Widely-based settlement arrangements for investment schemes and employee benefit arrangements entered into before 30 June 2003
Widely-based settlement arrangements for investment schemes and employee benefit arrangements entered into before 30 June 2003
Status of this settlement offer: current
While this settlement offer is current, its availability will depend on whether you have a disputed liability or entitlement under the Code of Settlement Practice.
Contact our hotline on 1800 177 006 to determine whether this settlement is still available for you.
Who does this settlement apply to?
This settlement is available, on request, to most participants who entered into particular franchise schemes before 30 June 2003 and who have a current disputed liability or entitlement with us for that arrangement, or are able to enter into such a disputed liability or entitlement.
The terms provided, apply to participants in these arrangements who did not accept the mass marketed investment schemes settlement offered between February and June 2002.
Details of settlement terms
These terms have been endorsed by the widely-based settlement panel.
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme).
Principal settlement terms
We will agree to terms including both of the following:
- applying a shortfall penalty at or reduced to the rate of 10%
- remitting general interest charge (GIC) to 4.72% for the period from the due date of the original assessment, until the earlier of 14 days after the issue of an amended assessment (to give effect to settlement) or 31 May 2007.
In return, you will agree to terms, including all of the following:
- giving up your right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not, at any time, claiming or seeking to claim any deductions for losses relating to your participation in the arrangement.
The following factors were considered when determining the terms of settlement:
- a settlement term allowing participants a deduction for cash outlaid was not considered appropriate here as little underlying activity occurred
- a 10% penalty is considered appropriate as most participants voluntarily disclosed their claims prior to being advised of an audit
- a remission of interest on the tax shortfall recognises that these matters are aged and also provides a concession for participants who wish to finalise their dispute.
- Participants who received a fee for another investor's scheme participation or who designed prepared, managed or implemented the investment scheme.
Phone us on 1800 177 006 to discuss the settlement options available to you.
- Participants who were involved in Oracle 1998, Oracle 1999, TVI or TVA franchise scheme as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme) would receive the above terms, including a deduction for cash outlay. This was considered appropriate to reflect the decision in Tolich v Commissioner of Taxation [2007] FCA 1195 and Burrows v FC of T [2007] AATA 1467.
This settlement was available on request to participants who entered into Oracle 1998, Oracle 1999, TVI or TVA franchise scheme and who had a current disputed liability or entitlement under the Code of Settlement Practice or were able to enter into such a dispute after the above decisions.
About franchise schemes
These schemes generally had all of the following structuring features:
- round robin financing
- limited or non-recourse loans
- little underlying activity.
List of franchise schemes
Alpha Intermall Plus
|
Infomercial Syndicates
|
Oracle 1999*
|
Alpha Plus Software
|
Insurance Prem Finance (IPF) 1997
|
Oz Refunds
|
BFS 2000
|
Insurance Prem Finance (IPF) 1998
|
Rydal Hard Rock Joint Venture Project No. 1
|
Business & Financial Strategy
|
Interest Recount
|
Satcom Corporate Services
|
Computer Directories Australia
|
International Learning Foundation
|
Satcom Electronic Commerce Services
|
Connect The World
|
Liquid Engineering Industrial
|
Satcom Financial Services
|
Educational Services Project No 1
|
Madison Pacific
|
Servcom
|
Enviro Wheelie Wash
|
Money Unlimited Franchise
|
Tentas
|
Equity Match 1994
|
Music Scheme 1999
|
The First TrackNet Proj
|
Equity Match 1995
|
Netlink Hosp Franch 1997-1999
|
Tradematch
|
Fishing Information Line
|
NoRegrets
|
TVA*
|
Freedom Express
|
Oracle 1998*
|
TVI*
|
*This franchise scheme has differentiated settlement terms. Refer point 3 in Details of settlement terms.
About film scheme arrangements and the settlement offer
Film arrangements include a range of scheme structures designed to deliver deductions to investors. The schemes had the following structuring features:
- inflated budgets
- round robin financing
- non-arm's length dealings
- in extreme cases, claiming deductions for films that were never made.
These arrangements typically involved the investor paying a prescribed amount, either directly or through borrowings on which interest was paid. The investment was to then be used in the making of a film. The investor claimed a tax deduction for the amount invested and any interest paid on related borrowings. The investment guaranteed a return of the amount invested plus a small margin. The amount was to be included in the assessable income of the taxpayer in the year of receipt.
This settlement is available, on request, to most participants who entered into a film scheme arrangement before 30 June 2003 and who have a disputed liability or entitlement with us for that arrangement, or are able to enter into such a disputed liability or entitlement.
Four sets of settlement terms are available:
- participants who claimed the expenses as a deduction under Division 10B of the Income Tax Assessment Act 1936
- participants who claimed the expenses as a deduction under Division 10BA of the Income Tax Assessment Act 1936
- participants who claimed the expenses as a deduction under section 51(1) of the Income Tax Assessment Act 1936
- participants who claimed the expenses as a deduction under Division 373 of the Income Tax Assessment Act 1936.
These settlements are not available to participants who received a fee for another investor's scheme participation and/or were involved in the design, preparation, management or implementation of an investment scheme.
Status of this settlement offer: current
While this settlement offer is current, its availability will depend on whether you have a disputed liability or entitlement under the Code of Settlement Practice.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Who does this settlement apply to?
This settlement is available, on request, to most participants who entered into a film scheme arrangement before 30 June 2003 and who have a disputed liability or entitlement with us for that arrangement, or are able to enter into such a disputed liability or entitlement.
The terms provided apply to participants in these arrangements who did not accept the mass marketed investment schemes settlement offered between February and June 2002.
Details of settlement terms
|
Settlement conditions and disclaimers
The following settlement information is a general guide.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
|
- Participants who were involved in the arrangement as an investor and claimed the expenses as a deduction under Division 10B of the Income Tax Assessment Act 1936 (did not receive a fee for another investor's scheme participation, and were not involved in the design, preparation, management or implementation of an investment scheme).
Principal settlement terms
We will agree to terms including:
- allowing a deduction for interest paid on the amount borrowed in connection with the scheme in the year in which it was paid
- excluding from assessable income guaranteed returns up to the amount of the up-front scheme contribution
- applying a shortfall penalty at or reduced to the rate of 10%
- remitting general interest charge (GIC) to 4.72% for the period from the due date of the original assessment until the earlier of 14 days after the issue of an amended assessment to give effect to settlement, or 31 May 2007.
In return, participants will agree to terms, including:
- giving up the right to continue (or begin) to dispute the liability or entitlement of the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- including in their assessable income guaranteed returns that exceed their up-front scheme contribution
- not at any time claiming or seeking to claim any deductions for losses relating to their participation in the arrangement.
The following were considered by the widely-based settlement panel when determining the terms of settlement for participants at point 1 above:
- participants funded their upfront payment in full or in part through an interest bearing loan. Therefore, under these settlement terms a deduction is allowed for interest payments that represented real cash outlays paid to the lender
- a 10% penalty is appropriate as this arrangement was not widely available and was tailored to meet the needs of investors
- a remission of interest on the tax shortfall recognises that these matters are aged and also provides a concession for participants who wish to finalise this matter.
- Participants who were involved in the arrangement as an investor and claimed the expenses as a deduction under Division 10BA of the Income Tax Assessment Act 1936, (did not receive a fee for another investor's scheme participation, and were not involved in the design, preparation, management or implementation of an investment scheme).
Principal settlement terms
We will agree to terms, including:
- allowing a deduction for interest paid on the amount borrowed in connection with the scheme in the year in which it was paid
- excluding from assessable income guaranteed returns up to the amount of the up-front scheme contribution
- excluding from assessable income, income included under Division 16E of the Income Tax Assessment Act 1936
- not allowing a deduction for expenditure claimed under Division 10BA which is subject to a guaranteed return
- applying a shortfall penalty at or reduced to the rate of 5%
- remitting GIC to 4.72% for the period from the due date of the original assessment until the earlier of 14 days after the issue of an amended assessment to give effect to settlement, or 31 May 2007.
In return, participants will agree to terms, including:
- giving up their rights to continue (or begin) to dispute liability or entitlement for the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- including in their assessable income guaranteed returns which exceed their up-front scheme contribution
- not, at any time, claiming or seeking to claim any deductions for losses relating to their participation in the arrangement.
The following were considered by the widely-based settlement panel when determining the terms of settlement for participants at point 2 above:
- participants funded their upfront payment in full or in part through an interest bearing loan. Therefore, under these settlement terms a deduction is allowed for interest payments that represented real cash outlays paid to the lender
- a 5% penalty is appropriate as this arrangement was widely marketed and was not tailored to meet the needs of investors
- remitting interest on the tax shortfall recognises that these matters are aged and also provides a concession for participants who wish to finalise this matter.
- Participants who were involved in the arrangement as an investor and claimed the expenses as a deduction under section 51(1) of the Income Tax Assessment Act 1936, (did not receive a fee for another investor's scheme participation, and were not involved in the design, preparation, management or implementation of an investment scheme)
Principal settlement terms
We will agree to terms, including:
- allowing a deduction for interest paid on the amount borrowed in connection with the scheme in the year in which it was paid
- excluding from assessable income guaranteed returns up to the amount of the up-front scheme contribution
- applying a shortfall penalty at or reduced to the rate of 5%
- remitting GIC to 4.72% for the period from the due date of the original assessment until the earlier of 14 days after the issue of an amended assessment to give effect to settlement, or 31 May 2007.
