Unfair ATO a dangerous threat to innovation

The Australian, October 9, 2017 – Robert Gottliebsen

When Malcolm Turnbull goes to Brisbane and talks about one of his favourite topics, innovation, he should be prepared for a slow hand clap.

One of Brisbane’s most innovative projects, backed by the Queensland government, Arthur Sinodinos’s research grant incentives and financially supported by ordinary but influential Queenslanders, has been deliberately, savagely and falsely destroyed by the ATO. The entrepreneur has been forced to sell her house to pay the debts. We know she did nothing wrong because the Australian Taxation Office, after long delays, sent her an abject and complete written apology for their actions. And of course as we know these sorts of actions are rife in the power corrupted Australian Taxation Office.

But when she sought damages from the ATO for their actions in financially destroying Queensland innovation and a Queensland female entrepreneur, they set up one of their notorious kangaroo courts where people in or linked to the ATO are the appeal judges. Not surprisingly, the kangaroo court told her to “cop it sweet” and awarded her a token $30,000 damages for the dastardly acts of their colleagues.

But the good people of Brisbane have decided to fight and do the right thing by the nation to stop this deliberate and unfair action by the ATO to prevent Australian innovation. Until the Prime Minister fixes the problem — and it’s not hard to do — all Australians, not just Queenslanders, should slow hand clap him when he talks innovation.

Earlier this year I first exposed the incredible dangers honest Australians were facing when they accepted export incentives from the AusIndustry research grants supervised by the Minister for Industry, Innovation and Science Arthur Sinodinos. I urged Sinodinos to put a warning sign on the promotion of the government research incentives because the ATO might at any time move to bankrupt those honestly and properly using these grants. Sinodinos did not do it and now we have a new example of the hazards with more to come.

The Helen Petaia story is therefore important for the Prime Minister and Arthur Sinodinos and his people, as well as for all Australians. The good news is that while significant sections of the ATO are power corrupted there are still honest and reputable people in the organisation and they shine.

Back in 2007 the idea of putting chips on cards to help in emergency medical situations, monitoring children including treating sports injuries was new.

Helen Petaia believed she had a breakthrough. After funding the early stages herself Helen Petaia needed extra help and a group of influential Queenslanders contributed $600,000 to what was a second company, which took over the work of the first. The Queensland Rugby League embraced the use of the cards and the AFL also began discussions. The Queensland government had earlier chipped in. None if this would have been possible but for the AusIndustry research grants in 2010, 2011 and 2012. Helen was meticulous in making sure her claims were in accordance with the act. There was great excitement and everything was put in place in late 2012 for the Toro group to raise $3 million to take the venture to the next stage. It was now called “Safe Family Cards Australia”.

Then in December 2012 Helen Petaia was told she would be tax audited. This of course delayed the $3 million capital raising. But in February 2013 Richard Brown became her case officer. He was an honest ATO official and told her to go ahead because nothing was wrong. But then there was absolute silence. Richard Brown seemed to vaporise. Later Helen Petaia was advised the audit was still going so she could not raise the capital. Funds were running low and soon it would be time to sell the family home.

Then late in 2013 came the bombshell. An ATO official phoned the secretary of the company in which the Queenslanders were invested and alleged fraud and recklessness in both the first and second companies. Understandably, at that point the Queensland investors believed that Helen Petaia had defrauded them. And then came the ATO stunt of going back four years with penalties and interest. They claimed $400,000. The project was over. But if there was “fraud and recklessness”, it was in the ATO not Helen Petaia and she kept fighting. Finally an honest ATO official, Daryl Richardson, wrote this letter of apology.

“As a consequence of a number of procedural errors during the audit this claim was adjusted without a full examination of source documents supporting the claim. A recent review of the audit has confirmed the majority of the claim for the Research and Development concession was correct.

“As I stated during the 20 November 2014 telephone call, the audit result should not be taken to be an indication of incompetence or dishonesty on your part. In contrast, the results of the review confirm the legitimacy of making the claim for the Research and Development concession.

“I apologise for the stress the audit result has caused you.”

Then it went to the kangaroo court which awarded the token $30,000 in damages.

The Queensland investors now knew that the fraudsters were the ATO not their Queensland entrepreneur. They funded the giant global accounting firm Deloitte to asses the damages. Here I give tremendous praise to Deloitte because they acted in the national interest even though they obviously do work for the ATO. The Petaia investigation was kept totally separate.

Deloitte said the damages to the venture were between $13 million and $40 million. The Queenslanders have lodged writs to try and recover that money.

All Australians will have to hope they win — although it’s up to the courts. I would like any damages the court does award to be paid by the power corrupted tax officials. But that will not happen.

If Malcolm Turnbull and Arthur Sinodinos want to fix the problem they first need an independent body or system — not a kangaroo court — to assess small business claims in a low cost way. However I fear the power corruption in the ATO is so deep that further action may now be required. The two ministers involved and the taxation commissioner are like the three wise monkeys who “see no evil, hear no evil, speak no evil”.