Tax Fraud – Avoid Going to Jail for Tax Evasion in Australia

Australia – Federal Tax Crimes and Penalties

If you commit serious tax fraud against the Australian Federal Government, you may be criminally prosecuted by the Commonwealth Director of Public Prosecution (CDPP) or the Australian Taxation Office (ATO) under federal legislation. 

However, if the ATO does not believe that your crime is serious enough to be taken to court, you may simply receive an administrative penalty (e.g. a fine). 

Serious Federal Tax Crimes

In Australia, serious federal tax offences are legislated under the Criminal Code Act 1995 (Cth). The main tax fraud offences that are prosecuted under the Act include:

• Dishonestly obtaining Commonwealth property by deception (s 134.1(1));
• Obtaining a financial advantage from the Commonwealth by deception (s 134.2(1)); and
• Dishonestly causing a loss to the Commonwealth (s 135.4(3)). 

All of the above tax crimes carry a maximum penalty of 10 years imprisonment. 

Federal tax legislation is very broad. Any of the following forms of tax fraud or tax evasion may mean that you are liable to be prosecuted for one of the offences above:

• Failing to report cash income
• Falsifying tax claims
• Falsely claiming refunds and benefits that you are not entitled to (illegal tax avoidance)
• Using complex offshore secrecy arrangements
• Conspiring with your tax agent or accountant to obtain benefits that you are not entitled to.

There is no time limit to commencing federal tax fraud offences. 

Less Serious Federal Tax Crimes

It is at the discretion of the ATO and the CDPP whether or not you are prosecuted for federal tax fraud. If they believe that your matter is not serious enough to be taken to court, the ATO may instead impose an administrative penalty. 

Administrative penalties are often imposed in relation to less serious tax fraud offences, such as:

• Making a false or misleading statement on your tax return
• Failing to lodge a tax return or statement on time
• Failing to withhold amounts as required under the PAYG withholding system
• Failing to meet other tax obligations.

An administrative penalty is a fine that is calculated using a statutory formula and multiples of a penalty unit. In Australia, one penalty unit is worth about $222. 

For example, the fine for making a false or misleading statement on your tax return is:

• 20 penalty units if you were negligent (about $4,400)
• 40 penalty units if you were reckless (about $8,800)
• 60 penalty units if the act was intentional (about $13,300)

Victoria – State Tax Crimes and Penalties

If you commit tax fraud against the Victorian State Government, you may be prosecuted by the Commissioner of State Revenue under the Taxation Administration Act 1997 (Vic) (Taxation Act). If you are criminally prosecuted, your case will likely be heard in the Magistrates’ Court of Victoria.

Tax Evasion

The most serious tax fraud offence under the Taxation Administration Act (Vic) is tax evasion.

Tax evasion is when a person evades or attempts to evade tax by a deliberate act or omission (s 61). For a person to be found guilty of tax evasion, the prosecution must prove beyond a reasonable doubt that the accused:

• Evaded or attempted to evade paying tax; and
• did so by a deliberate act or omission. 

The Taxation Administration Act (Vic) does not strictly define which behaviours constitute tax evasion. However, the courts have traditionally applied a general definition to the word “evade”. As such, any deliberate action that a person takes to avoid paying tax could constitute “tax evasion”. 

If the accused was simply careless (i.e. they made an honest and genuine mistake when filing their taxes), they can not be found guilty of tax evasion. The accused can only be found guilty of tax evasion if the prosecution can prove beyond a reasonable doubt that the accused’s act or omission was “deliberate”.

If an individual is found guilty of tax evasion, the maximum penalty is a fine of 200 penalty units (about $33,000) or 2 years’ imprisonment or both. In the case of a body corporate, the maximum penalty is a fine of 1000 penalty units (about $165,000).

Several legal defences exist in relation to tax evasion (see below). If you have been charged with tax evasion, it is crucial that you discuss your matter with a tax fraud lawyer. 

Other Tax Fraud Offences in Victoria

The Taxation Administration Act (Vic) notes several other tax fraud offences in Victoria, including:

• Failing to keep all records necessary to enable your tax liability to be properly assessed (s 50).
  • Maximum penalty of a 100 unit fine (about $16,500) for individuals.
• Failing to comply with a written notice from the Commissioner regarding tax records (s 51).
  • Maximum penalty of a 100 unit fine (about $16,500) for individuals.
• Including false or misleading information in your taxation records (s 52). 
  • Maximum penalty of a 240 unit fine (about $40,000) for individuals.
• Failing to keep your tax records so that they can be readily produced if the Commissioner requires them (s 53).
  • Maximum penalty of a 40 unit fine (about $6,600) for individuals.
• Failing to keep your tax records in English or in a form that can be readily translated into English (s 54).
  • Maximum penalty of a 40 unit fine (about $6,600) for individuals.
• Failing to retain your tax records for 5 years (s 55).
  • Maximum penalty of a 100 unit fine (about $16,500) for individuals.
• Wilfully destroying or damaging tax records that you are required to keep (s 56).
  • Maximum penalty of a 100 unit fine (about $16,500) for individuals.
• Giving false or misleading information to tax officers (s 57).
  • Maximum penalty of a 120 unit fine (about $19,900) for individuals.
• Deliberately omitting information when giving a statement to a tax officer (s 58).
  • Maximum penalty of a 240 unit fine (about $40,000) for individuals.
• Failing or refusing to lodge a required taxation document, statement or return (s 59).
  • Maximum penalty of a 40 unit fine (about $6,600) for individuals.
• Falsifying or concealing your identity or address as a taxpayer (s 60).
  • Maximum penalty of a 100 unit fine (about $16,500) for individuals.

You can not be imprisoned if you are found guilty of any of the above tax fraud offences in Victoria. However, you are liable to receive a criminal conviction and a substantial fine.