Questions raised after ATO wiped $1m bill from Paul Keating's company

News.com.au

2 days ago

The Australian Taxation Office (ATO) is under pressure to explain why it wrote off almost $1 million in interest and late penalties owed by one of Paul Keating's companies.
An ABC Four Corners investigation has revealed that over a decade ago the ATO wrote off the debt in 2015 after years of negotiations.
The debt was owed by one of Paul Keating's companies but wiped after negotiations with the former prime minister and his financial advisers.
There is no suggestion of wrongdoing by Mr Keating or his advisers.
Instead, the focus of the investigation is on why the ATO took the steps it did, given the fact that for most taxpayers formally challenging such a decision would require them to contest the matter in the Federal Court.
However, the ABC reports in this instance, a payment notice was cancelled after a negotiation, raising questions about how the ATO chose to handle the matter.
At the time, the Liberal Government was led by Tony Abbott and the Treasurer was Joe Hockey.
There's no suggestion however that the Abbott Government was briefed on the decision to wipe the tax cut given the sensitivities around privacy and the ATO.
The ATO and Mr Keating's office have been contacted for comment.
The ABC's report states that the investigation raises 'questions about a lack of transparency in how the tax office conducts confidential settlements.'
According to the ABC, an interest and penalties bill was issued after the ATO discovered in 2012 that Mr Keating's company, Brenlex Pty Ltd, had not reported profits from an earlier share sale.
After Mr Keating was audited by the ATO in 2010 an agreement was struck according to the ABC for Mr Keating to settle tax liabilities of more than $3 million involving another of his companies, Verenna Pty Ltd.
According to the ABC, Mr Keating was questioned about his other companies, including Brenlex, and his advisers confirmed it had paid a significant amount of tax relating to the sale of shares and was up to date with its tax liabilities.
However, two years later the ATO discovered in 2012 that Paul Keating's company had not reported profits from a 2004 share sale.
While Brenlex agreed to pay the tax debt, the ATO demanded the company pay more than $600,000 in interest and penalties which had accrued in the years since Mr Keating sold the shares.
Mr Keating's advisers asked the ATO to write off this debt entirely via an ATO rule known as a 'commissioner's discretion'.
The ATO commissioner at the time was Chris Jordan AO, who was appointed as the 12th Commissioner of Taxation on 1 January 2013.
Mr Jordan led the ATO during the tumultuous pandemic period and during scrutiny of the ATO's role in the PwC tax leak scandal.
News.com.au does not suggest he was involved or aware of the decision to cancel the debt.
According to the ABC, the argument over the tax debt went back and forth until the debt had grown to $904,000, at which point the ATO sent a formal notice to not waive the interest and penalties charge.
'Your request has been fully considered and it has been decided that on this occasion the circumstances detailed do not warrant remission of the GIC,' the notice said according to the ABC.
'There is a clear acknowledgment that the Company should have accounted for the disposal of shares in the relevant financial years returns and did not.'
In 2015, Mr Keating's advisers became involved in the correspondence arguing the ATO should waive the bill because it was an honest mistake.
As a result, 'the lodgement and payment of the Company returns were overlooked' but the tax office said 'This is not a valid justification'.
In July 2015, 'a last-ditch letter from Brenlex was sent to the ATO requesting a meeting'
Ten days later, the tax office sent a four-line email writing off the almost $1 million debt.
'I am able to confirm that the GIC and Late Lodgement Penalties … have been remitted in full,' the email said.
'Consequently the balance of the account has been reduced to nil and the amount payable as stated in the Creditors Statutory Demand is no longer owed.'
Accounting experts have told the ABC that such negotiations are unfair because the only recourse available to taxpayers to challenge this kind of decision was an appeal to the Federal Court.
This is a 'lengthy and complex process that is out of reach of most taxpayers'.
The ATO's own website states 'Taxpayers should be aware that remission requests are carefully assessed to ensure a level playing field for those taxpayers who pay on time.'
In a statement, the ABC told Four Corners that 'inadvertently overlooking' the need to pay tax was generally not valid grounds on which to cancel GIC.
'However, there may be instances where GIC is remitted when a taxpayer inadvertently overlooks the requirement to lodge a form or make a payment, depending on the individual circumstances of the taxpayer,' the ATO said.