Ombudsman backs Tax Office crackdown
The Australian Taxation Office (ATO) has won support for its crack-down on more than 1,600 investors who took advantage of tax breaks in schemes run by Budplan.
The Australian Taxation Office (ATO) has won support for its crack-down on more than 1,600 investors who took advantage of tax breaks in schemes run by Budplan.
After a 10-month investigation, the Commonwealth Ombudsman's Office today backed the ATO's decision not to allow tax deductions for peo-ple investing in Budplan, dating back to 1995.
The Budplan prospectus offered investment in the commercial marketing of tea tree oil to pharmaceutical and cosmetics companies.
Other Budplan projects offered investment in research into the use of celery to cure arthritis, wine grape genetics, and the manufacturing and sale of tea tree oil based products.
The Commonwealth Ombudsman received more than 1,600 complaints after the Tax Commissioner decided the investment was being entered into for the main purpose of a tax benefit, and that losses or expenses relating to the investment were not tax deductible.
Ombudsman Ron McLeod says this is by far the largest number of com-plaints received on a single tax matter, and that it places the om-budsman's office under considerable pressure.
"Although the ultimate decision as to the legality of the commis-sioner's decision to disallow the participants' deductions will probably be made in the courts, our investigation indicates that the Commissioner's decision ... was reasonable," he says.
"The commissioner's action to disallow participants' tax variations and to amend their tax returns was appropriate."
McLeod reiterated tax commissioner Michael Carmody's warning to in-vestors to be wary of tax effective investment schemes offering bene-fits which seem "too good to be true".
"Our investigation of this matter has revealed the importance of tax-payers obtaining certainty in taxation matters before they begin in-vesting in, and claiming deductions for, arrangements like Budplan," McLeod says.
Since the problems with Budplan, the ATO has introduced a product ruling system designed to provide more certainty for potential investors.
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