Tax Fraud Investigations

If you are an accountant and the Australian Tax Office (ATO) is investigating one of your clients, you should be informed about its powers of investigation and about your rights to withhold and obligations to disclose information. This article outlines what is involved in tax fraud investigations.

There are two ways for the ATO to obtain material from the offices of external professional accountants. It can enter your premises, ask to view documents relating to your clients and copy them. They may not take items away. Alternately, the ATO can have the Australian Federal Police (AFP) issue a warrant to search the premises. An ATO officer will attend to help in the search. Where a warrant is issued, we advise you to read it carefully because the AFP is allowed to seize documents, but only if they are described in the warrant.

Tax fraud instigations: What if the ATO asks to search my office without a warrant?

If the ATO asked to search your premises without a warrant you should:

• ask the ATO officer to produce their authority because only authorised officers are allowed to use access powers;
• note the name of the ATO officer who attended;
• ask under which Act they are making their inquiries and the purpose;
• ask which particular records are being inspected.

If this information is supplied, you are then required to provide reasonable facilities and assistance to allow the officers to access and copy the materials requested. You don’t have to answer any questions except those that will help the ATO officers to locate the records. ATO officers can copy computer records electronically or print a hard copy.

Tax Fraud Investigations: Professional privilege

There are rules which prevent the ATO from accessing documents which are confidential between taxpayers and their external professional accounting advisors. The rules do not apply to in-house accountants.

Source documents

The ATO can ask to see source documents, which include traditional accounting records such as ledgers, journals, working papers for financial statements, profit and loss accounts, and balance sheets.

They can also look at documents comprising the permanent audit file including those that outline an organisation’s history, structure, chain of command, memorandum and articles, chart of accounts and any continuing contracts, such as leases.

The Accountant’s Concession

The ATO acknowledges that taxpayers should be able to consult with their professional accounting advisors to enable full discussion in respect of their rights and obligations under tax laws and for advice to be communicated frankly. This allowance is called “The Accountant’s Concession”. If you invoke this concession, the ATO officers will have to contact their local access specialist.

Advice papers given to a taxpayer may be considered to be restricted source or non-source documents and access to them requires exceptional circumstances.

Legal professional privilege

Any communication by your client, or on behalf of your client to a lawyer is subject to legal professional privilege. The privilege does not cover documents which provide evidence of transactions.

If you have require advice or representation in relation to tax fraud or tax evasion or in any other legal matter, please contact Armstrong Legal.