If the investment you are considering sounds too good to be true it probably is. Be wary of the following statements:
even if the investment doesn’t go ahead you'll still make a profit from your tax refund
you don’t need any credit or asset checks, we’ll lend you the money
you’ll only have to pay back the money from the profits of the investment
don’t worry about asking the Tax Office if it’s OK – we have a ruling (or an opinion from a Queen’s Counsel, QC, etc)
there’s no risk
you’re guaranteed to get your money back in a few years
while the scheme is legal, the tax man doesn't like it and that’s why all the meetings and transactions are off shore, or
we can get you access to your superannuation now, no need to retire or worry about the usual rules.
If you see any of these things:
ask the promoter of the investment whether they have a product ruling from the Tax Office for the project
if the answer is yes, ask for a copy of the product ruling and read it, or have an independent tax professional read it and explain how it applies to you
if the answer is no, ask why they don't have a product ruling for the project
apply to the Tax Office for a private ruling, or
consult a tax professional who is not involved in promoting the investment.
The following features could also be regarded as warnings. You might see these when you check the proposed investment carefully:
arrangements which are contrived and artificial in their method of execution
little or no real underlying business or purpose
the significance of the claimed tax benefit in realising an economic return
the contrived transfer of a tax benefit
limited or non-recourse funding associated with a round-robin flow of funds
little cash outlay associated with borrowing funds under a capitalising debt facility
mechanisms for winding up or exiting an arrangement before net income is generated for investor
assumptions, including ‘blue sky’ projections, that can lead to seemingly excessive valuations of assets resulting in inflated deduction claims
use of tax exempt entities, eg charities to wash income, and
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