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  • Financial crime

    Tax crime is not victimless and has a serious economic impact on the community as it deprives the community of funding for essential services such as health, education and infrastructure. Illegally obtained funds are often used to facilitate other crimes (for example drug trafficking), that harm real people and our communities.

    Tax crime also has significant direct impacts on individuals and businesses. Examples include:

    • people whose life savings or identities are stolen by cyber criminals
    • small businesses who are not paid for the goods or services they have provided to a phoenix company and who are at a competitive disadvantage from dishonest operators.

    In most cases there is a toll on victims' emotional wellbeing, physical health and relationships as well.

    Thankfully, only a small percentage of people deliberately abuse the tax and superannuation systems to reap illegal financial benefits. Such 'tax crime' can include:

    • tax evasion (blameworthy act or omission by the taxpayer)
    • tax fraud (involves the taxpayer making a false statement to the Commissioner about their tax liability or being recklessly careless as to whether what they state is true or false)
    • other offences like money laundering or identity theft.

    Like any crimes, financial crimes are diverse in nature, scale and the amount of harm they cause. They are often structured in ways that combine legal and illegal transactions and fund flows in attempts to make it difficult to unravel the full extent of these illegal activities.

    Whether financial crime threats originate in Australia or offshore they are usually enabled by facilitators and technology. For example, rapidly evolving technology and platforms let cyber criminals access information and sensitive data, making it easier for them to commit crimes against:

    • individuals
    • businesses
    • the government.

    Indications of tax crime

    When people commit tax crime they typically misrepresent or conceal the true nature of transactions, assets or ownership of entities. Some of the indicators we look for include:

    • use of nominees or straw directors
    • unexplained wealth or wealth that is at odds with their reported income
    • giving false or misleading statements to the ATO
    • mischaracterising the true nature of transactions
    • understating income
    • inflating or claiming deductions to which they aren't entitled
    • keeping two sets of books or financial statements
    • failing to keep records or intentionally destroying financial records
    • concealing money or the source of money
    • making payments in cash
    • using fictitious names or names of unauthorised third parties
    • failing to lodge income tax returns or business activity statements (BAS)
    • failing to pay tax debts when they are due
    • withholding information from a tax professional or the ATO
    • ignoring legal advice or guidance from the ATO.

    Tax evasion or fraud

    Tax evasion involves some blameworthy act or omission by the taxpayer.

    Tax fraud is more serious and involves the taxpayer making a false statement to the Commissioner about their tax liability or being recklessly careless as to whether what they state is true or false.

    Examples of fraud or evasion include:

    • recklessly claiming deductions that the taxpayer was not entitled to
    • withholding information from the Commissioner or failing to keep records
    • submitting false, backdated or altered documents
    • paying wages in cash and not reporting the wages paid or not remitting GST, Pay As You Go Withholding (PAYGW) tax or Superannuation Guarantee charges to the ATO
    • making false statements
    • disguising expenses intended for personal benefit as business expenses.

    Where there is sufficient evidence to suggest that a person has acted knowingly or recklessly to dishonestly obtain a payment or refund from the ATO, we consider making a referral for criminal investigation and prosecution.

    Serious Organised Crime Syndicates

    Serious organised crime syndicates engage in tax crime, money laundering, cybercrime and identify theft to obtain funds that they can use to facilitate their other criminal activities. Organised crime is estimated to cost Australia up to $47 billion each yearExternal Link.

    Under the Commonwealth Organised Crime Strategic Framework, we have a shared responsibility to tackle the financial aspects of serious organised crime and we are a key player in disrupting and dismantling serious organised crime syndicates.

    We are a key participant in many taskforces and coordination groups with a shared goal to identify and dismantle organised crime in Australia. Some of the key partnerships include:

    • Criminal Assets Confiscation Taskforce (CACT)
    • National Anti-Gangs Squad (NAGS)
    • ATO-led joint agency Serious Financial Crime Taskforce (SFCT).

    Internationally, we work through alliances such as the Joint Chiefs of Global Tax Enforcement (J5), to crack these criminal enterprises wide open and remove their ill-gotten gains.

    Our partnerships allow us to share intelligence and information, bringing the most serious offenders of financial crime to account, including those involved in organised crime.

    See also:

    Last modified: 12 Jan 2021QC 64530