• Scenario 2

    Attention

    All persons mentioned in this scenario are fictional.

    End of attention

    Don't be fooled by bad advice

    John and his brother, George, owned a fruit and vegetable shop supplied with organic produce grown at their cousin's nearby farm. The brothers were also volunteer community liaison officers for new migrants from culturally and linguistically diverse backgrounds.

    They were well respected and trusted as a result of their successful business and volunteer work.

    Their accountant told them they could save on their tax bill by using an offshore investment company, 'Everyone does it. You'll still be paying tax, except only what you have to'.

    The brothers entered into the arrangement, both investing $200,000, which they got back as 'loans' from the offshore investment company. While they knew this was technically illegal, they believed they weren't harming anyone, and besides, they were still paying a lot of tax.

    They used the money to refurbish their sick mother's home, paying the tradespeople in cash and not receiving tax invoices.

    Some time later, their accountant was targeted by the ATO for promoting illegal tax avoidance schemes. The ATO was monitoring suspect fund transfers to companies concealing assets and income in secrecy havens.

    This led the ATO to the brothers, who were both charged with tax fraud and also ordered to pay significant penalties and interest on the tax they had evaded.

    Since they had also recommended their accountant to newly arrived migrants who trusted them, these people were also investigated and subjected to fines and other penalties for evading tax.

    Eventually the brothers were sentenced to two years jail, the judge noting that they had used their good reputations in the community to mislead people unfamiliar with Australia's tax laws. He warned that avoiding paying tax is a serious criminal offence which will result in significant penalties and possible financial ruin.

      Last modified: 05 Jul 2011QC 23475