Yahoo Finance ATO jails 3 men for attempted $4.6 million theft
Thinking of defrauding the Government? Think again.
Three men have been sentenced to jail for conspiring to defraud the Commonwealth $4,632,355 after orchestrating an elaborate phoenix operation.
The ‘instigator and architect’ of the scheme, Seng Leng Heng, was sentenced to 8 years' imprisonment, the Australian Taxation Office (ATO) said.
His co-conspirators Nathan Sarinn, and Nay Chy were also sentenced to 4 and 5 years' imprisonment respectively for their roles in the scheme.
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The three men have also been ordered to pay back the full amount.
What did they do?
Heng, Sarinn, and Chy established multiple labour hire companies to provide workers to vineyards, fruit and vegetable growers, and meat processors around South Australia and Queensland.
The companies failed to pay both Goods and Services Tax (GST) and Pay as You Go (PAYG) withholdings to the ATO, despite charging their clients GST and including figures supposedly withheld for PAYG on employee payslips, the ATO said.
Significant debts were raised following audits. However, because the men were withdrawing funds from the company accounts on a frequent basis, there were insufficient funds at the time of liquidation to recover the outstanding tax debts.
Over a 25-month period, across all six of their companies, $23,131,414 was withdrawn in cash by the three men.
In some instances, there was some overlap in the operation of the companies, but in most cases, they would close down operations for one and move on to another, beginning the cycle again.
ATO slams operations as ‘blatant fraud’
ATO assistant commissioner Ian Read welcomed the sentence and slammed the three men for the scheme.
“This type of behaviour is blatant fraud against the Commonwealth, and we will not tolerate it,” he said.
“Phoenixing is an intentional act that requires planning and the alleged behaviour in this case demonstrates a deliberate attempt to defraud the tax and super system.”
The trio attempted to hide their illegal activities by appointing shadow directors for the companies, exploiting their relationship with employees or acquaintances living in Australia, at least three of whom were on student visas.
“Today’s result demonstrates the ATO’s commitment to detecting and prosecuting tax crimes. We take our responsibility to protect the tax and super systems seriously,” Read said.
What is Phoenixing?
Phoenixing is an illegal practice where company directors transfer assets from an existing company over to a new one, leaving the old company with all the debts, according to Morrissey Law.
The old company is then placed into liquidation, but because the company no longer has any assets there is nothing to be used to cover the debts.
Chair of the Phoenix Taskforce Will Day said illegal phoenix activity is an economy-wide issue that costs the Australian community billions of dollars every year, impacting businesses, employees and government.
“Tax crime is not victimless. Illegal phoenix operators gain an unfair advantage by never intending to meet their financial or tax obligations, not only disadvantaging honest businesses, but the whole Australian community who do the right thing,” Day said.
“The taskforce aims to disrupt the business model of phoenix operators, bring them back into the system, or remove them from the business environment and penalise them,”
Just like in this case, phoenixing can be done many times over and can cost the Government billions.
Since the taskforce was established in 2014, the ATO has raised more than $1.54 billion in liabilities from audits and reviews of illegal phoenix activities. It has also returned more than $687 million to the community.
If you know or suspect illegal phoenix activity, report it to the ATO by:
completing a tip-off form on our website or in the 'Help & Support' section of the ATO app – available from the app store
calling the Tax Integrity Centre on 1800 060 062
emailing PhoenixReferrals@ato.gov.au
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