Government floats further regulatory changes in tax avoidance crackdown
The Assistant Treasurer has released a consultation paper exploring how any shortcomings with tax promoter penalty laws can be addressed to mitigate unethical tax avoidance behaviour.
Treasury has released a consultation paper seeking views on whether the tax promoter laws operate as intended, are still fit for purpose and are adequate to deter newer forms of misconduct.
The paper warned that the rise in social media usage and other changes in technology use have seen promoter behaviours evolve, making the proliferation of tax misconduct easier and more expansive.
The government has concerns about emerging promoter behaviours including an increase in the promotion of schemes through social media, the promotion of non-lodgment and non-payment of tax debts, the promotion of schemes across jurisdictions and schemes involving fraudulent claims.
It is also concerned about the involvement of multiple tax intermediaries in promoting schemes and tax intermediaries that encourage aggressive tax positions on existing transactions contrary to the law.
As part of the consultation paper, Treasury is seeking feedback on whether the current scope of the tax promoter penalty laws capture the appropriate range of misconduct including these emerging behaviours.
The government is also exploring the introduction of grouping rules for conduct of associates where, for example, one party designs the scheme and another markets the scheme.
The paper is also seeking feedback on the advantages and risks of introducing these kinds of rules and whether the current regime effectively captures all parties involved in promoting tax exploitation schemes across multidisciplinary firms or other legal intermediaries.
As part of the review, the government is also exploring whether the definitions of 'promoters' and 'scheme benefit' are broad enough to capture schemes designed to circumvent anti-avoidance provisions or emerging behaviours by promoters of tax exploitation schemes.
The government is also looking at the advice exemption for tax practitioners under the current laws and whether the exception "achieves a clear and adequate balance for tax practitioners between the protection of advice and the potential application of the tax promoter penalty laws to the development and marketing of schemes to clients".
The review also looks at the other exemptions under the laws and whether the threshold of ‘sole or dominant purpose’ of gaining a scheme benefit is appropriate.
Assistant Treasurer and Minister for Financial Services Stephen Jones said this latest consultation is part of the government's continued crackdown on tax avoidance.
"This forms the next part of the government’s steadfast response to the PwC tax scandal," Minister Jones said.
He noted that the promoter penalty laws are designed to capture tax agents who promote illegal and fraudulent schemes to clients to reduce their taxes.
"However, the PwC scandal exposed gaps in these laws, which did not capture the heinous activity of those involved in the promotion of illegal tax dodging schemes to multinational corporations," Minister Jones said.
"The government responded quickly to close the obvious loopholes, and this consultation builds on the legislation passed in May 2024, which significantly increased the maximum civil penalties for promoters of tax exploitation schemes."
Jones said the consultation is considering whether the regime, as amended in response to the scandal, is fit for purpose, adequately addresses current types of promoter activity, and effectively safeguards taxpayers from being enticed into illegal tax exploitation schemes.
"The government is committed to ensuring the ATO has the tools to address tax exploitation schemes and closing gaps identified during the PwC matter."