In return, participants will agree to terms, including:
- giving up their right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- including in their assessable income guaranteed returns which exceed their up-front scheme contribution
- not, at any time, claiming or seeking to claim any deductions for losses relating to their participation in the arrangement.
The following were considered by the widely-based settlement panel when determining the terms of settlement for participants at point 3 above:
- participants funded their upfront payment in full or in part through an interest bearing loan. Therefore, under these settlement terms a deduction is allowed for interest payments which represented real cash outlays paid to the lender
- a 5% penalty is appropriate as this arrangement was widely marketed and was not tailored to meet the needs of investors
- a remission of interest on the tax shortfall recognises that these matters are aged and also provides a concession for participants who wish to bring this matter to finalisation.
- Participants who were involved in the arrangement as an investor and claimed the expenses as an intellectual property deduction under Division 373 of the Income Tax Assessment Act 1936, (did not receive a fee for another investor's scheme participation, and were not involved in the design, preparation, management or implementation of an investment scheme)
Principal settlement terms
We will agree to terms, including:
- allowing a deduction for interest paid on the amount borrowed in connection with the scheme in the year in which it was paid
- applying a shortfall penalty at or reduced to the rate of 10%
- charging interest on any tax shortfall resulting from participation in the scheme at the full GIC rate from the date it first became payable until 14 days after the issue of amended assessments arising from this settlement offer.
In return, participants will agree to terms, including:
- giving up their right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- including in their assessable income all cash actually received with for the arrangement
- not, at any time, claiming or seeking to claim any deductions for losses relating to their participation in the arrangement.
The following were considered by the widely-based settlement panel when determining the terms of settlement for participants at point 4 above:
- participants funded their upfront payment in full or in part through an interest bearing loan. Therefore, under these settlement terms a deduction is allowed for interest payments which represented real cash outlays paid to the lender
- a 10% penalty is appropriate as this arrangement was not widely available and was tailored to meet the needs of investors
- a remission of interest on the tax shortfall recognises that these matters are aged and also provides a concession for participants who wish to bring this matter to finalisation.
These terms have been endorsed by the widely-based settlement panel.
About this scheme
The Alpha Intermall - TFS-D9 scheme was a franchise scheme which commenced around April 2000. Participants were invited to be franchisees of an online internet facility providing assistance for lodging Australian immigration applications. There were plans to develop other internet products for the franchises to market.
Participants were required to purchase warrants and a stock of software, and pay a franchise fee. After payment of a cash deposit the remaining amount was purportedly loaned by an interposed entity. Participants were also advised that their outlay did not entitle them to a franchise; rather it entitled them to an interest in the franchise. Any franchise income would first be offset against loan amounts before distribution to franchisees.
Other than a round robin of journal entries, there was no documentation evidencing the existence of either the loan or any real funds. Neither was there any documentation supporting the view that the participants ever held an interest in the franchise.
Upon receiving large tax refunds the participants instructed their agents to withhold amounts as payment towards the cash deposit cost of the franchise, with any balance being returned to the participants.
Status of this settlement offer: closed
Who did this settlement apply to?
This settlement was available on request to participants who entered into the Alpha Intermall - TFS-D9 scheme and who had a current disputed liability or entitlement under the Code of Settlement Practice or were able to enter into such a dispute.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Principal settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agreed to terms including all of the following:
- penalty at or reduced to the rate of 15% was appropriate because a higher level of tax mischief featured in this arrangement compared to other Franchise schemes
- remitting GIC to nil for the period between March 2002 and November 2003 was considered appropriate due to unreasonable ATO delay
- remitting GIC to 4.72% for the period from the due date of the original assessment until the earlier of 14 days after the issue of an amended assessment to give effect to settlement, or 31 May 2007 considered appropriate due to the participants' particular circumstances.
In return, participants agreed to terms including all of the following:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement. Any objection or appeal currently in process was required to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed, prepared, managed or implemented the investment scheme were required to phone us on 1800 177 006, to discuss the settlement options.
Grampians Olive Project scheme
About this scheme
The Grampians Olive Project was an agricultural scheme whereby investors subscribed funds to seven partnerships, each of which was formed to carry on a business as a commercial grower of olives.
The partnerships were formed in the 2000-01 financial year and each partnership entered into a separate lease agreement in relation to its portion of the property and a separate set of agreements in relation to various services to be performed.
Each partner was required to make a capital contribution for their interest in one of the seven partnerships. Almost all of the partners funded most of their capital contributions by 15-year loans from an Australian entity.
The partners' capital contributions and the loan amounts were deposited into an overseas bank account opened by each partnership. A small part of the partners' capital contributions was transferred to the project entities in Australia.
However, the loan funds appeared to be part of a round robin arrangement through a chain of overseas bank accounts and were not remitted to Australia to be used in the project.
Status of this settlement offer: current
While this settlement offer is current, its availability will depend on whether you have a disputed liability or entitlement under the Code of Settlement Practice.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Who does this settlement apply to?
This settlement is available, on request, to participants who entered into the Grampians Olive Project and who have a current disputed liability or entitlement with us or are able to enter into such a disputed liability or entitlement.
These terms apply to participants in these arrangements who did not accept the mass marketed investment schemes settlement offered between February and June 2002.
Details of settlement terms
|
Settlement conditions and disclaimers
The following settlement information is a general guide.
|
Principal settlement terms
These terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We will agree to terms, including:
- allowing a deduction to you for cash payments contributed to the respective partnership in the 2000-01 to 2002-03 financial years is appropriate given the level of underlying activity
- allowing a deduction for interest actually paid to the financier involved in this arrangement in the 2000-01 to 2002-03 financial years is appropriate given the level of underlying activity
- applying a shortfall penalty at or reduced to the rate of 10% in relation to tax shortfalls for returns lodged prior to being advised of our final position on this arrangement. This is appropriate as at the time the participants entered into the project a product ruling existed in relation to the project which was later withdrawn by us after review.
- applying a shortfall penalty at or reduced to the rate of 25% in relation to tax shortfalls for returns lodged after being advised of our final position on this arrangement
- remitting to 4.72% the general interest charge (GIC) that has been applied to any tax shortfall resulting from participation in the scheme, up to being advised of our final position on this arrangement. The full rate of GIC will be imposed from then on. This is due to the circumstances of the withdrawal of the product ruling, a remission of interest was granted up to 7 January 2004, being the date when participants were advised of our final position on this arrangement.
In return, participants will agree to terms, including:
- giving up their right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not at any time claiming or seeking to claim any deductions for losses relating to their participation in the arrangement.
Status of this settlement offer: current
While this settlement offer is current, its availability will depend on whether you have a disputed liability or entitlement under the Code of Settlement Practice.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Who does this settlement apply to?
This settlement is available, on request, to participants who entered into the following agricultural schemes before 30 June 2003 and who have a current disputed liability or entitlement with us for that arrangement, or are able to enter into such a disputed liability or entitlement.
These terms apply to participants in these arrangements who did not accept the mass marketed schemes settlement which was offered between February and June 2002 and the settlement offer sent to participants in March to May 2005 following the Federal Court decision in Sleight.
Details of settlement terms
- Participants who were involved in the arrangement as an investor and did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of the investment scheme.
Principal settlement terms
For those participants who entered into an identified agricultural schemes where there is some underlying activity we will agree to terms, including all of the following:
- allow a deduction for cash payments as per the original contracted amounts (excluding payments of a capital nature - for example, shares) in the first year, unless a deduction for cash outlay with respect to the arrangement has previously been allowed (for example, in the determination of an objection)
- apply a penalty on any tax shortfall at or reduced to the rate of 5%
- remit interest on any tax shortfall to 4.72% from the date the interest became payable on the amended assessment/s to disallow your scheme deductions until 31 July 2007.
In return, you will agree to terms including all of the following:
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or enter into other agreed payment arrangements
- not, at any time, claiming or seeking to claim any deductions for losses relating to your participation in the project.
- Participants who received a fee for another investor's scheme participation or who designed, prepared, managed or implemented the investment scheme.
|
Phone us on 1800 177 006 to discuss the settlement options available to you.
|
The following were considered when determining the terms of settlement:
In addition to the Full Federal Court in FC of T v. Sleight [2004] FCAFC 94 decision, there have been a number of court decisions that have been favourable to the Commissioner in relation to claims by participants in schemes that are included in the attached schedule of agricultural schemes where there is some underlying activity.
These decisions are as follows:
Reasons for terms:
- a deduction for cash outlay is considered appropriate given the level of underlying activity
- given previous settlement offers made to participants and the case decisions which found in the Commissioner's favour, a 5% penalty is considered appropriate
- a remission of interest on the tax shortfall is in recognition of the age of this matter and also provides a concession for participants who wish to finalise their dispute.
These terms have been endorsed by the widely-based settlement panel.
Agricultural schemes where there is some underlying activity
The schemes that fall into this category are agricultural schemes that were structured similarly to the Northern Rivers Tea Tree Project No. 1.
The Northern Rivers Tea Tree Project No. 1 was the subject of the decision of the Full Federal Court in FC of T v. Sleight [2004] FCAFC 94. In that decision, the Court decided that the applicant was carrying on a business operation but that the applicant entered into the project for the dominant purpose of obtaining a tax benefit and that Part IVA of the Income Tax Assessment Act 1936 operated to deny the deductions claimed by the applicant.
These arrangements were mass marketed to various participants via a prospectus prior to the Commissioner's views on these arrangements becoming widely known.
Common features of these schemes include round robin financing, limited or non-recourse loans and an underlying business activity.
