Unreported Income | What to look out for when assessing economic loss

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By Kain Elsmore 

Obviously, all tax payers in Australia have an obligation to comply with legislation in relation to the reporting of their income.  Unfortunately, this is not always the case and a claimant presenting with financial records which do not fully reflect the totality of their income may cause some concern for those persons calculating their economic loss.

Generally, the prospect of preparing amendments to the relevant financial records is met with trepidation as to the ensuing tax debt.  However, amendments may provide some positive cost / benefit outcomes in relation to claims for damages.

I provide the following example:

  • Joe is a Carpenter and has been for several years
  • Joe’s injury occurred on 30 June 2015 and since that time he has been / will continue to be unable to work
  • He “does cashies” which he estimates equate to around $25,000 per year
  • His pre-accident taxable income (relating solely to his work as a subcontract Carpenter) is $40,000 per year for the years ended 30 June 2013 to 2015
  • Based on an amended taxable income of $65,000 per year, the additional tax payable during the aforementioned years would be around $27,000 and
  • The difference between Joe’s losses (5% multiple) from 01 July 2015 to 30 June 2025 (notional retirement) calculated based on his original taxable income and amended taxable income is around $100,000 after tax

Based on the above, the cost to Joe of meeting his tax obligations may give rise to an increased economic loss assessment.  Further, Joe’s claim can proceed with a full set of financial records which accurately detail his earnings.

Want to know more?

Should you require any assistance with the amendment of taxation returns and assessment of damages, please contact Kain Elsmore our Forensic Services Director for assistance.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

 

 

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