Category: Tax

ATO on reported tax evasion

The Australian Tax Office received over 22,900 reports about suspected tax evasion in the six months to 31 December 2005. Reports with enough information for follow-up action or investigation led to over $26 million in tax and penalties being raised.

The most common reports were about:

* irregularities in pay as you go (PAYG) withholding – some businesses are not withholding an amount from payments to employees or are not sending in withheld amounts
* business income not being declared
* businesses in the cash economy
* income tax returns not being lodged, and
* non-business income not being declared.

People making reports about tax evasion included current or former employees, friends or acquaintances, current or former spouses or partners, customers of the business being reported and third parties who overheard something.

The five industries reported most often were:

* building and construction
* retail trade
* cafes and restaurants
* property and business services, and
* manufacturing.

Topics recently reported

* Businesses not declaring all of their cash income. Businesses must include all income in their tax returns, whether it is in cash or another form.
* Employees not being asked to complete a Tax file number declaration (form number NAT3092) and where necessary a Withholding declaration (NAT3093) so that the appropriate PAYG withholding amounts can be withheld.
o Every employee should complete a Tax file number declaration. Their employer should then complete the payer section of the declaration, send the original to the Tax Office within 14 days of the employee starting work, and keep a copy.
o Every employee should also give their employer a completed Withholding declaration if any adjustments need to be made to the standard rate of withholding.

What have the ATO observed in the community?

We are receiving calls alleging that some GST registered trades people are not providing tax invoices. Some consumers are tempted to pay cash and not ask for a tax invoice, but then find they have a problem if the work is faulty, or if they need to make a warranty or insurance claim.

Some tax evaders who were recently caught

A bricklayer was reported as not lodging activity statements for over a year. Our investigations resulted in over $47,000 in tax and penalties.

A restaurateur was reported as not meeting superannuation obligations to eligible employees and not sending the PAYG withholding amounts retained from payments to staff. The investigation resulted in over $78,000 in tax and penalties.

Individuals involved in the property and construction industry were reported to be claiming personal expenses for such things as a nanny, travel and extensions to their own home as business expenses. Investigations by ATO staff resulted in over $500,000 in tax and penalties.

An entertainment promoter was reported to be paying employees cash wages without withholding and sending amounts from payments. Investigations resulted in over $900,000 in tax and penalties.

A security company was reported to be only withholding 50% of the pay of its employees through the use of two time sheets. Investigations found one time sheet showing actual hours worked and the other showing half the hours which was used to record payment and tax for the mostly full-time employees. The investigation resulted in over $6 million in tax and penalties.

From ATO press release

Three arrested over tax evasion

Three people have been arrested by the Australian Crime Commission and charged with tax evasion offences.

Three company directors were arrested at the Southport Police Station on the Gold Coast and were charged with Conspiracy to Defraud the Commonwealth. It is alleged that between 1999 and 2005, the benefit that the trio received through defrauding the Australian Taxation Office (ATO) was $6.6 million.

Conviction on these charges carries jail terms of up to 10 years and fines totalling up to $110,000 each. Proceeds of Crime Action has also been used in respect to this specific investigation and $10 million in assets are currently restrained.

“The charging of three directors of a Queensland company with conspiracy to defraud the Commonwealth is a significant step in this multi-agency project,” the Treasurer said.

“The ACC and its partner agencies have vigorously pursued promoters and participants allegedly involved in concealing substantial taxable income through falsifying documents and transactions. This particular case has involved extensive investigations in Australia, Switzerland, the United Kingdom and China,” Senator Ellison said.

Project Wickenby is a multi-agency taskforce set-up in 2004, with funding of $305.1 million over seven years, to investigate internationally promoted tax arrangements that allegedly involve tax avoidance or evasion, and in some cases large-scale money-laundering.

It is further evidence of the Government’s determination to defend the integrity of the Australian tax system. On 6 April 2006, laws came into effect to penalise promoters of tax avoidance or evasion schemes.

Project Wickenby is being managed at the cross-agency level, with the ATO being the lead agency. The five agencies involved are the ATO, the Australian Crime Commission (ACC), the Australian Federal Police (AFP), the Australian Securities and Investments Commission (ASIC) and the Commonwealth Director of Public Prosecutions (CDPP). This is the first time that these five agencies, supported by AUSTRAC, the Attorney-General’s Department and the Australian Government Solicitor, have brought their expertise and considerable powers together, to deal with tax avoidance and evasion.

When fully resourced, well over 350 officers from these agencies will be working on Project Wickenby, the majority from the Tax Office.

“Investigations are continuing into a number of similar complex cases with a view to laying criminal charges and taking proceeds of crime recovery action,” the Treasurer said.

From the Treasuruer’s press release

Gaol sentence for breaching PAYG obligations

The Tax Office has announced that a Queensland employer who failed to withhold more than $600,000 in tax from his 44 workers’ wages has been sentenced to three and a half years in prison, having been found guilty on five counts of defrauding the Commonwealth. He had also breached worker’s compensation, superannuation and Centrelink requirements.