PROSECUTION ON THE ATO’S RADAR - LATE LODGEMENT OF A TAX RETURN CAN RESULT IN A CRIMINAL CONVICTION

Smailes Krawitz is seeing an uptick in criminal prosecutions brought by the ATO. This includes targeting company directors for criminal liability when the company or trustee taxpayer entity has failed to lodge.

The ATO’s ability to audit taxpayers and raise assessments is common knowledge. The ATO has extensive data-matching powers and is supporting by a robust statutory framework giving them an evidentiary advantage in all taxpayer disputes. Coinciding with its advantage in tax quantum disputes, it possesses an arsenal of debt recovery tools to recover unpaid taxes or cause insolvent taxpayers to be externally administered.

But what about the ATO’s attitude to criminal prosecutions?

Unsurprisingly, the ATO is backed by a similarly powerful statutory regime. That regime covers serious tax and Commonwealth offences, but also supports the ‘lesser’, summary offences. Those offences include failing to comply with the requirements of a taxation law, such as failing to lodge an income tax return or BAS.

Common consequences of a successful prosecution include a criminal record, a monetary fine, and if the returns remain outstanding, court orders compelling compliance with the tax laws. When taxpayers do not address their taxation obligations by the time of the court orders expiry, things can severely escalate, and a term of imprisonment is available to the Judicial Officer.

There are quirks which arise when the ATO institutes criminal prosecutions. Much like engaging in a tax technical or debt recovery dispute with the ATO, the criminal matters require a grasp of the specific rules making the ATO a unique prosecutor to come up against.

A tax technical dispute and on-going debt negotiations are one thing, but many taxpayers lose the appetite for a contest when they are summonsed to the criminal courts. In our view, it is at this point that many taxpayers draw a line in the sand and engage with professionals to ‘tidy up’ their affairs and resolve all matters with the ATO. Almost inevitably, it comes as a sense of relief for many who have been living with years of dread about their tax affairs.

Smailes Krawitz assists taxpayers in all forms of engagements and disputes with the ATO, including audits, objections, reviews, appeals, debt recovery, Federal Court challenges and criminal matters.

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