14/04/2025
ATO SOUNDS WARNING OF FRESH TAX SCAMS
With the cost of living an issue for many Australians there’s concern vulnerable individuals are being tempted by tax avoidance opportunities.
Taxpayers are being warned about tax schemes that promise easy wins, but which are likely to lead to financial loss, legal action, and hefty penalties.
These unlawful schemes claim to reduce taxable income, increase deductions and offsets, inflate refunds, and, in some cases “safely” access super benefits early.
Appearing as online promotions on websites and social media, they also falsely classify revenue as capital, exploit concessional tax rates and camouflage funding sources or true relationships between parties.
Sold by promoters as significantly reducing or avoiding paying tax altogether, the latest wave of the dodgy schemes has triggered a warning from the Australian Taxation Office (ATO).
The ATO is concerned that honest people who don’t know what they’re getting into are being snared by the misleading promotions.
Their advice is to look out for any scheme that promises a big tax saving by either reducing taxable income or increasing deductions and offsets to a point that seems too good to be true.
Also avoid schemes that offer zero-risk guarantees, promise huge returns on your investment and any scheme that promises you can avoid your tax obligations entirely.
External agencies and taskforces, including the Australian Securities & Investment Commission (ASIC), the Department of Industry, Science and Resources (DISR) and the Serious Financial Crime Taskforce, are working with the ATO to prosecute perpetrators.
Those who participate in unlawful tax schemes will not only have to pay back the tax but potentially face significant penalties in the range of 10 to 90 per cent of the tax avoided, plus interest.
Some schemes that have been red flagged:
1. Early-stage investor tax offset where individuals are offered an investment opportunity in an early stage innovation company (ESIC), when in actual fact the start-ups don’t qualify as an ESIC.
2. Research and development tax offsets where clients are encouraged to lodge inflated, inaccurate or unsubstantiated claims.
3. Research and development tax offsets for expenditure and activities conducted in Australia or overseas for foreign related entities. Some companies are mischaracterising the relationships to access or increase their entitlement.
4. Dividend stripping where holding companies try to access the profits of a private company tax free via a franked dividend or set up loans from the holding company to the business owner illegally.
5. Inappropriate use of self-managed super funds (SMSFs), e.g. illegal early access as well as encouraging people to channel money into the fund to avoid paying tax.
6. Exploiting not for profits (NFPs) by encouraging participants to set up sham NFPs that pay no tax.
