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This is for Australia, NSW.

Can a contractor be held liable (in any way) if they prepare documentation that is used to make an excessive/misleading tax claim?

The contractor has been directed to prepare documentation to support a tax claim (under an R&D tax incentive programme).

The contractor is neither a taxation specialist, nor do they fully understand the technology that they are documenting. The contractor is concerned that, as the technical author of the submission, they are legally exposed if their documentation is used to support a claim that is 'excessive' or 'misleading'.

In this situation, what can the contractor do?

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  • A good and not entirely easy to know question.
    – ohwilleke
    Aug 9 '21 at 21:58
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A contractor can be held liable for everything they do

For that reason, a contractor is unwise to do anything that falls outside of their skill set.

If the request from the principal falls outside the scope of the contract, the contractor can, and should, say “no”.

If, for whatever I’ll-considered reason, the contractor has agreed to do it in the contract then they can:

  • break the contract and pay the damages,
  • take out insurance,
  • subcontract the work to someone who does have the skills.

If the “contractor” is really en employee

It is not uncommon in Australia for a person who is actually an employee at law to be described as a “contractor”. This is usually because someone (possibly both parties) is cheating on their employment, superannuation, insurance or tax obligations.

An employee asked to do something beyond their competency should raise that with their employer. Then, if the employer insists, they should do it provided it’s not unlawful or unsafe.

If they are actually an employee then in at least an employer cannot hold them liable for errors and omissions they make in the course of their employment.

The Australian Tax Office

The ATO holds the taxpayer liable for errors and omissions in tax returns - they do not cast the net wider than that.

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    @RockApe thank you also, that's exactly the kind of information I'd like to digest - understand worst case scenario. Aug 9 '21 at 10:51
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    Could there be criminal liability for conspiracy to commit tax fraud (or perhaps conspiracy to defraud the government), even if there are no civil tax implications?
    – ohwilleke
    Aug 9 '21 at 21:59
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    @ohwilleke sure but conspiracy requires an intent to defraud. Not just being unsure of what the right answers on a form are.
    – Dale M
    Aug 9 '21 at 23:04
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    Could knowing that you don't know whether or not what you are signing off on is legitimate and that it will be used for tax purposes and doing it anyway without disclosing that in the document supply the necessary intent?
    – ohwilleke
    Aug 9 '21 at 23:08
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    @ohwilleke as far as I am aware there is no sign-off, prepare documentation and submit for approval. Trying to draw a parallel without being dramatic: it feels like putting items in a bag knowing that another person plans to leave the store without paying. Aug 9 '21 at 23:16

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