Hundreds of ATO agents raid tax agents in Victoria over alleged phoenix activity

The Australian Taxation Office (ATO) has targeted a group of Victorian tax agents suspected of being involved in “tax mischief”, with 250 ATO officers taking part in raids at 11 sites on Wednesday.

The ATO said on Thursday the coordinated action at unnamed business and residential sites in Melbourne and the regional city of Shepparton was part of “a broad investigation into alleged phoenix activity and avoidance of tax”. 

The raids were conducted without notice and were intended to allow the officers to gather information, according to ATO deputy commissioner Jeremy Geale. Victorian police officers also participated in raids at some of the sites.

“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,” Geale said in the statement.

“We suspect the agents have used phoenix techniques to assist clients to avoid paying tax on millions of dollars of income.”

The ATO said it had received complaints from concerned tax professionals and clients about the alleged activity, in addition to its own intelligence.

The use of the tax office’s formal access powers is rare, said Geale, and only happens in “the most serious of cases”.

These cases occur “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 Geale.

The raids come just weeks after the federal government unveiled a new ‘hotline’ for anyone to dob in businesses they believe could be engaging in phoenix activity.

At the time, the government’s taskforce against phoenix activity revealed the estimated cost of such activity to the economy could now exceed $5 billion annually.

The largest direct cost is estimated to be to businesses themselves, with parties such as unpaid trade creditors reportedly losing up to $3.17 billion a year from companies being deliberately liquidated to avoid liabilities.

The government is estimated to lose $1.66 billion a year in unpaid taxes, while employees were found to be losing up to $298 million in unpaid wages and superannuation each year.

The ATO said on Thursday it is also taking “broader action” against tax agents it deems to be high risk or “agents of concern”, ensuring there are significant consequences and referring the agents to the Tax Practitioners Board.

The tax office says tax agents often have significant influence on tax compliance among small businesses. Those who don’t follow the rules may be gaining an unfair advantage over agents and businesses who are doing the right thing, while also leaving clients vulnerable to other consequences and liabilities.

This also extends to the lodging of tax returns. In March, Tax Commissioner Chris Jordan, took aim at tax agents who give clients “sugar hits” by lodging incorrect tax deductions on their behalf.

Jordan said for years he had “heard how tax agents were guardians of the system”, but auditing results showed “this is not the case for some agents”.

“Not doing the right thing might be a ‘sugar hit’ for your clients in the short term but in the long run is not good for your clients, not good for the profession and not good for the system,” said Jordan.

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