A Perth man allowed an old acquitance to lodge amended tax returns on his behalf, which resulted in him receiving fraudulent tax refunds. (Source: Getty/ATO)
Australians are being warned not to fall for “too good to be true” tax claims after a Perth man was hit with a $63,000 penalty from the Australian Taxation Office (ATO). So-called “tax loopholes” have been spruiked on social media that claim you can get back all the tax you’ve paid.
A Perth mining worker found himself in hot water after he was contacted by an old acquaintance on Facebook claiming he had used such a “loophole” and “got every single cent” back. The man subsequently allowed his friend to lodge amended tax returns for him, where fraudulent deductions were claimed.
While the ATO initially paid out tax refunds for two income years, weeks later it launched an audit into the man’s tax returns and the expense claims. That resulted in the man paying back the ATO the refunds he had received, along with being slapped with a hefty $63,000 penalty on top.
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Tax Invest Accounting director Belinda Raso told Yahoo Finance many people weren’t aware the ATO could impose significant penalties on top of their tax shortfall. This can be 25, 50 or 75 per cent of the shortfall, based on the severity of your behaviour.
“A lot of people are really unaware of this. They don’t realise,” Raso said.
“They think if I get audited, I’ve made a mistake, or I can get away with it, or only be charged a small penalty. [But] depending on how much they’ve caught you for, it can be a massive amount.”
The Perth man allowed his old acquaintance to lodge amended income tax returns using his myGov account.
According to the Administrative Review Tribunal, the man claimed he believed his friend was a tax agent or knowledgeable about tax laws at the time. The arrangement was that if he received a tax refund, he would pay his friend 10 per cent.
The amended tax returns included deductions equivalent to his gross income, despite him never incurring these expenses. This meant his income was reduced to nil and he obtained fraudulent tax refunds from the ATO.
The ATO ended up paying tax refunds of around $48,100 for the 2020 income year and $36,850 for the 2019 income year. The ATO also issued a notice of amended assessment indicating a refund of around $41,600 for the 2021 income year, but withheld the payment and subsequently commenced its audit.
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The man took his penalty to the Administrative Review Tribunal but the decision was upheld. (Source: Getty)
When the man alerted his friend to the amended assessment and penalties, his friend claimed the ATO was “not a legal entity” and had “no authority to collect taxes”.
It was around this time the mining worker claimed he understood the information he had received was wrong. He then saw his actual tax agent and paid back the refunds he received.
He was given a notice to pay a penalty of around $18,400, $24,000 and $20,800 for the 2019, 2020 and 2021 income years, with the Tax Commissioner considering him to be “reckless” and imposing a 50 per cent penalty on the tax shortfalls.
The man disputed these penalties, arguing they were excessive, but the Administrative Review Tribunal affirmed the decision last week.
An ATO spokesperson told Yahoo Finance taxpayers needed to do their own research before making tax decisions, as you are ultimately the one responsible for your own taxes.
“Taxpayers who have questions about the legitimacy of tax information should refer to the ATO’s website or speak to their registered tax professional if they have one,” the spokesperson said.
“As a general rule, if it seems too good to be true, it probably is. Think twice before acting on information heard from third-party sources, for example, ‘finfluencers’.”
The ATO also noted it took action against those who promoted unlawful schemes, including through promoter penalty laws.
Raso said she has seen similar “tax loopholes” being promoted by sovereign citizens online that falsely claim you can use a detail on your birth certificate to get all your tax back.
“That’s just a stupid idea,” she said.
Tax Invest Accounting director Belinda Raso said many people weren’t aware the ATO could impose these kinds of penalties. (Source: Belinda Raso/Getty)
The ATO spokesperson also noted claims you could opt out of the tax system are pure fantasy.
“The ‘sovereign citizen’ type claims promoted by some suggest you can opt out of the tax system, or that the ATO does not have legal standing. These claims have been repeatedly debunked and, if acted upon, are likely to lead to significant penalties,” the spokesperson said.
Aussies seeking tax advice have been urged to approach registered tax professionals and be cautious about “free expert” advice. You should check the tax agent is registered with the Tax Practitioners Board.
If you have been offered or have entered into this kind of scheme, the ATO said you can make a confidential tip-off, ask for the ATO’s view through a private ruling, seek independent advice from a registered tax agent, lodge any outstanding lodgements and make a voluntary disclosure to reduce any penalties.
Raso expects more similar cases to pop up in the future.
“If it’s too good to be true, it is. You will get caught and it won’t just be a slap on the wrist. It’ll be a massive penalty,” she said.
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