Tax avoidance schemes
Each year arrangements that are aggressive towards the tax system are promoted to taxpayers. These arrangements typically involve:
- reducing a participant's taxable income
- increasing their deductions against their income
- increasing rebates
- avoiding tax and other obligations entirely.
Tax avoidance schemes range from mass-marketed arrangements (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 avoid tax or other tax obligations It may also structure arrangements to, for example:
- incorrectly classify revenue as capital
- exploit concessional tax rates, such as those available to superannuation funds
- illegitimately 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.
These tax avoidance schemes are often contrived arrangements created to obtain a tax benefit for the participant by reducing their tax liability. This is done in a way that is not intended by the law and gives a financial benefit to the promoter.
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.
Each year a significant number of tax avoidance schemes are promoted to individual and business taxpayers and self-managed super funds (SMSFs). These contrived arrangements have little or no economic substance and are created predominantly to obtain a tax benefit not intended by the law. Check our list to see whether you're considering a type of arrangement we have identified as questionable.