ATO warns about tax scams
These new tax avoidance and investment schemes are spreading on social media – and seniors are being targeted.
Keep Scam SAFE
The National Seniors website offers a range of resources to help protect you against scams.
These include a downloadable Scams Protection eGuide, Cyber Safety videos produced in conjunction with the Australian Federal Police, Keep Scam SAFE resources, and other scams awareness resources.
The Australian Tax Office (ATO) is warning seniors to stay away from schemes that promise to reduce or avoid tax.
Such schemes are concerning because they can entice honest people into arrangements they don’t understand.
The dodgy tax schemes are spreading online, including through social media – a well-known haunt of retirees doing what they call “research” into making money quickly.
Some of them are peddled as investment schemes, which ATO Acting Deputy Commissioner, Sarah Taylor, said are specifically designed to target vulnerable people, looking for high returns and tax savings.
“Those who invest in unlawful tax schemes stand to lose their hard-earned cash, and risk paying tax with interest and heavy penalties,” she said.
“Protect yourself and your money by getting advice from a registered tax practitioner before committing to anything.”
The ATO’s website lists tax schemes to look out for.
In one recent scheme, individuals are advised to invest in a start-up company that allegedly qualifies as an early-stage innovation company (ESIC). By investing in an ESIC, they’re told they can then claim the early-stage investor tax offset on shares purchased through the financing arrangement.
The operators lend the money to buy shares in the start-up and then funds are moved around between the start-up, the individual investor, and the operator to access the tax offset.
“We’re concerned these start-ups don’t qualify as ESICs,” the ATO warned.
These type of circular financing arrangements where people claim a tax offset and interest deductions can result in honest people being caught in a tax avoidance scheme, which could lead to serious penalties.
Another type of scheme promises people they can avoid paying tax by setting up a purported non-profit foundation and diverting their income to it.
The ATO says these schemes are not effective and you will still have to pay tax on the income.
If you are approached with tax arrangements that sound like either of these examples, or sound too good to be true, seek advice from a registered tax practitioner and report it to the ATO.
The ATO says it takes a strong stance against all types of unlawful tax schemes and their promotion.
“Promoting and participating in unlawful tax schemes are not victimless crimes. Those who choose to engage in these behaviours are attempting to obtain an unfair advantage over those who do the right thing,” Ms Taylor said.
“We take targeted action against unlawful tax schemes that promote tax avoidance behaviours and against those who promote these schemes. We are committed to helping protect the community against misinformation about schemes spread on various channels.”
If you are offered an unlawful tax scheme, you should reject it and report it to the ATO confidentially by:
Completing the tip-off form on the ATO website
Phoning the tip-off hotline on 1800 060 062.
If you suspect that you’ve inadvertently become involved in an unlawful tax scheme, you should also contact the ATO immediately. If you proactively approach the ATO, you may be eligible for a reduction in any penalties imposed.
To check if a tax practitioner is registered, use the Tax Practitioners Board’s public register.
More information about unlawful tax schemes can be found at ato.gov.au/taxschemes.
