Question

Daniel was audited by the ATO. He runs a furniture business. Throughout the audit, he hindered the ATO by failing to attend schedule meetings and failing to disclose important information. The auditor has discovered undisclosed income of $300,000 over four years, resulting in tax short tax of $100,000. The auditor is of the opinion that Daniel deliberately conceal the shortfall. The auditor also found Daniel did not keep proper record of his transactions. (3.2) Required: Advise client his expected current tax obligation according to taxation authorities and determine the followings. (a) How much short fall is the ATO likely to Charge? (b) What else will the ATO charge on tax shortfall? (c) Name one other administrative penalty the ATO is likely to charge? (d) What other further action can ATO take? (e) If Daniel believes the tax shortfall is incorrect, what resources does he have available to him

Answer 1

A. The client's expected current tax obligation is 1,00,000$.

The ATO will charge the whole shortfall of 1,00,000 $ as misstatement of taxes, as per the section it is material. It exceeds greater of 10℅ of the tax or 5000 whichever is higher.

B. The ATO will charge penalty of 100℅ on the shortfall of tax I.e. 1,00,000$.

C. ATO can also levy other criminal sections also such as:

Criminal prosecution and imprisonment of one year upto five years.

As Daniel tried to evade tax by understatement of income, and also not cooperating with the authorities to hide his tax evasion.

E. If Daniel believes the shortfall is incorrect, appeal to the federal court.