List of agricultural schemes where there is some underlying activity
Austral Timber Project
|
First Peel Valley Mushroom Project
|
Oil Fields Project No. 2
|
Austimber Project
|
Frankland Valley Vineyard Project 1997
|
Oil Fields Project No. 3
|
Austvin Vineyards 1997 Project
|
Golden Vintage Project
|
Ord River Sandalwood Project
|
Banalasta Oil Plantation Project No. 1
|
Harcourt Ridge Estate
|
Pacific Tea Tree Plantations Project
|
Barkworth Olive Groves Project No. 1
|
Harcourt Vines Project
|
Profound Holstein Breeding Project 1992
|
Barkworth Olive Groves Project No. 2
|
Heydon Part Project
|
Profound Holstein Breeding Project 1993
|
Bopple Macadamia - Prospectus No. 2
|
Hillston Grove Vineyards Project (1998)
|
Profound Holstein Breeding Project 1994
|
Cattle Breeders Project
|
Karri Oak Vineyard Project 1998
|
PT Partnership
|
Central Highlands Wine Grape Project No. 1
|
Kirin Partnership
|
QFP No. 2 Tomato Project
|
Central Highlands Wine Grape Project No. 2
|
Koala Hydroponics Project
|
QFP Professionals Tomato Project
|
Central Highlands Wine Grape Project No. 3
|
Kringin Olive Project
|
QFP Tomato Project
|
Central Highlands Wine Grape Project No. 4
|
Kununurra Tropical Forestry Project
|
Queensland Essential Oils Project
|
Chalice Bridge Project 1998
|
Main Camp Tea Tree Oil Project No 3
|
Southern Highlands Horticultural Co-operative Project
|
Coonawarra Wine Grape Project 1998
|
Main Camp Tea Tree Oil Project No 4
|
Treetop Apple Project
|
Diamond Ridge Wine Grape Project 1998
|
Native Foods - Lemon Myrtle Project No. 1
|
Treetop Plums Project
|
Dragon Partnership
|
Native Foods - Lemon Myrtle Project No. 3
|
Treetop Supersweet Project
|
East Kimberley Sandalwood Project No. 1 (1998)
|
Northern Rivers Tea Tree Oil Project No. 1
|
|
Enviro Systems Renewable Resource
|
Northern Rivers Tea Tree Oil Project No. 2
|
|
About this arrangement
This arrangement involves the purchase of office suites and/or car parks in a commercial office block development and utilising the funding structure promoted by a property investment group. The funding structure provided a discount of approximately 30% on the retail purchase price of the office suite and/or car park if full payment was made up front. A loan was provided by a related entity to fund this discount purchase option. The loans were conditional on the prepayment of interest by the investor. These prepayments were made annually for the term of the loan. Loans were typically for a set two year period.
The substance of the scheme is the claiming of the interest deductions that are capital in nature by the investors.
Status of this settlement offer: current
Who did this settlement apply to?
This settlement was available, on request, to participants who entered into the Pacific Towers project and who had a current disputed liability or entitlement under the Code of Settlement Practice or were able to enter into such a dispute.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Details of settlement terms
|
Settlement conditions and disclaimers
The following settlement information is a general guide.
|
Principal settlement terms
- Participants who were involved in the arrangement as an investor (did not receive a fee for another investor's scheme participation, and were not involved in the design, preparation, management or implementation of an investment scheme).
Settlement terms are available to participants who obtained valid title and signed loan agreements.
These terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agreed to terms, including:
- no deduction for interest expenses arising from the arrangement as the payments are instalments of the purchase price and, therefore, capital in nature
- allowing the purported interest amounts to be included in the cost base of the asset (being the office suit and/or car park) as it is considered that the purported interest payments are in truth instalments of the purchase price and it would be reasonable to allow the purported interest claims to be included in the cost base of the asset/s on sale
- remitting a shortfall penalty from 50% to 10% recognised that some participants were given an opportunity to confirm information and, therefore, qualify for a voluntary disclosure rate, and considered that it is reasonable to extend the remission to all participants
- remitting general interest charge (GIC) to the base rate for the period from the due date of the original assessment until the amended assessment was issued disallowing their claims with respect to the arrangement, due to the age of the arrangement
- remitting GIC to the base rate for the period from the issuing of the amended assessment disallowing their claims with respect to the arrangement until 14 days after an amended assessment was issued to give effect to settlement due to the age of the arrangement and as an incentive to settle.
In return, participants agreed to terms, including:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process was to be withdrawn
- paying all outstanding debts relating to their participation in the arrangement and all other outstanding undisputed amounts, either in full within 14 days of receipt of the amended assessment notice or within an agreed period by entering into and meeting the terms of a payment arrangement acceptable to the ATO
- providing all relevant information to support any request for a payment arrangement
- not at any time claiming or seeking to claim any deductions for losses relating to participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed prepared, managed or implemented the investment scheme.
- Phone us on 1800 177 006 to discuss the settlement options available to you.
About these schemes
There were three schemes under the Sealink Charter Boat arrangement (Sealink - Jackpot, Sealink Brisk, and Sealink - Tina 1). Participants entered into a loan and were purportedly given the opportunity to purchase a 1/16th share in each of the vessels, the MV Jackpot, the MV Brisk or the MV Tina, which were to operate passenger and freight services between the islands of the Republic of Vanuatu.
These schemes generally had all of the following structuring features:
- guaranteed charter income that offset approximately interest payment obligations
- purchase of business special risks insurance to protect charter fee income and insuring the sale of the vessel at the guaranteed call option price
- purchase of a life insurance policy.
Participants returned charter income and claimed deductions for interest on the loan, marine insurance, business special risks insurance and other expenses as well as depreciation of the vessel.
Status of this settlement offer: current
Who did this settlement apply to?
This settlement was available, on request, to participants of any of the three Sealink Charter Boat arrangements who did not receive a fee and who have a current disputed liability or entitlement under the Code of Settlement Practice.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Details of settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation, and were not involved in the design, preparation, management or implementation of an investment scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
Principal settlement terms
We agreed to terms, including all of the following:
- excising any charter fee income returned in relation to the arrangement, in order to unwind the arrangement
- applying a shortfall penalty at a reduced rate of 15% was considered appropriate in view of the schemes' level of tax mischief, but also recognising the participants' level of cooperation
- no deduction for cash outlays was considered appropriate as the expenses were not incurred in gaining or producing assessable income or in carrying on a business
- no further remission of general interest charge (GIC) was warranted because all participants had already received a remission of GIC due to unreasonable delay by the ATO.
In return, you agreed to terms, including:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement for the arrangement, and any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into an agreed payment arrangement
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement, and
- returning income derived from the life insurance policy.
- Participants who received a fee for another investor's scheme participation or who designed prepared, managed or implemented the investment scheme are required to contact us.
Phone us on 1800 177 006, to discuss the settlement options available to you.
About this scheme
The Australian Security Perpetual Trust Retirement Plan was a life insurance investment arrangement based offshore, that commenced in the 2001 financial year with the intention to finish in 10 years.
Participants purchased units in the trust, which was financed 100% through a round robin arrangement involving non-recourse loans from a company based in Vanuatu. Other features included investors entering into a currency hedging agreement with the loan company indemnifying the investors against losses from exchange rate fluctuations. The cost of these agreements amounted to 13.4% of the principal sum borrowed and in most cases was paid annually by further borrowings.
The amount invested (including amounts paid as interest on the loan) in the trust was eventually invested in life insurance policies issued by a subsidiary of the loan company. There was no real economic return on these policies and investors ceased their investment within three years.
Status of this settlement offer: current
Who did this settlement apply to?
This settlement was available, on request, to participants of the Australian Security Perpetual Trust Retirement Plan arrangement who did not receive a fee and who have a current disputed liability or entitlement under the Code of Settlement Practice.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Details of settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
Principal settlement terms
We will agree to terms including all of the following:
- assessing any increase in value of the amount held in the life insurance policy under the foreign investment fund (FIF) regime
- excising any bonus income assessed under s26AH of the Income Tax Assessment Act 1936 was considered appropriate due to the manner the scheme was implemented
- no deduction for cash outlays was considered appropriate given the nature of the investment
- applying a shortfall penalty at or reduced to the rate of 10% was considered to be reasonable and consistent
- remitting GIC to nil from 16 April 2002 to 27 July 2004 was appropriate due to unreasonable ATO delay
- remitting GIC to the extent of any interest withholding tax paid as part of the interest repayments on the loan.
In return, you agreed to terms, including all of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement for the arrangement, and any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into an agreed payment arrangement
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed prepared, managed or implemented the investment scheme are required to contact us.
Phone us on 1800 177 006, to discuss the settlement options available to you.
About this scheme
The Coconut Oil Production Samoa Joint Venture project offered investors the opportunity to participate in the start up/expansion of a coconut oil production business in Western Samoa. Participation required a cash component of 20%, and investors could borrow the remaining 80% of investment funds from the project banking facility. A once-off establishment fee was also payable. The joint venture had a term of 10 years (June 2011).
The joint venture used the invested amounts to pre-pay expenses for the following year, producing a loss, which it distributed to the joint venturers. Investors claimed deductions for the losses in their 2001 income tax returns. The loss claims covered the full amount of their investment.
Cash received from the investors was not transferred to the bank account of the project banking facility, and the project banking facility never provided real funds to the project. An insurance policy ensured investors never had to repay the monies borrowed from the project banking facility.
Status of this settlement offer: current
Who did this settlement apply to?
