Practice Group Instructions

Revenue & Benefits Fraud Practice Group

Charging tax-related offending under the Criminal Code

Updated: July 2016

Practice Group instructions

Revenue & Benefits Fraud Practice Group

Charging tax-related offending under the Criminal Code

Instruction Number: 7

Last Update:July 2016

  1. Paragraphs 2.19-2.23 of the Prosecution Policy of the Commonwealth set out the primary considerations to be taken into account when deciding which charge is to be preferred where the evidence discloses an offence against several different laws.
  1. This document is intended to assist case officers in that process by describing common types of tax-related offending and common charging practices. It is not intended to be prescriptive. Charges should always be drafted having regard to the facts and evidence in a particular matter, and any special requirements imposed by the jurisdiction.
  1. It supplements CFC’s Practice Group Instruction number 3 ’Dishonesty offences under the Criminal Code‘, which outlines the circumstances in which it may be appropriate to lay or proceed with a charge of an offence of general dishonesty contrary to s 135.1 of the Criminal Code.
  1. Scenario 1: the taxpayer enters into a tax scheme which the Prosecution contends is intended to imperil the revenue but no clear false statement can be identified, e.g. because no income tax returns have been lodged.

4.1Depending on the circumstances, a charge under s 135.1 of the Criminal Code – General dishonesty, or s 135.4 of the Criminal Code – Conspiracy to defraud, may be appropriate. Note that the Director must consent to any conspiracy charge.

  1. Scenario 2: the taxpayer lodges with the ATO a document such as a Business Activity Statement (BAS), an income tax return or a claim for benefit (e.g. Energy Grants Credit or Education Tax Refund) in which a particular false statement can be identified.

5.1 In these circumstances, a separate charge under s 134.2(1) of the Criminal Code - Obtaining a financial advantage by deception, for each document lodged with the ATO which contains false information will usually be appropriate.

5.2 However, in some cases, given the nature of the alleged criminality, particularly where the lodgement of documents is part of a scheme, a general dishonesty charge (s 135.1) or a conspiracy charge (s 135.4) (if there are multiple offenders) may be preferred.

5.3 Initially businesses used BAS to report and pay the Goods and Services Tax (GST). Now businesses use BAS to report and pay a number of other taxation obligations such as PAYG withholding and fringe benefits tax. If a BAS contains false statements relating to more than one kind of taxation obligation, it will usually be necessary to lay a separate charge for each kind of taxation obligation affected. Accordingly, a single BAS may give rise to more than one fraud charge.

  1. Scenario 3: the taxpayer lodges with the ATO numerous BAS (or other documents) each of which contains false information.

6.1 It is accepted that the language of s 134.2(1) of the Criminal Code does not permit multiple acts of deception to be ‘rolled up’ (unless the defendant pleads guilty and a ‘rolled up’ charge is agreed by the defendant as part of charge negotiations, refer paragraph 8 below). This can present difficulties for charging where the defendant is alleged to have submitted large numbers of BAS to the ATO, each of which contains false information, and has obtained large sums of money as a result. In these circumstances, charging a separate s 134.2(1) offence for each BAS may overload the indictment (acknowledging that what constitutes an overloaded indictment varies across jurisdictions). At the same time, representative charges or a charge of general dishonesty contrary to s 135.1 (which can sometimes be used to roll-up multiple acts of deception) may not adequately reflect the defendant’s criminality and provide an appropriate basis for sentencing.

6.2In the past, a solution has been to conduct split trials. However, another option may be to lay a combination of representative fraud charges under s 134.2(1) (e.g. one charge for each entity or group of related transactions) together with a ‘between dates’ money laundering charge under Part 10.2 of the Criminal Code. The advantage of the money laundering charge is that it can be framed to cover the balance of the transactions in terms of the moneys received and/or dealt with as the proceeds of the tax frauds, with the multiple transactions and amounts accumulated as permitted by s 400.12 of the Criminal Code.

6.3Each of the charges will need to be carefully framed to avoid arguments about abuse of process (refer Nahlous v R [2010] NSWCCA 58; see also Thorn v R [2009] NSWCCA 294) or double punishment (refer Pearce v The Queen [1998] HCA 57). However this should be possible if the money laundering charge is in place of, not in addition to, any fraud charges arising from the same conduct; that is, the money laundering charge covers moneys obtained from the non-charged frauds only.

6.4The decision to lay a money laundering charge in these circumstances should be first discussed with and approved by your Senior Assistant Director.

