Artificially creating upfront tax deductions may break tax laws
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The Australian Taxation Office (ATO) has warned that arrangements to artificially create upfront deductions for employment costs may break tax laws.
Tax Commissioner Michael D’Ascenzo said employers involved in arrangements that use trust and round robin cash flows to artificially create upfront tax deductions, while also allowing employees to defer tax to a later income year, might not comply with tax laws and anti avoidance rules might apply.
Under these arrangements, an employer makes a cash contribution to a trustee of a trust, which then pays the cash contribution back to the employer as consideration for acquiring options from the employer.
“People involved in or considering these arrangements should be aware that they face close examination by the tax office,” D’Ascenzo said.
The ATO has stated that it will consider a reduction in penalties that might apply should those who have been involved in these types of arrangements come forward before they are contacted for an audit.
Those unsure about their situation are advised to seek independent advice or contact the ATO.
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