This settlement was available, on request, to participants of the Coconut Oil Production Samoa Joint Venture project who did not receive a fee and who have a current disputed liability or entitlement under the Code of Settlement Practice.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Details of settlement terms
Principal settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agreed to terms, including all of the following:
- no deduction for cash outlay, as the expense was not incurred for the purpose of producing assessable income or necessarily incurred in carrying on a business for that purpose
- reducing the shortfall penalty to 25% or 20%(if a voluntary disclosure was made) was in line with settlements agreed to in similar related schemes, and was considered appropriate in view of the level of tax mischief
- remitting the general interest charge (GIC) to nil from the date of your reply to the section 264 notice, or if there was no such reply, from the date of each participant's settlement proposal to 14 days after the issue of the amended assessments arising out of settlement. This remission was in line with settlements granted to similar related schemes.
In return, you agreed to terms, including all of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process was to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed, prepared, managed or implemented the investment scheme are required to contact us. Phone us on 1800 177 006, to discuss the settlement options available to you.
About these schemes
The Advantage Trading Fund, Venture Trading Fund, Dragon Asia Fund and International E-Commerce arrangements all involved raising funds for investment in offshore marketing and sales and internet-related businesses. Participants entered into a loan to purportedly buy units in the investment and claim a deduction for prepaid interest or marketing fee.
These schemes generally had the following structuring features:
- round robin financing
- limited or non-recourse loans
- little or no underlying activity
- prepayment of interest (except for International E-Commerce).
Status of this settlement offer: closed
Who did this settlement apply to?
This settlement was available, on request, to participants of any of these four arrangements and who had a disputed liability or entitlement under the Code of Settlement Practice.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Details of settlement terms
Principal settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of the scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agreed to terms including all of the following:
- no deduction for cash outlays was considered appropriate given that there was a lack of evidence that the participants' funds were used in any business activity
- applying a shortfall penalty at the reduced rate of 25% was considered appropriate in view of the substantial level of tax mischief, while recognising that participants may have been misled by their agents
- remitting GIC to 4.72% for the period from the due date of the original assessment until the earlier of 14 days after the issue of an amended assessment to give effect to settlement, or 31 May 2007. This remission was considered appropriate due to unreasonable ATO delay, and that participants were not receiving ATO communications sent to their advisers/agents.
In return, participants agreed to terms including all of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process was to be withdrawn
- paying the amended tax debt by the due date or entering into an agreed payment arrangement
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed prepared, managed or implemented the investment scheme were required to contact us to discuss the settlement options available.
|
Phone us on 1800 177 006, to discuss the settlement options available to you.
|
About this scheme
The Scotch whisky project is a venture where participants purport to be in the business of marketing and selling whisky. The main features of the venture are:
- to enter the participants completed an application form, Management Agreement and a Finance Agreement and made a cash contribution of 25% of the initial cost
- under the particular financial arrangements adopted, the only funds that were available initially to the Manager to undertake the services required arose from the 25% cash contribution made by the participants
- participants claimed tax deductions for management, production, commissions, storage and insurance expenditures (initial cost) and also possibly have claimed deductions for borrowing costs, interest, legal fees and commissions on the basis that they were carrying on a business.
Status of this settlement offer: current
Who did this settlement apply to?
This settlement was available on request to participants who entered into the Scotch whiskey project and who had a current disputed liability or entitlement under the Code of Settlement Practice or were able to enter into such a dispute.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Principal settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agreed to terms, including:
- applying a shortfall penalty at or reduced to the rate of 20% or 25% depending on the participant's circumstances, was appropriate and consistent with other similar arrangements, and
- remitting GIC to 4.72% from the date of the original assessment to 1 March 2005, was appropriate due to delays in court proceedings by the Federal Court that were beyond the taxpayer's control.
In return, you agreed to terms, including:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process was to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements, and
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed, prepared, managed or implemented the investment scheme are required to contact us.
Phone us on 1800 177 006, to discuss the settlement options available to you.
About this scheme
The Global Places project had the following structuring features:
- The arrangement dealt with the development and maintenance of participants' advertising banners on the Internet, and subsequent promotion of those banners to attract advertisers.
- The participants engaged Global Licensing International Ltd (GLIL) to develop, maintain market and manage the website location.
- The participants were charged for the development and maintenance of the website, pre-paid marketing fees, annual marketing and management fees.
- Participants typically borrowed 80% of the total fees from an offshore finance entity, who was to transfer the funds to GLIL. There was no evidence that these funds were ever transferred.
Status of this settlement offer: closed
Who did this settlement apply to?
This settlement is available on request to participants who entered into the Global Places scheme and who have a current disputed liability or entitlement with us or are able to enter into such a disputed liability or entitlement.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Principal settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agreed to terms, including all of the following:
- no deduction for cash outlay was considered appropriate because there was no underlying business
- excising the capital gain accounted for in the 2001 income tax return was appropriate because there was no evidence to substantiate the sale of the website banners
- reduction of penalty to 25% or 20% if voluntary disclosure made was appropriate and consistent with similar internet schemes
- general interest charge (GIC) remitted to 4.72% for the period from the due date of the original assessment until the earlier of: 31 May 2007 or 14 days after the issue of an amended assessment to give effect to settlement, was considered appropriate due to the age of the cases.
In return, you agreed to terms, including all of the following:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process was to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed, prepared, managed or implemented the investment scheme are required to contact us.
Phone us on 1800 177 006, to discuss the settlement options available to you.
About the scheme
The Sampson Vineyard & Winery project, Great Southern Olive Oil project and Zurich project Investment schemes all generally had the following structuring features:
- participants acquired units in the underlying trust
- participants purportedly invested, via the unit trusts, in three different projects Olive Oil, Wine or Investment Projects
- participants paid a fee for accountancy and consultancy services in respect of their unit holding (this fee could be funded in part with a short term loan, and the remainder by a non-recourse loan)
- investors did not repay the non-recourse loan as this was to be paid by the income from the projects.
The reference to Great Southern and Zurich in name of the scheme, does not relate to Great Southern Ltd or Zurich Financial Services Australia Ltd.
Status of this settlement offer: closed
Who did this settlement apply to?
This settlement was available on request to participants who entered into any of these three arrangements and who had a current disputed liability or entitlement with us or were able to enter into such a disputed liability or entitlement.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Principal settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agreed to terms, including all of the following:
- no deduction for cash outlay was considered appropriate as the funds were never intended to be available to the underlying business
- a reduction of the shortfall penalty to 15% was considered appropriate as participants were misled by their trusted agent who has been prosecuted for his actions with respect to the scheme
- remitting general interest charge (GIC) to nil from 18 April 2002 to 11 April 2003, was considered appropriate due to unreasonable ATO delay
- remitting GIC to 4.72% from the due date of the relevant notice of assessment up to 14 days after the date the amended assessment issues to give effect to settlement was considered appropriate due to the participants' particular circumstances. The participants' agent was the promoter and creator of the scheme who was prosecuted for his actions with respect to these arrangements.
In return, participants agreed to terms, including all of the following:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process was to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed, prepared, managed or implemented the investment scheme were required to contact us on 1800 177 006, to discuss the settlement options.
About the scheme
The Investor Partnership schemes revolved around the use of investor partnerships for the purposes of marketing and/or selling in Australia new technologies developed overseas.
These schemes generally had the following features:
- limited or non-recourse loans
- lack of real risk associated with outgoings or deductions claimed
- little underlying activity.
In some cases the schemes did not continue, however, the investors continued to claim losses.
List of Investor Partnership schemes
Probe
|
Airbag
|
Disposable Video Camera
|
Status of this settlement offer: closed
Who did this settlement apply to?
This settlement is available on request to participants who entered into the listed Investor Partnership schemes and who have a current disputed liability or entitlement with us or are able to enter into such a disputed liability or entitlement.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Principal settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agreed to terms, including:
- no deduction for cash outlay was considered appropriate because there was no underlying business
- a reduction of the shortfall penalty to 25% was considered appropriate as a higher levels of tax mischief featured in these arrangements
- remitting general interest charge (GIC) to nil from 1 March 2002 to 31 October 2002, was considered appropriate due to unreasonable ATO delay, and
- depending on the circumstance a further remission of GIC to 4.72% from the due date of the relevant notice of assessment to three months after the ATO advised the participant of these settlement terms.
In return, you agreed to terms, including:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process was to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements, and
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed, prepared, managed or implemented the investment scheme were required to contact us on 1800 177 006, to discuss the settlement options.
About this scheme
Innovation HR is a 2001 year advertising based scheme which was developed from an associated internet based franchise scheme.
The original scheme provided for investors to receive a number of warrants which purportedly allowed advertising income to be earned via the internet based arrangement. That system required the sale of the warrants for advertising.
When the warrants failed to sell they were recycled and purportedly sold as advertising in the Innovation HR scheme. Therefore the investors in Innovation HR purported to purchase advertising on the associated internet site for their businesses.
The arrangements involve inflated deductions, indemnified loans, guaranteed returns and the washing of income.
Status of this settlement offer: current
Who did this settlement apply to?
This settlement was available on request to participants who entered into the Innovation HR and who had a current disputed liability or entitlement under the Code of Settlement Practice or were able to enter into such a dispute.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Principal settlement terms
- Participants who were involved in the arrangement as an investor (who did not receive a fee for another investor's scheme participation and were not involved in the design, preparation, management or implementation of an investment scheme).
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agree to terms including all of the following:
- no deduction for cash outlay was considered appropriate because payments were capital in nature
- applying a shortfall penalty at or reduced to the rate of 15%, was appropriate due to the level of tax mischief
- remitting GIC to 4.72% for the period from the due date of the original assessment until, the later of, 14 days after the issue of an amended assessment to give effect to settlement or 31 May 2007, was appropriate due delays in finalising this matter.
