This page contains details of widely-based settlements that were endorsed by the widely-based settlement panel for investment schemes and employee benefit arrangements entered into after June 2003.
The details of settlements for the various schemes are published progressively. If the information you are seeking is not here, you can:
- contact the tax officer currently dealing with your dispute (if known)
- phone us on 1800 060 062.
Investment schemes
Schemes endorsed by the widely-based settlement panel include:
- Joint venture loss arrangement
- Management investment schemes – purported partnership arrangement
- Deduction scheme – refinancing home loans
Joint venture loss arrangement
The arrangement seeks to create losses or deductions for participant taxpayers. The arrangement involved a group of corporate entities involved in the business of asset financing and leasing. Documents were created, executed and presented to taxpayers to invest in a purported joint venture(s) or partnership(s) with the corporate group, which reported deductions and losses under a partnership entity. The alleged partnership or joint venture then distributed losses to participants during the 2008 to 2016 income years in return for one or more financial contributions.
There have been significant deficiencies found in the legal documents and in the implementation of the arrangement, such that the participants appear to have no interest in the purported joint venture(s), nor does it appear they are partners in a partnership(s). Furthermore, most of the tax losses do not appear to exist for distribution to the participants in the first instance.
A private ruling was applied for by the corporate group in respect of the joint venture loss arrangement. Also see the edited version of the Private Ruling 1011451125719 'Joint Venture'. This private ruling appears to have been referenced by several participants and said to have confirmed the tax treatment of the investment in the purported joint venture(s) or partnership(s) and its associated tax losses.
The private ruling did not apply to the participants as:
- the factual circumstances of the purported joint venture(s) was materially different from the arrangement described in the private ruling, and
- the private ruling was applied for by the corporate group and not by each of the individual participants.
Settlement conditions and disclaimers
The following settlement information is a general guide only.
Status of this settlement offer: Open
Does this settlement apply to you?
The Commissioner of Taxation has identified the participants involved in the joint venture loss arrangement and will directly contact them about their involvement in the arrangement and the terms of this settlement offer.
If you believe you are a participant in the joint venture loss arrangement as described above, you can request this settlement.
There are instances where these settlement terms may not apply. The instances include, but are not limited to, participants who were involved in the arrangement and either:
- received a fee for another person's participation in the scheme, or
- were involved in the design, preparation, management or implementation of the joint venture loss arrangement.
Send an e-mail to PW_IC@ato.gov.au to check if you have been identified as a participant, whether the settlement offer applies to you or to find out more about when we will contact you.
Principal settlement terms
Based on the circumstances around the implementation of the joint venture loss arrangement the Commissioner is currently aware of, the identified participants may have adjustments made for all income years during which they were involved with the arrangement. The settlement terms that were endorsed by the widely-based settlement panel are as follows:
- All the deductions or tax losses claimed by the participants in respect of the purported joint venture will be disallowed in full.
- Reversal of any interest income reported by the participants in respect of the purported joint venture.
- A shortfall penalty of 50% reduced to 10%.
- Impose shortfall interest charge (SIC) on any shortfall in prior years.
- Agree to the negotiation of payment plans for up to 12 months on any resulting tax liability.
The circumstances of participants, not including those the Commissioner has already identified, will be considered when deciding which years will be adjusted.
In return, participants will agree to the following terms:
- give up the right to continue (or begin) to dispute the liability or entitlement to losses arising from the joint venture loss arrangement (any objection or appeal currently in process is to be withdrawn), and
- pay the amended tax debt by the due date or enter into other payment arrangements as agreed.
For further information on resolving disputes through widely-based settlement, refer to:
- Practice Statement PS LA 2007/6 – Guidelines for settlement of widely-based tax disputes. This practice statement addresses the Commissioner’s approach to resolving widely-based disputes including consideration of a taxpayer’s individual circumstances in their individual settlements.
- Code of settlement practice.
Managed investment schemes: Purported partnership arrangement
The aim of this scheme is to create deductions for individuals who are not entitled to claim them. It involves a promoter and associates executing documentation to invest in a managed investment scheme (MIS). The promoters then allegedly created partnerships and claimed the deductions associated with the MIS. The promoters then distribute the partnership losses to participants who have not signed any of the relevant documentation, and so have no interest in the MIS, nor are they partners in a partnership.
See also:
- TA 2009/13 Managed Investment Schemes: Purported partnership participation – describes other features which may apply to this arrangement.
Settlement conditions and disclaimers
The following settlement information is a general guide. You should read Settlement conditions and disclaimers for more detailed information.
