Fraud Or Evasion Submission

FILE REF: [FILE NO.]

FRAUD OR EVASION SUBMISSION

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PURPOSE

This submission template is to be used to present sufficient information, facts and evidence on which the Commissioner may form an opinion that there has been fraud or evasion and/or satisfy the Commissioner that an unpaid net amount was avoided by fraud or evaded or that a payment of an excess was brought about by fraud or evasion.

A fraud or evasion opinion allows the Commissioner to amend an income tax assessment and/or seek to recover an excess amount, an unpaid net amount, net fuel amount or other indirect tax more than four years after it became payable at any time.

FRAUD OR EVASION GUIDELINES

This template is supported by the Fraud and Evasion Guidelines. ATO officers should familiarise themselves with the Guidelines before completing this template.

RELEVANT LEGISLATIVE PROVISIONS

Subsection 170(1) item 5 ITAA 1936 (2004-05 and following income years) Paragraph 170(2)(a) ITAA 36 (2003-04 and prior income years) Subsection 171A(2) ITAA 36 (2003-04 and prior income ‘nil’ years) Paragraph 105-50(3)(b) of Schedule 1 to the TAA 1953

TAXPAYER DETAILS

Taxpayer: TFN: ABN: Entity Type: Date of Birth/Incorporation: Address: Tax Agent: Siebel Case ID: 1-

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REFERRING ATO OFFICER

Case Officer: ATO Office: Contact Details:

TABLE OF CONTENTS

Issue/s...... 2 Periods under review...... 3 Income Tax...... 3 Indirect Taxes...... 3 Chronology of material facts...... 3 Evasion...... 4 Relevant Authorities...... 4 Elements...... 4 Discussion...... 4 Fraud...... 5 Relevant Authorities...... 5 Elements...... 5 Discussion...... 5 Recommendation...... 6 Income Tax:...... 6 Indirect Taxes:...... 6 SNC and S&ME specific instructions...... 7 Referral to Technical Panel:...... 7 ATO Procedures – Authority to Amend...... 7 Authorisation levels...... 7 Income Tax...... 7 Indirect taxes...... 7 Referral to Decision Maker...... 7 Income Tax...... 7 GST and indirect Taxes...... 7

ISSUE/S

1 Is the Commissioner of the opinion that there has been fraud or evasion in order to amend the taxpayer’s assessment at any time for the income years ended 30 June XXXX, XXXX and XXXX. 2 Is the Commissioner satisfied that the payment of the net amount/s, net fuel amount/s and/or other amount/s of indirect tax was avoided by fraud or evaded or that payment of an excess was brought about by fraud or evasion?

PERIODS UNDER REVIEW

Income Tax

Relevant dates (Notices of Assessment):

Income year Issue date Due and Expiration date of payable date amendment period

Indirect Taxes

Relevant dates (Business or Instalment Activity Statements): Tax period Lodgement Due and Expiration date of date payable date amendment period

CHRONOLOGY OF MATERIAL FACTS

A chronology is a sequential list, in date order, of all the relevant facts. This includes events, transactions, documents and statements. Each entry in the chronology must be footnoted with a reference to the evidence from which the fact has been drawn. The following table should be completed by extracting the relevant entries from the Facts and Evidence Worksheet.

Date Facts <1/11/09> 1

1 Eg: “See taxpayer’s ITR lodged with ATO 1/11/04, Sale contract dated 01/04/04 and Settlement statement dated 25/05/04”

EVASION

Relevant Authorities2

The common test used to describe evasion arises from the High Court in Denver Chemical Manufacturing Co v. Commissioner of Taxation (NSW) (1949) 79 CLR; 9 ATD 60 at 313. Dixon J stated:

I think it is unwise to attempt to define the word “evasion”. … it means more than avoid and also more than a mere withholding of information or the mere furnishing of misleading information. It is probably safe to say that some blameworthy act or omission on the part of the taxpayer or those for whom he is responsible, is contemplated. (emphasis added)

As an example, behaviour that is tantamount to intentionally keeping the Commissioner ‘in the dark’ may amount to evasion:3

‘Even where a taxpayer is firmly of opinion that his view is the correct one, he may be guilty of evasion by seeking to prevent the Commissioner from applying his mind to some debatable question, e.g., whether a particular item of income should be assessed: the evasion in such cases consists in the attempt to preclude the presentation of any opposing view or to exclude its application.

