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The ATO's sentencing statistics and some advice about tax related fraud - the AWU WRA Inc's founders might be in strife

Julia Gillard argued the AWU WRA Inc wasn't a trade union.   One legal consequence of that is the loss of the trade-union exemption from paying tax.   That means the legal advice on its incorporation should have included a range of tax related matters - either exemption from tax by some other means or advice about registering the entity and its tax obligations.

The ATO may take an interest in the advice Bruce Wilson sought and received in order to achieve his aim of setting up an entity to deliver training services in return for money.

There was some discussion about how that might be done, and someone suggested creating a separate legal entity that could run the training and to which the funding could be provided. If that could be done, we discussed that there could be no confusion that the funds for the training would be completely separate from AWU funds.

It was my strong position that there was no way that I would be raising these funds and allowing the national office to make any claim on them. The separate legal entity would be the vehicle that would propel the concept of the NCB, and funds received by the entity could be used to support the NCB concept through supporting candidates in the election and paying for various associated expenses.

 A general concept of a separate legal entity was further discussed, and there was support for this idea.

I did some research to inform myself about how to go about setting up a legal entity to receive the monies from the DCP (the Dawesville Channel Project). I may have asked someone like my accountants, or Stephen BOOTH or Julia GILLARD. I got as much information as I could about how to go about it from various sources. After informing myself I believed that the entity should be an incorporated association.

On 13 May 1992 Ms Gillard wrote to the WA Corporate Affairs Department - we don't have the letter but Peter Gordon did when he interviewed Gillard on 11 September, 1995.   She agrees she wrote to confirm that the AWU WRA Inc was not a trade union.

PG.......there'd been a letter back from the authority suggesting that
it might be a trade union and therefore ineligible for incorporation under
that legislation, and that we had prepared a response submitted on Wilson's
instructions to that authority suggesting that in fact it wasn't a trade union
and arguing the case for its incorporation. My recollection is that all of
that happened in or about mid 1992. Is that right?
JG......I wouldn't want to be held to the dates without looking at the file, but
whatever dates the file shows are the right dates, so ..

.
PG: Can I ask you then following the last thing that we did to setting up the
incorporation which appears from the file to be the letter arguing that it
ought to be not construed as a trade union, did you have anything
personally to do with that incorporated association afterwards?
JG: No I did not

On 15 May the Corporate Affairs department wrote back:

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Ms Gillard tells us she provided "legal advice on the incorporation of the association".  

Ms Gillard can hardly argue that her incorporated association was the beneficiary of a trade union exemption from paying tax having argued that the AWU WRA Inc was not a trade union.    There is no evidence that she provided any advice about any alternate Not For Profit status it might have triggered.  It wasn't a charity.  In the absence of trade union status or registration as a charity, legal advice about its incorporation should have included advice on its tax obligations, including an application for a Tax File Number or advice to Wilson that the entity's income once banked could be taxed at the top rate.

Ms Gillard set it up, personally drafting the incorporation documents.  She then argued that it wasn't a trade union, re-drafting the rules to make that non-trade union status explicitly clear.   Ms Gillard can't have it both ways.  If it wasn't a union then her legal advice on its establishment should have included tax advice.

At the least she should have advised that a separate legal entity that wasn't a trade union and wasn't a charity would not be exempt from tax.   She should also have advised on the problems it would face if it did not apply for a Tax File Number.  No TFN was ever applied for and there's not a skerrick of advice on the issue.

Wilson told the Royal Commission that the AWU WRA Inc paid no tax.   It's clear he never had any intention of paying tax.  Apparently his legal advisor thought he'd get away with it - its name, sounding so much like a union made getting away with it all the easier.

Well Ms Gillard can't have it both ways.   She argued it wasn't a trade union - that means she was establishing a separate corporate entity in the real world.   She gave no advice about how to deal with its tax obligations at all.  She knew it wasn't a trade union but she put the AWU's name in its title - that allowed it to be passed off as part of the union (for example at its bank) and thus outside the normal taxation world.

Thanks to Seeker of Truth for pointing out this recent post from the ATO's website below.