Status of this settlement offer: closed
Does this settlement apply to you?
You can request this settlement if you:
- have entered into a managed investment schemes: purported partnership arrangement, and
- have a current disputed liability or entitlement under the Code of settlement practice, or
- are able to enter into such a dispute.
These settlement terms apply to participants who were involved in the arrangement and who:
- did not receive a fee for another person's participation in the scheme
- were not involved in the design, preparation, management or implementation of an investment scheme.
Participants who received a fee for getting someone else involved in the scheme, or who designed, prepared, managed or implemented the scheme, are required to contact us.
- Phone us on 1800 060 062 to discuss the settlement options available to you.
Principal settlement terms
The settlement terms were endorsed by the widely-based settlement panel based on the factors and principles below.
We agreed:
- that no deduction was allowed for partnership losses claimed
- a further reduction of 5% to the shortfall penalty amount imposed, depending on the individual circumstances, was appropriate due to the circumstances of the participants, and such remission would be an incentive to settle
- no further remission of interest, other than any remission available in accordance with ATO Practice Statement Law Administration PS LA 2006/8 Remission of shortfall interest charge and general interest charge for shortfall periods.
In return, participants agreed to:
- give 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)
- pay the amended tax debt by the due date or entering into other agreed payment arrangements.
Deduction scheme: Refinancing home loans
This scheme seeks to generate interest deductions for the taxpayer through refinancing a taxpayer's existing home loan and establishing purported investment loans to fund the purchase of shares in companies controlled by the promoter of the arrangement.
The taxpayer claims large deductions for the interest purportedly incurred on the investment loans. The scheme may be promoted as part of a 'mortgage management plan' said to assist taxpayers to repay their home loan sooner.
See also:
- TA 2009/20 Interest deduction generators involving promoter controlled companies – for a further description of this type of scheme.
Settlement conditions and disclaimers
The following settlement information is a general guide. You should read Settlement conditions and disclaimers for more detailed information.
Status of this settlement offer: closed
Does this settlement apply to you?
While this settlement offer was current, we wrote to participants who we were aware had entered into the scheme and who, for the purposes of the Code of settlement practice, had an existing disputed liability or were able to enter into a dispute in relation to a liability.
Although this particular offer is closed, you may still be eligible to enter into a settlement arrangement.
- Phone us on 1800 060 062 to discuss the options available to you.
Principal settlement terms
The settlement terms were endorsed by the widely-based settlement panel based on the factors and principles below.
We agreed:
- all interest deductions claimed by participants with respect to Loan B and Loan C would be disallowed in full
- compensating adjustments would reduce any amount of dividend income or franking credits included in participants' income tax returns with respect to the scheme
- a further reduction of 50% to the shortfall penalty amount imposed, depending on the individual circumstances, was appropriate due to the circumstances of the participants
- the shortfall interest charge rate would be reduced to the base rate from 23 April 2009 until the day before the notice of amended assessment, and any further remission available would be in accordance with ATO Practice Statement Law Administration PS LA 2006/8 Remission of shortfall interest charge and general interest charge for shortfall periods.
In return, participants agreed to:
- give 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)
- pay the amended tax debt by the due date or entering into other agreed payment arrangements.
Employee benefit arrangements
Arrangements endorsed by the widely-based settlement panel include an:
Employee entitlement fund
The employee entitlement fund is an arrangement where an employer seeks deductions for contributions made to an entitlement fund, which is supposed to meet employee entitlements in the future. The entitlement fund is established for the employer (in Australia or in a foreign country) and is controlled by those who market the arrangement.
The contributed funds are then returned to the employer, or put under the employer's control, via associates. The contributions may be funded by a promissory note or loan, cash, or in-specie payments. They are then invested in tax-free offshore life insurance bonds.
See also:
- TA 2007/2 Employee Entitlement Fund – describes other features which apply to this arrangement.
Settlement conditions and disclaimers
The following settlement information is a general guide. You should read the relevant settlement conditions and disclaimers for more detailed information.
Status of this settlement offer: Closed
Does this settlement apply to you?
You can request this settlement if you:
- have entered into the employee entitlement fund arrangement, and
- have a current disputed liability or entitlement under the Code of settlement practice, or
- are able to enter into such a dispute.
These settlement terms apply to participants who were involved in the arrangement and who:
- did not receive a fee for another person's participation in the scheme
- were not involved in the design, preparation, management or implementation of an investment scheme.
Participants who received a fee for getting someone else involved in the scheme or who designed, prepared, managed or implemented the scheme, are required to contact us.
- Phone us on 1800 060 062 to discuss the settlement options available to you.