In return, you agreed to terms, including all of the following:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement - any objection or appeal currently in process was to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not to claim or seek any deductions, at any time, for losses relating to your participation in the arrangement.
- Participants who received a fee for another investor's scheme participation or who designed, prepared, managed or implemented the investment scheme are required to contact us.
Phone us on 1800 177 006, to discuss the settlement options available to you.
About the scheme
The Prepaid Service Fee arrangement had the following structuring features.
- The arrangement established a service trust to provide personnel, staff and administration services to a trading entity at a cost that is marked up by approximately 50% for employee costs and 20% for other costs.
- The issue of round-robin cheques that have never been banked.
- The payment of a facility fee to an associate of the promoter.
- The trading entity claims a sizeable deduction in the current year and the service trust defers returning the service fee until the following year. This deduction creates a large carried-forward loss for the trading entity for the current year and potentially for the following five years.
- The arrangement is replicated in future years to defer payment of tax indefinitely.
Status of this settlement offer: Current
Who did this settlement apply to?
This settlement is available on request to participants who entered into the Prepaid Service Fee arrangement and who have a current disputed liability or entitlement under the Code of Settlement Practice or are able to enter into such a dispute.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
Principal settlement terms
- Participants who were involved in the arrangement where the service trust provided real services and the participants did not receive a fee for another participant's scheme participation and were not involved in the design, preparation, management or implementation of the arrangement.
We agreed to terms including:
- disallow the service fee income tax deduction claimed by the trading entity
- where appropriate a service fee will be allowed to the trading entity in the income year that the services were provided by the service entity
- deductions for associated claims incurred in participating in the arrangement be disallowed or income be excised
- any action regarding director's fees would be tailored to individual circumstances
- applying a shortfall penalty at or reduced to the rate of 5% where claims were made prior to receiving an ATO view or 10% where claims were made after receiving the ATO view regarding this arrangement, and
- remitting GIC to 4.72% for the period from the due date of the original assessment until the 31 May 2007. After this date GIC will be imposed at the statutory rate.
In return, participants agreed to terms including:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement. Any objection or appeal currently in process is to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- cease future participation in the arrangement and ensure that their service trust arrangement is consistent with the service trust guidelines (that is, Taxation Ruling TR 2006/2)
- not at any time claiming or seeking to claim any deductions for losses relating to participation in the arrangement.
- Participants who were involved in the arrangement where the service trust did not provide real services and the participants did not receive a fee for another participant's scheme participation and were not involved in the design, preparation, management or implementation of the arrangement.
We agreed to terms including:
- disallow the service fee income tax deduction claimed by the trading entity
- income returned by the service entity including service trusts that relates to the prepaid service fee arrangement will be excised
- income returned by the service trust beneficiary from the service entity that relates to the prepaid service fee arrangement will be excised
- deductions for associated claims incurred in participating in the arrangement be disallowed or income be excised
- expenses excluding the above point, any mark ups and prepaid fees, claimed by the service entity will be allowed as a deduction to the trading entity
- applying a shortfall penalty at or reduced to the rate of 5% where claims were made prior to receiving an ATO view or 10% where claims were made after receiving the ATO view regarding this arrangement, and
- remitting GIC to 4.72% for the period from the due date of the original assessment until the 31 May 2007. After this date GIC will be imposed at the statutory rate.
In return, participants agreed to terms including:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement. Any objection or appeal currently in process is to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- cease future participation in the arrangement and ensure that their service trust arrangement is consistent with the service trust guidelines (that is, Taxation Ruling TR 2006/2)
- not at any time claiming or seeking to claim any deductions for losses relating to participation in the arrangement.
The following were considered when determining the terms of settlement:
- The settlement reflects the ATO view and the unwinding of the arrangement is on principles similar to those used by the Courts.
- The increase in penalty is appropriate as participants continued to claim even after receiving advice of the ATO view.
- The fact that settlement was entered into in the 1999 year is ground for GIC remission to 4.72% in line with mass marketed investment schemes where the age of the cases was a factor.
About this arrangement
The Shareholders' Loan arrangement had the following structuring features:
- a round robin transaction at year end in which the shareholder
- purportedly borrows money from the private company in the form of a cheque
- circulates the money with the assistance of a promoter finance company to purportedly fully repay shareholder loans from the private company from the previous year
- those loans purportedly complied with section 109N of the Income Tax Assessment Act 1936
- the transaction occurs each year to roll over the shareholder's indebtedness on the previous year's loans to ostensibly satisfy paragraph109E(1)(b) that the loan is repaid at the end of the following year.
Status of this settlement offer: Current
Who did this settlement apply to?
This settlement is available on request to participants who entered into the Shareholders' loan arrangement and who had a current disputed liability or entitlement under the Code of Settlement Practice or were able to enter into such a dispute.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Principal settlement terms
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
Participants who were involved in the arrangement and did not receive a fee for another participant's scheme participation and were not involved in the design, preparation, management or implementation of the arrangement.
We agreed to terms including all of the following:
- assess the shareholder on the deemed dividend - where the shareholder is assessed on the deemed dividend as an alternative assessment, the later year assessment will be amended to excise the income
- franking credits will not be available to the shareholder on the deemed dividend
- the company which made the payments assessed as a deemed dividend will have to reduce its franking credits
- where shareholders continued to participate in the arrangement in later financial years (2000-01 and later) and who have not been assessed for the deemed dividend, those shareholders will be required to
- unwind the arrangement by either repaying all of the relevant loans or execute and comply with a written loan agreement in accordance with Division 7A of the Income Tax Assessment Act 1936
- where the arrangement is unwound as above, no penalties or interest will apply
- deductions for associated claims incurred in participating in the arrangement be disallowed or income be excised
- any action regarding director's fees will be tailored to individual circumstances
- applying a shortfall penalty at or reduced to the rate of 15% for the 2003 and earlier income years, and 25% in later income years, was appropriate due to the nature and manner of the arrangement
- remitting GIC to 4.72% for the period from the due date of the original assessment until the 31 May 2007 was in line with mass marketed schemes where the age of the cases was a factor. After this date GIC will be imposed at the statutory rate.
In return, participants agreed to terms including:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement. Any objection or appeal currently in process is to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements.
The following were considered when determining the terms of settlement:
- The nature and manner the arrangement was implemented by the participants.
- When the ATO view was clearly communicated to participants, participants continued to claim even after receiving this advice.
- The fact that settlement was entered into in the 1999 year is ground for GIC remission to 4.72% in line with mass marketed investment schemes where the age of the cases was a factor.
About this arrangement
The Managed Partnership arrangement had the following structuring features.
- The arrangement dealt with a promoter setting up an arrangement where participants directed their personal services income to a purported partnership. The purported partnership, arranged by the promoter, included other unrelated participants.
- The participant's income from the purported partnership is based on the income generated by the participant's personal services rather than a share of the net income of the partnership.
- An artificial finance arrangement utilising a round robin of unfunded cheques was used to purportedly transfer income from the participants to the partnership and back again, to give the impression that the income was from the partnership.
- The participant assigns up to 49% of their alleged interest in the partnership to their spouse or a related party.
Status of this settlement offer: Current
Who did this settlement apply to?
This settlement is available on request to participants who entered into the Managed Partnership arrangement and who have a current disputed liability or entitlement under the Code of Settlement Practice or are able to enter into such a dispute.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Principal settlement terms
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
- Participants who were involved in the arrangement.
We agreed to terms including:
- assess the participant on the income assigned
- excise income from spouse or related party
- remitting GIC to 4.72% for the period from the due date of the original assessment until 21 February 2007 was in line with mass marketed schemes where the age of the cases was a factor (after this date GIC will be imposed at the statutory rate)
- applying a shortfall penalty at or reduced to the rate of:
- 20% on the tax shortfall for the 1999 and 2000 income year - appropriate because there was a well established view concerning these arrangements at the time
- 10% on the tax shortfall for the 2001 and 2002 income year - appropriate as there was no genuine opportunity to make a voluntary disclosure and uncertainty was raised due to the enactment of new personal services income legislation
- 50% on the tax shortfall for the 2003 income year - appropriate as the ATO view was clearly communicated to participants and participants continued to claim even after receiving this advice.
In return, participants agreed to terms including all of the following:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement. Any objection or appeal currently in process was to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not at any time claiming or seeking to claim any deductions for losses relating to participation in the arrangement.
Four settlements are available to participants in Employee benefit trust arrangements. In what follows, a participant is generally the employer entity.
- Participants who have received an amended income tax assessment in relation to the arrangement within the standard four year period of amendment and whose employees who participated in the arrangement are associated with or are able to control the employer entity through directorships, shareholding or controlling interests.
- Participants who have received an amended income tax assessment in relation to the arrangement outside the four year period of amendment but within the six year period of amendment and whose employees who participated in the arrangement are associated with or are able to control the employer entity through directorships, shareholding or controlling interests.
- Participants who have received an amended income tax assessment within the four or six year period of amendment in relation to the arrangement and whose employees who participated in the arrangement are not associated with the employer entity other than by way of the employment relationship.
- Participants who have only received fringe benefits tax assessments in relation to the arrangement.
- These settlements are not available to participants who are corporate entities and have deregistered. Phone us on 1800 177 006 to discuss what settlement options are available to you.
- If more than one of the above terms apply to you, phone us on 1800 177 006 to discuss what settlement options are available to you.
