Australian Taxation Office launches crackdown on scam using trusts and bankrupt companies
August 13, 2013 Leave a comment
ATO launches crackdown on scam using trusts and bankrupt companies
Published 13 August 2013 11:01, Updated 13 August 2013 11:28
Katie Walsh
An increase in tax dodging through use of trust funds and bankrupt companies has triggered a crackdown by the Australian Taxation Office, which is trying to lure people into revealing their illegal activity on promise of smaller penalties. The ATO has criticised tax advisers for their part in promoting the schemes. “Most taxpayers and their advisers are correctly taxing trust income but we are unfortunately seeing more instances where some are trying to avoid or substantially reduce tax,” said ATO assistant second commissioner Mark Konza in a statement on Monday.“We are concerned that these arrangements may have been marketed to taxpayers on the basis that they are legitimate tax-planning strategies.”
The scheme attracting the ire of the ATO involves a trust handing cash distributions from capital gains to one beneficiary, but giving the tax liability to another. That other party is a company which cannot pay the tax bill because it did not in fact receive the cash.
It is then wound up, scuppering the ATO’s chances of recovering the tax.
It is what the tax office calls a “deliberate mismatch” between trust entitlements and taxable amounts and one it has targeted for some time.
In its statement, the ATO complains that some tax advisers have publicly marketed the scheme. The ATO was handed an extra $68 million in the 2013 budget for a special trust taskforce to chase “egregious tax avoidance” over the next four years, in the hope of raising $380 million. Another $99 million was allocated in the August mini-budget to chase unpaid tax.
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