Non-Profit News Service No. 0417 - Donors Without Borders case: Federal Court fines promoter $1.5 million

On 4 February, the Federal Court handed down its decision in Commissioner of Taxation v Arnold (No 2) [2015] FCA 34External Link. The court awarded civil penalties of $1.5 million to the Australian Taxation Office (ATO) against scheme promoters Stephen Arnold, Leaf Capital Pty Limited and Donors Without Borders because they attempted to exploit and profit from the tax system by generating deductions, associated with a donation arrangement, to which the donors were not entitled.

The decision helps protect the integrity of the not for profit sector and the community by penalising those who choose to promote tax schemes that exploit tax concessions designed to promote philanthropy.

We issued a media release on 6 February about the court decision. Extracts are as follows:

ATO Deputy Commissioner Tim Dyce said the so-called philanthropic scheme was modelled on an arrangement which previously failed in Canada, and involved the purchase and donation of AIDS pharmaceutics to charities in Africa.
"As we discovered, the purchasers only paid 7.5 per cent of the grossly inflated price of the drugs, yet claimed tax deductions of 100 per cent."
In delivering his judgement, Justice Edmonds noted at least five grounds why the scheme was not available under the law, including that there was no actual delivery of the pharmaceuticals to the charities concerned at the relevant time. ….
Mr Dyce said the Court's decision on Wednesday sent a clear message to scheme promoters that the court will penalise those who actively seek to do the wrong thing.

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    Last modified: 19 Feb 2015QC 44294