ATO prosecutions: Who’s in the firing line?

Failure to comply with the tax laws can have varying results. These range from the ATO issuing an amended assessment imposing penalties, to criminal prosecution by the ATO or criminal prosecution by the Commonwealth Director of Public Prosecutions for tax fraud under the Criminal Code.

Of course, any unpaid tax must be paid on top of any monetary penalties imposed.

The ATO prosecutes people for a range of criminal offences under taxation laws where taxpayers have not complied with their taxation obligations. Common examples of these offences include:

• failure to lodge an income tax return or activity statement;
• making false or misleading statements;
• falsifying or concealing identity; and
• record-keeping offences.

The penalties are serious and the maximum penalties the courts can impose for these offences are fines up to $5,500 and/or 12 months’ imprisonment per offence for individuals. Fines of up to $27,500 per offence can apply for companies, and a company director can be held liable for offences that a company has committed.

Recent figures released by the ATO show it successfully prosecuted around 2,000 individuals and companies for fraud, tax and superannuation offences in the 2011-12 financial year. Of the individuals and companies convicted:

• 39 individuals were prosecuted for offences including attempting to hide income and assets overseas, and individuals using stolen identities to submit false BASs. Some 37 custodial sentences were handed down by the courts, ranging from fully suspended to nine-year imprisonment;
• 1,447 individuals and 514 companies were prosecuted for taxation offences including failing to lodge returns, making false and misleading statements on tax returns and activity statements. For the offences, the court-imposed sanctions compromised reparation orders, fines and other penalties.

• In 2011-12, the majority of prosecutions were in relation to taxpayers not lodging returns or activity statements and taxpayers making false and misleading statements about their tax affairs.

So what were some of these convictions about?

A Victorian social worker was convicted of making a false or misleading statement and keeping a false record. She claimed a number of work-related deductions and offsets in her tax return, which were found to be false. She also provided a false receipt in an attempt to substantiate a work-related deduction. She was ordered to pay additional amounts and fines of $3,520, as well as $4,317 reparation.

A NSW operations analyst who has an Advanced Diploma of Accounting qualification, was convicted and ordered to pay a total of $7,745 (including a fine of $5,000) for three offences of making a false or misleading statement in each of his 2007, 2008 and 2009 income tax returns.

He claimed a spouse tax offset in each of the returns for persons who actually resided overseas and had never been his dependant. The magistrate noted that the defendant had no entitlement to this money as it was obtained by a false statement, and he was well aware of what he was doing by way of his qualifications, and his actions were reckless and dishonest.