Paying tax is something that every Australian needs to do. Unfortunately, a small percentage of people will deliberately break the law to avoid paying tax or to claim refunds or payments that they are not entitled to. People may break tax law (on purpose or inadvertently) when involved in a tax minimisation scheme.
You have the right to arrange your financial affairs to keep the tax you have to pay to a minimum. To legitimately minimise your tax through tax planning or tax-effective investing is something we can help you with. It’s a legitimate measure to use if done within the intent of the law. Some taxpayers, however, may find themselves in situations where their tax affairs push the boundaries of the law.
However, a tax minimisation scheme (also referred to as a tax avoidance scheme or arrangement) aims to exploit the tax and superannuation system.
They can range from mass-marketed arrangements advertised to the public to boutique or specialised arrangements offered directly to experienced investors. In most cases, the marketing focuses on individuals and may exploit people’s social or environmental conscience and generosity.
For Instance, these schemes typically involve:
- Reducing a participant’s taxable income
- Increasing their deductions against their income
- Increasing rebates
- Avoiding tax and other obligations entirely
Illegal Tax Minimisation Schemes
A tax avoidance scheme may include complex transactions or distort the use of funds to avoid tax or other obligations. It may also structure arrangements to:
- Incorrectly classify revenue as capital
- Exploit concessional tax rates
- Illegally release super funds early
- Inappropriately move funds through several entities, such as a series of trusts, to avoid or minimise tax that would otherwise be payable.
For example, some of the more common tax avoidance arrangements that the Australian Taxation Office (ATO) are currently aware of include:
- Retail sale of illicit alcohol
- Mischaracterised arrangements and schemes connected with foreign investment into Australian entities
- Accessing business profits through an interposed partnership with a private company partner
- Accrual deductions and deferral or avoidance of withholding tax
Above all, If you are concerned that you may be involved in a tax avoidance scheme, you should consult with us or speak directly with the ATO. This may entitle you to a reduction in penalties if you talk with them prior to their investigation.
