Power without integrity as tax office ruins R&D grant users

In the weeks leading up to Christmas the Australian Taxation Office made a major payment to settle a tax dispute.

The tax office ruined the gold-refining industry in Australia.

In the weeks leading up to Christmas the Australian Taxation ­Office made a major payment to settle a tax dispute.

The settlement is couched in all sorts of secrecy provisions but involved millions of dollars and ­almost certainly rivals the settlement that the ATO made with Paul Hogan.

I am not able to reveal the identity of the beneficiary because of a confidentiality agreement but because many people are involved in the settlement it is widely known. The entrepreneur family was involved in research and development and received a generous grant from the federal government because of its groundbreaking work.

In June 2017 under the heading, “Research and development tax incentives a dangerous hazard to small enterprises”, I warned Australian companies that it was high risk to accept research grants from the federal government because the ATO was picking out government grant recipients for “special treatment”.

They faced grave danger of bankruptcy. I urged the federal government to issue a public warning that it was a high-risk strategy to accept research and development help because of the attitudes of the ATO, which had a different view to the government as to what was research and development. Such a difference remains a national disgrace.

Normally, people who are picked on by the ATO for “special treatment” are financially destroyed so they can’t fight back. In this case the “treatment” started with vast amounts of questions followed by truthful answers.

But there was no fraud or evasion. It was simply yet another example of the ATO wielding power. The ATO issued a huge demand for payment, which immediately bankrupted the operation because the ATO assessment ranks above all other creditors. The family was unable to pursue its world-first technology.

The ATO managed to force the sale of the family home and destroy the business. And then that would have been the end of the matter because the family had no money to fight in the courts and the appeal process within the ATO, as always, was a totally useless exercise. And normally there it would have ended.

But it so happened that ordinary Australians had invested in the project. They were not rich people but they were appalled at what happened.

It was bad enough that they had lost money but what really annoyed them was that a world-class technology that had a real chance of generating great Australian wealth was simply destroyed.

They began financing top ­people to research the whole ATO exercise so that they could document very clearly the ATO’s bad behaviour.

Of course, I would have liked the case to have gone to court because then we would have had a judgment and everyone would have seen what the ATO was all about. But the good Australians would have had to put up more money. They were not rich and many were retired. A settlement was agreed.

I have a lot of confidence in the Australian judiciary and I think it highly likely that if the case had gone to court the damages would have been many tens of millions.

The attacks on our research and development grants are probably the worst example of ATO power, but not far behind was the ATO decision to wipe out the entire Australian gold-refining industry, apart from the Perth Mint.

The pretext was that criminal activities had taken place, but the court system — not the ATO — decides whether behaviour is criminal. Part of the reason why the gold-refinery industry was bankrupted was to cover up an ATO mistake.

Just as people in research and development have lost their jobs, so did the gold-refining industry and again we lost a fantastic skills base.

Finally, I want to salute those magnificent Australians who lost their money because of ATO “sport” but were prepared to put more money in to fight for justice. They are national heroes. Until the politicians are prepared to introduce a proper appeal system for small enterprises we will need more and more Australians to take on the ATO.

Remember that nobody wants to protect people who are not filing tax returns or filing tax returns that have false information in them.

If the politicians are not prepared to protect honest taxpayers then there will be a revolt in the small-business community. The yellow shirts in France showed that if in the view of the population the government is behaving badly, the population will revolt.