Friday, March 01, 2024

Accidental diarist’s ashes

The relation between poetry and awe is intimate and absolute. Any poet who loses that capacity for wonder—the Biblical sort, which includes fear—is done. One of the most important theologians in my life is Abraham Joshua Heschel, whose whole theology is built around awe or wonder. (“Wonder rather than doubt is the root of all knowledge.”) It’s not a bouncy castle kind of wonder, though. In one of his poems, Heschel hints at the cost: “I prayed for wonders instead of happiness, Lord / And you gave them to me.”

 The life of every man is a diary in which he means to write one story, and writes another; and his humblest hour is when he compares the volume as it is with what he vowed to make it.

There are two types of encryption: one that will prevent your sister from reading your diary and one that will prevent your government.

The Metsquare debacle is not an isolated incident but a symptom of a pervasive issue within the construction sector, where subcontractors grapple with the pressure of underquoting in tenders, leading to insurmountable tax debts. The case sheds light on the ATO's uphill battle in clamping down on tax evasion and fraud within the industry, with other construction entities like Dalma and Titan Cranes also under the microscope for tax fraud schemes. 

Despite Metsquare's insistence on fair pricing and the non-existence of phoenix activity, the circumstances surrounding the transfer of operations to M2 and the familial ties between the entities raise critical questions about corporate governance and ethical standards in business practices.

Reflections on Governance and Tax Compliance

Richard Las CBE’s attended an evidence session on behalf of HMRC as part of the Home Affairs Committee inquiry into fraud along with my fellow panel members Andrew Penhale and Stephen Smart. I spoke about what HMRC is doing to combat fraud and non-compliance, including the exchange of information and collaboration with a wide range of partners.


A Sydney construction subcontractor that won work on major government projects collapsed last year owing $23 million in tax, but not before its business was resurrected through a related entity that continued its work.
Formwork contractor Metsquare, backed by eco-tech investor TrueGreen and its founder Kirk Tsihlis, paid the ATO just 8.9¢ in the dollar in a deal waived through by administrators WLP Restructuring despite opposition from the Australian Taxation Office.
TrueGreen founder Kirk Tsihlis was a key investor in Metsquare. 
New firm M2 Sustainable Services, which traded as Metsquare 2 and whose sole director was Mr Tsihlis, then continued the company’s work at Mirvac’s Green Square project and Lendlease’s state government project, Victoria Cross Station.
Metsquare said it was the victim of major trading downturns in 2021-22 due to pandemic shutdowns and its arrangement was “in the best interests of all creditors”.

“The sale of the Metsquare business was not an attempt to phoenix the business in any way shape or form,” a spokesman said.

Independent valuations of all assets were obtained and those assets transferred were sold at above market value and at full consideration.”

Metsquare’s double-digit tax debt joins a wave of ATO liabilities in the industry and comes as subcontractors claim they can’t compete for major projects due to firms underquoting in tenders and then collapsing owing huge amounts of pay-as-you-go tax.
Earlier this week, The Australian Financial Reviewreported that one of Sydney’s top formwork companies, Dalma, is under investigation by the ATO for an alleged $180 million tax fraud scheme that ran over some 15 years.
Another NSW firm, Titan Cranes, is under investigation for its involvement in an alleged $70 million tax fraud scheme that ran for more than a decade. Titan denies any involvement.
One formwork contractor, speaking anonymously because he did not want to upset potential clients, said he was “sick of what is happening to our industry”.
“They [subcontractors] undercut everyone on price and leverage the ATO to make a living,” he said.
“The tier one builders turn a blind eye because it all comes down to price.
“The true cost of the Sydney Metro developments, the new hospitals and schools should factor in the unpaid taxes. The taxpayer is being screwed.”

