Australian Government Hunts Down Lawyers Using Bankruptcy To Avoid Paying Taxes

Mary Swire, Tax-news.com, Hong Kong

23 March 2001

According to Asian news service Asia Pulse, the Australian government is cracking down on a number of wealthy individuals who file for bankruptcy as a means to avoid paying tax. The government has gone as far as creating a taskforce to determine whether the law should be changed to stop people using bankruptcy to avoid tax obligations.

The taskforce - assembled by Attorney-General Daryl Williams and Assistant Treasurer Rod Kemp - will be made up of representatives from their departments, the Australian Taxation Office and the Insolvency Trustee Service. It will liaise closely with the Commonwealth Director of Public Prosecutions and the Australian Federal Police to ensure there is appropriate and coordinated federal action against people deemed to be laughing in the face of the Australian tax system.

The kind of individuals under scrutiny are barristers and lawyers. Last month, several wealthy Sydney barristers were reported to have filed for bankruptcy, some more than once, to escape tax obligations often running into millions of Australian dollars. They are said to engage in the practice of placing their assets in their spouses names or in family trusts.

The initiative doesn't stop at identifying the guilty parties. The government is also introducing procedures to stop federal departments and agencies engaging barristers found to have played the bankruptcy card in endeavouring to avoid taxes.

Asia Pulse quoted Mr Williams and Senator Kemp as saying: 'While the [New South Wales] government has acted to require legal practitioners to notify their professional association of bankruptcy, a national approach is needed. The Commonwealth will urge the states and territories to develop nationally consistent options to ensure that legal practitioners who become bankrupt are required to report that fact to their professional association and that the association then applies a "fit and proper person" test to the right to continue to practise.

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