The ATO says it will soon commence the next phase of its dividend washing compliance program by issuing letters to 500 taxpayers who did not respond to the ATO’s initial letters, and up to 1,500 other taxpayers who updated data analysis suggests may have entered into a dividend washing transaction.
The letters will ask those taxpayers to self-amend their tax returns in order to reverse franking benefits they may have obtained from dividend washing transactions.
In line with an earlier commitment, the ATO says it will not impose any penalty on taxpayers who have entered into dividend washing transactions and who come forward to self-amend their tax returns before the date specified in the ATO letter.
In addition, the ATO says that taxpayers who have entered into dividend washing transactions, but do not receive a letter from the ATO, will not be subject to penalties provided they amend their tax returns by 22 September 2014.
[FJM Note: There is now a statutory ‘integrity rule’ that expressly prohibits ‘dividend washing’ from 1 July 2013. Prior to that the ATO had to rely on s177A of the Income Tax Assessment Act 1936.]
[LTN 154, 12/8/14]