Director hit with $11m penalty notice

Metsquare was until last year listed in the online portfolio of TrueGreen, a “positive impact investor” that was talking up an IPO last year for its EV bus manufacturer business GoZero.
A spokesman for Metsquare said it was “not a TrueGreen operated or owned company” and “all contracts were priced at market rates and vetted by builders and developers and third party assessors for sustainable pricing”.
The formwork business worked on major state projects from transport to health to education and with top-tier builders including Lendlease, John Holland and Multiplex.
The projects included Wyong Hospital, Sydney Children’s Hospital and Kellyville North Public School as well as residential and commercial projects such as Hutchinson’s The Landmark high-rise and Nine Entertainment’s headquarters in North Sydney.
However, in May 2022, the ATO issued the firm a $6 million PAYG liability and hit Mirvac and Lendlease with garnishee notices, forcing the builders to pay 20 per cent of whatever it paid Metsquare to the tax office.
The PAYG assessments quickly escalated to $23.2 million and stretched back to 2020.
Meanwhile, the ATO imposed penalty notices on Metsquare’s director, 75-year-old Celso Paiva, that required he personally pay $11 million. The amount remains unpaid.
By June last year, Metsquare was in administration under insolvency firm WLP Restructuring.
But two months before, the company had entered an agreement to transfer its business to M2.
Mr Tsihlis, who was a co-investor in Metsquare through his company Halifax Central, had set up M2 at the end of 2022 as sole director. Metsquare’s manager, Mr Paiva’s son, had also signed off on a CFMEU EBA with M2 in February last year as M2’s manager.
The new entity paid WLP $100,000 for the cost of Metsquare’s administration.

Return ‘minimal’: ATO

At a July creditors meeting, WLP partner Glenn Livingstone said, after a preliminary examination of the books, that he saw “no reason to doubt” statements Metsquare collapsed due to lockdowns, flood delays, overtime costs and lack of resources to tender for new projects.
The administrators also found the company had been trading insolvent since at least June 2022 to the tune of $7.1 million but they did not believe the money was recoverable.
Instead, Mr Livingstone pushed for a deed, proposed by M2 and Metsquare’s director, that would pay creditors 8.9¢ in the dollar.
In return, 140 employees would have their entitlements transferred to M2 and M2 could complete Metsquare’s work and so release any retention payments to creditors.
The ATO complained the return was minimal and that the administrator had failed to point out Metsquare’s business had been transferred to someone with links to the company.
Mr Livingstone said the deed was expected to result in $1.5 million for creditors due to completion of works, in contrast to liquidation, where there would be “no return”.
However, he subsequently corrected the administrator’s report, which originally said Mr Tsihlis was not a related party.
The ATO, which was owed 80 per cent of the total debt, voted against the deed but faced opposition from 14 creditors.
Twelve of the creditors were Metsquare employees who were admitted as “contingent creditors” on the basis that if the deed was not voted through they could lose their entitlements.
Mr Livingstone, as chair of the meeting, declared that no result was reached because while a majority of creditors voted in favour, it was not a majority in value.
However, he then exercised his casting vote for the deed, which he said offered a more certain return given the ATO had not indicated funding for recovery action.
A Metsquare spokesman said the administrator had investigated the sale process and “confirmed in writing to creditors that the sale was in their best interests”.

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Professional bodies ‘need a rocket under them,’ senator says 


The TPB was grilled over its governance of professional bodies following CA ANZ’s wrongful acceptance of PwC partner’s resignation.

By Nick Wilson     

In a Senate hearing on Thursday, CA ANZ was criticised for wrongfully accepting the resignation of a former PwC partner before beginning disciplinary proceedings. The mistake was partly attributed to a failure of co-regulation between the TPB and the professional accounting body.

“We’ve heard evidence from the accounting professional bodies, all of them, saying that accountants across the country are very dismayed by their professional organisations’ lack of taking action on clear misdemeanours," said Senator Barbara Pocock.

"I think a lot of them, and I certainly, need to look to the leadership of CA ANZ,” she added.

As a partner at PwC, Mr Collins leaked confidential information from the ATO and Treasury and was subjected to an investigation by the TPB. Though Mr Collins informed CA ANZ of the investigation against him, the agency failed to 'flag' his membership before allowing him to resign.

CA ANZ's by-laws prevent it from investigating former members, though a spokesperson told Accountants Daily it began a review of its resignation processes when the matter came to light.

In a letter to the joint committees, CA ANZ chief executive Ainslie van Onselen admitted the body had been informed that Mr Collins was under investigation by the TPB before accepting his resignation despite earlier telling the committees otherwise.

Mr Collins had failed to make use of the body's formal notification system, instead notifying the CA ANZ via a 'generic email.' Mr Collins forwarded this initial email to Ms van Onselen on Sunday evening.

“It remains true that at the time of the resignation there were no flags on Mr Collins’ record,” wrote Ms van Onselen.

“However, since providing our evidence it has come to my attention that Mr Collins had disclosed he was subject to an investigation from the TPB via an informal channel.”

CA ANZ said all members are made aware of the correct notification procedure when becoming a member and that  relevant information is available on its website. 