- These terms do not apply to you if you used a 'Stichting' as part of the employee benefit trust arrangement. A 'Stichting' can generally be described as a 'foundation' which is registered in the Netherlands and which is neither a trust nor company under English law. Phone us on 1800 177 006 to discuss what settlement options are available to you.
|
Details of settlement terms for employee benefit trust arrangements
Status of this settlement offer: current
Who does this settlement apply to?
This settlement is available, on request, to all participants who entered into an employee benefit trust arrangement before 30 June 2003 and who have a disputed liability or entitlement with us with respect to that arrangement, or are able to dispute such a liability or entitlement.
Details of settlement terms
|
Settlement conditions and disclaimers
The following settlement information is a general guide. For more information, refer to conditions and disclaimers.
|
These terms should be read in conjunction with further remissions offered to you following the release by the Minister for Revenue and Assistant Treasurer, the Hon Mal Brough, MP, of a report by the Inspector-General of Taxation.
- Participants who have received an amended income tax assessment in relation to the arrangement within the standard four year period of amendment and whose employees who participated in the arrangement are associated with, or are able to control, the employer entity through directorships, shareholding or controlling interests.
Your amended assessment was issued to you within the standard four year period of amendment to disallow a deduction claimed under subsection 51(1) of the Income Tax Assessment Act 1936 (ITAA 1936) and is authorised by section 170 of the ITAA 1936.
The following terms are applicable to you if you were a participant in an employee benefit trust arrangement and employees who participated in the arrangement were controllers of the employer entity by way of directorships, shareholding or other controlling interest.
Principal settlement terms
We will agree to terms including all of the following:
- one taxing point, either income tax or fringe benefits tax. If we have issued both an income tax and fringe benefits tax assessment, we will amend to nil the liability for one of these assessments with respect to your employee benefit arrangement
- shortfall penalty will be applied at or reduced to the rate of 10% (or 5% if you made a voluntary disclosure between 19 May 1999 and 13 September 1999 as per media releases Nat 99/16 and Nat 99/46)
- interest on any tax shortfall resulting from your participation in the scheme will be at full statutory rates subject to the guidelines for remission of interest and/or remission of penalties, and
- interest on any tax shortfall resulting from your participation in the scheme will be remitted in full where there was an unreasonable delay by the ATO in issuing amended assessments after you provided all of the necessary information.
In return, you will agree to terms including all of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- the employee benefit trust reimburse you for the contributions or transfer to you assets now represented by the contributions
- no further tax consequences, will apply to the reimbursement up to the value of the contributions disallowed, and
- any earnings or amounts above the value of the contributions will be assessable under the income tax law
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements.
The following were considered when determining the terms of settlement:
The Federal Court decision in Essenbourne considered the deductibility of 'contributions' purported to have been paid to an employee benefit trust. The Court held that an income tax deduction was not allowable under subsection 51(1) of the ITAA 1936 for an amount contributed by a company to the employee benefit trust because the payment was simply a distribution of the company's profits to the three principals of the company.
Given the decision in Essenbourne and support for the ATO view, a 10% penalty rate (or 5% if you made a voluntary disclosure between 19 May 1999 and 13 September 1999 as per media releases (Nat 99/16 and Nat 99/46) and full rates of general interest charge are considered appropriate.
These terms have been endorsed by the widely-based settlement panel.
- Participants who have received an amended income tax assessment in relation to the arrangement outside the four year period of amendment but within the six year period of amendment and whose employees who participated in the arrangement are associated with or are able to control the employer entity through directorships, shareholding or controlling interests.
Your amended assessment issued later than four years after the day on which tax became due and payable under the original assessment but within six years after the date on which tax became due and payable. The amended assessment issued to cancel a tax benefit obtained by you under Part IVA of the ITAA 1936 and is authorised by section 177G of the ITAA 1936.
The following terms are applicable to you if you were a participant in an employee benefit trust arrangement and employees who participated in the arrangement were controllers of the employer entity by way of directorships, shareholding or other controlling interests.
Principal settlement terms
We will agree to terms including:
- one taxing point, either income tax or fringe benefits tax. If we have issued both an income tax and a fringe benefits tax assessment we will amend to nil the liability for one of these assessments with respect to your employee benefit arrangement
- interest on any tax shortfall resulting from your participation in the scheme will be remitted to 4.72% until 14days after an amended assessment issues to give effect to settlement
- interest on any tax shortfall resulting from your participation in the scheme will be remitted in full where there was an unreasonable delay by the ATO in issuing amended assessments after you provided all of the necessary information, and
- shortfall penalty will be remitted to nil.
In return, you will agree to terms including all of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- the employee benefit trust reimburse you for the contributions or transfer to you assets now represented by the contributions
- no further tax consequences, will apply to the reimbursement up to the value of the contributions disallowed, and
- any earnings or amounts above the value of the contributions will be assessable under the income tax law
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements.
The following were considered when determining the terms of settlement:
The above settlement terms are available to participants who cannot demonstrate that their circumstances are sufficiently similar to Essenbourne such that the decision in Essenbourne necessarily applies to them.
The Federal Court decision in Essenbourne considered the deductibility of 'contributions' purported to have been paid to an employee benefit trust. The Court held that an income tax deduction was not allowable under sub-section 51(1) of the ITAA 1936 for an amount contributed by a company to the employee benefit trust because the payment was simply a distribution of the company's profits to the three principals of the company.
In circumstances where a participant's arrangement is sufficiently similar to the arrangement implemented in Essenbourne, the ATO view is that the deductions claimed by the participant are not allowable under subsection 51(1) or section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as they constitute a distribution of profits to principals of the company. In these circumstances, where amended income tax assessments have been made outside the standard four year period of amendment, the ATO is conceding both income tax and fringe benefits tax assessments.
However, we are offering the above settlement terms without requiring that the taxpayer provide additional information that would be unfairly onerous and burdensome. This will apply if:
- the arrangement is not sufficiently similar to Essenbourne
- there is insufficient information available to make such a decision and the taxpayer does not wish to provide additional information to permit such a decision
- there is some indication that the participant could not establish that they had a reasonable basis on which to have originally claimed their deductions in respect of the contribution to the employee benefit trust.
These settlement terms provide a basis for settlement for taxpayers who may be like Essenbourne but are not prepared to provide the additional information required to enable the ATO to conclude they are sufficiently similar to Essenbourne.
The terms of settlement recognise that there is doubt as to the deductibility of the expenditure but not enough information to maintain a tax shortfall penalty and the culpability part of general interest charge.
These terms have been endorsed by the widely-based settlement panel.
- Participants who have received an amended income tax assessment within the four or six year period of amendment in relation to the arrangement and whose employees who participated in the arrangement are not associated with the employer entity other than by way of the employment relationship.
The following terms are applicable to you if you were a participant in an employee benefit trust arrangement and the arrangement was implemented in the following way:
- employees who participated in the arrangement were not able to exert any control over the employer entity through directorships or shareholding
- employees who participated in the arrangement were not able to exert any control over the employer entity through any other controlling interest
- employees who participated in the arrangement were not associated with the employer entity or a controller of the employer entity other than by way of the employment relationship.
Principal settlement terms
We will agree to terms including all of the following:
- one taxing point, either income tax or fringe benefits tax. If we have issued both an income tax and a fringe benefits tax assessment we will amend to nil the liability for one of these assessments with respect to your employee benefit arrangement
- shortfall penalty will be remitted to nil
- interest on any tax shortfall resulting from your participation in the scheme will be remitted to 4.72% until 14 days after an amended assessment issues to give effect to settlement
- interest on any tax shortfall resulting from your participation in the scheme will be remitted in full where there was an unreasonable delay by the ATO in issuing amended assessments after you provided all of the necessary information
- compensating adjustments by way of deductions for bonus payments made to, and included in the assessable income of employee participants provided that the bonus payments were not claimed as a tax deduction by you or the employee benefit trust. The compensating adjustments will be made in the income years in which the bonus payments were/are made.
In return, you will agree to terms including all of the following:
- deductions for associated claims incurred in participating in the arrangement are disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements.
The following were considered when determining the terms of settlement:
The ATO view of the application of Part IVA of the ITAA 1936 to employee benefit trusts is based on the Full Federal Court decision in Spotlight/Pridecraft. While the court held that the contributions were deductible under the general deduction provisions, it also held that the general anti-avoidance provisions in Part IVA applied to strike out the deductions otherwise allowable.
The court concluded that Spotlight/Pridecraft held a reasonably arguable position that Part IVA did not apply. Subsequent to the decision in Spotlight/Pridecraft, and to reflect the view taken by the court of the applicable penalty, the ATO offered settlement terms incorporating 0% penalty.
The settlement is consistent with the decision in Spotlight/Pridecraft, the ATO is offering settlement terms that remit tax shortfall penalty to nil and general interest charge to a rate of 4.72%. This recognises that participants who carried out the arrangement in this way do not demonstrate a level of culpability that warrants a tax shortfall penalty and the culpability component of the general interest charge.
These terms have been endorsed by the widely-based settlement panel.
- For participants who have only received fringe benefits tax assessments in relation to the arrangement.
Principal settlement terms
We will agree to terms including all of the following:
- reducing your fringe benefits tax assessment(s) to equate to the amount payable that would have arisen if the Commissioner had disallowed the income tax deduction for contributions and associated claims made by the taxpayer to the special purpose trust and applied general interest charge of 4.72% on the tax shortfall
- interest on any tax shortfall resulting from your participation in the scheme will be remitted in full where there was an unreasonable delay by the ATO in issuing amended assessments after you provided all of the necessary information
- shortfall penalty will be remitted to nil.
