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  • Recognising, rejecting and reporting tax avoidance

    How to recognise tax avoidance schemes and the red flags associated with them.

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    How tax avoidance schemes operate

    Tax avoidance schemes often involve a series of complex transactions. They typically move funds through several entities, such as trusts, to avoid or minimise tax otherwise payable.

    Schemes may also involve distorting the way funds are used to enable a taxpayer to claim deductions, tax credits or offsets that they are not entitled to.

    Some indicators of a tax avoidance scheme include where it:

    • is carried out in a contrived or artificial way
    • uses complex structures or intra-group transactions to create tax benefits that are unrelated to the commercial activity
    • involves a low level of financial risk and a large tax benefit not usual for a commercially driven transaction
    • includes any of the following
      • round robin finance
      • circular funds movement
      • non-recourse or limited recourse loans paid off by future earnings
      • use of tax exempt entities such as charities, or entities with accumulated tax losses, to wash income
      • use of a tax haven or bank secrecy country without any sound economic reason
      • not implemented as described in any relevant product ruling.

    Find out more information on tax avoidance schemes to watch out for.

    You can also watch the Tax Avoidance SchemesExternal Link video on atoTV.

    How to report a tax avoidance scheme

    With your help, we can challenge promoters and take steps to protect your clients from participating in schemes that may lead to tax debts or penalties.

    Advising us of tax schemes and scheme promoters helps us to protect the integrity of the tax and superannuation systems.

    It helps maintain a level playing field for you, by preventing less reputable agents obtaining a competitive advantage, through selling tax avoidance schemes.

    Find out more about how to make a tip-off.

    You can also report schemes and promoters.

    If you are involved in promoting a tax scheme

    If you find yourself inadvertently involved in the promotion of a tax avoidance scheme and you let us know, we will help you.

    Depending on the conduct, we may accept a voluntary undertaking. We take a careful and considered approach to legal action. We only go to court after carefully considering a range of factors, including the seriousness and extent of the prohibited conduct.

    For more information, see: promoter penalty laws and PS LA 2021/1 Application of the promoter penalty laws.

    Last modified: 01 Aug 2023QC 33370