Australia – Major payroll scam could hit labour hire firms

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By (Adam Pode, CCWP)

In what has been described as the biggest white-collar fraud case in Australian history, payroll company Plutus Payroll has allegedly been funneling wage payments through several sub-contracted ‘second-tier’ companies. These companies were effectively operated by a crime syndicate that only paid a fraction of the required income tax according to Australian Federal Police (AFP). Unfortunately, this has impacted a number of labour hire firms (the Australian term for staffing companies) that have outsourced their payroll operations to Plutus.

According to the Financial Review, the 2,000 workers hired on by recruitment firms will not be responsible for the missing money, but the recruitment firms could be according to guidance issued by the Australian Taxation Office (ATO) yesterday. Labour hire firms were attracted to Plutus’ services as it paid them generous fees of AUD 1,000 (USD 744) per referral. Even labour hirers with their own payroll organisations were tempted to use Plutus’ services.

At the beginning of May, hundreds of contractors were left without pay after Plutus unexpectedly and abruptly stopped trading due to a so-called “commercial dispute”.

The company advised its customers that: “Some of your contractors will have had their pay adversely affected … We have taken the initiative to contact these and all other contractors to let them know we are attempting to resolve the issue and recover any pay that may be owed to them.” A Plutus spokesman advised that the contractors would be paid once the commercial dispute was resolved.

The company’s business model of offering a no-fee payroll management service had been questioned by others in the sector who wondered how the company could make a profit. (A fee of 2.5% is typical for payroll providers in Australia.) Nevertheless, high-profile clients, which included the Australian Broadcasting Corporation (ABC) and at least three government departments, were attracted by slick marketing and the promise of zero commission.

However, last week, the business model was exposed as a tax scam as the AFP executed 33 search warrants across Sydney, arresting ten people and laying charges of extortion, money laundering and conspiracy to defraud the Commonwealth.

The fraud is variously estimated at between AUD 65 million (USD 48 million) to AUD 165 million (USD 123 million) though investigations are still continuing. Meanwhile police seized almost AUD 15 million (USD 11 million), two aircraft, 25 luxury cars, 12 motorbikes, 18 homes, firearms, jewellery, watches, diamonds, artwork, vintage wines and more than 100 bank accounts and share trading accounts. Of particular concern is the involvement of the Australian Tax Office Deputy Commissioner, Michael Cranston, who is being investigated for providing his son, the principal operator of Plutus Payroll with confidential Tax Office information.

Among those charged were Simon Anquetil, a tech entrepreneur at Plutus Payroll and Adam and Lauren Cranston, the children of Michael Cranston who is due in court next month to answer charges of allegedly abusing his position.

Plutus had set up tier-2 subcontracted companies in each state supposedly to minimise payroll liability, however, it is now alleged that these companies were simply vehicles created to commit fraud. The subcontracting companies would be legally obliged to remit pay-as-you-go (PAYG) withholding tax payments to the ATO on behalf of the clients, however, investigators found that only part of these tax obligations were paid. The remaining money was allegedly siphoned off by syndicate members and channeled through a complex series of companies and trusts for their own personal gain.

Speaking to Daily Mail Australia , Mr Munk a senior manager at Plutus Payroll said he felt ‘sick to the stomach’ thinking he and other employees might have ‘unwittingly helped’ a syndicate allegedly skim millions of dollars in an elaborate fraud to fund their own lavish lifestyles.

Private equity firm SYNEP bought Plutus in mid-2016 which is when the alleged fraud is supposed to have begun. SYNEP is a private equity firm that invests in Australian and New Zealand companies with enterprise values of between AUD 20 million and AUD 200 million.

While Australia’s taxation commissioner, Chris Jordan, has given contractors impacted by the alleged fraud hope that they may yet receive compulsory superannuation payments, many are left concerned that Plutus will not be able to issue correct tax documentation in time for the closure of Australia’s financial year which ends on 30 June.

Source:: Australia – Major payroll scam could hit labour hire firms


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