Failure to lodge returns can land criminal conviction

We regularly have clients referred to us who are facing prosecution by the ATO for failure to lodge income tax returns or BASs, often for a number of years.  Many of those clients express to us their surprise that they face the possibility of receiving a criminal conviction for failure to lodge.

Every accountant will have stories of certain clients who `put their head in the sand’ and simply fail to address their tax affairs for a considerable period.  For accountants with clients in that category, it is a good idea to let the client know at an early stage the possible outcomes of adopting an `ostrich’ attitude, including the chance that they may be convicted of a criminal offence.

The practical consequences of having a criminal conviction will vary depending on the individual circumstances of the taxpayer involved, but may include:

  • Reputational damage (which in some industries may have very adverse commercial ramifications).
  • Impacting the ability of the taxpayer to become registered in professions or industries that are regulated (tax agents and lawyers are obvious examples).
  • Difficulties in joining professional and industry bodies.
  • Making it more difficult to obtain employment, especially in industries where police checks of job applicants are likely to be made.
  • Problems in obtaining visas to work in or visit some countries.

Where taxpayers are charged, a criminal conviction can still often be avoided and a bond (usually requiring the payment of money) imposed instead if:

  • The taxpayer’s lodgements are brought completely up to date prior to the case being heard by the Court; and
  • Evidence is able to be obtained which would persuade the Court that a conviction is not warranted and that a bond should be imposed instead.  This may involve (in appropriate cases) the commissioning of a report from a forensic psychologist setting out any mental health issues which may have prevented the taxpayer from attending to their affairs or which made doing so difficult.

In cases where a psychologist’s report may be of assistance, the cost of obtaining such a report is in our experience a worthwhile investment as it greatly enhances the taxpayer’s chances of avoiding conviction.

It is important that legal advice be sought by taxpayers as soon as they have been served with the Summons and charge-sheet so that an assessment can be made and appropriate evidence and other documentation obtained prior to the hearing of the charges by the Court.

Tony Riordan and Craig Healy are able to assist taxpayers who are facing prosecution for failing to lodge returns.