Warning on tax exploitation schemes
Financial advisers and accountants have been warned that a recent Full Federal Court's decision dealing with advice around an agricultural managed investment scheme (MIS) has demonstrated the breadth of Australian Taxation Office's ability to deal with promoting particular tax schemes.
An analysis of the decision published by the Institute of Chartered Accountants pointed to the manner in which the case concerned two financial advisers who had tried to secure investors in the MIS — the 2006 Gunns Woodlot Project.
It said that, under the scheme, the advisers made acquisitions of fully financed woodlots directly and indirectly through certain investors. The loan obligations were met from profits obtained by investing into a foreign exchange trading fund composed of the commissions received from the acquisition of the woodlots, the GST refunds from the acquisition of the woodlots and the funds obtained from offering the woodlots to subsequent investors.
It said the Tax Commissioner had alleged that it was intended that the subsequent investors would fund their acquisitions of the woodlots from tax savings obtained by claiming deductions for the financial year ending 30 June 2007 in respect of the acquisitions.
While a single judge of the Federal Court dismissed the ATO's case, an appeal to a Full Bench overturned that finding and concluded a tax exploitation scheme had been promoted.
The ICAA analysis said the Full Court decision had shown that "the promoter penalty provisions have a lot more breadth in application than viewed by the original judge".
"Thus the Commissioner has a greater ability to make successful claims against alleged ‘promoters' of ‘tax exploitation schemes'," it said.
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