The ATO can initiate criminal prosecution in a variety of circumstances. The most common is for a failure to lodge tax returns, BAS or any other document that the ATO prescribes. This includes a failure to provide information and documentation during audits or at any time at the request of the ATO.
The penalties for failure to lodge are swift and severe. Offences pursuant to section 8C of the TAA 1953 are punishable (as at 1 July 2017) by fines of up to $4,200 for the first offence, $8,400 for the next offence and $10,500 for each subsequent offence, with a potential 12 month custodial sentence (prison). Considering that it is common to have multiple years of non-lodgement and BAS is due 4 times per year it is easy to see how the potential fines can escalate very quickly. Of course, this is in addition to any tax and interest that is owed.
A finding of Intentional disregard during a tax audit will likely trigger a further internal assessment as to whether you should be referred to the Commonwealth Director of Public Prosecutions for criminal prosecution. Put simply, Intentional disregard means that you knew that what you were doing was wrong but you ignored the law and proceeded anyway. This may be by making a false statement to the ATO or by omitting to disclose relevant information. Even in the absence of direct evidence against you a charge may be proved when the facts and circumstances support an inference that you acted with an intentional disregard for the law (see Weyers v. Federal Commissioner of Taxation [2006] FCA 818). Such findings will often lead to a custodial sentence (prison).
More serious matters are referred to the Commonwealth Director of Public Prosecutions where charges such as dishonestly obtain a financial advantage from a Commonwealth entity may be pursued. Some real examples are (not CharterLaw Legal clients):
1. A desperate taxpayer submitted improper BAS for six months and over claimed a GST refunds. The fraudulent claims were lodged by the online portal which ultimately led to an audit. During the audit it was discovered that the claims were fabricated. Subsequently, the taxpayer was charged with obtaining a financial advantage by deception contrary to section 134.2 (1) of the Criminal Code. The taxpayer was sentenced to 3 years imprisonment for each of the charges proved.
2. A taxpayer, aged 62, bankrupt and on a disability pension, lodged false BAS over a period of six months to obtain a benefit that exceeded what was truly owed by recruiting people to assist him, without their knowledge. Taxpayer was audited and the wrongdoing uncovered leading to multiple charges of obtaining a financial advantage by deception from the Commonwealth contrary to section 134.2 (1) of the Criminal Code. The taxpayer was sentenced to a total of five years imprisonment.