International Family Business Blog

Too late for 7,000 Australian tax haven account holders to plead for amnesty?

This is a follow-up to my recent "Possible amnesty" blog.

It may be too late for 7,000 Australian holders of accounts with the tax haven branches of Australian based banks to make vountary disclosures of their as yet untaxed offshore tax haven interest income. 

Writing in the Australian newspaper today Susannah Moran reports that as part of the Australian Tax Office's (ATO) ongoing Project Wickenby tax evasion investigations, Australian banks have handed over “…information on a large number of people with bank accounts in offshore jurisdictions”.

The banks conceded this information following a decision of the Full Federal Court in the case of Australia and New Zealand Banking Group Limided v Konza [2012] FCAFC 127 where it was held that a Section 264 information notice issued to the bank in connection with accounts held at their Vanuatu branch was valid.

Assistant Deputy Commissioner Michael O’Neill also indicated the ATO have already matched over 7,000 customers. Many of these have, or will be receiving “please explain” letters or more extended audit activity. Those taxpayers are likely to have missed the opportunity to make voluntary disclosures that would otherwise limit the extent of penalties for tax evasion. 

Those taxpayers who are large-scale evaders might also face criminal charges.

Possible amnesty for Australian tax haven users?

In today’s Australian Financial Review it is reported that the new Commissioner of Taxation (Chris Jordan - formerly a KPMG tax partner) may be considering an offer of limited amnesty to rich Australians who voluntarily disclose offshore income or assets. 


Deputy Commissioner Michael Cranston who leads the ATO’s high-wealth individuals unit, said “The ATO is always considering initiatives that could help disclosures.” he pointed out that exchanges of information under Australia’s Double Tax and Information-sharing agreements with 79 countries provided the ATO with data that resulted inthe assessment of tax, penalties and interest charges of some A$500 million during the 2012-13 tax year. 

Australian serious tax crime conviction rate soars: Offshore schemes targeted.

The Australian Taxation Office (ATO) has since July 2006 prosecuted 467 serious fraud tax evasion cases. The average conviction rate to September 2013 is 98%. Of these convictions, 75% have resulted in custodial sentences of more than 12 months. To date, the custodial sentence rate for the 2013 to 2014 tax-year is 100%.

Reparation orders and fines have also been recorded in the majority of these cases, many of which have been initiated as part of the cross-agent taskforce Wickenby Project. This project focuses on arrangements the taskforce considers to involve offshore tax evasion utilising what the ATO refers to as “secrecy havens”. 

To date, the taskforce has charged 70 individuals with serious crime offences and there have been 38 convictions. A number of these cases are currently “live” so more serious crime convictions may yet be recorded. Additionally, 69 people have been prosecuted for so called “summary offences” that involve penalties of imprisonment of less than 12 months.

As well as the significant existing resources of the 8 cross-agency Project Wickenby participants, they can access further information in terms of: the formal OECD style Double Tax Treaties (DTAs) that 49 major countries have with Australia; the Tax Information Exchange Agreements (TIEAs) that 34 countries previously designated as “tax haven” countries that have more recently signed with Australia; the Joint International Tax Shelter Information Centre JITSIC); and the OECD databases.

Although the activities and investigatory abilities of Project Wickenby are clearly extensive, valid inbound and outbound international tax planning is not dead. The key is to tread a straight path within the terms of both Australian domestic laws and those of the source, transition and host countries involved in any proposed planning. 

There are a number of useful rules of thumb that provide “don’t embark on the offshore voyage” indicators. 

1. The proposed arrangements rely unduly upon secrecy for their success*.

2. You are not prepared to place the minimum equivalent of US$100,000 in a lawyer’s trust account to cover the fees of a recognized Australian international tax barrister and a well-regarded lawyer in the intended source or host country.

3. Your international tax advisor quotes a relatively modest fixed fee.

4. There is an effective “round robin” of cash*. Wickenby has caught some schemes when the Australian Transaction Reports and Analysis Centre (ATRAC) followed the funds returning to Australia.

5. The international tax adviser has not gathered, analysed and taken into account extensive data regarding your individual circumstances. For example, does it encompass your estate and succession planning needs, and how are your funds to be controlled and protected (e.g. if you are using individual trustees in an offshore financial centre are they appropriately bonded by a reputable insurance company?).

6. The arrangement is “off-the-shelf” and not tailored for your corporate or individual circumstances and needs*.

7. The arrangements are deceptively simple and surprisingly affordable for those of modest means*. If it looks too good to be true, it is indeed a mirage!

* Caveat emptor: the presence of more than 2 of these indicators suggests that the “adviser” could already be under surveillance. 

Australian Tax Office to outsource company tax audits to Big 4?

The Australian Financial Review’s Fleur Anderson reported today on an internal ATO memo to staff mooting the use of external audit firms to conduct threshhold tax risk audits.

See my TaxConnections blog at:

Australian Tax Office increases pressure on South African emigre - Asks SA Revenue Service to ‘freeze’ his assets

In a footnote to it’s recent A$21 million tax claim against businessman Mark Krok (see my earlier blog @, the ATO has reportedly seized A$2.85 million from his accounts with Australia’s St George Bank. 

Furthermore, it has requested that SARS freeze his shares in South African companies as well as his A$4 million house.

The request to SARS appears to have been made under Article 25A of South Africa’s double tax treaty with Australia which was updated by a Protocol in 2008. This Article provides for SARS to collect the Australian tax as if it was a South African revenue debt.

Is should be noted that the Australian tax debt is disputed by Mr Krok and his legal appeals against the underlying assessments are yet to be heard by the Australian Federal Court.

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