- Key Takeaways
- Who Prosecutes Tax Evasion or Lying on Tax Returns in Australia?
- Federal Tax Evasion Offences and Penalties
- NSW Taxation Administration Act Offences and Penalties
- Federal Taxation Administration Act Offences and Penalties
- How Do People Get Caught for Lying on Tax Returns?
Lodging inaccurate or dishonest tax returns or business activity statements with the Australian Taxation Office is a criminal offence warranting serious penalties ranging from 1 to 10 years imprisonment and heavy fines. These are also considered a type of white collar crime.
For more on tax fraud laws, speak to our tax fraud lawyers. This article is not to be taken as legal advice.
Who Prosecutes Tax Evasion or Lying on Tax Returns in Australia?
The Commonwealth Director of Public Prosecutions (‘CDPP’) prosecutes taxation fraud matters, which are referred to them by the Australian Taxation Office (‘ATO’).
Whilst the ATO is able to prosecute straight-forward regulatory offences under taxation legislation, defended or more serious matters will most often be referred to the CDPP.
How Often Does the ATO prosecute Tax Evasion Offences?
In the period of 2020-21, summary prosecutions by the ATO resulted in 200 successful prosecutions, 192 criminal convictions, reparation orders of $56,499 and fines of $1.65 million.
Federal Tax Evasion Offences and Penalties
The below table are some common tax evasion offences prosecuted in Australia under the schedule to the Criminal Code Act 1995 (Cth) (‘the Criminal Code’).
|Obtaining Financial Advantage by Deception
|10-years imprisonment||section 134.2|
|General Dishonesty||10-years imprisonment
|Obtaining Financial Advantage
|1-year imprisonment||section 135.2|
|Conspiracy to Defraud
|10-years imprisonment||section 135.4|
|False or misleading statements
|1-year imprisonment||section 136.1|
|False or misleading information
|1-year imprisonment||section 137.1|
|False or misleading documents
|1-year imprisonment||section 137.2|
NSW Taxation Administration Act Offences and Penalties
The Government has power to impose penalties against corporations and/or people who evade tax in its various forms under the Taxation Administration Act 1996 (NSW). The below table outlines the applicable penalties you can face if guilty of the following tax evasion offences.
|Offence||Individual Penalty||Corporation Penalty||Section|
|Knowingly giving false or misleading information
|Deliberately omitting information
|Failure to Lodge Documents
|Falsifying or Concealing Identity
It is a defence to the above offences if you took reasonable care to comply with the requirement or the contravention of the requirement was caused solely because of circumstances beyond your control. This defence is available in section 59 of the Taxation Administration Act 1996 (NSW).
Federal Taxation Administration Act Offences and Penalties
The below are the penalties for some common tax evasion offences under the Taxation Administration Act 1953 (Cth).
|Failure to comply with requirements under tax law
|$4,440 (Court can double this)||s8HA|
|False or misleading statement
|Recklessly making false or misleading statements
Making a false tax declaration, without reasonable excuse, is an offence as per section 8K of the Tax Administration Act 1953 (Cth).
An offence is committed where a person makes a statement to a taxation officer, which is false or misleading.
The ATO has specified three categories, which depend on the level of deception involved, including:
- Failure to take reasonable care: where you have not done what a reasonable person in the same circumstances would have done (maximum penalty = 25% of the shortfall, or a fine of $4,440).
- Recklessness: where a reasonable person would have been aware of a real risk that the declaration was false or misleading, and you disregarded that risk (maximum penalty = 50% of the shortfall, or a fine of $8,880).
- Intentional disregard: where you intentionally disregarded the law with the intention of bringing about certain results such as underpaying tax or gaining an entitlement (maximum penalty = 75% of the shortfall, or a fine of $13,320).
The ‘shortfall’ refers to the difference between a person’s correct tax liability or entitlement, and the tax liability or entitlement determined using false or misleading information provided.
Penalty amounts may be reduced or increased if there are aggravating or mitigating circumstances.
Aggravating circumstances include obstructing the ATO’s investigation, or failing to alert the ATO, where you are aware that you have made a false or misleading tax declaration.
Mitigating circumstances include where a person cooperates with the ATO, alerts them to the error, or where the penalty imposed would be unjust in the circumstances.
A defence may be provided under ‘safe harbour’, which is applicable where:
- the statement was made by a registered agent,
- the agent was provided with all relevant information to make the statement correctly,
- the false or misleading statement resulted from the agent failing to take reasonable care.
In the period of 2020-21, the ATO referred 20 tax crime cases to the CDPP, resulting in 20 criminal convictions, 12 sentences of imprisonment, reparation orders totalling $550,000 and $56,000 of fines.
The Criminal Code Act 1995 (Cth) contains multiple offences, which may be applied to taxation fraud.
One of the main offences with which those who are alleged to have engaged in taxation fraud are charged with is obtaining financial advantage, by deception, against a Commonwealth entity, as per section 134.2(1).
The maximum penalty applicable is 10 years imprisonment.
The prosecution must prove, beyond reasonable doubt, that:
- The accused’s conduct involved deception, which resulted in financial advantage,
- The financial benefit was received from a Commonwealth entity, such as the ATO or Centrelink,
- The accused’s conduct was dishonest, such as where they were aware that they were not entitled to make a claim, what they were doing was wrong,
- The accused, at the time of their conduct, knew that there was a substantial risk that they would benefit financially, yet proceeded.
Dishonesty is defined by the Act, as dishonest according to the standards of ordinary people, and known by the accused person to be dishonest according to those standards of ordinary people.
Deception can involve intentional or reckless deception, and can be via words or other conduct, including via electronic means.
There is an alternative offence within section 135.2(1), labelled ‘obtaining financial advantage from commonwealth entity’, which carries a considerably lower maximum penalty of 12 months imprisonment.
The prosecution must prove, beyond reasonable doubt, that:
- The accused’s conduct results in them receiving a financial advantage from a Commonwealth entity, such as the ATO or Centrelink (Centrelink fraud), and
- The accused, at the time of their conduct, knew that they were not eligible to receive the financial advantage.
How Do People Get Caught for Lying on Tax Returns?
People get caught for lying on tax returns or tax evasion through tip offs from members of the community. People may give the ATO a tip off through the ATO Tax Integrity Centre via their website or their tip off hotline on 1800 060 062.
Another method in which people get caught is through the Serious Financial Crimes Taskforce led by the ATO joint agency to address very serious types of tax frauds across Australia. It was established on 1 July 2015.
The Serious Financial Crimes Taskforce main focus is tax evasion offshore, serious financial crime regarding COVID, cybercrime relating to tax and superannuation, and illegal phoenix. The taskforce also consists of other agencies including AFP, CDPP ACIC and AUSTRAC.