Tax Office technology catches tax cheats

14 March 2012

Media release 2012/04

Tax Commissioner Michael D'Ascenzo today released the ATO's annual 2011 prosecution figures for tax and superannuation offences.

"The ATO's use of sophisticated data matching technology is helping to close the net around those exploiting the tax and super systems," Mr D'Ascenzo said.

"People deliberately committing tax evasion are often caught by the sharing of information between government departments and other third parties.

"Cooperation across government departments has led to increased intelligence sharing and improved information gathering which is driving our data matching capabilities to new levels.

"We use advanced technology to bring together information from a range of government departments and other third parties to cross check personal and business records such as car registrations and supply orders for businesses.

"The ATO also undertakes risk profiling to identify people and businesses that may have not declared all their earnings or overinflate their deductions," Mr D'Ascenzo said.

"We can see how personal and business claims compare to other tax payers. If alarms are raised the ATO investigates those claims and taxpayer records more closely."

"The community as a whole pays the price for the actions of tax cheats. We take the responsibility of protecting the community from tax cheats very seriously and rigorously seek to identify people making false claims in their tax returns," Mr D'Ascenzo said.

The ATO's annual 2011 prosecution figures reveal that almost 1200 people were prosecuted and convicted for tax and superannuation offences last year:

• 48 people were prosecuted and convicted of serious tax crime offences, with sentences ranging from three months to nine years and 11 months. Six of these convictions occurred under Project Wickenby.
• 1,149 people and 370 companies were prosecuted and convicted for other tax offences. This included failing to lodge a tax return, providing false and misleading information, or receiving a fee for preparing an income tax return when not being a registered tax agent.

"People who are unclear of their tax or superannuation obligations, or are struggling to meet their obligations, should contact the ATO on 13 11 42 to discuss their situation," Mr D'Ascenzo said.

If you believe someone is doing the wrong thing, you can report suspected tax fraud by calling the ATO on 1800 060 062. Registered Agents can use the dedicated Registered Agent phone line on 137 286 (using Fast Key Code 34) to help protect honest taxpayers. The information provided by registered agents may also be given to the Tax Practitioners Board.

Summary of 2011 tax fraud and prosecution figures

Serious Tax Crime Statistics

Project Wickenby

• The Project Wickenby cross-agency task force was established in 2006 to prevent people from promoting or participating in the abusive use of secrecy jurisdictions.
• From the commencement of the project to 31 January 2012, Project Wickenby has resulted in:
• $1.26 billion in tax liabilities raised
• $597.14 million in tax collected made up of 287.44 million in cash, 307.6 million in improved voluntary compliance and 2.1 million in cash recovered under Proceeds of Crime Act provisions.
• 65 people having been charged with serious offences and 22 people having been convicted.

Goods and Services Tax (GST)

• As part of its Compliance Program the ATO is increasing its focus on non-complying taxpayers in the GST system, with $337 million provided in last financial year's budget (over 4 years) for this purpose.
• The emphasis is on identifying people who do not lodge their business activity statements, and detecting businesses that over-claim entitlements or deliberately under-report taxable supplies that they make.
• In 2011 the ATO prosecuted 545 individuals and 211 companies for over $12.55 million worth of GST offences.

Cash Economy

• The ATO has increased scrutiny of businesses deliberately not reporting cash income, with over 1.9 million small businesses evaluated against the ATO's sophisticated risk detection systems during 2011.
• In 2011 the ATO prosecuted 41 individuals and nine companies for over $3.22 million worth of Cash Economy offences.

Significant 2011 Tax Crime Prosecutions

Project Wickenby

• A Queensland based company director was sentenced to four years imprisonment for 10 offences including defrauding the Commonwealth, obtaining a financial advantage by deception and dishonestly causing a loss to the Commonwealth. Through his companies he participated in an illegal 'round-robin' scheme where over $1.7 million from his companies was transferred offshore and then returned to him supposedly 'tax free'.
• Two brothers were each sentenced to two years and seven months jail in the NSW District Court following investigations into the use of tax haven structures in Vanuatu under Project Wickenby. As former co-directors of a Sydney work safety company the pair used illegal 'round-robin' schemes; where money from their company was transferred and then returned 'tax free' to their personal accounts, which they then claimed were loans.

