ATO tax scheme action too late

The Australian Tax Office has admitted it acted too late in disallowing a number of tax schemes according to the Commissioner of Taxation Michael Carmody.

Carmody's comments were made on the Four Corners program on the ABC last night in which the ATO was criticised for taking four years to disallow some of the schemes.

Responding to questions of whether the ATO had been slow off the mark in disallowing the schemes Carmody said, "We can always say that we could have acted earlier. It would have been better for people."

The tax schemes, some of which have been round for more than ten years, involve up to 60,000 people and in many cases have had adverse rulings against them costing investors tens of thousands of dollars in tax bills.

The four year delay also meant that many investors in the schemes were able to accumulate very large tax deductions only to have these turned into a tax bill when the ATO made its adverse rulings.

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Carmody says the tax office was auditing some schemes and denying deductions and was trying to take into account the circumstances of the people involved.

"We need to make sure that the tax is paid under these arrangements. If we don't, to put it bluntly, you can kiss our tax system goodbye."

According to the program around 40,000 people had already be sent amended assessments from the ATO querying more than $3 billion worth of tax deductions, with 20,000 more expected to receive their bills soon.

However the ATO has offered a small measure of relief to those facing the tax bills. In April it announced a minor concession for some investors by lowering the interest rate charged on late tax payments to 5.86 per cent, from the standard 13.86 per cent.