UNDERSTANDING ATO'S CRIMINAL PROSECUTION POWERS

The ATO continues to ramp up criminal prosecution activity – but is yet to return to previous peaks reached.

The ATO’s efforts to bring legal proceedings against individuals and companies with outstanding tax debts has been the subject of considerable media publication and industry comment. Debt recovery processes, director penalty notices and formal insolvency appointments continue to rise post-pandemic.

However, debt recovery and insolvency processes are typically civil matters in nature. The ATO has recourse to a broad criminal statutory regime which allows it to institute criminal prosecutions. These offence and crime provisions vary in form and severity; whilst the ATO is often found prosecuting in relation to the failure to lodge income tax returns and activity statements, the ATO can also take action in relation to:

failing to comply with an information gathering notice;
making false or misleading statements; and
more serious offences in relation to fraud and dishonestly causing a loss to the Commonwealth.

Many of the offences are ‘offences of absolute liability’, which reduces the number of the elements the prosecution may need to prove in order to secure a conviction. The ATO’s figures on prosecutions versus convictions demonstrate a high success rate. Often, but not always, these matters can be disputed at sentencing and in respect to further court orders.

The tax offence laws also interrelate with the ATO’s civil powers – in fact, the ATO’s practice statement on the making of default assessments has a part dedicated to whether the ATO should pursue both the making of a default assessment and prosecution for non-lodgment.

It is expected that the ATO will continue to prosecute tax offences and crimes and, in doing so, the volume of their actions will return to, and perhaps exceed, the figures reached 7 years ago.

The material in this article is provided only for general information. It does not constitute legal or other advice.

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Alan Krawitz7 February 2025