Dodgy tax schemes on the rise, ATO warns

The ATO has revealed the number of taxpayers falling victim to dodgy tax schemes online has spiked recently, with victims believing they can avoid paying tax.

According to the ATO, unreliable tax schemes are being promoted online and on social media to con people into believing they could effectively dodge their tax obligations.

“We’re urging individuals and businesses to be wary of tax schemes promoted online promising to significantly reduce or avoid tax. Getting involved can attract heavy penalties,” the Tax Office said.

Taxpayers have been reminded to be wary of all schemes as some tax advisers could also attempt to promote tax and super schemes by inappropriately claiming their schemes were supported by ATO rulings.

The ATO noted there was a prominent list of tax schemes that had caused reason for concern as schemes often targeted Australians planning for their retirement by advising them to send money “inappropriately” through their SMSFs.

Other schemes the ATO had also seen an increase in promised to access superannuation assets despite a condition of release not being met.

“Tax and super schemes range from mass-marketed schemes advertised to the public, to boutique or specialised schemes tailored for specific taxpayer circumstances. Some are marketed to individuals and others to large private groups and public companies,” the ATO said.

Dodgy schemes often included tax avoidance, tax evasion and super schemes and typically involved reducing a participant’s taxable income, increasing their deductions against their income, increasing offsets, inflating refunds, avoiding tax obligations and accessing super benefits before meeting a condition of release.

The ATO also warned that tax and super schemes could include complex transactions that incorrectly classified revenue as capital, exploited concessional tax rates, obscured the source of funds or the relationships between parties, illegally released super funds early and inappropriately moved funds through several entities, such as a series of trusts to avoid or minimise tax that would otherwise be payable.

The Tax Office said one of the most notable tax schemes that had occurred in 2016 included an unlawful tax scheme that encouraged people to dodge their taxes by setting up a purported not-for-profit foundation and organising their finances to look like their income belonged to it.

Another past scheme noted by the ATO offered would-be investors the opportunity to invest in a start-up that allegedly qualified as an early-stage innovation company which benefitted from the associated tax offset.

Taxpayers were warned to not fall for promoter risks and to conduct their own research before making tax decisions, seek advice from a registered tax professional and immediately contact the ATO if they had fallen victim to a dodgy scheme.

“Such schemes have the potential to entice honest people who don’t fully understand what they’re getting into. Getting involved is risky.”