In return, you will agree to terms including all of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not at any time claiming or seeking to claim a deduction for fringe benefits tax relating to your participation in the arrangement.
The following were considered when determining the terms of settlement:
These terms apply to participants in these arrangements who are not able to settle on an income tax assessment due to the ATO being outside the statutory time limits in which to amend income tax assessments.
Taxpayers who have only received fringe benefits tax assessments who wish to settle their dispute with the ATO are disadvantaged at settlement as a fringe benefits tax liability is greater than the liability which would arise under an alternative income tax assessment.
These terms allow the taxpayer to have a settlement outcome consistent with other taxpayers who have received multiple assessments.
These terms have been endorsed by the widely-based settlement panel.
Four settlements are available to participants in employee share plans.
- Participants who have received an amended income tax assessment in relation to the arrangement disallowing a deduction under subsection 51(1) of the ITAA 1936 and the amended assessment issued to them within the standard four year period of amendment.
- Participants who have received an amended income tax assessment in relation to the arrangement cancelling a tax benefit under Part IVA of the ITAA 1936 and the amended assessment issued to them outside the four year period of amendment but within the six year period of amendment.
- Participants who have only received fringe benefits tax assessments in relation to the arrangement.
- Participants who did not make a voluntary disclosure to the ATO between 19 May 1999 and 13 September 1999 because they relied on advice by the promoter of the arrangement that the media releases Nat 99/16 and Nat 99/46 did not apply to them.
|
These settlements are not available to participants who are corporate entities and have deregistered. Phone us on 1800 177 006 to discuss what settlement options are available to you.
|
Details of settlement terms for employee share plans
Status of this settlement offer: current
Who does this settlement apply to?
This settlement is available, on request, to all participants who entered into an employee share plan before 30 June 2003 and who have a disputed liability or entitlement with the ATO with respect to that arrangement, or are able to dispute a liability or entitlement.
These terms should be read in conjunction with further remissions offered to you following the release by the Minister for Revenue and Assistant Treasurer, the Hon Mal Brough, MP, of a report by the Inspector-General of Taxation.
Details of settlement terms
- The following settlement information is a general guide. Participants who have received an amended income tax assessment in relation to the arrangement disallowing a deduction under subsection 51(1) of the ITAA 1936 and the amended assessment issued to them within the standard four year period of amendment under section 170 of the ITAA 1936.
Principal settlement terms
We will agree to terms including all of the following:
- one taxing point, either income tax or fringe benefits tax - if we have issued an income tax assessment to the employer entity, an income tax assessment to the employee participant, and a fringe benefits tax assessment, we will amend to nil the liability for two of these assessments with respect to your employee share plan
- shortfall penalty will be applied at a reduced rate of 10% (or 5% if you made a voluntary disclosure between 19 May 1999 and 13 September 1999 as per media releases Nat 99/16 and Nat 99/46) subject to the guidelines for remission of interest and/or remission of penalties
- interest on any tax shortfall resulting from your participation in the scheme will be at full statutory rates subject to the guidelines for remission of interest and/or remission of penalties
- interest on any tax shortfall resulting from your participation in the scheme will be remitted in full where there was an unreasonable delay by the ATO in issuing amended assessments after you provided all of the necessary information.
In return, you will agree to terms including:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements.
The following were considered when determining the terms of settlement:
We are of the view that the deductions claimed by the employer entities are not allowable under subsection 51(1) of the ITAA 1936 as contributions made by closely held entities to special purpose companies or trusts purportedly established for the provision of benefits or shares for the controllers of the employer entities are simply distributions of profit to those controllers. This view has been supported by the decision in Essenbourne.
- Participants who have received an amended income tax assessment in relation to the arrangement cancelling a tax benefit under Part IVA of the ITAA 1936 and the amended assessment issued to them outside the four year amendment period but within the six year amendment period.
Your amended assessment issued to you later than four years after the day on which tax became due and payable under the original assessment but before six years after the date on which tax became due and payable as authorised by section 177G of the ITAA 1936.
Principal settlement terms
We will agree to terms including all of the following:
- cancellation of the tax benefit obtained by the participant. If we have issued both an income tax and fringe benefits tax assessment we will amend the following assessments to nil
- fringe benefits tax assessments, and
- income tax assessments that issued to employees under Division 13A of the ITAA 1936
- interest on any tax shortfall resulting from your participation in the scheme will be remitted to 4.72% until 14 days after an amended assessment issues to give effect to settlement
- interest on any tax shortfall resulting from your participation in the scheme will be remitted in full where there was an unreasonable delay by the ATO in issuing amended assessments after you provided all of the necessary information
- shortfall penalty will be remitted to nil.
In return, you will agree to terms including all of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements.
The following were considered when determining the terms of settlement:
The above settlement terms are available to participants who cannot demonstrate that their circumstances are such that the decision in Essenbourne necessarily applies to them.
We are of the view that the deductions claimed by the employer entities are not allowable under subsection 51(1) of the ITAA 1936 as contributions made by closely held entities to special purpose companies or trusts purportedly established for the provision of benefits or shares for the controllers of the employer entities are simply distributions of profit to those controllers. This view has been supported by the decision in Essenbourne.
In circumstances where an employer entity has made contributions to a special purpose entity for the purported purpose of providing benefits to the controllers of the employer entity, the ATO view is that the deductions claimed by the participant are not allowable under subsection 51(1) of the ITAA 1936 or section 8-1 of the ITAA 1997 as they constitute a distribution of profits to those controllers. In these circumstances, where income tax assessments have been raised outside of the four year period of amendment, the ATO is conceding both income tax and fringe benefits tax assessments.
However, we are offering settlement terms without requiring that the taxpayer provide additional information that would be unfairly onerous and burdensome where:
- the arrangement is not sufficiently similar to Essenbourne
- there is insufficient information available to make such a decision and the taxpayer does not wish to provide additional information in support of such a decision
- there is some indication that the participant could not establish that they had a reasonable basis on which to have originally claimed their deductions in respect of the contribution to the special purpose entity.
These settlement terms provide a basis for settlement for taxpayers who may be like Essenbourne but are not prepared to provide the additional information required to enable the ATO to conclude they are sufficiently similar to Essenbourne.
The terms of settlement recognise that there is sufficient doubt as to the deductibility of the expenditure but not enough information to maintain a tax shortfall penalty and the culpability part of general interest charge.
These terms have been endorsed by the widely-based settlement panel.
- Participants who have only received fringe benefits tax assessments and did not receive an income tax assessment in relation to the arrangement.
Principal settlement terms
We will agree to terms including all of the following:
- reducing your fringe benefits tax assessment(s) to equate to the amount payable that would have arisen if the Commissioner had disallowed the income tax deduction for contributions made by the taxpayer to the arrangement and applied general interest charge of 4.72% on the tax shortfall
- interest on any tax shortfall resulting from your participation in the scheme will be remitted in full where there was an unreasonable delay by the ATO in issuing amended assessments after you provided all of the necessary information
- shortfall penalty will be remitted to nil.
In return, you will agree to terms including of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not at any time claiming or seeking to claim a deduction for fringe benefits tax relating to your participation in the arrangement
- not at any time claiming or seeking to claim any capital losses relating to your participation in the arrangement.
The following were considered when determining the terms of settlement:
These terms apply to participants in these arrangements who are not able to settle on an income tax assessment due to the ATO being outside of statutory time limits in which to amend income tax assessments.
Taxpayers who have only received fringe benefits tax assessments who wish to settle their dispute with the ATO are disadvantaged at settlement as a fringe benefits tax liability is traditionally greater than the liability which would arise under an alternative income tax assessment.
These terms allows the taxpayer to have settlement terms consistent with other taxpayers who have received multiple assessments.
- Participants who did not make a voluntary disclosure to the ATO between 19 May 1999 and 13 September 1999 because they relied on advice by the promoter of the arrangement that the media releases Nat 99/16 and Nat 99/46 did not apply to them.
These settlement terms are only applicable to participants who were not known to the ATO in relation to their participation in the EBA at the time the media releases Nat 99/16 and Nat 99/46 were announced and relied upon the advice of a specific promoter that the media releases did not apply to them.
As we do not publish settlement agreements where the specific details of the settlement would enable the parties to be identified from the information published, phone us on 1800 177 006 to discuss whether these terms are applicable to you.
Principal settlement terms
We will agree to terms including:
- one taxing point
- income tax for the employer entity
- income tax for the employee participant
- fringe benefits tax
- shortfall penalty will be applied at or reduced to the rate of 5%, and
- interest on any tax shortfall resulting from your participation in the scheme will be at full statutory rates other than for the period from 19 May 1999 to 29 July 2002 where it will be remitted to 4.72%.
In return, you will agree to terms including:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn, and
- paying the amended tax debt by the due date or entering into other agreed payment arrangements.
The following were considered when determining the terms of settlement:
On 19 May 1999, we provided participants the opportunity to come forward and voluntarily disclose their involvement in employee benefit arrangements. If a taxpayer made such a voluntary disclosure, we undertook to impose tax shortfall penalty of 5%, cease general interest charge accruing after the date of the voluntary disclosure and impose only one taxing point. This voluntary disclosure period ended on 13 September 1999.
Participants in this employee share plan were advised at the time by the promoter of the arrangement that the media release of 19 May 1999 and 13 August 1999 did not apply to their arrangement. These participants relied upon this advice and did not make a voluntary disclosure. We were not aware of the existence of the scheme or the participants in the scheme at the time the media releases were announced.
