Plutus payroll allegedly at centre of Australia's biggest ever tax fraud

The depth of the alleged tax ring’s cover-up was so extensive that even Plutus’ employees were unaware of the complex AU$165 million scam taking place.

Plutus Payroll has been named as sitting at the heart of an AU$165 million (US$122.5 million) tax fraud, which is being billed as one of Australia’s largest ever white collar crimes.

The Australian Federal Police (AFP) has arrested nine alleged members of the crime syndicate following an eight-month investigation by the Australian Tax Office (ATO). The probe, codenamed ‘Operation Elbrus’, involved 290 AFP members and up to 30 ATO staff.

The fraud scheme allegedly saw the payroll company, which was run by syndicate members, accept money from legitimate clients in order to process payroll on their behalf. The money was then apparently transferred to seven sub-contracted organisations, dubbed ‘tier two companies’, which made payroll payments to individual workers.

The two tier companies were essentially fronts run by so-called “straw directors”, not all of whom were believed to be aware of what was going on. The companies themselves were controlled by syndicate members and were contractually obliged to remit Pay-As-You-Go withholding tax payments to the ATO on behalf of Plutus’ customers.

The investigation revealed, however, that these tax obligations were only partially paid, while the rest was siphoned off and channelled through a complex system of companies and trusts.

Unprecedented levels of tax fraud

The depth of the alleged tax ring’s cover-up was so extensive that even Plutus’ employees were unaware of what was taking place. Their contracts were terminated just after the payroll provider informed IT contractors that it would be unable to pay them as the ATO had frozen its accounts.

To make matters worse, employers caught up in the fraud have now been warned that they could be liable for tax that was not paid as it was being siphoned off.

Mark Molesworth, tax partner at accountancy firm BDO told Fairfax Media: “If the service provider does not make the payments to the ATO as required, it will be the employer who the ATO will target for payment, not the service provider. An employer could potentially have to pay the amount again to the ATO, even though they have already paid the amount to the service provider.”

Meanwhile, the AFP has so far charged six people with conspiracy to defraud the Commonwealth of Australia for their roles in the syndicate, two for money laundering and one for alleged extortion.

ATO deputy commissioner Michael Cranston has also been charged with abusing his position as a public official for accessing ATO information on behalf of his son, Adam, who has been arrested for suspected involvement in the syndicate. Michael Cranston is not believed to be part of the ring, however.

AFP deputy commissioner Leanne Close described the scale of the fraud as “unprecedented” in Australia. During 27 police raids, the AFP seized 25 motor vehicles, 18 residential properties, 12 motor bikes, more than 100 bank and share trading accounts, two aircraft, firearms, jewellery, artwork and vintage wine.