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  • Tax avoidance schemes

    Each year a significant number of arrangements that are aggressive towards the tax system are promoted to taxpayers. These arrangements reduce total tax revenue in one of three ways: by reducing a participant's taxable income or increasing their deductions against their income (or both), or by avoiding tax entirely.

    There are many different types of tax avoidance schemes, ranging from mass-marketed arrangements that you might see advertised to the public to boutique arrangements - specialist financial arrangements offered directly to experienced investors. Some are marketed to individuals, and may exploit people's social or environmental conscience and generosity. Others target self-managed super funds.

    A tax avoidance scheme may include complex transactions or distort the way funds are used in order to claim tax deductions incorrectly. It may also structure arrangements to, for example:

    • exploit concessional tax rates, such as those available to superannuation (super) funds
    • illegitimately release super funds early
    • move funds through several entities (such as a series of trusts) to avoid or minimise tax that would otherwise be payable.

    These tax avoidance schemes are frequently contrived arrangements that have little or no economic substance and are created predominantly to obtain a tax benefit for the participant (by reducing their tax liability) not intended by the law and a financial benefit to the promoter (see Common types of schemes for information on the sorts of arrangements we currently have concerns about).

    The promoter is the person or entity behind a scheme. The promoter has a vested interest in securing your involvement in the arrangement and is generally quite active in marketing the arrangement, charging substantial fees and receiving a payment, including commissions, from you or your investment.

    Schemes designed to avoid tax increase the tax burden on responsible taxpayers and deny funds for the community overall. We take them seriously. They attract our scrutiny to determine whether or not they are within the law.

    Early detection and swift action is critical to helping unwary taxpayers avoid getting burnt and maintaining the integrity of our tax system. You can help by letting us know if you come across an arrangement that sounds like a tax avoidance scheme.

    End of further information

    • Last modified: 09 Jul 2012QC 33863