After a nine-month trial and almost two months of deliberation, a Jury found Adam Cranston and two of his key co-conspirators guilty of one of the biggest tax frauds in Australia’s corporate history.
In March this year, the NSW Supreme Court Jury delivered guilty verdicts to three of the five co-accused, including Adam Cranston, son of former deputy tax commissioner, Michael Cranston, and former sports commentator Jason Onley.
The trial commenced in April 2022 over charges of conspiring to defraud the Commonwealth and the ATO of more than $105 million between 2014 and 2017 through a free payroll service known as Plutus Payroll that shifted tax liabilities to a network of second-tier companies. The second-tier companies then went into liquidation when pursued by the ATO.
As the end of financial year approaches us, it is always a safe bet to get reacquainted with laws governing tax fraud/ evasion in New South Wales.
Tax evasion (also known as tax fraud) involves illegally reducing or eliminating tax liability. This may involve fraud by lying to the Australian Taxation Office (ATO), deliberately concealing material facts, or entering into false transactions.
The most common forms of tax evasion include:
1. Individuals deliberately failing to declare some or all of their business or personal income, or dishonestly over-stating their business or personal expenses.
2. Individuals and businesses paying employees or other businesses in cash, or receiving cash payments, to avoid leaving an audit trail.
The Australian government can prosecute tax evaders for committing offences under the Taxation Administration Act 1953 (Cth) and the Criminal Code Act 1995 (Cth). The general anti-avoidance provisions are also contained in the Income Tax Assessment Act 1936 (Cth), A New Tax System (Goods and Services Tax) Act 1999 (Cth) and the Fringe Benefits Tax Assessment Act 1986 (Cth).
The ATO will impose administrative penalties under the Taxation Administration Act 1953 (Cth) (‘the Act’) for offences it believes are not serious enough for criminal prosecution. The penalties apply to a range of prohibited forms of conduct, including:
1. Making false or misleading statements, adopting positions under the tax laws that are not reasonably arguable, and entering into certain tax avoidance schemes (div 284).
2. Failing to lodge documents (e.g. tax returns) on time (div 286).
3. Miscellaneous breaches, such as the failure to keep requisite records (div 288).
The penalties are in the form of fines that are calculated using a statutory formula and penalty units. Generally, the prohibited conduct carries a “base penalty amount” which tends to be a specified percentage of the “shortfall amount”. The penalties for prohibited conduct are contained in sub-divisions 284-B to 284-D of the Act. In NSW, one penalty unit is equivalent to $110.
When the ATO investigates a tax discrepancy, it seeks to determine whether fraud or tax evasion have occurred, or whether you have made an honest mistake.
The ATO will look at whether you:
1. Knowingly made false or deceptive statements.
2. Withheld information to influence a tax outcome.
3. Failed to keep adequate records to support a tax audit.
4. Intentionally omitted income from a tax return with no credible explanation.
To form an opinion that there has been fraud or tax evasion, the ATO must exercise sound judgement and fairness. In its Practice Statement, the ATO states that this opinion should be formed only by an executive or senior level officer, in accordance with ATO policies and practices.
Green & Associates Solicitors have a wide range of experience dealing with clients who have been charged with fraud or other complex criminal offences. Feel free to reach out to our office to arrange for a consultation to speak with one of our lawyers today.
