The ATO said in a statement on Thursday (16 May) that it had secured a conviction against Mildura resident Suleyman Erdogan in the County Court of Victoria for “Pay As You Go Withholding (PAYGW) fraud relating to illegal phoenix activity”.
According to the Tax Office, Mr Erdogan had failed to remit over $664,000 in PAYGW from the 49 employees of his labour hire business, Sunraysia Harvesting Contractors Pty Ltd, which operated within the agriculture sector.
“Mr Erdogan also arranged for more than 136 false income tax returns to be lodged on behalf of 49 of his employees. Many of the tax returns were lodged on behalf of people on working holiday visas using identities of former employees who had departed Australia,” the ATO said.
“In total, $187,994 in tax refunds was paid.”
“As the director of labour hire firm Sunraysia Harvesting Contractors Pty Ltd (Sunraysia), Mr Erdogan offered farm work including fruit pruning, picking and packing services to various locations around Queensland and Western Australia,” the ATO said.
“With the help of Mrs Samantha Toffoletti, a financial services advisor at SME’s R Us Pty Ltd, two shell companies were registered, Danood and Jameron, to sub-contract the services of Sunraysia. Danood operated from October 2011 to September 2012 and Jameron was used from November 2012 to July 2013. A third shell company, Kigra Pty Ltd was later established in July 2013 to replace Jameron.
“The ATO investigation found the shell companies were registered to take on the liability of tax for the employees of Sunraysia with a total of $664,711 in PAYGW tax owed to the ATO. The investigation also found no business activity statement (BAS) had been lodged, and no PAYGW tax had been withheld or remitted to the ATO by Danood or Jameron for the tax years 2012, 2013 or 2014.”
Mr Erdogen was, the ATO said, convicted on three charges: two counts of dishonestly causing a loss to the Commonwealth, and one count of dishonestly obtaining a gain from the Commonwealth, and was sentenced to six months in prison.
According to the Tax Office, Mrs Toffoletti had been convicted by the County Court of Victoria for her role in the matter, and was released on an 18-month good behaviour bond with surety of $800.
The ATO’s action is the latest in a number of regulatory proceedings against Mr Erdogan and Sunraysia.
Reference material published on the Tax Institute’s website, dated 1 October 2015, said that its initial ruling that Sunraysia had engaged in sham contracting had been upheld by the Administrative Appeals Tribunal.
“A Mr Erdogan operated a business of supplying casual labour to meet the seasonal demands of orchardists and vignerons. An entity, Sunraysia Harvesting Contractors Pty Ltd, was incorporated. Sunraysia acted as the trustee of a discretionary trust of which Mr Erdogan and his spouse were beneficiaries,” the note said at the time.
“Sunraysia contracted with growers but, according to Mr Erdogan, it did not engage employees. Instead, he said, it contracted successively with three other companies, Danood Pty Ltd, Jameron Pty Ltd and Kigra Pty Ltd, for those companies to engage and pay employees, and to account for PAYG deductions and for payroll tax if necessary.
“Following an audit of the affairs of Sunraysia, Mr Erdogan and Mrs Erdogan, the commissioner concluded that the arrangements between Sunraysia and Danood, Jameron and Kigra were a sham.”
The full AAT verdict can be found on its website.
Sunraysia was placed into liquidation on 23 March 2018, ASIC records show.
‘Tax crime is not victimless’
Responding to the ruling, ATO assistant commissioner Peter Vujanic said that “contrary to popular belief, tax crime is not victimless”.
“By deliberately defrauding the tax and super system, including claiming a refund you’re not entitled to, you are stealing from the whole community and disadvantaging Australians who do the right thing,” he said.
“This case shows a deliberate act to attempt to defraud the tax and super system. Mr Erdogan purposefully engaged Mrs Toffoletti in a calculated attempt to evade his tax liabilities and subsequently defraud the tax system.
“Today’s result demonstrates the ATO’s commitment to detecting and prosecuting tax crimes and should serve as a warning to those who think they can flout the law and get away with it.”
Mr Vujanic added: “The ATO takes its responsibility to protect the tax and super systems seriously. This case should serve as a timely reminder that we will take determined action when necessary, even if this means pursuing you in the criminal judicial system.”