Corporate Taxpayers may rely on ‘Data Files’ as Financial Records

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The Supreme Court of Western Australia confirmed that ‘data files’ are admissible evidence for corporate entities in Brian Kevin Hughes as liquidator of Westgem Investments Pty Ltd (Liq.) v Commonwealth Bank of Australia Ltd [2018] WASC 150.

This decision is relevant for corporate taxpayers as they may now rely on raw information which has been inputted into accounting software (such as ‘Mind Your Own Business (MYOB), Quickbooks or Xero) as evidence in support of their financial position. The information saved on the data files may then be processed for everyday use in the form of balance sheets, general ledgers etc.

A summary of the dispute and its potential benefits for taxpayers is set out below.

The Case

In the Westgem case, the liquidator relied on data files to demonstrate that Westgem Investments Pty Ltd (Liq.) was insolvent at the time when it entered commercial transactions with the Commonwealth Bank of Australia. Accordingly, the liquidator submitted that the Commonwealth Bank of Australia could not enforce the terms of the commercial transactions against Westgem Investments Pty Ltd (Liq.).

The case ultimately turned on the admissibility of ‘data files’ as evidence. Westgem Investments Pty Ltd (Liq.) had inputted information into the Quickbooks accounting software at the time when it entered commercial transactions with the Commonwealth Bank of Australia and these raw ‘data files’ demonstrated that Westgem Investments Pty Ltd (Liq.) was insolvent. The Commonwealth Bank argued that a data file could not be a book ‘kept’ by the company.

Tottle J weighed up both parties’ arguments, and ultimately determined that ‘data files’ containing the financial records of a company were ‘books’ admissible as evidence.

Relevance to Taxpayers

In tax disputes, the burden of proof is reversed, meaning that taxpayers are liable for proving that assessments made by the Australian Taxation Office are excessive. Accordingly, many tax disputes turn on the facts. The decision of Tottle J in the Westgem case is beneficial for corporate taxpayers, as it broadens the scope of information which they may rely upon to verify their financial position in tax disputes.


Gabrielle Bourke & Joshua Leslie

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