Most individuals and businesses correctly comply with their tax obligations, but there are exceptions, as detailed in the below examples.

David Irvine, a businessman from Brisbane has been sentenced by the Brisbane District Court to four years and six months in jail for GST fraud and personal income tax return fraud by illegally obtaining nearly $600,000.

Between 2012 and 2015, David Irvine, the director of International Products Group Pty Ltd (IPG) and
a corporate trustee for the Irvine Family Trust, lodged 39 monthly Business Activity Statements (BAS), which resulted in wrongful payment of  tax refunds amounting to $480,000 from the Australian Taxation Office (ATO) into his personal bank account. In addition, Mr Irvine falsely reported export sales from his company to reduce the company’s GST payment obligations. Furthermore, Mr Irvine had declared in his income tax returns nil income for the 2009 to 2011 financial years, resulting in a tax shortfall of $116,056.

Suleyman Erdogan, the director of labour hire firm Sunraysia Harvesting Contractors Pty Ltd (Sunraysia), was sentenced to six months in jail by the County Court of Victoria for Pay as You Go withholding tax (PAYGW) fraud relating to illegal phoenix activities.

Mr Erdogan (with the assistance of a financial services advisor, Mrs Samantha Toffoletti), registered two shell companies – Danood and Jameron, to sub-contract the services of Sunraysia. The shell companies were registered to deduct PAYG withholding tax from the salaries of the employees of Sunraysia. The ATO has found that Mr Erdogan illegally failed to remit to the ATO more than $664,000 in PAYGW from his forty-nine employees. The ATO’s investigation also found that no BASs were lodged by Dannod and Jameroon for the 2012, 2013, and 2014 financial years. Moreover, Mr Erdogan had arranged over 136 false income tax returns to be lodged on behalf of his employees, resulting in $187,994 in tax refunds being incorrectly paid.

Mrs Toffoletti was also convicted in the County Court of Victoria for dishonest use of her position.
Mrs Toffoletti was released on an eighteen-month good behaviour bond with surety payable of $800.


The Serious Financial Crime Results

As demonstrated above, the ATO will prosecute people with the potential of jail penalties for deliberate evasion of tax.  The ATO’s detection systems are becoming increasingly sophisticated.  In addition, the ATO obtains assistance from other Government agencies as indicated below.  

The Serious Financial Crime Taskforce (SFCT) is a joint taskforce established on 1 July 2015 to identify the most serious and complex forms of the financial crime. The SFCT includes:

  • Australian Tax Office (ATO);
  • Australian Federal Police (AFP);
  • Australian Criminal Intelligence Commission (ACIC);
  • Attorney-General’s Department (AGD);
  • Australian Transaction Reports and Analysis Centre (AUSTRAC);
  • Australian Securities and Investments Commission (ASIC);
  • Commonwealth Director of Public Prosecutions (CDPP); and
  • Australian Border Force (AFP).

Practitioners working for SFCT include intelligence analysts, data miners and financial crime experts.

By the 31 March 2019, the activity of SFCT has resulted in:

  • 272 search warrants;
  • Completion of 1,104 audits and reviews;
  • Sentencing 7 people;
  • Conviction of 8 people;
  • Raised liabilities of $813 million; and
  • Collection of AUD$298 million.

For assistance with claiming tax deductions and GST input tax credits for your business expenses, please speak to your Nexia Adviser.

Categories: Weekly Tax Update

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