Principal settlement terms
The settlement terms were endorsed by the widely-based settlement panel based on the factors and principles below.
We agreed:
- where interest expense claimed is verified as an amount paid, allow a deduction for the interest expense; this was considered to be fair where expense was genuinely and economically incurred
- reducing the shortfall penalty to 10% was consistent with the settlement terms of the other employee benefit arrangements and any further remission will be subject to individual circumstances
- interest to be remitted to the base rate for the period 28 July 2007 to 11 April 2008.
In return, participants agreed to:
- give 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)
- pay the amended tax debt by the due date or entering into other agreed payment arrangements.
Employee savings plan
This scheme attempts to convert salary or wages income into a capital gain. The employee defers their salary or bonus income payable by the employer, to the employee savings plan (the trust). The employee then receives an interest-free loan from the trust, equal to the amount contributed to the trust. The loan funds are used by the employee to purchase units in the trust.
Once the employee satisfies the minimum holding period, usually 12 months, the employee redeems their units. At the same time, bonus units are issued by the trustee at no cost to the employee, to the same value of the loan. The bonus units extinguish the loan and the employee receives the deferred amount plus any capital appreciation.
See also:
- TA 2008/13 Employee Savings Plan – describes other features of this type of scheme.
Settlement conditions and disclaimers
The following settlement information is a general guide. You should read the relevant settlement conditions and disclaimers for more detailed information.
Status of this settlement offer: Closed
Does this settlement apply to you?
You can request this settlement if you:
- have entered into an employee savings plan arrangement, and
- have a current disputed liability or entitlement under the Code of settlement practice, or
- are able to enter into such a dispute.
These settlement terms apply to participants who were involved in the arrangement and who:
- did not receive a fee for another person's participation in the scheme
- were not involved in the design, preparation, management or implementation of an investment scheme.
Participants who received a fee for getting someone else involved in the scheme or who designed, prepared, managed or implemented the scheme, are required to contact us.
- Phone us on 1800 060 062 to discuss the settlement options available to you.
Principal settlement terms
The settlement terms were endorsed by the widely-based settlement panel based on the factors and principles below.
We agreed:
- to one taxing point – either the income tax at the time of contribution made to the trust, or the income tax at the time the units are redeemed, was appropriate as both positions were alternate taxing points within the scheme
- capital gains tax will apply only on any gain on the units attributable to the ownership of the ordinary units
- to reduce the shortfall penalty to either 5% or 10%, depending on their circumstances, in applying penalties for false or misleading statements; the remission was appropriate due to a lack of communication with participants and the participants acting in good faith to try to provide a voluntary disclosure
- interest to be remitted due to delay in providing a response to settlement.
In return, participants agreed to:
- give 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)
- pay the amended tax debt by the due date or entering into other agreed payment arrangements.
Managed partnership arrangements
Managed partnership arrangements occur where profits are said to be directed through a purported partnership between an individual(s) and an associated private company. Most of the profits are taxed to the private company at the corporate tax rate, but are accessed by one or more individuals or associated entities without them paying additional tax at their higher marginal tax rate.
See also:
- TA 2015/4 Accessing business profits through an interposed partnership with a private company partner
Status of this settlement offer: closed
This settlement offer is available up to 31 December 2016.
Who does this settlement apply to?
This settlement is available on request to participants who have implemented a managed partnership arrangement.
This offer does not apply to:
- any participants or their associates who have provided advice around implementing a managed partnership arrangement
- any taxpayer who has a managed partnership arrangement in place which is currently under audit.
Details of settlement terms
We will complete the following:
- Amend the relevant income tax returns to assess all monies distributed to the managed partnership to the ultimate controlling individual.
- Accept the tax returns of the corporate partner and its share of the reported income of the managed partnership. But treat the distributions received by the corporate partner as a franked dividend paid by the corporate partner to the controlling individual in the years in which the distributions were paid to the managed partnership.
- This will allow the individual to recognise an entitlement to the franking credits on the tax already paid by the corporate partner.
- Impose a shortfall penalty of 25%, but will agree to remit 80% of the shortfall penalty, effectively resulting in a shortfall penalty of 5%.
- Impose shortfall interest charge (SIC) on any shortfall in prior years.
- Agree to the negotiation of payment plans for up to 12 months on any resulting tax liability.
In return, participants will agree to the following terms:
- Give up your right to continue (or begin) to dispute the liability or entitlement with respect of the arrangement.
- Pay the amended tax debt by the due date, or enter into other agreed payment arrangement up to 12 months on any resulting tax liability.