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$22.7 million: ATO hands down largest fine EVER for tax rort

Jessica Yun
·3-min read
Financial or taxes fraud. Business report and magnifying glass.
A former tax agent has copped a massie penalty for scamming clients into claiming oversized tax offsets. (Source: Getty)

A disgraced former tax accountant has been handed a $22.7 million penalty after being found guilty for systematic tax exploitation.

Last Friday, Sydney-based Paul Bogiatto was ordered by the Federal Court to pay $6.51 million, $6.01 million and $3.65 million for his three related entities Ryusei, Lambda Chase Chartered Accountants and Lambda Chase Service respectively.

Bogiatto was a registered tax agent and chartered accountant between 2012 and 2015 when he advised 12 clients about lodging overstated claims for the research and development (R&D) tax offset.

All Australian companies are eligible for a tax offset based on their R&D spending, and companies with less than $20 million turnover a year can get cash back if the refund is bigger than their tax bill.

But Bogiatto would systematically exaggerate his clients’ spending with claims that didn’t reflect actual expenditure, the ATO said in a statement.

Bogiatto would tell clients they were eligible to obtain R&D tax incentives, and then make claims on their behalf that were “grossly exaggerated,” according to the Federal Court.

And if clients questioned his claim figures, Bogattio would defend his methods as his intellectual property and asset his expertise on the claims, AccountantsDaily reported.

In total, the R&D tax offset refunds that were paid to Bogiatto’s clients amounted to $45.5 million.

Any R&D tax offset the client would receive would incur a 30 per cent fee paid to Bogiatto.

Investigations into Bogiatto’s activities started in late 2015, but he evaded regulators and did not redress any losses or damages incurred by his clients.

He also didn’t show up to court hearings and attempted to leave the country in September 2019.

Bogiatto was deregistered as a tax agent in October 2017 and also lost his membership to Chartered Accountants ANZ and the Institute of Public Accountants.

Assistant ATO Commissioner Ash Khera said the major penalty reflected the scale of the former tax agent’s schemes which had a “devastating” impact on the individuals, and their businesses, that trusted him.

“The size of the penalty is the highest ever seen in Australia and reflects the scale and abusive nature of these schemes,” he said.

Those that encourage others to claim incentives they’re not entitled to will be held accountable, he warned.

“The ATO and the Commissioner view this recent decision as a strong deterrent for the advisers exhibiting repeated poor behaviour.”

Those who suspect they’ve been approached by a scheme promoter or have been accidentally caught in a tax rort scheme should get in touch with the ATO, he added.

“If you approach us early, you may be eligible for a reduction in any penalties imposed.”

You can report a scheme to the ATO at reportataxscheme@ato.gov.au or ring them anonymously on 1800 060 062.

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