A former chartered accountant and tax agent has been ordered to pay almost $23-million in penalties by the Federal Court for what has been described as “systematic abuse” of the Research and Development Tax Incentive – commonly known as the R&DTI.
The court made the order against Paul Enzo Bogiatto, who between 2012 and 2015 operated as a R&DTI adviser for a range of businesses in his capacity as a registered tax agent and CA.
Investigations into his activities began in late 2015 and uncovered Bogiatto’s promotion of arrangements for his clients to lodge overstated and unsubstantiated R&DTI claims. In total, research and development (R&D) tax offset refunds of $45.5 million were paid to these clients.
There was ‘systematic abuse’ of the incentive program
Last Friday, Bogiatto was ordered to pay $6.51-million, in addition to $6.01-million and $3.65-million penalties for his related entities, Ryusei, Lambda Chase Chartered Accountants and Lambda Chase Service, respectively.
According to the Australian Taxation Office (ATO), evidence gathered in relation to Lambda Chase’s activities indicated systematic abuse, with claims that were not reflective of taxpayers’ actual R&D expenditure for the relevant years.
Bogiatto avoided regulators when investigated and never looked to redress any amount of loss or damage incurred by scheme participants.
“This outcome reflects the scale of Mr Bogiatto’s scheme, which had a devastating impact on the individuals and businesses that followed his advice and trusted him. The size of the penalty is the highest ever seen in Australia and reflects the scale and abusive nature of these schemes,” said ATO Assistant Commissioner, Ash Khera.
Must protect businesses from becoming unwitting victims
“We want to protect individuals and businesses from being unwittingly caught up in schemes like this one. Those who encourage others to do the wrong thing and claim the incentive to which they are not entitled will be caught and held to account for their actions.”
A statement from the ATO said this decision builds on several previous successful results under promoter penalty laws that are designed to ensure that promoters are held accountable when they encourage their clients to enter into risky tax schemes.
As a result of the investigations, Bogiatto was de-registered as a tax agent in October 2017, as well as forfeiting his membership of the Institute of Public Accountants. He had his CA membership terminated and his name removed from the Registers in 2018.