The Australian Federal Police allege the scam was a conspiracy to divert Pay As You Go withholding tax owed to the ATO. It ran for a year from June 2016 to May 2017 and raised a suspected $165 million.
The alleged scammers took control of Plutus Payroll Australia, a company that provided a payroll administration service for legitimate clients, large corporate employers.
Those clients would regularly transfer funds to Plutus to pay the wages and salaries of employees. Plutus was also expected to withhold and remit to the ATO the required PAYG contributions.
But the alleged scammers set up several other second-tier companies into which they installed unrelated small-time crooks and drug addicts as company directors, or straw directors. This was to allow the scammers to disguise their involvement in the conspiracy. One of the alleged co-conspirators was assigned to recruit and manage the straw directors to ensure they had no unsupervised involvement in the companies they were supposed to be running.
Plutus would then transfer the payroll funds to the second-tier companies - from where it would pay the client companies' payroll as expected, but it would only forward part of the PAYG contributions to the tax man. The alleged scammers would ensure both Plutus and the second-tier companies would retain a percentage of the funds owed to the ATO as PAYG. They would aim to pass on no more than 60 per cent of the PAYG owed by any company.
It is alleged the funds dishonestly retained by Plutus and the second-tier companies were then transferred to the scammers through false invoices or other companies' bank accounts, and used to fund their lavish lifestyles.
The alleged scammers would stay ahead of the tax man by not leaving enough money in the second-tier companies. When the tax office came looking for the outstanding PAYG liabilities, it would wind up the companies in pursuit of the money that was owed.
The alleged conspirators would learn when the tax office was looking into recouping PAYG liabilities via the issue of a garnishee notice, an order to a bank, for example, compelling it to pay funds held on a taxpayer's behalf to the ATO to recover a tax debt.
It is also alleged the chief conspirator Adam Cranston contacted his father, Michael - an ATO deputy tax commissioner responsible for high wealth individuals - who allegedly checked restricted information on tax office files, such as if any garnishee notices had been issued.
And because the directors of the second-tier companies were essentially unknowns, there was no trace back to the conspirators.
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