The tax office confirmed this morning 250 of its officers accessed 11 sites across Victoria, as part of a broader crackdown on phoenix activity. Victoria Police was also involved in the raids.
“We are examining a group of tax agents suspected of facilitating phoenix activity and promoting avoidance of tax involving GST, income tax and the failure to remit pay-as-you-go withholding tax payments,” said ATO deputy commissioner Jeremy Geale in a statement.
“We suspect the agents have used phoenix techniques to assist clients to avoid paying tax on millions of dollars of income,” Mr Geale said.
The ATO used these powers without notice, which it is permitted to do where there’s belief documents may be destroyed. In the 2017 financial year, the ATO used its access powers 10 times without notice, and 27 times with notice.
Broadly, the tax office is permitted to use its formal access powers in circumstances where it can’t otherwise obtain information through cooperation.
“We only use these powers in the most serious of cases, when taxpayers or their representatives refuse to engage with us within a reasonable period of time and where we believe there is a risk of records being moved or destroyed,” said Mr Geale.
The government and regulators have long been warning compliance action of this nature was brewing, most recently in mid-July after a PwC report estimated phoenix activity puts a $5.13 billion hole in the federal budget annually.
In early May, the government also announced directors will face GST liabilities under its new phoenix activity reforms package.
Tax agents have been central to the government and ATO’s high-level, persistent warnings about tax avoidance. Most notably, so far this year, the ATO positioned tax agents as major contributing group to the $8.7 billion individual tax gap.
This report followed persistent public lashings from ATO commissioner Chris Jordan from last year onwards, about tax agents facilitating incorrect work expenses claims for clients.
In today’s statement, the ATO also acknowledged the majority of tax agents operate by the book.
“There are a small number of agents who don’t participate appropriately in Australia’s tax and super system,” the ATO said.
“Tax agents who fail to meet the required professional standards may be gaining an unfair advantage over other tax agents and businesses who do the right thing, and often leave their clients with significant consequences and liabilities,” the ATO said.
The ATO also previously told Accountants Daily that of the categories it divides tax agents into, high-risk tax agents make up the smallest portion.