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Mid-tier warns on payroll compliance after fraud case


Following the recent $165 million tax fraud involving a payroll service provider, a mid-tier accounting firm is encouraging businesses to assess their payroll arrangements and review associated risks.

By Lara Bullock 11 minute read

Last week a joint investigation between the ATO and the AFP culminated in the arrest of 10 people linked to a syndicate responsible for a $165 million tax fraud against the Australian government.

The fraud allegedly involved a company named Plutus established by the syndicate to provide payroll services to legitimate clients, according to the AFP.

The money received from these companies was transferred to subcontracted companies – allegedly controlled by syndicate members – to process payroll.


While processing these payments, funds paid by legitimate clients to service tax obligations were allegedly diverted by the syndicate for their own personal gain, according to the AFP.

BDO tax partner Mark Molesworth has said this case should serve as a reminder to businesses to assess their payroll provider arrangements and review associated risks.

“If you are using a payroll service provider, now is the time to assess the provider’s integrity and any associated risk,” Mr Molesworth said.

He reminded that businesses are obliged to ensure the tax withheld from employees’ wages is remitted to the ATO, however under some arrangements payroll providers will be paid the gross wages by the employer and then arrange payment of the net wages to the employee and the withholding tax to the ATO.

“If you use such a service, you should be aware that paying these amounts to the service provider does not meet your obligations to the ATO,” he said.

“If the service provider does not make the payments to the ATO as required, it will be the employer who the ATO will target for payment, not the service provider. An employer could potentially have to pay the amount again to the ATO even though they have already paid the amount to the service provider.”

Mr Molesworth said businesses should be confirming that their payroll provider is registered with the Tax Practitioners Board as a tax agent or BAS agent, that their trust accounts or financial statements are audited each year, and that sufficient arrangements are in place to hold funds until they are remitted to the ATO.

Lara Bullock


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