A Chinese businessman accused of being behind a multi-million dollar Australian tax scam will remain in a New Zealand prison while facing extradition to Australia.

Li Zhang, 56, appeared in the Auckland District Court today as Australian authorities attempt to prosecute him over an alleged $10.5m tax fraud, which is linked to a luxury New South Wales golf course and resort.

The Chinese-born Australian citizen had been on the run for a decade after he and another left the country when the Australian Taxation Office (ATO) and Australian Federal Police tried to arrest him in 2009.

Last month Zhang was arrested after police attended a minor car crash, the Newcastle Herald reported, and Zhang was found to have been living at a rental property north of Auckland.

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It is not known how long Zhang has been living in New Zealand.

Police said in a statement to the New Zealand Herald it arrested a 56-year-old man on behalf of Australian authorities on April 4.

"An Australian warrant was endorsed by the New Zealand courts for his arrest."

Today, Judge Robert Ronayne declined granting Zhang bail and remanded him in custody until an extradition hearing later this month.

The Crown solicitor at Auckland Brian Dickey opposed bail, while a woman in the public gallery sobbed and waved at Zhang as he stood in the dock.

Zhang's lawyer Quentin Duff said his client would fight the extradition request.

Zhang reportedly owned the Chinese construction company Hightrade, which had more than 100 of its subsidiary companies collapse 10 years ago.

The company's finance head, Simon Chan, also left Australia and has not returned.

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According to the ATO, Hightrade was used to engage in fraudulent behaviour during the construction of the Pokolbin golf course and its resort in the Hunter Valley.

The ATO alleges the construction group inflated the cost of building the resort by more than $115m.

Hightrade executive Song (Peter) Chang has so far been the only member of the company charged with tax fraud.

He was jailed in 2017 for five and a half years for conspiracy to defraud the Australian Government.

An investigation by the ATO found Chang conspired to "defraud the Commonwealth of $10.5 million" between 2002 and 2007.

"Mr Chang's fraud involved the use of multiple related companies which grossly inflated sale prices between themselves and then finally failed to remit the GST to the ATO," an ATO statement explained.

"In addition, Mr Chang's companies failed to supply goods and services to the developments. There were numerous other techniques and attempts to conceal the fraud, including large-scale and complex round-robin transactions."

Chang was already serving a five-year jail term for separate fraud crimes involving a Sydney property.

When sentencing Chang in the Sydney District Court, Judge Robyn Tupman said the monetary loss to the Australian Government would never be recovered.