act;
• (ii) whether the amount is, in whole or part, "expenditure … for complying with an obligation imposed on [Mr Harvey] by a Commonwealth law, insofar as that obligation relates to the tax affairs of an entity" within the meaning of s 25-5(1)(b) of the Act;
• (iii) alternatively, whether the amount is, in whole or part, "capital expenditure" and therefore not deductible by reason of s 25-5(4) of the Act;
• (iv) whether the express apportionment of the amount charged to Mr Harvey in the two invoices issued by the solicitor governs the question whether the amount of $249,550 is wholly for managing Mr Harvey's tax affairs;
• (v) if not, how much of the whole amount should be apportioned or referable to the management of Mr Harvey's tax affairs within the meaning of s 25-5(1) of the Act.

9. Subject to what we set out in [20] below, we agree that they are the issues for our determination, although for convenience we will deal with the issues in a different order.

Issue 1 - Was any part of the expenditure "for managing [the taxpayer's] tax affairs"?

10. At the heart of this first issue is a costs agreement which was made between Mr Harvey and his legal advisers, David Bonnell & Associates, Solicitors ("DBA") in the early part of 1999. (DBA is undoubtedly a "recognised tax adviser" for the purposes of the relevant legislation.) The costs agreement letter was dated 26 March 1999, and Mr Harvey indicated his acceptance of the arrangement on 8 April 1999. It is that letter that, Mr Bonnell of DBA said, "purports to be the contract between DBA Solicitors and Mr Harvey" (Transcript, page 48).

11. In that letter, under the heading "Work to be carried out", appears the following:

"The work that you have instructed us to carry out on your behalf involves establishing an investment and contribution plan including preparation of a superannuation trust deed and associated minutes and other additional services required to implement the contribution plan."

12. Under a separate heading "Our Charges" appears the following:

"As agreed, our cost in this matter will be $250,000.

All and any future contributions undertaken directly or indirectly in accordance with our advice, procedures and documentation at any future time will be required to be implemented through David Bonnell & Associates.

I will provide two invoices. The first invoice will be for $450.00, our usual costs for providing basic superannuation plan documentation and this will not be deductible. The balance of our fee will be charged for tax advice and will be wholly deductible."

13. With some minor exceptions, the letter is in almost identical terms to the one that was issued, by the same firm, to the taxpayer in
Re Drummond and Federal Commissioner 2004 ATC 2381; [2004] AATA 1342; 58 ATR 1119 (on appeal
Drummond v Federal Commissioner of Taxation 2005 ATC 4783; [2005] FCA 1129; 60 ATR 356). The arrangement in question here is also identical to the one in question in the Drummond matter. In summary, the arrangement revolved around the making of contributions to a non-employer sponsored superannuation fund.

14. Mr Harvey was duly provided with proforma documentation to enable:

• • the incorporation of a company, Limash Investments Pty Ltd, which was to be under his control;
• • the establishment of the Ian S. Harvey Superannuation Fund with another company under Mr Harvey's control, Limash Holdings Pty Ltd, as its trustee; and
• • Mr Harvey to make contributions to the superannuation fund.

15. Mr Harvey made contributions totalling $5,102,000 to the fund, which contributions were accepted by the trustee on 12 and 26 April 1999.

16. In addition - and, once again, as was the case in the Drummond matter - Mr Harvey was provided by DBA with a letter that was headed "Tax Advice". The letter was dated 23 March 1999 and is identical to the one issued to the taxpayer in the Drummond matter. It included commentary on fringe benefits tax and superannuation law.

17. The bulk of that 23 March 1999 letter is in fact a rewritten version of a private ruling that Mr Bonnell received from the Commissioner in relation to Mr Bonnell's own taxation affairs. Whereas the body of the private ruling had referred to Mr Bonnell by name, the "advice" that DBA sent to Mr Harvey referred more neutrally to "a taxpayer" or "the taxpayer". Apart from the rewriting of the private ruling that was issued to Mr Bonnell, the "advice" letter also made reference to Part IVA (the general anti-avoidance provisions in the Income Tax Assessment Act 1936), a topic that had not been dealt with in the private ruling. Again, this state of affairs is reminiscent of the circumstances in the Drummond matter.