6.5If multiple offenders are involved, a conspiracy charge (utilising either s 11.5 or s 135.4 of the Criminal Code) is a further option.

  1. Scenario 4: the taxpayer is audited by the ATO following the lodgement of a BAS or claim for benefit etc. In order to ’substantiate‘ the information previously provided, the taxpayer falsifies invoices and provides them to the ATO.

7.1If the preferred fraud charge is not capable of encompassing this additional conduct then separate charges under either s 134.2(1) – Obtaining a financial advantage by deception or s 144.1 of the Criminal Code – Forgery (one per false invoice) or s 8T of the Taxation Administration Act 1953 – Incorrectly keeping records with intention of deceiving or misleading etc. may be appropriate.

‘Rolling up’ charges

  1. In some States and Territories, charges which must otherwise be charged separately to avoid any element of duplicity (e.g. s 134.2(1) of the Criminal Code) may be ‘rolled up’ if the defendant proposes to plead guilty and agrees to the charges being rolled up. These ‘rolled up’ charges have been described as a collection of counts bundled together in a single count. Where ‘rolled up’ charges are used, the total number of charges proceeding will be reduced. Prosecutors should ensure that the court is provided with adequate scope to impose a penalty which is appropriate in all the circumstances. ‘Rolled up’ charges can only be used where the defendant agrees and the matter is expected to proceed as a plea of guilty. If the defendant pleads not guilty, it will be necessary to ‘unroll’ the charge.

Framing of charges

  1. The way in which a charge is particularised is obviously important. Two sample charges for a BAS-related offence against s 134.2(1) of the Criminal Code are set out below. However, it is important to remember that charges may vary depending on the jurisdiction and may differ from these examples.

’Between about [date of BAS lodgement] and [date GST refund was paid into D’s or another’s bank account] at [location], [D] did, by a deception, being that [name of entity (ABN ###)] was entitled to a refund payment in respect of a Business Activity Statement lodged with the Australian Taxation Office in respect of the period [relevant dates], dishonestly obtain a financial advantage from the Commonwealth, contrary to s 134.2(1) of the Criminal Code (Cth).

And:

’Between about [date of BAS lodgement] and [date GST refund was paid into D’s or another’s bank account] at [location], [D] did, by a deception, dishonestly obtain a financial advantage, namely a Goods and Services Tax refund, from the Commonwealth, by lodging with the Australian Taxation Office a Business Activity Statement for [entity name (ABN ###)] for the period [relevant dates] which contained false information [short generalised statement of the deception e.g., in that it overstated the GST paid on purchases during that period], contrary to s 134.2(1) of the Criminal Code (Cth).’

  1. Of these two examples, the first will often be preferable because the alleged ‘deception’ and the alleged ‘advantage’ line up with the particulars in each case. Also, the first charge gets to the essence of the deception, namely, that the entity is entitled to a GST refund. The fact that GST payments on purchases (acquisitions) have been overstated in the BAS is but one way to achieve this; another is to under-report the GST collected on sales (supplies) or to do a combination of both. Finally, lodgement of the BAS is the means by which the deception is communicated to the ATO but the deception is the false statement in the BAS. It makes sense therefore to emphasise the false statement upfront, rather than the act of lodgement.

Attempt

  1. It is very common to have a mix of charges where the defendant succeeds in obtaining some payments from ATO but one or more claims are rejected (usually once the ATO detects the conduct) and it is necessary to charge an attempt. In these circumstances it is very important to correctly plead the attempt charge otherwise the elements of the offence may be misrepresented.
  1. For example, for an offence against sections 11.1 and 134.2 of the Criminal Code, the primary offence is ‘by a deception, dishonestly obtains a financial advantage’ with the gravamen of the offence being the ‘obtaining’. The elements are, inter alia:

(a) Physical: D induces a person to believe that a thing is true (conduct)

Fault: Intention (s 5.6(1)); and

(c) Physical: As a result of that conduct, D obtains a financial advantage from another person (result) Fault: Dishonesty (section 134.2 and section 130.3);

(For further details, refer to the relevant offence guide.)

