Widely-based settlement arrangements for investment schemes and employee benefit arrangements entered into before 30 June 2003

Managed Partnership arrangement

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.

Settlement conditions and disclaimers The following settlement information is a general guide. For more information, refer to settlement conditions and disclaimers.

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.

1. 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.