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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.

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The Australian tax system is complex and can result in you accidentally committing tax fraud. If you are being investigated for or you have been charged with tax fraud offences, contact our office for legal advice by our expert criminal lawyers.

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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:

arrow  Commonwealth Criminal Code

arrow  Taxation Administration Regulations 

arrow  Proceeds of Crime Act 

arrow  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:

arrow  Cybercrime that impacts on superannuation and taxation

arrow  Offshore tax evasion (deliberately holding money and assets in offshore accounts to avoid paying tax)

arrow  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)

arrow  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.

Case Study

James is involved in an organised crime syndicate. He imports tobacco products from the United States through the post under an assumed product name. James imports tobacco in this manner to avoid paying import taxes. He sells them to local tobacconists who on sell them ‘under the counter’. Tobacconists sell them ‘under the counter’ for cash as the sale of the product would bring them to the attention of law enforcement. This process of sale means tobacconists are failing to pay GST on the product. As a result, the government is missing out on two revenue streams.

In a nutshell...

Tax fraud is illegally avoiding or limiting the amount of tax or superannuation you pay. It is a white collar crime that may involve criminal penalties. For more information, contact our office for a free initial consultation.

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. 

Case Study

Allan filed 10 income tax returns under multiple names over a period of 6 months with the intention of obtaining $60,000 in tax returns. He made the mistake of including the same bank account details on two of the returns lodged. This was flagged and an investigation was commenced. He was convicted and sentenced to 5 months imprisonment.

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.

Case Study

In 2020, Aaron Paul was receiving treatment in a drug rehabilitation facility when he was caught up in a tax fraud syndicate. He reached out to a former high school friend (the son of a former ATO Commissioner) for assistance when the facility was forced to close. 

The syndicate involved setting up payroll services to legitimate clients. The payments were then transferred to subcontractors, bypassing the ATO. He was employed as a personal assistant by the syndicate. 

He was convicted of money laundering but was not charged with conspiracy to defraud. He was sentenced to 3 years and 4 months imprisonment.

Conspiracy to defraud

arrow  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.
arrow  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.
arrow  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.
Case Study

James and Sally own a business. In 2019 they made a misrepresentation about their business’ total income and its expenses. They tried to claim meal allowances for meetings with clients and stakeholders beyond the income made by the business. They had no receipts to prove their claim and could not provide client or stakeholder information. Their attempt at defrauding the ATO was flagged and they were audited. They were convicted and sentenced to 5 years imprisonment.

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There are three common tax fraud offences:

  1. Obtain property by deception
  2. Obtain a financial advantage by deception
  3. Conspiracy to defraud

If you have been charged with a tax fraud offence, contact our office for a free initial consultation.

 

Disclaimer
The above is general legal information and should not be considered legal advice. You should speak with one of our criminal lawyers for legal advice tailored to your specific legal matter. The penalties listed are maximum penalties. The courts deal with matters on a case by case basis. It should also be noted that there may be court delays due to COVID-19.

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FAQs

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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