  1. It therefore follows that the appropriate wording for an offence against sections 11.1 and 134.2 of the Criminal Code would be ‘did attempt, by a deception, to dishonestly obtain …’. To do otherwise would be to incorrectly apply the fault element of dishonesty to the attempt rather than the obtaining, and consequently incorrectly tacitly impose the default fault element of intention to the obtaining. Put another way, the charge should be drafted to allege an intentional attempt, by a (intentional) deception, to dishonestly obtain a financial advantage – not the other way around.
  1. A sample charge is:

’Between about [date of BAS lodgement] and [date GST refund was paid into D’s or another’s bank account] at [location], [D] did [attempt to commit an offence against section 134.2(1) of the Criminal Code in that s/he did attempt], by a deception, to dishonestly obtain a financial advantage, namely a Goods and Services Tax refund, from the Commonwealth, by lodging with the Australian Taxation Office a Business Activity Statement for [entity name (ABN ###)] for the period [relevant dates] which contained false information [short generalised statement of the deception e.g., in that it overstated the GST paid on purchases during that period], contrary to sections 11.1 and 134.2(1) of the Criminal Code (Cth).’

Complex matters

  1. In complex matters, it may be difficult to properly reflect the particulars of the offence within the body of the charge itself. In these circumstances, it may be preferable to provide a statement of particulars separate to the charge.

Tax returns lodged by agents

  1. There will be many cases in which the BAS or other document in question was lodged with the ATO by a third party, usually a tax agent, acting on the defendant’s instructions. However, officers should avoid the use of language such as ‘caused to be lodged’ in framing the relevant charge. It is the view of the Office that the ‘Commission by proxy’ provisions in s 11.3 of the Criminal Code and the common law principles of agency mean that the third party’s conduct can be properly viewed as the defendant’s own conduct. On occasions, phrases such as ‘caused to be lodged’ have encouraged technical arguments from defence counsel about the chain of causation (i.e. precisely what happens within the ATO) after a BAS or tax return is lodged up until the point where a refund is issued. This is not a standard part of ATO briefs of evidence and makes the prosecution task unnecessarily complex. The issue can be avoided if the charge is framed in such a way that a particular statement or claim in a BAS etc. is alleged to have been false (refer example above).

‘False BAS’ v. a BAS that contains false information

  1. Finally, there is a distinction between a ‘false BAS’, being one that is false in its entirety (e.g. because the entity was not trading at all) and a BAS that contains false information but which may also contain information about legitimate expenses. As a default position, the Office prefers the phrase ‘by lodging … a Business Activity Statement … containing false information’ or words to that effect because it captures both scenarios.

Whether ‘the Commonwealth’ or ‘the Commissioner of Taxation’ should be named on tax-related charges

Income tax fraud

  1. When the charge relates to obtaining a financial advantage by falsely reducing the amount of income tax available, the loss is that of the Commonwealth rather than the Commissioner. Section 255-5(1) of Schedule 1 to the Taxation Administration Act 1953 (the TAA) provides:

An amount of a tax-related liability that is due and payable:

(a) is a debt due to the Commonwealth; and

(b) is payable to the Commissioner.

Therefore, such charges should name the Commonwealth.

  1. For example, a charge under s 134.2 of the Criminal Code (Cth) would be worded as follows: ’D did, by a deception, dishonestly obtain a financial advantage from another person, namely the Commonwealth‘.
  1. It is noted that although offences of obtaining a financial advantage, such as under s 134.2, require that the advantage be obtained from ‘a Commonwealth entity‘, ’Commonwealth entity‘ is defined in the Code’s dictionary as meaning ’the Commonwealth...or...a Commonwealth authority‘.

GST fraud

  1. In the case of GST refund-related fraud, the loss is that of the Commonwealth. Section 35-5 of the A New Tax System (Goods and Services Tax) Act 1999 provides: ’if the net amount for a tax period is less than zero, the Commissioner must, on behalf of the Commonwealth, pay the amount (expressed as a positive amount) to you‘.

Therefore, such charges should name the Commonwealth.

Excise fraud

  1. In the case of excise fraud, the loss is that of the Commonwealth. Section 250-10(2) of Schedule 1 to the TAA contains a list of ‘tax-related liabilities’ under Acts other than the TAA, which includes excise duty under the Excise Act 1901. Therefore, section 255-5(1) (set out at paragraph 10.1 above) also applies to excise cases.

Therefore, such charges should name the Commonwealth.

Other cases

  1. When the charge relates to false and misleading statements, such as a charge under s 136.1 of the Criminal Code, different considerations will apply.
  1. In other cases of tax fraud not covered by the above categories, careful consideration of the appropriate charges will be necessary. However, it is expected that in most cases it will be appropriate to name the Commonwealth, rather than the Commissioner.

Catherine Ryan

Acting Deputy Director (Revenue & Benefits Fraud Practice Group)

8/07/2016

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