Senator Deborah O’Neill said the failure to flag Mr Collins’ record at CA ANZ was “gamed to provide him with a quiet cover.” Senator Barbara Pocock said it was “particularly disappointing” that Ms van Onselen’s letter focused on human error and “allocates responsibility to staff.”

On Thursday, only two days after Ms van Onselen informed the joint committees of CA ANZ’s mistake, the TPB was grilled over the co-regulatory approach it employs alongside professional associations.

Senator Deborah O’Neill said the timeline presented in Ms van Onselen’s letter was “of great concern...It’s not just a failure at the point where the interaction with Mr Collins occurred, it’s a long failure over a period of time in which there should have been much greater awareness."

"It sounds like [the professional associations] need a rocket under them," she concluded.

While TPB CEO secretary Michael O'Neill acknowledged the lapse in time between TPB opening its investigation of Mr Collins and CA ANZ being notified raised “governance questions,” he assured that the professional association would have been notified when TPB issued its board sanction.  

Collaboratory efforts between the TPB and approved professional bodies to reform the latters governance structures have been ongoing, said TPB chair Peter de Cure, adding that "most have taken those things quite seriously."

When asked whether the TPB had inquired with CA ANZ as to whether more professionals might have escaped being flagged by CA ANZ, TPB CEO secretary Michael O'Neill said the professional body had refused to do so on the grounds it would require a breach of CA ANZ by-laws.

CA ANZ cannot share details of ongoing review cases until they reach the end of their disciplinary process, said Mr O'Neill, adding in certain cases this would not be allowed even upon the closing of a case. When asked what he made of those rules, Mr O'Neill said they "don't give us the transparency that is proposed."

Until they reach the end of their disciplinary process, said Mr O'Neill, adding in certain cases this would not be allowed even upon the closing of a case. When asked what he made of those rules, Mr O'Neill said they "don't give us the transparency that is proposed."

Internal FTC Documents and Testimony Reveal Abuse of Power, Misuse of Resources, and Culture of Fear Under Chair Lina Khan

Scammers are prompting people to ignore legitimate texts from the Australian Taxation Office because they believe they are fake, potentially leading to refund ­delays or worse.
As scams multiply amid an increasing use of artificial intelligence among criminals, ATO community forums are discussing fresh scams regularly and the ATO says the sophistication of new attacks is making it harder for people to spot a fake.
But taxpayers who ignore a genuine ATO approach may miss out on money or receive a late payment penalty, financial specialists say.
Financial strategist Theo ­Marinis, a former ATO assessor, said his and his wife’s refunds last year were delayed by several months because they both had deleted what they believed were scam texts from the ATO.

Nothing was showing on their myGov online messaging, even though their refunds had been suspended because their high level of donations were deemed by an ATO computer system to be unusual.
Mr Marinis eventually phoned the ATO to sort out the delay, and the couple only received their 2022-23 refunds in February.
“I was told they don’t send ­requests, such as for additional substantiation of expenses, via myGov because people don’t protect their login details, and therefore text and phone are safer,” he said.
People uncertain about any message claiming to be from the ATO should “never ring the number on the text before looking up the ATO yourself”, Mr Marinis said.
He said many people feared arguing with the ATO or questioning its decisions.
“If you don’t know what you are doing, get a good tax agent to help you, but don’t be scared of pushing back – as long as you are right,” he said.
Chartered accountant and Mr Taxman founder Adrian Raftery said he was fielding more questions from clients asking about whether contacts from the ATO were legitimate.
“I do get asked, I would say, once a month,” Dr Raftery said.
“Some are correct and true, but others are fraudulent.”
Dr Raftery said it was important for people concerned about an ATO text or email to contact it to check. “Call the ATO to talk to someone directly, or if you have an accountant, ask them,” he said.
An ATO spokeswoman said while there was no definitive data about people ignoring legitimate ATO text messages they feared were fraudulent, “we acknowledge that with fake communications growing in sophistication it is increasingly more difficult for the Australian public to 
The ATO’s advice to the community is for taxpayers or tax professionals to phone us on 1800 008 540 to confirm if an ATO interaction is legitimate or not, or if they are unsure,” the spokeswoman said.
“The ATO’s verify and report a scam web page also provides additional information on how to identify legitimate and scam interactions.
“We have continued to observe different types of SMS and email scams that include embedded hyperlinks as the main method scammers use to target the community.”
The ATO spokeswoman said it might use SMS or emails to ask people to contact it, but it would never send an unsolicited message containing a hyperlink to log on to online services.
“Always access ATO services directly by typing or into your browser,” the spokeswoman said.