Tax havens and tax administration

Fraudulent tax scheme

An international promoter provides a sham 'loan' to Australian investors in a tax scheme of, say, $60,000. Each investor contributes an additional cash amount of $20,000 to the scheme and then claims a tax deduction of $80,000. At a 40% tax rate, this would result in a tax refund of $32,000, so each taxpayer would recoup their initial outlay and obtain a net benefit of $12,000 ($32,000 - $20,000) from their investment in the scheme.

We would disallow the scheme deductions because they constitute tax avoidance or evasion, and the international and Australian promoters may be subject to criminal investigation.

A 'non-recourse' loan is a loan arrangement where the lender has no recourse beyond a specified security of the borrower. The borrower is not otherwise personally at risk to repay the loan.

Figure 4: International sham loan arrangement

Sections within How we deal with tax haven arrangements

• How we identify tax haven arrangements
• AUSTRAC
• How we investigate tax haven arrangements
• Fraudulent tax scheme
• Working with international organisations
• Providing information about a tax haven scheme