The ATO warns on tax tricks that will get you in trouble, and says that each year tax avoidance arrangements that are aggressive towards the tax system are promoted to taxpayers.
These arrangements typically involve:
- reducing a participant’s taxable income
- increasing their deductions against their income
- increasing rebates or
- avoiding tax and other obligations entirely.
The range of tax avoidance schemes is wide, the ATO says — from mass-marketed arrangements (advertised to the public) to boutique arrangements (specialist financial arrangements offered directly to experienced investors). Some are marketed to individuals, and may exploit people’s social or environmental conscience and generosity. Others target self-managed superannuation funds.
A tax avoidance scheme may include complex transactions or distort the way funds are used in order to avoid tax or other tax obligations. They can also be designed with structured arrangements to, for example:
- incorrectly classify revenue as capital
- exploit concessional tax rates, such as those available to super funds
- illegitimately release super funds early
- inappropriately move funds through several entities (such as a series of trusts) to avoid or minimise tax that would otherwise be payable.
The ATO warns taxpayers to not let the tax tricks of tax schemes trip you up, reminding individuals, business proprietors and tax practitioners alike that if a tax arrangement sounds too good to be true, it most probably is.
To help know what to look out for, it has created the following animated video, which highlights how to recognise the features of tax avoidance schemes and provides instructions on how to report anything suspicious to the ATO.