ATO launches guide to combat tax avoidance

The Australian Taxation Office has launched a new guide to help tax intermediaries avoid tax avoidance and tax exploitation schemes.

Speaking at the launch of the guide, Commissioner of Taxation Michael D’Ascenzo said the guide discusses the consequences of contravening the promoter penalty laws and how to establish the right governance controls to avoid these consequences.

“It also offers several suggestions to help reduce the risk of inadvertently marketing or encouraging tax avoidance schemes or incorrectly implementing arrangements,” he said.

A tax exploitation scheme is defined as if, at the time of promotion, it could be reasonable to conclude than an entity entered into or carried out the scheme with a sole or dominant purpose of getting a scheme benefit.

An entity is defined as a promoter of a tax exploitation scheme if any of the following occurs:

• It markets the scheme or otherwise encourages the growth of the scheme or interest in it.

• The entity or its associate directly or indirectly receives consideration in respect of that marketing or encouragement.

• It is reasonable to conclude that the entity has a substantial role in respect of that marketing or encouragement.

An ATO spokesperson says the promoter penalty laws also contain an anti-avoidance measure that enables the laws to apply to an entity that causes another entity to be a promoter.

“For example, some individuals may attempt to structure their affairs and operate through another entity in promoting a tax exploitation scheme to avoid being considered a promoter under the law,” the spokesperson says.

“The penalty provisions will not apply to entities or their employees who are peripherally involved in a contravention of the promoter penalties provisions through giving advice or minor involvement in implementing the scheme.”

“Moreover, the Commissioner cannot seek penalties against an employee if a penalty has already been imposed on the employer entity for the same conduct.”

The spokesperson says the promoter penalty laws are not meant to curtain the provision of ordinary tax advice.

“People who advise on tax planning arrangements, even those who advise favourably on a scheme later found to be a tax exploitation scheme, are not at risk of civil penalty to the extent that they have merely provided independent, objective advice to clients,” he says.

“However, the fact that an entity qualifies their conduct by stating that they are an adviser or that they have merely provided advice, does not, by itself, exclude the entity from being a promoter.”

“Advisers should familiarise themselves with the promoter penalty laws to ensure they do not cross the line from advice to promotion.”

Contravention of the promoter penalty laws may incur penalties of up to 5,000 penalty units for individuals, 25,000 penalty units for bodies corporate or up to twice the amount of consideration received or receivable. The current value of a penalty unit is $110.

The Commissioner can also apply to the Federal Court for restraining and performance injunctions against entities who have or are about to contravene these laws.

D’Ascenzo says in addition to helping reduce the risk of inadvertently marketing or encouraging tax avoidance schemes, the guide also encourages people to reject them and to bring the arrangements to the ATO’s attention.