Tax planning - investigate before investing

Protect yourself against promoters marketing dodgy tax schemes

The fact sheet Tax planning – investigate before investing is also available to download in Portable Document Format [PDF 83 KB].

What is tax planning?

Tax planning is when you organise your tax affairs to give you the greatest tax advantage. Tax planning is legitimate when you do it within the letter and the spirit of the law. You may receive advice about tax planning arrangements and schemes from financiers, accountants, lawyers, tax agents, financial planners and other businesses.

When should you be aware of tax planning?

Be alert to those advisers and promoters who market dodgy tax schemes – ones that are not within the spirit of the law and sometimes not even within the law. If you invest in a dodgy tax scheme, you are risking your original investment plus you could have to pay back any missing tax with interest and penalties long after the promoter and your money are gone.

It is often difficult to tell a legitimate scheme from a dodgy one. Promoters can be very good at convincing you the scheme is a good one, using professional marketing tools and attractive sales pitches offering big tax deductions or refunds. It can be difficult to tell if you are getting sound advice.

Here are a few lines that you may hear which should raise a red flag in your mind:

• There are no risks. We guarantee the returns.
• You don’t need credit or asset checks, we’ll lend you the money.
• Even if the investment doesn’t go ahead, you’ll still make a profit from your tax refund.
• Sign this secrecy agreement – we don’t want our competitors stealing our ideas.
• There’s no need to ask the Tax Office if it’s okay. We already have a ruling.
• You can get up to 100% tax deductions fully supported by Tax Office rulings.
• A top lawyer and accountant have looked at the investment and they think it’s great.
• Your funds will be managed by an international bank (or international trust, or global corporation).
• We’ll put your money in a tax-free overseas account.
• You can run your business through your own offshore company.

The bottom line is: if it sounds too good to be true, it probably is.

How do you investigate?

Before you invest:

• check licence details free at www.fido.gov.au – people who offer financial products and advice must work for a business that holds an Australian financial service licence issued by the Australian Securities and Investment Commissions (ASIC)
• contact ASIC at infoline@asic.gov.au if you haven’t received either a product disclosure statement or prospectus (as a potential investors you must be given one of these)
• get independent advice from an adviser who has no connection with the seller or the investment scheme
• check with us at www.ato.gov.au or by phoning us on 1800 177 006 (or ask your adviser to do this) to find out if the scheme has a product ruling – many tax effective investments have product rulings. A product ruling provides you with a legally binding assurance that the tax benefits set out in the ruling will be available, as long as the scheme is carried out as described in the ruling
• check taxpayer alerts at www.ato.gov.au or phone us on 1800 177 006 to find out if the scheme has any of the characteristics described in the alerts. Our taxpayer alerts are early warnings of significant and emerging tax planning issues we are assessing
• visit our website at www.ato.gov.au to apply to us for a private ruling to confirm the tax effects of the arrangement. You can rely on private rulings as binding, as long as the scheme is carried out as described in the ruling.

How do you report promoters of dodgy schemes?

If you have concerns about a promoter or a tax scheme, call our Tax Evasion and Referral Centre anonymously on 1800 060 062.

We will investigate further and take action to stop the promoter marketing the scheme if it seems outside the law. This will help stop other taxpayers from investing in the scheme.

How do we work with ASIC and ACCC?

We aim to protect you against promoters of dodgy tax schemes. Not all schemes are tax related, so check the Australian Securities and Investment Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) SCAMwatch to find out about other dodgy schemes and scams.

More information

For more information about tax planning and schemes, visit our website at www.ato.gov.au and select Compliance issues – Tax planning and schemes.

For financial tips and safety checks, visit the ASIC website at www.fido.gov.au

To help you recognise, report and protect yourself from scams, visit the SCAMwatch website at www.scamwatch.gov.au, a site managed by ACCC.

Last Modified: Friday, 24 April 2009