If a person deliberately fails to declare all of their personal or business income, or if they dishonestly over-state their personal or business expenses in an attempt to reduce the amount of tax payable to the Australian Tax Office (ATO) they are committing a tax offence. This is referred to as tax fraud or tax evasion.
Examples of Tax Offences
Common examples of tax fraud/tax evasion are:
- Not reporting all of your income;
- Not reporting cash wages;
- Failing to forward tax withheld from an employee’s wages to the ATO;
- Failing to withhold tax from a worker’s wages – for example, paying cash in hand;
- Not paying an employee their super entitlements;
- Not lodging tax returns, in an attempt to avoid payment of tax;
- Not lodging a tax return in order to avoid child support or other financial obligations;
- Claiming deductions for expenses not actually incurred;
- Claiming deductions which are not legal;
- Failing to claim GST on goods and services;
The expression ‘Tax crime’ is used when an individual deliberately engages in criminal behaviour in order to evade their tax obligations or to fraudulently make a financial gain by manipulating the taxation system.
Examples of tax crime and tax offences are:
- Identity crime;
- Hidden offshore dealings;
- High volume, low value suspect financial transactions;
- Credit and refund fraud;
- Illicit tobacco growing and trading;
The ATO is vigilant in their commitment to deterring, detecting and dealing with serious tax evasion and tax crime. The ATO regularly conducts ‘audits’ on businesses, companies and individuals. The ATO works with the Australian Federal Police and the Commonwealth Director of Public Prosecutions to restrain and confiscate assets obtained from tax crime using the powers of the Proceeds of Crime Act 2002.
Tax Charges – the consequences of Tax Fraud and Tax Crime
Sentences and penalties for tax evasion, tax fraud and tax crime are serious and the ATO has a long history of prosecutions.
There are many high profile examples of people being prosecuted for Tax evasion. Paul Hogan and John Cornell settled with the ATO in 2012 after an 8 year battle with them over an alleged $150 million in unpaid penalties and taxes dating back to the 1980s. Hogan and Cornell were the highest profile targets of Operation Wickenby – a multi-million dollar fraud investigation by the ATO in 2004.
With the right legal advice and representation it may well be possible to defend tax charges (including charges of tax evasion and tax crime) and to reduce the penalties applied or to reach a settlement with the ATO.
Penalties for Tax Fraud/Tax Evasion
Some common penalties for tax offences:
- A fine – usually only applied in less serious cases;
- Matter proven but dismissed – in rare cases the court may decide to dismiss the charge against you even if you have pleaded guilty to the offence. If the charge is dismissed then you will not receive a criminal record. Some dismissals are conditional upon you being of good behaviour for a specific period of time;
- Good Behaviour Bond – the court can order that you be placed on a ‘good behaviour bond’ for a specified period of time. If you comply with the good behaviour bond then there is no further penalty. If you don’t comply with the good behaviour bond you may be summoned to court to be resentenced for the offence.
- Community Service Order – this order requires that you undertake unpaid work in the community. The kind of unpaid work is chosen by the Probation and Parole officer. Sometimes you will be required to attend a course. In some cases, it may not be possible for this order to be granted due to certain medical conditions or other grounds of unsuitability which are determined by the probation service.
- Periodic detention – this usually involves attending jail on the weekend or for a few days during mid-week
- Suspended sentence – this is when the court imposes a full time jail sentence but decides to release the offender on a good behaviour bond for up to five years. Any breach of this good behaviour bond results in the full time jail sentence being imposed.
- Full time gaol –offenders are usually sent to low security prison facilities.
It is essential that you seek expert legal advice if you have been charged with a tax offence. Call North Shore Criminal Law on (02) 9955 2298 or 0400 44 64 24 at anytime for an initial free telephone consultation to discuss your tax charge.