ATO accused of dumping tax bill for ex-PM Paul Keating’s company

The Australian Taxation Office has been accused of writing off more than $950,000 in penalties and interest owed by one of Paul Keating’s investment companies following negotiations with the former prime minister and his advisers, the ABC reports.

There is no suggestion of wrongdoing by Keating, but the report raises questions for the Tax Office about its treatment of the rich and powerful as any challenge to an ATO decision like this would usually require the aggrieved party to contest the matter in the Federal Court, according to the ABC Four Corners report.

Former Australian PM Paul Keating was a major shareholder in Lake Technology, and profits from the sale of his shares are at the core of the alleged tax dispute.Credit: Louie Douvis

Keating has been contacted for comment.

An ATO spokesman said it was unable to comment on specific taxpayers, due to obligations under taxpayer confidentiality laws, but said it was “committed to ensuring that all taxpayers pay the right amount of tax as required by the law, regardless of size or profile”.

The penalties and interest bill relate to the sale of a successful investment by Keating in Australian audio group Lake Technology, which was sold to US group Dolby Laboratories in 2004 at a valuation of $23 million.

Keating was a major investor, along with ad man John Singleton.

“The Lake board runs the risk of doing another MIM; giving the company away to Americans who have been influenced by Lake’s exceptionally poor management,” Keating said in 2003 as the takeover bid from Dolby got under way.

According to the ABC report, the interest and penalties bill was issued after the ATO discovered in 2012 that one of Keating’s companies, Brenlex, had not reported profits from a Lake Technology share sale and owed $446,000 in tax.

Brenlex agreed to pay the tax debt, but the ATO demanded – at that stage – more than $600,000 in interest and penalties that had accrued in the years since the share sale.

Keating’s advisers accepted the tax bill but not the interest and penalties, and asked the ATO to write it off via an ATO rule known as a “Commissioner’s discretion”, saying the non-payment was inadvertent.

Keating subsequently became involved in the discussions, and in July 2015, the Tax Office wrote off the entire amount of $954,000, according to the ABC.

The ATO told the ABC that “inadvertently overlooking” the need to pay tax was generally not valid grounds on which to cancel a general interest charge (GIC).

An ATO spokesman said that, “in deciding whether to remit GIC, we consider the circumstances that caused the delayed payment resulting in GIC, how these circumstances prevented the taxpayer from paying by the due date, and what steps they have taken to reduce the delay”.

“There are multiple reasons as to why the ATO may make a new decision regarding GIC remission, for example, when new information is provided by the taxpayer or their registered tax agent, and this can result in a different outcome for the taxpayer.”

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