Taxation Law - Voluntary Disclosure

Currently the Glen Wheatley case is colouring everyone's perception of the Australian tax landscape.  Obviously the decision is not understood by the press which has influenced many taxpayers' perceptions on the desirability of making a voluntary disclosure.  The following further matters should be kept in mind as they have a direct bearing on any decision to make an unprompted voluntary disclosure:

1. The case was never about tax avoidance but tax evasion.
2. He did not make an unprompted voluntary disclosure.
3. Wheatley fell foul of the authorities not because this was an Operation Wickenby matter but because it was tax evasion practiced through a sophisticated fraud.
4. The Wheatley case accords with the current state of the law.
5. This was a case of a full and frank disclosure following detection and a raid on Wheatley's home and not as has been said above, a case of unprompted voluntary disclosure.
6. As the sentencing judge said, without Operation Wickenby this fraud may never have seen the light of day.
7. The protection originally afforded him was withdrawn as he did not qualify for an indemnity against prosecution as his fraud was sustained and sophisticated exhibiting a significant degree of criminality.
8. This case was also about defrauding his creditors when subject to a Deed of Arrangement under Part X of the Bankruptcy Act.

If a taxpayer makes a voluntary disclosure is there an amnesty available to them?

1. The Commissioner has at no point offered a general tax amnesty as reported.
2. The only statements made by him relate to voluntary disclosure.
3. A 5% penalty only applies in cases where there is no significant degree of criminality.
4. The Commissioner has made it clear that those who come forward will be treated leniently. Wait to be detected and you will be prosecuted.
5. The ATO is committed to stamping out tax evasion.
6. Where persons who do not make an unprompted voluntary disclosure and are subsequently detected by the Tax Officer they are prosecuted and where the amount exceeds $100,000, they regularly go to jail for terms exceeding 2½ years.
7. In the Ronen case given the size of the fraud and the period of time over which it was practiced this led to a head sentence for Ida Ronen and her two sons of 8½ years.  In her case she was given a non-parole period of four years six months and her two sons five years six months each.
8. Promoters, professionals and participants are being targeted.
9. The ATO has set up a Tax Haven Taskforce targeting assets and income secreted overseas and not brought to account as part of their worldwide income for  Australian taxation purposes.

Whenever a taxpayer is thinking of making an unprompted voluntary disclosure they need expert assistance due to the complexity of the law in this area.  It is hard enough unwinding a taxpayer's financial affairs but where their conduct exhibits a significant degree of criminality the skill lies in keeping them out of jail wherever possible.  The public have little real appreciation of the level of technical input required to achieve a positive outcome for clients in these circumstances.

The client needs to secure the services of a tax lawyer who specializes in this area.  Clients need to be strong, well-advised, well-represented and sensible.  Many clients have diverted money overseas to tax havens which are currently of special interest to the ATO.  The money may be channelled into a structure as omitted or undeclared income.  Sometimes it remains in specie earning interest or it may be invested.  More importantly though one should never forget that past integrity and good character, devotion to family and work and contributions to the community do not of themselves pardon the consequences of serial evasion. 

The worst thing which can happen is for the taxpayer to be detected/caught out as in the Wheatley case where he was given a full time custodial sentence even though his matter is now on appeal.  With Wheatley the courts pointed out the overriding sentencing object was general deterrence.  As the court said "Crimes of this nature are difficult to detect and thus require extensive investigation at public expense... serious frauds on the revenue will result in an immediate custodial sentence in the absence of substantial mitigating circumstances."  Co-operation and good character after the event count for little.

Why?  Because his offending occurred over some years and the benefit he derived was considerable.  He entered into complex arrangements enabling him to divert income overseas trusting that this subterfuge would render detection almost impossible.  If Egglishaw had not been discovered the Wheatley crime may never have been detected.  His co-operation and assistance followed discovery and after obtaining legal advice.

In all cases where taxpayers are contemplating making a voluntary disclosure call Frank Egan of LAC LAWYERS for assistance.  Mr Egan has been and is currently involved in some of the largest voluntary disclosures in this country and none of his clients' affairs to date have appeared in the press.