At Chidiac & Associates, we provide experienced criminal defence representation to individuals, company directors and businesses facing allegations of tax evasion and related taxation offences throughout Sydney and New South Wales. We approach each matter with careful analysis, detailed preparation and strategic advocacy, providing clear advice and representation throughout the investigation and court process.

What is Tax Evasion?

Tax evasion generally involves deliberately engaging in conduct intended to avoid or reduce a tax liability that would otherwise be payable.

In New South Wales, section 58A of the Taxation Administration Act 1996 (NSW) provides that a person must not, by a deliberate act or omission, evade or attempt to evade tax. The offence carries a maximum penalty of 500 penalty units, imprisonment for 2 years, or both.

Tax-related criminal allegations can also arise under Commonwealth taxation legislation. Depending on the circumstances, conduct involving false or misleading statements, incorrect or concealed records, failure to comply with taxation requirements or conduct designed to defeat the purposes of a taxation law may constitute an offence.

Examples of conduct that may result in allegations of tax evasion or related taxation offences include:

• deliberately understating income or taxable transactions;
• concealing income or assets;
• claiming deductions that are known to be false or improper;
• maintaining or providing false or misleading financial records;
• deliberately omitting information from a tax return or statement;
• using false invoices or documentation;
• failing to disclose relevant transactions;
• deliberately structuring transactions to conceal taxable income; or
• using electronic systems or tools to suppress or manipulate sales records.

The precise offence will depend on the conduct alleged, the taxation legislation involved and the evidence relied upon by the Prosecution.

Elements of Tax Evasion

The elements that must be established will depend on the particular taxation offence charged.

For an allegation of tax evasion under section 58A of the Taxation Administration Act 1996 (NSW), the Prosecution must establish that the accused deliberately engaged in an act or omission that evaded, or attempted to evade, tax.

The circumstances surrounding the alleged conduct are therefore critical.

1. A Tax Liability or Taxation Requirement

The Prosecution must establish the relevant taxation obligation or liability to which the alleged conduct relates.

This may involve matters concerning income, payroll tax, land tax, duties or another form of taxation administered under the relevant legislation.

2. A Deliberate Act or Omission

Tax evasion involves more than an innocent mistake or misunderstanding.

For an offence under section 58A, the alleged evasion or attempted evasion must arise from a deliberate act or omission. The circumstances surrounding how financial information was recorded, reported or provided to the relevant taxation authority may therefore be highly significant.

3. Evasion or Attempted Evasion of Tax

The Prosecution must establish that the conduct amounted to evasion, or an attempt to evade, the relevant tax.

Whether conduct was intended to avoid a tax liability may depend upon the surrounding circumstances, including financial records, communications, transactions, accounting practices and the person's dealings with taxation authorities.

Tax Evasion vs Tax Avoidance

Tax evasion and tax avoidance are not necessarily the same.

Tax avoidance generally concerns arrangements or transactions designed to obtain a tax advantage in circumstances where the relevant taxation legislation permits the Commissioner to challenge or disregard the arrangement.

Tax evasion involves deliberate conduct to evade or attempt to evade tax and can give rise to criminal Prosecution.

The distinction can be legally and factually significant. A complex taxation arrangement, an error in a tax return or a disputed tax assessment does not automatically establish criminal tax evasion.

What Are the Penalties for Tax Evasion?

The penalties for a taxation offence depend upon the legislation under which the person is charged, the precise allegations, the amount of tax involved, the duration and sophistication of the conduct, the person's role and the circumstances in which the offence occurred.

For tax evasion under section 58A of the Taxation Administration Act 1996 (NSW), the maximum penalty is 500 penalty units or imprisonment for 2 years, or both.

Other taxation offences may carry different penalties. Commonwealth taxation legislation, for example, contains a range of offences concerning false or misleading statements, taxation records and conduct intended to defeat the purposes of taxation laws.

Depending on the circumstances, potential outcomes may include:

• a fine;
• a non-conviction order where available;
• a community-based sentence;
• an order requiring payment of amounts in addition to a penalty;
• or, in more serious circumstances, imprisonment.

The financial consequences of a taxation Prosecution may also extend beyond the criminal penalty. Tax liabilities, administrative penalties, interest and other recovery proceedings may arise separately from the criminal proceedings.

Defending a Tax Evasion Charge

Being investigated for tax evasion does not mean that you are guilty of an offence. The Prosecution must establish the elements of the particular offence charged in accordance with the applicable law.

Depending on the circumstances, issues that may arise in defending a tax evasion allegation include:

• the conduct was not deliberate;
• the alleged tax liability is disputed;
• the relevant transaction or income was incorrectly characterised;
• an accounting or administrative error occurred;
• the accused relied upon professional accounting or taxation advice;
• the Prosecution cannot establish the necessary intention or state of mind;
• the alleged conduct did not amount to evasion or attempted evasion;
• the relevant records are incomplete or unreliable;
• the Prosecution evidence is inconsistent or insufficient; or
• the accused person was not knowingly involved in the conduct alleged.

Taxation Prosecutions can involve substantial documentary evidence. This may include tax returns, accounting records, bank statements, invoices, company records, emails, text messages, business records and material obtained during an investigation.

At Chidiac & Associates, we carefully examine the evidence relied upon by the Prosecution and consider the circumstances in which the relevant financial information was prepared, recorded and provided.

Tax Investigations and ATO Investigations

A taxation matter does not necessarily begin with a criminal charge.

Individuals and businesses may first become aware of an issue through an audit, examination, request for information, investigation or other correspondence from a taxation authority.

Where there is a risk that a taxation investigation may result in criminal Prosecution, obtaining legal advice at an early stage can be important.

Early advice may assist in determining the nature of the investigation, identifying potential exposure, protecting your legal position and ensuring that any response to investigators is carefully considered.

Defending Directors and Business Owners

Taxation investigations may involve companies, partnerships, trusts and other business structures, as well as individual directors, business owners or other persons involved in the management of an entity.

The role of an individual within a business may be an important consideration where criminal liability is alleged.

Common issues may include:

• who prepared or authorised the relevant tax returns;
• who had responsibility for financial records;
• the role of accountants and tax agents;
• the person's knowledge of the relevant transactions;
• whether the person participated in or authorised the alleged conduct; and
• whether the Prosecution can establish the necessary involvement and state of mind.

A director or business owner should not assume that responsibility for a company's financial affairs automatically means criminal liability for every alleged taxation irregularity.

How We Can Help

Tax evasion allegations require careful analysis of both the criminal and taxation aspects of the matter. At Chidiac & Associates, we understand that these cases can involve extensive financial evidence and potentially serious consequences.

We provide:

• detailed advice about the allegations and potential offences;
• advice during taxation investigations;
• representation in dealings with relevant authorities where appropriate;
• review and analysis of financial and documentary evidence;
• advice regarding potential criminal liability;
• representation at court appearances;
• negotiations with prosecutors where appropriate;
• preparation for defended hearings and trials; and
• strategic advocacy focused on protecting your rights and interests.

Our approach is built on thorough preparation, careful analysis of the evidence and strong courtroom advocacy.