Busting the biggest tax fraud case in Australian history started with a routine inquiry by the Australian Tax Office (ATO).
The ATO identified as early as February 2016 a series of “phoenix” companies – those deliberately liquidated to avoid paying debts – which would eventually lead to uncovering a crime syndicate skimming $130 million meant to be paid in tax.
Chris Jordan, the commissioner of taxation, told a Senate estimates hearing today that the tax owed is about $130 million, an amount smaller than the $165 million estimated by the Australian Federal Police (AFP) earlier this month after a series of raids and arrests.
Already, the ATO has recovered about a third, or $40 million, of that figure.
Among those charged with with conspiracy to defraud is Adam Cranston, the son of deputy tax commissioner Michael Cranston. The long-servicing senior executive at the ATO was issued a court attendance notice for alleged abuse of his position as a public official. He must appear in court on June 13.
Jordan says the alleged scam was first identified during routine monitoring by the ATO, which found a small number of companies that went into liquidation owing PAYG tax and GST payments.
“Our initial reviews showed the presence of a syndicate that appeared to be promoting phoenix arrangements to the labour hire industry in the construction and IT sectors, and because some potential criminal links were identified, covert audits and reviews were commenced,” Jordan told the committee.
“Over the year we progressively uncovered a complex web of suspected tax evasion involving a multitude of entities and individuals.”
The identities and details of those involved were not known to start with. Their identities, roles, activities and arrangements were deliberately opaque, deceptive and complicated.
So far, more than 200 companies in layered structures and complex transactional and business relationships have been identified.
In December 2016 and January this year, the ATO started recovering unpaid taxes through garnishee notices on bank accounts.
“We have raised liabilities to date of more than $130 million from Operation Elbrus and have collected almost a third of the amount so far, including from garnishees,” says Jordan.
“We were able to collect these amounts because we targeted bank accounts with significant balances and current payroll activity so that they could be garnisheed as soon as the tax liability was assessed — protecting the revenue at risk.”
This caused significant disruption to the syndicate and alerted the AFP, which unknown to the ATO had already been investigating the crime syndicate, to the ATO’s interest.
In February, the tax intelligence was merged with the police’s intelligence to create a fuller picture of the crime syndicate.
In April, the ATO froze bank accounts when it looked like the funds were about to be moved elsewhere.
The problems with Plutus Payroll Australia then surfaced publicly as tech contractors voiced their concerns about not being paid.
“Conscious of the impact this can have on innocent third parties, especially regarding wages, we established the names of those due to be legitimately paid so that funds could be released to pay the wages owing,” says Jordan.
“We did not stop people being paid. We are continuing to look into how we may be able to have any of the remaining funds released to pay outstanding superannuation guarantee amounts.”
The warrants executed by police earlier this month led to the seizure of a high value of cash and assets.
“With these significant amounts of cash and assets seized, we would hope and expect there to be recovery of significant amounts for the Commonwealth,” Jordon says.
The ATO this week said that workers won’t be penalised if their tax payments went missing during the Plutus Payroll case.
“Workers will not be penalised when the amount reported as being withheld is not actually paid to the ATO,” the tax office said in a statement.
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