A taxpayer has been unsuccessful before the Federal Court in seeking to challenge the validity of search warrants issued in respect of premises related to the taxpayer and associated companies under a joint investigation into “suspected non-declaration of income, the deception of the ATO in order to refrain or limit the taxation paid by the Caratti Group and the deception of the ATO in order to dishonestly obtain tax refunds”. The value of the alleged fraudulent activity was estimated to be greater than $15m.

In dismissing the taxpayer’s application, the Court found that the search warrants were validly issued and were also valid on their face (in that they sufficiently specified the perimeters which were able to be searched for and seized). This was despite the fact that the Court also found that the paragraph in the warrants relating to the seizure of electronic devices was invalid as it wrongly authorised the seizure of electronic devices, as opposed to the data stored on them. Nevertheless, the Court found that as this paragraph was able to be severed from the warrants, then the warrants as a whole were not invalid.

Furthermore, the Court found that in the exercise of its discretion whether to return the unlawfully seized electronic items, it should not order the return of the unlawfully seized items until the Commissioner was given an opportunity to further inspect them and, if satisfied in terms of the relevant provisions of the Crimes Act 1914, be allowed to copy the data stored on them.

(Caratti v Commissioner of the Australian Federal Police (No 2) [2016] FCA 1132, Federal Court, Wigney J, 15 September 2016.)

[LTN 182, 20/9/16]