The participants now contend that had they not relied upon the advice of the promoter at that time, they would have made a voluntary disclosure and obtained penalty of 5% and general interest charge imposed to the date of the voluntary disclosure.
The participants were misled by their advisor/promoter as to the applicability of the media releases NAT 99/16 and NAT 99/46 to their arrangement.
It would be inequitable to penalise these participants for relying on erroneous advice as it is more likely than not that had the participants been made aware that the media releases NAT 99/16 and NAT 99/46 did in fact apply to them, they would have made a voluntary disclosure within the required time period.
It is appropriate that settlement terms be offered to them to place them near to a position that would have existed had they not relied on the advice of their advisor.
These terms have been endorsed by the widely-based settlement panel.
Three settlements are available to participants in offshore superannuation schemes.
- Participants who have received both an income tax assessment and a fringe benefits tax assessment in relation to the arrangement.
- Participants who have claimed a deduction for their contribution to the offshore superannuation scheme but have only received fringe benefits tax assessments in relation to the arrangement.
- Participants who did not make a voluntary disclosure to us between 19 May 1999 and 13 September 1999 because they relied on advice by the promoter of the arrangement that the media releases NAT 99/16 and NAT 99/46 did not apply to them.
- These settlements are not available to participants who are corporate entities and have deregistered. Phone us on 1800 177 006 to discuss what settlement options are available to you.
- If more than one of the above terms apply to you, phone us on 1800 177 006 to discuss what settlement options are available to you.
- These terms do not apply to you if you used a 'Stichting' as part of the employee benefit trust arrangement. A 'Stichting' can generally be described as a 'foundation' which is registered in the Netherlands and which is neither a trust nor company under English law. Phone us on 1800 177 006 to discuss what settlement options are available to you.
|
Status of this settlement offer: current
Who does this settlement apply to?
This settlement is available, on request, to all participants who entered into an offshore superannuation schemes before 30 June 2003 and who have a disputed liability or entitlement with the ATO with respect to that arrangement, or are able to enter into such a disputed liability or entitlement.
Details of settlement terms
|
Settlement conditions and disclaimers
The following settlement information is a general guide. For more information, refer to conditions and disclaimers.
|
These terms should be read in conjunction with further remissions offered to you following the release by the Minister for Revenue and Assistant Treasurer, the Hon Mal Brough, MP, of a report by the Inspector-General of Taxation..
The following settlement information is a general guide.
- Participants who have received both an income tax assessment and a fringe benefits tax assessment.
Principal settlement terms
We will agree to terms including all of the following:
- one taxing point, either income tax or fringe benefits tax. If we have issued both an income tax and fringe benefits tax assessment we will amend to nil the liability for one of these assessments with respect to your offshore superannuation scheme
- interest on any tax shortfall resulting from your participation in the scheme at full statutory rates
- interest on any tax shortfall resulting from your participation in the scheme will be remitted in full where there was an unreasonable delay by the ATO in issuing amended assessments after you provided all of the necessary information
- shortfall penalty will be remitted to 10%.
In return, you will agree to terms including all of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not at any time claiming or seeking to claim any capital losses relating to your participation in the arrangement.
The following were considered when determining the terms of settlement:
The ATO view of the deductibility of contributions to a non-resident, non-complying superannuation fund was supported in the Federal Court decisions in Walstern and Cameron Brae. The Court supported the ATO's view of the application of section 82AAE of the ITAA 1936.
Our view is that the deductions claimed by the employer entities are not allowable under section 82AAE of the ITAA 1936.
Tax shortfall penalty of 10% and full statutory rates of general interest charge are, therefore, appropriate settlement terms in this context.
- Participants who have claimed a deduction for their contribution to the offshore superannuation scheme but have only received fringe benefits tax assessments in relation to the arrangement.
Principal settlement terms
We will agree to terms including all of the following:
- reducing your fringe benefits tax assessment(s) to equate to the amount payable that would have arisen if the Commissioner had disallowed the income tax deduction for contributions made by the taxpayer to the arrangement and applied general interest charge of 4.72% on the tax shortfall
- interest on any tax shortfall resulting from your participation in the scheme will be remitted in full where there was an unreasonable delay by the ATO in issuing amended assessments after you provided all of the necessary information, and
- shortfall penalty will be remitted to nil.
In return, you will agree to terms including:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or being) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not at any time claiming or seeking to claim a deduction for fringe benefits tax relating to your participation in the arrangement, and
- not at any time claiming or seeking to claim any capital losses relating to your participation in the arrangement.
The following were considered when determining the terms of settlement:
These terms apply to participants in these arrangements who are not able to settle on an income tax assessment due to the ATO being outside the statutory time limits in which to amend income tax assessments.
Taxpayers who have only received fringe benefits tax assessments who wish to settle their dispute with the ATO are disadvantaged at settlement as a fringe benefits tax liability is greater than the liability which would arise under an alternative income tax assessment.
These terms allows the taxpayer to have settlement terms consistent with other taxpayers who have received multiple assessments.
- Participants who did not make a voluntary disclosure to the ATO between 19 May 1999 and 13 September 1999 because they relied on advice by the promoter of the arrangement that the media releases NAT 99/16 and NAT 99/46 did not apply to them.
These terms should be read in conjunction with further remissions offered to you following the release by the Minister for Revenue and Assistant Treasurer, the Hon Mal Brough, MP, of a report by the Inspector-General of Taxation.
These settlement terms are only applicable to participants who were not known to us in relation to their participation in the EBA at the time the media releases NAT 99/16 and NAT 99/46 were announced and who relied upon the advice of a specific promoter that the media releases did not apply to them.
As we do not publish settlement agreements where the specific details of the settlement would enable the parties to be identified from the information published, phone us on 1800 177 006 to discuss whether these terms are applicable to you.
Principal settlement terms
We will agree to terms including all of the following:
- one taxing point, either income tax or fringe benefits tax. If we have issued an income tax assessment and a fringe benefits tax assessment we will amend to nil the liability for one of these assessments with respect to your offshore superannuation arrangement
- shortfall penalty will be applied at or reduced to the rate of 5%
- interest on any tax shortfall resulting from your participation in the scheme will be at full statutory rates other than for the period from 19 May 1999 to 27 August 2002 where it will be remitted to 4.72%.
In return, you will agree to terms including all of the following:
- deductions for associated claims incurred in participating in the arrangement be disallowed
- giving up your right to continue (or begin) to dispute the liability or entitlement with respect to the arrangement - any objection or appeal currently in process will be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements
- not at any time claiming or seeking to claim any capital losses relating to your participation in the arrangement.
The following were considered when determining the terms of settlement:
On 19 May 1999, we provided participants the opportunity to come forward and voluntarily disclose their involvement in employee benefit arrangements. If a taxpayer made such a voluntary disclosure, we undertook to impose tax shortfall penalty of 5%, cease general interest charge accruing after the date of the voluntary disclosure and impose only one taxing point. This voluntary disclosure period ended on 13 September 1999.
Participants in this offshore superannuation scheme were advised at the time by the promoter of the arrangement that the media releases of 19 May 1999 and 13 August 1999 did not apply to their arrangement. These participants relied upon this advice and did not make a voluntary disclosure.
We were not aware of the existence of the scheme or the participants in the scheme at the time of the media releases were announced. The participants now contend that had they not relied upon the advice of the promoter at that time, they would have made a voluntary disclosure and obtained penalty of 5% and general interest charge imposed to the date of the voluntary disclosure.
The participants were misled by their adviser/promoter as to the applicability of the media releases NAT 99/16 and NAT 99/46 to their arrangement.
It would be inequitable to penalise these participants for relying on erroneous advice as it is more likely than not that had the participants been made aware that the media releases NAT 99/16 and NAT 99/46 did in fact apply to them, they would have made a voluntary disclosure within the required time period.
It is appropriate that settlement terms be offered to them to place them near to a position that would have existed had they not relied on the advice of their advisor.
These terms have been endorsed by the widely-based settlement panel.
About the scheme
The cost of managing tax affairs arrangement is in relation to costs claimed by participants in a Controlling Interest Superannuation arrangement.
Status of this settlement offer: closed
Who did this settlement apply to?
This settlement was available on request to participants who entered in a Controlling Interest Superannuation arrangement and who had a current disputed liability or entitlement under the Code of Settlement Practice in relation to the particular issue - cost of managing tax affairs.
Phone us on 1800 177 006 to determine whether this settlement is still available for you.
Principal settlement terms
1. Participants who were involved in the arrangement and had a dispute.
The settlement terms were endorsed by the widely-based settlement panel due to the factors and principles stated below.
We agreed to terms including all of the following:
- allow a deduction for cost of managing tax affairs of the amount claimed or $15,000 which ever is the lesser, was considered to be a fair estimate in relation to this arrangement
- reducing the shortfall penalty to nil, as this was consistent with the settlement terms of the Controlling Interest Superannuation arrangement
- remitting GIC to 4.72% for the period from the due date of the original assessment until the earlier of 14 days after the issue of an amended assessment to give effect to settlement, as this, too was consistent with the settlement terms of the Controlling Interest Superannuation arrangement.
In return, participants agreed to terms including all of the following:
- giving up the right to continue (or begin) to dispute the liability or entitlement for the arrangement. Any objection or appeal currently in process was to be withdrawn
- paying the amended tax debt by the due date or entering into other agreed payment arrangements.
The following were considered when determining the terms of settlement:
- The Federal Court case decision Drummond v FC of T [2005] FCA 1129.
Last Modified: Monday, 25 February 2013
|