In a different case, the High Court found evasion where the taxpayer, while knowing its closing stock values were incorrect, was prepared to lodge returns hoping that the Commissioner would not review the calculations. 4

Elements

Accordingly the elements to be established on which the Commissioner may form an opinion of evasion are: 1 an avoidance of tax resulting in a shortfall amount,5 and 2 a blameworthy act or omission on the part of the taxpayer or their agent/trustee.6

Discussion

2 Officers do not need to cite additional authorities – instead focus on clearly identifying and presenting the information, facts and evidence which demonstrate the asserted fraud or evasion. 3 Jordan CJ in Denver Chemical Manufacturing Co v. Commissioner of Taxation (NSW) (1949) 49 SR (NSW) at 199 4 Australasian Jam Co Pty Ltd v. FC of T 88 CLR 23 5 Australasian Jam Company Pty Ltd v. FCT (1953) 88 CLR 23 6 Australasian Jam Company Pty Ltd v. FCT (1953) 88 CLR 23, Kajewski v. FCT, [2003] FCA 258; 2003 ATC 4375; (2003) 52 ATR 455, and Hasmid Investments Pty Ltd v. FC of T 2001 ATC 2150, see also paragraphs 43 and 44.

1 Shortfall amount

2 Behaviour amounting to evasion

Relevant Authorities

Derry v. Peek (1889) 14 App. Cas 337 at 373 contains the leading statement concerning what is meant by fraud:

fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without a belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states.

In Kajewski v. FCT, [2003] FCA 258; 2003 ATC 4375; (2003) 52 ATR 455 the Federal Court has observed that:

Fraud within s 170(2)(a) involves something in the nature of fraud at common law, ie, the making of a statement to the Commissioner relevant to the taxpayer's liability to tax which the maker believes to be false or is recklessly careless whether it be true or false.

Fraud in a tax context was found where tax returns were lodged with deductions claimed for non-existent employees. The Court concluded that the statements made in returns 'can only be described as frauds on the Commissioner of Taxation’. 7

Elements

The elements to be established on which the Commissioner may form an opinion of fraud are: 1 an avoidance of tax resulting in a shortfall amount;8 and 2 representations made to the Commissioner that resulted in the shortfall amount which the taxpayer: – knew were incorrect, or – held no belief in their truth, or – made recklessly, being careless or indifferent as to whether the representations were true or false.

Discussion

3 Shortfall amount

7 Masterman v. FC of T 85 ATC 4015; 16 ATR 77 8 Australasian Jam Company Pty Ltd v. FCT (1953) 88 CLR 23

4 Behaviour amounting to fraud

RECOMMENDATION

It is recommended that the Commissioner form the opinion that in respect of the relevant where there has been a tax shortfall amount, that tax shortfall amount was due to fraud or evasion pursuant to: . Subsection 170(1) item 5 ITAA 1936 (2004-05 and following income years) . Paragraph 170(2)(a) ITAA 36 (2003-04 and prior income years) . Subsection 171A(2) ITAA 36 (2003-04 and prior income ‘nil’ years) . Paragraph 105-50(3)(b) Schedule 1 TAA 1953

As a consequence of forming this opinion the Commissioner may amend at any time the taxpayer’s Income Tax Assessments and/or Activity Statements for the following periods:

Income Tax:

Relevant dates (Notices of Assessment):

Income year Issue date

Indirect Taxes:

Relevant dates (Business or Instalment Activity Statements):

Tax period Lodgement date

SNC AND S&ME SPECIFIC INSTRUCTIONS

Referral to Technical Panel:9

. Date referred to SNC Technical Panel: . SNC Technical Panel approval:

ATO PROCEDURES – AUTHORITY TO AMEND

Amended assessments that are otherwise out of time are not to be issued unless a fraud or evasion opinion has been formed by an authorised officer.

AUTHORISATION LEVELS

Income Tax

Only EL2s or above are authorised to form such an opinion for income tax matters, see Taxation Authorisation Guidelines point 1.6.1 (general fraud or evasion determination).

Indirect taxes

Only EL2s or above are authorised to form such an opinion for GST and other indirect tax matters, see Taxation Authorisation Guidelines point 4.1 3 (GST and other indirect taxes).

NB: Regardless of the tax/es, the opinion must be formed in the name of the Deputy Commissioner.

REFERRAL TO DECISION MAKER

Income Tax

. Date referred to EL2 or above:

GST and indirect Taxes

. Date referred to EL2 or above:

9 SNC and S&ME staff are required to refer this submission to the Technical Panel

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