Bribery is a criminal offence, so it stands to reason that tax benefits cannot be reaped from this conduct. The ATO provides guidance outlining the key considerations.
Legislative background
Australia is a signatory to the OECD anti-bribery convention which contains provisions prohibiting deductions for any loss or outgoing determined to be a bribe to a public official.
Although the convention is concerned with combating bribery of foreign public officials (foreign bribery), these guidelines also apply to bribes made to Australian public officials.
What is a foreign public official?
The term “foreign public official” may refer to:
- An employee, contractor, or official of a foreign government body.
- An individual who holds a position in service of a foreign country under a law or custom, including members of the military or police force.
- A member of the executive, judiciary, magistracy, or legislature of a foreign country.
- An employee or contractor of a public international organisation.
- An individual who is an authorised intermediary of a foreign public official.
An Australian public official is an employee or official of an Australian government agency or a local governing body.
Record-keeping requirements
For tax purposes, section 262A of the Income Tax Assessment Act 1936 requires that adequate records be kept, to explain all transactions.
This becomes particularly important in the case of facilitation payments. A facilitation payment is defined by the Australian Trade Commission as a “customary, unofficial minor payment to secure or speed a routine government action.” These types of payments should be avoided as they are often difficult to distinguish from bribery, however if they do occur, there are strict record-keeping requirements including:
- The value of the benefit.
- The date on which it occurred.
- The identity of the foreign public official in question, and their signature.
- Details of the routine government action that was sought to be expedited or secured.
These considerations not only have implications for whether a tax deduction could legitimately be claimed, but whether the person will have a reliable defence if prosecuted for bribing a foreign public official.
Who investigates foreign bribery?
Established in 2014, the multi-agency Fraud and Anti-Corruption (FAC) Centre is headed by the AFP, who works with partners including the ATO to investigate foreign bribery.
This effort was ramped up in 2016 with the AFP establishing multiple dedicated foreign bribery investigative teams. Additionally, the CDPP increased its foreign bribery expertise, creating a centralised system for the referral of foreign bribery matters.
Conclusion
You should ensure that you understand and comply with anti-bribery laws, and keep meticulous records, to avoid legal problems and keep your taxes in order.
