Tax Offences of Failure to Comply with Tax Law Requirements

Image credit: Borimat Praokaew

Poppy Morandin.

McDonald’s Australia has been convicted and fined after failing to provide documents to the Australian Taxation Office (ATO).

On 26 July 2019, the ATO issued a formal notice which required McDonald’s to produce documents. 

The notice had a compliance date of 30 August 2019. 

Despite continued follow-ups from the ATO regarding the information, and discussions with McDonald’s to try and resolve the matter, the documents were not provided by the compliance date.

Subsequently, the ATO referred the matter to the Commonwealth Director of Public Prosecutions for prosecution. 

Ultimately, McDonald’s Australia has since pleaded guilty at the Downing Centre Local Court in Sydney to one count of failing to comply with an information gathering notice.

ATO Deputy Commissioner, Will Day commented: “The vast majority of taxpayers willingly engage with us and voluntarily provide the information we need to undertake reviews and audits.”

“We only issue formal notices to taxpayers to obtain information as a last resort; where a cooperative approach is no longer productive or where a taxpayers’ circumstances, history or behaviour warrant the use of our formal powers.”

“As such, we expect the taxpayer to treat them seriously and respond in a timely way.”

Day noted that they issue about 70 formal notices to large business each year, as part of the ATO’s compliance activities. 

“Instances where taxpayers have failed to comply with requests for information rarely result in criminal convictions as most will work with us to meet their obligations. However, where taxpayers hold back necessary information or documents, the ATO will initiate prosecution action,” Mr Day explained. 

Information required by the ATO to administer the Australia’s tax and superannuation systems is largely in the control of taxpayers and associated parties involved in their business and tax affairs.

Due to this, the ATO have formal information-gathering powers, which include the notice powers.

Circumstances where the ATO may issue a notice range from simple verification procedures to situations in which there may be serious tax avoidance i.e. investigation into tax evasion.

During the 2020-21 financial year, 20,954 formal notices were issued to obtain relevant information and documents. 

This includes situations where notices for information and documents with notices requiring formal interviews. 

A formal notice may require an individual or corporation to: 

  • give information (through answering questions in writing), 
  • attend and give evidence, 
  • produce documents. 

The ATO generally provides 28 days to comply with a notice, however, shorter, or longer periods of time may be applicable in some cases. 

An individual or corporation may be liable for prosecution if they: 

  • refuse or fail to provide information, or to produce records or documents, 
  • fail to complete the requirements of the notice in full, 
  • refuse or fail to meet with us or answer questions, or 
  • make a false or misleading statement.

If the outlined conduct is engaged in, the ATO may refer the matter to the Commonwealth Director of Public Prosecutions (CDPP) for prosecution. 

Tax Offences of Failure to Comply with Tax Law Requirements

Pursuant to section 8C of the Taxation Administration Act (1953), it is an offence if a person, when required under taxation law, fails or refuses to:

  • to give any information or document to the Commissioner or another person, 
  • to lodge an instrument with the Commissioner or another person for assessment; 
  • to notify the Commissioner or another person of a matter or thing; 
  • to produce a book, paper, record or other document to the Commissioner or another person; 
  • to attend before the Commissioner or another person. 

The offence is considered one of ‘absolute liability’ which means that the prosecution is not required to prove intention, knowledge, recklessness, or negligence with respect to the conduct. 

The maximum penalty applicable is a fine of $4,440, pursuant to section 8E(1)

However, where the person has previously been convicted of a relevant offence, the maximum penalty applicable is $8,880. 

Furthermore, the Commissioner may elect to treat the offence otherwise than as a prescribed taxation offence. 

A prescribed taxation offence means an offence which is punishable by a fine and not by imprisonment, or a taxation offence that is committed by a corporation.

In circumstances where the Commissioner elects as such, and the accused person has previously been convicted of 2 or more relevant offences, the maximum penalty applicable is a fine of $11,100 and/or 12 months’ imprisonment.

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