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Plutus Payroll clients given hope pension payments will land

Taxation Office reveals investigation timeline, defends itself for causing pay delays

Australia's taxation commissioner Chris Jordan has given contractors impacted by the alleged fraud at Plutus Payroll hope they may yet receive compulsory superannuation payments.

In a lengthy account of the joint Australian Taxation Office (ATO) and Australian Federal Police (AFP) investigation delivered to a Senate Committee today, Jordan downgraded the extent of the fraud from AU$165m to $130m, and said “almost a third ” has been recovered. He's hopeful more cash can be raised from the assets seized from those behind Plutus.

“We are continuing to look into how we may be able to have any of the remaining funds released to pay outstanding superannuation guarantee amounts”, Jordan said. but did not offer any timeline for news on whether contractors will receive their superannuation* payments.

The statement offered to the Senate Committee also offers a timeline of the investigation into payroll fraud . That timeline starts in February 2016 when “... as part of our routine monitoring, we identified a small number of entities that went into liquidation owing Pay As You Go Withholding (PAYGW) and GST payments and the matter was referred to our Tax Evasion and Crimes area for review and potential audit action.”

Those reviews “showed the presence of a syndicate that appeared to be promoting phoenix arrangements to the labour hire industry in the construction and IT sectors”. Jordan said “some potential criminal links were identified” and “covert audits and reviews were commenced.”

By December 2016 and January 2017 the investigation had ripened to the point at which the ATO felt it could act, “starting with assessments and recovery of unpaid taxes through garnishee notices.”

Those actions “caused significant disruption to the syndicate and alerted the AFP’s Operation Elbrus team of the ATO’s interest in their targets.”

Which is when things got interesting, because Jordan said it was only on January 11th that AFP Commissioner Andrew Colvin “visited me … to make me aware of their investigations and the personal relationship between one of the principals they were interested in and Deputy Commissioner Michael Cranston.”

And it was not until February that the AFP and ATO “joined the tax crime intelligence with the AFP criminal intelligence to put a fuller picture together and both agencies continued working on investigations and compliance actions.”

One of the topics of conversation at the January 11th meeting was deputy taxation commissioner Michael Cranston's relationship to one of the alleged Plutus conspirators. Jordan says the AFP asked the ATO to let things roll, as follows:

I was not asked by the AFP to intervene, in fact the ATO was asked to leave things as they were, and to keep all existing arrangements in place, keeping Michael Cranston in the Deputy Commissioner position while further information continued to be gathered about the syndicate and its operations.

The matter started to come to a head in April, when Jordan says the ATO “undertook further steps to collect outstanding taxes, like we do in cases like these; we froze bank accounts due to the high risk of the removal of funds by account owners.”

Jordan defended the ATO's decision to do so, as follows:

Conscious of the impact this can have on innocent third parties, especially regarding wages, we established the names of those due to be legitimately paid so that funds could be released to pay the wages owing. We did not stop people being paid.

Numerous Plutus clients who contacted The Register would dispute that: some told us they could not pay their rent or afford medicines.

Jordan said three Australian Public Service staff “are being investigated for potential breaches of the APS Code of Conduct … If breaches are found, potential sanctions range from a reprimand through to demotion or termination of employment.”

He added that he has no more to say than is available in his statement to the Committee as investigations are ongoing, but referred Plutus clients to yesterday's advice on their 2016/17 tax arrangements.

Comment: The ATO and AFP clearly had a tricky balancing act to perform. On the one hand they wanted to make sure Plutus' alleged participants did not complete their heists, so that as much tax as possible could be recovered. On the other they did not want innocents to go unpaid. But as we've reported, numerous Plutus clients experienced weeks of financial hardship and plenty face ongoing uncertainty over Plutus actions.

That the ATO has now excused individuals liabilities caused by Plutus' possible frauds is welcome. But the Office has also said it may hold employment agencies liable for Plutus' alleged misdeeds. Doing so will eventually impact contractors as agencies increase charges to cover losses inflicted on them by Plutus' alleged actions.

As IBM's current take a pay cut or take a hike position indicates, contractors lives are already precarious. The final outcome of this mess looks, sadly, to make contracting even more risky. ®

* “Superannuation” payments are made by Australian employers into retirement pension funds. The payments are compulsory and are made at a rate of nine per cent of an employee's salary. Compulsory payments are seen as a way of reducing future aged pension liabilities. That the colossal pool of Super money represents a nice pool of capital and gives local financial services companies plenty to do are planned-for benefits of the scheme.


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