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  • 12. Investigations and prosecutions

    Our firmest strategies to deal with fraudulent behaviour are criminal investigations and prosecutions. This involves locating and identifying the person responsible for committing the offence and providing evidence in court to support a prosecution and ultimately secure a conviction.

    Criminal investigation and prosecutions are complemented by a communication strategy to maximise the impact of cases prosecuted. This increases:

    • community awareness of the impact of non-compliance with tax obligations
    • general deterrence of not lodging BAS and making false and misleading claims and statements.

    Our activities in 2019–20 included the following:

    • Completed 36 GST-related criminal investigations.
    • Referred GST-related briefs of evidence for breaches of the Criminal Code Act 1995 to the Commonwealth Director of Public Prosecutions (CDPP), resulting in 15 successful prosecutions. Prison sentences ranged from 12 months to 81 months.
    • Issued 41 warning letters. Warning letters are used as a risk treatment option to avoid unnecessary court action where alternative treatment strategies are available.

    The matters referred to the CDPP cover a range of complex GST risks, involving various business structures and can involve multiple suspects (or witnesses). In 2019–20, issues observed relate to identity takeovers (identity crime), recidivist behaviour and amended BAS lodgments.

    We also prosecute matters such as:

    • not complying with BAS lodgment requirements
    • making false and misleading statements
    • keeping false records
    • not complying with notices issued by the ATO requiring the provision of information, documents or attendance at an interview.

    In 2019–20, 328 court cases were finalised, resulting in four custodial sentences, 50 good behaviour bonds and one community service order.

    Table 10: GST investigations and prosecution results

     

    2015–16

    2016–17

    2017–18

    2018–19

    2019–20

    GST-related investigations – completed (number)

    96

    82

    75

    59

    36

    GST-related fraud prosecution cases resulting in conviction (number)

    14

    15

    14

    27

    15

    Total successful GST outcomes – Taxation Administration Act matters only (number)

    877

    1,095

    985

    618

    328

    Costs and fines ($m)

    6.1

    8.9

    8.0

    6.1

    2.3

    The changing environment throughout 2019–20 saw a significant proportion of our workforce shifted to support ATO stimulus measures. This resulted in reduced support for operational activities by state and federal law enforcement agencies.

    COVID-19 impacted our ability to undertake crucial aspects of our investigation work, such as search warrants, record of interviews and statements. These are mandatory requirements in the criminal process for preparing a brief of evidence. Prosecution outcomes have been delayed due to the inability of courts to empanel jury members to conduct trials for relevant hearings.

    Prosecution cases of note

    • A man who netted himself nearly $600,000 in fraudulent GST refunds was sentenced to three years and six months jail. Over a period of three years, he purchased several businesses and purported to develop them into profitable enterprises. Notwithstanding claiming a significant amount of input tax credits, plus the available research and development grants, he didn’t progress with any of the businesses. Further investigation revealed that across the three entities (two involving seafood farming) he made false claims totalling more than $8 million. In some instances, he had attempted to cover his tracks by seeking ‘pro-forma invoices’ for equipment he never intended to purchase. Ultimately, he was convicted on 40 counts and will now spend time behind bars.
    • A woman was sentenced to two years and six months jail for GST fraud totalling $200,553. In her capacity as director, she unlawfully lodged 10 false BAS overstating the company’s input tax credits and refunds owed.
    • A man was sentenced to three years jail for GST fraud, claiming refunds he wasn’t entitled to. He registered a family partnership with his wife in 2010, describing the business activity as cafes and restaurants. Contrary to the business description registered, he told ATO auditors he was in the business of buying and selling motor vehicles, claiming to have sold around 20. Between August 2011 and February 2015, the business claimed over $228,328 in GST refunds it wasn’t entitled to.
    • A man was sentenced to two years and four months jail for attempting to obtain nearly $1.5 million in GST and Wine Equalisation Tax refunds he wasn’t entitled to. The man used his accounting knowledge to set up a fake business claiming he sold cigars. Detailed investigations could find no evidence of business activity, nor evidence of his claims that all his paper and electronic records had been stolen.
      Last modified: 30 Aug 2021QC 64820