On 14 Jan 2022, the Commissioner posted an article saying that McDonald’s Australia had been convicted and fined, that day, for failing to provide documents to the Australian Taxation Office (ATO). This conviction seems to have something to do with the Mussalli decision, where prepayments of rent, to McDonalds were held to be on capital account. On 12 Nov 2021, the High Court refused the taxpayer leave to appeal.
On 26 July 2019, the ATO issued a formal notice requiring McDonald’s Australia to produce documents with a compliance date of 30 August 2019.
- However, despite continued engagement with McDonald’s Australia to obtain the information and resolve the matter, the documents were not provided by the compliance date.
- The matter was subsequently referred for prosecution by the Commonwealth Director of Public Prosecutions, which saw McDonald’s Australia plead guilty at the Downing Centre Local Court in Sydney to one count of failing to comply with an information gathering notice.
- Deputy Commissioner Will Day said: “We only issue formal notices to taxpayers to obtain information as a last resort; where a cooperative approach is no longer productive or where a taxpayers’ circumstances, history or behaviour warrant the use of our formal powers.” “As such, we expect the taxpayer to treat them seriously and respond in a timely way.”
Mr Day explained that:
- the ATO has intense one on one engagement with the top 1,000 companies operating in Australia, which provides access to vast amounts of information.
- “We issue about 70 formal notices to large business each year as part of our compliance activities to obtain information that is not forthcoming through this ongoing engagement.”
- “Instances where taxpayers have failed to comply with requests for information rarely result in criminal convictions as most will work with us to meet their obligations. However, where taxpayers hold back necessary information or documents, the ATO will initiate prosecution action,” Mr Day said.
This matter was prosecuted by the Commonwealth Director of Public Prosecutions.
The ATO ended by noting that the High Court has refused the special leave application of the taxpayer in Mussalli v FCT [2021] FCAFC 71, which would indicate that the breach notice was in relation to matters involving pre-paid rent. In Mussalli, the Full Federal Court held that upfront payments, by a McDonalds Franchisee, to McDodalds, to secure a rent reduction, under long-term leases, were on capital account as akin to good will, and not deductible under s 8-1 (see related TT articles about the First Instance Decision and later the Full Federal Court Decision). This comment hangs in the air, without explanation, but it does rather suggest that this conviction had to do with that case.
[ATO website: Conviction post; LTN 9, 17/1/22]
[Tax Month – January 2022 – Previous 2021] 18.1.22