Taxpayer Guilty Until Proven Innocent

Table of Contents

Share at:

You’ve just started generating a profit for your small business and you’ve never been more excited. You should be excited. Many businesses don’t even make it that far.

The time has come to do your taxes and you’re a little confused about what expenses you can claim. If you read our post on the proposed new offence for false accounting, you’d know that even a small mistake when doing your taxes can have significant consequences.

Unlike other areas of the law, If you are charged with tax evasion, you shoulder the burden of proving your innocence.

Recent tax law developments you need to know about

A recent parliamentary inquiry has pushed for a radical overhaul of current tax laws which give the Australian Taxation Office (ATO) powers to gather information to prosecute suspected tax evaders. Taxpayers alledge that ‘cowboy auditors’ have been treating taxpayers unfairly.

House Tax Committee chairman Bert van Manen said that if the allegation of fraud and evasion was being made, and the ATO was seeking to hit people with a tax bill dating back beyond five years, then all taxpayers – from small-business people to big companies such as Glencore and Commonwealth Bank – should be given the benefit of doubt.

Despite the hit-back, small business owners and individual taxpayers with large tax bills will continue to be presumed guilty until proven innocent.

Where to appeal if you’re accused of tax evasion

The recent tax disputes inquiry, chaired by Queensland Liberal National MP Bert van Manen, had recommended the ATO take on the burden of proving fraud or evasion in some cases. However, it made no recommendation that the ATO be split in two, a suggestion made by former treasurer Joe Hockey prior to the Coalition taking power.

The ATO has fiercely resisted the establishment of a second Commission to handle appeals. The ATO has aimed to create a new area within their own department which has responsibility for taxpayer appeals, and provide taxpayers with in-house mediation.

Tax Commissioner Chris Jordan has claimed that the new area will provide small business owners with a ‘fresh set of eyes’ to review their case in the event of a dispute.

What this means for your small business

With the ATO’s extensive powers to gather information and the absence of a presumption of innocence, you can’t afford to not have your accounts in order.

The government has dismissed the inquiry’s recommendation that the onus should be on the ATO to prove that an accused taxpayer is guilty of evasion and the establishment of a separate appeals area under a different Commissioner.

This means that it has never been more important to have a qualified lawyer or accountant ensure you are compliant with all relevant tax and accounting laws.

Let us know your thoughts by tagging us #lawpath or @lawpath.

Share at:

Simplify creating legal documents today

Browse through Lawpath's AI tools which can be used to draft, review and refine legal documents today!

Related Articles

House keys on a ledger page representing a trustee handover

How to Change the Trustee of a Discretionary Trust in Australia (2026 Guide)

Changing the trustee of a discretionary trust may be required for a number of reasons. In this article, we break down how to do so and its affect.

Tips For Contesting A Fine In NSW If You Have Committed A Traffic Offence

Have you committed a traffic offence in NSW? Here are tips for contesting a fine.

How to Start an Investment Partnership

Investment partnerships differ from common business structures, and it is important to understand what you are entering into by choosing such a structure for your business.

Changing Business Structure From Sole Trader To Partnership: A Legal Guide

Expanding your business? Here’s how to change your business structure from a sole trader to a partnership.

Should You Use A Mutual or One-Way NDA? (2026 Update)

As a business owner, it's important to protect your confidential information in every context. Find out the difference between one way and mutual NDAs here.