Chartered tax

Have you ever considered cheating the ATO? Judging by the number of people my taxes are supporting on 'an all-expenses paid' stay in one of her Majesty’s health farms for tax related convictions, quite a few people have thought about it and then taken it further than just wondering. Included in those people convicted of defrauding the ATO are a number of tax professionals.

Five years ago a 'tax professional' caught defrauding the ATO could have expected a head sentence in the order of three years. Today they would be looking at six years.

In part, this is as a result of appellate courts telling sentencing judges to make the sentences fit the offence. This comes from courts saying that tax fraud is a serious offence but then imposing relatively light sentences. It has also been recognised that there needs to be parity between sentences in social security fraud matters and in tax fraud matters.

Judges are making it clear that a tax professional should expect a longer sentence for tax fraud than a person without professional training in tax. Essentially this comes back to the fact that tax professionals should know better than a client who is simply following professional advice, or a mere 'chancer': a taxpayer who has decided to bear the risk of defrauding the system alone.

General deterrence is probably the single most significant or important aspect of sentencing. This has been stated on a number of occasions at both sentencing judge level and appellate court level. Hence, 'advisors' or 'facilitators' can expect higher sentences than 'taxpayers' (including those taxpayers acting alone).

Essentially this is a recognition that if a taxpayer ups the ante, it is less likely that professionals will take the risk of being involved, which therefore lessens the likelihood of the taxpayer being involved in a tax fraud in the first instance.

Those who are considering cheating the system should think twice.

For a salutatory reminder of the lengthy jail terms that professionals who are found guilty of tax fraud can expect, see the table of Tax practitioner sentences compiled by David Williams.

ACCUSED PERSON

CASE DETAILS

CONVICTED OF AN OFFENCE UNDER

SENTENCE [head sentence & non-parole period]

Ewan Stoddart

ATO Media Release 2013/24

Found guilty of 13 counts of aiding and abetting the commission of fraud against the Commonwealth

6 years

Philip Tadros

The Queen v Tadros

Unreported County Court of Victoria 29 July 2013

Pleaded guilty to five counts of obtaining a financial advantage by deception contrary to s134.2 and one count of attempting to obtain a financial advantage by deception contrary to s134.2

4 years with a non-parole period of 2 years

Philip de Figueiredo of Strachans

Courier Mail 6 March 2013External Link

[2013] QCA 303

Pleaded guilty to three counts of conspiracy to defraud the Commonwealth between 1999 and 2005 [involving Daniel Stoten & Adam Hargraves (counts 1 and 2) and Glenn Wheatley (count 3)]

6 years with a non-parole period of 2 year 5 months on appeal

Non-parole period reduced to 2 years due to co-operation given in relation to potential prosecution of Egglishaw

Cox, Cuffe & Morrison

R v Cox; R v Cuffe; R v Morrison [2013] QCA 10

Each found guilty of conspiracy to defraud the Commonwealth contrary to s86 of the Crimes Act (CA)

Cuffe and Morrison each received 5 years with a non-parole period of 2½ years

Cox received 9 years 11 months with a non-parole period of 3 years 4 months

Greg Dunn

R v Dunn [No 9] [2014] WASC 61

Found guilty of one count of conspiracy to dishonestly cause a loss to the Commonwealth contrary to s135.4(3)

7 years with a non-parole period of 4 years

Robert Agius

R v Agius; R v Zerafa [2012] NSWSC 978 [sentencing]

Agius v the Queen [2013] HCATrans 30

Agius v The Queen [2013] HCA 27

Found guilty of one count of conspiracy to defraud the Commonwealth contrary to s86 of the CA and one count of conspiracy to dishonestly cause a loss to the Commonwealth contrary to s135.4(5)

8 years 11 months (after allowance for having been detained for one month prior to trial) with a non-parole period of 6 years and 8 months. An appeal against the conviction under the second count was dismissed by the Full High Court.

