ATO Raises $28 Million from Legal Profession Review: Unpaid Taxes and Lodgements Detected

The Australian Taxation Office (ATO) has recently uncovered a significant amount of tax evasion within the legal profession, resulting in a total of $28 million in recovered funds. Through a thorough review of over 250 lawyers, the ATO found that a staggering 85% of practitioners had failed to lodge their tax returns, some of which were several years overdue.

One of the key issues identified by the ATO was lawyers incorrectly reporting distributions from partnerships and associated services trusts. By redirecting income to related entities, practitioners were flagged as high risk by the ATO. In one case, an unnamed lawyer owed $8.6 million in liabilities for not filing returns and assigning income to entities that also failed to lodge returns.

Another lawyer was caught for not declaring income as director’s fees, resulting in a hefty sum of $400,000 in liabilities and penalties. The ATO warned that legal practitioners who fail to meet their tax obligations could face being deemed unfit to practice and may be struck off.

In a recent case in Queensland, a barrister was found to be unfit to hold a practicing certificate due to unpaid tax liabilities since 2019. Justice Bradley emphasized the importance of honoring financial obligations and criticized the barrister for denying the ATO its due funds.

To avoid penalties and potential disbarment, the ATO advised lawyers to ensure their lodgements are up to date, including income tax, goods and services tax, fringe benefits tax, super, and other obligations. Practitioners should also carefully review trust and partnership distributions, comply with guidelines, and voluntarily disclose any missed tax obligations.

The ATO’s crackdown on tax evasion within the legal profession serves as a stark reminder for all practitioners to fulfill their tax responsibilities and maintain the integrity of the profession.