Reference no: EM133389231
Case Study: Tom and Frank are brothers and run retail business as a partnership in the outer suburbs of Melbourne. They sell a variety of goods. However, the bulk of their sales involve tobacco products, especially e cigarettes. The sale of e cigarettes to people below the age of 18 years is illegal in Victoria. They suspect many of the sales they have made have been to children who are 16 to 17 years of age. They have never checked the age of any customer before selling the cigarettes.
Over the last few years they have made substantial sums of money from their business. However, they have not lodged their individual returns nor a tax return for the partnership for the last 5 years. This is despite repeated advice by their accountant that they should do so.
In January 2022, they were both sent a letter from the tax office requesting them to submit the outstanding tax returns. Tom was divorced 2 years ago and the letter was sent to his former home, which is now occupied by his former wife and her new partner. He never received the letter.
Frank is single. He also sold his house and moved 2 years ago. He also did not receive the letter from the tax office. They have never informed the Tax Office about their change of address.
In April 2022, both Tom and Frank received a summons to appear in the Melbourne Magistrates Court to face charges of failing to comply with a directive from the Tax Office. They have also received a tax assessment showing they each owed $2,000,000 in taxes.
Tom has girlfriend based in Malaysia and with the borders opening he visits her regularly.
Tom and Frank are intending to set up a tobacco business in Malaysia, where the sale to tobacco products is not as regulated as it is in Australia.
Tom and Frank are naturally worried and stressed and have sought meetings with you their lawyer. They have a series of questions:
REQUIRED
Provide advice on the above questions.
Discuss the tax issues raised by the above facts, referring to any appropriate legislation, case law, guidelines and rulings. If applicable, reference should be made to appropriate cases, provisions of the Income Tax Assessment Act 1936(Cth), Income Tax Assessment Act 1997 (Cth), The Tax Regulations, Tax Administration Act 1953 (Cth), Administrative Decisions (Judicial Review) Act 1977 (Cth), Freedom of Information Act 1982 (Cth) and the Ombudsman Act 1976 (Cth). Your discussion should also include the application of Administrative Law/ Judicial review of the Commissioners actions.
1. A friend told said they can interview my former wife - can they? She hates me. I am guessing that she told the Tax Office where we live. She knows a lot about my business. We also have a former employee we sacked. She kept our books of account. Can they question her? Can they question my clients? Perhaps we can make up a fake set of records. What do you think? Anyway we do not think they can prove anything. We will just do nothing. What do you think?
2. Do we have to pay the tax? What happens if we do not pay? Do we go to jail? Can I get an extension of time to pay? What happens if they refuse to give us time to pay? Is there any legal way we can challenge it in Court if they do not give us an extension of time to pay?
3. A friend told me that they can stop me leaving the country. If that happens, I cannot see my girlfriend and set our new business in Malaysia.
4. Frank is single and is considering just selling his house and going to live in Thailand with his girlfriend. Can they stop Frank selling his house and depositing the money in Frank's Commonwealth Bank account and transferring it overseas?