The date is February 26, 2019. The Australian Taxation Office and the land developer family I described yesterday are awaiting the result of an appeal before the Administrative Appeals Tribunal. Of the original four daughters of the developer it had targeted, who are being relentlessly pursued for tax on income they did not receive, one has caved in made some sort of deal. The other three have somehow avoided bankruptcy but the ATO knows the families are cracking. So they decide not wait for courts to make decisions, knowing that under Australia’s crazy anti-small business tax laws they can attack at any time during an appeal.
The tax collectors ask themselves: “When is a mother most vulnerable?” The answer is easy: when she has children in the car and/or is picking up children from school.
They know that at around 3pm on a school day their targeted mother is usually in her car with her young children when picking up her daughter from school.
February 29 was a hot day but the air conditioner in the car was working. The young children are noisy.
The phone rings from a blocked number (so there is no record in the ATO of the call). The mother answers it. It’s is the ATO. Sadly for the tax collector she does not crack and was smart enough to start taking notes. And those notes were available in all the papers that went before the courts for all in the ATO to see.
The mother tells the tax collector: “you have called me at a terrible time – I am about to pick up my daughter from school and have my kids in the car”. The tax man must be grinning because he already knows that. The research was right.
Here are some extracts of what tax collectors in modern Australia say when they knowingly call mothers with children in the car: “Yes, I know you are innocent ... you are your father’s favourite daughter and I am surprised he won’t pay for you”.
The mother asks him “why are you pushing for my bankruptcy when you know I am innocent?”. The ATO tax collector responds: “I could have bankrupted you many times but we have given you adjournment after adjournment. I have given your dad an offer, and if you don’t accept my offer you will be bankrupted on May 13”. And so it went on.
The mother stays calm and takes notes furiously. and so we have a record. There is no record of what the children said. They might have asked “why are you grandpa’s favourite” or “what does bankruptcy mean?”
Remember in February 2019 that mother’s case was the subject of an appeal process, and when the ATO gets to the full Federal Court that ATO assessment will be rejected unanimously.
The mother owes absolutely nothing. Her father has a huge legal bill. Relentless, the ATO now plans to go to the High Court.
Now let’s go back to 2017. Some years earlier the government wanted to promote research so handed out grants on a widespread basis. Then, when the money was spent the ATO tried to claw it back and charge interest and high penalties for those that accepted government grants. The ATO managed to successfully bankrupt large numbers of our best researchers and cost the nation untold billions.
In June 2017 under the heading “Research and development tax incentives a dangerous hazard to small enterprises” I asked the then Minister for Industry, Innovation and Science Arthur Sinodinos to instruct his AusIndustry research grants people to warn small businesses about the dangers of taking the grants. Sadly, the message was ignored and the decimation continued.
Josh Frydenberg is now trying to repair the damage that was done by the ATO.
You will note that I have not named the persecuted family, nor the tax collector who led the charge. The family has suffered enough and tax collector is merely doing what large numbers of his colleagues do. It’s the truly awful appeals system that is at fault .
Just as there was no point in Arthur Sinodinos handing out research grants, Josh Frydenberg’s magnificent set of entrepreneurial initiatives are not worth a row of beans if they are not accompanied by a proper and fair tax collection appeal process.
That new system must follow the US principles where the appeal bodies are totally separated from the tax collection system. People are not allowed to move from one system to the other because that breeds mateship. The appeals must be handled quickly, and once a decision is made it’s finished. A tax assessment is not a liability until it has been through the appeal process.
There must be strict rules on bankruptcy applications and garnishing. This will restore confidence in the Australian tax system which is now rapidly eroding. The Americans have found that if you have a fair system you can reward employees for dobbing in people.
It works and the cost of tax collection is slashed. Income rises. To his great credit, I believe Josh Frydenberg has discovered the truth about the Australian tax collection system and will fix it. The nation depends on him not being “snowed”.
Join the conversation
Central banks were ‘foolish’ to lift rates so high: Stiglitz
Visiting Nobel laureate and former chief economist of the World Bank Joseph Stiglitz says interest rates were hiked too far and too fast in the wake of Covid-19.
Read more
Inflation ‘not likely RBA trigger’
Mortgage holders can breathe a sigh of relief, after inflation accelerated for the first time in 18 months to 3.8 per cent in the year to June, but not by enough to force the Reserve Bank to hike again next week.
Read more