Australia Tax fraud allegation could undermine trillion dollar investigations, senator says

17:25  18 may  2017
17:25  18 may  2017 Source:   ABC News

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There are concerns the arrest of Adam Cranston could have serious consequences for other major ATO tax fraud investigations , including the Panama Papers.

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Nick Xenophon © AAP Image/Mick Tsikas Nick Xenophon

The arrest of Adam Cranston over an alleged $165 million tax fraud could have serious consequences for the Australian Taxation Office and even the investigation into the Panama Papers, Senator Nick Xenophon says.

Adam Cranston is the son of deputy tax commissioner, Michael Cranston, who is now facing a charge of abusing his position as a public official.

Tax officials said they did not believe Michael Cranston had knowledge of the alleged conspiracy.

Michael Cranston was heavily involved in high-profile fraud investigations such as Operation Wickenby and the follow-up after the release of the Panama Papers.

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Labor Senator Doug Cameron is concerned about the fallout for the ATO.

"I think it will have suffered reputational damage," he said.

"How can you have one of the senior people under investigation and say that it's not a problem? Of course there is a problem."

South Australian senator Nick Xenophon agreed.

"To have one of their own implicated in something so serious is a shock," he told 7.30.

"As shocking as these revelations are, the biggest shockwaves could well be the impact this could have on the Panama Papers investigations, its international implications in what this could mean for a multi-billion dollar tax avoidance investigation, whether this in any way could taint or impede any prosecutions.

The alleged fraud centred on a company called Plutus Payroll.

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Plutus — named after the classical Greek god of wealth — is a company which helps large organisations pay contractors.

Adam Cranston is a director and secretary of Synep, the company which owns Plutus.

Paul Johnston was an IT contractor in Canberra being paid by Plutus.

"Every month I'd do my hours, I'd get paid, I'd get a pay slip, life went on," he said.

"Then one night I was working back in the office and I got an email [from Plutus] basically saying 'we've suspended operations'."

Plutus said this was due to a "commercial dispute" but gave no other explanation.

On May 2, Plutus sent an update email to contractors saying the company was "neither in receivership or administration".

"We have responsibly decided to suspend business activities due to our commercial dispute which prevents us from making payments," the email said.

It was on May 5 that Plutus finally acknowledged the full details of their problem.

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"Our dispute is with the Australian Taxation Office who believe that Plutus owes the ATO money. Acting in a draconian and unfair manner, the ATO froze Plutus' bank accounts on 27 April without prior warning or any consultation," it told contractors by email.

"Plutus unequivocally denies the ATO's claim and will vigorously fight the matter through the objection process and the courts. Plutus is and always has been rigorously tax compliant."

Mr Johnston said he should have done "more due diligence" when he signed up with Plutus.

"What I found was my payslip was actually coming from a company that wasn't Plutus Payroll," he said. "It's a different ABN, it's a different company. That got the alarm bells ringing a little bit."

He found there was $4,300 in superannuation that was unpaid.

Senator Cameron had already been investigating Plutus, having begun after he was contacted by someone who said they had not been paid.

"We actually knew there was a problem but we didn't know that while we were picking away at this, I think there were about 290 federal police involved and an investigation," he told 7.30.

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"What we found was contractors had been employed by contracting firms, agencies, those agencies then had contracted out to government agencies and the government agencies were paying through this company."

He said the profiles of the registered directors seemed unusual.

"Some of the directors had no qualifications to be directors, they were in homes in areas where you wouldn't expect directors to be living — young people living in Blacktown, and some of the blocks looking like vacant blocks.

"So I'm not surprised that eventually the federal police came on to this as a problem."

Senator Cameron said many of the contractors affected worked for government agencies.

"A myriad of government agencies [were involved]. ABC was one, the Department of Immigration and Border Security, Social Security, the NDIS, Defence — right across the spectrum of federal government agencies," he said.

Senator Xenophon said the alleged fraud raises another concern.

"This highlights the need for a federal ICAC or a federal integrity commission," he said.

Senator Cameron said all government departments should also take a look at their use of contractors and outsourcing.

"Federal government agencies across the country need to have a look at how they could ever hand out massive contracts without doing due diligence to the companies they're handing hundreds of millions of dollars of public money over to," he said.

"I think it's a waste of money. I think that we should make sure that workers who work for a department are paid by the department.

"I also think that we shouldn't be relying on companies like this to have coverage for superannuation, for workers' comp.

"I think there's a long way to go in this to find out what damage has been done to individuals."

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