Database dump helps ATO close in on a tax haven rich list
Deputy commissioner of serious non-compliance Greg Williams said two Australians were under criminal investigation while 65 others had been identified as "high risk" because they had each moved more than $1 million in or out of the country without declaring the money in their tax returns.
The swoop is based on a database, obtained through the Tax Office's international information exchange network, of more than 2 million documents that show how thousands of people around the world use shell companies and trusts in Singapore, the British Virgin Islands, the Cayman Islands and the Cook Islands.
Mr Williams said he expected the number of offenders to grow as the Tax Office swapped intelligence with its US and British counterparts.
"The message I've been putting out in recent times is that you think you can be clever and hide and that you are invisible in this particular system because you're dealing in some kind of offshore arrangement," Mr Williams said. "The reality is that we are starting to see this and we can see you."
After sifting through the data, the Tax Office is investigating a company in Sydney that has claimed millions of dollars in tax deductions for interest expenses on offshore borrowings. The ATO says the loans are a sham because the offshore lender is actually controlled by the Australian company.
It has also launched an audit for a Melbourne man who claimed more than $25 million in share deals were carried out on behalf of offshore clients. The Tax Office believes the man was the real owner of the shares.
The Tax Office's database appears to be the same as the one held by former Fairfax Media journalist Gerard Ryle's International Consortium of Investigative Journalists, which has published a series of reports linking secret offshore structures to individuals, including a member of the Philippines Marcos dynasty, the deputy speaker of the Mongolian parliament and Brigitte Bardot's former playboy husband. It is believed the data is a complex mix of spreadsheets, emails and other documents that required the use of sophisticated software to analyse.
"It's our ability to then link that with Austrac [the government agency that tracks international money flows] data that really paints to full picture," the Tax Office assistant commissioner for economic crime, Paul Cheetham, said.
Mr Williams declined to detail how the Tax Office gained access to the database but said it was obtained within the past 18 months and did not come from the journalist consortium.
The Tax Office also has access to thousands of client records stolen by a former employee of Liechtenstein Group Trust, the wealth management arm of the European tax haven's royal family. Those records were used as part of its Wickenby inquiry into the use of tax havens by Australians, targets of which have included actor Paul Hogan and music promoter Glenn Wheatley.
Mr Williams said those exposed in the new database were not "the average person in the street".
He said there was an international groundswell building against tax evasion.
Frequently Asked Questions about this Article…
The article says the ATO gained access to a large database of more than 2 million documents showing how people use shell companies and trusts in jurisdictions such as Singapore, the British Virgin Islands, the Cayman Islands and the Cook Islands. The data linked more than 100 wealthy Australians to offshore arrangements and helped identify a number of potentially undeclared or suspicious transactions.
According to the report, two Australians were under criminal investigation and 65 others were flagged as “high risk” because each moved more than $1 million in or out of Australia without declaring the money on their tax returns.
The ATO is focusing on arrangements using shell companies and trusts across tax havens, sham offshore loans where the offshore lender is actually controlled by the Australian entity, and nominee or purported offshore ownership of shares where the Australian person appears to be the real owner.
Yes. The article explains the ATO is combining the offshore database with other intelligence, including AUSTRAC data that tracks international money flows, and is swapping information with US and UK counterparts to build a fuller picture of transactions.
The ATO opened an investigation into a Sydney company that claimed large tax deductions for interest on offshore borrowings that the ATO says are sham loans, and it launched an audit of a Melbourne man who claimed more than $25 million in share deals were for offshore clients when the ATO believes he was the actual owner.
The deputy commissioner declined to detail exactly how the ATO obtained the database but said it was acquired within the past 18 months and did not come from the journalist consortium. The article also notes the database appears similar to the one held by investigative journalists but that the ATO’s access was separate.
The article quotes the deputy commissioner saying those exposed in the new database are not “the average person in the street.” However, the wider message is clear: undeclared offshore income and artificial arrangements can attract serious attention, so ordinary investors with legitimate, properly reported offshore investments should not expect to be targeted.
Based on the issues raised in the article, everyday investors should ensure they properly declare any offshore income or transfers, avoid contrived or sham arrangements (such as loans that aren’t genuine), keep clear records, and consider getting professional tax advice if they have cross-border investments.
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