Kevin Zerafa

R v Agius; R v Zerafa [2012] NSWSC 978

R v Zerafa [2013] NSWCCA 222

Found guilty of one count of conspiracy to defraud the Commonwealth contrary to s86 of the CA and one count of conspiracy to dishonestly cause a loss to the Commonwealth contrary to s135.4(5)

On appeal ordered to serve 500 hours of community service (for the first charge) and 3 years 6 months with a non-parole period of 2 years 3 months in respect of the second charge).

Lynnette Liles

R v Liles [2012] NSWSC 1249

Pleaded guilty to offences contrary to s29D of the CA, s86 of the CA and conspiracy to dishonestly cause a loss to the Commonwealth contrary to s135.4(3)

8 years 3 months with a non-parole period of 4 years 3 months

George Livanes

Prothonotary of the Supreme Court of New South Wales v Livanes [2012] NSWCA 325

Pleaded guilty to 10 counts of defrauding the Commonwealth contrary to s29D of the CA and two counts of obtaining a financial advantage by deception contrary to s134.2

6 years with a non-parole period of 3 years 6 months

Ian Henke, Robin Huston and Brian Fox

R v Huston; R v Fox; R v Henke [2011] QCA 349

R v Huston; R v Fox; R v Henke [2011] QCA 350

Each found guilty of one count of conspiracy to defraud the Commonwealth contrary to s86 of the CA of more than $4.5 million

After appeal sentences increased as follows.

Huston received 6 years with a non-parole period of 3 years

Fox received 5 years with a non-parole period of 2 years 6 months

Henke received 6 years with a non-parole period of 3 years

Paul Gregory

R v Gregory [2010] VSC 121; (2010) 77 ATR 219; DPP (C'th) v Gregory [2011] VSCA 145

Found guilty of one count of conspiracy to dishonestly cause risk of loss to a Commonwealth entity contrary to s135.4(5) [found not guilty of other charges]

Head sentence of 2 years' imprisonment but to be released after 12 months upon giving security by recognisance of $5,000 to be of good behaviour for 12 months

On appeal by the DPP it was indicated that the sentence was too lenient but the discretion was exercised by the Court not to increase the sentence because of the delay in the appeal by the DPP.

Trevor Thompson

Unreported Supreme Court of Western Australia, 13 May 2010

Pleaded guilty to falsifying documents in a tax fraud

3 years 3 months – Mr Thomson pleaded guilty in 2010 and served 13 months of a 39 month sentence (source: The West Australian,25 September 2013)

Peter Ambrosy

Herald Sun 2 February 2008

Unreported Victorian County Court, 2 February 2008

Pleaded guilty to three counts of defrauding the Commonwealth contrary to s29D of the CA

7 years with a non-parole period of 5 years

Scott Holzberger

R v Holzberger [2007] QCA 258

Pleaded guilty to one count of defrauding the Commonwealth contrary to s29D of the CA; three counts of obtaining a financial advantage by deception contrary to s134.2; two counts of attempting to obtain a financial advantage by deception contrary to s134.2; and one count of using a forged document.

3 years with a non-parole period of 15 months

Cassariti

Cassariti v R [2007] NSWCCA 66

Found guilty of 22 out of 23 counts of defrauding the Commonwealth contrary to s29D of the CA and of one count of attempting to defraud the Commonwealth contrary to s29D of the CA

Appeal against conviction rejected [sentence not disclosed in the appeal]

My Phung Ly

Ly v R [2007] NSWCCA 28

Pleaded guilty to 18 counts of defrauding the Commonwealth contrary to s29D of the CA and 18 counts of obtaining a financial advantage by deception contrary to s134.2; five counts of attempting to defraud the Commonwealth contrary to s29D of the CA and one count of attempting to obtain a financial advantage by deception contrary to s134.2

On appeal 6 years with a non-parole period of 4 years

Steven Hart

R v Hart [2004] QCA 421

R v Hart [2005] QCA 50

R v Hart [2006] QCA 39

Hart v DPP [2011] QCA 351

Found guilty of nine counts of defrauding the Commonwealth contrary to s29D of the CA

7 years with a non-parole period of 2 years 9 months

 

 

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