MONA caught up in tax fraud scheme by dodgy accountant

MONA claimed tax offsets of nearly $1 million after getting swindled by a dodgy accountant over its science projects.

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MONA has been caught up in a dodgy tax exploitation scheme, getting nearly $1 million in offsets after being duped into overclaiming for science projects by a now-disgraced accountant.

The Australian Taxation Office has been chasing Sydney-based charlatan Paul Enzo Bogiatto for several years after he charged several companies for bogus research and development claims submitted between 2012 and 2014.

One of those companies was MONA, according to a newly-published Federal Court of Australia judgment, which unwittingly over-claimed tax incentives for its virtual, robotic and experimental beer production displays after relying on Bogiatto’s advice.

Justice Michael Thawley said in April 2014, Bogiatto’s company Lambada Chase made an unsolicited phone call to MONA’s chief financial officer John Kelly, offering to discuss research and development tax incentives.

Bogiatto called Mr Kelly directly later that month, offering his purported expertise and asking for information on MONA’s projects to be provided quickly.

Mr Kelly mentioned Virtual MONA, a real-time 3D museum model allowing public access on Tuesdays when it was usually closed, mobile robotic display cases that could sense the proximity of a visitor and move toward or away from them, and an experimental beer project working up different Moo Brew varieties.

But Mr Kelly told a previous court hearing he felt the beer project wouldn’t qualify for a research and development tax offset “as most breweries are always experimenting with beer in order to enhance flavour and the consumer’s experience, and if they do not work you can just tip them down the sink”.

Hobart - Museum of New and Old Art pic by Rob Burnett

He also said he performed “due diligence” on Bogiatto, checking out Lambada Chase’s website and the company’s credentials, and told Bogiatto most of MONA’s research and development was outsourced due to its complexity.

Bogiatto then prepared a tax claim, noting projected costs of more than $2 million rather than the $256,700 Mr Kelly had mentioned for Virtual MONA and $130,000 for the robotic cases.

Mr Kelly “reiterated his concern” about the financial figures, calling Bogiatto to express his “shock” at the “level of expenditure and the size of the claim”.

But Bogiatto said the museum was entitled to do so, saying: “I’m the expert, leave that to me, I have 10 years’ experience, this is all part of the way the grant works”.

Then in June 2014, Bogiatto invoiced MONA for more than $100,000 in fees.

“On 10 November 2014, Mr Kelly sent an email to Mr Bogiatto advising Mr Bogiatto that he was deferring to his expertise and inviting him to reconsider the correctness of the R&D expenditure figures,” Justice Thawley said, noting Bogiatto replied that he was “comfortable with the number”.

“After Mr Bogiatto confirmed the correctness of the R&D figures, Moorilla’s tax agent and accountant, BDO, lodged Moorilla’s income tax return in respect of the 2013 financial year. As a result of the lodgement of the 2013 income tax return, the Commissioner allowed and credited to Moorilla an R&D tax offset of $923,217.75.”

The ATO argued MONA didn’t have adequate records to prove it spent the money on registered research and development activities.

Justice Thawley said he was satisfied Bogiatto had run an illegal tax exploitation scheme and that the ATO had paid MONA a greater offset than it was entitled to.

However, he said the tax office hadn’t proved the museum wasn’t entitled to any of the amount it claimed.

The case will return to the Federal Court on August 27.

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