Assignment task:
Tom and Frank are brothers and run retail business as a partnership in the outer suburbs of Melbourne. They sell a variety of goods. However, the bulk of their sales involve tobacco products, especially e cigarettes. The sale of e cigarettes to people below the age of 18 years is illegal in Victoria. They suspect many of the sales they have made have been to children who are 16 to 17 years of age. They have never checked the age of any customer before selling the cigarettes.
Over the last few years they have made substantial sums of money from their business. However, they have not lodged their individual returns nor a tax return for the partnership for the last 5 years. This is despite repeated advice by their accountant that they should do so.
In January 2022, they were both sent a letter from the tax office requesting them to submit the outstanding tax returns. Tom was divorced 2 years ago and the letter was sent to his former home, which is now occupied by his former wife and her new partner. He never received the letter.
Frank is single. He also sold his house and moved 2 years ago. He also did not receive the letter from the tax office. They have never informed the Tax Office about their change of address.
In April 2022, both Tom and Frank received a summons to appear in the Melbourne Magistrates Court to face charges of failing to comply with a directive from the Tax Office. They have also received a tax assessment showing they each owed $2,000,000 in taxes.
Tom has girlfriend based in Malaysia and with the borders opening he visits her regularly.
Tom and Frank are intending to set up a tobacco business in Malaysia, where the sale to tobacco products is not as regulated as it is in Australia.
Tom and Frank are naturally worried and stressed and have sought meetings with you their lawyer. They have a series of questions:
REQUIRED:
Provide advice on the above questions.
Discuss the tax issues raised by the above facts, referring to any appropriate legislation, case law, guidelines and rulings. If applicable, reference should be made to appropriate cases, provisions of the Income Tax Assessment Act 1936(Cth), Income Tax Assessment Act 1997 (Cth), The Tax Regulations, Tax Administration Act 1953 (Cth), Administrative Decisions (Judicial Review) Act 1977 (Cth), Freedom of Information Act 1982 (Cth) and the Ombudsman Act 1976 (Cth). Your discussion should also include the application of Administrative Law/ Judicial review of the Commissioners actions.
1. Did we have to lodge tax returns? We did not think that think that the illegal sale of e cigarettes to customers under 18 is taxable. It is illegal so it should not be taxable. What do you think?
2. Can they search our homes and business premises? We have a lot of stock we bought on the black market hidden under both our houses.
3. Our accountants have many of our business records. Can they access them? Can they question you as our accountant?
4. Your legal firm also has many of our business records. Can they access them? Can they question you as our lawyer?