18. Consistently with the costs agreement, Mr Harvey received two invoices from DBA, both of them dated 23 March 1999. One was for $450 and it was said to relate to "Our costs for establishing The Ian S. Harvey Superannuation Fund". The second one was said to relate to "Our costs for tax advice" and was for $249,550.

19. There is no doubt that Mr Harvey incurred expenditure. There is no doubt that the amount of expenditure that he incurred was $250,000. Furthermore, there is no doubt that at least some of what he received from DBA amounted to "tax advice": so much was in fact conceded by the Commissioner (Respondent's Outline of Submissions, paragraph 4) - and, in our view, properly so.

20. However, the critical question is whether any part of the expenditure of $250,000 was "for" the tax advice that he received. It is not sufficient that Mr Harvey paid money and received tax advice. He must have paid the money for that tax advice or, in the language of s 25-5, "for managing his tax affairs". In other words there must be a nexus between the expenditure, on the one hand, and the managing of his tax affairs on the other, such that it is proper to characterise the expenditure as expenditure incurred for managing his tax affairs.

21. Immediately it will be noted that the way we have expressed the question in [20] above - whether any part of the expenditure of $250,000 was for the tax advice that he received - is somewhat different from the taxpayer's formulation of the first issue as set out in [8] of these reasons. The taxpayer's proposition was that we need to determine whether any part of the $249,550 (rather than any part of the $250,000) was for managing his tax affairs. What is implicit in the formulation of the question in that way is that no part of the $450 was incurred for managing Mr Harvey's tax affairs, and with that we certainly agree. But because the taxpayer's formulation tends to suggest that $450, and no more, is attributable to the provision of the "basic superannuation plan documentation" (see [12] above), we prefer to express the issue as we have in [20].

22. To address the issue we need to examine the evidence of Mr Harvey. Mr Harvey made three written statements and was cross-examined. The following details, unless otherwise indicated, are taken from Mr Harvey's statement dated 19 September 2007.

23. Mr Harvey, according to his written statement, found himself in late 1998 looking for a long-term retirement option as a way of providing for his family. He said that he was looking for someone who could provide him with such a retirement option and also provide taxation advice (paragraph 4).

24. He consulted with a number of financial planners as well as friends and colleagues regarding the best way to plan and structure a superannuation plan to enable him to provide ongoing financial support to his family (paragraph 5).

25. Eventually he was introduced to David Bonnell. By the time he spoke to Mr Bonnell, Mr Harvey's intention was to establish a superannuation fund to invest the windfall sum that he was expecting from some employment options. It was always his plan that these funds would be invested to provide for his family and for his retirement (paragraph 8).

26. Mr Harvey said that he went to Mr Bonnell for "taxation advice in respect of income tax and superannuation" (paragraph 9). He explained that none of the other financial planners or tax agents that he knew offered the "total tax advice" (paragraph 9) that he was seeking.

27. He had some meetings with Mr Bonnell in February 1999 (paragraph 10). His intention in meeting with Mr Bonnell was to discuss his objectives and the prospects of generating an income without having to rely on working (paragraph 12). He said that during the first meeting he told Mr Bonnell that he was looking to invest "a substantial amount of money", being the proceeds from the sale of employment share options (paragraph 13).

28. Mr Bonnell explained that if Mr Harvey was both an employee of a company and its controlling shareholder, he could make a contribution to a superannuation fund and claim a tax deduction for that contribution. Mr Bonnell said that he could provide advice to Mr Harvey on the taxation consequences of making such a contribution to a non-complying superannuation fund (paragraph 14). Mr Bonnell explained that he had obtained a ruling from the Australian Taxation Office ("ATO") that confirmed that the contribution to a non-complying superannuation fund was deductible. Mr Bonnell also told Mr Harvey that he had obtained opinions from Queen's Counsel (paragraph 15).

