On 21 March 2018, the ATO website advised that the Federal Court had ordered a Queensland company to pay a $4.25 million penalty to the Commissioner of Taxation for its promotion of tax exploitation schemes. These are the civil penalties provisions for prevention of ‘tax exploitation schemes’ in Div 290 of the TAA1 (and in particular in s290-50).
The Commissioner commenced action last year against Australian R&D Funds and Grants Services Pty Ltd, now known as International Indigenous Football Foundation Australia Pty Ltd (in liquidation), and its director, Lorraine Amede, in relation to their conduct involving encouraging clients to lodge overstated or ineligible claims for refundable Research & Development (R&D) tax offsets.
The Commissioner’s case focused on 10 schemes promoted by the company and Ms Amede, which resulted in eight clients receiving, in total, more than $3 million in tax refunds to which they were not entitled.
The Court found that both the company and Ms Amede had breached the promoter penalty laws in relation to 10 separate schemes. Ms Amede has also provided undertakings to the Commissioner in relation to future conduct.
The decision confirms that the laws apply to arrangements which are tailored and marketed to individual clients, as well as to mass-marketed tax schemes.
“If you think you have been approached by a scheme promoter or are inadvertently involved in a tax avoidance scheme you should contact us right away. If you approach us early, you may be eligible for a reduction in any penalties imposed. For more information on how to recognise a dodgy scheme go to ato.gov.au/General/Tax-planning/Recognise-a-dodgy-scheme/.
22.3.18
[ATO website: R&D schemes; FJM; LTN 55, 21/3/18; Tax Month March 2018]
Study questions (answers provided)
- Did the Federal Court order the promoter of R&D ‘tax exploitation schemes’ to pay over $4m in ‘civil penalties’ under Div 290 of the TAA1?
- Did the offending involve 10 schemes with a total of about $1m each, that the taxpayers were not entitled to?
- Did the promoter also have to give undertakings about future conduct (presumably that it would not do it again)?
- Were there only the usual mass marketed exploitation schemes?
[answers:1.yes;2.no(only8NotEntitledToTotal$3m);3.yes;4.no(TailorMadeAsWell)]