Three of the principals of an Australian scheme that offered free payroll services to tech contractors have been found guilty of conspiring to defraud the Commonwealth and conspiring to deal with the proceeds of crime.
Organizations that hire contractors generally do so because they don’t want permanent staff on the books. Many contractors enjoy the flexibility of such arrangements, but are less enthused about the need to process income tax and retirement savings payments.
In Australia, a market has therefore sprung up for agencies that put contractors on the payroll as employees, pay their taxes and make their compulsory retirement savings payments. Contractors usually pay a point or three of their incomes for those services. But in the mid-2010s one such operation – Plutus Payroll – undercut the market with a free service and perks for contractors.
Plutus Payroll claimed it could offer a free service because it was paid in advance by employers that hired contractors, and was not obliged to make income tax payments instantly. Therefore it had a pool of cash it could use for short-term investments. Clever – if it were true.
The company quickly won many contractor clients. But in 2017 The Register caught wind of contractors who said Plutus Payroll had stopped paying them their wages.
As we investigated, it emerged that Plutus Payroll did not really have a cunning short term investment scheme. Rather, its owners trousered as much as AU$100 million ($65 million) they owed to Australian tax authorities. Some started spending up big on luxury items.
But the scheme had an obvious flaw: when Australians file their annual tax returns, they report how much income tax their employer remitted on their behalf. Because Plutus hadn’t paid up, the discrepancy was not hard to detect.
Once the Australian Taxation Office started asking questions, the scheme quickly fell apart, leaving tech contractors out of pocket and angry.
One intriguing allegation raised as Plutus collapsed was that figures from the criminal underworld had learned of the scheme and wanted to cream some of the crooked cash for themselves – accompanied by threats of exposure and whatever else the criminal underworld threatens people with these days.
Five of Plutus’s principals went on trial in 2022 in a marathon eight-month hearing that yesterday saw a jury find three of them guilty.
The ATO celebrated the guilty verdict, and noted that the maximum penalty for those offences is 25 years imprisonment.
Other actors involved with Plutus Payroll have already been sentenced to jail time, and two more await the verdict of a jury. Other cases related to the matter are ongoing. ®