Taxation Law - Tax Fraud

Butterworths Australian Legal Dictionary defines fraud as "an intentional dishonest act or omission done with the intention of deceiving". Obtaining a benefit by deception is to obtain an advantage or a profit or a gain by deceit.  Deception is defined as "misleading by deliberate misrepresentation; intentionally inducing in another a state of mind which the offender knows does not accord with the fact … deception includes deception (whether deliberate or reckless) by words or conduct as to fact or law, including deception as to the present intentions of any persons ….  It does not include innocent misrepresentation as the misrepresentation must be made fraudulently (that is with knowledge of its falsity), recklessly (without an honest belief in its truth), or carelessly (of whether it is true or false)"

Given this background there are four matters which have currently been dealt with by the courts which are worthy of consideration which involve fraud or attempting to or obtaining a financial advantage by deception.

1.   Craig Keith Phillips, resident of Newcastle, pleaded guilty to 11 charges relating to obtaining a financial benefit by deception and was sentenced on 26 November 2007 to 24 months jail at the Newcastle District Court for activity statement fraud of $111,097.  Between October 2000 and September 2001 he created three businesses and lodged 11 false activity statements resulting in GST refunds of $111,097.  He attempted to obtain a further $39,424 however this was stopped by ATO officials.  As in all of these cases the real question comes down to whether or not the taxpayer's activities disclosed a sufficient degree of criminality.  The presiding judge when sentencing Phillips said that fraud is a very serious offence and it is considered to be even more serious when the fraud is against the Tax Office and is sophisticated in nature.  Not only was he sentenced to 24 months' jail but he was also required to repay the $111,097 which he had stolen.

2.   Bronwyn Wood, another Newcastle resident, was sentenced to two years jail by the Newcastle District Court for GST fraud of $100,260 after she pleaded guilty to 23 counts of obtaining a financial advantage by deception.   As with Phillips she registered two businesses which she used to fraudulently obtain activity statement refunds of $100,260 between May 2003 and January 2005.  Her claims could not be substantiated and when sentenced Judge Hosking said that fraud on the Commonwealth revenue was a serious offence which must be dealt with by way of custodial sentence because "people who systemically cheat the revenue system inthis way cause an increased burden on other ordinary taxpayers."  As with Phillips not only was she jailed but was required to repay the $100,260 which was stolen.

3.   Stephen Lattimer, of Tamworth, pleaded guilty to four charges of obtaining a financial advantage by deception and was sentenced to three years and three months jail by the Tamworth District Court for GST fraud of $161,627.  Stupidly he had used his business to lodge four activity statements claiming these refunds between September 2000 and October 2004 and following investigation by the ATO they stopped further refunds of $24,182.  The court in this case said the fraud was sophisticated in nature and that general deterrence is a matter of major importance.  The judge pointed out that it was not just a fraud on the Tax Office but a fraud on the community as a whole.  Not only did Lattimer receive a custodial sentence but he was also required to pay $161,147 as reparation.

4.   Andrew McCall, of Mosman, pleaded guilty to 32 counts of obtaining and attempting to obtain a financial advantage by deception and was sentenced to seven years jail by the Downing Centre District Court for activity statement fraud totalling $714,077.  He used false identities and forged documents using these to create 17 bogus companies to submit false activity statements to the ATO.  He obtained refunds of $530,257 before the fraud was detected and a further $183,820 was stopped before payment was made.  Both the ATO and the Australian Federal Police acted in concert to arrest McCall.  Both his business and residential premises were searched leading to documents and his laptop computer being seized.  It reminds one of Phillip Egglishaw whose laptop computer was seized as part of Operation Wickenby.  Irrespective they uncovered false drivers' licences, passports and birth certificates used to create false bank accounts and activity statements.  Not only was he sentenced for a period of imprisonment but once again he was ordered to pay $502,023.03 as reparation.

The ATO is working harder to detect and deter serious tax fraud.  It will not tolerate frauds on the Revenue, after all it is charged with the administration of the tax system.  Fairness, deterrence and a measured response as to how the ATO will deal with the taxpayer is all part of the fabric of tax administration. Where deceit or fraud is identified they are at pains to point out that tax evasion and fraud is not victimless crime as they have an adverse effect on the whole community.  Where tax fraud is detected the ATO will deal firmly with those who commit it and in the majority of cases will have the Australian Federal Police involved.  The ATO is trying to achieve a tax system based on honest and integrity for all taxpayers and they are working hard to detect and deter tax fraud.  McCall's case indicates that the ATO is serious about identity-related tax fraud which will not be tolerated.  Information sharing between agencies has strengthened their hand in detecting and deterring serious tax fraud and evasion. 

We are currently dealing with a number of cases where tax fraud and the manipulation of the system to obtain or attempt to obtain a financial benefit by deception are core issues where clients engage us to deal with the ATO or the AFP.  Whatever your circumstances, should you be at risk because either you are likely to be detected or have been detected call LAC Lawyers for competent taxation advice and assistance now.  Confidentiality is assured.