ATO’s humiliating admission exposes its baseless accusations of fraud

On Monday I sat in the Federal Court in Sydney with our legal team witnessing an extraordinary event. We were defending Rod Douglass against the ATO. You’ll remember we’ve been assisting Rod for nearly two years. We’ve explained this before.
Rod had been accused by the ATO of fraud/evasion on the basis that he should have sought ‘professional’ advice before submitting his tax returns even though he followed ATO website information in completing his returns. He had declared all income. Yet the ATO sent Rod a $550,000 tax bill backdated 10 years which meant he would be bankrupt.

This ATO attack against Rod can happen to any self-employed person. In fact the ATO do this constantly in our experience.

On Monday the ATO caved in. They totally withdrew their accusation of fraud/evasion against Rod saying they had made an ‘error’. Note the ATO only admitted this once we were in court and a massive legal bill had been run up to defend Rod. The ATO’s behaviour is an outrage! How would you defend yourself against such an ATO attack?

Here’s the thing. The ATO can accuse you of a criminal act (fraud), issue a bankrupting tax bill, maintain the accusation for two years then say ‘ah sorry, we were wrong!’ You will have a huge legal bill and the ATO does not offer any compensation for turning your life and work upside down. (Note that in Rod’s case ICA’s lawyers have been supporting Rod pro bono! Thanks heaps to them!)

Senior business journalist Robert Gottliebsen from The Australian joined us in court on Monday and witnessed the entire episode. His comments are important.

Robert said yesterday in his article:

  • “…before the Federal Court, I have witnessed the Australia’s Commissioner of Taxation, Chris Jordan, make an unprecedented and humiliating admission of error.
  • tax officials tried to falsely bankrupt a small businessperson,
  • The commissioner’s barrister confessed that the facts in the Douglass case as presented were “incorrectly formed” and so the allegations of tax fraud and tax evasion “are withdrawn”.
  • Douglass worked as a contractor in partnership (with his wife)…. But the tax office … drummed up an unsigned opinion that fictitiously claimed that Douglass was guilty of tax evasion and fraud…(and) issued Douglass with a mammoth $500,000 assessment by going back 10 years
  • … I fear the ATO may have bankrupted hundreds and possibly thousands of small businesses by issuing Douglass-style fictitious opinions.”

Robert said in his article today:

  • “In the case of Douglas it is very easy. Clearly you can’t have the current anti-small business groups deep in the tax office preparing fictitious opinions so that upstanding Australians are falsely accused of evasion and fraud and are threatened with bankruptcy.
  • No person should be accused of evasion and fraud (which enables the ATO to go back much further than the two years that applied in Douglass) without the case being approved by the Federal Court as was envisaged by the constitution and the 1903 act.
  • In order for small enterprises to prosper in Australia this nonsense must stop.”

There’s a lot more to happen on this.

We’ll be back in court next year again defending Rod over ATO allegations on the Personal Services Income tax laws where we say the ATO (again) is wrong!

We’ll keep you informed. Regards Ken Phillips and the Team at Independent Contractors Australia