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A former tax agent and chartered accountant has been hit with $22.68 million in penalties after being found to have systematically abused the research and development tax incentive.
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Federal Court hands out highest-ever $22.68m penalty to tax exploitation promoter
16 February 2021
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The penalties are the largest ever for promoters of tax exploitation schemes and were ordered by the Federal Court last Friday against Paul Enzo Bogiatto and his associated companies.
Mr Bogiatto was ordered to pay $6.51 million, while his related entities Ryusei, Lambda Chase Chartered Accountants and Lambda Chase Service were made to pay $6.51 million, $6.01 million and $3.65 million, respectively.
The Federal Court found that Mr Bogiatto and his associated entities contravened promoter penalty laws a collective 68 times by advising 12 clients on 21 different tax exploitation schemes relating to the R&D tax incentive between 2012 and 2015.
A total of $45.5 million in R&D tax offsets were paid to Mr Bogiatto’s clients.
Mr Bogiatto would reach out to clients and advise them that they had a strong case for obtaining R&D tax incentives, before going on to make R&D claims that “were grossly exaggerated or wholly unavailable”, as described by the Federal Court.
When questioned by clients over how he calculated his claim figures, Mr Bogiatto was said to have defended his methodology as his intellectual property and assert that he was the expert on the claims.
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Mr Bogiatto would then typically charge a fee calculated at 30 per cent of any R&D tax offset that the client might obtain.
Investigations into Mr Bogiatto’s activities began in late 2015, with the accountant avoiding the regulators and failing to redress any amount of loss or damage incurred by scheme participants.
He also failed to appear at the court hearings and had attempted to leave Australia in September 2019.
Mr Bogiatto was stripped of his tax agent registration in October 2017, while Chartered Accountants Australia and New Zealand and the Institute of Public Accountants terminated his respective memberships in 2018.
ATO assistant commissioner Ash Khera said the size of the penalties was a strong deterrent for advisers looking to engage in tax exploitation schemes.
“This outcome reflects the scale of Mr Bogiatto’s scheme, which had a devastating impact on the individuals and businesses that followed his advice and trusted him,” Mr Khera said.
“The size of the penalty is the highest ever seen in Australia and reflects the scale and abusive nature of these schemes.
“We have the tax technical and investigative skills to deal with those who promote non-compliance with the tax and superannuation system.
“If you think you have been approached by a scheme promoter or are inadvertently involved in a tax avoidance scheme, you should contact us right away. If you approach us early, you may be eligible for a reduction in any penalties imposed.”
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