29. Mr Harvey had a second meeting with Mr Bonnell "to go into more details on how the structure would work". Mr Bonnell showed Mr Harvey a copy of the ruling he had received from the ATO. Mr Harvey read the ruling (paragraph 16). Mr Harvey said that the fact that the ATO had favourably ruled on the proposed structure gave him confidence that the proposal Mr Bonnell was suggesting was "a legitimate and viable means of providing a retirement plan" for Mr Harvey and his family. This was described as a "deciding factor" in Mr Harvey's decision to go ahead with the contribution (paragraph 17). (We now know, on the basis of decisions of the Full Court of the Federal Court in
Harris v Commissioner of Taxation [2002] FCAFC 226; 2002 ATC 4659 and
Prebble v Commissioner of Taxation [2003] FCAFC 165; 2003 ATC 4770, that contributions of this kind are not, in fact, deductible.)

30. There is, of course, an air of contrivance to a costs agreement that says, in effect, "I will do X for you, but I will invoice you for Y and Z." Nevertheless, the practical reality is that the tax outcome that DBA held out to Mr Harvey, although incorrect, was so central to the attractiveness of the arrangement that Mr Harvey entered into, that Mr Harvey must be seen to have paid the $250,000 for the totality of the services that DBA did, in fact, provide to Mr Harvey. Those services included the provision of the tax advice - first orally, during the early conferences, bolstered by Mr Harvey's reading of both the ruling that Mr Bonnell had obtained and the QC opinions, and then in writing through the letter dated 23 March 1999 to Mr Harvey. Contrivance or not, it is unreal to suggest that the $250,000 was charged solely for the conduct of what the costs agreement said was the "Work to be carried out" and that the remaining services were provided free of charge. The favourable, although incorrect, tax advice was integral to Mr Harvey's decision to make a contribution and it was an integral part of what he paid for. It follows that, to some extent at least, the expenditure incurred was for "managing [his] tax affairs" within the meaning of that expression in s 25-5.

Issue 4 - Does the express apportionment in the invoices mean that the amount of $249,550 is wholly for managing Mr Harvey's tax affairs?

31. No. How much of the expenditure was for managing Mr Harvey's tax affairs is a question of fact for us to determine on the basis of the evidence presented to us. What was specified in the invoices is a relevant factor but it is not determinative:
Commissioner of Taxation v Broken Hill Pty Co Ltd [2000] FCA 1431; 2000 ATC 4659 at [36]; Drummond at [45]. This is despite the fact that it is not alleged by the Commissioner that Part IVA applies or that the arrangement was a sham.

Issue 5 - How much of the expenditure was for managing Mr Harvey's tax affairs?

32. First it is appropriate to consider how broad is the expression "tax affairs" and in particular, whether it is broad enough to encompass not only income tax affairs and matters that are incidental to income tax, but also matters relating to taxes other than income tax, such as fringe benefits tax.

33. As the Act stood in relation to the 1999 income year, the word "tax" was defined but the expression "tax affairs" was not. In
Bartlett v Commissioner of Taxation 2003 ATC 4962; [2003] FCA 1125; (2003) 54 ATR 261, Hill J was asked to determine, in respect of the same income year as here (1999), whether expenditure incurred for the provision of advice relating to group tax and provisional tax was deductible under s 25-5. The reason for the particular controversy in that case was that neither group tax nor provisional tax is "assessed" under either of the Income Tax Assessment Acts (see the definition of "tax", set out in [5] of these reasons), and so they are not, strictly speaking, "income tax".

