The Australian Taxation Office (ATO) or the Commonwealth Director of Public Prosecutions (CDPP) can initiate proceedings against a taxpayer for the commission of a tax offence. The Australian tax system relies on taxpayers self-reporting and honesty in fulfilling their tax obligations. To ensure compliance with tax laws, the Commissioner of Taxation can apply penalties including administrative penalties and prosecutions. Here are the tax offences you should know about.
The ATO also has formal information gathering powers, including the power to issue notices to taxpayers for verification purposes to serious tax avoidance or tax evasion. A formal notice may require an individual or corporation to do the following:
- Provide information in response to questions in writing
- Attend and give evidence
- Produce documents
Generally, the ATO gives you 28 days to comply with a notice, however it can be discretionary for different cases.
An individual or corporation can be liable for prosecution if they:
- Refuse of fail to provide information or documents and records
- Fail to complete the requirements of a notice in full
- Refuse or fail to with the ATO or answer questions; or
- Make a false or misleading statement.
Where an individual or corporation engages in the above conduct, the ATO may refer the matter to the CDPP for prosecution.
Failure to Lodge (FTL) Penalties
If you fail to lodge a return, report or statement with the ATO by a due date, you may incur a failure to lodge penalty. The ATO does not generally apply an FTL penalty in isolated cases of late lodgement but will consider your circumstances when deciding what action to take. The ATO may contact you by telephone or in writing and issue a warning for failing to lodge.
If the ATO decided to apply a FTL penalty, they will notify you in writing of the following:
- the reason for the penalty
- the amount of the penalty
- the due date for payment (at least 14 days after they give notice)
The FTL penalty will be calculated depending on the size of the entity and the period since the due date for lodgement at a rate of one penalty unit for each period of 28 days or part thereof that the lodgement is overdue, up to maximum of five penalty units. The value of a penalty unit is currently $222. Although uncommon, the ATO can and does prosecute for failing to lodge returns.
Prosecution for Failure to Comply
Under section 8C of the Taxation Administration Act (1953), it is an offence if a person, when required under taxation law, fails or refuses to:
- to give any information or document to the Commissioner or another person,
- to lodge an instrument with the Commissioner or another person for assessment;
- to notify the Commissioner or another person of a matter or thing;
- to produce a book, paper, record or other document to the Commissioner or another person;
- to attend before the Commissioner or another person.
An offence under this section is considered one of ‘absolute liability’ meaning the prosecution is not required to prove intention, knowledge, recklessness, or negligence with respect to the conduct. The maximum penalty applicable is a fine of $2,200, pursuant to section 8E(1). However, where the person has previously been convicted of a relevant offence the penalty is $4,400.
Furthermore, the Commissioner may elect to treat the offence otherwise than as a prescribed taxation offence. A prescribed taxation offence is an offence punishable by a fine and not by imprisonment, or a taxation offence that is committed by a corporation.
If the Commissioner elects as such, and the accused person has previously been convicted of 2 or more relevant offences, the maximum penalty is a fine of $5,500 and/or 12 months’ imprisonment.
Serious Tax Offences
For serious tax offences involving fraudulent conduct such as dishonestly obtaining Commonwealth property (s134.1(1)), obtain financial advantage by deception (s134.2(1)) and dishonestly cause loss to the Commonwealth (s135.4(3)), taxpayers can be prosecuted under the Commonwealth Criminal Code 1995. Tax fraud encompasses a range of frauds, including GST fraud and Business Activity Statement (BAS) fraud.
Successful prosecution of fraud offences will usually result in a large fine at the least, in the most serious cases and cases of repeat offending the penalty can include imprisonment.
By agreement, the ATO may prosecute straight-forward regulatory offences under taxation legislation and certain defended hearings. The ATO generally refers more complex defended hearings to the CDPP.
Will the ATO or CDPP Prosecute?
When deciding whether to prosecute, the ATO or CDPP consider a number of different aspects, including the seriousness of the offence, the taxpayer’s circumstances, and whether or not the prosecution could act as a deterrent to the wider community.
Can I Appeal?
If your tax matter is finalised in court, like other court matters you have the right to appeal the conviction and penalty. An appeal must be lodged usually within 28 days from the court’s decision.
If you are being prosecuted for a tax offence or wish to appeal a conviction or penalty imposed by the court, you should speak to an experienced criminal solicitor.
Do you have questions about Taxation Law? Please don’t hesitate to contact our experienced Newcastle commercial lawyers at Butlers Business Lawyers on (02) 4929 7002 or fill out an enquiry form on our website.