Would Huang Xiangmo be the only Chinese political donor with undeclared foreign income- Recipients (and their civil service supporters) should also be investigated if the ATO is serious about pursuing undeclared foreign income

by Ganesh Sahathevan

Chinese businessman Huang Xiangmo is living in exile in Hong Kong. Picture: Renee Nowytarger

The Guardian and others have reported :

Chinese billionaire Huang Xiangmo has been ordered to declare all of his assets – everywhere in the world – to the federal court as the Australian tax office continues to pursue him over an alleged $140m tax bill.

In court on Thursday, Justice Jayne Jagot ordered Huang – exiled from Australia after his permanent residency was torn up by the government last year –disclose all of his assets, both in Australia and worldwide, by 11 November.

The decision by the ATO to pursue Huang's worldwide income, while technically correct, is rather strange for the ATO has not been known, in the past , to pursue the overseas assets of migrants like Huang who have accumulated assets in their home countries. Many would have been granted permanent residence on the strength  of that  wealth.Expecting that they would  declare the income from all their holdings outside Australia  would be as unrealistic as expecting them to  liquidate and transfer all their assets to Australia.  Put in another way, enforcing the law would be beyond the ATO's resources.

Be that all as it may,  if the ATO is in fact going to pursue worldwide income then all others with assets overseas, including  most if not all Chinese businessmen resident in Australia who have donated to the Liberals, Labor and any other political .party would also be targets.
Tracing their assets could be as  simple as interrogating the recipients, and the civil servants who have been involved in providing approvals to any of the Chinese donors concerned.
Interrogation plus an audit of the financial records of all of the above is likely to reveal the ultimate source of funds, and help determine if the source was foreign and from income that has not been declared.

Huang should not be singled out.

END

Orders freezing Huang Xiangmo's assets make interesting reading, and raises questions about who knew what when accepting his money 

by Ganesh Sahathevan




PHOTO: Huang Xiangmo, second from left, wants his political donations back. (Supplied: Yuhu website)

The following have been extracted from Katzman J's Orders freezing 
Huang Xiamao's assets in Australia. This writer is not interested in Huang's tax liability but rather the arrangements Huang used to house his assets and his capacity to access cash.

It is important to note that Huang and his wife became residents for tax purposes in 2013.Under Australian tax law tax residents are liable to pay tax on their worldwide income. Given that, see how volatile Huang's taxable income has been between 2013 and 2015.


Then note that Huang had the capacity to move "tens of millions" in cash in and out of Australia, and in doing so keep in mind that taxable income need not equal cash; indeed it  seldom is in the case of large and complex business enterprise.


See also the references to loans from a family trust, and note the value of known assets in Hong Kong.

More information is required about the sources of Huang's cashflows  and this writer should be grateful for anyone who can add any information via the comment section or via direct message.

Having said that, it is hard to see how all recipients of Huang's money failed to make relevant enquiries about his source of funds.It does appear as if all concerned were happy to accept that he was, in his words, an ATM.




From the reasons for the decision: 



Changran  Huang , also known as  Huang  Xiangmo, and Jiefang  Huang  are husband and wife. For several years they lived in Australia and, since 1 February 2013, they were tax residents of Australia. On 4 December 2018 Mr  Huang  left Australia bound for the People’s Republic of China (PRC).

Income Year:	Amended Taxable Income	Shortfall amount of income tax assessed	Shortfall Penalties	SIC:	Increase in liability following Audit:
2013	$10,863,286	$4,894,867.05	$2,447,433	$1,535,944.20	$8,878,244.25
2014	$124,413,338	$57,862,280.25	$28,931,140	$13,984,713.58	$100,778,133.83
2015	$38,132,677	$18,472,535.95	$9,236,267	$3,150,416.91	$30,859,219.86
TOTAL	$173,409,301	$81,229,683.25	$40,614,840	$18,671,074.69	$140,515,597.94

“SIC” is an acronym for shortfall interest charges

24. AUSTRAC records show that between January 2016 and August 2019 Mr  Huang  transferred tens of millions of dollars into and out of Australia. That evidence shows a substantial excess of monies going out compared to monies coming in. It also shows that the amount of money transferred out of Australia since December 2018 exceeds the amount coming in by $46,749,253, nearly twice as much as the previous year.

14. The records of the Huang Family Trust show that as at 30 June 2018 loans owing to the Huang Family Trust exceeded $165 million. While the last recorded creditor is named only as “unitholder”, the previous recorded creditor in an amount of over $108 million, is named as Mr Huang. Information acquired during the course of the audit indicates that that debt was not repaid. The loans appear to have been made to some of those Australian companies and trusts. The financial statements for the Austrump Family Trust, for example, record a loan from Mr Huang of nearly $12 million.

16. Mr Huang also has substantial real estate holdings.
17. On 31 March 2007 he acquired a property in Hong Kong with an estimated value of HKD25,861,500 (approximately AUD3,711,311). On 18 September 2015 he purchased a unit in Chatswood, NSW with an estimated value of $3,428,258. On 14 April 2016 he purchased a house in Chatswood, NSW with an estimated value of $3,275,128. As far as the evidence shows, none of these properties is subject to a mortgage.
18. According to his last income tax return lodged with the ATO on 13 December 2018 he last resided in Australia at a property in Bay Street Mosman, NSW (the Mosman property). The Mosman property was purchased in the name of Mrs Huang for the sum of $12,800,000. Settlement took place on 29 January 2013. It is unencumbered.
19. In addition to the Mosman property, Mrs Huang is also the owner of a property in Hong Kong which she purchased in about December 2018 for the amount of HKD520,000,000 (approximately AUD96,000,000). This, too, is apparently unencumbered.

Deputy Commissioner of Taxation v Huang [2019] FCA 1537 (18 September 2019)

Posted 19th September by Ganesh Sahathevan