A solicitor, financial planner and accountant have been penalised more than $9.4 million by the Federal Court for their involvement in a four-year long tax exploitation scheme that affected at least 200 businesses and individuals.
An investigation led by the Australian Taxation Office (ATO) into a tax exploitation scheme promoted by the trio culminated in a Federal Court decision in March.
Justice Steven Rares ordered Bruce Rowntree, Rinaldo Manietta and Peter Donkin to pay penalties of $7.75 million, $1.455 million and $210,000, respectively, for their roles in the scheme.
Justice Rares found each of the promoters had contravened s 290-50(1) of Sch 1 of the Taxation Administration Act 1953 by promoting four tax schemes they marketed as ‘Emission Reduction Purchase Agreements’ to clients, on the basis that the clients could claim a full deduction on credits that did not exist.
The court found the promoters charged clients a 15% non-refundable deposit fee and promised a reduction to their taxable income and resulting tax saving that far exceeded the initial deposit.
Justice Rares found that over four years, approximately 200 or more individuals and businesses claimed deductions under the tax schemes totalling over $58 million.
In reality, Justice Rares found it was “a chimerical investment” for the individuals and businesses, who had been led to invest in a scheme involving tax evasion.
“Each of the four schemes generated substantial profits for, and was calculated to enrich, the promoters and their associated entities,” Justice Rares said.
“The investors were left with nothing to show for their ‘investments’ except the responsibility of paying the tax due after the reversal of the deductions that they were led by the promoters, falsely, to believe they could claim,” he said.
Justice Rares found that the solicitor, Bruce Rowntree, “was central to the creation, operation, marketing and derivation of profit from the four schemes” and ordered him to pay the largest penalty of $7.75 million.
The financial planner, Rinaldo Manietta, has been penalised $1.455 million and the accountant, Peter Donkin was ordered to pay $210,000.
In his judgment, Justice Rares noted that Donkin’s participation was of a lesser scale than his counterparts, which is reflected in this penalty.
While all three of the promoters have the right to appeal the court’s decision, SmartCompany understands that the accountant, Donkin has already done so.
Acknowledging the Federal Court’s decision, the ATO said the penalties handed down reflect the seriousness of the conduct and the scale of the scheme.
Get SmartCompany FREE to your inbox every weekday
“The behaviour of the promoters, who received significant financial benefits for their actions, showed little regard for their clients who trusted their advice,” the ATO said on its website.
“Protecting individuals and businesses from getting inadvertently caught up in schemes like these is a priority for the ATO.”
SmartCompany contacted the solicitor representing Rowntree but did not receive a response prior to publication. SmartCompany was unable to contact Manietta and Donkin or their representatives prior to publication.