Goods and services tax (GST)

• A Townsville Accountant was sentenced to five years jail for GST fraud offences. He set up a property development company with the sole purpose of committing tax fraud. He lodged 32 false BAS statements with the intent to receive GST refunds of over $580,000 that he was not entitled to.
• An unemployed woman from Victoria was sentenced to four years and nine months jail for GST and identity theft offences. She set up 11 separate businesses, some under other people's names without their permission so she could attempt GST fraud of over $470,000. She used the identities of people she had previously prepared tax returns for, as well as deceased people. She also used non-existent businesses and addresses as part of her fraudulent claims.
• An Ipswich courier was sentenced to four years jail for GST fraud offences. He set up a courier business and submitted six totally fictitious Business Activity Statements with intent to receive GST refunds of over $115,000 that he was not entitled to.
• A Cairns director of a property development company was sentenced to four years jail for GST fraud offences. She submitted false Business Activity Statements totaling over $375,000 of GST claims that she could not substantiate.

Income tax

• An unemployed man from Queensland was sentenced to 9 years and 11 months jail for his role in organising and promoting illegal investment opportunities that claimed to provide participants with legitimate tax deductions. Over $46 million would have been fraudulently claimed through the scheme if the ATO had not intervened. Two other men were also each sentenced to 6 years jail for their role in the illegal investment scheme.
• A finance broker and unregistered tax agent from Brighton-Le-Sands, NSW was sentenced to nine years jail, for 57 counts of income tax fraud totaling over $720,000. The court found he prepared 57 fraudulent tax returns in the names of 36 taxpayers. Some taxpayers were not even in the country for the period when the unregistered tax agent reported they earned Australian income.

Cash Economy

• A Perth tradesman was convicted and fined $64,000 for making false and misleading statements in his Business Activity Statements and income tax returns. He was selected for an ATO audit due to consistently reporting income much lower than expected for someone working in the tiling trade. It was proved he hadn't disclosed all his cash income to his tax agent and his cash book did not reconcile with the cash deposited into his bank and credit card accounts.

Failure to lodge returns

• A takeaway food services company from Heidelberg in Melbourne was convicted and fined $10,000 for five offences for failing to lodge income tax returns. The solicitor indicated this was the third case involving the same accountant that he had to defend for failure to lodge returns in the last two months. The Magistrate said it is not the responsibility of the accountant, but rather the entity and it's directors to ensure lodgment occurs.
• A Sydney investment and data consultancy company was convicted and fined $11,000 for 11 offences for failing to lodge quarterly GST returns.
• A medical practitioner from Brisbane was convicted and fined $30,000 for eight offences for failing to lodge GST returns.
• A Sydney design service company was convicted and fined $25,000 for 13 offences of failing to lodge quarterly GST returns and a further $25,000 for four offences for failing to lodge income tax returns.
• A Melbourne restaurant owner was convicted and fined $11,000 for 11 offences for failing to lodge quarterly GST returns and fined $1,100 for two offences for failing to lodge income tax returns.
• An Sydney automotive repairer was convicted and fined $50,000 for six offences for failing to lodge GST returns.
• A truck driver from Wagga Wagga was convicted and fined $13,600 for four offences for failing to lodge income tax returns.
• A Sydney dentist was convicted and fined $10,000 for three offences for failing to lodge income tax returns.

Failure to comply

• A Sydney house construction company was convicted and fined $10,000 for failing to comply with court orders to lodge GST returns.

False and misleading statements

• A retail night filler and IT professional from Sydney was convicted and fined $3,000 for two offences of making a false or misleading statement. The matter arose from information received from the Department of Immigration and Citizenship (DIAC). It was alleged that the defendant falsely claimed a dependent spouse tax offset in his 2008 and 2009 income tax returns. In sentencing the Magistrate stated, "These are serious offences. Lying to the Commissioner of the ATO is lying to Australia. No one likes paying tax but it is a necessary evil. It is the responsibility of all of us to pay tax. To claim money by lying, you are committing fraud on the people of Australia."
• A Parramatta floor covering retailer was convicted and fined $2,000 for one offence of making a false or misleading statement.

More information

For more information about tax crime, visit www.ato.gov.au/taxcrime.

Further information about ATO prosecutions including statistics can be found at www.ato.gov.au/prosecutions.