• Project Wickenby scenarios - illegal offshore schemes

    Scenario 1


    All persons mentioned in this scenario are fictional.

    End of attention

    If it looks too good to be true it probably is

    Joe ran a successful tyre business in Sydney, while Joe's friend, Gus, was also doing pretty well for himself with a restaurant in Coolangatta.

    Noticing Gus was doing particularly well lately, Joe asked about the secret to his success.

    Gus said that there was no 'secret', it was simply a matter of business structuring. He added he'd be happy to set up a meeting with his new adviser, Tony.

    'It's as easy as giving Tony some money and getting it back in a tax effective structure,' Gus assured Joe.

    Joe met Tony at a very smart building and was ushered into his equally smart and spacious office.

    Tony outlined a proposed structure, detailing potential cost benefits, returns on investment, risk margins and other terms equally foreign to Joe.

    Joe agreed to transfer $500,000 to Tony's account as instructed, and was satisfied with the terms of the agreement where he would receive an ATM card to access his money.

    About a year later, Joe has a new kitchen and boat and things are looking good. Tony was making him a fortune with his restructuring plan.

    So Joe was surprised when a very worried-sounding Gus called him for a chat.

    Gus was being audited by the ATO, and said there was a chance he could go to jail. Gus said Joe needed to talk with a solicitor, and to get Tony in on the meeting.

    Joe's solicitor sat in stunned silence as Tony outlined the offshore structure, the use of false invoices, multiple accounts in secrecy havens and ATM cards to access the funds.

    Tony argued that Gus was just unlucky, and that the ATO still had to find evidence and didn't have the time or expertise to do it.

    Joe's solicitor advised him to have nothing more to do with Tony and his 'scheme' and arranged a meeting with the ATO. He explained to Joe that it wasn't the 80's anymore, and the ATO was serious about catching tax cheats and had the resources and technology to do it. And it wasn't just the ATO, the Australian Crime Commission, Australian Federal Police and other agencies were all working together to target tax crime.

    His advice, 'It's time to own up, pay up and come clean'.

    It was the first good advice Joe had received on his business in a long time.

    Although he had to pay back the tax he had avoided using Tony's scheme, plus interest and penalties, Joe avoided prosecution and having his name in the media. It was a different story for his pal Gus and former 'business adviser' Tony.

    Gus was sentenced to five years jail on top of the $1.2 million in unpaid taxes, penalties and interest he had to pay to the ATO. As it turned out, he was skimming hundreds of thousands of dollars from the till and didn't declare it as income. Gus's 'secret' to success was tax evasion and fraud.

    As a promoter of dodgy tax schemes, Tony also wound up in jail with a hefty fine to pay.

      Last modified: 05 Jul 2011QC 23475