The Federal Court of Australia has delivered judgment in civil penalty proceedings commenced by the Commissioner of Taxation concerning the promotion of tax exploitation schemes in relation to claiming research and development (R&D) tax offsets: Commissioner of Taxation v Bakarich (No 2) [2024] FCA 1448.
The Court upheld an agreement reached by the Commissioner and the first respondent as to contravention and penalties, whereby the first respondent admitted that he had contravened s 290-50(1) of Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA) in relation to his promotion of 12 tax exploitation schemes involving 11 taxpayers across the 2015 and 2016 financial years.
The tax exploitation schemes concerned claims under Division 355 of the Income Tax Assessment Act 1997 (Cth) in relation to R&D activities, where it was not reasonably arguable that those claims were available at law. The first respondent marketed and encouraged interest in those tax exploitation schemes (or caused other entities to do so), and received, or was entitled to receive, consideration in respect of that marketing and encouragement.
The first respondent admitted that his conduct in respect of each of the schemes involved tax evasion. Further, the Court accepted a submission made by the parties that there “was a complete disregard as to whether or not a client’s activities even qualified for the R&D tax incentive and, broadly, whether the claim for the R&D tax incentive was reasonably arguable”.
The two corporate respondent entities were also found to have contravened s 290-50(1) of Schedule 1 to the TAA in relation to their promotion of the same tax exploitation schemes.
The Court upheld a separate agreement in relation to contravention and penalties for the fourth respondent, who admitted that she had contravened s 290-50(1) of Sch 1 to the TAA in relation to her promotion of three tax exploitation schemes in the 2015 financial year.
The judgment is available here.
Greg O’Mahoney, Karen Petch and Amy Reid acted for the Commissioner of Taxation, instructed by Australian Government Solicitor.
