The ATO ‘Will Take Action’ On This Particular Tax Behaviour in 2024

Tax time is creeping up on us for another year, and the ATO is dishing out warnings based on its focus points for the financial year. In late March, the Australian Taxation Office released an update on tax schemes and potential penalties for people who get caught up in what the ATO refers to as ‘unlawful schemes’, so here’s an update on what that’s all about.

Here’s what the ATO shared and what you need to know.

Tax time focus: The ATO is looking at unlawful schemes

In its recent update, the ATO shared that folks in Australia have the right to seek out ways to keep “tax to a minimum,” as long as it is done legally.

“However, tax schemes that are outside the spirit of the law may attract our attention,” it reads.

In a nutshell, unlawful schemes are those that seek to exploit Australian systems to reduce tax payments.

The ATO writes that “tax schemes range from mass-marketed arrangements advertised to the public, to boutique or specialised arrangements tailored for specific taxpayer circumstances.”

And if you’re caught participating in one, the ATO has warned that it “will take action”.

“Involvement in a tax scheme can risk your original investment. You might also have to pay back tax, with interest and penalties,” it shared in a statement.

Signs you should look out for when it comes to unlawful schemes (according to the ATO):

If you’ve come across a scheme that promotes any of the below, it’s worth flagging it as something that may grab the attention of the ATO.

• reducing a participant’s taxable income
• increasing their deductions against their income
• increasing rebates
• obtaining refunds
• avoiding tax and other obligations entirely
• incorrectly classifying revenue as capital
• exploiting concessional tax rates
• obscuring the source of funds or the relationships between parties
• illegally releasing super funds early
• inappropriately moving funds through several entities, such as a series of trusts, to avoid or minimise tax that would otherwise be payable

Warnings you’re engaging with an unlawful tax scheme:

The ATO has shared that the below signs are additional warnings that you may be getting involved in something a little dodgy. So, if a scheme offered by a service, accountant, lawyer, financial adviser, telemarketer or other salesperson promotes any of the below, it’s probably not worth risking.

• offer zero-risk guarantees for their product
• refer you to a particular adviser or expert (they may claim the adviser has specific knowledge about the arrangement and the promised tax benefits)
• ask you to maintain secrecy to protect the arrangement from rival firms
• charge a fee or commission based on tax saved
• discourage you from obtaining independent advice
• do not have a PDS or prospectus for the product
• offer advice about illegal phoenixing or liquidation of key companies.

For more insight, you can take a look at the full list of signs and details on the ATO here. And if you’re worried about any programs you’ve taken part in, ATO’s advice service is a useful point of reference.

This article has been updated since its original publish date.

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