Making a false tax declaration without having a reasonable excuse can result in both individual and businesses being exposed to significant financial penalties from the Australian Taxation Office (ATO).
If the ATO has identified that you have made a false or misleading tax declaration they will likely issue you with an infringement notice.
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However, depending on the severity of the deception and the benefit that has been obtained, the ATO may refer your case to the Commonwealth Director of Public Prosecutions where you may be charged with serious criminal offences that can result in terms of imprisonment.
When will the ATO Investigate?
You may be liable to a financial penalty from the ATO if you make a false or misleading tax declaration that results in you declaring a shortfall amount.
The shortfall amount is the difference between your correct tax liability or credit entitlement, and the liability or entitlement worked out using the information you provided.
Even if there is no shortfall amount, the ATO can still issue an infringement notice if you make a false or misleading tax declaration.
What type of financial penalty will I receive?
The ATO has identified three categories, depending on your level of deception, in which they can impose a monetary fine. The greater the deception, the greater the financial penalty that can be imposed.
The categories include:
- Failing to take reasonable care – this means you failed to take reasonable steps that an ordinary, reasonable person would have taken in the same set of circumstances (20 penalty unit fine)
- Reckless – this means that you were aware and that there was a real risk that the tax declaration you filed was misleading or false and you showed indifference or disregarded that risk (40 penalty unit fine)
- Intentional Disregard – this means you intentionally disregarded the law, and were fully aware that the tax declaration you filed was misleading or false in order to obtain a benefit (60 penalty unit fine)
What is a Penalty Unit?
|When Infringement Notice Occurred||Penalty Unit Amount|
|Up to 27 December 2012
|28 December 2012 – 30 July 2015
|31 July 2015 – 30 June 2017||$180
|On or after 1 July 2017
Can the base penalty be reduced or increased?
The base penalty can be reduced or increased, depending on whether there are any aggravating or mitigating circumstances in your particular case.
For example, if you have been contacted by the ATO who are investigating a shortfall amount in your tax declaration, and you attempt to obstruct or prevent them from conducting their investigation into the shortfall amount, then the base penalty can be increased. Additionally, if you were aware that you made a false or misleading tax declaration and failed to alert the ATO within a reasonable time, the base penalty may be increased.
The ATO also has the discretion reduce the base penalty that it may otherwise impose. In deciding whether to reduce the penalty, the ATO will consider:
- Whether you were cooperative with the ATO.
- Whether you alerted the ATO to the filing of the false or misleading tax declaration.
- There were circumstances beyond your control which prevented you from meeting your obligations.
- The penalty that would be imposed would produce an unjust result.
What is the Safe Harbour provision?
You will not be exposed to an administrative financial penalty from the ATO if the following applies:
- The statement was made by your registered agent
- You gave your agent all the relevant tax information to enable the statement to be made correctly
- The false or misleading statement was the result of your agent failing to take reasonable care
- The statement was made on or after 1 March 2010.
Can I object or request a review?
If you disagree with the decision the ATO has made about your case, you have the right to have the decision reviewed.
What do I do if I have received a letter from the ATO regarding my tax affairs?
If you have received any form of correspondence from the ATO regarding making a false or misleading tax declaration then you should contact one of our experienced criminal lawyers to obtain advice about how you should respond to the ATO, and whether or not you will be exposed to criminal prosecution.