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  • Tax avoidance schemes to watch out for

    Promoters are always looking for new ways to exploit the law or changes in the law. They promote schemes to people and promise tax benefits that aren't legally available.

    Tax avoidance schemes range from mass-marketed arrangements advertised to the public, to boutique or specialised arrangements offered directly to experienced investors. Some are marketed to individuals and may exploit people's social or environmental conscience and generosity.

    These schemes typically involve:

    • reducing a participant's taxable income
    • increasing their deductions against their income
    • increasing rebates
    • avoiding tax and other obligations entirely.

    A tax avoidance scheme may include complex transactions or distort the way funds are used in order to avoid tax or other obligations. It may also structure arrangements to:

    • incorrectly classify revenue as capital
    • exploit concessional tax rates
    • illegally release super funds early
    • inappropriately move funds through several entities, such as a series of trusts, to avoid or minimise tax that would otherwise be payable.

    Below are types of schemes we have seen.

    Current areas of concern

    Common tax avoidance arrangements

    • TA 2017/5A Addendum Claiming the Research and Development Tax Incentive for software development activities
    • TA 2017/5 Claiming the Research and Development Tax Incentive for software development activities
    • TA 2017/4 Claiming the Research and Development Tax Incentive for agricultural activities
    • TA 2017/3 Claiming the Research and Development Tax Incentive for ordinary business activities
    • TA 2017/2 Claiming the Research and Development Tax Incentive for construction activities
    • TA 2016/6 Diverting personal services income to self-managed superannuation funds
    • TA 2016/5 Purported tax-exempt non-profit ‘foundations’ used to evade or avoid taxation obligations
    • TA 2015/4 Accessing business profits through an interposed partnership with a private company partner
    • TA 2015/3 Accessing the R&D Tax Incentive for ineligible broadacre farming activities
    • TA 2015/1 Dividend stripping arrangements involving the transfer of private company shares to a self-managed superannuation fund
    • TA 2014/1 Trusts mischaracterising property development receipts as capital gains
    • TA 2013/1 Arrangements to exploit mismatches between trust and taxable income
    • TA 2012/7 Self-managed superannuation arrangements to acquire property which contravene superannuation law
    • TA 2012/4 Accessing private company profits through a dividend access share arrangement attempting to circumventing taxation laws
    • TD 2012/1 Applying Part IVA to deny a deduction for some, or all, of the interest expense incurred in respect of an ‘investment loan interest payment arrangement'
    • TA 2011/2 Certain labour hire arrangements utilising a discretionary trust to split income

    See also:

    Last modified: 19 Nov 2019QC 33631