Australians who have evaded tax outside Australia now have less than five months to take advantage of a unique ATO initiative to allow a voluntary disclosure.
The initiative is known as Project DO IT, short for “Disclose Offshore Income Today.” Project DO IT offers tax evaders the opportunity to voluntarily disclose tax evaded through false deductions and offshore undeclared income. In return, tax evaders can potentially avoid substantial tax penalties and possible criminal exposure, including lengthy jail time. This is a one-off opportunity and is only available until 19 December 2014. The remarkable benefits may never again be on offer.
“The window of opportunity is certainly closing rapidly and we are seeing an increase in Project DO IT queries from taxpayers, including serious evaders, anxious to beat the deadline,” commented Mills Oakley Private Advisory tax partner Jack Stuk.
Those eligible for Project DO IT will only be required to pay tax evaded for limited periods of review. In most cases that period is only the last four years. Further, those eligible will only have a shortfall penalty of a maximum of 10%. In total, that means an end tax bill of 110% of the evaded tax amount and only for that four year period. Importantly, tax evaded prior to that four year period is forgone by the ATO.
However, it is vital that any voluntary disclosure be handled through an experienced lawyer so all instructions from the taxpayer are covered by legal professional privilege between client and lawyer. The most serious evaders can “tell all” and third parties – including the ATO – cannot access those damning facts so long as they are disclosed genuinely for the purpose of obtaining legal advice under a proper legal engagement. The substantial accounting work, including original and amended returns, which the client’s accountant must perform as a result of the disclosure can then proceed through instructions received by the lawyer as part of their legal advice to the client.
A lawyer can also guide the taxpayer through some of the critical commercial and legal pitfalls. Importantly, acceptance of a voluntary disclosure is at the discretion of the ATO and is not guaranteed. However, it may be possible for eligibility to be determined anonymously. Great care needs to be taken at every stage during the disclosure process. Full and upfront disclosure is paramount if the taxpayer proceeds. Anything less than the truth (‘the whole truth and nothing but the truth’) will be rejected when that fact comes to light.
“Therefore, it is critical to put forward a full and compelling case on the first attempt, which saves the ATO as much work as possible. The ‘prize’ on offer is the extremely generous and once-off benefits,” said Stuk. Failure to disclose will most likely see the evader found out under the extensive international exchange of information treaties and protocols which Australia already has in place and those proposed between “tax haven” financial institutions and G20 country revenue authorities.
If the ATO finds the tax evader first, the remarkable benefits offered under Project DO IT will evaporate. In that case, the likely outcome is that the evader will be subject to serious penalties of up to 95% of the shortfall, a total tax bill of up to 195% of the total tax evaded – not just limited to the last four years – and extensive jail time. “The benefits conferred by Project DO IT are compelling, not least because of the opportunity to avoid crippling financial penalties and even a jail sentence,” said Stuk.
Mills Oakley Lawyers’ Private Advisory practice has many experienced and thorough tax experts who can advise those affected on the best course to take in relation to Project DO IT. Please contact us for further information.