34. His Honour explained the position as follows (54 ATR at 274):

• "[63] It is clear that Parliament did not intend that the expression "tax affairs" as used in s 69 of the [Income Tax Assessment Act 1936] should be limited to the income tax affairs of a taxpayer in the strict sense of the tax which is the subject of assessment under s 166 of the 1936 Act. If Parliament had so intended, it could have said so very simply. Take for example expenditure incurred by a taxpayer for advice on or in connection with the calculation of provisional tax. Strictly provisional tax is not itself income tax. While it is a tax and is payable under s 221YB of the 1936 Act it is not assessed under any Act. The liability to provisional tax is ancillary to the liability to income tax and is not a separate tax:
  FCT v Clyne (1958) 100 CLR 246 at 260 per Dixon CJ. The liability arises for the purpose of enabling the income tax of certain taxpayers to be collected during the financial year for which it is levied and in advance of assessment. Advice in relation to compliance with requirements for provisional tax clearly would involve a tax-related matter within the meaning of s 69 [the predecessor provision in the 1936 Act] and thus potentially deductible under that section if all other requirements of the section were fulfilled.
• [64] Likewise, group tax, and prescribed payments tax are both taxes which are not the subject of assessment. They are both amounts which a taxpayer is required to deduct from amounts payable to others, the one from salary and wages paid to an employee and the other from amounts paid to contractors in certain industries. Like provisional tax group tax and prescribed payments tax are ancillary to the liability imposed for income tax on a person not being the payer of the amount from which deduction is to be made. They arise to ensure that income tax of a taxpayer will be paid to the Commissioner concurrently with the derivation of income and the liability to pay to the Commissioner is there to protect against payment of income tax being evaded. In my view advice concerning both would thus fall within the expression "tax affairs" as used in the 1936 Act.
• [65] I think that a like view should be taken of the construction of s 25-5 of the 1997 Act, particularly when in the year of income there was no definition of "tax affairs". … There is nothing in the Explanatory Memorandum to the 1997 Act or the Second Reading Speech to that Act which suggested that s 25-5 was to be given any different or narrower interpretation than s 69 of the [1936 Act] or for that matter that it was to be given a wider interpretation. In my view in the relevant year of income here, and before s 25-5 was amended to include a definition of "tax affairs" advice concerning provisional tax, group tax or prescribed payment deductions and obligations thereto were intended to be deductible. …"

35. There is nothing in the judgment of the Full Court on appeal (
Falcetta v Commissioner of Taxation;
Commissioner of Taxation v Bartlett 2004 ATC 4514; [2004] FCAFC 117; 207 ALR 102) that casts doubt on Hill J's reasoning.

36. Once it is accepted that s 25-5 should be interpreted neither more narrowly nor more widely than its predecessor, there is no room for the argument that expenditure for advice relating to fringe benefits tax is deductible under s 25-5. Nor, for that matter, can expenditure for advice relating to the application of the Superannuation Contributions Tax (Assessment and Imposition) Act 1997 or the Superannuation Industry (Supervision) Act 1993 be deductible under that provision.

37. We note that this conclusion is consistent with that reached by Deputy President Block in
Re Drummond - a conclusion that was originally challenged by that taxpayer in the Federal Court but ultimately withdrawn (see 60 ATR at 366 [38]).

38. We now turn to the question of apportionment.

39. In the Applicant's Outline of Submissions on Legal Issues (Exhibit A4), the following appears at paragraphs 84 and 85:

• "[84] If apportionment is necessary, the starting point must be that the fee was sizeable in the context of the provision of services by lawyers. It would be unfair and unreasonable not to acknowledge that Mr Harvey was willing to pay this fee because of the value to him of the advice with respect to deductibility of contributions.
• [85] It follows that the most fair and reasonable method by which to apportion the $249,550 fee is to carve out the (relatively nominal) value of works in providing documents and advice which do not give rise to a deduction under Division 25 and which were not otherwise attributable to the $450 fee. Any other method of apportionment (such as excising a percentage of the $249,550 fee) cannot satisfactorily accord with the underlying commercial basis for the transaction."

40. As to the first sentence of paragraph 84, we agree - but we need to emphasise again that the fee was $250,000, not $249,550. It follows that the second sentence of that paragraph misconstrues things. We think that the proper inference to draw is that Mr Harvey was willing to pay the $250,000 because of the value to him of the totality of the services that he received. To suggest that the value to him is entirely sourced in the tax advice (to the effect that the contribution would be deductible) is contrary to his own evidence - referred to in [23] above - that what he wanted was "a long-term retirement option as a way of providing for his family" and that, in Mr Bonnell of DBA, he had found "someone who could provide him with such a retirement option and also provide taxation advice" (our emphasis).

