Tax Office reviews inappropriate shifting of business losses into Australia

Media release 2008/55

Tax Commissioner Michael D’Ascenzo today issued a taxpayer alert warning multinationals that the Tax Office will be closely examining claims for foreign business losses shifted to Australia.

“We have seen attempts to aggressively transfer existing or unrealised losses from the foreign operations of another business into Australia, possibly as a result of the current global economic environment,” Mr D’Ascenzo said.

“These arrangements are an emerging risk for Australia’s revenue and for multinationals, including those in the financial and manufacturing sectors, if the arrangements prove to be ineffective.

“Multinationals should be careful not to inappropriately attribute losses from a foreign business to related Australian businesses.

“This is an especially timely reminder for those multinationals whose financial year ends on 31 December. Taking caution should help to avoid tax debts, substantial penalties and interest which may arise from inappropriate transfers of foreign losses to Australia.

“However it is important to note these arrangements don’t involve the new rules for foreign losses of Australian residents that apply from this year.”

Mr D’Ascenzo said arrangements that aim to inappropriately reduce taxable income in Australia are a growing concern for Australia amid times of global financial uncertainty given the relative strength of the Australian financial system.

“We are looking carefully for these arrangements as international markets continue to generate foreign losses and will be working with industry to address any concerns.”

Tax agents or business representatives with information about anyone who may be promoting arrangements covered by this alert should call the tax agent integrity service on 1800 639 745.

More information

Full details can be found in taxpayer alert 2008/18, available from www.ato.gov.au/atp

People who want information about the taxpayer alerts can call 1800 177 006.

Taxpayer alerts are intended as an ‘early warning’ to taxpayers and their advisers of significant tax planning issues or arrangements that the Tax Office has under risk assessment or about which it has concerns.

Last Modified: Thursday, 13 November 2008

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