A former big four partner has been taken to court by the tax office over allegations of promoting a tax exploitation scheme.
Australia’s Commissioner of Taxation on Wednesday announced proceedings had been lodged in the Federal Court alleging a former Ernst & Young tax partner had promoted the exploit scheme.
In a statement, Ernst & Young confirmed the former partner was sacked after allegedly receiving more than $700,000 in unauthorised financial benefits “in connection with the client transactions subject to the proceedings”.
“These (alleged) unauthorised financial benefits, received in relation to the transactions described in the proceedings, gave Ernst & Young cause for concerns about the former partner’s transactions, advice and conduct,” the statement reads.
“(We have) co-operated fully with regulators throughout this process and will continue to do so.”
Ernst & Young has not been named as a party to the tax office’s proceedings and are not accused of wrongdoing.
“The Australian Taxation Office (ATO) has been working closely with the Tax Practitioners Board (TPB) on this matter,” an ATO spokesman said.
“As the matter is before the courts, the ATO is limited in making any further comments.”
Individuals found to promote tax exploitation schemes face maximum fines of up to $1.5m.
“Promoter penalty laws are in place to deter and disrupt the promotion and implementation of aggressive tax avoidance and evasion schemes,” the ATO said in a statement.
“The promotion of tax exploitation schemes undermines the integrity of the tax and super system and challenges community trust and confidence.
“These schemes create an uneven playing field for everyone, including businesses and advisers.”
Ernst & Young said a suppression order surrounding the tax office’s proceedings had been varied on Wednesday.
In a statement, the firm said it wanted to demonstrate its “transparency … given the significant uncertainty that the proceedings have created in the market”.
Ernst & Young Oceania chief executive and regional managing partner David Larocca said the former partner’s alleged actions were “unacceptable”.
“The allegations also involve deeply disappointing behaviour and actions by the former partner that contravene a range of firm policies that have been in place for many years,” he said.
“EY is very clear that the behaviour alleged against the former partner are the isolated actions of a rogue operator and are in no way reflective of the way we do business.”
“A number of legal avenues are being pursued by EY against the former partner.”