41. Paragraph 85, therefore, in seeking to identify the most fair and reasonable method by which to apportion the $249,550 fee, misses the point. The true exercise is to apportion the entire $250,000. And for that, the starting point must be Mr Bonnell's evidence as to how he calculated the overall $250,000 fee in the first place. He said that from the time he established DBA (he had previously been a partner at Gadens), he had never charged for his services on a time basis. In particular, under cross-examination by Mr Connor SC, he said (Transcript, page 51):

"It doesn't matter what I do. I always charged a fee that is a single fee. It doesn't matter what I do. It's always a fixed fee. I never charge time based. I don't keep time sheets. I haven't since I formed the firm."

42. He also gave evidence that his firm had entered into costs agreements with around 300 clients other than Mr Harvey, each of them in relation to the same type of arrangement as the one under consideration here (paragraph 1 of his statement dated 10 March 2008). Often the fee would be 10 percent of the amount contributed, and sometimes it would be 5 percent (Transcript, page 50), but he said in cross-examination (Transcript, page 52):

"… in Mr Harvey's case for instance it was not. It was a fixed fee. I agreed to that amount. We talked about the dollar figure and that was why the dollar figure was in there rather than the percentage figure."

43. And so, not only was the fee of $250,000 not based on the time spent by DBA in performing the services for Mr Harvey, it was also a "fixed fee", not calculated as a percentage of the amount contributed. The suggestion in paragraph 22 of Mr Harvey's statement, that the fee would be "5% of the contribution … as a fee for providing tax advice on the deductibility of the contribution to my superannuation fund", must be rejected in light of Mr Bonnell's evidence and the clear terms of the costs agreement letter.

44. Mr Harvey's counsel suggested three alternative methodologies to apportion that $250,000 fee. They were summarised in paragraph 86 of Exhibit A4 in the following way:

• "(a) to excise administrative tasks to establish the fund not covered by the $450 fee;
• (b) to excise disbursements not covered by the $450 fee; and
• (c) to excise work on subject matters of tax advice which are not 'tax affairs'."

45. Each of the suggested methodologies was expanded upon in the Applicant's closing submissions (Exhibit A6). As an example, in relation to methodology (a), it was said:

• "[48] Mr Bonnell gave uncontested evidence as to how he set the $450 fee. Mr Bonnell [said] that he set at $450 the price for documents to set up the Fund, because that was the amount which he understood was then being charged in the market place at the time for similar documentation to establish a superannuation fund from proforma documentation including conferences. It was also the amount he had charged to set up a complying superannuation fund both in his practice at Gadens and as a sole practitioner. It was his understanding that the usual practice when ordering the establishment of a company or trust document from a large provider of such structures, was that the fee charged included all supporting documentation such as minutes, forms and draft documents for immediate and future use as well as notifications to relevant registration bodies. Mr Bonnell decided he should follow what he considered to be accepted business practice.
• [49] However, if the Tribunal finds that the cost of various documents to establish the Fund was not entirely covered by the invoiced $450 and some amount ought to be excised from the $249,550 fee, then the Applicant refers to the evidence of Ms Lanigan estimating fees for the cost of preparation of all documents including the Trust Deed at between $1,500 and $2,000." [Footnotes and references omitted]

46. The reference to "Ms Lanigan" is a reference to Sandra Lanigan, a Director of SML Legal Pty Limited, who in 1999 had been a partner in the Taxation Group of Blake Dawson Waldron. Ms Lanigan had been asked by Mr Harvey's solicitors to "estimate the fees you might have charged in 1999, or the fees any firm you have worked for may have charged, or such other basis for estimating fees as you consider appropriate", for seven named activities which can fairly be described as the individual components of the services that DBA provided to Mr Harvey.

47. The Commissioner objected to Ms Lanigan's evidence on the basis that her focus was on who the world who will howhat she or her firm - rather than DBA - would have charged for the services that DBA provided. It was said that her evidence would not assist the Tribunal to address the question that has to be addressed in this case. Nevertheless, we considered that her report might be relevant as giving us a benchmark, and admitted it into evidence as part of the Applicant's Bundle of Documents (A1).

