ATO promises Plutus IT contractors won't be penalised

Technology contract workers caught up in the alleged $165 million tax fraud surrounding Plutus Payroll won't be penalised for any tax discrepancies, the ATO has promised.

The alleged fraud operation was unmasked by the Australian Federal Police last week when ten men - including Simon Anquetil, the founder of payroll provider Plutus Payroll - were arrested as part of the so-called Operation Elbrus.

The payroll provider - which police have said was a legitimate company providing services in large part to IT contractors - was allegedly under the control of members of the fraud syndicate.

The AFP claims money accepted from legitimate Plutus Payroll clients was transferred to seven subcontracted companies controlled by members of the syndicate.

The subcontractor companies allegedly paid only some of the income tax on behalf of clients that they were supposed to, and used a "complex series of companies and trusts" to divert the remaining money off to syndicate members.

The ATO today said Plutus Payroll customers that were inadvertently caught up in the alleged tax fraud syndicate would not be penalised if the company had not paid the right amount of tax on their behalf.

"Workers will not be penalised when the amount reported as being withheld is not actually paid to the ATO. At tax time, the amounts withheld from their pay will be applied when their income tax liability is assessed," the agency said.

"We hope this general advice will provide certainty to workers and employers who have used the services of payroll company Plutus Payroll and associated entities and may be seeking guidance regarding PAYGW [pay as you go withholding] status, to ensure their tax obligations are met."

It suggested Plutus Payroll customers contact the agency with any further questions.

The Commonwealth Bank froze Plutus' bank accounts earlier this month over the dispute with the ATO. It meant thousands of its clients - many who are IT contractors - didn't get paid for weeks.

The frozen funds were unlocked a week later so Plutus' customers could receive their pay.