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18 Feb 2021 Cases

Federal Court hands out largest promoter penalty in R&D history

Commissioner of Taxation v Bogiatto (No 2) [2021] FCA 98

The Federal Court has handed down a judgment against Mr Paul Enzo Bogiatto and ordered $22.68 million in penalties to be paid. Mr Bogiatto was ordered to pay $6.51 million, in addition to $6.01 million and $3.65 million penalties for his related entities, Ryusei, Lambdachase Chartered Accountants and Lambdachase Services respectively.

The penalties are the largest ever for promoters of tax exploitation schemes that the Federal Court has handed out.

Between 2012 and 2015, Mr Bogiatto operated as a Research and Development Tax Incentive (R&DTI) adviser for a range of businesses in his capacity as a registered tax agent and chartered accountant.

Investigations into Mr Bogiatto’s activities began in late 2015 and uncovered Mr Bogiatto’s promotion of arrangements for his clients to lodge overstated and unsubstantiated R&DTI claims. In total, R&D tax offset refunds of $45.5 million were paid to Mr Bogiatto’s clients.

The court declared that Mr Bogiatto and his entities had contravened the promoter penalty rules in Div 290 in Sch 1 to the Taxation Administration Act 1953 (Cth).

Evidence gathered in relation to Lambdachase’s activities indicated systematic abuse of the R&DTI, with claims that were not reflective of taxpayers’ actual R&D expenditure for the relevant years.

Mr Bogiatto avoided regulators when investigated and never looked to redress any amount of loss or damage incurred by scheme participants.

This decision provides further judicial clarification on the application of the promoter penalty laws and the eligibility of the R&DTI.

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