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TAX FRAUD

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Australia is one of the most heavily taxed nations in the world. It seems the harder we work, the more we are taxed. It can be tempting to try and find ways to avoid paying tax or limit the amount tax we pay. However, if your methods are less than legal, you could find yourself in serious trouble. 

Tax fraud is a serious criminal offence because it impacts on the Government’s ability to provide basic goods and services to the citizens and residents of Australia. Taxpayers money is used to provide goods and services such as education, healthcare, social services, etc.

Australian tax laws are also a complex system to navigate. It can be easy to make mistakes when filing your tax return, setting up or running a business, managing investments, etc. If you are unsure about how to navigate the system, you should seek the advice of a registered tax agent to avoid inadvertently making a costly tax mistake.

Heavy criminal penalties apply. If you are being investigated or prosecuted for tax related offences, contact our office for a free initial consultation by one of our expert criminal lawyers.

Many people believe that tax evasion is not as serious as other criminal offences, however, being a white collar criminal can have a greater impact on your life. It not only makes it difficult to gain or maintain employment in your chosen industry, it can result in you losing your professional licence or accreditation, your ability to obtain employment outside of your chosen industry, apply for loans and other financial services and result in your assets being frozen or seized.

What is tax fraud?

Tax fraud or tax evasion is a serious criminal offence that involves employing illegal methods to avoid or limit the amount of tax or superannuation you pay. Tax fraud is a white collar crime meaning that it is a financially motivated, non-violent crimes committed by business and government officials. The most common white collar crimes are corporate crimes such as insider trading and embezzlement. However, when it comes to tax fraud, that isn’t entirely true because the offence can be committed by anyone who earns an income.

Tax fraud is prosecuted under a number of Commonwealth criminal law statutes including:

  • Commonwealth Criminal Code
  • Taxation Administration Regulations 
  • Proceeds of Crime Act 
  • Crimes (Taxation Offences) Act

The ATO has the authority to prosecute minor tax fraud and regulatory matters. However, more serious taxation fraud cases are referred to federal law enforcement for investigation and are prosecuted by the Commonwealth Director of Public Prosecutions. Tax fraud is a criminal offence and the prosecution is therefore required to prove the elements of the offence beyond a reasonable doubt. 

 In 2015, the Serious Financial Crime Taskforce was established to target serious and complex financial crimes. The tax offences targeted by the taskforce include:

  • Cybercrime that impacts on superannuation and taxation
  • Offshore tax evasion (deliberately holding money and assets in offshore accounts to avoid paying tax)
  • Illegal phoenix activity (setting up a new company to continue the business of an existing company that has been deliberately liquidated to avoid paying taxes and other debts)
  • Serious financial crime affecting the ATO-administered measures of the Coronavirus Economic Response Package  

Outside of corporations, organised crime is a large contributor of tax evasion. The nature of organised crime means that paying taxes would flag their illegal activity with law enforcement. In the digital age, organised crime groups are developing more sophisticated methods to hide their business’ including money laundering their proceeds of crime. Money laundering occurs when proceeds of crime are transferred, or ‘washed’, through legitimate businesses such as using casinos, online currency, etc.

Common taxation offences:

Obtain property by deception

If you:

By a deception, dishonestly obtain property belonging to another with the intention of permanently depriving the other party of property; and

The property belongs to a Commonwealth entity, 

You are guilty of an offence.

The maximum penalty for this offence is a 10 years prison sentence. 

Obtain a financial advantage by deception 

If you:

By deception, dishonestly obtain a financial advantage from another person; and 

The other person is a Commonwealth entity,

You are guilty of an offence.

The maximum penalty for this offence is a 10 year prison sentence.

Conspiracy to defraud

 If you:

Conspire with another person with the intention of dishonestly obtaining a gain from a third person; and 

The third person is a Commonwealth entity,

You are guilty of an offence.

The maximum penalty for this offence is a 10 year prison sentence.

If you:

Conspire with another person with the intention of dishonestly causing a loss to a third person; and

The third person is a Commonwealth entity,

You are guilty of an offence.

The maximum penalty for this offence is a 10 year prison sentence.

If you:

Conspire with another person to dishonestly cause a loss, or to dishonestly cause a risk of loss, to a third person; and

You know, or believe that the loss will occur or that there is a substantial risk of the loss occurring; and

The third person is a Commonwealth entity,

You are guilty of an offence.

It does not matter whether you knew the third person was a Commonwealth entity.

The maximum penalty for this offence is a 10 year prison sentence.

Frequently Asked Questions.

It is easy to make a simple mistake like leaving a digit off your total income when lodging your tax return. If you have made a mistake, you can contact your accountant or tax agent to lodge an amended return. If it is a first offence or the ATO can see that it has been a minor administrative error, you are likely to receive a warning. If you have received an infringement notice or you have been charged, you should contact your accountant and seek legal advice immediately.

Unfortunately, if you use the services of another person to do your accounting and lodge your paperwork with the ATO, you are responsible for any mistakes made. The onus falls on you because you are required sign documents lodged with the ATO. It is a legal document and by signing it, you are stating on oath that it is true and accurate.

The ATO recommends keeping your tax records for 5 years from the date you lodge your return. Your records can be kept in hard copy or digitally, however, they must be true and clear copies of the original. Additional record keeping requirements may be necessary, depending on the situation, for example, disposing of an asset where capital gains tax is in question.

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