48. Ms Lanigan approached her task as best she could. She estimated, where she could, what she or her firm would have charged in 1999 for the components of the work - and generally on the basis of the time she thought would have been required to carry out the tasks. In that way we could calculate a relativity between the different components of the total, but that would be a relativity based on estimates of the time taken for each of the components. The difficulty with that is that Mr Bonnell specifically told us that he never charged for his services on a time basis. And in any event, we think it entirely inappropriate to use, as a method of apportionment, one which takes the total fee (arrived at on a basis other than time occupied) and then carves out of it time-based estimates of another practitioner's fees for the components of the total as if the components. Indeed, we do not think it appropriate to use any of the alternative "carve-out" methodologies (b) or (c) listed in [44] of these reasons.

49. Ms Lanigan's report does provide an opinion as to the relative difficulty of the issues dealt with in the components of the total services, and we have considered whether that opinion might provide a reasonable basis for apportionment of the $250,000 fee that was charged. She said this at page 4:

"… I believe that I would have estimated the fees to provide advice on the deductibility of the proposed contribution and the potential application of Part IVA to deny such deduction would be higher than the fees estimated to provide advice on the other issues concerning superannuation and fringe benefits tax. This is because the analysis required to advise on the latter issues is more straightforward, involving what I would regard as fairly "mechanical" provisions.

In my opinion, the more difficult analysis would have been required in advising on the deductibility and Part IVA aspects of the proposed contribution by the client. This is because the correct interpretation of the legislative provisions involved was not as clear or straightforward, and involved issues which have subsequently been the subject of various decisions by the courts. In providing an estimate of fees to be quoted for provision of advice on these points, I would have considered additional time would have been required to be spent by both partner and non-partner in researching, considering and preparing the advice. It is for this reason that I have concluded that the estimate which I would have made at the relevant time would have been higher for advice on these aspects than the estimates for the advices on superannuation and fringe benefits tax matters."

50. Of course, an apportionment based on the perceived difficulty of the different components of the service is really not so different from one based on time, since the time spent on solving a problem will generally be a function of the complexity of the problem.

51. The real difficulty that we have is that the evidence does not provide any real guidance on how the fee that was actually charged should be apportioned. Mr Harvey stated at paragraph 21 of his statement:

"The ability to claim a deduction for the contributions was of significant value to me …"

but exactly what was its value to him, and more particularly how the value of the advice, to the effect that the contribution was deductible, rated against the value of the proforma documentation (which provided the mechanism by which the deduction could be claimed) are questions that have been left unanswered and, indeed, unexplored.

52. Having already rejected the "carve-out" methodologies, we turn to the only other suggested methodology, which was developed in Exhibit A6. This methodology was based on Ms Lanigan's time estimates. The submission was that we take the midpoint of the estimated fee for each of the identified components of the total service, and then add them to arrive at a total ("A"). Then we should compare that total with the actual fee charged by DBA ($250,000, or "B"). Ms Lanigan's estimated fee for that component that is strictly "tax advice", multiplied by B and divided by A, would be the proportion of the $250,000 attributable to the tax advice.

53. There is a good deal of logic in that methodology. We may well accept it as a sound basis for apportioning DBA's fee if we could draw a parallel between Ms Lanigan's approach to setting fees and that of DBA. However, the effect of Mr Bonnell's evidence is that his firm charged what it thought the market would bear, and he specifically distanced himself from a time-based approach to billing. What we are left with is a fee that the client was prepared to pay, a fee that we have found was paid for the totality of the services that were provided to him, but no rational basis on which we can attempt an apportionment between those services that can be described as "managing his tax affairs" and those that cannot.

54. Given that outcome, we consider it unnecessary to address issues 2 and 3 identified in paragraph 7 of these reasons.

Conclusion

55. The taxpayer's burden under s 14ZZK of the Administration Act is to show that the assessment is excessive. In that sense, it is necessary that the taxpayer show the extent to which it is excessive:
Commissioner of Taxation v Dalco 90 ATC 4088; [1990] HCA 3; (1990) 168 CLR 614; Bartlett, per Hill J at 276 [70]. The taxpayer has not done so.

56. In those circumstances we must affirm the objection decision under review.